Contents:
Employment Agreement - William W. McGuire, M.D.
Letter to William W. McGuire, M.D., regarding Employment Agreement 
 

 AMENDMENT TO EMPLOYMENT AGREEMENT

 

This Amendment, effective as of August 5, 2005, is made by and between William W. McGuire, M.D. (“Executive”) and UnitedHealth Group Incorporated (“UnitedHealth Group” or the “Company”) and amends that certain employment agreement, dated October 13, 1999, as amended on February 13, 2001 (the “Employment Agreement”), between UnitedHealth Group (formerly known as United HealthCare Corporation).

 

WHEREAS, the parties previously entered into the Employment Agreement to provide for Executive’s services as Chief Executive Officer of the Company;

 

WHEREAS, pursuant to the Company’s existing policies, Executive is eligible for retirement (“Retirement”);

 

WHEREAS, it is the desire of the Company and Executive to provide for Executive’s continued services as Chief Executive Officer, notwithstanding Executive’s eligibility for Retirement;

 

WHEREAS, Executive and the Company desire to amend Executive’s Employment Agreement on the terms set forth herein.

 

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained in this Agreement and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

1. COMPENSATION. Sections 2 (a) and 2(b) of the Employment Agreement, are hereby amended and restated in their entirety to read as follows:

 

 

(a)

BASE SALARY. Executive shall initially be paid a minimum base annual salary in the amount of $2,200,000 payable bi-weekly. The Board of Directors (or a committee thereof) shall review Executive’s performance and shall consider increasing Executive’s compensation at least annually.

 

 

(b)

ANNUAL EQUITY GRANTS. Executive shall be eligible to receive in each calendar year during the Initial Term (as defined in Section 3(a)) and each calendar year during any extension of the Initial Term as provided for in Section 3(a) of this Agreement, equity and/or equity-based incentive compensation awards (the “Equity Grants”). The Equity Grants shall be granted in such forms, in such amounts, at such exercise prices (where relevant), on such date or dates, and subject to such terms and conditions, as the Compensation and Human Resources Committee of the Board of Directors (the “Committee”) shall determine; provided, however, that (i) in making such grants, the Committee shall consider, without limitation, the Executive’s tenure with the Company, the scope of the Executive’s responsibilities, the Executive’s leadership and performance, the Company’s growth and success, the shareholder value created during the Executive’s employment, and previous Equity Grants, including the Executive’s


prior right to an annual stock option grant under Section 2(b) of the Employment Agreement, and (ii) in no event shall the aggregate amount of Equity Grants to Executive in any calendar year be in an amount less than or contain terms and conditions that are less favorable than the aggregate amount of Equity Grants granted generally to any other senior officer of UnitedHealth Group in that calendar year. Each Equity Grant shall be subject to the terms and conditions of UnitedHealth Group’s 2002 Stock Incentive Plan, or any substitute or similar successor plan (the “Stock Plan”). The form of award for each Equity Grant granted after August 5, 2005 shall include a provision that unless the Employment Agreement, as amended, provides for vesting or exercise periods that are more favorable, upon termination of employment by reason of Retirement, then (i) vesting of such Equity Grant shall continue as if such termination employment had not occurred and (ii) Executive may, at any time within a period of five years after such termination of employment by reason of Retirement or for such other longer period established at the discretion of the Committee, subject to earlier termination upon expiration of such Equity Grant in accordance with its terms and subject to forfeiture upon violation of any restrictive covenant contained in this Agreement, exercise the Equity Grant to the extent of the full number of shares which were exercisable and which Executive was entitled to purchase under the Equity Grant on the date of exercise of the Equity Grant.

 

2. TERM AND TERMINATION. Sections 3(a) and 3(b) of the Employment Agreement are amended and restated in their entirety to read as follows:

 

 

(a)

TERM. Subject to the provisions of Section 3(b) below, the term of this Agreement shall begin effective as of August 5, 2005 (the “Effective Date”) and shall continue in full force and effect until the fifth anniversary of the Effective Date (the “Initial Term”); provided, however, (i) UnitedHealth Group and the Executive shall, commencing on or about the fourth anniversary of the date of this Agreement, enter into discussions and negotiate in good faith a new five-year employment agreement to replace and supersede this Agreement at the end of the Initial Term, and (ii) in the event the parties are not able to conclude a new employment agreement by the end of the Initial Term, such term shall automatically be extended for successive one-year periods unless UnitedHealth Group or Executive, at least one hundred twenty (120) days prior to the end of the Initial Term or any successive one-year period, as applicable, provides written notice to the other party of the intent not to extend the term for an additional one-year period.

 

 

(b)

TERMINATION OF AGREEMENT.

 

 

(i)

This Agreement may be terminated at any time by the mutual written agreement of the parties.

 

 

(ii)

This Agreement and Executive’s employment may be terminated by UnitedHealth Group or Executive at any time upon 30 days’ prior written notice to the other party and such termination shall be

 

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considered a termination of the Executive’s employment by reason of Retirement in good standing, unless such termination constitutes (A) a “Termination of Employment by Executive Following a Change in Control” as set forth in Section 3(e) of the Employment Agreement, (B) a termination upon death or permanent disability set forth in Section 3(b)(iii) below, or (C) a termination for Cause set forth in Section 3(b)(iv) below.

 

 

(iii)

This Agreement and Executive’s employment shall automatically terminate upon the death or Permanent Disability (as defined in Section 5(a)) of Executive.

 

 

(iv)

This Agreement and Executive’s employment may be terminated by UnitedHealth Group for Cause (as defined in Section 5(a)) immediately upon written notice to Executive.

 

3. OTHER TERMINATION PROVISIONS. Sections 3(d) and 3(g) of the Employment Agreement (“Termination of Employment by UnitedHealth Group without Cause or by Executive for Good Reason” and “Termination of Employment by Executive without Good Reason”) are hereby deleted in their entirety and any cross-references in the Agreement shall be updated accordingly. Section 3(f) of the Employment Agreement (“Termination of Employment by Executive Upon Retirement”) is hereby amended as follows:

 

 

(a)

The portion of Section 3(f) prior to the numbered subsections is hereby amended in its entirety to read as follows:

 

If Executive’s employment with UnitedHealth Group is terminated by UnitedHealth Group or Executive pursuant to Section 3(b)(ii) whether prior to or upon the end of the term of this Agreement, such termination shall be a Retirement of Executive in good standing and upon the termination of Executive’s employment:

 

 

(b)

The following new subsection (viii) is hereby added at the end of Section 3(f) immediately following Section 3(f)(vii):

 

 

(viii)

UnitedHealth Group may elect to retain Executive as a consultant for a period of up to and not more than thirty-six (36) months after the date of the termination of the Executive’s employment (the “Consulting Period”) by giving written notice of such election, including the length of the Consulting Period elected, to Executive within thirty (30) days after such termination. If UnitedHealth Group elects to retain Executive as a consultant, Executive shall be reasonably available to the Board of Directors or the Chairman or Chief Executive Officer to provide his advice and counsel on strategic matters and other matters within Executive’s experience and expertise as may be reasonably requested; provided that the requests for consulting services shall not unreasonably interfere

 

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with the personal, charitable or other business activities of Executive or interfere with Executive pursuing other full time employment. As compensation for the consulting services to be provided by Executive after his retirement if elected by UnitedHealth Group, UnitedHealth Group shall pay Executive or, in the event of his death, his designated beneficiary in bi-weekly payments equal to 1/26 of Executive’s annualized Cash Compensation during the Consulting Period. During the Consulting Period and provided that UnitedHealth Group makes the payments to be made to Executive or his designated beneficiary under this Section 3(f), Executive shall be bound by the non-solicitation and non-compete provisions contained in Sections 4(c) and 4(d) of the Employment Agreement. Notwithstanding any other provision in the Employment Agreement to the contrary, Executive shall not be bound by the non-solicitation and non-compete provisions contained in the Employment Agreement following a termination subject to the provisions of this Section 4(f) during any period that he is not receiving consulting payments.

 

4. TERMINATION OF EMPLOYMENT BY EXECUTIVE FOLLOWING A CHANGE IN CONTROL. Any references to termination of Executive’s employment without Cause in Section 3(e) of the Employment Agreement shall mean any termination of Executive’s employment by UnitedHealth Group for any reason other than for Cause (as set forth in Section 3(b)(v)), death or permanent disability (as set forth in Section 3(b)(iv)) and at any time upon 30 days prior written notice to Executive. Any references to termination of Executive’s employment by Executive for Good Reason in Section 3(e) of the Employment Agreement shall mean any termination of the Employment Agreement for Good Reason (as defined in Section 5(a) of the Employment Agreement) upon 30 days’ prior written notice from Executive to UnitedHealth Group, specifying such Good Reason; provided that such notice is given within 120 days after the initial occurrence of such Good Reason, and provided further that the events giving rise to Good Reason shall not have been remedied as of the date of such notice.

 

5. PROPERTY RIGHTS, CONFIDENTIALITY, NON-SOLICIT AND NON-COMPETE PROVISIONS. Section 4(d)(iv) of the Employment Agreement is hereby deleted in its entirety.

 

6. DEFINITIONS. The following definitions contained in Section 5(a) of the Employment Agreement are hereby amended as follows:

 

 

(a)

Section 5(a)(i) of the Employment Agreement is hereby amended and restated in its entirety to read as follows:

 

 

(i)

“Cash Compensation” means the sum of Executive’s annual base salary together with Executive’s incentive compensation as hereinafter determined. In determining annual base salary, the greater of $2,200,000 or the Executive’s highest annualized base salary shall be used (whether or not deferred). Executive’s incentive compensation shall equal the average incentive

 

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compensation actually earned by Executive for the two years preceding the date of determination. For purposes of determining average incentive compensation for the two years preceding the date of determination, incentive compensation for such year shall include any incentive compensation relating to such fiscal year but payable after the fiscal year, including but not limited to the annual incentive bonus, any pay-outs under the long term incentive plan of the Executive Incentive Plan, annual bonus or pay-out under long term incentive plan that is deferred during such years, but not including any stock option granted prior to August 5, 2005 or any Equity Grants. Notwithstanding the foregoing, if Executive’s Cash Compensation is to be determined pursuant to Sections 3(e) or 3(f), then Executive’s incentive compensation will equal the greater of the amount determined in accordance with this paragraph or an amount Executive would have been paid at Executive’s then target level. In any event, unless otherwise excluded by this paragraph, incentive compensation shall include the cash equivalent value at the time earned of any incentive compensation earned and paid or payable in Company Common Stock or other form of consideration.

 

(b)

Section 5(a)(iii) of the Agreement is hereby amended and restated in its entirety to read as follows:

 

 

(iii)

“Change in Control” means (A) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) other than UnitedHealth Group or any employee benefit plan of UnitedHealth Group of beneficial ownership (as defined in the Exchange Act) of 50% or more of the then outstanding shares of common stock of UnitedHealth Group (the “Outstanding Common Stock”); (B) individuals who, as of the date hereof, constitute UnitedHealth Group’s Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the UnitedHealth Group Board of Directors, provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by UnitedHealth Group’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents; (C) the completion of a reorganization, merger or consolidation, in each case, with respect to which the

 

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beneficial owners of the Outstanding Common Stock immediately prior to such reorganization, merger or consolidation, beneficially own, directly or indirectly, less than two-thirds of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such reorganization, merger or consolidation; or (D) the approval by the stockholders of UnitedHealth Group of (i) a complete liquidation or dissolution of UnitedHealth Group or (ii) the sale or other disposition of all or substantially all of the assets of UnitedHealth Group.

 

IN WITNESS WHEREOF, this Agreement has been signed by the parties hereto on the date set forth below.

 

 

 

 

 

 

 

 

UNITEDHEALTH GROUP INCORPORATED

 

WILLIAM W. MCGUIRE, M.D.

 

 

 

By

 

 


 

 

 


 

 

 

 

 

Date

 

 


 

 

Date

 

 


 

 

6

 

 

 
 
 
EMPLOYMENT AGREEMENT
 
This Agreement, effective as of October 13, 1999, is made by and between
William W. McGuire, M.D. ("Executive") and United HealthCare Corporation,
("UnitedHealth Group" or the "Company") for the purpose of setting forth the
terms and conditions of Executive's employment by UnitedHealth Group and to
protect UnitedHealth Group's knowledge, expertise, customer and provider
relationships, and the confidential information UnitedHealth Group has
developed about its customers, providers, products, operations, and services.
As of the Effective Date (as defined in Section 3(a)), this Agreement
supersedes that certain Employment Agreement, effective as of January 1,
1996, and any prior similar agreement or agreements between Executive and
UnitedHealth Group or any of UnitedHealth Group's subsidiaries or affiliates.
 
1.  EMPLOYMENT.  UnitedHealth Group hereby employs Executive to serve as its
Chief Executive Officer. Executive shall, during the term of his employment
hereunder and subject to the supervision and control of the Board of
Directors of UnitedHealth Group (the "Board of Directors"), perform such
duties, have such power, and exercise such supervision and control with
regard to the business of UnitedHealth Group as are commonly associated with
or appropriate to the office of Chief Executive Officer, including, but not
limited to, the day-to-day general management, supervision and control of all
businesses and operations of UnitedHealth Group and its subsidiaries. In
furtherance thereof, Executive shall report to the Board of Directors, and
all other senior executives of UnitedHealth Group and its subsidiaries shall
report to Executive or as Executive may direct. In addition, Executive shall
perform such other duties of a senior executive nature as the Board of
Directors and Executive from time to time determine to be mutually
acceptable. Executive accepts such employment on the terms and conditions set
forth in this Agreement and, except as specifically superseded by this
Agreement, subject to all of UnitedHealth Group's policies and procedures, as
changed from time-to-time, in regard to its employees generally. During the
period of his employment, the Board of Directors shall nominate Executive as
a director for election by the stockholders of UnitedHealth Group to the
Board of Directors and the Board of Directors shall elect Executive as
Chairman of the Board of Directors.
 
2.  COMPENSATION.
 
         (a)  BASE SALARY. Executive shall initially be paid a minimum base
              annual salary in the amount of $1,600,000 payable bi-weekly. From
              time-to-time the Board of Directors shall review Executive's
              performance and shall consider increasing Executive's
              compensation. Effective on each succeeding January 1 during the
              term of this Agreement, Executive's then-current minimum base
              annual salary shall be increased by a minimum of $100,000.
 
         (b)  ANNUAL STOCK OPTIONS. Executive shall receive each calendar year
              during the Initial Term of this Agreement (as defined in Section
              3(a)) and each calendar year during any extension of the Initial
              Term in accordance with this
 
<PAGE>
 
              Agreement, nonqualified options to purchase a minimum of 325,000
              shares of UnitedHealth Group's Common Stock (the "Annual
              Options"). The Annual Options shall be granted on such date or
              dates as Executive requests by oral notification to the Chair of
              the Compensation and Human Resources Committee (with such
              notification confirmed promptly in writing).  To the extent
              Executive has not otherwise requested the issuance of Annual
              Options representing the right to purchase 325,000 shares in any
              year, Annual Options representing such amount shall be issued as
              of the last business day of such year. The exercise price for the
              Annual Options shall be the closing price for UnitedHealth Group
              Common Stock on the date of issuance. Each Annual Option issued
              pursuant to this Section 2(b) shall vest over a period of four
              years at the rate of 25 percent per year on January 1 of each
              year following the grant of such option, subject to earlier
              vesting as otherwise provided in Section 3 of this Agreement.
              Each Annual Option shall be subject to the terms and conditions
              of UnitedHealth Group's Amended and Restated 1991 Stock and
              Incentive Plan, or any substitute or similar successor plan
              (the "Stock Plan"). Notwithstanding the foregoing provisions of
              this Section 2(b), Executive shall be eligible to receive
              additional awards of nonqualified options, as determined by the
              Board of Directors, in accordance with the normal practices of
              UnitedHealth Group for successful performance.
 
         (c)  SPECIAL STOCK OPTION GRANT. In addition to the Annual Options
              contemplated by Section 2(b), Executive shall also receive an
              option (the "Special Option") to purchase 1,000,000 shares of
              UnitedHealth Group Common Stock. The Special Option shall be
              substantially in the form of Exhibit 2(c) and shall be subject to
              the terms and conditions of the Stock Plan. The exercise price of
              the Special Option shall be $40.125 per share subject to
              adjustment as provided in the Stock Plan. The Special Option will
              expire on the tenth anniversary of its issuance. The Special
              Option will become exercisable on the ninth anniversary of its
              issuance, subject to acceleration upon the occurrence of certain
              performance events as specified in the Special Option.
 
         (d)  BONUS AND STOCK PLANS. Executive shall be eligible to participate
              in UnitedHealth Group's incentive bonus and other bonus plans and
              shall be eligible to receive grants or awards pursuant to
              UnitedHealth Group's stock option and incentive plans, all in
              accordance with the terms and conditions of those plans and on a
              basis consistent with that customarily provided for senior
              officers at the highest level of UnitedHealth Group. For purposes
              of the Company's Management Leadership Results Plan or any
              substitute or similar successor plan, Executive's target incentive
              awards shall be equal to 150% of Executive's then current base
              annual salary.
 
                                       2
 
<PAGE>
 
         (e)  SPECIAL BONUS. In recognition of Executive's strategic
              accomplishments over the past several years, including Executive's
              leadership in implementing the Company's realignment, in making
              successful startup investments in the health care field, in
              augmenting UnitedHealth Group's senior executive management and
              creating leadership succession, Executive shall be entitled to
              receive a special one-time bonus in the amount of $2,600,000 (the
              "Special Bonus"). The Special Bonus shall be paid in cash or
              UnitedHealth Group Common Stock, as Executive elects, upon
              reasonable notice to the Company. If Executive elects to be paid
              in Common Stock, the shares shall be valued at their closing price
              on the date of payment. The Special Bonus shall be paid on January
              4, 2000, subject only to Executive's continued employment as of
              such date.
 
         (f)  EMPLOYEE BENEFITS. Executive shall be eligible to participate in
              UnitedHealth Group's other employee benefit plans, including
              without limitation, any life, health, dental, short-term and
              long-term disability insurance coverage and any retirement or
              savings plans, in accordance with the terms and conditions of
              those plans and on a basis consistent with that customarily
              provided for senior officers at the highest level of UnitedHealth
              Group. Executive shall also receive other benefits consistent with
              his office and position, which benefits shall include, without
              limitation, an allowance to be determined periodically by the
              Chair of the Compensation and Human Resources Committee, on behalf
              of the Committee, and acceptable to Executive, for security
              considerations (such as home and personal security) and for tax
              and financial planning expenses. Executive may utilize any
              UnitedHealth Group aircraft for Executive's personal business up
              to such amount as represents an income tax benefit to the
              Executive of not more than 10% of Executive's then current base
              salary pursuant to Section 2(a). Executive shall be responsible
              for the payment of all income taxes payable by Executive as a
              result of the personal use of UnitedHealth Group aircraft.
 
         (g)  SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN. UnitedHealth Group shall
              provide Executive a supplemental retirement benefit (the
              "Supplemental Employee Retirement Plan") in an amount equal to the
              following percentages of his average Cash Compensation (as defined
              in Section 5(a)) for the three calendar years immediately
              preceding termination of employment hereunder:
 
<TABLE>
<CAPTION>
 
                       AGE               PERCENTAGE
                       ---               ----------
                      <S>                <C>
                       52                   47.5
                       53                   50.0
                       54                   52.5
                       55                   55.0
                       56                   56.0
                       57                   57.0
 
 
                                        3
 
<PAGE>
 
                       58                   58.0
                       59                   59.0
                       60                   60.0
                       61                   61.0
                       62                   62.0
                       63                   63.0
                       64                   64.0
                       65                   65.0
 
</TABLE>
 
              Executive will be 100 percent vested in such benefit as of January
              1, 1999. The supplemental benefit shall be paid as a joint and
              survivor annuity, and Executive's Spouse (as hereinafter defined)
              shall be entitled to a benefit, at no cost to Executive, equal to
              50 percent of the benefit payable to Executive upon termination of
              this Agreement. Provided, however, if Executive dies while
              actively employed, his Spouse shall receive a survivor annuity as
              if Executive had terminated this Agreement the day before his
              death. Executive shall have the option to convert such annuity to
              a lump sum payment or such other actuarial equivalent optional
              form of payment if Executive makes an irrevocable election at
              least one year prior to termination of this Agreement or if less
              than one year prior to termination of this Agreement if such
              election is agreeable to UnitedHealth Group in its sole
              discretion. The actuarial equivalent value of any optional form of
              benefit shall be determined on the basis of an interest rate of 4%
              per annum and such other actuarial assumptions as are reasonable
              and agreeable to the Executive and UnitedHealth Group. The
              supplemental benefit shall be payable in accordance with Section 3
              or as the parties otherwise agree. For purposes of this section,
              "Spouse" means the person to whom Executive was legally married on
              the date of Executive's death. If the age difference between
              Executive and Spouse exceeds five years, the benefit payable to
              the Spouse shall be actuarially determined as if the age
              difference between Executive and Spouse were five years.
 
         (h)  VACATION AND ILLNESS. Executive shall be entitled to paid vacation
              and sick leave benefits each year in accordance with UnitedHealth
              Group's then-current policies and on a basis consistent with that
              customarily provided for senior officers at the highest level of
              UnitedHealth Group.
 
         (i)  ADDITIONAL INSURANCE. In addition to any other insurance to which
              Executive is entitled to under Section 2(f), UnitedHealth Group
              shall provide and pay for, and Executive shall own, a term life
              insurance policy on Executive in an amount equal to $5,500,000,
              which policy shall include an option for Executive to purchase, at
              Executive's expense, additional term life insurance on Executive
              in an amount equal to $3,200,000, and an individual supplemental
              long term "own occupation" disability insurance policy, which may
              be self-
 
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<PAGE>
 
              insured by UnitedHealth Group, providing for monthly disability
              income payments to Executive equal to his then-applicable monthly
              pro rata annual base salary reduced by any monthly payments to
              Executive under other individual or group disability income plans
              or policies provided and paid for by UnitedHealth Group. The
              monthly disability income payments to Executive shall begin at
              such time as Executive becomes Permanently Disabled as defined
              in Section 5(a) and shall continue until Executive ceases to be
              disabled, until five years have elapsed, or until Executive
              reaches age 65. UnitedHealth Group shall compensate Executive
              on an after-tax basis for any additional income taxes payable by
              Executive as a result of UnitedHealth Group's payment of
              premiums with respect to the insurance policies described in this
              subsection.
 
3.       TERM AND TERMINATION.
 
         (A)  TERM. The term of this Agreement shall begin effective as of
              October 13, 1999 (the "Effective Date") and shall continue in full
              force and effect until the fifth anniversary of the Effective Date
              (the "Initial Term"), unless and until terminated as set forth
              below. The term of this Agreement shall be automatically extended
              for an additional one-year period at the end of each year of the
              Initial Term and of each year thereafter, unless and until
              terminated as set forth below, unless either party shall have
              delivered a written notice to the other party of its intention not
              to renew this Agreement at least 120 days prior to October 13 of
              any such year.
 
         (B)  TERMINATION OF AGREEMENT.
 
                  (i)      This Agreement may be terminated at any time by the
                           mutual written agreement of the parties.
 
                  (ii)     This Agreement and Executive's employment may be
                           terminated by UnitedHealth Group for any reason and
                           at any time upon 30 days' prior written notice to
                           Executive.
 
                  (iii)    Executive may resign his employment and terminate
                           this Agreement without Good Reason (as defined in
                           Section 5(a)) by 30 days' prior written notice to
                           UnitedHealth Group.
 
                  (iv)     This Agreement shall automatically terminate upon the
                           death or Permanent Disability (as defined in Section
                           5(a)) of Executive.
 
                  (v)      This Agreement may be terminated by UnitedHealth
                           Group for Cause immediately upon written notice to
                           Executive.
 
                                      5
 
<PAGE>
 
                  (vi)     This Agreement and Executive's employment may be
                           terminated by Executive for Good Reason (as defined
                           in Section 5(a)) upon 30 days' prior written notice
                           from Executive to UnitedHealth Group, specifying such
                           Good Reason; provided that such notice is given
                           within 120 days after the initial occurrence of such
                           Good Reason, and provided further that the events
                           giving rise to Good Reason shall not have been
                           remedied as of the date of such notice.
 
         (c)  TERMINATION OF EMPLOYMENT BY UNITEDHEALTH GROUP FOR CAUSE. If
              Executive's employment with UnitedHealth Group is terminated by
              UnitedHealth Group under Section 3(b)(v) for Cause prior to the
              end of the term of this Agreement then upon termination of the
              Executive's employment:
 
                  (i)      All cash compensation payable to Executive shall
                           cease as of the date of termination.
 
                  (ii)     Executive shall be entitled to begin receiving
                           payments under the Supplemental Employee Retirement
                           Plan described in Section 2(g) as of the date of
                           termination.
 
                  (iii)    Executive's participation in the health care
                           coverage, life insurance, or other employee benefit
                           plans of UnitedHealth Group shall terminate in
                           accordance with applicable law and those plans' terms
                           and conditions. Executive shall receive any benefits
                           payable under Section 2(f) of this Agreement within
                           sixty days of such termination.
 
                  (iv)     Any stock options or grants awarded Executive under
                           any of UnitedHealth Group's stock option or grant or
                           similar stock plans shall expire and cease to be
                           exercisable at the end of ninety days from the
                           effective date of such termination.
 
                  (v)      All accrued and unpaid vacation to the date of
                           termination shall be paid to the Executive.
 
         (d)  TERMINATION OF EMPLOYMENT BY UNITEDHEALTH GROUP WITHOUT CAUSE OR
              BY EXECUTIVE FOR GOOD REASON. If Executive's employment with
              UnitedHealth Group is terminated by UnitedHealth Group under
              Section 3(b)(ii) without Cause prior to the end of the term of
              this Agreement or Executive's employment with UnitedHealth Group
              is terminated by Executive under Section 3(b)(vi) prior to the end
              of the term of this Agreement then upon termination of the
              Executive's employment:
 
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<PAGE>
 
                  (i)      For a period of thirty-six months following the
                           effective date of the termination of employment,
                           Executive shall receive biweekly payments equal to
                           1/26 of Executive's annualized Cash Compensation. In
                           the event of any anticipated tax law change during
                           the payment period that would increase Executive's
                           taxes on such income, Executive may elect to take and
                           receive his remaining compensation under this Section
                           3(d)(i), discounted at an interest rate of 4% per
                           annum to the present value thereof, in a single lump
                           sum payable within thirty days after written request
                           therefor setting forth such anticipated tax law
                           change.
 
                  (ii)     The percentage of Cash Compensation paid pursuant to
                           the Supplemental Employee Retirement Plan
                           contemplated by Section 2(g) shall be determined as
                           of, and payments under such plan shall commence on,
                           the third anniversary of the termination date as if
                           Executive had been continuously employed by
                           UnitedHealth Group through such third anniversary.
 
                  (iii)    Executive shall be entitled to continue participation
                           in the health care coverage as provided in Section
                           3(j) below and in all other life insurance or other
                           employee benefit plans of UnitedHealth Group
                           established under Section 2(f) of this Agreement.
                           UnitedHealth Group shall for a period of thirty-six
                           months following the effective date of the
                           termination (A) continue to pay disability coverage
                           premiums or provide disability coverage on a
                           self-funded basis for Executive and his dependents
                           with UnitedHealth Group and Executive sharing the
                           costs associated with such coverage as if Executive
                           were still actively employed by UnitedHealth Group,
                           and (B) maintain and pay the premiums with respect
                           to the additional insurance policies provided for in
                           Section 2(i). Executive shall continue to receive
                           health care coverage as provided in Section 3(j) of
                           this Agreement. If Executive cannot be covered under
                           any of UnitedHealth Group's group plans or policies,
                           UnitedHealth Group shall reimburse Executive for his
                           full cost of obtaining comparable alternative group
                           or individual coverage elsewhere, less any
                           contribution that Executive would have been required
                           to make under UnitedHealth Group's group plans or
                           policies. Executive shall receive any benefits
                           payable under Section 2(f) of this Agreement within
                           sixty days of such termination.
 
                  (iv)     Any vesting requirements or other conditions that an
                           employee or participant complete a longer period of
                           service or employment as shall otherwise theretofore
                           pertain to any of Executive's rights or
 
                                        7
 
<PAGE>
 
                           benefits under outstanding options (excluding the
                           Special Option granted pursuant to Section 2(c) or
                           other similar option that specifies it will not vest
                           in this particular instance) or any bonus, incentive
                           compensation, deferred compensation, stock grant,
                           restricted stock, or similar plans, from time to time
                           implemented by UnitedHealth Group or its successor or
                           assign, shall automatically terminate and be of no
                           further force or effect. All such rights and benefits
                           shall continue to be deemed to be fully vested and,
                           as the case may be, subject to accrual, payment or
                           exercise in full, or transfer (unless expressly
                           non-transferrable) without regard to such
                           restrictions. Stock options or grants awarded
                           Executive under any of UnitedHealth Group's stock
                           option or grant or similar stock plans (including the
                           Special Option granted pursuant to Section 2(c)) to
                           the extent vested shall continue to be exercisable in
                           accordance with their terms for a period of up to
                           seventy-two months after termination of Executive's
                           employment subject to earlier termination upon
                           expiration of the option or grant in accordance with
                           the terms of such option or grant.
 
                  (v)      UnitedHealth Group shall provide Executive with
                           office, secretarial, and administrative support
                           reasonably customary for executives comparable to
                           Executive for a period of thirty-six months following
                           termination of employment.
 
                  (vi)     All accrued and unpaid vacation to the date of
                           termination shall be paid to the Executive.
 
                  (vii)    In the event the payments, the acceleration of
                           vesting of stock options or the provision of any
                           other benefits under this Agreement are "parachute
                           payments" within the meaning of, and the regulations,
                           rulings and procedures under, Sections 280G and 4999
                           of the Internal Revenue Code of 1986, as the same
                           from time to time may be amended (the "Code"), or
                           other related or successor sections and provisions of
                           the Code at any time applicable thereto, and become
                           subject to excise taxes under Section 4999 of the
                           Code, UnitedHealth Group will pay Executive the
                           amount of such excise taxes plus all federal, state,
                           and local taxes applicable to UnitedHealth Group's
                           payment of such excise taxes, including any
                           additional excise taxes due under Section 4999 of the
                           Code with respect to payments made pursuant to this
                           Section 3(d)(vii). All determinations required by
                           this Section 3(d), upon termination of Executive's
                           employment and at UnitedHealth Group's sole expense,
                           shall forthwith be made by UnitedHealth Group's
                           regularly engaged
 
                                       8
 
<PAGE>
 
                           independent public accounting firm. In determining
                           the amount of excise tax which would be payable by
                           Executive pursuant to Section 4999 of the Code, such
                           accounting firm shall take into consideration and
                           apply all non-includible, excludable and exempt
                           amounts of compensation in accordance with Section
                           280G of the Code. The parties shall cooperate fully
                           by promptly providing such accounting firm all
                           information required to complete such
                           determinations. Such determinations shall be set
                           forth in a written statement and analysis thereof
                           issued by such accounting firm which shall be
                           promptly finished to and shall be binding upon the
                           parties. In the event Executive is subject to any
                           audit with respect to the amount of such excise
                           taxes, Executive and UnitedHealth Group will mutually
                           cooperate in contesting such audit; provided that
                           UnitedHealth Group will pay the cost of such contest
                           and will reimburse Executive on an after tax basis
                           for any additional excise taxes payable as a result
                           of such audit and for any income taxable to Executive
                           as a result of UnitedHealth Group paying the cost of
                           such audit and any additional excise taxes. In the
                           event any such audit results in a refund of excise
                           taxes paid, Executive will turn over the refund to
                           UnitedHealth Group less any income taxes incurred by
                           Executive in respect of the receipt of the refund.
 
         (e)  TERMINATION OF EMPLOYMENT BY EXECUTIVE FOLLOWING A CHANGE IN
              CONTROL. If a Change in Control of UnitedHealth Group occurs and
              either (y) within a period following such Change in Control of six
              months (or such lesser period of time as is acceptable to the
              Company or its successor) and twelve months Executive terminates
              employment under Section 3(b), or (z) at anytime after a Change of
              Control, Executive's employment with UnitedHealth Group is
              terminated by UnitedHealth Group under Section 3(b)(ii) without
              Cause prior to the end of the term of this Agreement or by
              Executive for Good Reason under Section 3(b)(vi) prior to the end
              of the term of this Agreement, then upon termination of
              Executive's employment:
 
                  (i)      For a period of thirty-six months following the
                           effective date of the termination of employment
                           Executive shall receive biweekly payments equal to
                           1/26 of Executive's annualized Cash Compensation. In
                           the event of any anticipated tax law change during
                           the payment period that would increase Executive's
                           taxes on such income, Executive may elect to take and
                           receive his remaining compensation under this Section
                           3(e)(i), discounted at an interest rate of 4% per
                           annum to the present value thereof, in a single lump
                           sum payable within thirty days after written request
                           therefor setting forth such anticipated tax law
                           change.
 
                                       9
 
<PAGE>
 
                  (ii)     The percentage of Cash Compensation paid pursuant to
                           the Supplemental Employee Retirement Plan
                           contemplated by Section 2(g) shall be determined as
                           of, and payments under such plan shall commence on,
                           the third anniversary of the termination date as if
                           Executive had been continuously employed by
                           UnitedHealth Group through such third anniversary.
 
                  (iii)    Executive shall be entitled to continue participation
                           in the health care coverage as provided in Section
                           3(j) below and in all other life insurance or other
                           employee benefit plans of UnitedHealth Group
                           established under Section 2(f) of this Agreement to
                           the extent permitted by applicable law and the terms
                           and conditions of those plans. UnitedHealth Group
                           shall for a period of thirty-six months following the
                           effective date of the termination (A) continue to pay
                           disability coverage premiums or provide disability
                           coverage on a self-funded basis for Executive and his
                           dependents with UnitedHealth Group and Executive
                           sharing the costs associated with such coverage as if
                           Executive were still actively employed by
                           UnitedHealth Group, and (B) maintain and pay the
                           premiums with respect to the additional insurance
                           policies provided for in Section 2(i). Executive
                           shall continue to receive health care coverage as
                           provided in Section 3(j) of this Agreement. If
                           Executive cannot be covered under any of UnitedHealth
                           Group's group plans or policies, UnitedHealth Group
                           shall reimburse Executive for his full cost of
                           obtaining comparable alternative group or individual
                           coverage elsewhere, less any contribution that
                           Executive would have been required to make under
                           UnitedHealth Group's group plans or policies.
                           Executive shall receive any benefits payable under
                           Section 2(f) of this Agreement within sixty (60) days
                           of such termination.
 
                  (iv)     Any vesting requirements or other conditions that an
                           employee or participant complete a longer period of
                           service or employment as shall otherwise theretofore
                           pertain to any of Executive's rights or benefits
                           under all outstanding options (excluding the Special
                           Option granted pursuant to Section 2(c) which shall
                           already have been fully vested and exercisable upon
                           the Change of Control in accordance with its terms)
                           shall automatically terminate and be of no further
                           force or effect. All such rights and benefits shall
                           continue to be deemed to be fully vested and, as the
                           case may be, subject to accrual, payment or exercise
                           in full, or transfer (unless expressly
                           non-transferable) without regard to such
                           restrictions. The options and any other grants
                           awarded Executive under any of UnitedHealth Group's
                           stock option
 
                                      10
 
<PAGE>
 
                           or grant or similar stock plans, including the
                           Special Option, shall continue to be exercisable
                           in accordance with their terms for a period of up
                           to seventy-two months after termination of
                           Executive's employment subject to earlier termination
                           upon expiration of the option or grant in accordance
                           with the terms of such option or grant.
 
                  (v)      UnitedHealth Group shall pay a reasonable amount for
                           outplacement and job search services for Executive by
                           a firm selected by Executive and reasonably
                           acceptable to UnitedHealth Group.
 
                  (vi)     UnitedHealth Group shall provide Executive with
                           office, secretarial, and administrative support
                           reasonably customary for executives comparable to
                           Executive and shall provide Executive with use of
                           Company aircraft for personal business to the same
                           extent Executive could so use such aircraft for
                           personal business prior to termination, all for a
                           period of thirty-six months following termination of
                           employment.
 
                  (vii)    All accrued and unpaid vacation to the date of
                           termination shall be paid to Executive.
 
                  (viii)   In the event the payments, the acceleration of
                           vesting of stock options or the provision of any
                           other benefits under this Agreement or the Special
                           Option are "parachute payments" within the meaning
                           of, and the regulations, rulings and procedures
                           under, Sections 280G and 4999 of the Code or other
                           related or successor sections and provisions of the
                           Code at any time applicable thereto, and become
                           subject to excise taxes under Section 4999 of the
                           Code, UnitedHealth Group will pay Executive the
                           amount of such excise taxes plus all federal, state,
                           and local taxes applicable to UnitedHealth Group's
                           payment of such excise taxes, including any
                           additional excise taxes due under Section 4999 of the
                           Code with respect to payments made pursuant to this
                           Section 3(e)(viii). All determinations required by
                           this Section 3(e), upon termination of Executive's
                           employment and at UnitedHealth Group's sole expense,
                           shall forthwith be made by UnitedHealth Group's
                           regularly engaged independent public accounting firm.
                           In determining the amount of excise tax which would
                           be payable by Executive pursuant to Section 4999 of
                           the Code, such accounting firm shall take into
                           consideration and apply all non-includible,
                           excludable and exempt amounts of compensation in
                           accordance with Section 280G of the Code. The parties
                           shall cooperate fully by promptly providing such
                           accounting firm all information required to complete
                           such determinations. Such
 
                                        11
 
<PAGE>
 
                           determinations shall be set forth in a written
                           statement and analysis thereof issued by such
                           accounting firm which shall be promptly furnished
                           to and shall be binding upon the parties. In the
                           event Executive is subject to any audit with respect
                           to the amount of such excise taxes, Executive and
                           UnitedHealth Group will mutually cooperate in
                           contesting such audit; provided that UnitedHealth
                           Group will pay the cost of such contest and will
                           reimburse Executive on an after tax basis for any
                           additional excise taxes payable as a result of such
                           audit and for any income taxable to Executive
                           as a result of UnitedHealth Group paying the cost of
                           such audit and any additional excise taxes. In the
                           event any such audit results in a refund of excise
                           taxes paid, Executive will turn over the refund to
                           UnitedHealth Group less any income taxes incurred by
                           Executive in respect of the receipt of the refund.
 
         (f)  TERMINATION OF EMPLOYMENT BY EXECUTIVE UPON RETIREMENT. If
              Executive terminates employment under Section 3(b)(iii) without
              Good Reason prior to the end of the term of this Agreement, and at
              the time of termination the Board of Directors of UnitedHealth
              Group or its Compensation and Human Resources Committee determines
              that such termination by Executive constitutes a retirement in
              good standing, then upon the termination of Executive's
              employment:
 
                  (i)      Unless the Board of Directors of UnitedHealth Group
                           or its Compensation and Human Resources Committee
                           otherwise determine, all cash compensation payable to
                           Executive shall cease as of the date of termination.
 
                  (ii)     Unless the Board of Directors of UnitedHealth Group
                           or its Compensation and Human Resources Committee
                           otherwise determine, with consent of Executive to
                           continue vesting of the Supplemental Employee
                           Retirement Plan and to defer its payout, Executive
                           shall be entitled to begin receiving payments under
                           the Supplemental Employee Retirement Plan described
                           in Section 2(g) as of the date of retirement.
 
                  (iii)    Executive shall be entitled to continue participation
                           in the health care coverage as provided in Section
                           3(j) below and all other life insurance or other
                           employee benefit plans of UnitedHealth Group
                           established under Section 2(f) of this Agreement to
                           the extent permitted by applicable law and the terms
                           and conditions of those plans. UnitedHealth group
                           shall for a period of thirty-six months following the
                           effective date of the termination (A) continue to pay
 
                                       12
 
<PAGE>
 
                           disability coverage premiums or provide disability
                           coverage on a self-funded basis for Executive and his
                           dependents with UnitedHealth Group and Executive
                           sharing the costs associated with such coverage as if
                           Executive were still actively employed by
                           UnitedHealth Group, and (B) maintain and pay the
                           premiums with respect to the additional insurance
                           policies provided for in Section 2(i). Executive
                           shall continue to receive health care coverage as
                           provided in Section 3(j) of this Agreement. If
                           Executive cannot be covered under any of UnitedHealth
                           Group's group plans or policies, UnitedHealth Group
                           shall reimburse Executive for his full cost of
                           obtaining comparable alternative group or individual
                           coverage elsewhere, less any contribution that
                           Executive would have been required to make under
                           UnitedHealth Group's group plans or policies.
                           Executive shall receive any benefits payable under
                           Section 2(f) of this Agreement within sixty days of
                           such termination.
 
                  (iv)     Any vesting requirements or other conditions that an
                           employee or participant complete a longer period of
                           service or employment as shall otherwise theretofore
                           pertain to any of Executive's rights or benefits
                           under all outstanding options (excluding the Special
                           Option granted pursuant to Section 2(c) unless at the
                           time of retirement the Board of Directors of
                           UnitedHealth Group or its Compensation and Human
                           Resources Committee determines it is appropriate in
                           its discretion to vest all or a portion of the
                           unvested Special Option Shares and excluding any
                           option that specifies it will not vest in this
                           particular instance) or any bonus, incentive
                           compensation, deferred compensation, stock grant,
                           restricted stock, or similar plans, from time to time
                           implemented by UnitedHealth Group or its successor or
                           assign, shall automatically terminate and be of no
                           further force or effect. All such rights and benefits
                           shall continue to be deemed to be fully vested and,
                           as the case may be, subject to accrual, payment or
                           exercise in full, or transfer (unless expressly
                           non-transferable) without regard to such
                           restrictions. Stock options or grants awarded
                           Executive under any of UnitedHealth Group's stock
                           option or grant or similar stock plans to the extent
                           vested shall continue to be exercisable in accordance
                           with their terms for a period of up to seventy-two
                           months after termination of Executive's employment
                           subject to earlier termination upon expiration of the
                           option or grant in accordance with the terms of such
                           option or grant.
 
                  (v)      UnitedHealth Group shall provide Executive with
                           office, secretarial, and administrative support
                           reasonably customary for executives comparable to
                           Executive and shall provide Executive with use of
 
 
                                       13
<PAGE>
 
                           company aircraft for personal business to the same
                           extent Executive could so use such aircraft for
                           personal business prior to termination, all for a
                           period of thirty-six months following termination of
                           employment.
 
                  (vi)     All accrued and unpaid vacation to the date of
                           termination shall be paid to Executive.
 
                  (vii)    In the event the payments, the acceleration of
                           vesting of stock options or the provision of any
                           other benefits under this Agreement are "parachute
                           payments" within the meaning of, and the regulations,
                           rulings and procedures under, Sections 280G and 4999
                           of the Code or other related or successor sections
                           and provisions of the Code at any time applicable
                           thereto, and become subject to excise taxes under
                           Section 4999 of the Code, UnitedHealth Group will pay
                           Executive the amount of such excise taxes plus all
                           federal, state, and local taxes applicable to
                           UnitedHealth Group's payment of such excise taxes,
                           including any additional excise taxes due under
                           Section 4999 of the Code with respect to payments
                           made pursuant to this Section 3(d)(v). All
                           determinations required by this Section 3(f), upon
                           termination of Executive's employment and at
                           UnitedHealth Group's sole expense, shall forthwith be
                           made by UnitedHealth Group's regularly engaged
                           independent public accounting firm. In determining
                           the amount of excise tax which would be payable by
                           Executive pursuant to Section 4999 of the Code, such
                           accounting firm shall take into consideration and
                           apply all non-includible, excludable and exempt
                           amounts of compensation in accordance with Section
                           280G of the Code. The parties shall cooperate fully
                           by promptly providing such accounting firm all
                           information required to complete such determinations.
                           Such determinations shall be set forth in a written
                           statement and analysis thereof issued by such
                           accounting firm which shall be promptly furnished to
                           and shall be binding upon the parties. In the event
                           Executive is subject to any audit with respect to the
                           amount of such excise taxes, Executive and
                           UnitedHealth Group will mutually cooperate in
                           contesting such audit; provided that UnitedHealth
                           Group will pay the cost of such contest and will
                           reimburse Executive on an after tax basis for any
                           additional excise taxes payable as a result of such
                           audit and for any income taxable to Executive as a
                           result of UnitedHealth Group paying the cost of such
                           audit and any additional excise taxes. In the event
                           any such audit results in a refund of excise taxes
                           paid, Executive will turn over the refund to
 
 
                                       14
<PAGE>
 
                           UnitedHealth Group less any income taxes incurred by
                           Executive in respect of the receipt of the refund.
 
         (g)  TERMINATION OF EMPLOYMENT BY EXECUTIVE WITHOUT GOOD REASON. If
              Executive's employment with UnitedHealth Group is terminated by
              Executive under Section 3(b)(iii) without Good Reason prior to the
              end of the term of this Agreement then upon the termination of
              Executive's employment:
 
                  (i)      For a period of twenty-four months following the
                           effective date of the termination of employment,
                           Executive shall receive bi-weekly payments equal to
                           1/26 of Executive's annualized Cash Compensation. In
                           the event of any anticipated tax law change during
                           the payment period that would increase Executive's
                           taxes on such income, Executive may elect to take and
                           receive his remaining compensation under this Section
                           3(g)(i), discounted at an interest rate of 4% per
                           annum to the present value thereof, in a single lump
                           sum payable within thirty days after written request
                           therefor setting forth such anticipated tax law
                           change.
 
                  (ii)     The percentage of Cash Compensation paid pursuant to
                           the Supplemental Employee Retirement Plan
                           contemplated by Section 2(g) shall be determined as
                           of the date of termination. Payments under such plan
                           shall commence on the second anniversary of the
                           termination date.
 
                  (iii)    Executive's participation in the life insurance or
                           other employee benefit plans of UnitedHealth Group
                           shall terminate in accordance with applicable law and
                           those plans' terms and conditions. Executive shall
                           continue to receive health care coverage as provided
                           in Section 3(j) of this Agreement. Executive shall
                           receive any benefits payable under Section 2(f) of
                           this Agreement, within sixty days of such
                           termination.
 
                  (iv)     Any stock options or grants awarded Executive under
                           any of UnitedHealth Group's stock option or grant or
                           similar stock plans shall cease to vest following the
                           effective date of termination and, to the extent
                           vested, shall be exercisable for up to
                           thirty-six-months following the effective date of
                           termination subject to earlier termination of the
                           option or grant in accordance with the terms of such
                           option or grant.
 
                  (v)      All accrued and unpaid vacation to the date of
                           termination shall be paid to Executive.
 
 
                                       15
<PAGE>
 
         (h)  TERMINATION OF EMPLOYMENT IN THE EVENT OF DEATH. If Executive's
              employment with UnitedHealth Group is terminated under Section
              3(b)(iv) due to the death of Executive prior to the end of the
              term of this Agreement then upon the termination of Executive's
              employment:
 
                  (i)      For a period of twenty-four months following
                           Executive's death, Executive's beneficiaries shall
                           receive bi-weekly payments equal to 1/26 of
                           Executive's annualized Cash Compensation. In the
                           event of any anticipated tax law change during the
                           payment period that would increase Executive's taxes
                           on such income, Executive's beneficiaries may elect
                           to take and receive his remaining compensation under
                           this Section 3(h)(i), discounted at an interest rate
                           of 4% per annum to the present value thereof, in a
                           single lump sum payable within thirty days after
                           written request therefor setting forth such
                           anticipated tax law change.
 
                  (ii)     The Cash Compensation payable pursuant to the
                           Supplemental Employee Retirement Plan contemplated by
                           Section 2(f) shall commence.
 
                  (iii)    Executive's beneficiaries shall be entitled to
                           receive all proceeds from the life insurance provided
                           in accordance with this Agreement and any benefit
                           payable under Section 2(f) of this Agreement.
                           Executive's spouse and children shall continue to
                           receive health care coverage as provided in Section
                           3(j) of this Agreement.
 
                  (iv)     Any stock options or grants awarded Executive under
                           any of UnitedHealth Group's stock option or grant or
                           similar stock plans (excluding the Special Option
                           granted pursuant to Section 2(c) and any other option
                           that specifies it will not vest in this particular
                           instance) shall vest immediately upon Executive's
                           death and shall be exercisable by Executive's
                           beneficiaries for up to thirty-six-months following
                           the effective date of termination subject to earlier
                           termination of the option or grant in accordance with
                           the terms of such option or grant.
 
                  (v)      All accrued and unpaid vacation to the date of
                           termination shall be paid to Executive's estate.
 
         (i)  TERMINATION OF EMPLOYMENT IN THE EVENT OF PERMANENT DISABILITY. If
              Executive's employment with UnitedHealth Group is terminated under
              Section 3(b)(iv) due
 
 
                                       16
<PAGE>
 
              to the Permanent Disability of Executive prior to the end of the
              term of this Agreement then:
 
                  (i)      For a period of twenty-four months, Executive shall
                           receive bi-weekly payments equal to 1/26 of
                           Executive's annualized Cash Compensation. In the
                           event of any anticipated tax law change during the
                           payment period that would increase Executive's taxes
                           on such income, Executive may elect to take and
                           receive his remaining compensation under this Section
                           3(i)(i), discounted at an interest rate of 4% per
                           annum to the present value thereof, in a single lump
                           sum payable within thirty days after written request
                           therefor setting forth such anticipated tax law
                           change.
 
                  (ii)     The Cash Compensation payable pursuant to the
                           Supplemental Employee Retirement Plan contemplated by
                           Section 2(f) shall be determined as of, and the
                           payments shall commence on, the second anniversary of
                           the termination date.
 
                  (iii)    Executive shall be entitled to receive health care
                           coverage in accordance with Section 3(j) of this
                           Agreement and disability benefits provided under any
                           other employee benefit plans or compensation policies
                           of UnitedHealth Group to executive officers of
                           similar rank in accordance with applicable law and
                           those plans' terms and conditions. Executive shall
                           receive any benefits payable under Section 2(f) of
                           this Agreement within sixty days of such termination.
 
                  (iv)     Any stock options or grants awarded Executive under
                           any of UnitedHealth Group's stock option or grant or
                           similar stock plans (excluding the special option
                           granted pursuant to Section 2(c) and any other option
                           that specifies it will not vest in this particular
                           instance) shall vest immediately and shall be
                           exercisable for up to thirty-six-months following the
                           effective date of termination subject to earlier
                           termination of such option or grant in accordance
                           with the terms and conditions of such option or
                           grant.
 
                  (v)      All accrued and unpaid vacation to the date of
                           termination shall be paid to Executive.
 
         (j)  HEALTH CARE CONTINUATION COVERAGE. Notwithstanding any other
              provision of this Agreement to the contrary, if Executive is
              terminated other than for Cause pursuant to Section 3(b)(v),
              UnitedHealth Group shall continue to provide, at no cost to
              Executive, health care coverage for Executive and his wife for the
              remainder of their lives and for his children until they attain
              age 25,
 
 
                                       17
<PAGE>
 
              substantially as in effect on the date of termination. If
              Executive, his wife, or his children cannot be covered under any
              of UnitedHealth Group's group plans or policies, UnitedHealth
              Group shall reimburse Executive for his full cost of obtaining
              comparable alternative group or individual coverage elsewhere,
              less any contribution that Executive would have been required to
              make under UnitedHealth Group's group health plans or policies.
 
4.       PROPERTY RIGHTS, CONFIDENTIALITY, NON-SOLICIT AND NON-COMPETE
         PROVISIONS.
 
         (a) UNITEDHEALTH GROUP'S PROPERTY.
 
                  (i)      Executive shall promptly disclose to UnitedHealth
                           Group in writing all inventions, discoveries, and
                           works of authorship, whether or not patentable or
                           copyrightable, which are conceived, made, discovered,
                           written, or created by Executive alone or jointly
                           with another person, group or entity, whether during
                           the normal hours of employment at UnitedHealth Group
                           or on Executive's own time, during the term of this
                           Agreement. Executive assigns all rights to all such
                           inventions and works of authorship to UnitedHealth
                           Group. Executive shall give UnitedHealth Group any of
                           the assistance it reasonably requires in order for
                           UnitedHealth Group to perfect, protect and use its
                           rights to inventions and works of authorship.
 
                           This provision shall not apply to an invention,
                           discovery, or work of authorship for which no
                           equipment, supplies, facility, or trade secret
                           information of UnitedHealth Group was used and which
                           was developed entirely on the Executive's own time
                           and which does not relate to the business of
                           UnitedHealth Group, to UnitedHealth Group's
                           anticipated research or development, or does not
                           result from any work performed by Executive for
                           UnitedHealth Group.
 
                  (ii)     Executive shall not remove any records, documents, or
                           any other tangible items (excluding Executive's
                           personal property) from the premises of UnitedHealth
                           Group in either original or duplicate form, except as
                           is needed in the ordinary course of conducting
                           business for UnitedHealth Group.
 
                  (iii)    Executive shall immediately deliver to UnitedHealth
                           Group, upon termination of employment with
                           UnitedHealth Group, or at any other time upon
                           UnitedHealth Group's request, any property, records,
                           documents, and other tangible items (excluding
                           Executive's personal property) in Executive's
                           possession or control, including data incorporated in
                           word processing, computer, and other data storage
 
 
                                       18
<PAGE>
 
                           media, and all copies of such records, documents, and
                           information, including all Confidential Information,
                           as defined below.
 
         (b)  CONFIDENTIAL INFORMATION. During the course of his employment
              Executive will develop, become aware of, and accumulate expertise,
              knowledge, and information regarding UnitedHealth Group's
              organization, strategies, business, and operations and
              UnitedHealth Group's past, current, or potential customers,
              providers, and suppliers. UnitedHealth Group considers such
              expertise, knowledge, and information to be valuable,
              confidential, and proprietary. For purposes of this Agreement,
              "Confidential Information" shall mean non-public information
              concerning the financial data, business strategies, product
              development (and proprietary product data), marketing plans, past,
              current, or potential customers, providers, and suppliers, and
              other proprietary information concerning UnitedHealth Group.
              During this Agreement and at all times thereafter, Executive shall
              not use such Confidential Information or disclose it to other
              persons or entities except as is necessary for the performance of
              Executive's duties for UnitedHealth Group or as has been expressly
              permitted in writing by UnitedHealth Group. Provided, however,
              that the foregoing covenant shall not apply to any information
              possessed by Executive prior to his employment by UnitedHealth
              Group, or to any information which is in or has entered the public
              domain or has been disclosed within any industry segment in which
              UnitedHealth Group or any subsidiary or affiliated company of
              UnitedHealth Group operates by or pursuant to the authority of
              UnitedHealth Group or any subsidiary or affiliated company of
              UnitedHealth Group.
 
         (c)  NON-SOLICITATION. During (i) the term of this Agreement, (ii) any
              period for which Executive is receiving payments under Sections
              3(d), 3(e), 3(f), or 3(g) of this Agreement, notwithstanding any
              lump-sum payment that Executive might receive under any such
              Section, (iii) any period following the termination of this
              Agreement in which Executive remains employed by UnitedHealth
              Group, and (iv) for a period of one year after the last day of the
              latest of any period described in (i), (ii) or (iii), Executive
              shall not directly or indirectly attempt to hire away any
              then-current employee of UnitedHealth Group or a subsidiary of
              UnitedHealth Group or to persuade any such employee to leave
              employment with UnitedHealth Group.
 
         (d)  NON-COMPETITION.
 
                  (i)      During the term of this Agreement and ending one year
                           after the later of (A) any period for which Executive
                           is receiving payments under Section 3(d), 3(e), 3(f),
                           or 3(g) of this Agreement, notwithstanding any
                           lump-sum payment that Executive might receive
 
 
                                       19
<PAGE>
 
                           under any such Section or (B) the last day in which
                           Executive remains employed by UnitedHealth Group
                           following termination of this Agreement (the
                           "Restriction Period"), Executive shall not directly
                           or indirectly solicit, divert, or take away from
                           UnitedHealth Group, or attempt to solicit, divert, or
                           take away from UnitedHealth Group, the business of
                           any person, partnership, company, or corporation with
                           which UnitedHealth Group, or any subsidiary or
                           affiliated company thereof in which UnitedHealth
                           Group has a more than 20% equity interest (the
                           "UnitedHealth Group Companies"), has established a
                           business or customer relationship; PROVIDED, HOWEVER,
                           that this Section 4(d)(i) shall apply only to the
                           business(es) in which UnitedHealth Group or any of
                           the UnitedHealth Group Companies were engaged prior
                           to or planned to be engaged in within six months
                           after the termination of this Agreement.
 
                  (ii)     During the Restriction Period, without UnitedHealth
                           Group's prior written consent, Executive shall not
                           engage or participate, either individually or as an
                           employee, consultant or principal, partner, agent,
                           trustee, officer or director of a corporation,
                           partnership, or other business entity, in any
                           business in which UnitedHealth Group or any of the
                           UnitedHealth Group Companies is engaged; PROVIDED,
                           HOWEVER, that this Section 4(d)(ii) shall apply only
                           to businesses whose primary business is in
                           competition with a material business of UnitedHealth
                           Group as of the date of termination of this
                           Agreement.
 
                  (iii)    Except as otherwise set forth below in Section
                           4(d)(iv), Executive's obligations under this Section
                           4(d) shall remain in effect only so long as
                           UnitedHealth Group continues to make the payments and
                           provide the benefits specified in Section 3(d), 3(e),
                           3(f), or 3(g) notwithstanding any lump sum payment
                           that Executive might receive under any such Section
                           (though UnitedHealth Group shall have no option to
                           discontinue such payments on its own).
 
                  (iv)     The provisions of this Section 4(d) shall terminate
                           one year after the date of termination of this
                           Agreement if Executive (A) elects not to receive any
                           further payments and benefits specified in Section
                           3(d), 3(e), 3(f), or 3(g), (B) pays to UnitedHealth
                           Group an amount equal to (1) any profits realized by
                           Executive upon the exercise of UnitedHealth Group
                           stock options (with profits equaling the spread
                           between the exercise price and the fair market value
                           at the close of business on the respective date of
                           exercise) that are accelerated pursuant to any such
                           Section, but only to the extent such options would
                           not otherwise have vested prior to exercise had
                           Executive
 
 
                                       20
<PAGE>
 
                           remained an employee of UnitedHealth Group,
                           multiplied by (2) the percentage of the period of
                           time pursuant to any such Section 3(d) for which this
                           Section shall no longer remain in effect, and (C)
                           reimburses UnitedHealth Group for that portion of any
                           single lump sum payment Executive received pursuant
                           to any such Section which represents the period of
                           time for which this Section shall no longer remain in
                           effect.
 
5.       MISCELLANEOUS.
 
         (a) DEFINITIONS.  For purposes of this Agreement:
 
                  (i)      "Cash Compensation" means the sum of Executive's base
                           annual compensation together with Executive's
                           incentive compensation as hereinafter determined. In
                           determining base annual compensation, the greater of
                           $1,600,000 or the Executive's highest annualized base
                           salary shall be used. Executive's incentive
                           compensation shall equal the average incentive
                           compensation actually earned by Executive for the two
                           years preceding the date of determination for which
                           an incentive determination has been made.
                           Notwithstanding the foregoing, if Executive's
                           severance compensation is paid pursuant to Sections
                           3(e) or 3(f), then Executive's incentive compensation
                           will equal the greater of the amount determined in
                           accordance with this paragraph or an amount Executive
                           would have been paid at Executive's then target
                           level. In any event, incentive compensation shall
                           include the cash equivalent value at the time earned
                           of any incentive compensation earned and paid or
                           payable in Company Common Stock or other form of
                           consideration. The Special Bonus paid pursuant to
                           Section 2(e) shall be treated as if it were incentive
                           compensation received equally for 1997 and 1998.
 
                  (ii)     "Cause" means (A) the willful and continued failure
                           by Executive substantially to perform his duties
                           hereunder (other than any such failure resulting from
                           his disability or from termination by Executive for
                           Good Reason), after a written demand for substantial
                           performance is delivered to Executive that
                           specifically identifies the manner in which Executive
                           has not remedied such failure within a reasonable
                           time after receipt of such written notice; (B) a
                           violation of United's Code of Conduct that is
                           materially detrimental to UnitedHealth Group and that
                           Executive has not remedied within a reasonable time
                           after receipt of a written notice from UnitedHealth
                           Group that specifically identifies such violation;
                           (C) the conviction of Executive of a felony; or (D)
                           any other willful and material breach of
 
 
                                       21
<PAGE>
 
                           this Agreement by Executive that Executive has not
                           remedied within a reasonable time after receipt of a
                           written notice from UnitedHealth Group that
                           specifically identifies such breach. For purposes of
                           this paragraph, no act, or failure to act, on
                           Executive's part will be deemed "willful" unless
                           done, or omitted to be done, by Executive not in good
                           faith and without reasonable belief that his action
                           or omission was in the best interest of UnitedHealth
                           Group.
 
                  (iii)    "Change in Control" means (A) the acquisition by an
                           individual, entity or group (within the meaning of
                           Section 13(d)(3) or 14(d)(2) of the Securities
                           Exchange Act of 1934, as amended (the "Exchange
                           Act")) of beneficial ownership (within the meaning of
                           Rule 13d-3 promulgated under the Exchange Act) of 50%
                           or more of the then outstanding shares of common
                           stock of UnitedHealth Group (the "Outstanding Common
                           Stock"); (B) individuals who, as of the date hereof,
                           constitute UnitedHealth Group's Board of Directors
                           (the "Incumbent Board") cease for any reason to
                           constitute at least a majority of the UnitedHealth
                           Group Board of Directors, provided, however, that any
                           individual becoming a director subsequent to the date
                           hereof whose election, or nomination for election by
                           UnitedHealth Group's shareholders, was approved by a
                           vote of at least a majority of the directors then
                           comprising the Incumbent Board shall be considered as
                           though such individual were a member of the Incumbent
                           Board, but excluding, for this purpose, any such
                           individual whose initial assumption of office occurs
                           as a result of either an actual or threatened
                           election contest (as such terms are used in Rule
                           14a-11 of Regulation 14A promulgated under the
                           Exchange Act) or other actual or threatened
                           solicitation of proxies or consents; (C) the approval
                           by the stockholders of UnitedHealth Group of a
                           reorganization, merger or consolidation, in each
                           case, with respect to which the beneficial owners of
                           the Outstanding Common Stock immediately prior to
                           such reorganization, merger or consolidation,
                           beneficially own, directly or indirectly, less than
                           two-thirds of the then outstanding shares of common
                           stock and the combined voting power of the then
                           outstanding voting securities entitled to vote
                           generally in the election of directors of the
                           corporation resulting from such reorganization,
                           merger or consolidation in substantially the same
                           proportions as their ownership, immediately prior to
                           such reorganization, merger or consolidation; or (D)
                           the approval by the stockholders of UnitedHealth
                           Group of (i) a complete liquidation or dissolution of
                           UnitedHealth Group or (ii) the sale or other
                           disposition of all or substantially all of the assets
                           of UnitedHealth Group.
 
 
                                       22
<PAGE>
 
                  (iii)    "Confidential Information" shall have the meaning set
                           forth in Section 4(b).
 
                  (iv)     "Permanent Disability" means Executive's inability by
                           reason of accident, illness, or injury to perform any
                           of the principal duties, responsibilities, or
                           functions of Executive's employment for a period of
                           180 days or such shorter period as provided in the
                           policy for the Supplemental Long-Term Disability
                           Benefit.
 
                  (v)      "Good Reason" means (A) the assignment to Executive
                           of any duties inconsistent in any respect with
                           Executive's position (including status, offices,
                           titles and reporting relationships), authority,
                           duties or responsibilities as contemplated by Section
                           1 or any other action by UnitedHealth Group which
                           results in a diminution in such position, authority,
                           duties or responsibilities, excluding for this
                           purpose an isolated, insubstantial and inadvertent
                           action not taken in bad faith and which is remedied
                           by UnitedHealth Group promptly after receipt of
                           notice thereof given by Executive; (B) the failure by
                           UnitedHealth Group to elect Executive to the position
                           of the Chairman and Chief Executive Officer and as a
                           member of the Board of Directors or any other action
                           by UnitedHealth Group which results in the diminution
                           of Executive's position, authority, duties, or
                           responsibilities, excluding an isolated,
                           insubstantial and inadvertent action not taken in bad
                           faith and which is remedied by UnitedHealth Group
                           promptly after receipt of notice thereof given by
                           Executive; (C) any failure of UnitedHealth Group to
                           pay base salary or incentive compensation or to grant
                           Annual Options in accordance with Section 2(a), (b)
                           and (d) or any failure by UnitedHealth Group to
                           maintain or provide the plans, programs, policies and
                           practices, or benefits described in Section 4(f),
                           (g), (h) and (i) on the most favorable basis such
                           plans programs, policies and practices were
                           maintained and benefits are provided to Executive on
                           the Effective Date; (D) UnitedHealth Group's
                           requiring Executive to be based at any office or
                           location other than its principal executive offices
                           at its current location in Minnetonka, Minnesota or
                           within twenty-five miles of such current location,
                           except for travel reasonably required in the
                           performance of the Executive's responsibilities; (E)
                           any purported termination by UnitedHealth Group of
                           Executive's employment otherwise than as expressly
                           permitted by this Agreement; (F) any other material
                           breach of this Agreement by UnitedHealth Group that
                           is not remedied within a reasonable time after
                           written notice from Executive to UnitedHealth Group
                           that specifically identifies such breach; or (G) any
                           failure by UnitedHealth Group to comply with and
                           satisfy Section 5(b) of this
 
 
                                       23
<PAGE>
 
                           Agreement. For purposes of the definition of "Good
                           Reason," any good faith determination of "Good
                           Reason" made by the Executive on or after the Change
                           of Control Date shall be conclusive.
 
                  (vi)     "Spouse" shall have the meaning set forth in Section
                           2(g).
 
         (b)  ASSIGNMENT. This Agreement shall be binding upon and shall inure
              to the benefit of the parties and their respective legal and
              personal representatives, heirs, successors, and assigns, but may
              not be assigned by either party (except by operation of law upon
              death or disability of Executive) without the prior written
              consent of the other party, provided that any assignment by
              UnitedHealth Group shall not relieve UnitedHealth Group of its
              obligations under this Agreement. UnitedHealth Group will require
              any successor (whether direct or indirect, by purchase, merger,
              consolidation or otherwise) to all or substantially all of its
              business and/or assets to assume expressly and agree to perform
              this Agreement in the same manner and to the same extent that
              UnitedHealth Group is required to perform under this Agreement if
              no such succession had taken place. As used in this Agreement,
              "UnitedHealth Group" shall mean each as hereinbefore defined and
              any successor to its business and/or assets as aforesaid which
              assumes and agrees to perform this Agreement by operation of law,
              or otherwise.
 
 
         (c)  NOTICES. All notices under this Agreement shall be in writing and
              shall be deemed to have been duly given if delivered by hand or
              mailed by registered or certified mail, return receipt requested,
              postage prepaid, to the party to receive the same at the address
              set forth below or at such other address as may have been
              furnished by proper notice.
 
              UnitedHealth Group:           300 Opus Center
                                            9900 Bren Road East
                                            Minnetonka, MN 55343
                                            Attn: General Counsel
 
                       Executive:
 
         (d)  ENTIRE AGREEMENT. This Agreement contains the entire understanding
              of the parties with respect to its subject matter and may be
              amended or modified only by a subsequent written amendment
              executed by the parties. This Agreement replaces and supersedes
              any and all prior employment or employment related agreements and
              understandings, including any letters or memos which may
 
 
                                       24
<PAGE>
 
              have been construed as agreements, between Executive and
              UnitedHealth Group or any of its subsidiaries and affiliated
              companies.
 
         (e)  CHOICE OF LAW. This Agreement shall be construed and interpreted
              under the applicable laws and decisions of the State of Minnesota.
 
         (f)  WAIVERS. No failure on the part of either party to exercise, and
              no delay in exercising, any right or remedy under this Agreement
              shall operate as a waiver; nor shall any single or partial
              exercise of any right or remedy preclude any other or further
              exercise of any right or remedy.
 
         (g)  ADEQUACY OF CONSIDERATION. Executive acknowledges and agrees that
              he has received, prior to or contemporaneously with the Effective
              Date, adequate consideration from UnitedHealth Group to enter into
              this Agreement.
 
         (h)  DISPUTE RESOLUTION AND REMEDIES. Any dispute arising between the
              parties relating to this Agreement or to Executive's employment by
              UnitedHealth Group shall be resolved by binding arbitration held
              in the City of Minneapolis pursuant to the Rules of the American
              Arbitration Association, except as hereinafter expressly modified.
              If the disputing and responding parties are unable to agree upon a
              resolution within forty-five business days after the responding
              party's receipt of written notice from the disputing party setting
              forth the nature of the dispute, within the following ten business
              days the disputing and responding parties shall select a mutually
              acceptable single arbitrator to resolve the dispute or, if the
              parties fail or are unable to do so, each shall within the
              following ten business days select a single arbitrator, and the
              two so selected shall select a third arbitrator within the
              following ten business days. Such single arbitrator or, as the
              case may be, panel of three arbitrators acting by majority
              decision, shall resolve the dispute within sixty days after the
              date such arbitrator, or the last of them so selected, is
              selected, or as soon thereafter as practicable. If either party
              refuses or fails to select an arbitrator within the time therefor,
              the other party may do so on such refusing or failing party's
              behalf. The arbitrators shall have no power to award any punitive
              or exemplary damages or may construe or interpret but shall not
              ignore or vary the terms of this Agreement and shall be bound by
              controlling law. The parties acknowledge that Executive's failure
              to comply with the Confidentiality, Non-Solicit and Non-Compete
              provisions of this Agreement will cause immediate and irreparable
              injury to UnitedHealth Group and that therefore the arbitrators,
              or a court of competent jurisdiction if an arbitration panel
              cannot be immediately convened, will be empowered to provide
              injunctive relief, including temporary or preliminary relief, to
              restrain any such failure to comply. The party not prevailing in
              the proceeding shall bear the costs and expenses thereof,
              including without limitation, the reasonable attorneys' fees of
              the prevailing
 
 
                                       25
<PAGE>
 
              party. The arbitration award or other resolution may be entered
              as a judgment at the request of the prevailing party by any court
              of competent jurisdiction in Minnesota or elsewhere.
 
         (i)  SURVIVAL. The provisions of Sections 2(f), 2(i), 3(c)-3(j), 4 and
              5 shall survive any termination of this Agreement pursuant to
              Section 3(b).
 
 
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION THAT MAY BE ENFORCED BY
THE PARTIES.
 
 
UNITEDHEALTH GROUP                          WILLIAM W. MCGUIRE, M.D.
 
By______________________________            _________________________________
 
Date____________________________            Date_____________________________
 
 
                                       26
 
 
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February 13, 2001
 
William W. McGuire, M.D.
Chairman and CEO
UnitedHealth Group Incorporated
9900 Bren Road East
Minnetonka, Minnesota 55343
 
Re: Employment Agreement
 
Dear Bill:
 
I am writing to confirm the intent and understanding of the Compensation and
Human Resources Committee of the Board of Directors (the "Committee") of
UnitedHealth Group Incorporated (the "Company") as it relates to the annual
stock option grant you are entitled to receive pursuant to Section 2(b) of your
employment agreement with the Company. It is the Committee's intent and
understanding that the minimum option grant set forth in such section shall be
adjusted to reflect any stock splits, consolidations or stock dividends in the
Company's common stock occurring after the effective date of your employment
agreement. Therefore, as a result of the Company's two-for-one stock split that
was payable December 22, 2000, you are currently entitled to receive options to
purchase a minimum of 650,000 shares of the Company's common stock annually.
 
Sincerely,
 
William G. Spears
Chairman
Compensation and Human Resources Committee
UnitedHealth Group Incorporated
 
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