EXHIBIT 10(c)

 

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

 

2

--------------------------------------------------------------------------------

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

 

3

--------------------------------------------------------------------------------

       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

 

4

--------------------------------------------------------------------------------

       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

 

5

--------------------------------------------------------------------------------

       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