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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
effective January 1, 2000, by and between Caremark Rx, Inc., a Delaware
corporation ("Employer"), and Xxxx Xxxxxxx ("Officer").
RECITALS
WHEREAS, Employer desires to continue to retain the services of Officer
and Officer desires to serve Employer in the capacity of President/COO of
Caremark PSG; and
WHEREAS, Employer and Officer desire to set forth the terms and
conditions of Officer's continued employment with Employer under this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and of the
mutual covenants and agreements contained in this Agreement, the parties agree
as follows:
1) Term.
a) Employer agrees to employ Officer, and Officer agrees
to serve Employer, on an "at will" basis for such period (such period being the
"Term") as Employer desires to employ Officer and Officer agrees to serve
Employer. Without limiting the generality of the foregoing sentence, Employer
shall have the right to terminate Officer at any time for any reason or no
reason without any obligation to Officer other than for Base Salary (as
hereinafter defined) earned but unpaid through the date of such termination and
for the obligations of Employer pursuant to Section 5 of this Agreement.
2) Employment of Officer.
a) Position; Duties. Employer and Officer agree that,
subject to the provisions of this Agreement, Officer will serve as President/COO
of Caremark PSG of Employer.
3) Compensation.
a) Salary. Employer shall pay Officer a salary in the
amount of Five Hundred Thousand Dollars ($500,000.00) per year (pro-rated for
any partial year during the Term) (the "Base Salary") payable in equal Bi-weekly
installments, less state and federal tax and other legally required
withholdings. The Base Salary shall be subject to review and adjustment from
time-to-time consistent with past practice.
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b) Incentive Compensation. During the Term, Officer
shall be eligible to receive from Employer incentive compensation in an amount
equal to One Hundred (100%) percent of Base Salary (pro-rated for any partial
calendar year during the Term), less state and federal tax and other legally
required and Officer-authorized withholdings. The incentive compensation
contemplated by this Section 3(2) shall be payable to Officer solely at the
discretion of the Chief Executive Officer of Employer based upon Officer's
performance. The incentive compensation that Officer shall be eligible to earn
under this Section 3(b) shall be subject to review and adjustment from
time-to-time consistent with past practice.
4) Benefits.
a) Fringe Benefits. In addition to the compensation and
other remuneration provided for in this Agreement, Officer shall be entitled,
during the Term, to such other benefits of employment with Employer as are now
or may after the date of this Agreement be in effect for employees of Employer
at the same level as Officer.
b) Expenses. During the Term, Employer shall reimburse
Officer promptly for all reasonable travel, entertainment, parking, business
meeting and similar expenditures in pursuit and furtherance of Employer's
business upon receipt of reasonable supporting documentation as required by
Employer's policies applicable to its officers generally.
c) Corporate Apartment and Relocation. Employer shall
provide Officer an apartment for his use in the greater Northbrook, Illinois,
area at no expense to Officer. Additionally, if Officer elects to move from
Whitefish Bay, Wisconsin, to the Chicago area, Officer shall be eligible for
relocations costs in accordance with Employer's relocation policy for
executives, which shall include, without limitation, costs for movement of
household goods and certain closing costs associated with the sale of Officer's
prior residence and purchase of Officer's new residence.
d) Stock Options. Officer shall participate in the stock
options plans of the Company. The opportunity for the grant of such options will
be reviewed at least annually.
5) Termination and Termination Benefits.
The following Section provides the basis for terminating this
Agreement and the applicable termination benefits payable to Officer. Employer
shall provide to Officer the applicable benefits and/or payments set forth
below.
a) Termination Due to Retirement, Disability or Death.
If this Agreement is terminated due to Officer's voluntary retirement,
disability, or his death, then Officer shall be entitled to (i) payment of any
previously unpaid Base Salary through the date of termination; (ii) payment of
Officer's Performance Bonus under Section 3(b) through the date of termination,
calculated on the basis of the sum of the total achievable amounts of the
Performance Bonus for the current fiscal year, divided by twelve months, and
multiplied by the number of months Officer is employed during such fiscal year
through the date of termination, with any partial month of employment to be
treated as a full month; and (iii) payment of any life insurance, disability or
other
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benefits, if any, for which Officer is then eligible under the terms of
Employer's employee retirement, benefit and welfare plans. For purposes of this
Section 5(a), the term "retirement" is defined as the date Officer reaches age
70-1/2, or the date Officer retires in accordance with Employer's retirement
arrangements established for Officer with Officer's consent. Further, for
purposes of this Section 5(a), the term "disability" is defined as any condition
in which Officer has made application for and has been declared eligible to
receive long term disability benefits pursuant to Employer's applicable
Long-Term Disability Plan. If no such plan exists, then Officer shall submit
supporting medical information to Employer that certifies he is totally and
permanently disabled and therefore, unable to perform his duties for a minimum
of at least 90 days. Employer's Chief Executive Officer shall determine, with
the assistance of a medical expert, whether Officer is disabled for purposes of
this Section in the absence of a Long-Term Disability Plan.
b) Termination by Resignation. Officer shall have the
right to voluntarily terminate this Agreement by providing Employer with thirty
(30) days written notice. If Officer voluntarily terminates his employment,
other than for Good Reason as defined in Section 5(d), then Officer shall be
entitled to only those benefits and payments he is entitled to under the
applicable controlling benefit plans and policies. Officer shall not be entitled
to any severance or like payments.
c) Termination for Cause. Employer shall have the right
to terminate this Agreement for Cause by providing Officer written notice as
provided below. If Employer terminates Officer for cause, then Officer shall be
entitled to only those benefits and payments he is entitled to under the
applicable controlling benefit plans and policies. Officer shall not be entitled
to any severance or like payments. The term "Cause" shall mean Officer (i)
materially breaches any material term of this Agreement, (ii) is convicted by a
court of competent jurisdiction of a felony, (iii) refuses, fails or neglects to
perform his duties under this Agreement in a manner substantially detrimental to
the business of Employer, (iv) engages in illegal or other wrongful conduct
substantially detrimental to the business or reputation of Employer, or (v)
develops or pursues interests substantially adverse to Employer; provided,
however, that in the case of clauses (i), (iii), or (v), no such termination
shall be effective unless (1) Employer shall have given Officer 30 days' prior
written notice of any conduct or deficiency in performance by Officer that
Employer believes could, if not discontinued or corrected, lead to Officer's
termination under this Section 5(c), to provide Officer an opportunity to cure
such non-compliant conduct or performance, and (2) Officer shall not have cured
such non-compliant conduct or performance during such notice period.
d) Termination for Good Reason. Officer may terminate
this Agreement for Good Reason by providing 30 days written notice to Employer.
If Officer terminates this Agreement for Good Reason, then Officer shall be
entitled to the termination benefits described in Section 5(e) of this
Agreement. For purposes of this Section, "Good Reason" is defined as follows:
(i) A reduction in Officer's total compensation, other than a reduction in
connection with an across-the-board salary reduction affecting Employer's
Officers' at a comparable level to Officer; (ii) A material reduction in
Officer's title, duties or responsibilities unless replaced with a new title,
duties or new responsibilities of comparable stature or value to Employer within
30 days; (iii) A material breach of this Agreement by Employer that is not
remedied within 30 days after receiving written notice from Officer of such
failure; (iv) Any purported termination for Cause or Disability without
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reasonable grounds for the termination; (v) Any change in Officer's primary work
location from the greater Chicago, Illinois area; or (vi) Officer ceases to be
operationally responsible for the Caremark Pharmaceutical Group business.
Notwithstanding the provisions contained in Sections 5(d)(ii) and Section
5(d)(vi), Employer may alter or change Officer's Title and duties as part of a
corporate restructuring, provided, Officer remains the functional Chief
Operational Officer for either the pharmaceutical benefits business or the
therapeutic services business.
e) Termination without Cause. Employer may terminate
this Agreement without cause at any time and for any reason. If Employer
terminates this Agreement without cause, it shall provide Officer with the
following termination benefits: (i.) 30 days written notice of Employer's
intention to terminate Officer's Agreement without cause; (ii.) Continued
payment of Officer's current base salary for three (3) years; (iii.) Continued
payment of Officer's current annual incentive bonus for three (3) years; (iv.)
Continued coverage under Employer's standard and Officer benefit plans for three
(3) year's in accordance with the terms of the applicable plans, provided, if
the terms of the applicable plan does not permit continued coverage, then
Employer shall pay to Officer the value of the applicable benefits in lump sum
upon termination of employment; and (v.) A right to immediately vest in 100% of
all options to purchase Common Stock of Caremark Rx that have been granted to
Officer and a period of at least 90 days following termination to exercise all
such options.
f) Termination following a Change in Control. During the
first six months following a change in control, Officer may provide the
Successor Employer with written notice requesting the Successor Employer to
reconfirm in writing that it intends to continue all of the terms and conditions
of this Employment Agreement. If Successor Employer fails to respond to Officer
within Sixty (60) days of receipt of Officer's written notice, or if Successor
Employer declines to continue all of the terms and conditions of Officer's
Employment Agreement, then Officer shall be deemed to be terminated following a
change in control. If a successor Employer terminates this Agreement at any time
following a change in control, it shall provide Officer with the following
termination benefits: (i.) 30 days written notice of its intention to terminate
this Agreement; (ii.) A lump sum payment equivalent to three (3) year's of
Officer's current base salary; (iii.) A lump sum payment equivalent to three (3)
year's of Officer's current annual incentive bonus; (iv.) Continued coverage
under Employer's standard and Officer benefit plans for three (3) year's in
accordance with the terms of the applicable plans, provided, if the terms of the
applicable plan does not permit continued coverage, then Employer shall pay to
Officer the value of the applicable benefits in lump sum upon termination of
employment; and (v.) The applicable Stock Option Plan shall control the
treatment of Officer's unexercised stock options. For purposes of this
Agreement, the term "Change in Control" shall mirror the definition of a "Change
in Control" contained in the Employer' 1998 Stock Option Plan.
g) Full Release of Claims. As a condition precedent to
receiving the payments and benefits described in Section 5 of this Agreement,
Officer shall be required to execute a full release of all claims for the
benefit of Employer in a form provided exclusively by Employer. Upon execution
of this release, Employer shall provide and/or begin the payments and benefits
described in Section 5, within 10 days.
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h) Subsequent Employment. Subject to the covenants
contained in Section 8 of this Agreement, Officer shall be entitled to receive
severance compensation to the extent provided in this Agreement regardless of
whether Officer obtains other employment following termination of his employment
with Employer.
6) Certain Additional Payments By Employer.
a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, if it shall be determined that
any payment or distribution by Employer to or for Officer's benefit (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 5) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
Officer with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Officer shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Officer of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Officer retains an amount of the Gross-Up Payment equal to the excise Tax
imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 6, if
it shall be determined that Officer is entitled to a Gross-Up Payment, but that
the Payments do not exceed 110% of the greatest amount that could be paid to
Officer such that the receipt of Payments would not give rise to any Excise Tax
(the "Reduced Amount"), then no Gross-Up Payment shall be made to Officer and
the Payments, in the aggregate, shall be reduced to the Reduced Amount.
All determinations required to be made under this Section 6,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized accounting firm as may
be designated by Officer (the "Accounting Firm") which shall provide detailed
supporting calculations both to Employer and Officer within 15 business days of
the receipt of notice from Officer that there has been a Payment, or such
earlier time as is requested by Employer. In the event that the Accounting Firm
is serving as accountant or auditor for an individual, entity or group effecting
a change in control, Officer shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne by Employer. Any Gross-Up
Payment, as determined pursuant to this Section 6, shall be paid by Employer to
Officer within five days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon Employer and
Officer. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by Employer should have been made ("Underpayment"), consistent
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with the calculations required to be made hereunder. In the event that Employer
exhausts its remedies pursuant to Section 6(b) and Officer is required to make a
payment of any Excise Tax, the Accounting firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by Employer to or for Officer's benefit.
b) Officer shall notify Employer in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by Employer of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after Officer is informed in
writing of such claim and shall apprise Employer of the nature of such claim and
the date on which such claim is requested to be paid. Officer shall not pay such
claim prior to the expiration of the 30-day period following the date of which
is gives such notice to Employer (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If Employer notifies
Officer in writing prior to the expiration of such period that it desires to
contest such claim, Officer shall:
(i) give Employer any information reasonably
requested by Employer relating to such claim;
(ii) take such action in connection with
contesting such claim as Employer shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by Employer,
(iii) cooperate with Employer in good faith in
order effectively to contest such claim, and
(iv) permit Employer to participate in any
proceeding relating to such claim;
provided, however, that Employer shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Officer harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest and penalties)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 6, Employer shall
control all proceedings taken in connection with such contest and, it its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct Officer to pay the tax claimed and xxx
for a refund or contest the claim in any permissible manner, and Officer agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as
Employer shall determine; provided, however, that if Employer directs Officer to
pay such claim and xxx for a refund, Employer shall advance the amount of such
payment to Officer, on an interest-free basis, and shall indemnify and hold
Officer harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for Officer's taxable year with respect to which such
contested amount is claimed
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to be due is limited solely to such contested amount. Furthermore, Employers
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable and the Officer shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
c) If, after Officer's receipt of an amount advanced by
Employer pursuant to Section 6(b), Officer becomes entitled to receive any
refund with respect to such claim, Officer shall (subject to Employer complying
with the requirements of this Section 6(b)) promptly pay to Employer the amount
of such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after Officer's receipt of an amount advanced by
Employer pursuant to Section 6(b), a determination is made that Officer shall
not be entitled to any refund with respect to such claim and Employer does not
notify Officer in writing of its intent to contest such denial of refund prior
to the expiration of 30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
7) Trade Secrets and Confidentiality
a) Trade Secrets. Officer agrees and covenants that,
both during the Term and after termination of his employment, Officer will hold
in a fiduciary capacity for the benefit of Employer, and shall not directly or
indirectly use or disclose, except as Employer authorizes in connection with the
performance of Officer's duties, any Trade Secret, as defined below, that
Officer may have or acquire during the Term for so long as the such information
remains a Trade Secret. The term "Trade Secret" as used in this Agreement shall
mean information including, but not limited to, technical or non-technical data,
a formula, a pattern, a compilation, a program, a device, a method, a technique,
a drawing, a process, financial data, financial plans, product plans, or a list
of actual or potential customers or suppliers, including without limitation,
information received by Employer or Officer from any client or potential client
of Employer, which:
(i) Derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or
use; and
(ii) Is the subject of reasonable efforts by
Employer or the client from which the information was received to maintain its
secrecy.
b) Confidentiality. In addition to the covenants set
forth in Section 7(a), Officer agrees that, during the Term and for a period of
five (5) years after termination of his employment, Officer will hold in a
fiduciary capacity for the benefit of Employer and shall not directly or
indirectly use or disclose, except as Employer authorizes in connection with the
performance of Officer's duties, any Confidential or Proprietary Information, as
defined below, that Officer may have or acquire (whether or not developed or
compiled by Officer and whether or not Officer has been authorized to have
access to such Confidential or Proprietary Information) during the Term. The
term "Confidential or Proprietary Information" as used in this Agreement means
any secret,
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confidential or proprietary information of Employer, including information
received by Employer or Officer from any client or potential client of Employer,
not otherwise included in the definition of "Trade Secret" in Section 7(a)
above. The term "Confidential or Proprietary Information" does not include
information that has become generally available to the public by the act of one
who has the right to disclose such information without violating any right of
the client to which such information pertains.
c) Restrictions Supplemental to State Law. The
restrictions set forth in Sections 7(a) and 7(b) are in addition to and not in
lieu of protections afforded to trade secrets and confidential information under
applicable state law. Nothing in this Agreement is intended to or shall be
interpreted as diminishing or otherwise limiting Employer's right under
applicable state law to protect its trade secrets and confidential information.
8) Restrictive Covenants.
As a material inducement for Employer to enter into this Agreement,
Officer agrees to the following restrictive covenants.
a) Non-competition. During the term of this Agreement
and for a period of 3 years after the termination of this Agreement, you shall
not, except with Employer's express prior written consent, directly or
indirectly, establish, engage, own, manage, operate, join or control, or
participate in the establishment, ownership, management, operation or control or
be a director, officer, employee, salesman, agent or representative of, or be a
consultant to, any person or entity in any business in competition with Employer
or its subsidiaries in any state where the they now conduct, or during such 3
year period, begin conducting, any material business.
b) Non-solicitation. During the term of this Agreement
and for a period of 3 years after the termination of this Agreement, you shall
not, except with Employer's express prior written consent, directly or
indirectly, in any capacity, for the benefit of any person or entity: Solicit,
interfere with, or divert, any person who is a customer, patient, supplier,
employee, salesman, agent or representative of Employer or its subsidiaries, in
connection with any business in competition with Employer or its subsidiaries.
c) Modification of covenants. If any provision contained
in Section 8 subparagraphs (a) or (b) above is later adjudicated to exceed the
time, geographic, scope, or other limitations permitted by governing law, then
such provisions will be reformed in such jurisdiction to the maximum permissible
time, geographic, or scope limitations.
9) Miscellaneous.
a) Succession. This Agreement shall inure to the benefit
of and shall be binding upon Employer, its successors and assigns. The
obligations and duties of Officer under this Agreement shall be personal and not
assignable.
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b) Notices. Any notice, request, instruction or other
document to be given under this Agreement by any party to the others shall be in
writing and delivered in person or by courier, telegraphed, telexed or sent by
facsimile transmission or mailed by certified mail, postage prepaid, return
receipt requested (such mailed notice to be effective on the date of such
receipt is acknowledged), as follows:
If to Officer:
Xxxx Xxxxxxx
Caremark Rx
0000 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
If to Employer:
Caremark Rx, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxxxxx, Xxxxxxx 00000
Attn.: Chief Executive Officer
or to such other place as either party may designate as to itself by written
notice to the other.
c) Waiver; Amendment. No provision of this Agreement may
be waived except by a written agreement signed by the waiving party. The waiver
of any term or of any condition of this Agreement shall not be deemed to
constitute the waiver of any other term or condition. This Agreement may be
amended only by a written agreement signed by the parties.
d) Governing Law. This Agreement shall be construed
under and governed by the internal laws of the State of Alabama, without regard
to Alabama's choice of law rules.
e) Arbitration. Any disputes or controversies arising
under this Agreement shall be settled by arbitration in Birmingham, Alabama in
accordance with the rules of the American Arbitration Association relating to
the arbitration of commercial disputes. The determination and findings of such
arbitrators shall be final and binding on all parties and may be enforced, if
necessary, in the courts of the State of Alabama. Notwithstanding the preceding
agreement between the parties for arbitration of any disputes or controversies
arising from this Agreement contained in this Section 9(e), Employer shall have
the right to proceed directly to the appropriate court of equity to enforce the
covenants contained in Section 8 of this Agreement and have access to the full
range of equitable and legal remedies available from such court of equity.
f) Captions. Captions have been inserted solely for the
convenience of reference and in no way define, limit or describe the scope or
substance of any provisions of this Agreement.
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g) Prior Agreements. This Agreement shall supersede and
void any prior existing agreements between Employer and Officer regarding
payments upon termination or due to change in control. Notwithstanding this
section, nothing in this Section 9 (g) is intended to have any affect upon
Officer's Stock Option Awards or the terms of Employer's Stock Option Plans, or
the terms of any benefit plans.
h) Severability. If this Agreement shall for any reason
be or become unenforceable by any party, this Agreement shall thereupon
terminate and become unenforceable by the other party as well. In all other
respects, if any provision of this Agreement is held invalid or unenforceable,
the remainder of this Agreement shall nevertheless remain in full force and
effect and, if any provision is held invalid or unenforceable with respect to
particular circumstances, it shall nevertheless remain in full force and effect
in all other circumstances.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CAREMARK RX, INC.
/s/ E. Xxx Xxxxxxxx /s/ Xxxx Xxxxxxx
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E. Xxx Xxxxxxxx Xxxx Xxxxxxx
Chairman and CEO
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