EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT 10.1
EXECUTION
COPY
This
Executive Employment Agreement (the “Agreement”) is made and entered on
October 31, 2008, and is effective as of November 1, 2008 (the “Effective
Date”), by and between Express Scripts, Inc., a Delaware corporation (the
“Company”), and Xxxxxx Xxx (“Executive”).
WHEREAS,
Executive is now and has been employed by the Company as its President and Chief
Executive Officer pursuant to the terms of that certain Executive Employment
Agreement effective as of April 1, 2008 (the “Original Agreement”);
and
WHEREAS,
the parties wish to amend and restate the Original Agreement by entering into
this Agreement, which shall supersede the Original Agreement as of the Effective
Date, to set forth the terms and conditions of Executive’s employment with the
Company.
NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
As used
herein, the following terms shall have the following meanings:
1.1 “Accrued Rights” has
the meaning set forth in Section 4.1.
1.2 “Annual Base Salary”
means the base salary set forth in Section 3.1 hereof.
1.3 “Annual Bonus” means
Executive’s annual bonus granted pursuant to the Annual Bonus Plan, as described
in Section 3.2 hereof.
1.4 “Annual Bonus Plan”
means the annual bonus program established for senior executives by the Board of
Directors of the Company (the “Board”) or by the Committee, as adopted or
amended from time to time.
1.5 “Bonus Potential”
means the maximum bonus amount Executive could receive pursuant to Section 3.2
hereof for achieving 100% of “base” or “targeted” performance goals established
by the Board or Committee under the Annual Bonus Plan with respect to the
applicable fiscal year; provided, however, in no event
shall Executive’s Bonus Potential for the year in which the Bonus Potential is
being determined (a) be less than 130% of Executive’s Annual Base Salary as in
effect on January 1 of such year or (b) take into account, or include in any
way, any increase in Executive’s bonus amount due to the Company exceeding its
“base” or “target” goals for such year (e.g., if Executive’s “base” or “target”
Bonus Potential is stated at $50,000, but Executive is eligible to receive more
than $50,000 if certain targets are exceeded then Executive’s Bonus Potential
for purposes of this definition is $50,000).
1.6 “Cause”
means:
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(a)
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any
act or acts by Executive, whether or not in connection with his or her
employment by the Company, constituting, or Executive’s conviction or plea
of guilty or nolo contendere (no contest) to, (i) a felony under
applicable law or (ii) a misdemeanor involving moral
turpitude;
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(b)
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any
act or acts of gross dishonesty or gross misconduct in the performance of
Executive’s duties hereunder;
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(c)
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any
willful malfeasance or willful misconduct by Executive in connection with
Executive’s duties hereunder or any act or omission which is materially
injurious to the financial condition or business reputation of the Company
or its affiliates; or
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(d)
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any
breach by Executive of the provisions of Sections 5.1 through 5.3 of this
Agreement, or of the terms and provisions of the Nondisclosure and
Noncompetition Agreement (as defined in Section 1.24
hereof).
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Notwithstanding
the foregoing, the event(s) described in clause (c) of this Section 1.6 shall
not be deemed to constitute “Cause” if such event is (i) primarily the result of
bad judgment or negligence on the part of Executive not rising to the level of
gross negligence; or (ii) primarily because of an act or omission believed by
Executive in good faith to have been in, or not opposed to, the interests of the
Company and its affiliates.
1.7 “Change in Control”
means a Change in Control as that term is defined in the Incentive Plan (as
defined in Section 1.22 hereof).
1.8 “Code” means the
Internal Revenue Code of 1986, as amended.
1.9 “Committee” means the
Compensation and Development Committee of the Board.
1.10 “Covered Equity
Awards” means the following awards granted to the Executive under the
Incentive Plan: any and all Options, Stock Appreciation Rights, Restricted Stock
Units or Performance Shares (as such terms are defined in the Incentive Plan)
granted after January 1, 2008, but during the term of this
Agreement.
1.11 “Covered Payments”
means the amounts described in Section 6.12(a) hereof.
1.12 “Deemed Retirement
Date means the later to occur of (a) the date six months after the
Executive properly delivers a Notice of Retirement, or (b) the Termination
Date.
1.13 “Disability” has the
meaning ascribed to such term in the Incentive Plan.
1.14 “Early Retirement”
means a voluntary termination of employment by Executive which is not a Tenured
Retirement and which meets all of the following requirements:
(a) Executive
shall have properly delivered a Notice of Retirement at least six (6) months
prior to the proposed effective date of the Retirement;
(b) as
of the date of proper delivery of the Notice of Retirement (i) Executive shall
be at least 54 ½ years of age, (ii) Executive shall have served on Senior Staff
for a continuous period of at least 4 ½ years up to and including the date such
Notice of Retirement is delivered, and (iii) the sum of Executive’s age plus
cumulative years of service on Senior Staff shall equal at least
64.
1.15 “Early Retirement Option
Expiration Date” means, with respect to each applicable grant of Options
or Stock Appreciation Rights, the first to occur of (A) the expiration of such
grant’s respective term (as set forth in the applicable option or stock
appreciation right agreement or notice), or (B) the date twelve months, plus the
number of months in the Early Retirement Extension Period, after the Deemed
Retirement Date (e.g. if the Early Retirement Extension Period is 4 months, the
date referenced in this Subsection (B) would be 16 months after the Deemed
Retirement Date).
1.16 “Early Retirement Extension
Period” means a number of months equal to the number of months from the
first day of the calendar month of Executive’s 55th
birthday to the Deemed Retirement Date, truncated to a whole number (e.g. if an
Executive’s 55th
birthday was February 11, 2009 and his or her Deemed Retirement Date was
November 5, 2009, the Early Retirement Extension Period would be nine months –
the truncated number of months from February 1, 2009 to November 5,
2009).
1.17 “Early Retirement Vesting
Factor” means a fraction, the numerator of which is the number of whole
months in the Early Retirement Extension Period, and the denominator of which is
60; provided, however, that under no circumstances may the Early Retirement
Vesting Factor be greater than one (or, if expressed as a percentage,
100%).
1.18 “Effective Date” means
the date specified in the recitals to this Agreement.
1.19 “Employment Period”
means the Initial Employment Period (as defined in Section 1.23 hereof) plus any
additional Renewal Periods (as defined in Section 1.30 hereof).
1.20 “Excise Tax” means the
excise tax imposed by Section 4999 of the Code or any similar state or local tax
that may be imposed.
1.21 “Good Reason” means
the occurrence of any one or more of the following:
(a) Any
material breach by the Company of any of the provisions of this Agreement or any
material failure by the Company to carry out any of its obligations
hereunder;
(b) The
Company’s requiring Executive to be based at any office or location more than 50
miles from Xxx Xxxxxxx Xxx, Xxxxx Xxxxx, Xxxxxxxx (the “Current Headquarters”),
except for travel reasonably required in the performance of Executive’s
responsibilities to the extent substantially consistent with Executive’s
business travel obligations;
(c) Any
substantial and sustained diminution in Executive’s authority or
responsibilities from those described in Section 2.3 hereof; provided, however,
notwithstanding the foregoing, (i) in the event a Change in Control shall occur
which results in the Company becoming a subsidiary of another pharmacy benefit
management company (“PBM”), or which is in the form of a merger in which the
surviving corporation or entity is a PBM (x) so long as Executive is
offered a position as an officer of the parent PBM (or surviving corporation or
entity) with duties and responsibilities which are not inconsistent in any
material adverse respect with his or her duties and responsibilities immediately
prior to such Change in Control, and such position is based at an office or
location not more than 50 miles from the Current Headquarters, such change in
position shall not constitute Good Reason, but (y) if Executive is not offered a
position as an officer of the parent PBM or surviving corporation or entity as
described in (x), a substantial and sustained diminution in Executive’s
authority or responsibility shall be deemed to have occurred; or (ii) in the
event a Change in Control shall occur which results in the Company becoming a
subsidiary of a non-PBM or is in the form of a merger in which the surviving
corporation or entity is not a PBM, failure to receive an offer to serve as an
officer of the non-PBM parent or surviving corporation or entity shall not
constitute Good Reason provided Executive’s duties subsequent to the Change in
Control are not inconsistent in any material adverse respect with his or her
duties immediately prior to the Change in Control, and such position is based at
an office or location not more than 50 miles from the Current
Headquarters;
(d) The
failure by the Company to continue to provide Executive with substantially
similar perquisites or benefits Executive enjoyed in the aggregate under the
Company’s benefit programs (other than long-term incentive compensation
programs), such as any of the Company’s pension, savings, vacation, life
insurance, medical, health and accident, or disability plans in which he or she
was participating at the time of any such discontinuation (or, alternatively, if
such plans are amended, modified or discontinued, substantially similar
equivalent benefits thereto in the aggregate), or the taking of any action by
the Company which would directly or indirectly cause such benefits to be no
longer substantially equivalent in the aggregate to the benefits in effect
immediately prior to taking such action; provided, that any
amendment, modification or discontinuation of any plans or benefits referred to
in this subsection (d) hereof that generally affect substantially all other
domestic salaried employees of the Company who were eligible to participate, and
participated, in the affected Company benefit program(s) shall not be deemed to
constitute Good Reason; and
(e) The
timely delivery by the Company to the Executive of notice under Section 2.2,
indicating that the Company does not desire to renew this Agreement for an
additional Renewal Period, unless the Employment Period during which such notice
is delivered is scheduled to end after the Executive has attained the age of
65;
provided that the
events described in Section 1.21 (a), (b), (c) or (d) above shall only
constitute Good Reason if the Company fails to cure such event within 30 days
after receipt from Executive of written notice of the event which constitutes
Good Reason; and provided further that, “Good Reason” shall cease to exist for
an event on the 120th day following the later of its occurrence or Executive’s
knowledge thereof, unless Executive has given the Company written notice thereof
prior to such date.
Notwithstanding
anything to the contrary set forth in this Section 1.21, the Company’s
appointment of a new President to succeed Executive with Executive’s consent
(which consent shall not be unreasonably withheld) shall not constitute Good
Reason.
1.22 “Incentive Plan” means
the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to
time.
1.23 “Initial Employment
Period” has the meaning set forth in Section 2.2 hereof.
1.24 “Nondisclosure and
Noncompetition Agreement” means the Form of Nondisclosure and
Noncompetition Agreement entered into by and between Executive and the Company
dated as of January 29, 1998.
1.25 “Notice of Retirement”
means a notice of any purported Retirement by Executive as further described in
Section 4.5(b) hereof.
1.26 “Notice of
Termination” means a notice of any purported termination of Executive’s
employment by the Company or by Executive as further described in Section 4.5
hereof.
1.27 “Original Effective
Date” means the date specified in the recitals to this
Agreement.
1.28 “Payment Cap” means
the maximum amount described in Section 6.12(b) hereof.
1.29 “Post-Retirement Performance
Share Factor” means a fraction determined as follows:
(a) The
numerator shall be the sum of (i) the number of calendar years in a Performance
Period (as such term is defined in the Incentive Plan) during which the
Executive was employed by the Company as of December 31 of such year, plus (ii)
an additional one year for the calendar year in which the Termination Date
occurs, provided that the Executive was employed by the Company during such year
for at least three full calendar months prior to the Termination Date, and
further provided that such additional year was not already included in
1.29(a)(i) above (e.g. for a Performance Period of January 1, 2008 through
January 1, 2011, and a Termination Date of March 31, 2009 or thereafter, the
numerator shall be two); and
(b)
The denominator shall be the number of full calendar years in a Performance
Period (e.g. for a Performance Period of January 1, 2008 through January 1,
2011, the denominator shall be three).
1.30 “Renewal Period” has
the meaning set forth in Section 2.2 hereof.
1.31 “Retirement” means an
Early Retirement, a Tenured Retirement or any other voluntary termination of
employment by Executive which becomes effective on or after Executive has
reached the age of 59 ½.
1.32 “Senior Staff” means
those members of the Company’s senior management team with a pay grade of M3 or
higher, or a similar level under any new or revised salary grading system
utilized by the Company.
1.33 “Severance Benefit”
means a severance payment in an amount equal to:
(a) eighteen
(18) months of Executive’s Annual Base Salary as in effect immediately prior to
the Termination Date, plus
(b) an
amount equal to one hundred fifty percent (150%) of the product of (i)
Executive’s Bonus Potential for the year in which the Termination Date occurs
(the “Termination Year”), multiplied by (ii) the average percentage of the Bonus
Potential earned by the Executive for the three (3) full years immediately
preceding the Termination Year, (or such shorter period if Executive was
employed by the Company for less than three (3) full years and received, or was
eligible to receive, a bonus during such period), which product shall be
prorated for the portion of the Termination Year in which Executive was employed
by the Company; provided, however, that such product shall not be prorated if
the Termination Date occurs within one year following a Change in Control Date
(as defined in the Incentive Plan). Notwithstanding anything to the
contrary herein, neither the three-year average percentage of Bonus Potential
described in (ii) above, nor the percentage of Bonus Potential for any single
year used to compute such three-year average, may exceed 100%; provided,
however, that there shall be no such 100% maximum for the three year average, or
for any single year, if the Termination Date occurs within one year following a
Change in Control Date.
1.34 “Tax Reimbursement
Payment” means the payment described in Section 6.12(c)
hereof.
1.35 “Tenured Retirement”
means a voluntary termination of employment by Executive which meets all of the
following requirements:
(a) Executive
shall have properly delivered a Notice of Retirement at least six (6) months
prior to the proposed effective date of the Retirement;
(b) as
of the date of proper delivery of the Notice of Retirement (i) Executive shall
be at least 59 ½ years of age, and (ii) Executive shall have served on Senior
Staff for a continuous period of at least 4 ½ years up to and including the date
such Notice of Retirement is delivered.
1.36 “Termination Date”
means the effective date of termination of Executive’s employment as determined
in accordance with Section 4.5 hereof.
1.37 “Welfare Benefit” has
the meaning set forth in Section 4.2.
ARTICLE
II
TERM/POSITION
2.1 Employment; Effectiveness of
Agreement. Effective as of the Original Effective Date, the
Company hereby employs Executive, and Executive hereby accepts such employment,
according to the terms and conditions set forth in this Agreement.
2.2 Term. Subject
to the provisions of Sections 4.1 through 4.5 of this Agreement, the term of
Executive’s employment hereunder shall commence on the Original Effective Date
and continue through March 31, 2011 (the “Initial Employment
Period”). This Agreement may be extended by the Company and Executive
beyond the Initial Employment Period (any such additional period, a “Renewal
Period”) upon the mutual written agreement of the Company and
Executive. The Initial Employment Period and any Renewal Periods, if
any, shall constitute the “Employment Period” for purposes of this
Agreement. If there are no Renewal Periods, then the Employment
Period shall have the same meaning as Initial Employment
Period. Except as set forth in Section 6.1 hereof, upon termination
of Executive’s employment with the Company in accordance with the terms hereof
or upon termination of the Initial Employment Period or the Employment Period
without extension thereof, this Agreement shall terminate and no longer be of
any force or effect.
2.3 Position and
Duties. Executive shall hold the position of President and
Chief Executive Officer and shall report to, and at all times be subject to the
lawful direction of, the Board of Directors of the
Company. Additionally, Executive shall serve as a member of the
executive staff and participate in the strategic decision-making of the Company
from time to time. If requested, Executive shall also serve as a member of the
Board without additional compensation. During the Employment Period,
Executive shall devote his or her best efforts and his or her full business time
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business affairs of the Company. Executive
shall perform his or her duties and responsibilities to the best of his or her
abilities in a diligent, trustworthy, businesslike and efficient manner. Nothing
herein shall preclude Executive from, (a) subject to the prior written consent
of the Board, or an appropriate committee of the Board, serving on any
for-profit corporate or governmental board of directors (b) serving on the board
of, or working for, any charitable, not-for-profit or community organization,
(c) pursuing his or her personal, financial and legal affairs, or (d) pursuing
any other activity; provided that
Executive shall not engage in any other business, profession, occupation or
other activity, for compensation or otherwise, which would violate the
provisions of Section 5.1 or would, in each case, and in the aggregate,
otherwise conflict or interfere with the performance of Executive’s duties and
responsibilities hereunder, either directly or indirectly, without the prior
written consent of the Board or an appropriate committee of the
Board.
2.4 New
President. The appointment of a different person to the office
of President of the Company during the term of this Agreement shall not
constitute “Good Reason” for Executive’s termination of employment hereunder,
provided such person reports to and is subject to the direction of Executive in
Executive’s capacity as Chief Executive Officer.
ARTICLE
III
COMPENSATION
AND BENEFITS
3.1 Annual Base
Salary. During the Employment Period, the Company shall pay
Executive a base salary (the “Annual Base Salary”) at the annual rate of Nine
Hundred Fifty Thousand Dollars ($950,000.00), which shall be payable in regular
installments in accordance with the Company’s usual payroll practices and shall
be subject to deductions for customary withholdings, including, without
limitation, federal, state and local withholding taxes, social security taxes
and Medicare taxes. Executive shall be eligible for such merit-based increases
in Executive’s Annual Base Salary, if any, as may be determined from time to
time in the sole discretion of the Board or the Committee; provided that any
such increase shall not serve to limit or reduce any other obligation to
Executive under this Agreement. The term “Annual Base Salary” as used in this
Agreement shall refer to the Annual Base Salary as in effect from time to time
during the Employment Period. Executive’s Annual Base Salary shall not be
reduced after any such increase without Executive’s express written
consent.
3.2 Annual Incentive
Compensation. Executive shall be eligible to participate in
the Company’s Annual Bonus Plan established for senior executives by the Board
or the Committee. The size of Executive’s bonus opportunity, which for any
calendar year shall be no less than 130% of Executive’s Annual Base Salary as in
effect on January 1 of such year, and the terms of Executive’s participation in
the Annual Bonus Plan shall be determined based on the terms and conditions of
the Annual Bonus Plan, subject to adjustment as described therein, and in
accordance with any bonus award agreement thereunder. Executive’s
Annual Bonus shall be subject to deductions for customary withholdings,
including, without limitation, federal, state and local withholding taxes,
social security taxes and Medicare taxes
3.3 Participation in Benefit
Plans. During the Employment Period, Executive shall be
entitled to participate in the Company’s employee benefit plans (other than
bonus and incentive plans) as in effect from time to time, on the same basis as
those benefits are generally made available to similarly situated senior
executives of the Company.
3.4 Restricted Stock, Stock
Options and Other Equity Awards and Deferred
Compensation. Executive may receive restricted stock, stock
options and other equity awards and deferred compensation, to the extent
determined by the Company, Board or Committee, as applicable, from time to
time. The terms of any such award shall be documented in a separate
award notice or agreement.
3.5 Business
Expenses. During the Employment Period, Executive shall be
reimbursed for all reasonable expenses incurred by him or her in performing his
or her duties hereunder provided that such expenses are incurred and accounted
for in accordance with the policies and procedures established by the
Company.
3.6 Perquisites. During
the Employment Period, Executive shall be entitled to receive such perquisites
and fringe benefits which similarly situated executives of the Company are
entitled to receive and such other perquisites which are suitable to the
character of Executive’s position with the Company and adequate for the
performance of Executive’s duties hereunder.
ARTICLE
IV
TERMINATION
OF EMPLOYMENT
4.1 Termination by the Company
for Cause; Termination by Executive Other Than for Good Reason or
Retirement. If the Employment Period and Executive’s
employment under this Agreement is terminated by the Company for Cause or by
Executive other than for Good Reason or Retirement, prior to the scheduled
expiration of the Employment Period, Executive shall be entitled to
receive:
(a) The
Annual Base Salary through the Termination Date;
(b) Reimbursement
for any unreimbursed business expenses properly incurred by Executive in
accordance with Company policy prior to the Termination Date; and
(c) Such
employee benefits, if any, to which Executive may be entitled under the employee
benefit plans of the Company, including rights with respect to any restricted
stock, stock option and other equity awards or any deferred compensation,
subject to the terms and conditions of the applicable plan, award, agreement or
notice, if relevant (the amounts described in clauses (a) through (c) hereof
being referred to as the “Accrued Rights”).
Following
such termination of Executive’s employment hereunder pursuant to this Section
4.1, Executive shall have no further rights to any compensation or any other
benefits under this Agreement. Notwithstanding the delivery of a
Notice of Termination or a Notice of Retirement (as applicable) with respect to
a termination other than a termination by the Company under this Section 4.1,
the Company may, at any time on or prior to the Termination Date, exercise its
right to terminate the Employment Period and Executive’s employment for Cause,
and, upon the proper exercise of such right, any other purported termination
(including a purported Retirement) shall be null and void, and the terms of this
Section 4.1 shall apply. In addition, notwithstanding the delivery of
a Notice of Retirement by Executive, if the Employment Period and Executive’s
employment under this Agreement is terminated by Executive other than for Good
Reason prior to the proposed effective date set forth in such Notice of
Retirement, such purported Retirement (and the related Notice of Retirement)
shall be null and void, and the terms of this Section 4.1 shall
apply.
4.2 Termination by the Company
Other Than for Cause or Disability; Termination by Executive for Good
Reason.
(a) If
the Employment Period and Executive’s employment under this Agreement is
terminated by the Company prior to the scheduled expiration of the Employment
Period other than for Cause or Disability, or Executive terminates his or her
employment prior to the end of the Employment Period for Good Reason, Executive
shall be entitled to receive:
(i) The
Accrued Rights;
(ii) Any
Annual Bonus earned for a previously completed fiscal year but unpaid as of the
Termination Date, which Annual Bonus shall be payable to the extent the
corporate bonus pool is approved by the Committee;
(iii) A
Severance Benefit pursuant to the terms and conditions set forth in Section
4.2(b) below; and
(iv) The
Company will reimburse the Executive for Executive’s cost of continuing medical
insurance under COBRA, or, following the expiration of the COBRA period,
equivalent medical insurance coverage, for Executive, Executive’s spouse and any
eligible dependents of Executive until the earlier of (A) thirty-six (36) months
after the Termination Date, or (B) such time as Executive becomes eligible for
group insurance from another employer (the “Welfare Benefit”).
(b) The
Company shall pay the Severance Benefit, without interest thereon, in eighteen
(18) substantially equal monthly installments, which installments shall be
payable on the first day of each month, with the first installment payable in
the first full month commencing fifteen (15) days after the Termination
Date. Notwithstanding the foregoing, in the event that Executive is
determined to be a specified employee in accordance with Section 409A of the
Code and the regulations and other guidance issued thereunder for purposes of
the Severance Benefit, the Severance Benefit shall begin on the first payroll
date which is more than six months following the date of his or her separation
from service; provided, that this sentence shall apply only to the extent
required to avoid Executive's incurrence of any additional tax or interest under
Section 409A of the Code or any regulations or Treasury guidance promulgated
thereunder. Payment of the Severance Benefit is subject to deductions
for customary withholdings, including, without limitation, federal, state and
local withholding taxes, social security taxes and Medicare taxes. Executive
shall not be under any duty to mitigate damages in order to be eligible to
receive the Severance Benefit.
(c) Notwithstanding
the foregoing, Executive agrees that payment of the Severance Benefit is
contingent upon the following:
(i) In
the event of breach by Executive of Sections 5.1 through 5.3 hereof (or any
breach of any agreements in the release described in Section 4.2(c)(ii) below,
or in the Nondisclosure and Noncompetition Agreement, or in any other
nondisclosure or noncompetition agreement between Executive and the Company),
Executive shall reimburse the Company for all compensation or other amounts
previously paid, allocated, accrued, delivered or provided by the Company to
Executive pursuant to Section 4.2 (a)(ii) hereof and the Company shall be
entitled to discontinue the future payment, delivery, allocation, accrual or
provision of the Severance Benefit, the Welfare Benefit, and such other
compensation, including any deferred or equity compensation, as reflected in the
terms of any plan, notice or agreement evidencing such other compensation,
except to the extent prohibited by applicable law.
(ii) No
later than thirty (30) days after the Termination Date, Executive must execute
and deliver a general release releasing all claims against the Company (other
than those specifically described in the below proviso) in such form and
containing such terms as the Company may reasonably prescribe; provided, however, that it
shall not be a condition to the Executive’s receipt of the Severance Benefit
that the Executive release the Company from any of the following:
(A) the
obligations of the Company described in Article IV of the Agreement;
or
(B) any
vested rights that the Executive may have with respect to any benefits, rights
or entitlements under the terms of any employee benefit programs of the Company
to which the Executive is or will be entitled by virtue of his or her employment
with the Company or any of its subsidiaries, and nothing in the release will
prohibit or be deemed to restrict the Executive from enforcing his or her rights
to any such benefits, rights or entitlements; or
(C) the
Executive’s right to indemnification to the extent provided in the Company’s
Certificate of Incorporation and/or bylaws.
Following
such termination of Executive’s employment hereunder pursuant to this Section
4.2, Executive shall have no further rights to any compensation or any other
benefits under this Agreement.
4.3 Termination Due to Death,
Disability or Retirement.
(a) Rights Upon
Termination. If the Employment Period and Executive’s
employment under this Agreement are terminated due to Executive’s death,
Disability or Retirement prior to the scheduled expiration of the Employment
Period, Executive or Executive’s estate, as applicable, will receive (a) the
Accrued Rights plus any Annual Bonus earned for a previously completed fiscal
year but unpaid as of the Termination Date which Annual Bonus shall be payable
to the extent the corporate bonus pool is approved by the Committee; provided,
however, that, in the event of Executive’s death, the Company agrees to abide by
previously received written instructions from the Executive directing the
Company to pay the Accrued Rights and/or the accrued but unpaid Annual Bonus to
a living trust or similar estate planning vehicle of Executive, provided such
trust or similar vehicle is still in existence at the time of Executive’s death,
except to the extent prohibited by law, and except as may otherwise be required
or directed by any applicable employee benefit plan; and (b) reimbursement for
the Welfare Benefit. Following such termination of Executive’s
employment hereunder pursuant to this Section 4.3, Executive shall have no
further rights to any compensation or any other benefits under this
Agreement. Further, notwithstanding the specific terms of the
Incentive Plan, with respect to any grants made to the Executive under the
Incentive Plan during the term of this Agreement, a proper Retirement by
Executive under this Agreement which is not also an Early Retirement or a
Tenured Retirement shall be deemed to be a Retirement under the Incentive
Plan.
(b) Tenured
Retirement. Notwithstanding the specific terms of the
Incentive Plan, with respect to any Covered Equity Awards, upon a proper Tenured
Retirement, the following provisions shall apply:
(i) Vested Options and Stock
Appreciation Rights. All Options or Stock Appreciation Rights
which have vested on or prior to the Termination Date, but which have not
expired, been exercised, or otherwise terminated, shall remain vested and
exercisable through the expiration of their respective terms (as set forth in
the applicable option or stock appreciation right agreements or
notices).
(ii) Unvested Options and Stock
Appreciation Rights. All Options or Stock Appreciation Rights
which have not vested as of the Termination Date, and which have not expired or
otherwise terminated, shall continue to vest after the Termination Date in
accordance with their respective terms as if Executive were still employed by
the Company, and shall remain vested and exercisable through the expiration of
their respective terms (in each case as set forth in the applicable option or
stock appreciation right agreements or notices).
(iii) Restricted Stock
Units. All grants of Restricted Stock Units which have not
vested as of the Termination Date, and which have not expired or otherwise
terminated, shall continue to vest after the Termination Date in accordance with
their respective terms as if Executive were still employed by the Company (as
set forth in the applicable restricted stock unit agreements or
notices).
(iv) Performance Shares. For each
award of Performance Shares, to the extent not already vested, terminated or
forfeited as of the Termination Date, Executive shall be considered vested in
such Performance Shares, but only to the
extent the Performance Criteria (as defined in the applicable Performance Share
award agreement) are achieved at the end of the applicable performance period
(subject to the limitations set forth below in this Section 4.3(b)(iv)), and any
payment of shares shall be made in accordance with the terms of the applicable
Performance Share agreement as if the Executive had remained as an employee of
the Company through the end of the performance period (i.e. generally shares
would not be distributed until after the end of the performance
period). Notwithstanding the foregoing, certain Performance Shares
shall be subject to a reduction in the maximum number of shares which may be
delivered, as follows:
(A) For
each award of Performance Shares, if Executive’s Termination Date occurs on or
after the end of the third calendar month of the final full year of the
applicable Performance Period (as such term is defined in the Incentive
Plan)(e.g. for a Performance Period of January 1, 2007 through January 1, 2010,
on or after March 31, 2009), then such Performance Shares for shall be treated
as described in the preceding paragraph without any reduction in the maximum
number of shares which may be delivered.
(B) For
each award of Performance Shares, if Executive’s Termination Date occurs prior
to the end of the third calendar month of the final full year of the applicable
Performance Period (e.g. for a Performance Period of January 1, 2007 through
January 1, 2010, before March 31, 2009), then such Performance Shares shall be
multiplied by the Post-Retirement Performance Share Factor, and the product
shall be treated as described in the initial paragraph of this Section
4.3(b)(iv) without any reduction in the maximum number of shares which may be
delivered with respect to such portion of the Performance Shares. The
remaining portion of the Performance Shares shall be treated as described in the
initial paragraph of this Section 4.3(b)(iv) with a maximum payout
of 100% (or “target” number) of such remaining portion of the
Performance Shares.
EXAMPLE:
For an award of 150 Performance Shares, with a Post-Retirement Performance Share
Factor of two-thirds, assuming the achievement of the applicable Performance
Criteria results in a payment of 200% of the target number of Performance
Shares, the Executive would receive 250 shares determined as follows: 150
Performance Shares multiplied by the Post-Retirement Performance Share Factor
results in 100 Performance Shares which are not subject to the 100% maximum and
are thus paid out as 200 shares (100 Performance Shares * 200% payout factor);
the remaining 50 Performance Shares are capped at a 100% payout factor and are
thus paid out as 50 shares.
With
respect to any Performance Shares granted between January 1, 2008 and the date
hereof, the terms of this of this paragraph shall apply to such grants
notwithstanding the terms of the applicable Performance Share
agreements.
(c) Early
Retirement. Notwithstanding the specific terms of the
Incentive Plan, with respect to any Covered Equity Awards, upon a proper Early
Retirement, the following provisions shall apply:
(i) Vested Options and Stock
Appreciation Rights. All Options or Stock Appreciation Rights
which have vested on or prior to the Termination, but which have not expired,
been exercised, or otherwise terminated, shall remain vested and exercisable
through the Early Retirement Option Expiration Date.
(ii) Unvested Options and Stock
Appreciation Rights. Each grant, or portion thereof, of
Options or Stock Appreciation Rights which has not vested as of the Termination
Date, and which has not expired or otherwise terminated, shall vest or be
terminated and forfeited as follows: (A) any portion of such grant which is
scheduled (under its original terms) to vest after the Early Retirement Option
Expiration Date shall terminate and be forfeited on the Termination Date; (B)
for any portion of such grant which is scheduled (under its original terms) to
vest on or prior to the Early Retirement Option Expiration Date, each “tranche”
of such grant (meaning each portion scheduled to vest on the various vesting
dates under the grant) shall be multiplied by the Early Retirement Vesting
Factor, and a portion of such tranche equal to such product rounded to the
nearest whole number, shall continue to vest after the Termination Date in
accordance with its original terms as if Executive were still employed by the
Company, and shall remain vested and exercisable through the Early Retirement
Option Expiration Date; and (C) for each tranche to which the Early
Retirement Vesting Factor is applied under the preceding Subsection B, any
remaining portion of such tranche that does not so vest shall terminate and be
forfeited on the Termination Date. (See example on Exhibit
A to this
Agreement).
(iii) Restricted Stock
Units. Each grant, or portion thereof, of Restricted Stock
Units which has not vested as of the Termination Date, and which has not expired
or otherwise terminated, shall vest or be terminated and forfeited as follows:
(A) any portion of such grant which is scheduled (under its original terms) to
vest after the third anniversary of the Deemed Retirement Date shall terminate
and be forfeited on the Termination Date; (B) for any portion of such grant
which is scheduled (under its original terms) to vest on or prior to the third
anniversary of the Deemed Retirement Date, each “tranche” of such grant (meaning
each portion scheduled to vest on the various vesting dates under the grant)
shall be multiplied by the Early Retirement Vesting Factor, and a portion of
such tranche equal to such product rounded to the nearest whole number, shall
continue to vest after the Termination Date in accordance with its original
terms as if Executive were still employed by the Company; and (C) for each
tranche to which the Early Retirement Vesting Factor is applied under the
preceding Subsection B, any remaining portion of such tranche that does not so
vest shall terminate and be forfeited on the Termination Date.
(iv) Performance
Shares. For each award of Performance Shares, to the extent
not already vested, terminated or forfeited as of the Termination Date,
Executive shall be considered vested in a portion of such Performance Shares
determined by multiplying the number of such Performance Shares
by the Early Retirement Vesting Factor (the product being the
“Adjusted Performance Shares”), but only to the extent the Performance Criteria
are achieved at the end of the applicable performance period (e.g. if the target
number of Performance Shares is 150, the Early Retirement Vesting Factor is 0.24
the Adjusted Performance Shares would be 36, and if the achievement of the
Performance Criteria results in a payment of 75% of target shares, the number of
shares awarded would be 36 * 75% or 27 shares), and any payment of
shares shall be made in accordance with the terms of the applicable Performance
Share agreement as if the Executive had remained as an employee of the Company
through the end of the performance period (i.e. generally shares would not be
distributed until after the end of the performance
period). Notwithstanding the foregoing, certain Performance Shares
shall be subject to a reduction in the maximum number of shares which may be
delivered, as follows:
(A) For
each award of Performance Shares, if Executive’s Termination Date occurs on or
after the end of the third calendar month of the final full year of the
applicable Performance Period (as such term is defined in the Incentive
Plan)(e.g. for a Performance Period of January 1, 2007 through January 1, 2010,
on or after March 31, 2009), then the Adjusted Performance Shares for shall be
treated as described in the preceding paragraph without any reduction in the
maximum number of shares which may be delivered.
(B) For
each award of Performance Shares, if Executive’s Termination Date occurs prior
to the end of the third calendar month of the final full year of the applicable
Performance Period (e.g. for a Performance Period of January 1, 2007 through
January 1, 2010, before March 31, 2009), then the Adjusted Performance Shares
shall be multiplied by the Post-Retirement Performance Share Factor, and the
product shall be treated as described in the initial paragraph of this Section
4.3(b)(iv) without any reduction in the maximum number of shares which may be
delivered with respect to such portion of the Adjusted Performance
Shares. The remaining portion of the Adjusted Performance Shares
shall be treated as described in the initial paragraph of this Section
4.3(b)(iv) with a maximum payout of 100% (or “target” number) of such
remaining portion of the Adjusted Performance Shares.
EXAMPLE:
Assuming an award of 150 Performance Shares, and an Early Retirement Vesting
Factor is 0.24 the Adjusted Performance Shares would be 36. Further
assuming a Post-Retirement Performance Share Factor of two-thirds , if the
achievement of the Performance Criteria results in a payment of 200% of the
target number of Performance Shares, the Executive would receive 60 shares
determined as follows: 36 Adjusted Performance Shares multiplied by the
Post-Retirement Performance Share Factor (two-thirds) results in 24 Adjusted
Performance Shares which are not subject to the 100% maximum and are thus paid
out as 48 shares (24 Adjusted Performance Shares * 200% payout factor); the
remaining 12 Performance Shares are capped at a 100% payout factor and are thus
paid out as 12 shares.
With
respect to any Performance Shares granted between January 1, 2008 and the date
hereof, the terms of this of this paragraph shall apply to such grants
notwithstanding the terms of the applicable Performance Share
agreements.
(d) Notwithstanding
anything to the contrary set forth herein, if either (i) Executive breaches any
of the provisions of Sections 5.1 through 5.3 of this Agreement, or of the terms
and provisions of the Nondisclosure and Noncompetition Agreement (whether such
breach occurs during or after Executive’s employment with the Company), or (ii)
following the Termination Date the Committee becomes aware of acts or omissions
by the Executive during the term of Executive’s Employment with the Company
which would have constituted Cause, then, in either case, all Options, Stock
Appreciation Rights, Restricted Stock Units, Performance Shares or other Awards
(as defined in the Incentive Plan), to the extent not previously exercised or
paid out, shall immediately terminate and be forfeited, and the Executive shall
reimburse the Company for the value of any other Options, Stock Appreciation
Rights, Restricted Stock Units, Performance Shares or other Awards for which
vesting accelerated, or which Executive otherwise realized value, as a result of
a purported Retirement.
(e) In
the event the Employment Period and Executive’s employment under this Agreement
are terminated due to Executive’s death or Disability prior to the scheduled
expiration of the Employment Period, and, as of the Termination Date, Executive
would have been eligible for either Tenured Retirement or Early Retirement, then
Executive or Executive’s estate, as applicable, may elect to have Executive’s
termination treated as a Tenured Retirement or Early Retirement (as applicable)
with respect to the Covered Equity Awards only. Such election shall
be made by delivery of written notice to the Company not less than ninety (90)
days following the Termination Date. If proper election is made under
this paragraph, then (i) the provisions of either Section 4.3(b) or Section
4.3(c), as appropriate, shall apply to all, and not less than all, Covered
Equity Awards, (ii) the provisions of the Incentive Plan, and/or the agreements
or notices for the Covered Equity Awards, related to vesting, termination or
forfeiture, or exercise period, following a termination due to death or
Disability, shall not apply to the Covered Equity Awards (except to the extent
provided herein), and (iii) the Deemed Retirement Date shall be the date six (6)
months following the Termination Date.
(f) Any
payment of cash or stock to Executive is subject to all federal, state, and
local income and payroll tax withholding that, in the opinion of the Company, is
required by law. Unless Executive satisfies any such tax withholding
obligation by paying the amount in cash (including by check or wire transfer) or
shares of the Company’s stock, the Company shall withhold cash and/or shares on
the date of withholding sufficient to cover the withholding obligation, with
shares valued in the same manner as used in computing the withholding
taxes.
4.4 Expiration of the Employment
Period.
(a) In
the event either party elects not to extend the Employment Period pursuant to
Section 2.2, unless Executive’s employment is earlier terminated pursuant to
Sections 4.1 through 4.3, Executive’s term of employment hereunder (whether or
not Executive continues as an employee of the Company thereafter) shall be
deemed to close on the close of business on the day immediately preceding the
next scheduled Anniversary Date and Executive shall be entitled to receive the
Accrued Rights, plus any Annual Bonus earned for a previously completed fiscal
year (including a fiscal year which ends on the on the Termination
Date) but unpaid as of the Termination Date, which Annual Bonus shall be payable
to the extent the corporate bonus pool is approved by the
Committee.
(b) Unless
the parties otherwise agree in writing executed subsequent to the Effective
Date, continuation of Executive’s employment with the Company beyond the
expiration of the Employment Period shall be deemed an employment at-will and,
subject only to Section 6.1, shall not be deemed to extend any of the provisions
of this Agreement and Executive’s employment may thereafter be terminated at
will by either Executive or the Company.
Following
such termination of Executive’s employment hereunder pursuant to this Section
4.4, Executive shall have no further rights to any compensation or any other
benefits under this Agreement.
4.5 Notice of Termination;
Notice of Retirement; Termination Date.
(a) For
purposes of this Agreement, any purported termination of Executive’s employment
by the Company or by Executive (other than a Retirement by Executive), shall be
communicated by written “Notice of Termination” to the other party hereto in
accordance with Section 6.2 hereof. Any Notice of Termination shall set forth
(i) the effective date of termination (for purposes of determining Executive’s
entitlement to benefits hereunder), which, in the case of a termination by
Executive pursuant to Section 4.1, or a termination by either party pursuant to
Section 4.2 shall not be less than fifteen (15) days after the date the Notice
of Termination is delivered; (ii) the specific provision in this Agreement
relied upon; and (iii) in reasonable detail, the facts and circumstances claimed
to provide a basis for such termination.
(b) For
purposes of this Agreement, any purported Retirement by Executive shall be
communicated by written “Notice of Retirement” to the Company in accordance with
Section 6.2 hereof. Any Notice of Retirement shall include the
following (i) if Executive intends for the Retirement to qualify as either an
Early Retirement or a Tenured Retirement, the notice shall indicate such intent;
and (ii) the notice shall set forth the proposed effective date of the
Retirement, which, for either an Early Retirement or a Tenured Retirement shall
not be less than six (6) months after the date the Notice of Retirement is
delivered, or for any other Retirement shall not be less than fifteen (15) days
after the date the Notice of Retirement is delivered.
Notwithstanding
anything to the contrary set forth herein, in order for a Notice of Retirement
to be proper and valid, Executive must, during the period from delivery of the
purported Notice of Retirement through the Termination Date, continue to
substantially perform his or her duties hereunder, to the extent required by the
Company. Executive’s material neglect or willful and continuous
failure to perform such duties, which neglect or failure is not cured within
seven (7) days following written notice thereof from the Company to Executive,
shall (i) invalidate the Notice of Retirement ab initio, and (ii) deprive
Executive the right to deliver a subsequent Notice of
Retirement. However, the foregoing shall not prevent the Company, in
its sole discretion, from agreeing to reduce or diminish Executive’s duties and
obligations to the Company during the period following delivery of the purported
Notice of Retirement through the Termination Date.
(c) If
the Company terminates Executive’s employment pursuant to Section 4.1 or due to
Executive’s Disability pursuant to Section 4.3 hereof, the Termination Date
shall be the date upon which the Company notifies Executive of such termination.
If the Company terminates Executive’s employment pursuant to Section 4.2, or if
Executive terminates employment pursuant to Section 4.1, 4.2 or 4.3 hereof, the
Termination Date shall be Executive’s last full day of work prior to the
effectiveness of such termination. At any time following proper
delivery of a Notice of Retirement but prior to the effective date of such
Retirement, the Company may elect to terminate the Employment Period and
Executive’s employment under this Agreement in which case the Termination Date
shall be Executive’s last full day of work prior to the effectiveness of such
termination; provided, however, that, unless such termination is for Cause under
Section 4.1, such early termination by the Company shall not have any impact on
the Deemed Retirement Date. If the Agreement is terminated pursuant
to Section 4.4, the Termination Date shall be the last day of the Initial
Employment Period or the last Renewal Period, as applicable. Notwithstanding the
foregoing, if within fifteen (15) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
good faith dispute exists concerning the termination, the “Termination Date” for
purposes of determining the Executive’s entitlement to benefits under this
Agreement shall be the date on which the dispute is finally determined by an
independent arbitrator selected by the American Arbitration
Association.
4.6 Board/Committee
Resignation. Upon termination of Executive’s employment for
any reason, Executive agrees to resign, as of the Termination Date and to the
extent applicable, from the Board (and any committees thereof) and the Board of
Directors (and any committees thereof) of any of the Company’s
affiliates.
ARTICLE
V
RESTRICTIVE
COVENANTS
For the
purposes of this Article V, all references to the Company shall include the
Company and its affiliates.
5.1 Non-Solicitation and
Non-Competition.
(a) Executive
acknowledges and recognizes the highly competitive nature of the businesses of
the Company and its affiliates and accordingly agrees as follows:
(i) During
the period of Executive’s employment with the Company and, for a period of two
(2) years after termination of Executive’s employment (the
“Nonsolicit Period”), Executive will not, whether on Executive’s own behalf or
on behalf of or in conjunction with any person, firm, partnership, joint
venture, association, corporation or other business organization, entity or
enterprise whatsoever (“Person”), directly or indirectly solicit or assist in
soliciting in competition with the Company, the business of any client or
prospective client:
(1) with
whom Executive had personal contact or dealings on behalf of the Company during
the one (1) year period preceding Executive’s termination of
employment;
(2) with
whom employees reporting to Executive have had personal contact or dealings on
behalf of the Company during the one (1) year immediately preceding the
Executive’s termination of employment; or
(3) for
whom Executive had direct or indirect responsibility during the one (1) year
immediately preceding Executive’s termination of employment.
(ii) During
the Nonsolicit Period, Executive will not, whether on Executive’s own behalf or
on behalf of or in conjunction with any Person, directly or
indirectly:
(1) solicit
or encourage any employee of the Company or its affiliates to leave the
employment of the Company or its affiliates; or
(2) hire
any such employee who was employed by the Company or its affiliates as of the
date of Executive’s termination of employment with the Company or who left the
employment of the Company or its affiliates coincident with, or within one year
prior to or after, the termination of Executive’s employment with the
Company.
(iii) During
the Nonsolicit Period, Executive will not, directly or indirectly, solicit, or
encourage to cease to work with the Company or its affiliates, any consultant
then under contract with the Company or its affiliates.
(iv) During
the period of Executive’s employment with the Company and, for a period of (18)
months after termination of Executive’s employment for any reason (the
“Noncompete Period”), Executive will not directly or indirectly:
(1) engage
in any business that is, or will be, engaged wholly or primarily in the business
of manufacturing, purchasing, selling or supplying in the United States any
product or service manufactured, purchased, sold, supplied or provided by the
Company or its affiliates, and which is or will be directly in competition with
the business of the Company or its affiliates (including, without limitation,
businesses which the Company or its affiliates have specific plans to conduct in
the future and as to which Executive is aware of such planning) in the United
States (a “Competitive Business”);
(2) enter
the employ of, or render any services to, any Person (or any division or
controlled or controlling affiliate of any Person) who or which engages in a
Competitive Business;
(3) acquire
a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant;
or
(4) interfere
with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of
its affiliates and customers, clients, suppliers, partners, members or investors
of the Company or its affiliates.
(v) Notwithstanding
anything to the contrary herein, Executive may, directly or indirectly own,
solely as an investment, securities of any Person engaged in the business of the
Company or its affiliates which are publicly traded on a national or regional
stock exchange or on the over-the-counter market if Executive (i) is not a
controlling person of, or a member of a group which controls, such Person and
(ii) does not, directly or indirectly, own 5% or more of any class of
securities of such Person.
5.2 Confidentiality.
(a) Executive
acknowledges that the identity of the clients and customers of the Company, the
prices, terms and conditions at, or upon which, the Company sells its products
or provides its services and other non-public, proprietary or confidential
information relating to the business, financial and other affairs of the Company
(including, without limitation, any idea, product, trade secret, know-how,
research and development, software, databases, inventions, processes, formulae,
technology, designs and other intellectual property; creative or conceptual
business or marketing plan, strategy or other material developed for the Company
by Executive; or information concerning finances, investments, profits, pricing,
costs, products, services, vendors, customers, clients, partners, investors,
personnel, compensation, recruiting, training, advertising, sales, marketing,
promotions, government and regulatory activities and approvals -- concerning the
past, current or future business, activities and operations of the Company or
its affiliates and/or any third party that has disclosed or provided any of same
to the Company on a confidential basis) (hereinafter collectively referred to as
“Confidential Information”) are valuable, special unique assets of the Company
and that such Confidential Information, if disclosed to others, may result in
loss of business or other irreparable and consequential damage to the
Company.
(b) Executive
shall hold in fiduciary capacity, for the benefit of the Company, all
Confidential Information and shall not, at any time during the Employment Period
or thereafter (i) retain or use for the benefit, purposes or account of
Executive of any other Person, or (ii) disclose, divulge, reveal, communicate,
share, transfer or provide access to any Person outside the Company (other than
its professional advisers who are bound by confidentiality obligations), any
Confidential Information, without the prior written authorization of the
Company.
(c) Notwithstanding
the foregoing, the term Confidential Information shall not include information
(i) generally known to the public or the trade other than as a result of
Executive’s breach of this covenant or any breach of other confidentiality
obligations by third parties, (ii) made legitimately available to Executive by a
third party without breach of any confidentiality obligation, (iii) the release
of which is deemed by the Board to be in the best interest of the Company, or
(iv) the disclosure of which is required by applicable law; provided that
Executive shall give prompt written notice to the Company of such legal
requirement, disclose no more information than is so required, and cooperate
with any attempts by the Company to obtain a protective order or similar
treatment.
(d) Notwithstanding
anything herein to the contrary, any party to this Agreement (and any employee,
representative, or other agent of any party to this Agreement) may disclose to
any and all persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by this Agreement and all materials
of any kind (including opinions or other tax analyses) that are provided to it
relating to such tax treatment and tax structure. However, any such
information relating to the tax treatment or tax structure is required to be
kept confidential to the extent necessary to comply with any applicable federal
or state securities laws.
(e) Upon
termination of Executive’s employment with the Company for any reason, Executive
shall (i) cease and not thereafter commence use of any Confidential Information
or intellectual property (including without limitation, any patent, invention,
copyright, trade secret, trademark, trade name, logo, domain name or other
source indicator) owned or used by the Company or its affiliates, (ii)
immediately destroy, delete, or return to the Company, at the Company’s option,
all originals and copies in any form or medium (including memoranda, books,
papers, plans, computer files, letters and other data) in Executive’s possession
or control (including any of the foregoing stored or located in Executive’s
office, home, laptop or other computer, whether or not Company property) that
contain Confidential Information or otherwise relate to the business of the
Company or its affiliates, except that Executive may retain only those portions
of any personal notes, notebooks and diaries that do not contain any
Confidential Information, and (iii) notify and fully cooperate with the Company
regarding the delivery or destruction of any other Confidential Information of
which Executive is or becomes aware.
5.3 Non-Disparagement. Executive
agrees that Executive will not disparage the Company or its affiliates, or its
or their current or former officers, directors, and employees in any way;
further, Executive will not make or solicit any comments, statements, or the
like to the media or to others that would be considered derogatory or
detrimental to the good name or business reputation of any of the aforementioned
entities or individuals; provided, that this Section does not prohibit
statements which Executive is required to make under oath or which are otherwise
required by law, provided that such statements are truthful and made in a
professional manner; further provided that this Section does not prohibit
Executive from making statements which would otherwise be in violation of this
Section, provided such statements are made by Executive in response to public
statements made by the Company, or its authorized representatives, which are
derogatory or detrimental to the good name or business reputation of the
Executive.
5.4 Acknowledgment of Reasonable
Covenants. It is expressly understood and agreed that
Executive and the Company consider the restrictions and covenants contained
herein to be reasonable and enforceable, because, among other things, (a)
Executive will be receiving compensation under this Agreement or otherwise, (b)
there are many other areas in which, and companies for which, Executive could
work in view of Executive’s background, (c) the restrictions and covenants set
forth herein do not impose any undue hardship on Executive, (d) the Company
would not have entered into this Agreement but for the restrictions and
covenants of Executive contained herein, and (e) the restrictions and covenants
contained herein have been made in order to induce the Company to enter into
this Agreement.
5.5 Modification of the
Restrictive Covenants. If, at the time of enforcement of the
restrictive covenants set forth herein, a final judicial determination is made
by a court or arbiter of competent jurisdiction that the time or territory or
any other restriction contained in this Agreement is an unenforceable
restriction against Executive, the provisions of this Agreement shall not be
rendered void but shall be deemed amended to apply as to such maximum time and
territory and to such maximum extent as such court may judicially determine or
indicate to be enforceable. Alternatively, if any court of competent
jurisdiction finds that any restriction contained in this Agreement is
unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
ARTICLE
VI
MISCELLANEOUS
6.1 Survival. Sections
4.1 through 4.6 inclusive (as applicable to the relevant circumstance of
termination only), 5.1 through 5.5 inclusive and 6.1 through 6.14 inclusive
shall survive and continue in full force in accordance with their terms
notwithstanding any termination of Executive’s employment hereunder or
termination of the Initial Employment Period or the Employment
Period.
6.2 Notices. All
notices, demands or other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing and shall
be deemed
to have been given when delivered personally, mailed by certified or registered
mail, return receipt requested and postage prepaid, or sent via a nationally
recognized overnight courier, or sent via facsimile to the recipient. Such
notices, demands and other communications shall be sent to the address indicated
below:
To the
Company:
Express
Scripts, Inc.
Xxx
Xxxxxxx Xxx
Xxxxx
Xxxxx, XX 00000
Attention:
Chief Legal Officer
To
Executive:
Xxxxxx
Xxx
XXXXXXXXX
XXXXXXXXX
or such
other address or to the attention of such other person as the recipient party
shall have specified by prior written notice to the sending party.
6.3 Severability. Whenever
possible, each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other jurisdiction,
but this Agreement shall be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
6.4 Complete
Agreement. This Agreement constitutes the complete agreement
and understanding between the parties regarding the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by and between the parties, written or oral, including, without limitation, the
Prior Agreement, which shall automatically terminate upon the effectiveness of
this Agreement; provided, however, that this
Agreement shall not supersede or modify the terms of the Nondisclosure and
Noncompetition Agreement or any other nondisclosure or noncompetition agreement
between Executive and the Company, and any restricted stock, stock options or
other equity awards or deferred compensation shall be subject to the terms of
the applicable notices or agreements; and provided further,
however that
this Agreement shall not supersede or modify the terms of any equity awards or
special bonus awards (i.e. bonuses other than the Annual Bonus) specifically
granted under prior to January 1, 2008 under the Prior Agreement. The
applicable provisions of this Agreement amend the terms and provisions of the
Incentive Plan to the extent addressed by this Agreement, as the same may have
been amended prior to the date hereof, with respect to awards covered by this
Agreement and made to Executive hereunder.
6.5 Counterparts. This
Agreement may be executed in separate counterparts, each of which is deemed to
be an original and all of which taken together constitute one and the same
agreement.
6.6 Successors and
Assigns. Except as otherwise provided herein, all covenants
and agreements contained in this Agreement shall bind and inure to the benefit
of and be enforceable by the Company and its respective successors and assigns.
Except as otherwise specifically provided herein, this Agreement, including the
obligations and benefits hereunder, may not be assigned to any party by
Executive.
6.7 No Strict
Construction. The language used in this Agreement shall be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied to this
Agreement.
6.8 Descriptive
Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.
6.9 Governing
Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri, without regard to conflicts
of laws principles thereof; provided, however, that issues
related to the Incentive Plan or any grants thereunder shall be resolved in
accordance with the laws of the State of Delaware.
6.10 Specific
Performance. The Company shall be entitled to enforce its
rights under this Agreement specifically, to recover damages and costs
(including reasonable attorneys’ fees) caused by any breach of any provision of
this Agreement and to exercise all other rights existing in its favor. The
Executive agrees and acknowledges that money damages are an inadequate remedy
for any breach of the provisions of this Agreement, including, without
limitation, Sections 5.1 through 5.3 hereof, and that the Company shall be
entitled to apply to any court of law or equity of competent jurisdiction
(without posting any bond or deposit) for specific performance and/or other
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement. Further, Executive acknowledges that the
forfeiture provision set forth in the termination provisions hereof shall not be
construed to limit or otherwise affect the Company’s right to seek legal or
equitable remedies it may otherwise have, or the amount of damages for which it
may seek recovery, resulting from breach of this Agreement.
6.11 Amendment and
Waiver. The provisions of this Agreement may be amended and
waived only with the prior written consent of the Company and
Executive.
6.12 Tax
Matters.
(a) Notwithstanding
anything to the contrary herein (or any other agreement entered into by and
between Executive and the Company or any incentive arrangement or plan offered
by the Company), in the event that any amount or benefit paid or distributed to
Executive pursuant to this Agreement, taken together with any amounts or
benefits otherwise paid or distributed to Executive by the Company or any of its
subsidiaries (collectively, the “Covered Payments”), would constitute an “excess
parachute payment” as defined in Section 280G of the Code, and would thereby
subject Executive to an Excise Tax, the provisions of this Section 6.12 shall
apply.
(b) If
the aggregate present value (as determined for purposes of Section 280G of the
Code) of the Covered Payments exceeds the amount which can be paid to Executive
without Executive incurring an Excise Tax, but is less than 125% of such amount,
then the amounts payable to Executive under this Agreement (or any other
agreement by and between Executive and the Company or pursuant to any incentive
arrangement or plan offered by the Company) may, in the discretion of the
Company, be reduced (but not below zero) to the maximum amount which may be paid
hereunder without Executive becoming subject to the Excise Tax (such reduced
payments to be referred to as the “Payment Cap”). In the event Executive
receives reduced payments and benefits as a result of application of this
Section 6.12, Executive shall have the right to designate which of the payments
and benefits otherwise set forth herein (or any other agreement between
Executive and the Company or any incentive arrangement or plan offered by the
Company) will be received in connection with the application of the Payment Cap,
subject to the following sentence. Reduction shall first be made from
payments and benefits which are determined not to be nonqualified deferred
compensation for purposes of Section 409A of the Code, and then shall be made
(to the extent necessary) out of payments and benefits which are subject to
Section 409A of the Code and which are due at the latest future
date.
(c) If
the aggregate present value of all Covered Payments is equal to or exceeds 125%
of the amount which can be paid to Executive without Executive incurring an
Excise Tax, Executive shall be entitled to receive an additional amount (the
“Tax Reimbursement Payment”) such that the net amount retained by Executive with
respect to such Covered Payments, after deduction of any Excise Tax on the
Covered Payments and any federal, state and local income tax and Excise Tax on
the Tax Reimbursement Payment provided for by this Section 6.12, but before
deduction for any federal, state or local income or employment tax withholding
on such Covered Payments, shall be equal to the amount of the Covered
Payments. Such additional amount may be paid by the Company directly
to the applicable taxing authority. The Tax Reimbursement Payment
shall be paid in the calendar year following the date of the Change in
Control.
(d) Immediately
upon a Change in Control, the Company shall notify Executive of any modification
or reduction as a result of the application of this Section 6.12. In the event
Executive and the Company disagree as to the application of this Section 6.12,
the Company shall select a law firm or accounting firm from among those
regularly consulted (during the twelve-month period immediately prior to the
Change in Control that resulted in the characterization of the Covered Payments
as parachute payments) by the Company, and such law firm or accounting firm
shall determine, at the Company’s expense, the amount to which Executive shall
be entitled hereunder (and pursuant to any other agreements, incentive
arrangements or plans), taking into consideration the application of this
Section 6.12, and such determination shall be final and binding upon Executive
and the Company.
6.13 Executive
Representation. Executive hereby represents to the Company
that the execution and delivery of this Agreement by Executive and the Company
and the performance by Executive of Executive’s duties hereunder shall not
constitute a breach of, or otherwise contravene, the terms of any employment
agreement or other agreement or policy to which Executive is a party or
otherwise bound.
6.14 Cooperation. Each
party shall provide reasonable cooperation in connection with any action or
proceeding (or any appeal from any action or proceeding) which relates to events
occurring during Executive’s employment hereunder.
6.15 Section 409A of the
Code. Notwithstanding anything to the contrary in this
Agreement, the parties mutually desire to avoid adverse tax consequences
associated with the application of Section 409A of the Code to this Agreement
and this Agreement shall be interpreted in a manner consistent with the
provisions of Section 409A of the Code and the regulations
thereunder. The Company reserves the right (but is not required) to
provide compensation and benefits under any plan or arrangement in amounts, at
times and in a manner that minimizes taxes, interest or penalties as a result of
Section 409A. In addition, in the event any benefits or amounts paid hereunder
are deemed to be subject to Section 409A, Executive consents to the Company
adopting such conforming amendments as the Company deems necessary, in its
reasonable discretion, to comply with, or avoid the imposition of any additional
taxes under, Section 409A (including, but not limited to, delaying payments,
realization of any rights or benefits until six (6) months following termination
of employment).
6.16 Arbitration. Executive
and the Company agree that any and all disputes between the parties hereto
arising from or relating to this Agreement, and/or any release executed by
Executive pursuant to the terms of this Agreement, shall be submitted and
decided by binding arbitration before a single arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (“AAA”)
then in effect. Venue for the arbitration shall be in St. Louis
County, Missouri and the laws of the State of Missouri will
apply. Any demand for arbitration shall be made within a reasonable
time after the claim, dispute, or other matter in question has arisen, and in no
event shall any such demand be made after the date when institution of legal of
equitable proceedings based on such claim, dispute or other matter in question
would be barred by the applicable statute of limitations. Under no circumstances
will either party be subject to punitive damages. Each party hereto
shall bear its costs of the arbitration proceeding. However, the prevailing
party in the arbitration, as designated by the arbitrator, shall be entitled to
recover its reasonable cost of the arbitration, including, without limitation,
its reasonable attorneys’ fees, from the other party as determined by the
arbitrator.
* * * *
*
IN
WITNESS WHEREOF, the parties hereto have executed this Executive Employment
Agreement as of the date first above written.
THIS
CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE
PARTIES.
| EXPRESS SCRIPTS, INC. | |||
|
|
By:
|
/s/ Xxxx X. Xxxxxxx | |
| Name: Xxxx X. Xxxxxxx | |||
| Title: Chairman, Compensation and Development Committee | |||
| EXECUTIVE | |||
| /s/ Xxxxxx Xxx | |||
| Name: Xxxxxx Xxx | |||
EXHIBIT
A
Sample
Calculation under Section 4.3(c)(ii)
The
following is an example of the methodology to be used to calculate the impact of
Early Retirement on Unvested Options or Stock Appreciation Rights:
Option
Grant:
375 options granted on May 1, 2009, vesting in 3 tranches as
follows:
Tranche 1 -- 100
options vesting May 1, 2010
Tranche 2 -- 125
options vesting May 1, 2011
Tranche 3 -- 150
options vesting May 1, 2012
Expiration
Date: May 1, 2016
Executive’s 55th Birthday: March
11, 2009
Deemed Retirement
Date: November 1, 2009
Termination
Date: October 1, 2009
Early Retirement Extension
Period: 8 months (whole months between 3/1/09 and
11/1/09)
|
|
Early Retirement
Option Expiration Date: July 1, 2011 (20 months after
the Deemed Retirement Date. Note: For any Options or Stock
Appreciation Rights with an Expiration Date prior to 7/1/11, the Early
Retirement Option Expiration Date would be such Expiration
Date.)
|
Early Retirement Vesting
Factor: 0.133 or 13.3% (8 ÷ 60)
Calculations
as of the Termination Date based on the foregoing:
|
|
Tranche
1 – 13 options (100 * 0.133, rounded to the nearest whole option) would
remain scheduled to vest on May 1, 2010, and following vesting would
remain exercisable until July 1, 2011; the remaining 87 options in Tranche
1 would terminate and be forfeited as of the Termination
Date.
|
|
|
Tranche
2 – 17 options (125 * 0.133, rounded to the nearest whole option) would
remain scheduled to vest on May 1, 2011, and following vesting would
remain exercisable until July 1, 2011; the remaining 108 options in
Tranche 2 would terminate and be forfeited as of the Termination
Date.
|
|
|
Tranche
3 – Because Tranche 3 is not scheduled to vest until after July, 1, 2011
(the Early Retirement Option Expiration Date), all 150 options in Tranche
3 would terminate and be forfeited as of the Termination
Date.
|
The
foregoing is for illustrative purposes only and does not reflect any actual
grants to the Executive.
