EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTION
COPY
This
Executive Employment Agreement (the “Agreement”), is made and entered on March
31, 2008, and is effective as of April 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 President and Chief
Executive Officer pursuant to the terms of that certain Executive Employment
Agreement dated as of April 11, 2005 (effective as of April 1, 2005), as amended
(the “Prior Agreement”); and
WHEREAS,
the Prior Agreement is scheduled to expire on March 31, 2008 and the Company and
Executive mutually desire to replace the Prior Agreement upon such expiration
with this Agreement to provide for the continued employment of Executive on the
terms and conditions set forth herein, all effective as of the Effective
Date;
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 % 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 1.18
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 1.16 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 Payments”
means the amounts described in Section 6.12(a) hereof.
1.11 “Disability” has the
meaning ascribed to such term in the Incentive Plan.
1.12 “Effective Date” means
the date specified in the recitals to this Agreement.
1.13 “Employment Period”
means the Initial Employment Period (as defined in Section 1.17 hereof) plus any
additional Renewal Periods (as defined in Section 1.20 hereof).
1.14 “Excise Tax” means the
excise tax imposed by Section 4999 of the Code or any similar state or local tax
that may be imposed.
1.15 “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 1.15 (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 1.15, 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.
1.16 “Incentive Plan” means
the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended from time to
time.
1.17 “Initial Employment
Period” has the meaning set forth in Section 2.2 hereof.
1.18 “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.
1.19 “Payment Cap” means
the maximum amount described in Section 6.12(b) hereof.
1.20 “Renewal Period” has
the meaning set forth in Section 2.2 hereof.
1.21 “Retirement” means the
voluntary termination of employment by Executive on or after attaining age 59
1/2.
1.22 “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.
1.23 “Tax Reimbursement
Payment” means the payment described in Section 6.12(c)
hereof.
1.24 “Termination Date”
means the effective date of termination of Executive’s employment as determined
in accordance with Section 4.5 hereof.
1.25 “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 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 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.
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), 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. 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 shall be deemed to be a Retirement under the
Incentive Plan.
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. For purposes of this Agreement, any purported
termination of Executive’s employment by the Company or 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
(a) 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, a termination by either party pursuant to
Section 4.2, or a Termination by Executive for Retirement pursuant to Section
4.3 shall not be less than fifteen (15) days after the date the Notice of
Termination is delivered; (b) the specific provision in this Agreement relied
upon; and (c) in reasonable detail, the facts and circumstances claimed to
provide a basis for such termination. 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. 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.
Onx
Xxxxxxx Xxx
Xxxxx
Xxxxx, XX 00000
Attention:
Chief Legal Officer
To
Executive:
Xxxxxx
Xxx
140 Xxx
Xxxxxx
Xx.
Xxxxx, XX 00000
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, 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 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 agree to cooperate fully and take appropriate reasonable actions to avoid
any such consequences under Section 409A of the Code, including delaying
payments and reforming the form of the Agreement if such action would reduce or
eliminate taxes and/or interest payable as a result of Section 409A of the
Code.
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 | |||
