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EXECUTION
COPY
EXECUTIVE
EMPLOYMENT AGREEMENT
This
Executive Employment Agreement (the “Agreement”)
dated as of April 1, 2008 (the “Effective Date”),
by and between Express Scripts, Inc., a Delaware corporation
(the “Company”), and Jeffery L. Hall
(“Executive”).
WHEREAS,
the Company agrees to employ the Executive as its Executive
Vice President and Chief Financial Officer and the Executive
agrees to assume such position 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 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 70% 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 One Express Way, Saint
Louis, Missouri (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.
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 April 1,
2008.
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, 2009 (the “Initial Employment
Period”). On April 1 of each year, commencing
with April 1, 2009, and on each subsequent April 1
thereafter (each, an “Anniversary Date”), this
Agreement shall be extended automatically at such time for an
additional twelve (12) month period (each, a “Renewal
Period”) unless either party hereto delivers written
notice in accordance with Section 6.2 hereof to the other
party hereto at least 90 days prior to such Anniversary Date
of his, her or its desire not to renew this Agreement for an
additional Renewal Period. ( e.g. Subject to
the terms hereof, assuming an April 1 Anniversary Date, and an
employment period (Initial or Renewal) of April 1, 2008
through March 31, 2009, if either party gives proper notice at
least 90 days prior to April 1, 2009 then the Agreement shall
terminate as of March 31, 2009, but if neither party gives
proper notice at least 90 days prior to April 1, 2009 then the
Agreement shall automatically renew for an additional Renewal
Period of April 1, 2009 through March 31,
2010.) 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 Executive Vice President and Chief Financial Officer and
shall report to, and at all times be subject to the lawful
direction of, the Chief Executive Officer 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. 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.
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 Four Hundred Fifty
Thousand Dollars ($ 450,000), 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 70% 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) eighteen (18) 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 determine
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