Exhibit 10.1
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT
AGREEMENT (the
“Employment Agreement”) is entered effective
August 3, 2009, (the “Effective Date”) by and
between Catalyst Health Solutions, Inc. (the “Company”)
and Richard A. Bates (the “Executive”).
WHEREAS , the Company is engaged in business as a
pharmacy benefits manager; and
WHEREAS , the Company seeks to employ the Executive, and
the Executive seeks employment with and for the Company and to
execute the duties as Executive Vice President that the Chief
Executive Officer of the Company (the “CEO”) or the
Board of Directors of the Company (the “Board”) may
from time-to-time assign; and
WHEREAS , Executive and the Company wish to enter into
this Employment Agreement to set forth the terms for employment and
compensation for the Executive;
NOW, THEREFORE
, in consideration of the premises
and mutual covenants herein and for other good and valuable
consideration, the parties hereto hereby agree to enter into this
Employment Agreement effective as of the Effective Date.
SECTION I
Term of Employment; Executive
Representation.
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1.1
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Employment
Term. Executive shall be
employed by the Company under the terms of this Employment
Agreement for a four-year period commencing on the first day of
Executive’s active employment with the Company, which shall
be anytime on or before August 3, 2009 (the “Employment
Term”). Notwithstanding the foregoing, the Executive’s
employment with the Company may be terminated pursuant to Section
VIII, on the terms and subject to the conditions set forth in this
Employment Agreement. On the date the Executive’s employment
with the Company ends, the Executive shall cease to hold any
position (whether as an officer, director, manager, employee,
trustee, fiduciary or otherwise) with the Company or any of its
subsidiaries or affiliates, unless the Executive and the Company
shall specifically agree otherwise in writing.
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1.2
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Executive
Representation. Executive
hereby represents to the Company that the execution and delivery of
this Employment Agreement by Executive and the Company, and the
performance by Executive of the Executive’s duties hereunder,
shall not constitute a breach of, or otherwise contravene, the
terms of any employment agreement, other agreement, or policy
(including any covenant not to compete, solicit employees, or
customers of any prior employer(s)) to which Executive is a party
or otherwise bound. Executive further warrants that he has not been
the subject of any criminal or civil proceeding, investigation, or
sanction by any licensing authority of any state,
Federal
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agency, court, other public body,
or of any self-regulatory organization. Executive further
represents that he is not aware of any basis that he would not be
fit to transact business with an agency or instrumentality of the
federal or any state government.
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SECTION II
Position.
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2.1
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Effective
August 3, 2009 and for the remainder of the Employment Term,
Executive shall serve as an Executive Vice President of the Company
and shall principally perform Executive’s duties to the
Company and its affiliates from the Company’s offices in
Rockville, Maryland, subject to normal and customary travel
requirements in the conduct of the Company’s business to
customer locations and to its facilities, including (but not
limited to) its facilities in Florida, Louisiana, Maryland, Nevada,
North Carolina, and Texas. In such position, Executive shall report
to the CEO and shall have such duties as shall be assigned by the
CEO from time to time, including participation in corporate
strategy and planning meetings, development and implementation of
effective strategies to increase client retention, development of
new products and service offerings, and oversight of client
services, sales and marketing, strategic initiatives and clinical
services.
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2.2
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During the
Employment Term, Executive will devote Executive’s full
business time and best efforts to the performance of
Executive’s duties hereunder and will not engage in any other
business, profession, or occupation for compensation or otherwise
which would conflict with the rendition of such services either
directly or indirectly, without the prior written consent of the
CEO.
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2.3
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Executive has
no equity interest in any company engaged in the same lines of
business as the Company. Executive agrees not to acquire any
interest in any such company without the express consent of the
Company. Notwithstanding the foregoing, the Executive may acquire
up to a two percent interest in any publicly traded company so long
as his activity with respect to such company remains a passive
investment.
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2.4
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Executive, as
an obligation of employment, shall be/become familiar with
requirements of law(s) applicable to the lines of business in which
the Company is engaged and similarly with respect to its legal
obligations as a public company. Should any practice at the Company
appear to be inconsistent with such requirements, the Executive
shall report such incident or suspected activity to the CEO, or to
counsel for the Company (at the address identified in
Section 11.7, below). Failure to comply with the obligations
of this section is grounds for immediate dismissal.
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SECTION III
Base Salary.
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3.1
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The Executive
will be paid a base salary at regular installments in accordance
with the Company’s usual payment practices. The
Executive’s base salary will be paid at an annual rate of at
least $380,000. The Executive’s base salary, as in effect at
a given time hereunder, is hereinafter referred to as the
“Base Salary.” Any changes to Base Salary during the
term of this Employment Agreement shall be as authorized by the
Compensation Committee of the Board.
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SECTION IV
Incentive Bonus.
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4.1
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Executive is,
and shall be, eligible to earn an incentive cash bonus award (an
“Incentive Bonus”), as determined by the Board. The
current Incentive Bonus range for which the Executive is eligible,
subject to determination by the Board, is set forth in Schedule
4-1.
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SECTION V
Equity
Arrangements.
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5.1
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The Executive
is, and shall be, eligible to earn awards under the Company’s
2003 Equity Incentive Plan, the Company’s 2006 Stock
Incentive Plan and/or such similar programs as may be adopted from
time-to-time to provide long-term incentives for executives of the
Company (as applicable, the “Plan”).
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5.2
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The Executive
shall be entitled to receive a grant of 60,000 shares of restricted
Company common stock (the “Initial Restricted Stock”)
at the next meeting of our Board or the Compensation Committee of
the Board following the Start Date (as defined below). The Initial
Restricted Stock shall be subject to the terms and conditions of a
restricted stock agreement approved by the Board and the applicable
Plan, including a four year vesting schedule.
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5.3
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The Executive
shall be eligible to earn an annual grant of restricted Company
common stock (the “Restricted Stock”), as determined by
the Board. The current range for which the Executive is eligible,
subject to determination by the Board, is 0 to 40,000 shares of
Restricted Stock per year with a target of 20,000 shares of
Restricted Stock (the “Target Restricted Stock Grant”).
The Restricted Stock shall be subject to the terms and conditions
of a restricted stock agreement approved by the Board and the
applicable Plan.
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5.4
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Subject to the
Executive’s continued employment with the Company on the date
of a Change in Control, the Executive shall fully vest in the
Initial Restricted Stock, the Restricted Stock and all other equity
awards held by the Executive that relate to the common stock of the
Company. Such vesting shall occur immediately prior to the date of
the Change in Control.
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SECTION VI
Employee Benefits.
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6.1
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During the
Employment Term, Executive shall be entitled to participate in the
employee benefit plans of the Company maintained generally for
employees (including, e.g., without limitation, standard medical
and dental benefits, and savings plan), as well as those maintained
for other senior executives of the Company. In addition, Executive
shall be eligible for the following benefits:
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A.
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Three weeks of
paid vacation per year which may be taken at such times as approved
by the CEO, which approval will not be unreasonably withheld;
and
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B.
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Term life
insurance as currently in effect and to be maintained in an amount
equal to at least three times the Executive’s Base
Salary.
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SECTION VII
Business Expenses.
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7.1
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During the
Employment Term, reasonable business expenses incurred by Executive
in the performance of Executive’s duties hereunder shall be
reimbursed by the Company in accordance with Company
policies.
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SECTION VIII
Termination.
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8.1
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The Employment
Term and Executive’s employment hereunder may be terminated
by either party at any time and for any reason in accordance with
the provisions of this Section VIII. Notwithstanding any other
provision of this Employment Agreement, the provisions of this
Section VIII shall exclusively govern the Executive’s rights
upon termination of employment with the Company and its affiliates.
The following provisions shall apply to termination of the
Executive’s employment with the Company.
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A.
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By the
Company for Cause.
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(i)
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The Employment
Term and Executive’s employment hereunder may be immediately
terminated by the Company for Cause (as defined below) at any
time.
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(ii)
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For purposes of this Employment
Agreement, “Cause” shall mean the Executive’s:
(i) failure to comply with any law or regulation arising from
conduct not undertaken in good faith; (ii) commission of an
act of fraud upon, or act evidencing dishonesty to, the Company;
(iii) misappropriation of any funds, property, or rights of
the Company; (iv) willful breach or
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habitual neglect of
Executive’s job duties or Executive’s failure or
refusal to comply with explicit directives of the Company;
(v) conviction of a felony or a misdemeanor involving moral
turpitude; (vi) use or possession of illegal drugs at work or
Executive’s working under the influence of illegal drugs at
work; or (vii) Executive’s breach of the provisions of
any non-competition or confidentiality agreements with, or written
policies of, the Company or its affiliates to which Executive is
bound or subject.
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(iii)
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If
Executive’s employment is terminated by the Company for
Cause, Executive shall be entitled to receive:
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(a)
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The Base Salary
through the date of termination;
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(b)
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Reimbursement
for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of
the Executive’s termination; and
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(c)
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Such Employee
Benefits, if any, as to which Executive may be entitled under the
terms of the employee benefit plans of the Company.
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B.
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By the
Company Without Cause or by the Executive with Good Reason
(Including Death or Permanent Disability).
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(i)
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The Employment
Term and Executive’s employment hereunder may be terminated
by the Company at any time without Cause.
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(ii)
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If
Executive’s employment is terminated by the Company without
Cause, upon the death, or permanent disability of the Executive, or
by the Executive for Good Reason, then Executive shall be entitled
to receive:
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(a)
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Two times the
Executive’s Base Salary payable in the form of salary
continuation over the twelve month period following the termination
date in accordance with the Company’s normal payroll
practices as in effect on the date of termination of
Executive’s employment, except that any payments that would
otherwise have been made before the first normal payroll payment
date falling on or after the sixtieth (60th) day after the
date of termination of Executive’s employment (the
“First Payment Date”) shall be made on the First
Payment Date;
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(b)
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Continuation of
healthcare benefits at the Company’s expense for a period of
twelve months following the termination date provided, however,
that the amount of healthcare benefits reimbursed in one year shall
not affect the amount eligible for reimbursement in any subsequent
year;
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(c)
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The Initial
Restricted Stock, the Restricted Stock and all other equity awards
held by the Executive that relate to the common stock of the
Company, in each case, that would have vested in the twelve
(12) month period following the Executive’s date of
termination had the Executive remained employed by the Company
during such twelve (12) month period shall be immediately
vested on the date of termination;
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(d)
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Any Incentive
Bonus earned for the performance period that has ended prior to the
date of termination that remains unpaid as of the date of
termination;
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(e)
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Reimbursement
for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of
Executive’s termination; and
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(f)
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Such Employee
Benefits, if any, as to which Executive may be entitled to under
the terms of the employee benefit plans of the Company.
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(iii)
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Executive shall
have the right, upon not less than 30 days’ advance written
notice to the Company, to terminate his employment hereunder for
“Good Reason” (as hereinafter defined) if the Company
fails to substantially cure the action set forth as grounds for
Good Reason. Any such notice of termination of employment by
Executive for Good Reason must be given in writing to the CEO,
within four calendar months after the occurrence of the event
constituting Good Reason.
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(a)
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“Good
Reason” means (i) the assignment to Executive of any
duties inconsistent in any material respect with Executive’s
position (including status, offices, titles, and reporting
relationships), authority, duties, or responsibilities as of the
Effective Date; and (ii) the Company’s failure to honor
all of the terms of this Employment Agreement, excluding for such
purpose any isolated, insubstantial, and inadvertent action not
taken in bad-faith and which is remedied by the Company promptly
after receipt of written notice thereof from the
Executive.
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(iv)
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Permanent
disability shall be determined based upon the ability of the
Executive to perform the functions of Executive Vice President. The
determination that the Executive is permanently disabled for
purposes of any Company paid disability policy with respect to the
Executive shall be proof that the Executive is permanently
disabled.
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(v)
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Notwithstanding
any provision to the contrary in this Employment Agreement, the
Executive shall not be eligible to receive the payments and
benefits set forth in Section 8.1(B)(ii)(a), (b) and
(c) unless (x) on or prior to the 50th day following the
date of his termination, the Executive executes and delivers to the
Company a waiver and release of claims agreement, in the form
attached hereto as Appendix C (the “Release”), which
Release may be amended by the Company to reflect changes in
applicable laws and regulations, and (y) such Release shall
not have been revoked by the Executive on or prior to the 60th day
following the date of his termination. The salary continuation
payments payable hereunder are intended to constitute separate
payments for purposes of Section 1.409A- 2(b)(2) of the
Treasury Regulations.
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C.
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By the
Executive without Good Reason.
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(i)
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The Employment
Term and Executive’s employment hereunder may be terminated
by the Executive without Good Reason upon not less than 90
days’ advance written notice to the Company.
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(ii)
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If
Executive’s employment is terminated by the Executive without
Good Reason, then Executive shall be entitled to
receive:
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(a)
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The Base Salary
through the date of termination;
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(b)
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Reimbursement
for any unreimbursed business expenses properly incurred by
Executive in accordance with Company policy prior to the date of
Executive’s termination; and
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(c)
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Such Employee
Benefits, if any, as to which Executive may be entitled under the
terms of the employee benefit plans of the Company.
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D.
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Termination
Within 12 Months After Change in Control
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(i)
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In the event that
Executive’s employment is terminated within twelve months
after a Change in Control by the Company without Cause or by
Executive for Good Reason, Executive shall be entitled to the same
rights, payments and benefits as provided in paragraph B of this
Section VIII, except the amount provided in
Section 8.1(B)(ii)(a) shall be paid in a lump sum within
thirty (30) days following the effective date of the Release
if the Change in Control constitutes a “change in control
event” (as set forth
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in Section 409A). In
addition, the Executive shall be entitled to receive a lump sum
payment equal to two times his Target Bonus (without regard to any
reduction in Base Salary after the Change in Control).
Notwithstanding the foregoing, if as provided in Appendix A
Executive would otherwise be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code, the amounts payable
under this Employment Agreement shall be reduced as provided in
Appendix A.
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(ii)
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If any contest
or dispute shall arise under this Employment Agreement involving
termination of Executive’s employment with the Company within
twelve months after a Change in Control, the Company shall
reimburse Executive for all reasonable legal fees and related
expenses, if any, incurred by Executive in connection with such
contest or dispute if a court of competent jurisdiction or an
arbitration panel substantially upholds Executive’s position,
provided, that the Company shall make any such reimbursement
to Executive as soon as practicable after such reimbursement
becomes due, but in no event later than December 31st of the
year following the year in which the applicable fees and related
expenses were incurred. The amount of expenses reimbursed in one
year shall not affect the amount eligible for reimbursement in any
subsequent year.
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(iii)
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For purposes of
this Section VIII, paragraph E:
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(a)
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“Cause” shall have the meaning given
to such term in Section 8.1A(ii).
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(b)
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“Good
Reason” shall have the meaning set forth in paragraph
8.1B(iii)(a) of Section VIII and shall also include (i) any
requirement of the Company that Executive (a) be based
anywhere more than fifty (50) miles from Executive’s
primary office location and more than fifty (50) miles from
Executive’s principal residence at the time of the Change in
Control or (b) travel on Company business to an extent
substantially greater than the travel obligations of Executive
immediately prior to such Change in Control; and (ii) the
Company’s failure to continue to provide Executive with
benefits in the aggregate substantially equivalent to the benefits
Executive was entitled to under the employee benefit plans of the
Company in which Executive was participating immediately prior to
such Change in Control, at a substantially equivalent
cost.
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(c)
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“Change
in Control” shall have the meaning ascribed to such term in
Appendix B.
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E.
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Notwithstanding
anything to the contrary in this Section 8.1, the Executive
shall not be entitled to any severance payments or benefits
pursuant to this Section 8.1 that provide for deferral of
compensation covered by Section 409A of the Internal Revenue
Code of 1986, as amended (“Section 409A”) unless the
Executive’s termination of employment constitutes a
“separation from service” within the meaning of
Treasury Regulation Section 1.409A-1(h). If, at the time the
Executive experiences a “separation from service,” the
Company determines that the Executive is a “specified
employee,” as defined in Section 409A (and the
regulations promulgated thereunder), then notwithstanding anything
to the contrary in this Employment Agreement, any and all amounts
payable under this Section VIII that would constitute deferred
compensation subject to Section 409A, as determined by the
Company in its sole discretion, and that would (but for this
sentence) be payable within the six (6) month period following
such separation from service, shall instead be paid on the
thirtieth day following the expiration of the six (6) month
period following the separation from service, in cash and in the
form of a lump sum.
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SECTION IX
Notice of
Termination.
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9.1
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Any purported
termination of employment by the Company or by Executive (other
than due to Executive’s death) shall be communicated by
written Notice of Termination to the other party hereto in
accordance with Section 11.7 hereof. For purposes of this
Employment Agreement, a “Notice of Termination” shall
mean a notice which shall indicate the specific termination
provision in this Employment Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision
so indicated.
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SECTION X
Confidentiality.
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10.1
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Executive
acknowledges and agrees to the provisions of the Confidentiality
and Non-Competition Addendum set forth fully in Schedule 10-1 to
this Employment Agreement, made a part hereof, and acknowledged by
the signatures of the Executive and Company (or their respective
representatives).
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SECTION XI
Miscellaneous.
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11.1
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Governing
Law. This Employment
Agreement, except as otherwise expressly provided, shall be
governed by and construed in accordance with the laws of the State
of Maryland, without regard to conflicts of laws principles
thereof.
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11.2
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Entire
Agreement/Amendments. This Employment Agreement (together with its
Schedules, appendices and the Confidentiality and Non-Competition
Addendum) contains the understanding of the parties with respect to
the employment of Executive by the Company. There are no
restrictions, agreements, promises, warranties, covenants, or
undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein. This Employment
Agreement may not be altered, modified, or amended except by
written instrument signed by the parties hereto.
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11.3
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No
Waiver. The failure of a
party to insist upon strict adherence to any term of this
Employment Agreement on any occasion shall not be considered a
waiver of such party’s rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or
any other term of this Employment Agreement.
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11.4
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Severability. In the event that any one or more of the
provisions of this Employment Agreement shall be or become invalid,
illegal, or unenforceable in any respect, the validity, legality,
and enforceability of the remaining provisions of this Employment
Agreement shall not be affected thereby.
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11.5
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Assignment. This Employment Agreement shall not be
assignable by Executive. This Employment Agreement may be assigned
by the Company to a company which is a successor in interest to
substantially all of the business operations of the Company. Such
assignment shall become effective when the Company notifies the
Executive of such assignment or at such later date as may be
specified in such notice. Upon such assignment, the rights and
obligations of the Company hereunder shall become the rights and
obligations of such successor company, provided that any
assignee expressly assumes the obligations, rights, and privileges
of this Employment Agreement.
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11.6
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Successors;
Binding Agreement. This
Employment Agreement shall inure to the benefit of and be binding
upon the personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises, and
legatees of the respective parties to this Employment
Agreement.
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11.7
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Notice. For the purposes of this Employment Agreement,
notices and all other communications provided for in the Employment
Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, and addressed to the
respective addresses set forth below or to such other address as
either party may have furnished to the other in writing in
accordance herewith. Notice of change of address shall be effective
only upon receipt.
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