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EMPLOYMENT AGREEMENT

Employment Agreement

EMPLOYMENT AGREEMENT | Document Parties: CATALYST HEALTH SOLUTIONS, INC. You are currently viewing:
This Employment Agreement involves

CATALYST HEALTH SOLUTIONS, INC.

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Title: EMPLOYMENT AGREEMENT
Governing Law: Maryland     Date: 8/7/2009
Industry: Insurance (Accident and Health)     Sector: Financial

EMPLOYMENT AGREEMENT, Parties: catalyst health solutions  inc.
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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.

 

1.1

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.

 

1.2

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.

SECTION II

Position.

 

2.1

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.

 

2.2

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.

 

2.3

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.

 

2.4

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.

 

3.1

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.

SECTION IV

Incentive Bonus.

 

4.1

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.

SECTION V

Equity Arrangements.

 

5.1

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”).

 

5.2

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.

 

5.3

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.

 

5.4

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.

 

6.1

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:

 

 

A.

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

 

 

B.

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.

SECTION VII

Business Expenses.

 

7.1

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.

SECTION VIII

Termination.

 

8.1

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.

 

 

A.

By the Company for Cause.

 

 

(i)

The Employment Term and Executive’s employment hereunder may be immediately terminated by the Company for Cause (as defined below) at any time.

 

 

(ii)

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.

 

 

(iii)

If Executive’s employment is terminated by the Company for Cause, Executive shall be entitled to receive:

 

 

(a)

The Base Salary through the date of termination;

 

 

(b)

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

 

 

(c)

Such Employee Benefits, if any, as to which Executive may be entitled under the terms of the employee benefit plans of the Company.

 

 

B.

By the Company Without Cause or by the Executive with Good Reason (Including Death or Permanent Disability).

 

 

(i)

The Employment Term and Executive’s employment hereunder may be terminated by the Company at any time without Cause.

 

 

(ii)

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:

 

 

(a)

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;

 

 

(b)

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)

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;

 

 

(d)

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;

 

 

(e)

Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and

 

 

(f)

Such Employee Benefits, if any, as to which Executive may be entitled to under the terms of the employee benefit plans of the Company.

 

 

(iii)

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.

 

 

(a)

“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.

 

 

(iv)

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)

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.

 

 

C.

By the Executive without Good Reason.

 

 

(i)

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.

 

 

(ii)

If Executive’s employment is terminated by the Executive without Good Reason, then Executive shall be entitled to receive:

 

 

(a)

The Base Salary through the date of termination;

 

 

(b)

Reimbursement for any unreimbursed business expenses properly incurred by Executive in accordance with Company policy prior to the date of Executive’s termination; and

 

 

(c)

Such Employee Benefits, if any, as to which Executive may be entitled under the terms of the employee benefit plans of the Company.

 

 

D.

Termination Within 12 Months After Change in Control

 

 

(i)

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.

 

 

(ii)

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.

 

 

(iii)

For purposes of this Section VIII, paragraph E:

 

 

(a)

“Cause” shall have the meaning given to such term in Section 8.1A(ii).

 

 

(b)

“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.

 

 

(c)

“Change in Control” shall have the meaning ascribed to such term in Appendix B.

 

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E.

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.

SECTION IX

Notice of Termination.

 

9.1

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.

SECTION X

Confidentiality.

 

10.1

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).

SECTION XI

Miscellaneous.

 

11.1

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

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.

 

11.3

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.

 

11.4

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.

 

11.5

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.

 

11.6

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.

 

11.7

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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