Date of report (Date of earliest event reported): October 29, 2004
| DELAWARE | 0-20199 | 43-1420563 |
| (State or Other Jurisdiction of | (Commission File Number) | (I.R.S. Employer |
| Incorporation or Organization) | Identification No.) |
| 13900 Riverport Drive, Maryland Heights, MO | 63043 |
| (Address of Principal Executive Offices) | (Zip Code) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
On October 29, 2004, Express Scripts, Inc. (the “Company”) entered into long-term employment agreements with the following key executives: Thomas M. Boudreau, Senior Vice President and General Counsel, and Edward B. Ignaczak, Senior Vice President of Sales and Account Management. The agreement with Mr. Boudreau has an effective date of October 29, 2004, and replaces a previous agreement which was entered into in March 2001. Mr. Ignaczak’s agreement is effective as of April 1, 2004. Except as otherwise noted, the terms of the employment agreements are substantively identical. The employment agreements contain the following general terms:
| • | Term of Employment Agreements. The initial employment period under the agreements runs from the effective date through March 31, 2007, for Mr. Ignaczak, and through March 31, 2006 for Mr. Boudreau. Also, under each of the agreements, the employment period is automatically extended for successive one-year renewal periods unless either party gives timely notice of non-renewal. |
| • | Compensation and Benefits. Each employment agreement generally provides for: (i) the payment of an annual base salary (which may not be reduced after any increase); (ii) a guaranteed minimum annual bonus target pursuant to the terms of the Company’s bonus plan, with a bonus opportunity for each calendar year during the initial employment period of up to 200% of the executive’s guaranteed minimum annual bonus in the event the Company achieves certain “stretch” financial and work plan goals; (iii) an option grant under the Company’s 2000 Long Term Incentive Plan (the “LTIP”), scheduled to vest in full on December 31, 2010, but subject to accelerated vesting upon the achievement of certain financial goals; (iv) a restricted stock award under the LTIP, scheduled to vest in full seven years from grant date for Mr. Boudreau and ten years from grant date for Mr. Ignaczak, but subject to accelerated vesting upon the achievement of certain financial goals; (v) participation in Company employee benefit plans (other than bonus and incentive plans) on the same basis as such plans are generally made available to similarly situated senior executives of the Company; (vi) such perquisites and fringe benefits to which similarly situated executives of the Company are entitled and which are suitable for the executive’s position and reimbursement of reasonable business expenses; (vii) for Mr. Boudreau only, the crediting of a deferred bonus of $400,000 (to be credited in two annual installments of $200,000 each) to Mr. Boudreau’s account in the Company’s Executive Deferred Compensation Plan (the “EDCP”), subject to the terms and conditions of the EDCP, which bonus generally vests at the end of Mr. Boudreau’s initial employment period under the employment agreement, subject to certain exceptions; and (viii) for Mr. Boudreau only a one time bonus in the amount necessary to provide his annual salary set forth below retroactively to January 1, 2004; and (ix) for Mr. Boudreau only, a one time signing bonus in the amount of $100,000 (to be paid in two equal installments of $50,000 each, as soon as possible following the effective date of the agreement, and in January, 2005). The specific compensatory amounts and grants for each of the executives under the employment agreements are as follows: |
| Executive |
Initial Annual Base Salary |
Guaranteed Minimum Annual
Bonus Target (expressed as a
percentage of annual base
salary) |
Number of Shares Subject to Option Grant |
Number of Shares Subject to Restricted Stock Award | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Thomas M. Boudreau | $ | 350,000 | 64 | % | 9,655 | 7,226 | |||||||||||
| Edward B. Ignaczak | $ | 275,000 | 50 | % | 8,777 | 10,537 | |||||||||||
| • | Benefits Upon Termination of Employment Prior to Expiration of Employment Period. Each employment agreement provides for the provision and forfeiture of certain benefits if the executive’s employment is terminated prior to the expiration of the employment period (including any renewal period in effect). In general, if the executive’s employment is terminated prior to expiration of the employment period, the executive is not entitled to receive any further payments or benefits which have not already been paid or provided (including any unvested portion of the option grant, deferred bonus, or restricted stock award) except as follows: |
| – | The executive will be entitled to: (i) the executive’s annual base salary through the termination date; (ii) any annual bonus earned for a previously completed fiscal year but unpaid as of the termination date; (iii) reimbursement of any unreimbursed business expenses properly incurred by the executive; and (iv) any employee benefits that the executive would be entitled to under the employee benefit plans of the Company; |
| – | If the executive’s employment is terminated by the Company other than for Cause or Disability, or by the executive for Good Reason (as those terms are defined in the agreement), the executive is entitled to receive: (i) a severance benefit equal to 18 months of the executive’s base salary plus a specified portion of the executive’s bonus potential for the year based on the average percentage of the potential earned for the three prior years (not to exceed 100%); (ii) reimbursement for the cost of continuing medical insurance under COBRA for 18 months after termination of employment; (iii) if termination of employment occurs prior to the end of the executive’s initial employment period under the agreement, a pro rata portion (based on the number of days worked during the initial employment period) of 50% of the restricted stock award for Mr. Ignaczak and 83% of the restricted stock award for Mr. Boudreau; (iv) for Mr. Boudreau only, if termination of employment occurs prior to the end of the executive’s initial employment period under the agreement, a pro rata portion of the previously credited installment(s) of the deferred bonus based on the number of days worked during the initial employment period; |
| – | If the executive’s employment terminates on account of disability or retirement (i.e., voluntary retirement on or after age 59 ½ but not within 90 days after a change in control (as defined in the employment agreements) of the Company) prior to the end of the executive’s initial employment period under the agreement, the executive generally is entitled to receive: (i) for Mr. Ignaczak only, a pro rata portion of 50% of the restricted stock award, and (ii) for Mr. Boudreau only, a pro rata portion of the previously credited installment(s) of the deferred bonus. |
| – | If the executive’s employment terminates on account of death prior to the end of the executive’s initial employment period under the agreement, the executive generally is entitled to receive: (i) a portion of the restricted stock award (50% of the restricted stock award for Mr. Ignaczak and 83% of the restricted stock award for Mr. Boudreau), and (ii) for Mr. Boudreau only, a pro rata portion of the previously credited installment(s) of the deferred bonus. |
| – | The executive’s rights with respect to the stock option granted under the employment agreement are generally governed by the terms and provisions of the 2000 LTIP. However, each employment agreement provides that stock options granted thereunder shall not vest or otherwise become exercisable solely as a result of the executive’s retirement. |
| – | With respect to Mr. Boudreau’s agreement only, if a change in control (as defined in the agreement) of the Company occurs prior to the end of the initial employment period under the agreement, Mr. Boudreau, in certain instances, is afforded different rights with respect to the deferred bonus as follows: (i) if Mr. Boudreau remains employed for 90 days following the change in control, he obtains a vested right to receive 50% of the deferred bonus, with the remaining 50% otherwise eligible for vesting pursuant to the terms of the employment agreement; and (ii) if Mr. Boudreau is terminated by the Company other than for cause or disability (as defined in the agreement) or Mr. Boudreau terminates his employment for Good Reason (as defined in the agreement) within 90 days prior to the change in control or after the change in control but prior to the expiration of the initial employment period, he obtains a vested right to receive the entire deferred bonus. |
| • | Restrictive Covenants. If an executive’s employment is terminated prior to expiration of the employment period (including any renewal period in effect) for any reason, the executive is prohibited from competing against the Company for 18 months after such termination. If termination of employment occurs solely as a result of expiration of the employment agreement, the executive is prohibited from competing for one year after such termination. Each executive is also subject to certain non-solicitation, confidentiality and non-disparagement limitations. Entitlement to the severance benefit and the deferred bonus described above (including any prorated portion) is contingent upon compliance with these restrictive covenants. |
| • | Tax Indemnification. In the event that any amount or benefit paid or distributed to the executive pursuant to the employment agreement, taken together with any amounts or benefits otherwise paid or distributed to the executive by the Company pursuant to any other arrangement or plan (collectively, the “Covered Payments”), would result in the executive’s liability for the payment of an excise tax under Section 4999 of the Internal Revenue Code (or any similar state or local tax) (collectively, the “Excise Tax”), the Company will make a “gross-up” payment to the executive to fully offset the Excise Tax provided the aggregate present value of the Covered Payments is equal to or exceeds 125% of the maximum total payment which could be made to the executive without triggering the Excise Tax. If the aggregate present value of the Covered Payments, however, exceeds such maximum amount, but is less than 125% of such maximum amount, then the Company may, in its discretion, reduce the Covered Payments so that no portion of the Covered Payments is subject to the Excise Tax, and no gross-up payment would be made. |
In connection with entering into the new employment agreement with Mr. Boudreau described in Item 1.01 above, the Company and Mr. Boudreau terminated, effective as of October 29, 2004, the prior Executive Employment agreement entered into on March 15, 2001 between the Company and Mr. Boudreau. The Company did not incur any early termination penalties in connection with the termination of such employment agreement.
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| EXPRESS SCRIPTS, INC. | |
Date: November 2, 2004 |
By: /s/ Barrett A. Toan |
| Barrett A. Toan | |
| Chairman and Chief Executive Officer |