SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
(Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement Confidential, for use of the Commission
only (as permitted by Rule 14a-6(e)(2)
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EXPRESS SCRIPTS, INC.
(Name of Registrant As Specified in its Charter)
(Name of Person(s) Filing Proxy Statement. If other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing party:
4) Date filed:
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[COMPANY LOGO INSERTED HERE]
PRELIMINARY COPIES
EXPRESS SCRIPTS, INC.
14000 RIVERPORT DRIVE
MARYLAND HEIGHTS, MISSOURI 63043
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 26, 1999
The 1999 Annual Meeting of Stockholders of EXPRESS SCRIPTS, INC., a
Delaware corporation (the "Company"), will be held at the offices of the
Company, 13900 Riverport Drive, Maryland Heights, Missouri 63043, on Wednesday,
May 26, 1999, at 9:30 a.m. Central Time, to consider and act upon the following
matters:
1. to elect ten (10) directors to serve until the next Annual Meeting of
Stockholders or until their respective successors are elected and qualified;
2. to approve the Company's Employee Stock Purchase Plan;
3. to approve the Company's Executive Deferred Compensation Plan;
4. to approve the Third Amendment to the Company's Amended and Restated
1994 Stock Option Plan;
5. to approve the First Amendment to the Company's Amended and Restated
1992 Stock Option Plan;
6. to approve the Fourth Amendment to the Company's Amended and Restated
1994 Stock Option Plan;
7. to approve the Second Amendment to the Company's Amended and Restated
1992 Stock Option Plan;
8. to approve the Second Amendment to the Company's Amended and Restated
1992 Stock Option Plan for Outside Directors;
9. to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Class A Common Stock to 250,000,000 shares;
10. to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Class B Common Stock to 65,000,000 shares;
11. to ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the Company's current fiscal year; and
12. to transact such other business as may properly come before the meeting
or any adjournments thereof.
Only stockholders of record at the close of business on March 31, 1999, are
entitled to notice of and to vote at the Meeting. At least ten days prior to the
Meeting, a complete list of stockholders entitled to vote will be available for
inspection by any stockholder for any purpose germane to the Meeting, during
ordinary business hours, at the office of the Secretary of the Company at 14000
Riverport Drive, Maryland Heights, Missouri 63043. As a stockholder of record,
you are cordially invited to attend the Meeting in person. If you do not expect
to be present, please complete, sign and date the enclosed Proxy and mail it
promptly in the enclosed envelope. The return of the enclosed Proxy will not
affect your right to vote in person if you attend the Meeting.
By Order of the Board of Directors
/s/ Thomas M. Boudreau
Thomas M. Boudreau
Secretary
14000 Riverport Drive
Maryland Heights, Missouri 63043
April 21, 1999
THE RETURN OF YOUR SIGNED PROXY AS PROMPTLY AS POSSIBLE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING. NO POSTAGE IS REQUIRED IF THE PROXY IS
RETURNED IN THE ENVELOPE ENCLOSED FOR YOUR CONVENIENCE AND MAILED IN THE UNITED
STATES.
<PAGE>
[COMPANY LOGO INSERTED HERE]
PRELIMINARY COPIES
EXPRESS SCRIPTS, INC.
14000 RIVERPORT DRIVE
MARYLAND HEIGHTS, MISSOURI 63043
1999 ANNUAL MEETING OF STOCKHOLDERS
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Express Scripts, Inc., a Delaware
corporation (the "Company"), to be voted at the 1999 Annual Meeting of
Stockholders of the Company (the "Meeting") and any adjournment thereof. The
Meeting will be held at the offices of the Company, 13900 Riverport Drive,
Maryland Heights, Missouri 63043, on Wednesday, May 26, 1999, at 9:30 a.m.
Central Time, for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders and in this Proxy Statement. This Proxy Statement and
the accompanying Proxy will first be sent or given to stockholders on or about
April 21, 1999.
A Proxy, in the accompanying form, which is properly executed, duly
returned to the Company and not revoked, will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted as follows: (i) for the nominees for director named in this Proxy
Statement; (ii) for the proposal to approve the Express Scripts, Inc. Employee
Stock Purchase Plan (the "ESPP"); (iii) for the proposal to approve the Express
Scripts, Inc. Executive Deferred Compensation Plan (the "Deferred Compensation
Plan"); (iv) for the proposal to approve the Third Amendment to the Express
Scripts, Inc. Amended and Restated 1994 Stock Option Plan (the "1994 Plan"); (v)
for the proposal to approve the First Amendment to the Express Scripts, Inc.
Amended and Restated 1992 Stock Option Plan (the "the 1992 Plan" and, together
with the 1994 Plan, the "Employee Stock Option Plans"); (vi) for the proposal to
approve the Fourth Amendment to the 1994 Plan; (vii) for the proposal to approve
the Second Amendment to the 1992 Plan; (viii) for the proposal to approve the
Second Amendment to the Express Scripts, Inc. Amended and Restated 1992 Stock
Option Plan for Outside Directors (the "Outside Directors Plan"); (ix) for the
proposals to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Class A Common Stock to 250,000,000 and the
number of authorized shares of Class B Common Stock to 65,000,000; (x) for
ratification of the appointment of PricewaterhouseCoopers LLP as independent
accountants for the Company for 1999; and (xi) in accordance with the judgment
of the person or persons voting the proxies on any other matter that may
properly be brought before the Meeting and any adjournment thereof. Each such
Proxy granted may be revoked at any time thereafter by writing to the Secretary
of the Company prior to the Meeting, by executing and delivering a subsequent
proxy or by attending and voting in person at the Meeting, except as to any
matter or matters upon which, prior to such revocation, a vote shall have been
cast pursuant to the authority conferred by such Proxy.
VOTING SECURITIES
Stockholders of record as of the close of business on March 31, 1999 (the
"Record Date") will be entitled to notice of, and to vote at, the Meeting or any
adjournments thereof. On the Record Date there were 18,231,470 outstanding
shares of the Company's Class A Common Stock, $.01 par value per share (the
"Class A Common Stock"), and 15,020,000 outstanding shares of the Company's
Class B Common Stock, $.01 par value per share (the "Class B Common Stock",
which, together with the Class A Common Stock, are hereinafter collectively
referred to as the "Common Stock"). All of the outstanding shares of the Class B
Common Stock are owned by NYLIFE HealthCare Management, Inc. ("NYLIFE
HealthCare"), a Delaware corporation and an indirect subsidiary of New York Life
Insurance Company, a mutual insurance company organized and existing under the
laws of the State of New York ("New York Life"). Unless otherwise provided, all
shares of Class A Common Stock and Class B Common Stock included in this Proxy
Statement have been adjusted to reflect a 2-for-1 stock split effected on
October 30, 1998 (the "1998 Stock Split").
The Class B Common Stock is convertible into shares of Class A Common Stock
on a share-for-share basis at any time at the option of the holder, and will be
automatically converted to Class A Common Stock upon any transfer to any entity
other than New York Life or its affiliates. Each holder of the Class A Common
Stock is entitled to one vote for each share held by such holder and each holder
of the Class B Common Stock is entitled to ten votes for each share held by such
holder. In all respects other than voting power and the convertibility of the
Class B Common Stock, the Class A Common Stock and Class B Common Stock are
identical. The Class A Common Stock and the Class B Common Stock vote together
as a single class on all matters except where Delaware law or the Company's
Certificate of Incorporation require otherwise.
The presence, in person or by proxy, of the holders of shares entitled to
cast a majority of the votes of all outstanding shares entitled to vote shall
constitute a quorum at the Meeting. A stockholder who abstains from a vote by
registering an abstention vote will be deemed present at the Meeting for quorum
purposes but such abstention will have the same effect as a vote against the
particular matter under consideration. In the event a nominee holding shares for
beneficial owners votes on certain matters pursuant to discretionary authority
or instructions from beneficial owners, but with respect to one or more other
matters does not receive instructions from beneficial owners and does not
exercise discretionary authority (a so-called "non-vote"), the shares held by
the nominee will be deemed present at the Meeting for quorum purposes but will
be disregarded. Thus, on the proposal to elect directors, which requires a
plurality of the votes of shares present in person or represented by proxy and
entitled to vote on the election of directors, abstentions and non-votes will
have no effect. However, approval of each of the ESPP, the Deferred Compensation
Plan, the Third and Fourth Amendments to the 1994 Plan, the First and Second
Amendments to the 1992 Plan, and the Second Amendment to the Outside Directors
Plan requires the affirmative vote of a majority of the votes of shares present,
in person or by proxy, and entitled to vote at the Meeting, voting as a single
class. Accordingly, abstentions will have the same effect as votes against these
proposals, while non-votes will be disregarded and have no effect on the outcome
of these proposals. Approval of each of the proposals to amend the Certificate
of Incorporation requires the affirmative vote of a majority of the total voting
power of the outstanding Class A Common Stock and Class B Common Stock voting
together as a single class and voting separately by class. Accordingly,
abstentions and non-votes will have the same effect as votes against these
proposals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Stock and Class B Common Stock as of
March 1, 1999 (unless otherwise noted) by (i) each person known by the Company
to own beneficially more than five percent of the outstanding shares of Class A
Common Stock or Class B Common Stock, (ii) each of the five most highly
compensated executive officers and each director of the Company, and (iii) all
executive officers and directors of the Company as a group. Included are amounts
of shares which may be acquired on March 1, 1999 or within 60 days of March 1,
1999 pursuant to the exercise of stock options by employees or outside
directors. Unless otherwise indicated, each of the persons or entities listed
below exercise sole voting and investment power over the shares that each of
them beneficially owns. All beneficial owners other than New York Life own
shares of Class A Common Stock. New York Life, as a beneficial owner, owns Class
B Common Stock. These percentages do not give effect to possible future
issuances of capital stock. See "IX. And X. Proposals to Amend the Certificate
of Incorporation to Increase Authorized Shares of Common Stock."
<TABLE>
SHARES BENEFICIALLY OWNED
<CAPTION>
NAME AND ADDRESS NUMBER PERCENT OF
CLASS
<S> <C> <C>
CLASS A COMMON STOCK:
Howard I. Atkins.................. 0 *
Judith E. Campbell................ 0 *
Richard M. Kernan, Jr............. 0 *
Richard A. Norling(1)............. 48,000 *
Frederick J. Sievert.............. 0 *
Stephen N. Steinig................ 0 *
Seymour Sternberg(2).............. 6,000 *
Barrett A. Toan(3)................ 372,592 2.0%
Howard L. Waltman(4).............. 19,200 *
Norman Zachary(5)................. 34,000 *
Stuart L. Bascomb(6).............. 63,493 *
Patrick J. Byrne(7)............... 20 *
David A. Lowenberg(8)............. 68,602 *
George Paz (9).................... 21,039 *
Directors and Executive
Officers as a Group (20 792,345 4.3%
persons)(10)......................
Pilgrim Baxter &
Associates, Ltd.(11)...........2,481,100 13.3%
825 Duportail Road
Wayne, Pennsylvania 19087
AMVESCAP PLC(12).................2,229,600 11.9%
11 Devonshire Square
London, England EC2M 4YR
CLASS B COMMON STOCK:
NYLIFE HealthCare Management,
Inc.(13)(14)(15)...............15,020,000 100%
..................
* Indicates less than 1%
<FN>
(1) Consists of options for 48,000 shares granted under the Amended and
Restated 1992 Stock Option Plan for Outside Directors (the "Outside Directors
Plan").
(2) Excludes 360 shares held by Mr. Sternberg's son, as to which shares Mr.
Sternberg disclaims beneficial ownership.
(3) Includes options for 348,000 shares granted under the Employee Stock
Option Plans. See "Executive Compensation -- Stock Options" for a description of
certain restrictions on Mr. Toan's ability to transfer shares subject to options
and "Executive Compensation -- Employment Agreement" for a description of the
terms of his employment agreement with the Company governing his options. Also
included are 592 hypothetical share equivalents invested in the Company Stock
Fund under the Deferred Compensation Plan, calculated as of March 1, 1999, using
the February 26, 1999 per share closing price as reported on The Nasdaq National
Market ("Nasdaq").
(4) Consists of options for 19,200 shares granted under the Outside
Directors Plan.
(5) Consists of options for 34,000 shares granted under the Outside
Directors Plan.
(6) Includes options for 51,680 shares granted under the Employee Stock
Option Plans, 10,300 shares owned by Mr. Bascomb, of which 3,300 shares are held
as co-trustee (with shared voting and dispositive power) of a trust for the
benefit of his mother, and 1,513 hypothetical share equivalents invested in the
Company Stock Fund under the Deferred Compensation Plan, calculated as of March
1, 1999, using the February 26, 1999 per share closing price as reported on
Nasdaq.
(7) Consists of 20 hypothetical share equivalents invested in the Company
Stock Fund under the Deferred Compensation Plan, calculated as of March 1, 1999,
using the February 26, 1999 per share closing price as reported on Nasdaq.
(8) Consists of options for 68,440 shares granted under the Employee Stock
Option Plans, and 162 hypothetical share equivalents invested in the Company
Stock Fund under the Deferred Compensation Plan, calculated as of March 1, 1999,
using the February 26, 1999 per share closing price as reported on Nasdaq.
(9) Consists of options for 21,000 shares granted under the Employee Stock
Option Plans, and 39 hypothetical share equivalents invested in the Company
Stock Fund under the Deferred Compensation Plan, calculated as of March 1, 1999,
using the February 26, 1999 per share closing price as reported on Nasdaq.
(10) Includes options for 742,400 shares granted under the Outside
Directors Plan and the Employee Stock Option Plans, 2,645 hypothetical share
equivalents invested in the Company Stock Fund under the Deferred Compensation
Plan, calculated as of March 1, 1999, using the February 26, 1999 per share
closing price as reported on Nasdaq.
(11) The information with respect to the beneficial ownership of these
shares as of December 31, 1998 has been obtained from a copy of an Amendment No.
10 to Schedule 13G dated February 10, 1999. Such filing reports that the
beneficial owner is a registered investment advisor and it shares voting power
with respect to all of the shares reported but has sole dispositive power as to
all of the shares reported.
(12) The information with respect to the beneficial ownership of these
shares as of December 31, 1998 has been obtained from a copy of an Amendment No.
2 to Schedule 13G dated February 10, 1999. Such filing reports that the
beneficial owner is a parent holding company and it shares voting power and
dispositive power as to all of the shares reported.
(13) Messrs. Atkins, Kernan, Sievert, Steinig and Sternberg, and Ms.
Campbell, directors of the Company, are also directors and/or hold various
executive positions with New York Life and/or NYLIFE HealthCare, as described
herein. All of the foregoing directors disclaim beneficial ownership of the
Company's Class B Common Stock owned by NYLIFE HealthCare.
(14) NYLIFE HealthCare holds 15,020,000 shares of Class B Common Stock,
which will be automatically converted upon transfer (other than to New York Life
or its affiliates) at any time into shares of Class A Common Stock on a
share-for-share basis and otherwise at the option of NYLIFE HealthCare.
(15) If converted to Class A Common Stock, the Class B Common Stock would,
as of March 1, 1999, represent approximately 45% of the outstanding Class A
Common Stock.
</FN>
</TABLE>
I. ELECTION OF DIRECTORS
At the Meeting, the entire Board of Directors, comprised of ten directors,
is to be elected to serve until the next Annual Meeting of Stockholders or until
their successors shall be duly elected and qualified. The number of directors
was fixed by the Board of Directors pursuant to the Company's Bylaws. Unless
otherwise specified, all proxies will be voted in favor of the ten nominees
listed below as directors of the Company.
The Board of Directors has no reason to expect that any of the nominees
will be unable to stand for election at the date of the Meeting. If a vacancy
occurs among the original nominees prior to the Meeting, the proxies will be
voted for a substitute nominee named by the Board of Directors and for the
remaining nominees. Directors are elected by a plurality of the votes cast.
NYLIFE HealthCare has indicated its intention to vote its shares for election of
the ten nominees. Assuming NYLIFE HealthCare votes in favor of such nominees,
such vote would be sufficient to elect the nominees. The following information
is furnished as of March 1, 1999, with respect to each of the nominees for the
Board of Directors:
NAME, POSITION AND PRINCIPAL OCCUPATION
Howard I. Atkins, 48, was elected a director of the Company in January
1997. He has been an Executive Vice President and the Chief Financial Officer of
New York Life since April 1996. From September 1991 until joining New York Life,
Mr. Atkins was the Executive Vice President and Chief Financial Officer of
Midlantic Bank Corporation. Mr. Atkins is also a director and officer of certain
subsidiaries of New York Life and, until July 1998, was a director of NYLCare
Health Plans, Inc. ("NYLCare"), a former subsidiary of New York Life that was
sold to Aetna U.S. HealthCare Inc. ("Aetna") on July 15, 1998.
Judith E. Campbell, 51, was elected a director of the Company in November
1997. Ms. Campbell has been a Senior Vice President and the Chief Information
Officer of New York Life since June, 1997. From October, 1995 until joining New
York Life, Ms. Campbell was Senior Vice President of Consumer Banking, Manager
of Deposit Products, Consumer Payments and Direct Banking of PNCBank. Ms.
Campbell served as a Senior Vice President of Midlantic Bank Corporation from
May, 1992 until October, 1995, when Midlantic Bank was acquired by PNCBank. Ms.
Campbell is also a director of certain subsidiaries of New York Life.
Richard M. Kernan, Jr., 58, was elected a director of the Company in March
1992. He has been an Executive Vice President of New York Life since March 1991
and the Chief Investment Officer of New York Life since June 1997. Mr. Kernan is
also Chairman of the Board of Trustees of The Mainstay Funds Limited, and the
Chairman and CEO of Mainstay VP Series Fund, Inc., both subsidiaries of New York
Life, and a director and officer of NYLIFE HealthCare and other New York Life
subsidiaries. Mr. Kernan was also a director of NYLCare until July 1998.
Richard A. Norling, 53, was elected a director of the Company in March
1992. Mr. Norling has been the Chief Executive Officer of Premier, Inc., the
largest voluntary healthcare alliance in the U.S., since September 1998. From
September 1997 until September 1998, Mr. Norling was the Chief Operating Officer
of Premier. From July 1989 until joining Premier, Mr. Norling was the President
and Chief Executive Officer of Fairview Hospital and HealthCare Services, a
regional integrated network of hospitals, ambulatory care services and health
care management enterprises.
Frederick J. Sievert, 51, was elected a director of the Company in July
1995. Since January 1997, Mr. Sievert has been the Vice Chairman of New York
Life. From February 1995 to December 1996, Mr. Sievert was an Executive Vice
President of New York Life. From January 1992 to January 1995, Mr. Sievert was
Senior Vice President of New York Life in charge of financial management and
policyholder services for Individual Operations. Mr. Sievert is also a director
and officer of other subsidiaries of New York Life and was a director of NYLCare
until July 1998.
Stephen N. Steinig, 53, was elected a director of the Company in January
1994. Since February 1994, Mr. Steinig has been Senior Vice President and Chief
Actuary of New York Life. From February 1992 to February 1994, he was Chief
Actuary and Controller of New York Life. Mr. Steinig is also an officer of other
subsidiaries of New York Life and was a director of NYLCare until July 1998.
Seymour Sternberg, 55, was elected a director of the Company in March 1992.
Mr. Sternberg is the Chairman, President and Chief Executive Officer of New York
Life. He has been with New York Life since February 1989, serving as the
President and Chief Operating Officer from October 1995 to April 1997, the Vice
Chairman from February to September 1995, and as an Executive Vice President
from March 1992 to February 1995. Mr. Sternberg is also Chairman, Chief
Executive Officer and President of NYLIFE HealthCare, and a director or an
officer of a number of other New York Life subsidiaries. Mr. Sternberg also was
a director of NYLCare until July 1998.
Barrett A. Toan, 51, was elected Chief Executive Officer of the Company in
March 1992, and President and a director in October 1990. Mr. Toan has been an
executive employee of the Company since May 1989. Pursuant to Mr. Toan's
employment agreement, failure of the stockholders to elect Mr. Toan to the Board
of Directors would entitle Mr. Toan to terminate his employment for "Good
Reason" (as defined in the agreement). See "Executive Compensation -- Employment
Agreement."
Howard L. Waltman, 66, was elected Chairman of the Board of the Company in
March 1992. Mr. Waltman has been a director of the Company since its inception
in September 1986. From 1983 until September 1992, Mr. Waltman was Chairman of
the Board and Chief Executive Officer of Sanus Corp. Health Systems, a wholly
owned subsidiary of New York Life, which became known as NYLCare. From September
1992 to December 31, 1995, Mr. Waltman served as Chairman of the Board of
NYLCare.
Norman Zachary, 72, was elected a director of the Company in March 1992.
From June 1967 to November 1991, Mr. Zachary held various positions at Logica
Data Architects, Inc. (formerly known as Data Architects, Inc.) ("Logica"), a
consulting and software development company, including serving as President and
a director until November 1990. Logica provided consulting services to New York
Life from time to time.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established an Executive Committee, an Audit Committee and
a Compensation Committee of the Board of Directors. During intervals between
meetings of the Board of Directors, the Executive Committee (comprised of
Messrs. Kernan, Sievert, Sternberg (Chairperson), Toan, Waltman and Zachary) has
all the powers and authority of the Board of Directors, except as otherwise
provided by the Board of Directors, the Company's Bylaws, or as required by law.
The Audit Committee (comprised of Messrs. Norling, Steinig and Zachary
(Chairperson)) reviews the internal controls of the Company and the objectivity
of its financial reporting. In addition, the Audit Committee must review and, by
majority vote, approve material transactions with related parties (see "Certain
Relationships and Related Transactions - Approval of Related Party
Transactions"). A majority of the Audit Committee must be unaffiliated with the
Company and its affiliates. The Compensation Committee (comprised of Messrs.
Sievert (Chairperson), Sternberg and Zachary) administers the Company's
compensation plans. The Company does not have a standing Nominating Committee.
During 1998, the Board of Directors held nine meetings, the Executive
Committee held five meetings, the Audit Committee held five meetings and the
Compensation Committee held twelve meetings. Each director attended at least 75%
of the aggregate number of meetings held by the Board of Directors and the
Committees on which he or she served during 1998, except Mr. Steinig, who
attended approximately 67%.
DIRECTORS' COMPENSATION
Directors of the Company who are also employed by the Company or New York
Life or its subsidiaries do not receive compensation for serving as directors.
During 1998, directors who were not employees of the Company or New York Life or
its subsidiaries received an annual retainer of $10,000 and a fee of $750 for
each Board or Committee meeting attended. The Company also reimburses
non-employee directors for out-of-pocket expenses incurred in connection with
attending Board and Committee Meetings.
Under the Outside Directors Plan, prior to the amendment thereto effective
January 24, 1996, each non-employee director received a one-time grant of a
ten-year option to purchase 28,000 shares of Class A Common Stock at an exercise
price equal to the fair market value of the Class A Common Stock at the date of
grant. This option became exercisable in three equal annual installments on the
first three anniversaries of the grant date. Mr. Norling and Mr. Zachary were
granted options to purchase 28,000 shares each upon the closing of the Company's
initial public offering in June 1992.
Effective January 24, 1996, each non-employee director who is first elected
or appointed as a non-employee director on or after such date shall receive a
ten-year option to purchase 48,000 shares of the Class A Common Stock as of the
date of the first Board meeting he or she attends as a non-employee director.
These options will become exercisable in five equal installments at the rate of
one-fifth per year on each anniversary of the grant date. In addition, each
non-employee director who was first elected or appointed as a non-employee
director prior to January 24, 1996 received an option to purchase 20,000 shares,
in addition to the 28,000 previously granted. These additional options vested in
two installments of 10,000 shares each on June 16, 1996 and June 16, 1997. The
exercise price of all options granted under the Outside Directors Plan is equal
to the fair market value of the Class A Common Stock at the date of grant. Mr.
Norling and Mr. Zachary were each granted options to purchase 20,000 additional
shares effective January 24, 1996, and Mr. Waltman was granted an option to
purchase 48,000 shares effective May 22, 1996.
The Company is proposing to amend the Outside Directors Plan to award
additional options to each non-employee director, adjust the number of shares to
be issued to each director to reflect the 1998 Stock Split and modify certain of
the vesting provisions of options granted under the plan. See "VIII. Proposal to
Approve the Second Amendment to the Express Scripts, Inc. Amended and Restated
1992 Stock Option Plan for Outside Directors."
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee")
administers the Company's compensation plans, including the Company's employee
stock option plans and its recently adopted Executive Deferred Compensation
Plan. The Committee's overall recommendations regarding compensation are subject
to approval of the Board of Directors; although the Committee has authority to
grant stock options under the Company's employee stock option plans, it now
recommends stock option grants for executive officers to, and acts in
conjunction with, the full Board of Directors in awarding stock options to such
individuals in order to comply with the rules adopted under Section 16 of the
Securities Exchange Act of 1934, as amended.
COMPENSATION PLAN
The Company's general compensation policy for its executive officers,
including the Chief Executive Officer ("CEO"), is to provide short-term
compensation consisting of two components, a fixed base salary and a cash bonus
awarded based upon specific short-term financial and non-financial objectives
for the individual and the Company, and long-term compensation consisting of
options to purchase the Company's stock based upon the Committee's judgment as
to the relative contribution of each officer to the long-term success of the
Company. In addition, the Company has adopted a deferred compensation plan for
senior executives and has entered into severance agreements with certain key
executives. The CEO consults with the Committee regarding the compensation of
the Company's executive and senior vice presidents. The Committee reviews
executive compensation on an annual basis.
The Company's policy is to combine short-term compensation, long-term
incentive compensation and other components of the compensation package for
executives to create a total compensation package that is competitive with
compensation packages for executive officers of similarly sized companies in
comparable businesses.
During 1998, the Company engaged a nationally recognized consulting firm to
review compensation levels for the Company's executive officers. The study was
based on a group of comparable companies in health care and information
intensive businesses, together with other companies with high-growth
characteristics similar to those of the Company (the "Comparable Companies").
The consultant determined that the Company's executive officers, including its
CEO, were generally compensated at levels lower than the 50th percentile of
total compensation received by executives in comparable positions at the
Comparable Companies. Accordingly, the Committee approved certain adjustments to
the base salary and bonus levels for the executive officers to take effect
March, 1999 to bring executive compensation in line with the 50th percentile
level of compensation for the Comparable Companies. The Committee also
recommended long-term incentive compensation awards in the form of additional
stock options, which were made in December 1998, and the implementation of a
deferred compensation plan, both as discussed below.
The Committee continues to evaluate the impact of Section 162(m) of the
Internal Revenue Code on the deductibility of executive officer compensation.
The Committee is endeavoring to maximize the deductibility of compensation to
the extent practicable while maintaining competitive compensation.
COMPONENTS OF EXECUTIVE COMPENSATION
BASE SALARY: The Committee determines the salary ranges for each executive
officer position in the Company based upon the level and scope of
responsibilities of the position and the pay levels of similarly positioned
executive officers in companies deemed comparable by the Committee. The CEO's
evaluation of the level of responsibility of each position (other than his own)
and the performance of each other executive officer is of paramount importance
when base salary is determined. For 1998 compensation, which was determined in
late 1997, the Committee obtained information about the salary and total
compensation of officers in comparable companies through review of published
reports and periodic surveys, and from the consulting firm described above.
ANNUAL BONUS COMPENSATION: Each executive officer's bonus currently has two
components: (i) an amount based on the Company's profitability goal for the
year, and (ii) an amount based on achieving specific work plan objectives. For
each executive officer, each component of the bonus is expressed as a specific
dollar amount. In general, the profitability component represents approximately
43 percent of the total annual bonus amount, and the work plan objectives
represent the remaining 57 percent. The potential bonus amount for 1998 for any
executive officer (other than the CEO) is between approximately 31 percent and
50 percent of their respective base salary, depending on the extent to which
that executive officer's department can help meet certain Company-wide goals.
Executive officers are eligible for annual bonus payments only to the
extent that the Company meets certain predetermined profitability goals, which
are approved by the Board in its annual review of the Company's budget. For
1998, the goals were based on the Company's budgeted net income for 1998. If the
Company meets these profitability goals, the executive will receive the
specified profitability portion of the bonus.
In determining the amount of the work plan bonus component to be paid, the
Committee examines the executive's individual contribution to his or her
departmental work plan and the extent to which the departmental work plan goals
have been achieved. The departmental work plan goals are determined based upon
the departmental function, and include such items as development and marketing
of new products and programs within a specified time frame, systems enhancements
to support new products and programs, improvements in mail service pharmacy
processing costs and enhancements in the provider networks. The work plan bonus
for 1998 is available only to the extent that the Company's overall 1998
profitability goals are achieved.
For 1998, actual aggregate bonuses paid to current executive officers,
including the CEO, represented approximately 33% of the salaries and bonuses
paid to these officers, which is the same level as the 1997 aggregate bonuses.
Actual aggregate bonuses paid to all current executive officers who received
bonuses for 1998 represented approximately 91% of the total amounts allocated
for bonuses for these executive officers and approximately 17% of the total
bonus amounts paid to all employees for 1998, compared to 94% and 28%,
respectively, in 1997.
In addition, in connection with the Company's acquisition of ValueRx on
April 1, 1998, the Company created an additional incentive compensation program
for various employees, including two of the executive officers named in the
Summary Compensation Table (the "Named Officers"), involved in integrating the
operations of ValueRx with the Company's existing operations (the "Integration
Compensation"). The executive officers participating in the Integration
Compensation program can earn a bonus award of up to 100% of their base salary
for 1998, and up to 300% of their base salary for 1999, based on the achievement
of certain Company-wide financial performance goals, such as earnings before
interest, taxes, depreciation and amortization, as well as individual
performance goals, such as departmental integration objectives. The Company-wide
financial goals, which are measured objectively, were achieved for 1998.
Individual goals were measured subjectively, and each participating executive
officer achieved between 75 and 85 percent of their individual goals. Overall,
the executive officers participating in this program earned, in the aggregate,
bonus awards equaling an average of approximately 86% of their annual salary.
During 1998, the Company began a planning process for implementation of a
Shareholder Value Management incentive compensation system (the "SVM System"),
which is a formula-based plan that is based on the concept of "economic profit"
created by the Company, to replace, in whole or in part, the existing annual
bonus compensation system described above beginning in 1999. The SVM System
focuses on after-tax operating profit less a charge for invested capital.
Essentially, it measures the Company's operating profit after subtracting all
costs associated with generating those profits. Bonuses awarded will vary
directly with the amount by which after-tax operating profit exceeds the cost of
the invested capital. Thus, the SVM System rewards managers who increase
stockholder value by most effectively deploying the capital contributed by the
stockholders, and places bonuses at risk if targeted economic profit levels are
not achieved. Consequently, the Committee believes that the SVM System will
better align management's incentive compensation with the creation of
stockholder value. The details of the SVM System are still being determined.
LONG TERM INCENTIVE COMPENSATION: Long-term incentive compensation is in
the form of the Company's employee stock option plans, which are designed to
align the executive's incentive compensation more directly with stockholder
values by linking compensation to the performance of the Company's stock.
Long-term compensation is also designed to encourage executives to make career
commitments to the Company. Each executive officer receives an initial option
grant upon employment with the Company, and typically receives an annual grant
of additional stock options thereafter. The size of an executive's stock option
award is based upon the CEO's and the Committee's subjective evaluation of the
contribution that the executive officer is expected to make to overall growth
and profitability of the Company during the vesting period of the options. The
Committee also considers comparable long-term incentive compensation levels at
the Comparable Companies. In addition, in connection with the Company's
acquisition of ValueRx, the Committee awarded stock options to various key
employees, including four of the Named Officers, to provide an additional
incentive in connection with the integration process.
Stock options are granted with an exercise price equal to the market value
on the date of grant and constitute compensation only if the Company's stock
price increases thereafter. The Committee has discretion to determine the
vesting schedule for each option grant and generally has made grants that become
exercisable in equal amounts over five years. In general, executives must be
employed by the Company at the time of vesting in order to exercise their
options. Reference is made to the text of the Company's employee stock option
plans for detailed information on the terms of these plans.
DEFERRED COMPENSATION PLAN: In December 1998, the Board of Directors
adopted the Express Scripts, Inc. Executive Deferred Compensation Plan (the
"EDCP"), which also serves as a supplemental retirement plan for executives. The
EDCP provides eligible senior and vice-president-level executive employees of
the Company and its subsidiaries the opportunity to (i) defer the receipt and
taxation of up to 50% of the individual's annual base salary and 100% of his or
her annual bonus, and (ii) receive certain annual and past-service contributions
from the Company that represent a percentage of the individual's salary and cash
bonus compensation. Amounts deferred by participants and Company contributions
are assumed to have been invested in any of a number of mutual funds and a
Company Common Stock fund. The Board adopted the EDCP and approved the Company's
annual and past-service contributions for 1999, which were based upon
percentages of the participating executive's cash compensation during 1998 and
during his or her tenure as a senior executive, respectively, at the
recommendation of the Committee, which was based, in part, upon the study of
Comparable Companies described above. The purpose of the EDCP is to provide key
executives with more competitive retirement and capital accumulation benefits,
to retain and provide incentive to the Company's key executives, and to increase
the Company's ability to attract mid-career executives to senior executive
positions with the Company. Any compensation deferred under the EDCP would not
be included in the $1,000,000 limit provided for under Section 162(m) of the
Internal Revenue Code until the year in which distributions from the EDCP are
actually made to the participants. Nine of the Company's executive officers,
including all of the Named Officers, have elected to participate in the EDCP,
beginning March 1, 1999. See "III. Proposal to Approve the Express Scripts, Inc.
Executive Deferred Compensation Plan" for additional information regarding the
EDCP, including amounts that the Company has contributed or will contribute to
participating executives' accounts during 1999.
SEVERANCE ARRANGEMENTS: On January 27, 1998, the Board of Directors
authorized the Company to enter into severance agreements with certain
executives selected by the Board of Directors, upon recommendation of the
Compensation Committee, from time to time. Eight executives, including all of
the Named Officers other than the Company's CEO, have entered into such
agreements with the Company (the CEO had previously entered into an employment
agreement with the Company that includes a severance agreement). The severance
agreements are designed generally to encourage the Company's key management
personnel to remain with the Company and its subsidiaries and to continue to
devote their full attention to the Company's business, without distraction from
personal uncertainties and risks created by certain events that are not within
their control. The severance agreements are operative only in the event the
executive's employment with the Company or any of its subsidiaries, as the case
may be, terminates for any reason other than death, disability or "cause", or in
the event that the executive voluntarily terminates employment for "good reason"
(as such terms are defined in the agreements). The severance benefit thereunder
generally will be an amount equal to (i) one year's salary at the rate in effect
on the date of termination, plus (ii) an amount equal to the current year's
bonus potential multiplied by the average percentage of the bonus potential
realized by the executive over the preceding three years, prorated for the
portion of the year of termination during which the executive was employed by
the Company. See "Executive Compensation-Severance Agreements" for additional
information regarding the severance agreements.
THE CHIEF EXECUTIVE OFFICER'S COMPENSATION
The Committee evaluates the performance of the CEO for purposes of
recommending to the Board his annual base pay adjustment and annual bonus award.
The Committee also determines his annual stock option award. The factors
considered in recommending an increase in the CEO's salary in 1998 related to
the overall performance of the Company, particularly the increase in revenues,
membership, net income and earnings per share, which were subjectively evaluated
by the Committee. Another factor was the percentage increase in salary allocated
to certain senior executives of the Company in general, although this factor was
of secondary importance.
Under his employment agreement with the Company, during 1998 the CEO could
earn an annual bonus of up to 80% of his base salary for 1998 based upon
achievement of performance objectives set by the Board upon recommendation of
the Committee. As of the date of this Report, the Committee is currently
negotiating the terms of a new employment agreement with Mr. Toan, pursuant to
which Mr. Toan would be eligible for an annual bonus award of 100% of his base
salary for 1999 and future periods. Mr. Toan's bonus award for 1998 performance
was recommended by the Committee based upon the Company's attainment of its
profitability and enrollment goals, which were weighted equally, and for his
performance of the 1998 non-financial work plan objectives that were assigned to
him. The factors used in the non-financial work plan objectives related to such
items as the acquisition of ValueRx and integration of its operations, systems
and personnel with those of the Company, the negotiation of the pending
acquisition of Diversified Pharmaceutical Services, and strengthening of the
Company's internal management structure, all of which were subjectively
weighted.
In December 1998, the Committee, acting jointly with the Board of
Directors, awarded the CEO additional options to acquire shares of the Company's
Class A Common Stock in view of the importance of his expected contribution to
the Company's long term goals of sustaining revenue and earnings growth,
increasing market penetration and improving service effectiveness and
efficiency.
March 9, 1999 COMPENSATION COMMITTEE
Frederick J. Sievert, Chairman
Seymour Sternberg
Norman Zachary
The Compensation Committee Report on Executive Compensation and the
performance graph below shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement or portions
thereof into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Sternberg is the Chairman, President and Chief Executive Officer of New
York Life; Chairman, President and Chief Executive Officer of NYLIFE HealthCare;
and, until July 1998, was a director of NYLCare, a former subsidiary of NYLIFE
HealthCare. Mr. Sievert is the Vice Chairman of New York Life and, until July
1998, was a director of NYLCare. In July 1998, New York Life sold NYLCare to
Aetna. The Company was (and continues to be under the Aetna ownership regime) a
party to agreements with NYLCare pursuant to which the Company provides pharmacy
benefit management services to certain group policyholders of NYLCare and
various pharmacy benefit management, informed decision counseling, vision care
and infusion therapy services to health maintenance organizations owned or
managed by NYLCare. In 1998, the Company derived $145,758,000, or 5.2% of its
net revenues from services provided to NYLCare while NYLCare was an indirect
subsidiary of New York Life (i.e., for the period January 1 to July 15, 1998).
See "Certain Relationships and Related Transactions" for a more complete
description of this and certain other transactions involving the Company and New
York Life or its affiliates.
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder
return of the Company's Class A Common Stock, commencing January 1, 1993, with
the cumulative total return on the Standard & Poor's Health Care 500 Index and
the Standard & Poor's 500 Index, to the end of 1998. These indices are included
only for comparative purposes as required by Securities and Exchange Commission
rules in effect as of the date of this Proxy Statement and do not necessarily
reflect management's opinion that such indices are an appropriate measure of the
relative performance of the Class A Common Stock, and are not intended to
forecast or be indicative of possible future performance of the Class A Common
Stock. [Performance Graph to be inserted by Printer]
[Performance Graph, in tubular format, follows]
<TABLE>
<CAPTION>
INDEXED RETURNS
Years Ending
Base
Period
Company/Index Dec93 Dec94 Dec95 Dec96 Dec97 Dec98
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
EXPRESS SCRIPTS INC -CL A 100 156.38 217.02 152.66 255.32 571.28
S&P 500 INDEX 100 101.32 139.40 171.40 228.59 293.91
HEALTH CARE-500 100 113.12 178.55 215.61 309.86 446.87
</TABLE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for all services rendered in all capacities to the
Company for the fiscal years ended December 31, 1998, 1997 and 1996, by the
Company's chief executive officer and its other four most highly compensated
executive officers (the "Named Officers"):
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY($) BONUS ($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
BARRETT A. TOAN
PRESIDENT, CHIEF 1998 406,920(1) 308,000(1) -- 70,000(2) 304,083(3)
EXECUTIVE OFFICER AND 1997 332,256(1) 250,000(1) -- 28,000 2,000(4)
DIRECTOR 1996 290,769(1) 204,000(1) -- 28,000 2,000(4)
STUART L. BASCOMB
EXECUTIVE VICE 1998 258,269 134,000(5) -- 28,300(6) 222,282(7)
PRESIDENT 1997 210,815 95,380(5) -- 8,200 2,000(4)
1996 193,877 80,000(5) -- 8,000 2,000(4)
PATRICK J. BYRNE
SENIOR VICE PRESIDENT 1998 138,846(8) 241,650(9) -- 33,100(10) 12,523(11)
PLYMOUTH SITE 1997 N/A N/A -- N/A N/A
OPERATIONS 1996 N/A N/A -- N/A N/A
DAVID A. LOWENBERG
SENIOR VICE PRESIDENT 1998 215,961 281,776(9) -- 29,800(12) 84,517(13)
AND DIRECTOR OF SITE 1997 150,769 63,844(5) -- 5,100 2,000(4)
OPERATIONS 1996 145,000 53,000(5) -- 10,000 2,000(4)
GEORGE PAZ
SENIOR VICE PRESIDENT 1998 240,385(14) 117,500(5) -- 124,800(15) 57,592(16)
AND CHIEF FINANCIAL 1997 N/A N/A -- N/A N/A
OFFICER 1996 N/A N/A -- N/A N/A
<FN>
(1) Represents compensation awarded pursuant to the employment agreement
between Mr. Toan and the Company, which agreement was replaced with a new
agreement effective as of April 1, 1999 (see "Executive Compensation --
Employment Agreement") and the Company's annual bonus plan (see Note 5 below).
(2) Consists of 20,000 stock options awarded on May 27, 1998, and 50,000
stock options awarded on December 16, 1998.
(3) Consists of past service credit contribution of $302,083 by the Company
under its Deferred Compensation Plan (see "III. Proposal to Approve the Deferred
Compensation Plan" for more information), and $2,000 matching contribution in
connection with the Company's 401(k) Plan.
(4) Consists of the Company's matching contribution in connection with the
Company's 401(k) Plan.
(5) Consists of amounts earned pursuant to the Company's annual bonus plan.
The portion of the bonus based on each Named Officer's workplan objectives is
evaluated based on workplan performance from March 15 through the following
March 14.
(6) Consists of 8,000 stock options awarded on April 1, 1998, and 20,300
stock options awarded on December 16, 1998.
(7) Consists of past service credit contribution of $220,282 by the Company
under its Deferred Compensation Plan, and $2,000 matching contribution in
connection with the Company's 401(k) Plan.
(8) Mr. Byrne joined the Company on April 1, 1998.
(9) Consists of amounts earned pursuant to the Company's annual bonus plan
(see Note 5 above) and amounts earned for integration bonuses awarded in
connection with the Company's acquisition of ValueRx.
(10) Consists of 22,000 stock options awarded on June 6, 1998, and 11,100
stock options awarded on December 16, 1998.
(11) Consists of past service credit contribution of $10,523 by the Company
under its Deferred Compensation Plan, and $2,000 matching contribution in
connection with the Company's 401(k) Plan.
(12) Consists of 10,000 stock options awarded on April 1, 1998, and 19,800
stock options awarded on December 16, 1998.
(13) Consists of past service credit contribution of $82,517 by the Company
under its Deferred Compensation Plan, and $2,000 matching contribution in
connection with the Company's 401(k) Plan.
(14) Mr. Paz joined the Company on January 5, 1998.
(15) Consists of 100,000 stock options awarded on January 7, 1998, 5,000
stock options awarded on April 1, 1998, and 19,800 stock options awarded on
December 16, 1998.
(16) Consists of past service credit contribution of $20,000 by the Company
under its Deferred Compensation Plan, and reimbursement of relocation expenses
of $37,592.
</FN>
</TABLE>
STOCK OPTIONS
The table below sets forth certain information on the grants of stock
options to the Named Officers pursuant to the Employee Stock Option Plans during
1998.
<TABLE>
OPTION GRANTS IN FISCAL YEAR 1998
INDIVIDUAL GRANTS
<CAPTION>
NUMBER OF
SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS GRANTED GRANT DATE
OPTIONS TO EMPLOYEES IN EXERCISE EXPIRATION PRESENT VALUE
NAME GRANTED (#) FISCAL YEAR(4) PRICE ($/SH)(5) DATE ($)(6)
<S> <C> <C> <C> <C> <C> <C>
- ---- ----------- -------------- --------------- ---- ------
Barrett A. Toan 20,000 (1),(2) 1.60% $ 38.9375 05/27/08 $ 361,200
50,000 (2),(3) 4.00% 55.1250 12/16/08 868,500
Stuart L. Bascomb 8,000 (7),(8) 0.64% 42.3907 04/01/08 157.280
20,300 (7),(3) 1.62% 55.1250 12/16/08 519,071
Patrick J. Byrne 22,000 (7),(9) 1.76% 37.4375 06/06/08 382,140
11,100 (7),(3) 0.89% 55.1250 12/16/08 283,827
David A. Lowenberg 10,000 (7),(8) 0.80% 42.3907 04/01/08 196,600
19,800 (7),(3) 1.58% 55.1250 12/16/08 506,286
George Paz 100,000 (7),(10) 8.00% 28.4063 01/07/08 1,318,000
5,000 (7),(8) 0.40% 42.3907 04/01/08 98,300
19,800 (7),(3) 1.58% 55.1250 12/16/08 506,286
<FN>
(1) Consists of options awarded on May 27, 1998.
(2) Such options are fully exercisable from date of grant. The shares
subject to the options are restricted from transfer with the transfer
restriction lapsing as to 20% of such shares on each anniversary date of the
date of grant. Under the terms of Mr. Toan's employment agreement, the transfer
restriction is subject to complete lapse in the event of a "Change of Control"
of the Company (as defined in the agreement) or termination of Mr. Toan's
employment by the Company without "Cause" (as defined in the agreement), by Mr.
Toan for "Good Reason" (as defined in the agreement) or by reason of death,
disability or retirement. Pursuant to his employment agreement, Mr. Toan may
also have the right to require the Company to purchase a portion of his shares
within 12 months after his termination of employment without Cause, for Good
Reason or upon death or disability. See "Executive Compensation -- Employment
Agreement." Upon termination of Mr. Toan's employment, the Company will purchase
any shares issued upon the exercise of the options that remain subject to the
transfer restriction, at the lesser of the option exercise price or the then
current market value of the Class A Common Stock.
(3) Consists of options awarded on December 16, 1998.
(4) Total options granted to employees in fiscal year 1998 includes all
options granted to employees in 1998.
(5) Represents the closing price per share as reported on Nasdaq on the
date preceding the date of grant.
(6) Such estimated value is derived using the Black-Scholes method taking
into account the following key assumptions:
(a) volatility of 43.24% calculated using daily stock prices for the
24-month period prior to the grant date; (b) 0% dividend yield; (c) an interest
rate of 5.40% which represents the average interest rate on a U.S. Treasury
security on the applicable date of grant with a maturity date corresponding to
that of the option term; (d) 10-year option term; (e) an exercise price equal to
the fair market value on the date of grant, and (f) vesting of 20% per year on
each of the first five anniversaries of the date of grant. The resulting
Black-Scholes value was discounted by approximately 26.91% to reflect the
probability of a shortened option term due to termination of employment prior to
the option expiration date. The actual value of the options will depend on the
excess of the market price of the shares over the exercise price on the date the
options are exercised, and may vary significantly from the theoretical values
estimated by the Black-Scholes model.
(7) Become exercisable as to 20% of the shares subject to the option on
each anniversary of the date of grant. The options shall terminate in the event
of a "change in control" of the Company, whereby the Company shall pay the
employee an amount equal to the excess of the "change of control price" (as
defined in the Employee Stock Option Plans) over the exercise price thereof, for
the vested options or all options, depending on whether an offer of "comparable
employment" (as defined in the Employee Stock Option Plans) is made to and
accepted by the employee. The options terminate upon termination of employment
unless the employee dies, retires or is permanently disabled, or his or her
employment is terminated without cause.
(8) Consists of options awarded on April 1, 1998.
(9) Consists of options awarded on June 6, 1998.
(10) Consists of options awarded on January 7, 1998.
</FN>
</TABLE>
The Company has no plan under which it may grant stock appreciation rights.
The table set forth below provides certain information with respect to the
1998 fiscal year-end value of options to purchase the Company's Class A Common
Stock granted to the Named Officers and options exercised during such period.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS
END (#) AT FISCAL YEAR END ($)
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE (2)
<S> <C> <C> <C> <C> <C> <C>
- ---- ------------ --------------------- ------------- -----------------
Barrett A. Toan -- -- 348,000/0 $14,926,375/$0
Stuart L. Bascomb -- -- 44,880/64,220 $2,332,040/$2,057,834
Patrick J. Byrne -- -- 0/33,100 $0/$786,325
David A. Lowenberg -- -- 56,440/73,560 $3,079,293/$2,479,623
George Paz -- -- 0/124,800 $0/$4,233,142
<FN>
(1) Based on the difference between the sale price and the exercise price.
(2) Based on $67.125, the closing price of the Class A Common Stock as
reported on Nasdaq on December 31, 1998. On March 26, 1999, the closing price of
the Class A Common Stock was $75.50.
</FN>
</TABLE>
EMPLOYMENT AGREEMENT
Effective as of April 1, 1999, the Company entered into a new Employment
Agreement with Mr. Toan for an initial term extending through March 31, 2002,
pursuant to which Mr. Toan will serve as the Company's Chief Executive Officer
and President and a member of the Board of Directors. On April 1, 2001 and on
each April 1 thereafter, the term of the Employment Agreement will be extended
for an additional one year unless either party has given the other written
notice of termination at least 30 days prior to such April 1, provided that the
Employment Agreement will terminate when Mr. Toan reaches age 65. The Employment
Agreement provides for an annual base salary of $650,000, subject to increase in
the discretion of the Board of Directors. Pursuant to the Employment Agreement,
Mr. Toan is also eligible to participate in the Company's Annual Bonus Plan for
senior executives and will be eligible for target bonuses thereunder of a
minimum of 100% of his annual base salary, payment of which will depend upon the
Company meeting certain targeted financial and non-financial objectives
determined each year by the Board in its discretion. The Employment Agreement
replaced a previous employment agreement, which would have expired no earlier
than March 31, 2001. In addition to increases in annual base salary and
potential bonus compensation, the new Employment Agreement includes provisions
governing the vesting of options (and restricted shares issued upon exercise of
such options) granted under the Employee Stock Option Plans, the termination of
Mr. Toan's employment and severance benefits that differ from the comparable
terms of his previous employment agreement.
Pursuant to the Employment Agreement, on or about May 26, 1999, Mr. Toan
will receive a one-time grant of nonqualified options to purchase 70,000 shares
of Class A Common Stock at an exercise price equal to the fair market value of
Class A Common Stock on the date of grant. Subject to the Board's sole
discretion, Mr. Toan will continue to be eligible to receive annual option
grants under the Company's Employee Stock Option Plans, as determined by the
Compensation Committee. The Employment Agreement also provides that all of Mr.
Toan's stock options granted under the Employee Stock Option Plans, including
those granted prior to the date of the Employment Agreement, and all of Mr.
Toan's restricted shares acquired upon exercise of such options will become
fully vested upon (i) a "Change of Control," (ii) termination of Mr. Toan's
employment by the Company without "Cause," (iii) termination by Mr. Toan for
"Good Reason" and (iv) Mr. Toan's death or "Disability"(as each such capitalized
term is defined in the Employment Agreement). Upon the occurrence of any of the
foregoing events, Mr. Toan's options will remain exercisable for 18 months after
such event (or until the expiration date of the option, if the remaining term of
the option is less than 18 months). In addition, Mr. Toan may exercise his
vested options within 30 days after termination of his employment by the Company
for Cause or by Mr. Toan without Good Reason.
Pursuant to Mr. Toan's previous employment agreement, effective upon the
Company's initial public offering in June 1992, Mr. Toan received options to
purchase 280,000 shares of Class A Common Stock under the 1992 Plan, which are
exercisable at $3.25 per share, and he has received additional options on an
annual basis. These options are nonqualified options and are exercisable in full
immediately. If Mr. Toan exercises any of these options prior to the fifth
anniversary of the date of grant, however, the shares received upon exercise, to
the extent exceeding a number of shares equal to the product of (x) 20% of the
number of shares subject to the options, and (y) the number of whole years
elapsed since the date of grant, will be "restricted shares" and subject to
forfeiture. A pro rata portion of the restricted shares received will vest on
each succeeding anniversary until the fifth anniversary after the date of grant,
provided, however, that, pursuant to the Employment Agreement, the restricted
shares will vest immediately under the same circumstances that cause any of his
options to become fully vested, as described in the immediately preceding
paragraph.
The Employment Agreement also provides Mr. Toan the right to tender to the
Company, within 12 months after his termination without Cause, for Good Reason
or upon death or Disability, shares of Class A Common Stock equal to the greater
of (a) the number of shares subject to options granted to him during the
calendar year preceding such termination or (b) 70,000 shares (with (a) and (b)
adjusted for any stock splits occurring after the date of grant and the date of
the Employment Agreement, respectively). In such event, the Company must
repurchase such shares for the "Fair Market Value" (as defined in the Employment
Agreement) of such shares as of the date of tender. Under the Employment
Agreement, however, Mr. Toan's right to tender such shares will not become
effective until and unless the Financial Accounting Standards Board ("FASB")
formally adopts new accounting rules such that such right would not require the
Company to use "variable plan accounting" or similar "mark-to-market"
accounting, which could result in additional expense to the Company, to reflect
such right.
If the Company terminates Mr. Toan's employment without Cause or Mr. Toan
terminates his employment for Good Reason, the Employment Agreement requires the
Company to pay Mr. Toan the following amounts: (i) three times his annual base
salary then in effect; (ii) three times the greater of (A) his annual bonus for
the preceding calendar year or (B) his target bonus for the year of termination;
(iii) all amounts accrued but unpaid as of the date of termination; and (iv)
three times the amount or amounts the Company credited to Mr. Toan's account
under the Deferred Compensation Plan for the calendar year preceding termination
(excluding past service credits for years prior to 1999). The Company must also
continue Mr. Toan's employee life and health benefits (except long-term
disability insurance coverage) until the earlier of (x) three years following
his termination, (y) the date he becomes covered under another employer's plans
or (z) the last day of the month in which he reaches age 65. Among other events,
the failure of the Company's stockholders to elect Mr. Toan to the Board of
Directors constitutes Good Reason under the Employment Agreement.
In the event of any Change of Control that results in Mr. Toan's liability
for the payment of an excise tax under Section 4999 of the Code (or any similar
tax under any federal, state, local or other law), the Company will make a
"gross-up" payment which, in general, will effectively reimburse Mr. Toan in
full for any such excise taxes.
Mr. Toan's Employment Agreement requires that the Employee Stock Option
Plans be amended at the Meeting in order to ensure the effectiveness of certain
provisions of the Agreement relating to stock options granted under the Employee
Stock Option Plans. See "VI. Proposal to Approve the Fourth Amendment to the
Express Scripts, Inc. Amended and Restated 1994 Stock Option Plan" and "VII.
Proposal to Approve the Second Amendment to the Express Scripts, Inc. Amended
and Restated 1992 Stock Option Plan."
SEVERANCE AGREEMENTS
On January 27, 1998, the Board of Directors authorized the Company to enter
into severance agreements with executives selected by the Board of Directors
upon recommendation of the Compensation Committee. The severance agreements are
designed generally to encourage the Company's key management personnel to remain
with the Company and its subsidiaries and to continue to devote their full
attention to the Company's business without distraction from personal
uncertainties and risks created by certain events that are not within their
control. The severance agreements are operative only in the event the
executive's employment with the Company terminates for reasons discussed below.
Eight executives, including all of the Named Officers other than Mr. Toan, the
Company's Chief Executive Officer, have entered into such agreements with the
Company. (Mr. Toan has entered into an employment agreement with the Company
that includes a severance agreement - see "Employment Agreement" above.)
The severance agreements generally provide that, in the event of
termination of the executive's employment with the Company for any reason other
than death or disability (as defined in the agreements) and other than for
"cause" (as defined in the agreements, relating generally to acts constituting a
felony, gross dishonesty or gross misconduct or willful violations of
obligations to the Company), or in the event that the executive terminates
employment for "good reason" (as defined in the agreements, relating generally
to breaches of the agreement by the Company or changes in the executive's job
location, title, authority, duties, compensation or benefits), the executive
will be entitled to receive, subject to certain conditions, a cash severance
benefit payable in four substantially equal quarterly payments in an aggregate
amount equal to: (i) twelve (12) times the monthly base salary being paid to the
executive immediately prior to the date of termination plus (ii) an amount equal
to the product of (x) the executive's "bonus potential" (as determined in
accordance with the agreements) for the year in which the date of termination
occurs, multiplied by (y) the average percentage of the bonus potential earned
by the executive for the three full years immediately preceding such year (or
such shorter period if the executive was employed by the Company for less than
three full years and received or was eligible to receive a bonus during such
period), which product will be prorated for the portion of the year of
termination in which the executive was employed by the Company. As a condition
to receiving severance benefits an executive must execute a release of certain
claims against the Company and, in specified circumstances, agree to certain
non-competition restrictions. All payments will be discontinued in the event of
a breach by the executive. Any amounts earned by the executive from employment
with a third party prior to the final payment of amounts payable under the
severance agreement will reduce the severance benefit due the executive
thereunder, except that no such reduction will be required in the event the date
of termination occurs within 18 months following a "change in control" (as
defined in the severance agreements). The severance agreements also are subject
to certain arbitration provisions. The agreements continue through December 31,
1999, and renew automatically for additional one-year terms unless either party
provides notice as specified in the agreements; provided, that the agreements
will continue for two years beyond the month in which any change in control
occurs.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Until April 1992, the Company was a direct subsidiary of NYLCare, which was
a subsidiary of New York Life. In April 1992, both the Company and NYLCare
became direct subsidiaries of NYLIFE HealthCare, which is an indirect subsidiary
of New York Life. NYLIFE HealthCare is the beneficial owner of 15,020,000 shares
(or 100%) of the Class B Common Stock. On July 15, 1998, New York Life sold
NYLCare (the "NYLCare Transaction") to Aetna. In connection therewith, the
Company and Aetna amended certain of the terms and provisions of a series of
agreements between the Company and NYLCare (the "Aetna Amendments"). The
material terms and provisions of the Company's agreement with NYLCare and the
Aetna Amendments are discussed below.
The Company is also a party to a series of agreements with Premier
Purchasing Partners, L.P., (formerly known as American HealthCare Systems
Purchasing Partners, L.P.; the "Partnership"), a healthcare group purchasing
organization affiliated with Premier, Inc. (formerly known as APS Healthcare,
Inc.; "Premier"). Premier is the largest voluntary healthcare alliance in the
U.S., formed as a result of the mergers in late 1995 of three predecessor
alliances, American HealthCare Systems, Premier Health Alliance and SunHealth
Alliance. The Premier alliance includes approximately 215 integrated healthcare
systems that own or operate approximately 800 hospitals and are affiliated with
another 900 hospitals. Mr. Norling, who has served as a member of the Board of
Directors of the Company since March 1992, served as the Chief Operating Officer
of Premier for the period September 1997 to September 1998, and has served as
the Chief Executive Officer of Premier since that time.
APPROVAL OF RELATED PARTY TRANSACTIONS
In an effort to minimize conflicts, the Company's Bylaws require that any
material transaction with a related party be approved by the Company's Audit
Committee, which currently consists of three directors. A Bylaw provision, which
cannot be changed without the affirmative vote of a majority of the outstanding
Class A Common Stock, requires that a majority of directors on the Audit
Committee be persons who are not directors of New York Life or its subsidiaries
(other than the Company) or officers or employees of New York Life or its
subsidiaries. A material transaction is a transaction that, by itself, would be
required to be disclosed in the Company's proxy statement under the Securities
and Exchange Commission's rules and regulations as in effect at the time of the
transaction. In general, under the Securities and Exchange Commission's rules
and regulations as in effect on the date of this Proxy Statement, a material
transaction would be any transaction, or series of similar transactions, in
which the amount involved exceeds $60,000.
RELATIONSHIP WITH NEW YORK LIFE AND NYLCARE
PHARMACY BENEFIT MANAGEMENT - INDEMNITY PLANS
Pursuant to an agreement with New York Life, which was assigned to NYLCare
effective January 1, 1996 (the "Indemnity Plan Agreement"), the Company provided
pharmacy benefit management services to certain group indemnity policyholders of
NYLCare (formerly group indemnity policyholders of New York Life) and certain
contract holders whose health benefit plans provide indemnity style benefits for
which NYLCare provided administrative services only (such services formerly
being provided by New York Life). The Indemnity Plan Agreement was amended and
restated effective September 1, 1995, and again amended effective January 1,
1997.
Since the NYLCare Transaction and pursuant to the Aetna Amendments, the
Company has served, and will continue to serve, members of the NYLCare indemnity
programs at the contract rates in effect at the time of the NYLCare Transaction
until such members have been converted to Aetna health insurance policies. Aetna
has, however, assumed responsibility for most formulary management and
retrospective discount program administration (which are services the Company
was performing for NYLCare). The Company expects Aetna to assume full
responsibility for these services during the next several months. The Company
previously shared with NYLCare certain retrospective discounts which the Company
received from drug manufacturers with respect to these activities under the
Indemnity Plan Agreement. Going forward, the Company will receive a fixed amount
per prescription from Aetna in lieu of its prior fee and discount sharing
arrangement for these services. The Company believes the fees and other
financial remuneration received from NYLCare pursuant to the Indemnity Plan
Agreement were competitive with those received from unrelated clients.
PHARMACY BENEFIT MANAGEMENT, VISION AND INFUSION THERAPY SERVICE AGREEMENTS -
MANAGED CARE PLANS
The Company and NYLCare also were parties to an agreement which first
became effective January 1, 1992 and was amended and restated effective January
1, 1995 (the "Managed Care Plan Agreement"). Pursuant thereto, the Company and
various NYLCare subsidiaries entered into pharmacy benefit management ("PBM"),
managed vision care ("Vision") and infusion therapy service ("Infusion Therapy")
agreements (collectively, the "Site Agreements"). The Company believes the terms
of the Managed Care Plan Agreement and the Site Agreements are no less favorable
to the Company than the terms that could have been obtained in an arm's length
transaction with an unaffiliated third party. Pursuant to the Aetna Amendments,
the Company and Aetna have agreed to amend and otherwise extend certain
provisions of the Managed Care Plan Agreement, the PBM and Infusion Therapy Site
Agreements until December 31, 2003, as more particularly described below.
THE MANAGE CARE PLAN AGREEMENT AND THE SITE AGREEMENTS - PRE-AETNA AMENDMENTS
Under the Managed Care Plan Agreement, NYLCare was required to use the
Company as the exclusive provider of the managed care products and services
provided by the Company to its clients for all health maintenance organizations
("HMOs") in which NYLCare, directly or indirectly, held at least a majority
interest (the "NYLCare Owned Sites"), subject to certain exceptions with respect
to Infusion Therapy services, as discussed below. In addition, NYLCare agreed to
use its best efforts to use the Company as the exclusive provider of such
managed care products and services to any HMOs which NYLCare did not own, but
for which it provided health care management services, subject to certain
exceptions, including the condition that the prices the Company offered be
reasonably competitive with those available from third-party providers.
Pursuant to the Managed Care Plan Agreement, NYLCare was required to assist
the Company in product design and promotion and in the development and promotion
of drug formularies. Under the PBM Site Agreement for each NYLCare Owned Site,
the Company agreed to develop and maintain drug formularies for each NYLCare
Owned Site. Pursuant to the Managed Care Plan Agreement, the Company agreed to
negotiate retrospective discounts from drug manufacturers for drugs used by
members of health plans sponsored by the NYLCare Owned Sites ("volume-based
discounts"). The first $400,000 of volume-based discounts were required to be
allocated to the Company and discounts in excess of that amount were required to
be allocated 25% to the Company and 75% to NYLCare, except that certain
volume-based discounts attributable to prescription drug usage by members of
certain Medicare health plans sponsored by the NYLCare Owned Sites above certain
amounts were required to be allocated 50% to NYLCare and 50% to the Company. For
the period January 1, 1998 through the date of the NYLCare Transaction,
volume-based discounts aggregating $1,400,000 were allocated to the Company, and
volume-based discounts aggregating $6,376,000 were allocated to NYLCare.
Under the Infusion Therapy Site Agreements for the Dallas, Houston and the
Baltimore/Washington, D.C. sites, these sites are not required to use the
Company as the exclusive provider of Infusion Therapy services so long as the
Company received, for each year during the term of the Managed Care Plan
Agreement, 80% of the aggregate amount that such HMO paid in the prior year,
calculated on a member month basis, for non-maternity, out-patient Infusion
Therapy services to all providers (the "Guaranteed Amount"). For the other
NYLCare Owned Sites, once such site's total payments for Infusion Therapy
services equaled or exceeded $1.3 million in any year, such site was released
from the requirement to use the Company as its exclusive provider of Infusion
Therapy services so long as it paid the Company the applicable Guaranteed
Amount. Under the Infusion Therapy Site Agreements, the Company was required to
give the sites a discount for fees for these services if the volume of services
purchased from the Company exceeded certain thresholds in any year. The Company
also provided Infusion Therapy services to three NYLCare preferred provider
organizations under separate agreements that were terminable by either party
upon 30 days prior written notice.
Under the Vision Site Agreements, the Company provided Vision services for
the Chicago, Dallas, Houston, New Jersey, New York and Baltimore/Washington D.C.
sites.
THE MANAGED CARE PLAN AGREEMENT AND THE SITE AGREEMENTS - POST-AETNA AMENDMENTS
Since the NYLCare Transaction, the Company has provided and will continue
to provide, through December 31, 2003, PBM services to NYLCare/Aetna HMO
members. The Company is no longer the exclusive provider of such services to all
NYLCare/Aetna HMOs; however, the Aetna Amendments provide that the Company will
be the exclusive provider of such services to no less than 1.4 million HMO
members during this period, which is comparable to the NYLCare membership base
served by the Company prior to the NYLCare Transaction. The contract pricing in
effect prior to the NYLCare Transaction remains in effect through December 31,
1999, and, thereafter, certain pricing adjustments, which the Company believes
reflect an appropriate market price, will be instituted. Aetna has assumed
responsibility for most formulary development and promotion activities, as well
as management of volume-based discount programs. The Company expects Aetna to
assume full responsibility for these services during the next several months.
Going forward, the Company will receive a fixed amount per prescription from
Aetna in lieu of the percentage-based allocation compensation method described
above for these services.
In accordance with the amended Managed Care Plan Agreement and the Vision
Site Agreements, the Company continues to provide Vision services for the
Chicago, Dallas, Houston, New Jersey, New York and the Baltimore/Washington D.C.
sites. The Vision Site Agreements continue under the terms in effect prior to
the NYLCare Transaction through December 31, 1999.
The Company is now the preferred Infusion Therapy provider to the
NYLCare/Aetna HMO members located in the geographic areas served by the Company
at the time of the NYLCare Transaction through December 31, 2003. Specifically,
the pricing terms of the Infusion Therapy Site Agreements were extended until
December 31, 2000, and, thereafter, limited price adjustments may take effect
under certain circumstances. A minimum annual revenue guaranty is provided in
lieu of the Guaranteed Amount described above. The Company continues to provide
Infusion Therapy services to NYLCare/Aetna HMO members in the Dallas, Houston,
New Jersey, New York and the Baltimore/Washington D.C. areas pursuant to the
amended Managed Care Plan Agreement and the Infusion Therapy Site Agreements.
In connection with the Aetna Amendments, the Company and New York Life
reached an agreement whereby New York Life may make up to $2.8 million of
transition-related payments to the Company in 1999, depending upon the level of
profit derived by the Company from the provision of certain services to Aetna.
The agreement is subject to the approval of the Company's Audit Committee.
INFORMED DECISION COUNSELING SERVICE AGREEMENT
The Company also provides informed decision counseling services to NYLCare
HMO members and group indemnity policyholders pursuant to an agreement dated as
of April 1, 1997. Pursuant to the Aetna Amendments, the Company and Aetna
extended the term of the agreement through December 31, 1999. The Company
believes the terms of the agreement are no less favorable to the Company than
the terms that could have been obtained in an arm's length transaction with an
unaffiliated third party.
REVENUES ATTRIBUTABLE TO NYLCARE AGREEMENTS PRIOR TO NYLCARE TRANSACTION
For the period January 1, 1998 through July 15, 1998 (the effective date of
the NYLCare Transaction), the net revenues that the Company derived from all
services provided to NYLCare were approximately $145,758,000, or 5.2% of the
Company's total net revenues for 1998.
OTHER AGREEMENTS AND TRANSACTIONS
The Company and New York Life are parties to an agreement that provides
that, so long as New York Life, directly or through one or more of its
majority-owned subsidiaries, owns 10% or more of the Class B Common Stock, New
York Life will not engage directly, or through any of its majority-owned
subsidiaries, in a business that derives substantial revenues, as defined in
such agreement, from one or more of the following activities within the United
States (the "Protected Business"): the provision of pharmacy benefit management
services (including dispensing prescription drugs, monitoring cost and quality
of pharmacy services, establishing a network of retail pharmacies, processing
claims for prescription drugs, performing drug utilization review and assisting
in the design of prescription drug programs for benefit plans), and the
provision of vision care and home infusion therapy services. However, New York
Life and its majority-owned subsidiaries may engage in the following Protected
Businesses: (i) portfolio investment activities, without any of the entities in
which they invest being subject to the foregoing restrictions, (ii) claims
processing for prescription drugs in connection with processing medical claims
under insurance policies, (iii) acquisition of entities engaged in all or any
aspect of the Protected Business, unless any such entity derived a majority of
its consolidated revenues from the Protected Business in the first year
preceding such acquisition, and operation of the businesses of such acquired
entities as they may thereafter develop or expand. The foregoing does not in any
way restrict the activities of entities in which New York Life and its
subsidiaries own less than a majority equity interest. This agreement was not
affected by the NYLCare Transaction.
For an annual premium of $5,800, the Company has obtained a $2.5 million
life insurance policy from New York Life on the life of Mr. Toan. New York Life
maintains Directors and Officers/Corporation Reimbursement ("D&O") insurance
covering directors and officers of New York Life and its subsidiaries for
certain expenses and liabilities of such directors and officers while acting in
their capacity as such while New York Life maintains voting control of the
Company. The total amount of New York Life's D&O insurance is $150 million
aggregate corporate liability and $250 million aggregate individual liability
each policy period with a $10 million per loss deductible amount for corporate
liability and up to $50,000 per loss deductible for individual liability. The
Company did not incur any annualized premium expense for insurance covering the
first $10 million of such D&O liability deductible for 1998 because the premium
was waived by the insurer. There is no assurance that New York Life will provide
excess D&O insurance for the Company in the future.
From 1989, when NYLCare acquired all of the outstanding stock of the
Company, through June 15, 1992, the Company was included in consolidated groups
with New York Life for federal income tax purposes. The Company is no longer
entitled by law to be included in the consolidated tax groups and will continue
as a party to its tax allocation agreements with New York Life only for purposes
of adjustments to tax liabilities for the years in which it was included in
those consolidated groups.
INTERCOMPANY ACCOUNT
Prior to the sale of NYLCare to Aetna, the Company maintained an
intercompany account for payments to NYLCare, which was used primarily for
NYLCare's portion of the volume-based discounts earned by the Company, which
were approximately $7,257,000 for the period January 1, 1998 to July 15, 1998.
The highest outstanding balance at any one time during this period was
approximately $8,466,000.
RELATIONSHIP WITH THE PARTNERSHIP AND PREMIER
On December 31, 1995, the Company entered into a series of agreements with
the Partnership, which, among other things, designate the Company as Premier's
exclusive preferred provider of outpatient PBM services to shareholders of
Premier and their affiliated healthcare entities, plans and facilities which
participate in the Partnership's purchasing programs. The term of the
relationship is ten years, subject to early termination by the Partnership at
five years upon payment of an early termination fee to the Company. Premier is
required to promote the Company as the preferred PBM provider to its
shareholders and their affiliates. An individual Premier member or affiliated
managed care plan is not required to enter into a PBM agreement with the
Company, but if it does so, the term of the agreement will be five years.
As a result of the number of Premier plan members that receive PBM services
from the Company and the outcome of certain joint drug purchasing initiatives,
the Company issued 454,546 shares of its Class A Common Stock to the Partnership
in May 1996. The Partnership could also become entitled to receive up to an
additional 4,500,000 shares, depending on the number of members in
Premier-affiliated managed care plans that contract for the Company's PBM
services; however, no additional shares have been granted to date. If the
Partnership earns stock totaling over 5% of the Company's total voting stock, it
is entitled to have its designee nominated for election to the Board of
Directors. To date, the 5% threshold has not been met.
For the year ended December 31, 1998, the net revenues that the Company
derived from services provided to the Premier affiliates were approximately
$78,539,000, or 2.8% of total net revenues for such period. The Company does not
derive any revenue from Premier or the Partnership. As of January 1, 1999, the
Company was providing service to 29 Premier affiliates representing
approximately 1.3 million members.
II. PROPOSAL TO APPROVE THE EXPRESS SCRIPTS, INC.
EMPLOYEE STOCK PURCHASE PLAN
On November 24, 1998, the Board of Directors adopted the Express Scripts,
Inc. Employee Stock Purchase Plan (the "ESPP"), subject to stockholder approval.
The purpose of the ESPP is to provide employees of the Company and its
designated subsidiaries with an opportunity to purchase Class A Common Stock of
the Company through accumulated payroll deductions during the offering periods
under the ESPP. The ESPP is intended to qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). No shares of Class A Common Stock may be issued or sold until the
Company's stockholders have approved the ESPP. NYLIFE HealthCare has indicated
its intention to vote its shares for approval of the ESPP. Assuming NYLIFE
HealthCare votes in favor of the ESPP, such vote would be sufficient to approve
the ESPP. If such approval is not obtained prior to November 24, 1999, the ESPP
will be void and of no effect, and amounts withheld from participating employees
will be returned to them.
SUMMARY OF THE ESPP
The full text of the ESPP is set forth in Exhibit A to this Proxy
Statement. The following summary of the material features of the ESPP is
qualified in its entirety by reference to the text of the ESPP.
The ESPP is administered by the Board of Directors, or a committee named by
the Board of Directors. The Board of Directors has designated the Compensation
Committee as the committee responsible for the administration of the ESPP. A
total of 250,000 shares of Class A Common Stock have been reserved for issuance
under the ESPP, subject to antidilution adjustments as provided in the ESPP.
These shares may be newly issued or may be purchased in the open market or from
private sources. The ESPP will terminate on November 24, 2008.
The committee responsible for the administration of the ESPP has the
authority to (i) adopt, amend, and rescind any rules deemed desirable and
appropriate for the administration of the ESPP and not inconsistent with the
ESPP, (ii) construe and interpret the ESPP, and (iii) make all other
determinations necessary or advisable for the administration of the ESPP. The
Board of Directors may amend or terminate the ESPP at any time in accordance
with the terms of the ESPP. However, stockholder approval will be required for
any amendment that increases the maximum number of shares issuable under the
ESPP or if such approval is otherwise necessary under any applicable law or
regulation.
Employees, other than executives of the Company (as determined by the Board
or its committee), who are customarily employed by the Company or a designated
subsidiary at least 20 hours per week and more than five months per year and who
have been continuously employed by the Company or a designated subsidiary for at
least three months are eligible to participate in the ESPP. Approximately 2,800
employees are eligible to participate in the ESPP. None of the Named Officers is
eligible to participate in the ESPP.
Employees may enroll in the ESPP at least five days prior to a six-month
"Offering Period" (as defined in the ESPP), which begin on March 1 and September
1 of each year. Upon enrolling in the ESPP, each participant is deemed to have
authorized the establishment of a brokerage account in his or her name at a
securities brokerage firm. The brokerage firm serves as the custodial agent for
the purpose of holding shares purchased under the ESPP. Participants in the ESPP
may elect to have payroll deductions made each pay period during an Offering
Period in an amount not less than one percent (1%) and not more than ten percent
(10%), in whole percentages, of such participant's compensation in each pay
period. All payroll deductions made by a participant are credited to his or her
brokerage account. A participant may increase or decrease payroll deductions at
any time; however, he or she may not make any additional payments into the
participant's brokerage account. The ESPP also places certain limits on the
participant's ability to make contributions to the ESPP that might jeopardize
the ESPP's status as an "Employee Stock Purchase Plan" under Section 423 of the
Code.
On the first business day of each Offering Period, each participant is
deemed to have been granted an option to purchase shares of Class A Common Stock
at the end of the Offering Period. The purchase price is 85% of the closing sale
price of the Class A Common Stock on Nasdaq on the trading day immediately
preceding the last day of the Offering Period. The first Offering Period
commenced on March 1, 1999. Subject to stockholder approval, the first purchase
date will occur on August 31, 1999. Participants must hold shares purchased
under the ESPP for at least six months.
No participant may purchase more than 1,000 shares during any Offering
Period. Furthermore, a participant may not be granted an option during an
Offering Period:
if, as a result, the participant would own stock and/or hold outstanding
options to purchase stock representing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or of any
subsidiary, or if such option would permit his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries to
accrue at a rate which exceeds $25,000 of fair market value of such stock,
determined at the time such option is granted, for each calendar year in which
such option is outstanding at any time.
Options granted during an Offering Period vest on the last day of the
Offering Period and, unless a participant withdraws from the ESPP, his or her
option for the purchase of shares will be exercised automatically upon vesting.
Upon exercise, the maximum whole number of shares subject to such option will be
purchased at the applicable option price with the accumulated contributions in
each participant's brokerage account, subject to the limitations in the ESPP.
A participant may withdraw all but not less than all the contributions
credited to his or her brokerage account under the ESPP at any time prior to
five business days before the last day of the Offering Period. All of the
participant's contributions credited to his or her account will be repaid to him
or her, and no further contributions for the purchase of shares will be made
during that Offering Period. A participant who has withdrawn may re-enroll in
the next Offering Period.
FEDERAL INCOME TAX CONSEQUENCES
The ESPP is intended to qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended.
A participating employee is not taxed at the time of the grant of his or
her stock. The employee is not taxed when shares are purchased under the ESPP,
even though they are purchased at 85% of the market price on the purchase date.
If shares are sold after the expiration of two years or more from the first
day of the Offering Period in which such shares were purchased under the ESPP
(the "Grant Date") and one year or more from the purchase date (i) any profit up
to 15% of the market value of the shares at the beginning of the Offering Period
is taxable as ordinary income, (ii) any further profit is taxable as long-term
capital gain, and (iii) any loss is treated as long-term capital loss. Shares
sold or otherwise disposed of, including by way of gifts, before the expiration
of two years from Grant Date or one year or more from the purchase date are
considered disqualifying dispositions. If the employee disposes of shares prior
to the expiration of two years from the Grant Date or prior to the expiration of
one year from the purchase date (A) the difference between the price paid by the
employee and the market value of the shares at the date of purchase (on the date
preceding the date of determination) is taxable as ordinary income, and (B) the
difference between the amount received by the employee upon disposition of the
shares and the market value of the shares at the date of purchase is treated as
a capital gain or loss (long-term capital gain or loss if the shares have been
held more than one year).
If the employee makes a gift or otherwise disposes of his or her shares
within two years of the Grant Date or one year from the purchase date, the
difference between the price paid by the employee and the market value of the
shares at the date of purchase is taxed as ordinary income in the year of the
disposition. A disposition after these time frames may also result in tax, but
the amount of the discount taxed as ordinary income is limited to the extent
that the market value at the time of disposition exceeds the purchase price.
In the event of a participant's death prior to disposing of shares
purchased under the ESPP, the tax return for the year of death must include the
discount on the purchase as ordinary income (but not more than the amount by
which the market value at death exceeds the purchase price).
The amount that a participant elects to have deducted from his or her
compensation for the purchase of Common Stock under the ESPP constitutes taxable
wages and is subject to withholding. Moreover, the Company may have a
withholding obligation with respect to ordinary compensation income recognized
by a participant upon making a disqualifying disposition. The Company will
require any affected employee to make arrangements to satisfy any withholding
obligation.
The Company is not subject to any tax consequences due to the offering of
Common Stock under the ESPP. Moreover, in general, the Company is not subject to
any tax consequences due to the purchase or the sale of Common Stock acquired
under the ESPP. However, the Company will be entitled to a business-expense
deduction with respect to any ordinary compensation income recognized by a
participant upon making a disqualifying disposition. Any such deduction will be
subject to the limitations of Section 162(m) of the Code.
The foregoing is a summary of the Federal income tax consequences to
participants in the ESPP and to the Company, based upon current income tax laws,
regulations and rulings.
Participation in and amount of payroll deductions under the ESPP are at the
election of the eligible employee. Accordingly, the dollar value and number of
shares that may be granted are not determinable.
Approval of this proposal requires the affirmative vote of a majority of
the votes of shares present, in person or by proxy, and entitled to vote at a
meeting of the stockholders of the Company voting as a single class.
Accordingly, abstentions will have the effect of votes against this proposal,
and non-votes will be disregarded and have no effect on the outcome of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE EXPRESS
SCRIPTS, INC. EMPLOYEE STOCK PURCHASE PLAN.
III. PROPOSAL TO APPROVE THE EXPRESS SCRIPTS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
On December 16, 1998, the Compensation Committee of the Board of Directors
(the "Committee") adopted, and on January 27, 1999 the Board of Directors
ratified and approved, the Express Scripts, Inc. Executive Deferred Compensation
Plan (the "Deferred Compensation Plan"). Subject to stockholder approval, the
Board of Directors reserved 50,000 shares of Class A Common Stock that may be
issued under the Deferred Compensation Plan. The purpose of the Deferred
Compensation Plan is to provide eligible key employees of the Company with an
opportunity to defer compensation to be earned by them from the Company as a
means of saving for retirement or other future purposes and to provide such
employees with competitive retirement and capital accumulation benefits. In
addition, the Deferred Compensation Plan is intended to provide eligible key
employees additional incentive to remain employed by the Company and to attract
certain executive-level employees.
The Deferred Compensation Plan is being submitted to the Company's
stockholders for approval to comply with Nasdaq requirements for the listing of
the shares of Class A Common Stock that may be issued under the Plan. NYLIFE
HealthCare has indicated its intention to vote its shares for approval of the
Deferred Compensation Plan. Assuming NYLIFE HealthCare votes in favor of the
Deferred Compensation Plan, such vote would be sufficient to approve the Plan.
If the stockholders do not approve the Deferred Compensation Plan, the Plan, as
adopted by the Board of Directors and except with respect to provisions
governing the distribution of shares of Class A Common Stock, will remain in
effect. In such event, the Company will distribute participants' investments in
the Company's common stock fund under the Deferred Compensation Plan in cash in
lieu of shares of Class A Common Stock at the times the participant elects under
the Plan.
SUMMARY OF THE DEFERRED COMPENSATION PLAN
The full text of the Deferred Compensation Plan is set forth in Exhibit B
to this Proxy Statement. The following summary of the material features of the
Deferred Compensation Plan is qualified in its entirety by reference to the text
of the Plan.
Unless the Committee terminates the plan, the Deferred Compensation Plan,
as amended from time to time, will continue in effect indefinitely.
Subject to stockholder approval, the Company may distribute newly issued
shares of Class A Common Stock or treasury shares in lieu of newly issued shares
under the Deferred Compensation Plan.
Only senior and vice-president level executives designated by the Committee
are eligible to participate in the Deferred Compensation Plan. As of March 1,
1999, the date on which participating executives could begin their voluntary
deferrals, nine executives, all of whom were participating, were eligible to
participate in the Deferred Compensation Plan. Participation is the Deferred
Compensation Plan is voluntary.
Under the Deferred Compensation Plan, eligible executive employees of the
Company may elect to defer up to 50% of their base salary and 100% of their
bonus compensation and may receive additional contributions from the Company.
The participant's plan account is credited or debited at the end of each month,
with voluntary deferrals invested in, and with income or loss based upon, a
hypothetical investment in any one or more investment options available under
the Deferred Compensation Plan, as prescribed by the Committee. One of such
options includes a fund comprised solely of hypothetical equivalent shares of
Class A Common Stock. At the end of each plan year, the Company, at the sole
discretion of the Committee, may credit to a participant's plan account a
percentage of his or her total annual cash compensation (annual salary plus
annual executive bonus plan payment) for that year. For the plan year beginning
January 1, 1999, the Company will credit to the participating executives'
accounts six percent (6%) of the respective executive's total annual cash
compensation during 1999. The Committee may decide to preserve, increase or
decrease such percentage or forego any annual Company contributions in
subsequent years.
Upon an executive's becoming eligible to participate, the Company, at the
sole discretion of the Committee, may also make a one-time credit for past
service with the Company. For those currently participating, the past service
credit was deemed to have been made as of January 1, 1999 and equals
approximately eight percent (8%) of the participant's total salary and cash
bonus compensation for each year in which he or she served in a senior executive
capacity with the Company, plus estimated earnings on such amounts of eight
percent (8%) per year through March 31, 1999. After March 31, 1999 (or the date
of crediting of the past service credit, for executives who later become
eligible to participate and receive a past service contribution), the return on
past service credit amount will be determined solely by the performance of the
funds in which the participant invests portions or all of such amount.
Annual Company contributions for a specific plan year vest three (3) years
after the end of that plan year. Fifty percent (50%) of the past service
contribution is vested when it is credited to a participant's account. The
remaining fifty percent (50%) of the past service contribution vests as follows:
-one (1) year after the end of the plan year in which the contribution is
credited to the participant's account, the participant will be one-third (1/3)
vested in the remaining fifty percent (50%);
-two (2) years after the end of the plan year in which the contribution is
credited, the participant will be two-thirds (2/3) vested in the remaining fifty
percent (50%); and
-three (3) years after the end of the plan year in which the contribution
is credited, the participant will be 100% vested in the remaining fifty percent
(50%).
In any event, participants become fully vested in annual and past service
Company contributions upon reaching age 57. However, if a participant's
employment is terminated prior to age 57, unvested benefits will be forfeited.
Also, upon a participant's retirement or termination of his or her employment
with the Company, the Company may withhold payment of vested and unvested past
service and annual Company contributions, plus any earnings thereon, in the
event the Committee determines that the participant has violated any
noncompetition, nondisclosure, or employment agreement executed by the
participant or otherwise acted against the Company's interests.
The Deferred Compensation Plan is administered by the Committee. The
Committee is vested with the power and authority to:
-select which executives are eligible to participate in the Plan;
-select compensation eligible for deferral;
-select investment indices;
-establish the level of Company credits;
-establish deferral terms and conditions;
-receive and approve beneficiary designation forms; and
-adopt modifications, amendments and procedures as it may deem necessary,
appropriate or convenient.
The Committee may amend, alter or terminate the Deferred Compensation Plan
at any time without the prior approval of the Board of Directors or the
Company's stockholders, provided, however, that the Committee may not materially
increase the benefits accruing to participants under the Plan without Board
approval.
The Committee, in its sole discretion, may delegate day-to-day
administration of the Deferred Compensation Plan to an employee or employees of
the Company or to a third-party administrator and may rely on outside
consultants and advisors in fulfilling its administrative duties under the
Deferred Compensation Plan.
Distributions to a participant are made in the time and manner elected by
the participant in his or her initial and annual election forms, which permit
either lump-sum or annual installment payments. The Company will distribute
participants' account balances in cash; however, if this proposal is approved,
the Company, subject to certain restrictions under the Deferred Compensation
Plan, will distribute to participants amounts invested in the common stock fund
in the form of shares of Class A Common Stock. The Committee, upon receipt of a
written request by a participant, may also allow certain payments to a
participant while a participant is still participating in the Deferred
Compensation Plan to the extent necessary to abate financial or medical
hardship.
The following table sets forth the benefits or amounts that were allocated
as of January 1, 1999, to each of the Named Officers who have elected to
participate in the Deferred Compensation Plan. Benefits to be awarded in the
future under the Deferred Compensation Plan are not determinable because such
benefits depend upon the amount of compensation each participating employee
elects to defer and the percentage of compensation that the Company, at its
discretion, may contribute to each employee as a Company contribution.
<TABLE>
NEW PLAN BENEFITS
<CAPTION>
EXECUTIVE DEFERRED COMPENSATION PLAN
NAME AND POSITION DOLLAR VALUE (1) NUMBER OF SHARES (2)
<S> <C> <C>
----------------- ---------------- --------------------
BARRETT A. TOAN $302,083 1,125
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
STUART L. BASCOMB $220,282 820
EXECUTIVE VICE PRESIDENT
PATRICK J. BYRNE $10,523 39
SENIOR VICE PRESIDENT PLYMOUTH SITE
OPERATION
DAVID A. LOWENBERG $82,517 307
SENIOR VICE PRESIDENT AND DIRECTOR OF
SITE OPERATIONS
GEORGE PAZ $20,000 74
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Executive Officer Group (3) $786,565 2,929
Non-Executive Officer Director Group (4) -- --
Non-Executive Officer Employee Group (5) -- --
<FN>
(1) Represents the Company's entire obligation (both vested and non-vested
component) for the past service credit as of January 1, 1999.
(2) Represents the estimated number of shares (both vested and non-vested)
as of January 1, 1999, using the December 31, 1998 closing price of the
Company's Class A Common Stock as reported on Nasdaq, of $67.125 per share.
(3) Consists of nine persons.
(4) Directors who are not executive officers are not eligible to
participate in the Deferred Compensation Plan.
(5) Employees who are not executive officers are not eligible to
participate in the Deferred Compensation Plan.
</FN>
</TABLE>
Approval of this proposal requires the affirmative vote of a majority of
the votes of shares present, in person or by proxy, and entitled to vote at a
meeting of the stockholders of the Company voting as a single class.
Accordingly, abstentions will have the effect of votes against this proposal,
and non-votes will be disregarded and have no effect on the outcome of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE EXPRESS
SCRIPTS, INC. EXECUTIVE DEFERRED COMPENSATION PLAN.
IV. PROPOSAL TO APPROVE THE THIRD AMENDMENT TO THE
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1994 STOCK OPTION PLAN
BACKGROUND
On June 6, 1994, the Board of Directors of the Company adopted the 1994
Stock Option Plan, which provides for the grant of nonqualified stock options
and incentive stock options (within the meaning of Section 422 of the Code) to
certain officers and other key employees of the Company or certain subsidiaries.
On March 22, 1995, the Board of Directors adopted the Amended and Restated 1994
Stock Option Plan (the "1994 Plan"), which was approved by the stockholders of
the Company on May 24, 1995. The 1994 Plan was amended by the Board of Directors
on January 29, 1997, and January 27, 1998, and approved by the stockholders of
the Company on May 28, 1997, and May 27, 1998, respectively, to increase the
number of shares of Class A Common Stock which may be issued thereunder. The
purposes of the 1994 Plan are to further the growth, development and financial
success of the Company by providing incentives to those officers and other key
employees who have the capacity for contributing in substantial measure toward
the growth and profitability of the Company and to assist the Company in
attracting and retaining employees with the ability to make such contributions.
On March 24, 1999, the Board of Directors adopted an amendment to the 1994
Plan (the "Third Amendment") which is described below under "Proposed
Amendment." NYLIFE HealthCare has indicated its intention to vote its shares for
approval of the Third Amendment. Assuming NYLIFE HealthCare votes in favor of
such amendment, such vote would be sufficient to approve such amendment. If the
Third Amendment to the 1994 Plan is not approved, the existing plan would
continue in effect.
SUMMARY OF THE 1994 PLAN
The following summary of the material features of the 1994 Plan is
qualified in its entirety by reference to the text of the 1994 Plan.
GENERAL. The 1994 Plan is administered by the Compensation Committee (the
"Committee"). A total of 1,920,000 shares of Class A Common Stock have been
reserved for grants of options under the 1994 Plan, subject to antidilution
adjustments as provided in the 1994 Plan and a proposed increase in the total
number of shares available for grant, as described below. The maximum number of
shares issuable under the 1994 Plan is subject to adjustment by the Committee in
the event of certain changes in the Company's shares of Class A Common Stock,
including stock splits. The foregoing share numbers reflect the 1998 Stock
Split. As of March 1, 1999, options to purchase an aggregate of 1,820,862 shares
of Class A Common Stock have been granted under the 1994 Plan to 205 employees
of the Company, leaving 99,138 shares of Class A Common Stock available for
grants under the 1994 Plan. No more than 300,000 options may be granted to any
one individual under the 1994 Plan. Options have been granted to 226 officers
and other key employees from time to time under the 1994 Plan, 21 of which have
forfeited their unexercised options upon termination of their employment with
the Company. Approximately 225 employees are currently eligible to participate
in the 1994 Plan.
The Committee has the power to interpret the 1994 Plan and to determine and
interpret the terms of each option agreement (which need not be identical),
including, without limitation, (i) which eligible employees will be granted
options, (ii) the number of options that will be granted to an employee (subject
to the limitations set forth in the 1994 Plan), (iii) whether or not the options
granted are incentive stock options or nonqualified stock options, (iv) the
exercise price of the options, (v) the form of consideration that may be used to
pay for the shares issued upon exercise of an option, and (vi) when an option
will vest or become exercisable, and whether and to what extent the shares
received upon exercise will be "restricted shares" for a period of time, and
subject to forfeiture.
DURATION OF PLAN, OPTIONS. The 1994 Plan will terminate on June 6, 2004.
The term of each option shall be no longer than ten years from the date of grant
(five years in the case of an incentive stock option granted to an individual
who is a 10% stockholder).
OPTION TERMS. The exercise price of an option may not be less than 100% of
the fair market value of the Class A Common Stock at the time of the grant (110%
of the fair market value in the case of an incentive stock option granted to an
individual who at the time of grant beneficially owns more than 10% of the total
combined voting power of all classes of stock of the Company (a "10%
stockholder")). Such fair market value shall generally be considered to be the
closing sale price per share on Nasdaq on the last trading day preceding the
date of grant. The purchase price is to be paid in cash, by check or, at the
discretion of the Committee and upon such terms as the Committee may approve, by
delivering previously owned shares, having shares withheld or exercising
pursuant to a "cashless exercise" procedure, or any combination thereof.
At the time of exercise of a nonqualified stock option, the optionee is
required to pay to the Company, or make arrangements satisfactory to the
Committee regarding the payment of, any taxes required to be withheld by reason
of such exercise. The Committee may permit optionees to satisfy withholding
obligations by delivering previously owned shares or by electing to have shares
withheld.
Options are not transferable other than by will or under the laws of
descent and distribution, and are exercisable during the lifetime of the
optionee only by the optionee or his or her guardian or legal representative.
Subject to the "change in control" provision referred to below, all options
terminate immediately in the event of termination of employment for any reason,
except as follows: if such employment is terminated due to death, permanent
disability (as defined in the 1994 Plan), retirement (as defined in the 1994
Plan), or by the Company without cause (as defined in the 1994 Plan), all
outstanding options will immediately become exercisable and will remain
exercisable for three months following such termination; provided, that the
Committee may, in its discretion, permit the option to be exercised after such
period. In no event, however, may an option be exercised beyond the original
term of such option. The Committee also has the discretion to determine whether
and to what extent unvested restricted shares will vest or be forfeited upon an
optionee's termination of employment.
If an option expires or terminates without having been exercised in full,
or any restricted shares received upon exercise of an option are forfeited, such
shares will again be available for grant of options.
ADJUSTMENT OF SHARES. In the event that the outstanding shares of Class A
Common Stock are changed into or exchanged for a different number or kind of
shares or other securities of the Company, or of another corporation, by reason
of reorganization, merger or other subdivision, consolidation, recapitalization,
reclassification, stock split, issuance of warrants or rights, stock dividend,
combination of shares or similar event, appropriate adjustments will be made by
the Committee in the number and kind of shares subject to and which may be
subject to options under the 1994 Plan, and the purchase price per share, to
prevent dilution or enlargement of benefits granted to, or available for,
optionees.
VESTING AND CHANGE OF CONTROL PROVISIONS. The Committee has the authority
to determine the vesting schedule of options granted under the 1994 Plan, and
may accelerate the exercisability of any option, or the vesting of any
restricted shares, at any time. Options granted under the 1994 Plan prior to the
amendment and restatement thereof in 1995 become fully exercisable, and
restricted shares will fully vest, upon the occurrence of a "change in control"
of the Company, which, for purposes of such option grants, means the occurrence
of any of the following events at a time when New York Life is not the
beneficial owner of fifty percent or more of the combined voting power for the
election of directors of the Company: (i) any person (other than the Company or
any parent corporation or subsidiary or related employee benefit plan) becomes
the beneficial owner of securities representing fifty percent or more of the
combined voting power for the election of directors of the Company; (ii) a
change in the majority of the members of the Board of Directors during any
period of two consecutive years that is not approved by a vote of at least
two-thirds of the members of the Board who were members at the beginning of such
two-year period; (iii) the stockholders of the Company approve a merger or
consolidation involving the Company that results in existing stockholders owning
80% or less of the combined voting power of the voting securities of the Company
after such merger or consolidation, other than a recapitalization or similar
transaction in which no "person" acquires more than fifty percent of the
combined voting power for the election of directors; or (iv) the stockholders of
the Company approve a plan of complete liquidation or an agreement providing for
the sale or disposition of all or substantially all of the Company's assets or
any transaction having a similar effect.
With respect to all other options granted under the 1994 Plan, in the event
of a "change in control," all outstanding options, whether or not previously
exercisable and vested, will terminate and any restricted shares will be
redeemed by the Company and, in either case, the Company will pay the optionee a
specified amount in lieu of such options or restricted shares. For options
granted after the 1994 Plan was amended and restated, the term "change in
control" means the occurrence of one of the following events: (i) the first date
on which both of the following conditions shall exist: (A) New York Life shall
have ceased to be the ultimate beneficial owner of securities representing fifty
percent or more of the combined voting power for the election of directors, and
(B) a person (other than the Company or any parent corporation or subsidiary or
related employee benefit plan) becomes the beneficial owner of securities
representing fifty percent or more of the combined voting power for the election
of directors of the Company; (ii) the stockholders of the Company approve a plan
of complete liquidation of the Company; or (iii) the stockholders of the Company
approve an agreement for the sale or disposition of all or substantially all of
the Company's assets or any transaction having a similar effect. Upon the
occurrence of such a change of control, the Company will pay the optionee a
specified amount in lieu of such options or restricted shares, and such amount
will be determined based upon whether an offer of "comparable employment" is
made to and accepted by the optionee. For purposes of the foregoing, "comparable
employment" means employment with the Company or its successor following a
change in control pursuant to which (i) the employee's responsibilities and
duties are substantially the same and the other terms and conditions of
employment are not materially more burdensome; (ii) his or her aggregate
compensation is substantially the same; and (iii) the employee is not required
to relocate unless the Company or its successor pays the cost of such
relocation, appropriate cost of living adjustments are made, the employee is
employed under a written contract for a term of not less than three years, and
the employee is required to make only one such move during the first three years
of the written contract. If an optionee is offered and accepts comparable
employment, then the Company would pay, in the case of options, the excess of
the "change in control price" (as defined in the 1994 Plan) over the purchase
price for the option shares and the change in control price, in the case of
restricted shares. If an optionee is offered and rejects comparable employment,
then the optionee would receive the same payment for his or her options that
were fully vested immediately prior to the "change in control date" (as defined
in the 1994 Plan) and would receive the lesser of the change in control price or
the purchase price for his or her restricted shares.
The 1994 Plan also provides for the reduction of any payments that may be
characterized as "excess parachute payments" (within the meaning of Section
280G(b)(1) of the Code) to an optionee under the Plan and any other plan,
program or arrangement maintained by the Company (or a subsidiary or parent of
the Company) so that the present value of the total parachute payments equals
$1.00 less than three times the optionee's "base amount" (within the meaning of
Section 280G(b)(2)(A) of the Code).
AMENDMENT AND TERMINATION OF PLAN. The Board of Directors may at any time
terminate or modify the 1994 Plan, except that without the approval of the
stockholders it may not increase the number of shares as to which options may be
granted, change the class of persons eligible to participate in the 1994 Plan,
change the minimum purchase price of shares subject to the options, extend the
maximum period for granting or exercising options, or otherwise materially
increase the benefits accruing to optionees under the 1994 Plan. The 1994 Plan
will terminate on June 6, 2004. No termination or amendment of the 1994 Plan
may, without the consent of the optionee to whom an option has been granted,
alter or impair any rights or obligations under any option theretofore granted.
PROPOSED AMENDMENTS
The complete text of the Third Amendment to the 1994 Plan, as approved by
the Board of Directors, subject to stockholder approval, is set forth in Exhibit
C to this Proxy Statement. The following summary of proposed amendments is
qualified in its entirety by reference to the Third Amendment as set forth in
Exhibit C.
Under the proposed Third Amendment to the 1994 Plan, effective March 24,
1999, the number of shares which may be issued under the 1994 Plan would be
increased from 1,920,000 shares of Class A Common Stock to 2,920,000 shares of
Class A Common Stock under Section 2.1 of the 1994 Plan, and such amount would
be further increased on January 1st of each year, through and including January
1, 2004, by an additional amount equal to 1% of the Company's total outstanding
shares of Class A and Class B Common Stock on such dates. As of March 1, 1999,
options to acquire 99,138 shares were available for grant under the 1994 Plan.
In connection with the proposal to approve the Deferred Compensation Plan,
the Third Amendment includes changes to the definitions of the terms "Early
Retirement" and "Normal Retirement." These changes are intended to clarify that
the retirement provisions under the Deferred Compensation Plan do not affect
these terms as defined in the 1994 Plan.
In light of recent changes adopted by the Securities and Exchange
Commission, Section 6.1 ("Compensation Committee") would be amended to eliminate
the existing requirement that Committee members be disinterested directors as
previously required under the former Rule 16b-3 under the Securities Exchange
Act of 1934, and further amended to clarify that all members of the Compensation
Committee would not be required to be "outside directors" as defined in Section
162(m) of the Code.
The Third Amendment would also (i) revise Section 1 to reflect the full
name of the 1994 Plan, (ii) amend Section 2.2 and Section 3 to clarify that the
limitation on the number of options that may be granted to any employee under
the plan shall be adjusted to reflect changes in the Company's shares, and (iii)
amend Section 4.4 ("Method of Exercise") to expressly recognize attestation of
the ownership of an optionee's shares as an acceptable method of transferring
previously owned shares to the Company in payment of the exercise price of an
option upon exercise.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee does not realize income on the grant
of an incentive stock option. If an optionee exercises an incentive stock option
in accordance with the terms of the option and does not dispose of the shares
acquired within two years from the date of the grant of the option or within one
year from the date of the exercise, the optionee will not realize any ordinary
income by reason of the exercise, and the Company will be allowed no deduction
by reason of the grant or the exercise. The optionee's basis in the shares
acquired upon exercise will be the amount of cash paid upon exercise. Provided
the optionee holds the shares acquired as a capital asset at the time of sale or
other disposition of the shares, his or her gain or loss, if any, recognized on
the sale or other disposition, will be a capital gain or loss. The amount of his
or her gain or loss will be the difference between the amount realized on the
disposition of the shares and his or her basis in the shares.
If an optionee disposes of the shares within two years from the date of
grant of the option or within one year from the date of exercise, the optionee
will realize ordinary income at the time of disposition equal to the excess, if
any, of the lesser of (a) the amount realized on the disposition, or (b) the
fair market value of the shares on the date of exercise over the optionee's
basis in the shares. The Company will be entitled to a deduction in an amount
equal to such income. The excess, if any, of the amount realized on disposition
of such shares over the fair market value of the shares on the date of exercise
will be treated as a long- or short-term capital gain, depending upon the
holding period of the shares, provided the optionee holds the shares as a
capital asset at the time of disposition.
The excess of the fair market value of the shares at the time the incentive
stock option is exercised over the exercise price for the shares is tax
preference income for purposes of computing the alternative minimum tax
applicable to individuals.
NONQUALIFIED STOCK OPTIONS. Nonqualified stock options do not qualify for
the special tax treatment accorded to incentive stock options under the Code.
Although an optionee does not recognize income at the time of the grant of the
option, he or she recognizes ordinary income upon the exercise of a nonqualified
stock option in an amount equal to the excess of the fair market value of the
stock on the date of exercise of the option over the amount of cash paid for the
stock.
As a result of the optionee's exercise of a nonqualified stock option, the
Company will be entitled to deduct as compensation an amount equal to the amount
included in the optionee's gross income. If the optionee pays all or part of the
option price of a nonqualified stock option by surrendering shares already owned
by such optionee, certain additional tax rules apply.
The excess of the fair market value of the stock on the date of exercise of
a nonqualified stock option over the exercise price is not a tax preference
item.
RESTRICTED SHARES. An optionee does not recognize income upon receipt of
restricted shares (unless he or she elects, within thirty days of the transfer
of restricted shares, to recognize income currently). Upon the lapse of the
restriction, the optionee will recognize income in an amount equal to the fair
market value of the shares on the date the restriction lapses and the Company
will be entitled to a tax deduction equal to the same amount.
If the optionee elects to recognize income within thirty days of receipt of
the shares, he or she will recognize income in an amount equal to the fair
market value of the shares on the date of receipt of the restricted shares and
the Company will be entitled to a tax deduction equal to the same amount.
CHANGE IN CONTROL. If there is an acceleration of the vesting or payment of
benefits and/or an acceleration of the exercisability of stock options upon a
change in control, all or a portion of the accelerated benefits may constitute
"Excess Parachute Payments" under Section 280G of the Code. The optionee
receiving an Excess Parachute Payment incurs an excise tax of 20% of the amount
of the payment in excess of the employee's average annual compensation over the
five calendar years preceding the year of the change in control, and the Company
is not entitled to a deduction for such payment.
The foregoing is a summary of the Federal income tax consequences to the
participants in the 1994 Plan and to the Company, based upon current income tax
laws, regulations and rulings.
STOCK OPTION AWARDS
The following table shows options which have been granted under the 1994
Plan to date to each of the Named Officers and certain specified groups
(including options which have been exercised and those which have been
forfeited):
<TABLE>
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
<CAPTION>
NUMBER OF EXERCISE PRICE PER
NAME AND POSITION SHARES (#) SHARE ($)(1)
<S> <C> <C> <C>
- ----------------- ---------- ------------
BARRETT A. TOAN..................... 182,000 (2) $33.2692
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
STUART L. BASCOMB................... 56,700 (3) $33.7996
EXECUTIVE VICE PRESIDENT
PATRICK J. BYRNE.................... 33,100 (3) $43.3690
SENIOR VICE PRESIDENT PLYMOUTH SITE
OPERATION
DAVID A. LOWENBERG.................. 38,000 (3) $39.8467
SENIOR VICE PRESIDENT AND DIRECTOR
OF SITE OPERATIONS
GEORGE PAZ.......................... 119,800 (3) $32.8222
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Executive Officer Group (4)......... 757,400 (3) $32.3469
Non-Executive Officer Director
Group(5)............................ 0 --
Non-Executive Officer Employee
Group(6)............................ 1,851,966 (3) $34.1661
<FN>
(1) The closing price per share of the Company's Class A Common Stock as
reported on Nasdaq on March 26, 1999, was $75.50. Exercise prices shown are
weighted averages of the actual exercise prices for stock options granted to the
individuals or members of the groups, as applicable.
(2) See Note 2 to "Option Grants in Fiscal Year 1998" on page __.
(3) See Note 7 to "Option Grants in Fiscal Year 1998" on page __.
(4) Consists of eleven persons.
(5) Consists of nine persons.
(6) Consists of 215 persons.
</FN>
</TABLE>
Approval of this proposal requires the affirmative vote of a majority of
the votes of shares present, in person or by proxy, and entitled to vote at a
meeting of the stockholders of the Company voting as a single class.
Accordingly, abstentions will have the effect of votes against this proposal,
and non-votes will be disregarded and have no effect on the outcome of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE THIRD
AMENDMENT TO THE AMENDED AND RESTATED 1994 STOCK OPTION PLAN.
V. PROPOSAL TO APPROVE THE FIRST AMENDMENT TO THE
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
BACKGROUND
On April 2, 1992, the Board of Directors and the stockholder of the
Company adopted the 1992 Stock Option Plan, which provides for the grant of
nonqualified stock options and incentive stock options (within the meaning of
Section 422 of the Code) to certain officers and other key employees of the
Company or certain subsidiaries. On March 22, 1995, the Board of Directors
adopted the Amended and Restated 1992 Stock Option Plan (the "1992 Plan"), which
was approved by the stockholders of the Company on May 24, 1995. The purposes of
the 1992 Plan are to further the growth, development and financial success of
the Company by providing incentives to those officers and other key employees
who have the capacity for contributing in substantial measure toward the growth
and profitability of the Company and to assist the Company in attracting and
retaining employees with the ability to make such contributions.
On March 24, 1999, the Board of Directors approved certain amendments to
the 1992 Plan (the "First Amendment") which are described below under "Proposed
Amendments." NYLIFE HealthCare has indicated its intention to vote its shares
for approval of the First Amendment. Assuming NYLIFE HealthCare votes in favor
of the First Amendment, such vote would be sufficient to approve such amendment.
If the First Amendment is not approved, the existing plan and outstanding awards
would continue in effect.
SUMMARY OF THE 1992 PLAN
The following summary of certain provisions of the 1992 Plan is qualified
in its entirety by reference to the text of the 1992 Plan.
A total of 1,400,000 shares of Class A Common Stock were initially reserved
for issuance under the 1992 Plan. Pursuant to the 1992 Plan, that number
increased annually by 140,000 shares, beginning January 1, 1993, with the final
annual increase occurring on January 1, 1999 (the "Evergreen Provision"). The
maximum number of shares issuable under the 1992 Plan also is subject to
adjustment by the Committee in the event of certain changes in the Company's
shares of Class A Common Stock, including stock splits. The foregoing share
numbers reflect the 1998 Stock Split. As of March 1, 1999, options to purchase
an aggregate of 2,236,280 shares of Class A Common Stock have been granted under
the 1992 Plan to 46 employees of the Company, leaving 143,720 shares of Class A
Common Stock available for grants under the 1992 Plan. Approximately 225
employees are currently eligible to participate in the 1992 Plan. The 1992 Plan
will terminate on March 31, 2002.
Except as described above, or as described below under "Proposed
Amendments," the terms and conditions of the 1992 Plan are substantially
identical to those of the 1994 Plan. Reference is hereby made to the description
of the 1994 Plan contained under "IV. Proposal to Approve the Third Amendment to
the Express Scripts, Inc. Amended and Restated 1994 Stock Option Plan -- Summary
of the 1994 Plan," which is hereby incorporated herein by reference.
PROPOSED AMENDMENTS
The complete text of the First Amendment to the 1992 Plan, as approved by
the Board of Directors, subject to stockholder approval, is set forth in Exhibit
D to this Proxy Statement. The following summary of proposed amendments is
qualified in its entirety by reference to the First Amendment as set forth in
Exhibit D.
Except as described below, the proposed amendments to the 1992 Plan set
forth in the First Amendment are identical to those proposed to be made in the
Third Amendment to the 1994 Plan. See "IV. Proposal to Approve the Third
Amendment to the Express Scripts, Inc. Amended and Restated 1994 Stock Option
Plan," which is incorporated herein by reference.
Unlike the Third Amendment to the 1994 Plan, the proposed amendment to the
1992 Plan does not increase the maximum number of shares issuable under the
plan. Instead, Section 2.1 ("Shares Subject to Plan") would be revised to set
forth the current limit, adjusted for the 1998 Stock Split, and to remove the
Evergreen Provision, which lapsed as of January 1, 1999.
STOCK OPTION AWARDS
The following table shows options which have been granted under the 1992
Plan to date to each of the Named Officers and certain specified groups
(including options which have been exercised and those which have been
forfeited):
<TABLE>
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
<CAPTION>
NUMBER OF EXERCISE PRICE PER
NAME AND POSITION SHARES SHARE (1)
<S> <C> <C>
- ----------------- ------ ---------
BARRETT A. TOAN..................... 476,000 $7.3529
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND DIRECTOR
STUART L. BASCOMB................... 230,000 $7.7984
EXECUTIVE VICE PRESIDENT
PATRICK J. BYRNE.................... 0 --
SENIOR VICE PRESIDENT PLYMOUTH SITE
OPERATION
DAVID A. LOWENBERG.................. 100,000 $17.0391
SENIOR VICE PRESIDENT AND DIRECTOR
OF SITE OPERATIONS
GEORGE PAZ.......................... 5,000 $42.3907
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
Executive Officer Group (4)......... 1,052,000 $10.2869
Non-Executive Officer Director
Group(5)............................ 0 --
Non-Executive Officer Employee
Group(6)............................ 1,478,650 $13.8773
<FN>
(1) The closing price per share of the Company's Class A Common Stock as
reported on Nasdaq on March 26, 1999, was $75.50. Exercise prices shown are
weighted averages of the actual exercise prices for stock options granted
to the individuals or members of the groups, as applicable.
(2) See Note 2 to "Option Grants in Fiscal Year 1998" on page __.
(3) See Note 7 to "Option Grants in Fiscal Year 1998" on page __.
(4) Consists of eleven persons.
(5) Consists of nine persons.
(6) Consists of 62 persons.
</FN>
</TABLE>
Approval of this proposal requires the affirmative vote of a majority of
the votes of shares present, in person or by proxy, and entitled to vote at a
meeting of the stockholders of the Company voting as a single class.
Accordingly, abstentions will have the effect of votes against this proposal,
and non-votes will be disregarded and have no effect on the outcome of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE FIRST
AMENDMENT TO THE AMENDED AND RESTATED 1992 STOCK OPTION PLAN.
VI. PROPOSAL TO APPROVE THE FOURTH AMENDMENT TO THE
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1994 STOCK OPTION PLAN
BACKGROUND
Effective as of April 1, 1999, the Company entered into a new Employment
Agreement with Barrett A. Toan, its President and Chief Executive Officer, which
replaced his previous employment agreement. Among other provisions, the
Employment Agreement provides for the vesting of unvested options and restricted
shares received upon exercise of options, the extension of option exercise
periods and the payment by the Company of any excise tax triggered by a change
of control of the Company. See "Executive Compensation -- Employment Agreement."
These provisions differ from those under the 1994 Plan and the 1992 Plan,
pursuant to each of which Mr. Toan has been granted options and may be granted
additional options in the future. The Employment Agreement requires the Company
to submit this proposal to amend the 1994 Plan and the 1992 Plan to ensure the
effectiveness of these provisions.
On March 24, 1999, the Board of Directors approved certain amendments to
the 1994 Plan (the "Fourth Amendment") which are described below under "Proposed
Amendment." NYLIFE HealthCare has agreed to vote its shares for approval of the
Fourth Amendment. Assuming NYLIFE HealthCare votes in favor of the Fourth
Amendment, such vote would be sufficient to approve such amendment. If the
Fourth Amendment is not approved, the existing plan and outstanding awards would
continue in effect.
SUMMARY OF THE 1994 PLAN
See "IV. Proposal to Approve the Third Amendment to the Express Scripts,
Inc. Amended and Restated 1994 Stock Option Plan -- Summary of the 1994 Plan,"
which is hereby incorporated herein by reference.
PROPOSED AMENDMENTS
The complete text of the Fourth Amendment to the 1994 Plan, as approved by
the Board of Directors, subject to stockholder approval, is set forth in Exhibit
E to this Proxy Statement. The following summary of proposed amendments is
qualified in its entirety by reference to the Fourth Amendment as set forth in
Exhibit E.
Under the proposed Fourth Amendment to the 1994 Plan, certain provisions of
the 1994 Plan would be amended to exclude from their coverage provisions under
the Employment Agreement that govern previously granted options and options to
be granted in the future to Mr. Toan under the 1994 Plan, as well as restricted
shares received upon exercise of such options. These provisions govern the
vesting and continued exercisability of options and vesting of restricted shares
upon a "change of control" and termination of employment, and the payment of any
excise tax that is triggered by a change of control, as such tax may apply to
any parachute payments relating to options granted under the 1994 Plan.
The Employment Agreement provides that all of Mr. Toan's stock options
granted under the Employee Stock Option Plans, including those granted prior to
the date of the Employment Agreement, and all of Mr. Toan's restricted shares
acquired upon exercise of such options will become fully vested upon (i) a
"Change of Control," (ii) termination of Mr. Toan's employment by the Company
without "Cause," (iii) termination by Mr. Toan for "Good Reason" and (iv) Mr.
Toan's death or "Disability" (as each such capitalized term is defined in the
Employment Agreement). Upon the occurrence of any of the foregoing events, Mr.
Toan's options will remain exercisable for 18 months after such event (or until
the expiration date of the option, if the remaining term of the option is less
than 18 months). In addition, Mr. Toan may exercise his vested options within 30
days after termination of his employment by the Company for Cause or by Mr. Toan
without Good Reason. The Employment Agreement also provides that, in the event
of any Change of Control that results in Mr. Toan's liability for the payment of
an excise tax under Section 4999 of the Code (or any similar tax under any
federal, state, local or other law), the Company will make a "gross-up" payment
which, in general, will effectively reimburse Mr. Toan in full for any such
excise taxes.
Under the proposed Fourth Amendment to the 1994 Plan, these provisions of
the Employment Agreement would override the comparable provisions of the 1994
Plan that govern the vesting, exercise period and termination of options upon a
change of control and termination of employment. These 1994 Plan provisions
include the requirement that (i) all outstanding options terminate upon any
change of control, (ii) optionees receive payment from the Company for such
options and restricted shares upon any change of control and (iii) any parachute
payments be reduced to avoid any excise tax that may be triggered by a change of
control. See "IV. Proposal to Approve the Third Amendment to the Express
Scripts, Inc. Amended and Restated 1994 Stock Option Plan -- Summary of the 1994
Plan -- Vesting and Change of Control Provisions" for a detailed description of
the 1994 Plan provisions governing the vesting and termination of options and
restricted shares issued under the 1994 Plan.
STOCK OPTION AWARDS
See "IV. Proposal to Approve the Third Amendment to the Express Scripts,
Inc. Amended and Restated 1994 Stock Option Plan -- Stock Option Awards," which
is hereby incorporated herein by reference.
Approval of this proposal requires the affirmative vote of a majority of
the votes of shares present, in person or by proxy, and entitled to vote at a
meeting of the stockholders of the Company voting as a single class.
Accordingly, abstentions will have the effect of votes against this proposal,
and non-votes will be disregarded and have no effect on the outcome of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE FOURTH
AMENDMENT TO THE AMENDED AND RESTATED 1994 STOCK OPTION PLAN.
VII. PROPOSAL TO APPROVE THE SECOND AMENDMENT TO THE
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
BACKGROUND
See "VI. Proposal to Approve the Fourth Amendment to the Express Scripts,
Inc. Amended and Restated 1994 Stock Option Plan -- Background," which is hereby
incorporated herein by reference.
On March 24, 1999, the Board of Directors approved certain amendments to
the 1992 Plan (the "Second Amendment") which are described below under "Proposed
Amendment." NYLIFE HealthCare has agreed to vote its shares for approval of the
Second Amendment. Assuming NYLIFE HealthCare votes in favor of the Second
Amendment, such vote would be sufficient to approve such amendment. If the
Second Amendment is not approved, the existing plan and outstanding awards would
continue in effect.
SUMMARY OF THE 1992 PLAN
See "V. Proposal to Approve the First Amendment to the Express Scripts,
Inc. Amended and Restated 1992 Stock Option Plan -- Summary of the 1992 Plan,"
which is hereby incorporated herein by reference.
PROPOSED AMENDMENTS
The complete text of the Second Amendment to the 1992 Plan, as approved by
the Board of Directors, subject to stockholder approval, is set forth in Exhibit
F to this Proxy Statement. The following summary of proposed amendments is
qualified in its entirety by reference to the Second Amendment as set forth in
Exhibit F.
The proposed amendments to the 1992 Plan set forth in the Second Amendment
are identical to those proposed to be made in the Fourth Amendment to the 1994
Plan. See "VI. Proposal to Approve the Fourth Amendment to the Express Scripts,
Inc. Amended and Restated 1994 Stock Option Plan," which is incorporated herein
by reference.
STOCK OPTION AWARDS
See "V. Proposal to Approve the First Amendment to the Express Scripts,
Inc. Amended and Restated 1992 Stock Option Plan -- Stock Option Awards," which
is hereby incorporated herein by reference.
Approval of this proposal requires the affirmative vote of a majority of
the votes of shares present, in person or by proxy, and entitled to vote at a
meeting of the stockholders of the Company voting as a single class.
Accordingly, abstentions will have the effect of votes against this proposal,
and non-votes will be disregarded and have no effect on the outcome of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE SECOND
AMENDMENT TO THE AMENDED AND RESTATED 1992 STOCK OPTION PLAN.
VIII. PROPOSAL TO APPROVE THE SECOND AMENDMENT TO THE EXPRESS SCRIPTS, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
BACKGROUND
On April 2, 1992, the Board of Directors and the stockholder of the Company
adopted the 1992 Stock Option Plan for Outside Directors which provides for the
grant of nonqualified stock options to those members of the Board of Directors
who are not employees of the Company or certain affiliates (a "Non-Employee
Director"). On May 24, 1995, the stockholders approved the Amended and Restated
1992 Stock Option Plan for Outside Directors (the "Outside Directors Plan"). On
May 27, 1997, the stockholders approved the First Amendment to the Outside
Directors Plan, which increased the number of shares available under such plan,
awarded additional options to the existing Non-Employee Directors and increased
the award which newly elected Non-Employee Directors would receive. The purpose
of the Outside Directors Plan is to increase the proprietary and vested interest
of the Non-Employee Directors of the Company in the growth and performance of
the Company by granting them options in the Company's stock.
On January 27, 1999, the Board of Directors approved the Second Amendment
to the Outside Directors Plan (described below under "Proposed Amendment"),
which approved additional awards of stock options to be granted under such plan.
NYLIFE HealthCare has indicated its intention to vote its shares for approval of
the Second Amendment. Assuming NYLIFE HealthCare votes in favor of the Second
Amendment, such vote would be sufficient to approve such amendment. If the
Second Amendment to the Outside Directors Plan is not approved, the existing
plan would continue in effect and the options to purchase 2,500 additional
shares granted to existing Non-Employee Directors as of January 27, 1999, would
be null and void.
SUMMARY OF THE OUTSIDE DIRECTORS PLAN
The complete text of the Second Amendment to the Outside Directors Plan, as
approved by the Board of Directors, subject to stockholder approval, is set
forth in Exhibit G to this Proxy Statement. The following summary of certain
provisions of the Outside Directors Plan is qualified in its entirety by
reference to the text of the Outside Directors Plan.
The Outside Directors Plan is administered by the Board. A total of 384,000
shares of Class A Common Stock have been reserved for grants of options under
the Outside Directors Plan, subject to antidilution adjustments as provided in
the plan. The foregoing share number reflects the 1998 Stock Split.
Messrs. Norling, Waltman and Zachary are the Company's current Non-Employee
Directors. On June 6, 1992, Mr. Norling and Mr. Zachary each received a
nonqualified stock option to purchase 28,000 shares of Class A Common Stock at
an exercise price of $3.25 per share, as reflected in the table below. On June
16, 1996, Mr. Norling and Mr. Zachary each received an option to purchase an
additional 20,000 shares of Class A Common Stock, which vested in two
installments of 10,000 each on June 16, 1996, and June 16, 1997, at an exercise
price of $26.625 per share. On May 22, 1996, Mr. Waltman received a nonqualified
stock option to purchase 48,000 shares of Class A Common Stock at an exercise
price of $23.50 per share, which vests in five equal annual installments on each
anniversary of the date of grant.
Currently under the Outside Directors Plan, any other individual who is
elected as a Non-Employee Director will be granted an option to purchase 48,000
shares of Class A Common Stock as of the date of the first meeting of the Board
of Directors which such director attends. All such options are exercisable at a
price equal to the fair market value of Class A Common Stock on the date of
grant (generally, the closing sales price on Nasdaq on the last preceding
trading day), and have a term of ten years. The options become exercisable in
five equal annual installments, beginning on the first anniversary date of the
date of grant. If an optionee ceases to be a Non-Employee Director for any
reason other than his or her death or total disability, all of his or her
outstanding options will expire, except that if such director has attained age
65 prior to such cessation, the portion of the options that has become
exercisable will remain exercisable for the lesser of three months following
such cessation or the remainder of the original option term. If an optionee
ceases to be a Non-Employee Director as a result of his or her death or total
disability, all of his or her outstanding options will become fully exercisable
and remain exercisable for the lesser of three months or the remainder of the
original option term.
A Non-Employee Director's options will also become fully exercisable upon
the occurrence of a "change in control" of the Company. For options granted
pursuant to the Outside Directors Plan after it was amended and restated in
1995, "change in control" generally means one of the following events: (i) the
first date both of the following conditions exist: (A) New York Life shall have
ceased to be the ultimate beneficial owner of fifty percent or more of the
combined voting power for the election of directors of the Company, and (B) a
person (other than the Company or any parent corporation or subsidiary or
related employee benefit plan) is the beneficial owner of fifty percent or more
of the combined voting power for the election of directors of the Company; (ii)
the stockholders of the Company approve a plan of complete liquidation of the
Company; or (iii) the stockholders of the Company approve an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets or any transaction having a similar effect. In the event of a change in
control, all options, whether or not previously exercisable and vested, will
terminate, and the Company will pay the optionee an amount equal to the excess
of the change in control price over the option exercise price. "Change in
control price" generally means, in a change in control transaction in connection
with which New York Life receives consideration for the transfer or cancellation
of its voting securities, the per share amount received by New York Life; and in
the case of any other change in control transaction, the greater of the closing
sales price on Nasdaq or the highest price per share paid in a bona fide
transaction relating to such change in control at any time during the 60 days
immediately preceding the change in control date. Options granted prior to the
time the Outside Directors Plan was amended and restated in 1995 will also
become fully exercisable upon a change in control as defined in the Outside
Directors Plan before it was amended and restated. Prior to its amendment and
restatement in 1995, "change in control" in the Outside Directors Plan generally
meant the occurrence of any of the following events at a time when New York Life
is not the beneficial owner of fifty percent or more of the combined voting
power for the election of the directors of the Company: (i) any person (other
than the Company or any parent corporation or subsidiary or related employee
benefit plan) becomes the beneficial owner of securities representing fifty
percent or more of the combined voting power for the election of directors of
the Company; (ii) a change in the majority of the members of the Board of
Directors during any two-year period that is not approved by at least two-thirds
of the members of the Board who were members at the beginning of the two-year
period; (iii) the stockholders of the Company approve a merger or consolidation
involving the Company that results in existing stockholders owning eighty
percent or less of the combined voting power of the voting securities of the
Company after such merger or consolidation, other than a recapitalization or
similar transaction in which no "person" acquires more than fifty percent of the
combined voting power for the election of directors; or (iv) the stockholders of
the Company approve a plan of complete liquidation or an agreement providing for
the sale or disposition of substantially all of the Company's assets or any
transaction having a similar effect. The Company may, but is not obligated to,
request the holders of outstanding options granted prior to the amendment and
restatement of the Outside Directors Plan to consent to the amendment of their
existing option agreements to reflect the Amendment and Restatement. These
option agreements have not been amended.
Options are not transferable other than by will or under the laws of
descent and distribution, and are exercisable during the lifetime of the
optionee only by the optionee or his or her guardian or legal representative.
The Board of Directors may at any time terminate or modify the Outside Directors
Plan, except that without the approval of the stockholders it may not increase
the number of shares as to which options may be granted, change the class of
persons who constitute Non-Employee Directors eligible to participate, change
the requirement that the purchase price of shares subject to options be fair
market value, extend the maximum period for granting or exercising options or
otherwise materially increase the benefits accruing to optionees under the
Outside Directors Plan. In addition, certain of the operative provisions may not
be amended more than once in any six month period, unless the amendments are
made to comply with changes in certain federal laws. The Outside Directors Plan
will terminate on March 31, 2002. No termination or amendment of the Outside
Directors Plan may, without the consent of the optionee to whom an option has
been granted, alter or impair any rights or obligations under any option
theretofore granted.
PROPOSED AMENDMENT
The complete text of the Second Amendment to the Outside Directors Plan, as
approved by the Board of Directors, subject to stockholder approval, is set
forth in Exhibit G to this Proxy Statement. The following summary of the
proposed amendments is qualified in its entirety by reference to the Second
Amendment as set forth in Exhibit G.
Under the proposed Second Amendment to the Outside Directors Plan,
effective January 27, 1999, all share numbers in the plan would be adjusted to
reflect the 1998 Stock Split.
In addition, with respect to Messrs. Norling, Waltman and Mr. Zachary, who
were Non-Employee Directors prior to January 27, 1999, each received an option
to purchase 2,500 additional shares of Class A Common Stock on January 27, 1999,
which will vest in three equal annual installments beginning on January 27,
2000. The exercise price of these options is equal to $65.25, which was the fair
market value on the date of grant.
FEDERAL INCOME TAX CONSEQUENCES
The options granted under the Outside Directors Plan are not incentive
stock options and do not qualify for the special tax treatment accorded to
incentive stock options under Section 422 of the Code. Although an optionee does
not recognize income at the time of the grant of the option, he or she
recognizes ordinary income upon the exercise of a stock option in an amount
equal to the excess of the fair market value of the stock on the date of
exercise of the option over the amount of cash paid for the stock.
As a result of the optionee's exercise of a nonqualified stock option, the
Company will be entitled to deduct as compensation an amount equal to the amount
included in the optionee's gross income. If the optionee pays all or part of the
option price of a nonqualified stock option by surrendering shares already owned
by such optionee, certain additional tax rules apply. The excess of the fair
market value of the stock on the date of exercise of a nonqualified stock option
over the exercise price is not a tax preference item.
If there is an acceleration of the vesting or payment of benefits and/or an
acceleration of the exercisability of stock options upon a change in control,
all or a portion of the accelerated benefits may constitute "Excess Parachute
Payments" under Section 280G of the Code. The optionee receiving an Excess
Parachute Payment incurs an excise tax of 20% of the amount of the payment in
excess of the employee's average annual compensation over the five calendar
years preceding the year of the change in control, and the Company is not
entitled to a deduction for such payment.
The foregoing is a summary of the Federal income tax consequences to the
participants in the Outside Directors Plan and to the Company , based upon
current income tax laws, regulations and rulings.
STOCK OPTION AWARDS
The table set forth below shows options which have been granted to date
under the Outside Directors Plan to certain specified individuals and groups.
Certain options are subject to stockholder approval, as indicated.
<TABLE>
AMENDED AND RESTATED 1992 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
<CAPTION>
NUMBER OF EXERCISE PRICE PER
NAME AND POSITION SHARES (#) SHARE ($) (1)
<S> <C> <C> <C>
----------------- ---------- -------------
Richard A. Norling 50,500 (2) $14.7351
Howard L. Waltman 50,500 (2) $14.7351
Norman Zachary 50,500 (2) $25.5668
All current directors as a group (3) 151,500 $18.3457
<FN>
(1) The closing price of the Company's Class A Common Stock as reported on
Nasdaq on March 26, 1999, was $75.50. Exercise prices shown are weighted
averages of the actual exercise prices for stock options granted to the
individuals or members of the groups, as applicable.
(2) Includes options to acquire 2,500 shares under the proposed Second
Amendment to the Amended and Restated 1992 Stock
Option Plan For Outside Directors.
(3) Consists of three persons.
</FN>
</TABLE>
Approval of this proposal requires the affirmative vote of a majority of
the votes of shares present, in person or by proxy, and entitled to vote at a
meeting of the stockholders of the Company voting as a single class.
Accordingly, abstentions will have the effect of votes against this proposal,
and non-votes will be disregarded and have no effect on the outcome of this
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE SECOND
AMENDMENT TO THE AMENDED AND RESTATED 1992 STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS.
IX. AND X. PROPOSALS TO AMEND THE CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors has proposed two amendments to Article Four of the
Certificate of Incorporation of the Company (the "Amendments"). One of the
Amendments (Proposal IX) would increase the number of shares of Class A Common
Stock which the Company is authorized to issue to 250,000,000 shares. The other
Amendment (Proposal X) would increase the number of authorized shares of Class B
Common Stock to 65,000,000 shares.
The Certificate of Incorporation presently authorizes the Company to issue
5,000,000 shares of Preferred Stock, issuable in series, the terms of which may
be fixed by the Board of Directors, 75,000,000 shares of Class A Common Stock
and 22,000,000 shares of Class B Common Stock. The Class B Common Stock is
convertible, share-for-share, into Class A Common Stock at the option of the
holder and automatically so converts upon any transfer to any person or entity
other than New York Life or its affiliates. In stockholder votes, each share of
Class A Common Stock has one vote and each share of Class B Common Stock has ten
votes. Under the Certificate of Incorporation, the outstanding Class B Common
Stock is entitled to equal treatment (payable in shares of Class B Common Stock)
with the Class A Common Stock in the event of any Common Stock dividend or
split. Dividends on the common stock will be paid if, when and as determined by
the Board of Directors out of funds legally available for this purpose. In all
respects other than voting power and the convertibility of the Class B Common
Stock, the shares of Class A Common Stock and Class B Common Stock are
identical. Stockholders do not have cumulative voting rights with respect to the
election of directors. The affirmative vote of the holders of a majority of the
outstanding Class A Common Stock is required for an amendment of the By-laws
that would alter the requirement that a majority of the directors on the Audit
Committee be persons who are not directors of New York Life or its subsidiaries
(other than the Company) or officers or employees of New York Life or its
subsidiaries (other than the Company).
Other than Premier, the holders of the Common Stock do not have preemptive
rights as to additional issues of Common Stock or, other than the Class B Common
Stock, conversion rights. Premier has a contractual right pursuant to its
agreements with the Company to maintain its proportionate interest in the
Company's Class A Common Stock should the Company issue additional shares of its
Class A Common Stock in a firm commitment public offering. Therefore, should the
Board of Directors elect to issue additional shares of Class A Common Stock,
existing stockholders (other than potentially Premier) would not have any
preferential rights to purchase such shares. Premier waived its preemptive
rights in connection with the Company's proposed primary offering (the
"Offering") of approximately $350 million of Class A Common Stock. The Company
has filed a registration statement with the Securities and Exchange Commission
relating to these securities, but the registration statement has not yet become
effective. These securities may not be sold nor may offers to buy be accepted
prior to the time the registration statement becomes effective. This Proxy
Statement shall not constitute an offer to sell or the solicitation of an offer
to buy nor shall there be any sale of these securities in any state in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state. Once the registration
statement has been declared effective, a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended, may be obtained by
contacting the Company's Investor Relations Department, 14000 Riverport Drive,
Maryland Heights, Missouri 63043.
In addition, the shares of Common Stock are not subject to redemption or to
any further calls or assessments and are not entitled to the benefit of any
sinking fund provisions. After satisfaction of the preferential liquidation
rights of any preferred stock, the holders of the Class A and Class B Common
Stock are entitled to share, ratably, in the distribution of all remaining net
assets.
At March 31, 1999, no shares of Preferred Stock, 18,706,470 shares of Class
A Common Stock and 15,020,000 shares of Class B Common Stock were issued and
outstanding. Also at such date, a total of 25,443,638 shares of Class A Common
Stock were reserved for future issuance upon conversion of the outstanding Class
B Common Stock (15,020,000 shares), for issuance upon exercise of stock options
granted or which may be granted under the Employee Stock Option Plans and the
Outside Directors Plan (4,166,270 shares, including the additional shares
proposed under the Third Amendment to the 1994 Plan), for issuance in connection
with the ESPP, the Deferred Compensation Plan and other employee benefit plans
(450,000 shares), and for issuance in connection with the Company's strategic
alliances with certain of its clients (5,807,368 shares).
The Certificate of Incorporation authorizes the Board of Directors to issue
from time to time, in one or more series, shares of preferred stock with such
designations and preferences, relative voting rights (except that voting rights,
if any, in respect of the election of directors shall be limited to voting with
the holders of Class A Common Stock and Class B Common Stock, as a single class,
with no more than one vote per share of preferred stock), redemption,
conversion, participation and other rights and qualifications, limitations and
restrictions as permitted by law. No shares of preferred stock have been issued.
As a result of the disproportionate voting rights given to holders of Class
B Common Stock, NYLIFE Healthcare could reduce its investment to slightly less
than 10% of the outstanding common stock and still control the Company with a
majority of the combined voting power of such common stock. In addition, certain
provisions of the Certificate of Incorporation and the By-laws may have
anti-takeover effects, which may delay, defer or prevent a takeover attempt that
a holder of the Class A Common Stock might consider in its best interest. These
anti-takeover provisions, among other things: (i) provide that only the Board of
Directors or holders of shares entitled to cast at least 50% of the votes of all
outstanding shares entitled to vote may call special meetings of the
stockholders; (ii) eliminate the ability of stockholders to take any action by
written consent without a meeting; and (iii) establish certain advance notice
procedures under the By-laws for the nomination of candidates for election as
directors and for stockholder proposals to be considered at stockholders'
meetings. The Company elected not to be subject to Section 203 of the General
Corporation Law of the State of Delaware, which prohibits certain publicly held
Delaware corporations from engaging in a business combination with an interested
stockholder (any person or entity who, together with affiliates and associates,
owns (or within the three immediately preceding years did own) 15% or more of
the corporation's voting stock).
The Board of Directors is recommending that the authorized Class A Common
Stock and Class B Common Stock be increased so that the Company will have
additional shares available for such proper corporate purposes as the Board may
determine, without having the further need to seek stockholder authorization.
Such purposes might include, among other corporate purposes, the issuance of
additional shares as stock dividends or stock splits (the number of shares of
Class B Common Stock currently authorized is insufficient to permit the Company
to effect a 3-for-2 or greater stock split) and, with respect to the Class A
Common Stock, as consideration for the acquisition of properties or businesses
or in capital raising transactions and the reservation of additional shares for
use in compensation plans or for conversion of Preferred Stock, should the Board
determine to provide conversion rights to one or more series of the Preferred
Stock which it may establish. The future issuance of shares of Class A Common
Stock and Class B Common Stock may, depending on the circumstances, have a
dilutive effect on the earnings per share, voting power and other interests of
the existing stockholders. Except for the presently reserved shares and the
contemplated Offering, the Company has no present plans, understandings or
commitments for the issuance of any of the additional shares of Class A Common
Stock or Class B Common Stock. The Board of Directors does not presently intend
to seek stockholder approval of any particular issuance of shares unless such
approval is required by law or the rules of Nasdaq. The Company reserves the
right to seek a further increase in authorized shares from time to time in the
future as considered appropriate by the Board of Directors.
If both of the Amendments are approved, the first paragraph of Article 4 of
the Certificate of Incorporation will read as follows:
"4. The total number of shares of stock which the Corporation has authority
to issue is 320,000,000 shares, of which (i) 5,000,000 shares are preferred
stock, par value $0.01 per share (the "Preferred Stock"), and (ii) 315,000,000
shares are common stock, consisting of 250,000,000 shares of Class A Common
Stock, par value $0.01 per share (the "Class A Common Stock"), and 65,000,000
shares of Class B Common Stock, par value $0.01 per share (the "Class B Common
Stock")."
If only one of the proposals is approved, then the number of shares of
Class A Common Stock or Class B Common Stock, as the case may be, and the total
number of shares of common stock will be revised accordingly.
Assuming stockholders' approval of one or both of these proposals, the
required amendment or amendments of the Certificate of Incorporation will become
effective at the close of business on June 11, 1999, or as soon thereafter as
practicable.
The affirmative votes of a majority of the total voting power of the
outstanding Class A Common Stock and Class B Common Stock voting together as a
single class and voting separately by class are necessary for each of the
proposed Amendments to be approved. Therefore, abstentions and non-votes (which
may occur if a beneficial owner of stock where shares are held in a brokerage or
bank account fails to provide the broker or bank voting instructions as to such
shares) effectively count as votes against the respective proposal. NYLIFE
HealthCare has indicated its intention to vote its Class B Common Stock in favor
of the proposed Amendments.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSALS TO
AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK.
XI. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP served as the Company's independent
accountants for the year ended December 31, 1998. The Board of Directors has
appointed, subject to stockholder ratification, PricewaterhouseCoopers LLP to
act in that capacity for the year ending December 31, 1999. A representative of
PricewaterhouseCoopers LLP is expected to be present at the Meeting with the
opportunity to make a statement if he or she desires to do so and to be
available to respond to appropriate questions from stockholders. NYLIFE
HealthCare has indicated its intention to vote its shares in favor of the
ratification of the appointment of PricewaterhouseCoopers LLP. Assuming NYLIFE
HealthCare votes to ratify such appointment, such vote would be sufficient to
approve such ratification.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1999.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Under Proposals VI and VII above, stockholders are being asked to approve
certain amendments to the Employee Stock Option Plans that are designed to
accommodate certain provisions under Mr. Toan's Employment Agreement that affect
stock options granted under such Plans and restricted shares underlying such
options. If stockholder approval is not obtained and is deemed to have been
legally required under the terms of such Plans, failure to obtain such approval
may render those provisions affecting Mr. Toan's rights in respect of stock
options granted under the Employee Stock Option Plans unenforceable.
If stockholders do not approve Proposal VIII above, regarding the Second
Amendment to the Outside Directors Plan, the Board of Directors' approval of the
grant of options to purchase 2,500 shares to each of Messrs. Norling, Waltman
and Zachary will be null and void.
STOCKHOLDER PROPOSALS
In accordance with the amended Bylaws of the Company, a stockholder who at
any annual meeting of stockholders of the Company intends to nominate a person
for election as a director or present a proposal must so notify the Secretary of
the Company, in writing, describing such nominee(s) or proposal and providing
information concerning such stockholder and the reasons for and interest of such
stockholder in the proposal. Generally, to be timely, such notice must be
received by the Secretary during the 30-day period that ends 90 days before the
anniversary of the prior year's annual meeting. For the Company's annual meeting
to be held in 2000, any such notice must be received between January 27, 2000
and February 26, 2000 to be considered timely for purposes of the 2000 Annual
Meeting. Any person interested in making such a nomination or proposal should
request a copy of the relevant Bylaw provisions from the Secretary of the
Company. These time periods also apply in determining whether notice is timely
for purposes of rules adopted by the Securities and Exchange Commission relating
to the exercise of discretionary voting authority, and are separate from and in
addition to the Securities and Exchange Commission's requirements that a
stockholder must meet to have a proposal included in the Company's proxy
statement.
Stockholder proposals intended to be presented at the 2000 Annual Meeting
must be received by the Company no later than December 24, 1999, in order to be
eligible for inclusion in the Company's proxy statement and proxy relating to
that meeting. Upon receipt of any proposal, the Company will determine whether
to include such proposal in accordance with regulations governing the
solicitation of proxies.
OTHER MATTERS
Management does not intend to bring before the Meeting any matters other
than those specifically described above and knows of no matters other than the
foregoing to come before the Meeting. If any other matters or motions properly
come before the Meeting, it is the intention of the persons named in the
accompanying Proxy to vote such Proxy in accordance with their judgment on such
matters or motions, including any matters dealing with the conduct of the
Meeting.
SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of proxies for the
Meeting. Brokerage houses, banks, custodians, nominees and fiduciaries are being
requested to forward the proxy material to beneficial owners and their
reasonable expenses therefor will be reimbursed by the Company. Solicitation
will be made by mail and also may be made personally or by telephone, facsimile
or other means by the Company's officers, directors and employees, without
special compensation for such activities. In addition, the Company has engaged
MacKenzie Partners, Inc. as proxy solicitors. The Company has agreed to pay
MacKenzie Partners, Inc. a fee of approximately $6,500, plus reimbursement of
out-of-pocket expenses for its proxy solicitation services.
By Order of the Board of Directors
/s/ Thomas M. Boudreau
Thomas M. Boudreau
April 21, 1999 Secretary
<PAGE>
EXHIBIT A
EXPRESS SCRIPTS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirement of that section of the
Code.
2. DEFINITIONS.
a) "Board" shall mean the Board of Directors of the Company.
b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
c) "Common Stock" shall mean the Class A Common Stock, par value $0.01, of
the Company.
d) "Company" shall mean Express Scripts, Inc., a Delaware corporation, and,
unless the context requires otherwise, any Designated Subsidiary.
e) "Compensation" shall mean all regular straight time gross earnings and
commissions, exclusive of payments for overtime, shift premium, incentive
payments, bonuses and other compensation, and without reduction for
contributions to any 401(k) plan sponsored by the Company.
f) "Contributions" shall mean all amounts credited to the account of a
participant pursuant to the Plan.
g) "Designated Subsidiary" shall mean any Subsidiary which has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
h) "Employee" shall mean any person who is an employee of the Company for
tax purposes whose customary employment with the Company is at least twenty (20)
hours per week and more than five (5) months in a calendar year. For purposes of
the Plan, the employment relationship shall be treated as continuing intact
while the individual is on short term disability or other leave of absence
approved by the Company. Where the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
j) "Offering Date" shall mean the first business day of each Offering
Period of the Plan.
k) "Offering Period" shall mean a period of six (6) months commencing on
March 1 and September 1 of each year (commencing with March 1, 1999) except as
otherwise indicated by the Company.
l) "Plan" shall mean this Employee Stock Purchase Plan.
m) "Purchase Date" shall mean the last day of each Offering Period of the
Plan.
n) "Subsidiary" shall mean a corporation, domestic or foreign, which not
less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
3. ELIGIBILITY.
a) Any person who is an Employee of the Company as of the Offering Date of
a given Offering Period, who has continuously been an Employee for at least
three months, and who is not a "senior executive" of the Company, as such term
may be defined from time to time by the Board (or any committee administering
the Plan in accordance with Section 13 hereof), shall be eligible to participate
in such Offering Period under the Plan, subject to the requirements of Section
5(a) and the limitations imposed by Section 423(b) of the Code.
b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) if, immediately after the grant,
such Employee (or any other person whose stock would be attributed to such an
Employee pursuant to Section 424(d) of the Code) would own stock and/or hold
outstanding options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or of any Subsidiary, or (ii) if such option would permit his or her rights to
purchase stock under all employee stock purchase plans (described in Section 423
of the Code) of the Company and its Subsidiaries to accrue at a rate which
exceeds twenty-five thousand dollars ($25,000) of fair market value of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by a series of Offering
Periods of six (6) months duration, with new Offering Periods commencing on or
about March 1 and September 1 of each year (or at such other time or times as
may be determined by the Board of Directors). The Plan shall continue until
terminated in accordance with Section 19 hereof. The Board shall have the power
to change the duration and/or the frequency of the Offering Period with respect
to future offerings without stockholder approval if such change is announced at
least fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be affected.
5. PARTICIPATION.
a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement (in such form and manner as may be approved by the
Board or the committee administering the Plan) authorizing payroll deductions
and filing it with the Company's payroll office at least five (5) business days
prior to the applicable Offering Date. A subscription agreement in effect for a
participant for a particular Offering Period will continue in effect for
subsequent Offering Periods if the participant remains an eligible Employee and
has not withdrawn the subscription agreement pursuant to Section 10.
b) Payroll deductions shall commence on the first payroll following the
Offering Date and shall end on the last payroll paid in the Offering Period to
which the subscription agreement is applicable, unless sooner terminated by the
participant as provided in Section 10 hereof.
c) By enrolling in the Plan, each participant will be deemed to have
authorized the establishment of a brokerage account in his or her name at a
securities brokerage firm, which firm shall serve as custodial agent for the
purpose of holding shares purchased under the Plan. The account will be governed
by, and subject to, the terms and conditions of a written agreement with the
firm approved by the Board or the committee administering the Plan, which
agreement shall, among other things, reflect the restrictions contained in
Section 21(c) and Section 21(d).
d) Subject to the limitations of Section 3 hereof and Section 423(b)(8) of
the Code, all cash dividends, if any, paid with respect to shares of Common
Stock purchased under the Plan and held in a participant's account established
under Section 5(c) shall be automatically invested in shares of Common Stock
purchased at One Hundred Percent (100%) of fair market value (as determined
under Section 7(b)) on the next Purchase Date. All non-cash distributions on
Common Stock purchased under the Plan and held in a participant's account
established under Section 5(c) shall be paid to the participant as soon as
practical.
6. METHOD OF PAYMENT OF CONTRIBUTIONS.
a) The participant shall elect to have payroll deductions made each pay
period during the Offering Period in an amount not less than one percent (1%)
and not more than ten percent (10%), in whole number percentage increments, of
such participant's Compensation in each pay period. All payroll deductions made
by a participant shall be credited to his or her account under the Plan. A
participant may not make any additional payments into such account. Except as
otherwise provided in this Section 6(a), all Employees granted options under the
Plan shall have the same rights and privileges.
b) A participant may increase or decrease his or her payroll deductions by
filing a new subscription agreement at any time during an Offering Period. The
change may not become effective sooner than the next pay period after filing of
the subscription agreement. The Board or the committee administering the Plan,
at its discretion, may limit the number of participation rate changes during any
Offering Period and may, in its discretion, require up to five (5) business days
prior written notice.
c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof.
d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 6(a) hereof, a participant's payroll
deductions may be decreased to zero percent (0%) at any time during the Offering
Period. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Offering
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
e) At the time of each exercise of a participant's option, and at the time
any Common Stock issued under the Plan to a participant is disposed of, the
participant must adequately provide for the Company's federal, state or other
tax withholding obligations, if any, that arise upon the exercise of the option
or the disposition of the Common Stock. At any time, the Company may, but will
not be obligated to, withhold from the participant's compensation the amount
necessary for the Company to meet applicable withholding obligations, including
but not limited to, any withholding required to make available to the Company
any tax deductions or benefits attributable to the sale or early disposition of
Common Stock by the participant.
7. GRANT OF OPTION.
a) On the Offering Date of each Offering Period, each eligible Employee
participating in such Offering Period shall automatically be deemed to have been
granted an option to purchase on the Purchase Date a number of shares of the
Company's Common Stock determined by dividing such Employee's Contributions
accumulated prior to such Purchase Date and retained in the participant's
account as of the Purchase Date by eighty-five percent (85%) of the fair market
value of the Company's Common Stock on the Purchase Date; provided, however,
that in no event shall an Employee be permitted to purchase during each Offering
Period more than 1,000 shares (subject to any adjustment pursuant to Section 18)
and provided further that such purchase shall be subject to the limitations set
forth in Section 3(b). The fair market value of the Company's Common Stock shall
be determined as provided in Section 7(b).
b) The fair market value of the Company's Common Stock on a given date
shall be equal to the closing sales price of Common Stock on the date preceding
the date of determination (or, in the event that the Common Stock is not traded
on such date, on the immediately preceding trading date on which there was a
closing sales price), as reported by The Nasdaq National Market or, in the event
the Common Stock is listed on a stock exchange, the fair market value per share
shall be the closing sales price on such exchange on the date preceding the date
of determination (or, in the event that the Common Stock is not traded on such
date, on the immediately preceding trading date), as reported in THE WALL STREET
JOURNAL. In the absence of any listing of the Common Stock on The Nasdaq
National Market or on any established stock exchange, the fair market value of
the Common Stock on a given date shall be determined in good faith by the Board.
8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Purchase Date of the Offering Period, and the
maximum whole number of shares subject to such option will be purchased at the
applicable option price with the accumulated Contributions in his or her
account, subject to the limitations in this Plan. The shares purchased upon
exercise of an option hereunder shall be held in the participant's account
established under Section 5(c) pursuant to Section 21(c) and Section 21(d).
During his or her lifetime, a participant's option to purchase shares hereunder
is exercisable only by him or her.
9. DELIVERY. As promptly as practicable after the Purchase Date of each
Offering Period, the Company shall arrange the delivery by direct deposit into
the account established for each participant under Section 5(c), the shares
purchased upon exercise of his or her option. Any cash remaining to the credit
of a participant's account under the Plan after a purchase by him or her of
shares on the Purchase Date, other than amounts representing fractional shares,
will be returned to him or her as soon as practicable. Amounts representing
fractional shares will be carried forward for use in subsequent purchases.
10. VOLUNTARY WITHDRAWAL; TERMINATION OF EMPLOYMENT.
a) A participant may withdraw from an Offering Period all but not less than
all the Contributions credited to his or her account under the Plan at any time
prior to [five (5)] business days prior to the Purchase Date of the Offering
Period by completing a Company approved notice of withdrawal. All of the
participant's Contributions credited to his or her account will be paid to him
or her as soon as practicable after receipt of his or her notice of withdrawal
and his or her option of the current period will be automatically terminated,
and no further Contributions for the purchase of shares will be made during the
Offering Period. Payroll deductions shall not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a new
subscription agreement in accordance with this Plan.
b) A participant's withdrawal from an offering will not have any effect
upon his or her eligibility to participate in a succeeding Offering Period or in
any similar plan which may hereafter be adopted by the Company.
c) Upon a participant's ceasing to be an Employee prior to the Purchase
Date of an Offering Period for any reason, including retirement or death, the
Contributions credited to his or her account and not yet applied to the purchase
of shares will be returned to him or her, or, in the case of his or her death,
to the person or persons entitled thereto under Section 14, and his or her
option will be automatically terminated, provided that if the Company does not
learn of such death more than five (5) business days prior to the Purchase Date,
payroll deductions credited to the participant's account may be applied to the
purchase of shares under the Plan on such Purchase Date.
d) In the event an Employee's salary grade level is elevated or title or
position is changed so as to make an Employee a "senior executive" of the
Company during the Offering Period in which the Employee is a participant, he or
she will be deemed to have elected to withdraw from the Plan and Contributions
credited to his or her account will be returned to him or her and his or her
option terminated.
11. INTEREST. No interest shall accrue on the Contributions of a
participant in the Plan.
12. STOCK.
a) The maximum number of shares of the Company's Common Stock which shall
be made available for purchase under the Plan shall be 250,000 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
Section 18 hereof. These shares may be newly issued or may be purchased for the
Plan on the open market or from private sources. If the total number of shares
which would otherwise be subject to options granted pursuant to Section 7(a) on
the Offering Date of an Offering Period exceeds the number of shares then
available under the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Company shall make a pro rata
allocation of the shares remaining available for option grant in as uniform a
manner as shall be practicable and as it shall determine to be equitable. In
such event, the Company shall give written notice of such reduction of the
number of shares subject to the option to each Employee affected thereby and
shall similarly reduce the rate of Contributions, if necessary.
b) The participant will have no interest or voting right in shares covered
by his or her option until such option has been exercised.
c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the "Street Name" of a Company
approved broker, subject to Section 21 hereof.
13. ADMINISTRATION. The Board, or a committee named by the Board, shall
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. The composition of the committee shall be in accordance with the
requirements to obtain or retain any available exemption from the operation of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
To aid in the administration of the Plan, the Board or the committee may appoint
a Plan administrator and allocate to it certain limited responsibilities to
carry out the directives of the Board or the committee in all phases of the
administration of the Plan.
14. DESIGNATION OF BENEFICIARY.
a) A participant may file a written designation of a beneficiary who is to
receive shares and cash, if any, from the participant's account under the Plan
in the event of such participant's death subsequent to the end of an Offering
Period but prior to delivery to him or her of such shares and cash. In addition,
a participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to the Purchase Date of an Offering Period. If a
participant is married and the designated beneficiary is not the spouse, spousal
consent shall be required for such designation to be effective.
b) Such designation of beneficiary may be changed by the participant (and
his or her spouse, if any) at any time by written notice. In the event of the
death of a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death, the
Company shall deliver such shares and/or cash to the executor or administrator
of the estate of the participant, or if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one or
more dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
15. TRANSFERABILITY. Neither Contributions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as election to withdraw all
Contributions in accordance with Section 10 hereof.
16. USE OF FUNDS. All Contributions received or held by the Company under
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
17. REPORTS. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees
promptly following the Purchase Date, which statements will set forth the amount
of Contributions, the per share purchase price, the number of shares purchased,
the remaining cash balance, if any, and the dividends received, if any, for the
period covered.
18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but have not yet been placed under option (collectively, the "Reserves"), as
well as the price per share of Common Stock covered by each option under the
Plan which has not yet been exercised, shall be appropriately adjusted for any
changes in the Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
similar changes in the Company's capitalization. Such adjustment shall be made
by the Board or the committee administering this Plan, whose determination in
that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
b) CORPORATE TRANSACTIONS. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period will terminate immediately prior
to the consummation of such proposed action, unless otherwise provided by the
Board. In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company into another corporation, each
option under the Plan shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Board determines, in the exercise of its sole
discretion and in lieu of such assumption or substitution, to shorten the
Offering Period then in progress by setting a new Purchase Date (the "New
Purchase Date"). If the Board shortens the Offering Period then in progress in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify each participant in writing, at least ten (10) days prior
to the New Purchase Date, that the Purchase Date for his or her option has been
changed to the New Purchase Date and that his or her option will be exercised
automatically on the New Purchase Date, unless prior to such date he or she has
withdrawn from the Offering Period as provided in Section 10 hereof. For
purposes of this paragraph, an option granted under the Plan shall be deemed to
have been assumed or substituted if, following the sale of assets or merger, the
option confers the right to purchase, for each share of Common Stock subject to
the option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of the
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation and the participant, provide for the consideration to be received
upon exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the sale of assets or
merger.
19. AMENDMENT OR TERMINATION.
a) The Board may at any time terminate or amend the Plan. Except as
provided in Section 19, no such termination may affect options previously
granted, nor may an amendment make any change in any option theretofore granted
which adversely affects the rights of any participant; provided, that no shares
may be issued or sold pursuant to any amendment increasing the maximum number of
shares issuable under the Plan unless the stockholders of the Company have
approved the amendment within 12 months of its adoption by the Board. If such
stockholder approval is not obtained within such 12-month period, the amendment
shall be void and of no force or effect and the amounts withheld from Employees
with respect to such increased shares shall be returned to them. In addition, to
the extent necessary to comply with Rule 16b-3 under the Exchange Act, or under
Section 423 of the Code (or any successor rule or provision or any applicable
law or regulation), the Company shall obtain stockholder approval in such a
manner and to such a degree as so required.
b) Without stockholder approval and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
during an Offering Period, establish the exchange ratio applicable to amounts
withheld in currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a participant in order to adjust for delays
or mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or accounting
and crediting procedures to ensure that amounts applied toward the purchase of
Common Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole discretion as
advisable which are consistent with the Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. CONDITIONS UPON ISSUANCE OF SHARES.
a) Shares shall not be issued with respect to an option unless the exercise
of such option and the issuance and delivery of such shares pursuant thereto
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of The Nasdaq National Market or any stock exchange upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
b) As a condition of the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
c) Each participant agrees, by enrolling in the Plan, to promptly give the
Company prior written notice of any withdrawal of shares held in the
participant's account established under Section 5(c), or any disposition of
shares purchased under the Plan, where such withdrawal or disposition occurs
within two (2) years after the date of grant of the option pursuant to which
such shares were purchased, provided that any such withdrawal or disposition
shall be subject to Section 21(d).
d) Prior to the participant's termination of employment with the Company, a
participant may withdraw some or all of the whole shares of Common Stock held in
the participant's account established under Section 5(c), provided that, unless
the Board or the committee administering the Plan otherwise permits in its sole
discretion, each participant agrees, by enrolling in the Plan, that he or she
may not withdraw any shares of Common Stock purchased under the Plan until six
(6) months have expired following the Purchase Date on which such shares were
purchased.
22. TERM OF PLAN; EFFECTIVE DATE. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof. However, no shares of
Common Stock may be issued or sold until the stockholders of the Company have
approved the Plan within 12 months of its adoption by the Board. If such
stockholder approval is not obtained within such 12-month period, the Plan shall
be void and of no force or effect and the amounts withheld from Employees shall
be returned to them.
23. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
<PAGE>
EXHIBIT B
EXPRESS SCRIPTS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
1. PURPOSE
The purpose of this Express Scripts, Inc. Executive Deferred Compensation
Plan (the "Plan") is to provide eligible key employees of the Company with an
opportunity to defer compensation to be earned by them from the Company as a
means of saving for retirement or other future purposes and to provide such
employees with competitive retirement and capital accumulation benefits. In
addition, the Plan is intended to provide eligible key employees additional
incentive to remain employed by the Company and to attract certain
executive-level employees.
2. DEFINITIONS
The following definitions shall be applicable throughout the Plan:
2.1 ACCOUNTING DATE.
"Accounting Date" means each Business Day on which a calculation concerning
a Participant's Compensation Account is performed, or as otherwise defined by
the Committee.
2.2 BASIC COMPANY CREDIT.
"Basic Company Credit" means an amount, if any, credited to a Participant's
Retirement Account as described in Section 7.
2.3 BENEFICIARY.
"Beneficiary" means the person or persons designated by the Participant in
accordance with Section 10, or if no person or persons are so designated, the
estate of a deceased Participant.
2.4 BOARD.
"Board" means the Board of Directors of Express Scripts, Inc. or its
designee.
2.5 BUSINESS DAY.
Business Day" means a day on which the New York Stock Exchange is open for
trading activity.
2.6 COMMITTEE.
"Committee" means the Compensation Committee of the Board.
2.7 COMMON STOCK.
"Common Stock" means the Class A Common Stock, $0.01 par value, of Express
Scripts, Inc.
2.8 COMMON STOCK FUND.
"Common Stock Fund" means that investment option, approved by the
Committee, in which a Participant's Compensation Accounts may be deemed to be
invested and may earn income (or incur losses) based on a hypothetical
investment in Common Stock.
2.9 COMPANY.
"Company" means Express Scripts, Inc., its divisions, subsidiaries and
affiliates.
2.10 COMPANY CREDITS.
"Company Credits" means amounts credited as either Basic Company Credits or
Past Service Credits by the Company to Compensation Accounts, in the sole
discretion of the Committee, pursuant to Section 7.
2.11 COMPENSATION.
"Compensation" means any employee compensation determined by the Committee
to be properly deferrable under the Plan.
2.12 COMPENSATION ACCOUNT(S).
"Compensation Account(s)" means the Retirement Account and/or the
In-Service Accounts.
2.13 CREDIT DATE.
"Credit Date" means each date on which Deferred Compensation is credited to
Compensation Accounts in accordance with rules prescribed by the Committee.
2.14 DEFERRED COMPENSATION.
"Deferred Compensation" means the Compensation elected by the Participant
to be deferred pursuant to the Plan.
2.15 DISABILITY.
"Disability" means qualification for disability benefits under a long-term
disability plan under which a Participant is covered and which is maintained by
the Company.
2.16 EFFECTIVE DATE.
"Effective Date" means January 1, 1999.
2.17 ELECTION.
"Election" means a Participant's delivery of a written notice of election
to the Committee or its designee electing to defer payment of a specified
percentage of his or her Compensation (in accordance with rules prescribed by
the Committee) either until Retirement, death or such other time as further
permitted by the Committee.
2.18 EMPLOYEE.
"Employee" means an individual classified by the Committee as a full-time,
regular salaried employee of the Company, its present and future subsidiary
corporations as defined in Section 424 of the Internal Revenue Code of 1986, as
amended, or its affiliates.
2.19 EXCHANGE ACT.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.20 FAIR MARKET VALUE.
"Fair Market Value" means, as of any specified date, the closing sales
price of a share of Common Stock, as reported on the Nasdaq National Market on
that date (or, if there are no sales on that date, the last preceding date on
which there was a sale), or, in the event the Common Stock is listed on a stock
exchange, the closing sales price of a share of Common Stock, as reported on
such exchange on that date (or, if there are no sales on that date, the last
preceding date on which there was a sale). In the absence of any listing of the
Common Stock on the Nasdaq National Market or on any established stock exchange,
Fair Market Value means the fair market value of the Common Stock on any
specified date as determined in good faith by the Committee.
2.21 IN-SERVICE ACCOUNT.
"In-Service Account" means the account or accounts to which a Participant
elects to contribute Deferred Compensation and from which, pursuant to Section
8.2, distributions are made.
2.22 PARTICIPANT.
"Participant" means an Employee selected by the Committee to participate in
the Plan who has elected to defer payment of all or a portion of his or her
Compensation under the Plan.
2.23 PAST SERVICE CREDIT.
"Past Service Credit" means an amount, if any, credited to a Participant's
Retirement Account as described in Section 7.
2.24 PLAN.
"Plan" means this Express Scripts, Inc. Executive Deferred Compensation
Plan, as amended from time to time.
2.25 PLAN YEAR.
"Plan Year" means the annual period commencing January 1 and ending the
following December 31.
2.26 RETIREMENT.
"Retirement" means a Participant's termination of employment on or after
age 57 or upon attaining age 55 with ten (10) Service Years in a position at
least as senior as a senior vice-president.
2.27 RETIREMENT ACCOUNT.
"Retirement Account" means the account to which a Participant elects to
contribute Deferred Compensation and to which Company Credits are made, and from
which, pursuant to Section 8.1, distributions are made.
2.28 SERVICE YEAR.
"Service Year" means, as designated by the Committee, such year or portion
thereof during which the services have been rendered by a Participant for which
Compensation is payable.
2.29 STOCK UNIT(S).
"Stock Unit(s)" means the share equivalents credited to the Common Stock
Fund of a Participant's Compensation Account in accordance with Sections 5, 6
and 7.
2.30 TERMINATION.
"Termination" means termination of services as an Employee for any reason
other than Retirement. In the event of a Participant's Disability, a Termination
will be deemed to have occurred as of the earlier of (a) the Committee's
determination that a Participant has experienced a termination of services or
(b) the date which is nine (9) months after the date the Participant begins
receiving disability benefits under a long-term disability plan maintained by
the Company.
3. ADMINISTRATION
Full power and authority to construe, interpret and administer the Plan
shall be vested in the Committee. This power and authority includes, but is not
limited to, selecting which Employees are eligible to participate in the Plan,
selecting Compensation eligible for deferral, selecting investment indices,
establishing the level of Company Credits (if any) to the Plan, establishing
deferral terms and conditions, receiving and approving beneficiary designation
forms, and adopting modifications, amendments and procedures as may be deemed
necessary, appropriate or convenient by the Committee. Decisions of the
Committee shall be final, conclusive and binding upon all parties. The
Committee, in its sole discretion, may delegate day-to-day administration of the
Plan to an employee or employees of the Company or to a third-party
administrator. The Committee may also rely on outside counsel, independent
accountants or other consultants or advisors for advice and assistance in
fulfilling its administrative duties under the Plan.
4. ELIGIBILITY
The Committee shall have the authority to select from senior and vice
president-level executives those Employees who shall be eligible to participate
in the Plan.
5. PARTICIPANT ACCOUNTS
Upon a Participant's initial election to participate in the Plan, there
shall be established a Retirement Account and an In-Service Account, as
designated by the Participant, to which there shall be credited any Deferred
Compensation as of each Credit Date. In addition, Company Credits, if any, made
pursuant to Section 7 shall be allocated to a Participant's Retirement Account
in accordance with rules prescribed by the Committee. Each such Compensation
Account shall be credited (or debited) on each Accounting Date with income (or
loss) based upon a hypothetical investment in any one or more of the investment
options available under the Plan, as prescribed by the Committee for the
particular Compensation credited, which may include a Common Stock Fund. If a
Participant elects to invest all or any portion of his or her Compensation
Account(s) in the Common Stock Fund, that portion of the Participant's
Compensation Account(s) shall be credited on each Credit Date with Stock Units
equal to the number of shares of Common Stock (including fractions of a share)
that could have been purchased with the amount of such Deferred Compensation at
the Fair Market Value on the Credit Date. As of any date for the payment of cash
dividends on the Common Stock, the portion of the Participant's Compensation
Account(s) invested in the Common Stock Fund as of the dividend record date
shall be credited with additional Stock Units calculated by dividing (i) the
product of (a) the dollar value of the dividend declared in respect of a share
of Common Stock multiplied by (b) the number of Stock Units credited to the
Participant's Compensation Account(s) as of the dividend record date by (ii) the
Fair Market Value of a share of Common Stock on the dividend payment date.
6. ELECTION TO PARTICIPATE
Any Employee selected by the Committee to participate in the Plan may elect
to do so by delivering to the Committee or its designee an Election on a form
prescribed by the Committee, designating the Compensation Account to which the
Deferred Compensation is to be credited, electing the timing and form of
distribution (if applicable), and setting forth the manner in which such
Deferred Compensation shall be invested in accordance with Section 5. A
Participant's initial Election must be filed within thirty (30) days of the date
on which the Participant becomes eligible to participate in the Plan. Such
initial Election shall only be effective as to the Plan Year to which such
Election relates. A Participant must submit a new Election for each subsequent
Plan Year in order to defer Compensation. Such subsequent Election must be filed
at least thirty (30) days prior to the first day of the Plan Year to which such
Election relates. An effective Election may not be revoked or modified except as
otherwise determined by the Committee or as stated in the Plan.
6.2 INVESTMENT ALTERNATIVES FOR EXISTING
A Participant may elect to change an existing selection as to the
investment alternatives in effect with respect to an existing Compensation
Account (in increments prescribed by the Committee) as often, and with such
restrictions, as determined by the Committee.
7. COMPANY CREDITS
In the sole discretion of the Committee, in a given Plan Year, the Company
may credit a specified percentage of a Participant's Compensation to the
Participant's Retirement Account as a Basic Company Credit. The Committee, in
its sole discretion, may cause the Company to credit such Basic Company Credit
for all or any portion of the participants in the Plan in such Plan Year. In
addition, the Committee may cause the Company to credit a Past Service Credit to
recognize past service as the Committee, in its sole discretion, deems
appropriate. Such Basic Company Credit and Past Service Credit, if any, shall be
credited to a Participant's Retirement Account and shall be subject to the
limitations determined appropriate by the Committee, including the limitation
contained in Section 8.3 and the limitations described below in this Section 7.
7.1 VESTING.
A Participant's Deferred Compensation shall be immediately one-hundred
percent (100%) nonforfeitable upon being credited to such Participant's
Retirement or In-Service Account.
A Participant's Basic Company Credit for a Plan Year shall become
nonforfeitable three (3) years after the end of the Plan Year to which such
Basic Company Credit relates.
A Participant's Past Service Credit shall be fifty-percent (50%)
nonforfeitable upon being credited to his or her Retirement Account. The
remaining fifty-percent (50%) shall become nonforfeitable as follows: one (1)
year after the end of the Plan Year in which the Past Service Credit is credited
to the Participant's Retirement Account, the Participant shall be one-third
(1/3) vested in the remaining fifty percent (50%); two (2) years after the end
of the Plan Year in which the Past Service Credit is credited to the
Participant's Retirement Account, the Participant shall be two-thirds (2/3)
vested in the remaining fifty percent (50%); and three (3) years after the end
of the Plan Year in which the Past Service Credit is credited to the
Participant's Retirement Account, the Participant shall be one-hundred percent
(100%) vested in the remaining fifty percent (50%).
Upon a Participant's termination of employment for any reason prior to
attaining age 57, he or she shall forfeit any nonvested benefits. A Participant
shall have a one-hundred percent (100%) nonforfeitable right to Basic Company
Credits and Past Service Credits upon attaining age 57.
7.2 FORFEITURE.
Upon a Participant's Termination or Retirement, the Company reserves the
right to withhold payment of a portion of a Participant's Retirement Account
attributable to Basic Company Credits or Past Service Credits made under Section
7 (and earnings thereon) in the event the Committee determines that the
Participant has violated the Company's standard noncompetition and nondisclosure
agreement or any other employment agreement executed by the Participant, or
otherwise acts against the interests of the Company, as determined by the
Committee in its sole discretion.
8. DISTRIBUTION
8.1 RETIREMENT ACCOUNT.
In the event of a Participant's Retirement, the Participant's Retirement
Account shall be distributed at the time and in the manner elected by the
Participant in his or her initial Election. If no Election is made by a
Participant as to the timing of distribution or form of payment of his or her
Retirement Account, upon the Participant's Retirement such account shall be paid
in a single lump sum.
8.2 IN-SERVICE ACCOUNT.
Deferred Compensation credited to a Participant's In-Service Account shall
be distributed at the time and in the manner elected by the Participant in his
or her Election. A Participant may not change the Election as to the
distribution of Deferred Compensation in his or her In-Service Account except as
otherwise permitted in Section 9.
8.3 TERMINATION.
In the event of a Participant's Termination, the Participant's Compensation
Accounts shall be distributed in a single lump sum to such Participant as soon
as administratively practicable following his or her Termination.
8.4 DEATH.
In the event of the Participant's death (a) while in the employment of the
Company or (b) after the Participant's Termination but prior to the payment of
such Participant's Compensation Accounts pursuant to Section 8.3, the Company
shall pay the following amounts to the Participant's Beneficiary in a single
lump sum:
(1) the remaining amounts, if any, in a Participant's In-Service Account;
and
(2) the amounts in the Participant's Retirement Account.
In the event of the Participant's death following Retirement, the Company
shall pay the amount in the Participant's Retirement Account to the
Participant's Beneficiary in the form and at the time elected by the Participant
pursuant to Section 6.1.
8.5 FORM OF DISTRIBUTION.
Distribution of a Participant's Compensation Accounts shall be made in
cash; provided that, any amounts in a Participant's Compensation Accounts
invested in the Common Stock Fund shall be distributed to the Participant in
wholes shares of Common Stock with fractional shares paid in cash.
9. FINANCIAL HARDSHIP
Upon the written request of a Participant or a Participant's legal
representative and a finding that continued deferral will result in an
unforeseeable financial emergency to the Participant, the Committee (in its sole
discretion) may authorize (a) the payment of all or a part of a Participant's
Compensation Accounts representing Deferred Compensation and earnings thereon in
a single lump sum prior to his or her ceasing to be a Participant, or (b) a
Participant to cease contributing Deferred Compensation to the Plan during a
Plan Year. It is intended that the Committee's determinations as to whether the
Participant has suffered an "unforeseeable financial emergency" shall be made
consistent with the requirements under Section 457(d) of the Internal Revenue
Code of 1986, as amended.
10. BENEFICIARY DESIGNATION
A Participant may designate one or more persons (including a trust) to whom
or to which payments are to be made if the Participant dies before receiving
distribution of all amounts due under the Plan. A Participant may, at any time,
elect to change the designation of a Beneficiary. A designation of Beneficiary
will be effective only after the signed designation of Beneficiary is filed with
the Committee or its designee while the Participant is alive and will cancel all
designations of Beneficiary signed and filed earlier. If the Participant fails
to designate a Beneficiary as provided above or if all of a Participant's
Beneficiaries predecease him or her and he or she fails to designate a new
Beneficiary, the remaining unpaid amounts shall be paid in one lump sum to the
estate of such Participant. If all Beneficiaries of the Participant die after
the Participant but before complete payment of all amounts due hereunder, the
remaining unpaid amounts shall be paid in one lump sum to the estate of the last
to die of such Beneficiaries.
11. UNSECURED GENERAL CREDITOR STATUS OF EMPLOYEE
The payments to Participants and their Beneficiaries hereunder shall be
made from the general corporate assets of the Company. No person shall have any
interest in any such assets by virtue of the provisions of this Plan. The
Company's obligation hereunder shall be an unfunded and unsecured promise to pay
money in the future. To the extent that any person acquires a right to receive
payments from the Company under the provisions hereof, such right shall be no
greater than the right of any unsecured general creditor of the Company; no such
person shall have nor acquire any legal or equitable right, interest or claim in
or to any property or assets of the Company. Any accounts maintained under this
Plan shall be hypothetical in nature and shall be maintained for bookkeeping
purposes only. Neither the Plan nor any account shall hold any actual funds or
assets.
12. SHARES; ADJUSTMENTS IN EVENT OF CHANGES IN CAPITALIZATION
An aggregate of 50,000 shares of Common Stock have been initially allocated
to the Plan and reserved for the distribution of Compensation Accounts as
described in Section 8.5, subject to adjustment under this Section 12. The
Company may, in its discretion, use shares held in the Treasury under this Plan
in lieu of authorized but unissued shares of Common Stock.
In the event of any change in the outstanding Common Stock of the Company
by reason of any stock split, share dividend, recapitalization, merger,
consolidation, reorganization, combination, or exchange or reclassification of
shares, split-up, split-off, spin-off, liquidation or other similar change in
capitalization, or any distribution to common shareholders other than cash
dividends, the number or kind of shares or Stock Units that may be credited
under the Plan shall be automatically adjusted so that the proportionate
interest of the Participants shall be maintained as before the occurrence of
such event. Such adjustment shall be conclusive and binding for all purposes of
the Plan.
13. INALIENABILITY OF BENEFITS
The interests of the Participants and their Beneficiaries under the Plan
may not in any way be voluntarily or involuntarily transferred, alienated or
assigned, nor subject to attachment, execution, garnishment or other such
equitable or legal process. A Participant or Beneficiary cannot waive the
provisions of this Section 13.
14. GOVERNING LAW
The provisions of this plan shall be interpreted and construed in
accordance with the laws of the State of Missouri, except to the extent
preempted by Federal law.
15. AMENDMENTS
The Committee may amend, alter or terminate this Plan at any time
without the prior approval of the Board; provided, however, that the Committee
may not, without approval by the Board, materially increase the benefits
accruing to Participants under the Plan.
IN WITNESS WHEREOF, the Express Scripts, Inc. Executive Deferred
Compensation Plan is effective as of January 1, 1999.
EXPRESS SCRIPTS, INC.
By:/s/ Barrett Toan
Title: President
<PAGE>
EXHIBIT C
THIRD AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1994 STOCK OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1994 Stock Option Plan, which was amended and restated on March 22, 1995 and
approved by the stockholders on May 24, 1995, and which was subsequently amended
by the Board of Directors of the Corporation (the "Board") on January 29, 1997
and January 27, 1998, and such subsequent amendments were approved by the
stockholders on May 28, 1997 and May 27, 1998, respectively (the "1994 Plan").
B. On March 24, 1999, the Board approved an increase in the number of
shares that the Company may issue pursuant to the 1994 Plan and certain
additional amendments to the 1994 Plan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Third Amendment to the
1994 Plan (the "Third Amendment") shall be as defined in the 1994 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "EARLY RETIREMENT". The definition
of the term "Early Retirement" in Section 1 of the 1994 Plan is amended by
inserting at the end of clause (ii) the additional language set forth below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
3. AMENDMENT TO SECTION 1, DEFINITION OF "NORMAL RETIREMENT". The
definition of the term "Normal Retirement" in Section 1 of the 1994 Plan is
amended by inserting at the end of clause (ii) the additional language set forth
below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
4. AMENDMENT TO SECTION 1, DEFINITION OF "PLAN". The definition of the term
"Plan" in Section 1 of the 1994 Plan is amended by deleting such definition in
its entirety and replacing it with the language set forth below:
"Plan" shall mean this Express Scripts, Inc. Amended and Restated 1994
Stock Option Plan, as amended from time to time.
5. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
1994 Plan is amended to read as follows in its entirety:
The maximum number of Shares that may be issued or transferred pursuant to
Options under this Plan shall be 2,920,000, which has been adjusted to reflect
the stock split effected on October 30, 1998. Such number of Shares shall
increase annually, effective as of each January 1, commencing on January 1, 2000
and ending on January 1, 2004, by an amount equal to one (1) percent of the
Company's total outstanding shares of Class A and Class B Common Stock on such
date. The Company shall reserve such number of Shares for the purposes of the
Plan out of its authorized but unissued Shares or out of Shares held in the
Company's treasury, or partly out of each. If any Shares that have been subject
to an Option cease to be subject thereto, or any Restricted Shares received by
an Optionee upon the exercise of an Option are forfeited to the Company in
accordance with the Option Agreement, such Shares may again be the subject of
Options hereunder.
6. AMENDMENT TO SECTION 2.2, CHANGES IN COMPANY'S SHARES. Section 2.2 of
the 1994 Plan is hereby amended by inserting at the end of the single paragraph
of such section the additional language set forth below:
and adjustments of the limitation in Section 3(b) of the maximum number of
Shares subject to Options that may be granted to any Employee.
7. AMENDMENT TO SECTION 3, ELIGIBILITY FOR OPTION GRANTS. Section 3 of the
1994 Plan is hereby amended by deleting paragraph (b) in its entirety and
replacing it with the language set forth below to reflect the stock split
effected on October 30, 1998:
(b) determine the number of Shares to be subject to each Option granted to
such selected Employees; provided, that in no event shall Options be granted to
any Employee in excess of 300,000;
8. AMENDMENT TO SECTION 4.4, METHOD OF EXERCISE. Section 4.4 of the 1994
Plan is hereby amended by deleting the second sentence thereof and replacing it
with the language set forth below:
The purchase price for any Shares purchased pursuant to the exercise of an
Option shall be paid in full upon such exercise in cash, by check or, at the
discretion of the Committee and upon such terms and conditions as the Committee
shall approve, by transferring previously owned Shares to the Company (including
by way of attestation of the Optionee's ownership of such Shares), having Shares
withheld or exercising pursuant to a "cashless exercise" procedure, or any
combination thereof.
9. AMENDMENT TO SECTION 6.1, COMPENSATION COMMITTEE. Section 6.1 of the
1994 Plan is hereby amended by deleting such section in its entirety and
replacing it with the language set forth below:
6.1 COMPENSATION COMMITTEE
The Plan shall be administered by the Committee which shall consist of at
least three directors of the Company, appointed by the Board and holding office
at the pleasure of the Board. All Committee members shall be members of the
Board.
10. EFFECTIVE DATE OF THE THIRD AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Third Amendment shall be March 24, 1999. This Third
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999, and, if not
approved by the stockholders, this Third Amendment shall be null and void.
<PAGE>
EXHIBIT D
FIRST AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1992 Stock Option Plan (the "1992 Plan"), which was amended and restated on
March 22, 1995 and approved by the stockholders on May 24, 1995.
B. On March 24, 1999, the Board of Directors of the Corporation approved
certain amendments to the 1992 Plan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this First Amendment to the
1992 Plan (the "First Amendment") shall be as defined in the 1992 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "EARLY RETIREMENT". The definition
of the term "Early Retirement" in Section 1 of the 1992 Plan is amended by
inserting at the end of clause (ii) the additional language set forth below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
3. AMENDMENT TO SECTION 1, DEFINITION OF "NORMAL RETIREMENT". The
definition of the term "Normal Retirement" in Section 1 of the 1992 Plan is
amended by inserting at the end of clause (ii) the additional language set forth
below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
4. AMENDMENT TO SECTION 1, DEFINITION OF "PLAN". The definition of the term
"Plan" in Section 1 of the 1992 Plan is amended by deleting such definition in
its entirety and replacing it with the language set forth below:
"Plan" shall mean this Express Scripts, Inc. Amended and Restated 1992
Stock Option Plan, as amended from time to time.
5. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
1992 Plan is amended to read as follows in its entirety:
The maximum number of Shares that may be issued or transferred pursuant to
Options under this Plan shall be 2,380,000, which has been adjusted to reflect
the stock split effected on October 30, 1998. The Company shall reserve such
number of Shares for the purposes of the Plan out of its authorized but unissued
Shares or out of Shares held in the Company's treasury, or partly out of each.
If any Shares that have been subject to an Option cease to be subject thereto,
or any Restricted Shares received by an Optionee upon the exercise of an Option
are forfeited to the Company in accordance with the Option Agreement, such
Shares may again be the subject of Options hereunder.
6. AMENDMENT TO SECTION 2.2, CHANGES IN COMPANY'S SHARES. Section 2.2 of
the 1992 Plan is hereby amended by inserting at the end of the single paragraph
of such section the additional language set forth below:
and adjustments of the limitation in Section 3(b) of the maximum number of
Shares subject to Options that may be granted to any Employee.
7. AMENDMENT TO SECTION 3, ELIGIBILITY FOR OPTION GRANTS. Section 3 of the
1992 Plan is hereby amended by deleting paragraph (b) in its entirety and
replacing it with the language set forth below to reflect the stock split
effected on October 30, 1998:
(b) determine the number of Shares to be subject to each Option granted to
such selected Employees; provided, that in no event shall Options be granted to
any Employee in excess of 800,000;
8. AMENDMENT TO SECTION 4.4, METHOD OF EXERCISE. Section 4.4 of the 1992
Plan is hereby amended by deleting the second sentence thereof and replacing it
with the language set forth below:
The purchase price for any Shares purchased pursuant to the exercise of an
Option shall be paid in full upon such exercise in cash, by check or, at the
discretion of the Committee and upon such terms and conditions as the Committee
shall approve, by transferring previously owned Shares to the Company (including
by way of attestation of the Optionee's ownership of such Shares), having Shares
withheld or exercising pursuant to a "cashless exercise" procedure, or any
combination thereof.
9. AMENDMENT TO SECTION 6.1, COMPENSATION COMMITTEE. Section 6.1 of the
1992 Plan is hereby amended by deleting such section in its entirety and
replacing it with the language set forth below:
6.1 COMPENSATION COMMITTEE
The Plan shall be administered by the Committee which shall consist of at
least three directors of the Company, appointed by the Board and holding office
at the pleasure of the Board. All Committee members shall be members of the
Board.
10. EFFECTIVE DATE OF THE FIRST AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this First Amendment shall be March 24, 1999. This First
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999, and, if not
approved by the stockholders, this First Amendment shall be null and void.
<PAGE>
EXHIBIT E
FOURTH AMENDMENT TO EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1994 STOCK
OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1994 Stock Option Plan, which was amended and restated on March 22, 1995 and
approved by the stockholders on May 24, 1995, and which was subsequently amended
by the Board of Directors of the Corporation (the "Board") on January 29, 1997
and January 27, 1998, and such subsequent amendments were approved by the
stockholders on May 28, 1997 and May 27, 1998, respectively (the "1994 Plan").
B. On March 24, 1999, the Board approved an increase in the number of
shares that the Company may issue pursuant to the 1994 Plan and certain
additional amendments to the 1994 Plan.
C. On March 24, 1999, the Board approved certain additional amendments to
the 1994 Plan pursuant to the Employment Agreement dated as of April 1, 1999
between the Corporation and Barrett A. Toan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Fourth Amendment to the
1994 Plan (the "Fourth Amendment") shall be as defined in the 1994 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "CHANGE IN CONTROL". The
definition of the term "Change in Control" in Section 1 of the 1994 Plan is
hereby amended by adding the following sentence to the end of such definition:
Notwithstanding anything to the contrary herein, "Change in Control" or any
other substantially similar term that is defined in the Employment Agreement
shall have the meaning given such term in the Employment Agreement in order to
give effect to the provisions of such Agreement.
3. AMENDMENT TO SECTION 1, DEFINITION OF "EMPLOYMENT AGREEMENT". The
definition of the term "Employment Agreement" is hereby added to Section 1 of
the 1994 Plan as set forth below:
"Employment Agreement" shall mean that certain employment agreement
effective as of April 1, 1999 between Barrett A. Toan and Express Scripts, Inc.,
as such agreement may be amended from time to time.
4. AMENDMENT TO SECTION 4.2. Section 4.2 of the 1994 Plan is hereby amended
by adding a new Section 4.2(e) as set forth below:
(e) EMPLOYMENT AGREEMENT. To the extent that the provisions of Section
4.2(c), Section 4.2(d) or any Option Agreement evidencing outstanding Options or
Restricted Shares conflict with any provisions of the Employment Agreement, the
Employment Agreement shall govern as to Options granted, and Restricted Shares
issued, to the employee named therein.
5. AMENDMENT TO SECTION 5.1. Section 5.1 of the 1994 Plan is hereby amended
by deleting such section in its entirety and replacing it with the language set
forth below:
5.1 IMPACT OF CHANGE OF CONTROL EVENT
Except as otherwise provided in the Employment Agreement with respect to
Options granted, and Restricted Shares issued, to the employee named therein and
notwithstanding any other provision of the Plan to the contrary, in the event of
a Change in Control (i) all outstanding Options, whether or not previously
exercisable and vested, shall terminate immediately and become null and void on
the Change in Control Date, and (ii) any Restricted Shares shall be redeemed by
the Company and canceled as of the Change in Control Date; and in either case
the Company shall pay such Optionee the amount, if any, determined in accordance
with Section 5.2 in lieu of such Options or Restricted Shares.
6. AMENDMENT TO SECTION 5.4. Section 5.4 of the 1994 Plan is hereby amended
by adding to the end of such Section the sentence set forth below:
To the extent that the provisions of this Section 5.4 or any Option
Agreement evidencing outstanding Options or Restricted Shares conflict with any
provisions of the Employment Agreement, the Employment Agreement shall govern as
to Options granted, and Restricted Shares issued, to the employee named therein.
7. AMENDMENT TO GRANDFATHER CLAUSE. The grandfather provision that
immediately follows Section 7.7 of the 1994 Plan is hereby amended by deleting
the italicized lead-in thereto and replacing it with the language set forth
below:
PRIOR TO AMENDMENT AND RESTATEMENT, SECTION 5, WHICH WILL CONTINUE TO
GOVERN CURRENTLY OUTSTANDING AWARDS OF STOCK OPTIONS AND RESTRICTED SHARES
(EXCEPT AS TO OPTIONS AND RESTRICTED SHARES HELD BY THE EMPLOYEE NAMED IN THE
EMPLOYMENT AGREEMENT), FORMERLY PROVIDED AS FOLLOWS:
8. EFFECTIVE DATE OF THE FOURTH AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Fourth Amendment shall be March 24, 1999. This Fourth
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999 or any
adjournment thereof, and, if not approved by the stockholders, this Fourth
Amendment shall be null and void.
<PAGE>
EXHIBIT F
SECOND AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
RECITALS
A Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1992 Stock Option Plan (the "1992 Plan"), which was amended and restated on
March 22, 1995 and approved by the stockholders on May 24, 1995.
B. On March 24, 1999, the Board of Directors of the Corporation approved
certain amendments to the 1992 Plan (the "First Amendment").
C. On March 24, 1999, the Board approved certain additional amendments to
the 1992 Plan pursuant to the Employment Agreement dated as of April 1, 1999
between the Corporation and Barrett A. Toan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Second Amendment to the
1992 Plan (the "Second Amendment") shall be as defined in the 1992 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "CHANGE IN CONTROL". The
definition of the term "Change in Control" in Section 1 of the 1992 Plan is
hereby amended by adding the following sentence to the end of such definition:
Notwithstanding anything to the contrary herein, "Change in Control" or any
other substantially similar term that is defined in the Employment Agreement
shall have the meaning given such term in the Employment Agreement in order to
give effect to the provisions of such Agreement.
3. AMENDMENT TO SECTION 1, DEFINITION OF "EMPLOYMENT AGREEMENT". The
definition of the term "Employment Agreement" is hereby added to Section 1 of
the 1992 Plan as set forth below:
"Employment Agreement" shall mean that certain employment agreement
effective as of April 1, 1999 between Barrett A. Toan and Express Scripts, Inc.,
as such agreement may be amended from time to time.
4. AMENDMENT TO SECTION 4.2. Section 4.2 of the 1992 Plan is hereby amended
by adding a new Section 4.2(e) as set forth below:
(e) EMPLOYMENT AGREEMENT. To the extent that the provisions of Section
4.2(c), Section 4.2(d) or any Option Agreement evidencing outstanding Options or
Restricted Shares conflict with any provisions of the Employment Agreement, the
Employment Agreement shall govern as to Options granted, and Restricted Shares
issued, to the employee named therein.
5. AMENDMENT TO SECTION 5.1. Section 5.1 of the 1992 Plan is hereby amended
by deleting such section in its entirety and replacing it with the language set
forth below:
5.1 IMPACT OF CHANGE OF CONTROL EVENT
Except as otherwise provided in the Employment Agreement with respect to
Options granted, and Restricted Shares issued, to the employee named therein and
notwithstanding any other provision of the Plan to the contrary, in the event of
a Change in Control (i) all outstanding Options, whether or not previously
exercisable and vested, shall terminate immediately and become null and void on
the Change in Control Date, and (ii) any Restricted Shares shall be redeemed by
the Company and canceled as of the Change in Control Date; and in either case
the Company shall pay such Optionee the amount, if any, determined in accordance
with Section 5.2 in lieu of such Options or Restricted Shares.
6. AMENDMENT TO SECTION 5.4. Section 5.4 of the 1992 Plan is hereby amended
by adding to the end of such Section the sentence set forth below:
To the extent that the provisions of this Section 5.4 or any Option
Agreement evidencing outstanding Options or Restricted Shares conflict with any
provisions of the Employment Agreement, the Employment Agreement shall govern as
to Options granted, and Restricted Shares issued, to the employee named therein.
7. AMENDMENT TO GRANDFATHER CLAUSE. The grandfather provision that
immediately follows Section 7.7 of the 1992 Plan is hereby amended by deleting
the italicized lead-in thereto and replacing it with the language set forth
below:
PRIOR TO AMENDMENT AND RESTATEMENT, SECTION 5, WHICH WILL CONTINUE TO
GOVERN CURRENTLY OUTSTANDING AWARDS OF STOCK OPTIONS AND RESTRICTED SHARES
(EXCEPT AS TO OPTIONS AND RESTRICTED SHARES HELD BY THE EMPLOYEE NAMED IN THE
EMPLOYMENT AGREEMENT), FORMERLY PROVIDED AS FOLLOWS:
8. EFFECTIVE DATE OF THE SECOND AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Second Amendment shall be March 24, 1999. This Second
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999 or any
adjournment thereof, and, if not approved by the stockholders, this Second
Amendment shall be null and void.
<PAGE>
EXHIBIT G
SECOND AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
RECITALS
A. Express Scripts, Inc. (the "Company") has an Amended and Restated 1992
Stock Option Plan for Outside Directors (the "Plan"), which was amended and
restated on March 22, 1995 and approved by the stockholders on May 24, 1995, and
further amended on January 24, 1996 and approved by the stockholders on May 22,
1996.
B. On January 27, 1999, based on the recommendation of the Compensation
Committee of the Board of Directors of the Company (the "Board"), the Board
approved additional awards of stock options to be granted to each of the
Company's outside directors.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Second Amendment to the
Plan (the "Second Amendment") shall be as defined in the Plan.
2. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
Plan is amended by deleting the phrase "192,000 Shares" in the first sentence
thereof and inserting in lieu thereof the figure "384,000 Shares", to reflect
the stock split effected on October 30, 1998.
3. AMENDMENT TO SECTION 3, ELIGIBILITY FOR OPTION GRANTS. Section 3 of the
Plan is hereby amended by deleting such section in its entirety and replacing it
with the language set forth below:
(a) Each individual who was a Non-Employee Director on the original
Effective Date of this Plan received an Option to purchase 28,000 Shares (as
adjusted to reflect the stock split effected on October 30, 1998) as of such
date;
(b) Each individual who was first elected or appointed to the office of
director as a Non-Employee Director prior to the effective date of the First
Amendment to this Plan and was still serving in such capacity on the effective
date of said First Amendment received an Option to purchase 20,000 Shares (as
adjusted to reflect the stock split effected on October 30, 1998), as of the
effective date of the First Amendment to this Plan (the "First Amendment
Additional Options"), such First Amendment Additional Options being in addition
to any Options previously granted to such Non-Employee Director;
(c) Each individual who is first elected or appointed to the office of
director as a Non-Employee Director on or after the effective date of the First
Amendment to the Plan shall receive an Option to purchase 48,000 Shares (as
adjusted to reflect the stock split effected on October 30, 1998), as of the
date of the first meeting of the Board which such individual attends in such
capacity; and
(d) Each individual who was first elected or appointed to the office of
director as a Non-Employee Director prior to the effective date of the Second
Amendment and is still serving in such capacity on the effective date of said
Second Amendment shall receive an Option to purchase 2,500 Shares as of the
effective date of said Second Amendment (the "Second Amendment Additional
Options"), such Second Amendment Additional Options to be in addition to any
Options previously granted to such Non-Employee Director.
4. AMENDMENT TO SECTION 4.2(C), VESTING. Subsection 4.2(c) of the Plan is
hereby amended by deleting such subsection in its entirety and replacing it with
the language set forth below:
(c) VESTING. Subject to provisions of Section 4.2 (d) and Section 5, an
Option shall become exercisable in installments on a cumulative basis at a rate
of one-fifth (1/5) each year, beginning on the first anniversary of the date of
grant, until the date such Option expires or is terminated; PROVIDED, HOWEVER,
that:
(i) the First Amendment Additional Options shall be vested in two
installments of 10,000 Shares each on June 16, 1996, and on June 16, 1997; and
(ii) the Second Amendment Additional Options shall vest in three
installments of 833, 833 and 834 on January 27, 2000, January 27, 2001 and
January 27, 2002, respectively.
5. EFFECTIVE DATE OF THE SECOND AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Second Amendment shall be January 27, 1999. This Second
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999, and if not
approved by the stockholders this Second Amendment and any Second Amendment
Additional Options granted pursuant hereto prior to such approval shall be null
and void.
<PAGE>
[COMPANY LOGO INSERTED HERE]
Dear Shareholder:
The Annual Meeting of Stockholders of Express Scripts, Inc. will be held at
the offices of the Company , 13900 Riverport Drive, Maryland Heights, Missouri
63043, at 9:30 a.m. on Wednesday, May 26, 1999.
It is important that your shares be represented at this meeting. Whether or
not you plan to attend the meeting, please review the enclosed proxy materials,
complete the attached proxy form below, and return it promptly in the envelope
provided.
Please Detach and Mail in the Envelope Provided
______________________________________________________________________________
- ------
X Please mark your votes as in this example.
- ------
(1) Election of
Directors
NOMINEE:
WITHHOLD
FOR ALL THE AUTHORITY TO HOWARD ATKINS
NOMINEES VOTE FOR ALL JUDITH E. CAMPBELL
LISTED AT RIGHT NOMINEES LISTED RICHARD M. KERNAN, JR.
(except as AT RIGHT RICHARD A. NORLING
marked to the FREDERICK J. SIEVERT
contrary below) STEPHEN N. STEINIG
SEYMOUR STERNBERG
BARRETT A. TOAN
HOWARD L. WALTMAN
NORMAN ZACHARY
INSTRUCTION: To withhold authority to vote for any
individual nominee, print
that nominee's name below.
______________________________________________________
For Against Abstain
(2) Approval of the Company's
Employee Stock Purchase Plan
(3) Approval of the Company's
Executive Deferred Compensation Plan
(4) Approval of the Third Amendment
to the Company's Amended and Restated
1994 Stock Option Plan
(5) Approval of the First Amendment to
the Company's Amended and Restated 1992
Stock Option Plan
(6) Approval of the Fourth Amendment to
the Company's Amended and Restated 1994
Stock Option Plan
(7) Approval of the Second Amendment to
the Company's Amended and Restated 1992
Stock Option Plan
(8) Approval of the Second Amendment to
the Company's Amended and Restated 1992
Stock Option Plan for Outside Directors
(9) Approval of an Amendment to the
Company's Certificate of Incorporation
to increase Authorized Shares of Class A
Common Stock
(10) Approval of an Amendment to the
Company's Certificate of Incorporation
to increase Authorized Shares of Class B
Common Stock
(11) Ratification of the appointment of
Price Waterhouse LLP as the Company's
independent accountants for 1999
This Proxy will be voted FOR items 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11
if no instruction to the contrary is indicated. If any other business
ispresented at the meeting, the proxy will be voted in accordance with the
recommendation of management.
(YOU ARE REQUESTED TO COMPLETE, SIGN AND RETURN THIS PROXY PROMPTLY)
<PAGE>
EXPRESS SCRIPTS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - MAY 26, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barrett A. Toan and Stuart L. Bascomb, or
either one of them, as attorneys-in-fact, agents and proxies for the undersigned
with full power of substitution, to vote all shares of the Common Stock of the
undersigned in Express Scripts, Inc. (the Company) at the Annual Meeting of
Stockholders of the Company to be held on May 26, 1999 at 9:30 A.M., at the
offices of the Company, 13900 Riverport Drive, Maryland Heights, Missouri 63043,
or at any adjournment thereof, upon the matters described in the Notice of such
Meeting and accompanying Proxy Statement, receipt of which is acknowledged, and
upon such other business as may properly come before the Meeting or any
adjournments thereof, hereby revoking any proxies heretofore given. Please sign
exactly as name(s) appear on this proxy card. When shares are held by joint
tenants, both should sign. When signing as attorney-in-fact, executor,
administrator, personal representative, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officers. If a partnership, please sign in partnership name
by authorized persons.
Dated:_________________________ _______________________________
(Signature)
_______________________________
(Signature if held jointly)
<PAGE>
APPENDIX I
EXPRESS SCRIPTS, INC.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
1. PURPOSES; DEFINITIONS
The purposes of the Plan are to further the growth, development and
financial success of the Company by providing incentives to those officers and
other key employees who have the capacity for contributing in substantial
measure toward the growth and profitability of the Company and to assist the
Company in attracting and retaining employees with the ability to make such
contributions.
To accomplish such purposes, the Plan provides that the Company may grant
Incentive Stock Options and Nonqualified Stock Options.
Whenever the following terms are used in the Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean the willful failure by an Employee to perform his duties
with the Company, a Parent or a Subsidiary or the willful engaging in conduct
which is injurious to the Company, a Parent or any Subsidiary, monetarily or
otherwise, as determined by the Committee in its sole discretion, provided that,
if the Employee has entered into an employment agreement with the Company, the
Committee, in its sole discretion, may determine to substitute the definition
set forth in such agreement.
"Change in Control" shall mean the following:
(i) the first date on which both of the following conditions shall exist:
(A) New York Life Insurance Company ("New York Life") shall have ceased to be a
Parent, and (B) a "person" (as such term is used in Section 13(d) and 14(d) of
the Exchange Act), other than the Company or a Related Entity is the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power for the election of directors of the Company's
then outstanding securities;
(ii) the shareholders of the Company approve a plan of complete liquidation
of the Company; or
(iii) the shareholders of the Company approve an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
or any transaction having a similar effect.
"Change in Control Date" shall mean, in the case of a Change in Control
defined in clause (i) or (ii) of the definition thereof, the date on which the
event occurs, and in the case of a Change in Control defined in clause (iii) of
the definition thereof, the date on which the transaction closes.
"Change in Control Price" shall mean, in a Change in Control transaction in
connection with which New York Life receives consideration for the transfer or
cancellation of its voting securities, the per share amount received by New York
Life; and in the case of any other Change in Control transaction, the greater of
the highest Fair Market Value or the highest price per share paid in a bona fide
transaction related to such Change in Control at any time during the 60 days
immediately preceding the Change in Control Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Compensation Committee of the Board, appointed
as provided in Section 6.1.
"Company" shall mean Express Scripts, Inc., a Delaware corporation, and any
successor corporation.
"Comparable Employment" shall mean employment with the Company any
successor to the Company's business following a Change in Control pursuant to
which:
(i) the responsibilities and duties of the Employee are substantially the
same as before the Change of Control (such changes as are a necessary
consequence of the fact that the securities of the Company are no longer
publicly traded if the Company's securities cease to be publicly traded as a
consequence of the Change of Control shall not be considered a change in
responsibilities or duties), and the other terms and conditions of employment
following the Change in Control do not impose on the Employee obligations
materially more burdensome than those to which the Employee was subject prior to
the Change in Control;
(ii) the aggregate compensation (including salary, bonus and other benefit
plans, including option plans) of such Employee is substantially economically
equivalent to or greater than such Employee's aggregate compensation immediately
prior to the Change in Control Date. In making such determination there shall be
taken into account all contingent or unvested compensation, under
performance-based compensation plans or otherwise, with appropriate adjustment
for rights of forfeiture, vesting rules and other contingencies to payment; and
(iii) the Employee is not required to relocate from the metropolitan area
of his or her residence immediately preceding the Change in Control (A) unless
the Company or such successor pays the cost of such relocation (including any
loss and expenses that the employee may incur upon the sale of his or her
residence), (B) if the relocation is to an area with a higher cost of living
than the area of the Employee's residence prior to such relocation, such
Employee's compensation is equitably adjusted to account for such difference,
(C) unless the Employee is employed under a written contract for a term of not
less than three (3) years, and (D) is required to make only one such move during
the first three years of the written contract.
"Effective Date" shall have the meaning set forth in Section 7.1.
"Employee" shall mean any employee (including any officer whether or not a
director) of the Company, or of any corporation which is then a Subsidiary that
has been designated by the Board to participate in the Plan.
"Early Retirement" shall mean retirement by an Employee from active
employment with the Company, a Parent or any Subsidiary (i) with the express
consent for purposes of the Plan of the Committee or such officer of the Company
as the Committee may designate from time to time, or (ii) pursuant to the early
retirement provisions of a pension plan maintained by the Company, a Parent or
any Subsidiary.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" per Share as of a particular date shall mean, unless
otherwise determined by the Committee:
(i) the closing sales price per Share on a national securities exchange for
the last preceding date on which there was a sale of Shares on such exchange;
(ii) if clause (i) does not apply and the Shares are then quoted on the
National Association of Securities Dealers Automated Quotation system (known as
"NASDAQ"), the closing price per Share as reported on such system for the last
preceding date on which a sale was reported;
(iii) if clause (i) or (ii) does not apply and the Shares are then traded
on an over-the-counter market, the average of the closing bid and asked prices
for the Shares in such over-the-counter market for the last preceding date on
which such bid and asked prices were quoted; or
(iv) if the Shares are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Committee in its
discretion may determine.
"Incentive Stock Option" shall mean an Option intended to be and designated
as an "incentive stock option" within the meaning of Section 422 of the Code.
"Nonqualified Stock Option" shall mean an Option that is not an Incentive
Stock Option.
"Normal Retirement" shall mean retirement by an Employee from active
employment with the Company, a Parent or any Subsidiary (i) on or after
attainment of age sixty-five (65), or (ii) pursuant to the normal retirement
provisions of a pension plan maintained by the Company, a Parent or any
Subsidiary.
"Option" shall mean an option to purchase Shares (including Restricted
Shares, if the Committee so determines) granted pursuant to the Plan.
"Option Agreement" shall mean an Option Agreement to be entered into
between the Company and an Optionee, which shall set forth the terms and
conditions of the Options granted to such Optionee.
"Optionee" shall mean an Employee to whom an Option has been granted
pursuant to the Plan.
"Parent" shall mean any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of the corporations (other
than the Company), or if each group of commonly controlled corporations, then
(i) is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of one or more of the other corporations
in such chain representing fifty percent (50%) or more of the combined voting
power for the election of directors for such corporation, or (ii) if the
determination of whether a corporation is a Parent is being made to determine
whether the requirements governing Incentive Stock Options have been met, owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of such corporation.
"Payment Date" shall mean a date not later than ten (10) business days
following the Change in Control Date.
"Permanent Disability" shall mean that the Employee has suffered physical
or mental incapacity of such nature as to prevent him from engaging in or
performing the principal duties of his customary employment or occupation on a
continuing or sustained basis, provided that, if an Employee has entered into an
employment agreement with the Company, the Committee, in its sole discretion,
may determine to substitute the definition set forth in such agreement. All
determinations as to the date and extent of disability of any Employee shall be
made by the Committee upon the basis of such evidence as it deems necessary or
desirable.
"Plan" shall mean this Express Scripts, Inc. 1994 Stock Option Plan, as
hereinafter amended from time to time.
"Related Entity" shall mean a Parent, a Subsidiary or any employee benefit
plan (including a trust forming a part of such Plan) maintained by the Company,
a Parent or a Subsidiary.
"Restricted Shares" shall mean Shares which are received by an Optionee
upon the exercise of an Option and are subject to the restrictions described in
Section 4.2(c).
"Restriction Period" shall mean the period during which Restricted Shares
are subject to the restrictions set forth in Section 4.2(c).
"Retirement" shall mean Early Retirement or Normal Retirement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share" shall mean a share of the Company's Class A Common Stock, .01 par
value.
"Stockholder Approval Date" shall have the meaning set forth in Section
7.1.
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation (other than
the last corporation in the unbroken chain), or if each group of commonly
controlled corporations, then owns fifty percent (50%) or more of the total
combined voting power in one of the other corporations in such chain.
"Ten-Percent Stockholder" shall mean an Employee, who, at the time an
Incentive Stock Option is to be granted to the Employee, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
a Parent or a Subsidiary.
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Employee and the Company, a Parent or a Subsidiary is
terminated for any reason whatsoever, but excluding any termination where there
is a simultaneous reemployment by either the Company, a Parent or a Subsidiary.
2. SHARES SUBJECT TO THE PLAN
2.1 SHARES SUBJECT TO PLAN
The maximum number of Shares that may be issued or transferred pursuant to
Options under this Plan shall initially be 210,000. The Company shall reserve
such number of Shares for the purposes of the Plan, out of its authorized but
unissued Shares or out of Shares held in the Company's treasury, or partly out
of each. If any Shares that have been subject to an Option cease to be subject
thereto, or any Restricted Shares received by an Optionee upon the exercise of
an Option are forfeited to the Company in accordance with the Option Agreement,
such Shares may again be the subject of Options hereunder.
2.2 CHANGES IN COMPANY'S SHARES
In the event that the outstanding Shares are hereafter changed into or
exchanged for a different number or kind of shares or other securities of the
Company, or of another corporation, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of warrants or rights, stock dividend, combination of shares or similar
event, appropriate adjustments shall be made by the Committee in the number and
kind of Shares subject to and which may be subject to Options under this Plan,
and the purchase price per Share, to prevent dilution or enlargement of the
benefits granted to, or available for, Optionees, including adjustments of the
limitations in Section 2.1 of the maximum number and kind of shares which may be
issued hereunder as Shares.
3. ELIGIBILITY FOR OPTION GRANTS
Any Employee who is employed on the senior staff, or as a member of the
sales force or who is designated by the Committee as a key Employee shall be
eligible to receive Options under this Plan. In no event shall any Options be
granted to any member of the Board who is not an Employee. The Committee shall
from time to time, in its sole discretion:
(a) select from among the eligible Employees (including Optionees who have
previously received Options) such of them as in its opinion should be permitted
to receive Options under this Plan;
(b) determine the number of Shares to be subject to each Option granted to
such selected Employees; provided, that in no event shall Options be granted to
any Employee in excess of 150,000;
(c) determine the terms and conditions applicable to each Option (which
need not be identical), consistent with the Plan; and
(d) establish such conditions as to the manner of exercise of such Options
as it may deem necessary, including but not limited to, requiring Optionees to
enter into agreements regarding transferability and other restrictions with
respect to Shares issuable upon exercise of such Options.
4 TERMS OF OPTIONS AND SHARES
4.1 OPTION AGREEMENT
Options shall be granted only pursuant to an Option Agreement, which shall
be executed by the Optionee and an authorized officer of the Company and which
shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan, including appropriate vesting arrangements. The
aggregate Fair Market Value (determined as of the date of grant) of the Shares
with respect to which Incentive Stock Options granted under this Plan and all
other option plans of the Company, the Parent and any Subsidiary become
exercisable by an Employee during any calendar year shall not exceed $100,000.
To the extent the limitation set forth in the preceding sentence is exceeded,
the Options with respect to such excess amount shall be treated as Nonqualified
Stock Options.
4.2 TERMS
The Options granted hereunder shall have the following terms and
conditions:
(a) PRICE. The purchase price for the Shares subject to an Option, or the
manner in which such purchase price is to be determined, shall be determined by
the Committee, in its sole discretion, and set forth in the Option Agreement,
provided that the purchase price per Share shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share as of the date the Option is
granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).
(b) TERM. Options shall be for such term as the Committee shall determine,
and as shall be set forth in each Option Agreement, provided that no Option
shall be exercisable after the expiration of ten years from the date it is
granted (five years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder).
(c) VESTING. Options shall be exercisable in such installments (which need
not be equal) and at such times as may be designated by the Committee and set
forth in the Option Agreement. To the extent not exercised, installments shall
accumulate and may be exercised, in whole or in part, at any time after becoming
exercisable, but not later than the date the Option expires. The Committee may
accelerate the exercisability of any Option, or the vesting of any Restricted
Shares, or portion thereof at any time.
The Committee may in its discretion provide that all or a part of the
Shares received by an Optionee upon the exercise of a Nonqualified Stock Option
shall be Restricted Shares subject to any or all of the following restrictions
or conditions:
(i) Subject to the provisions of the Plan and the Option Agreement, during
a period set by the Committee commencing with the date of the grant of the
Option (the "Restriction Period"), the Optionee may not be permitted to sell,
transfer, pledge or assign the Restricted Shares. The Committee in its
discretion may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as the Committee may determine
in its discretion,
(ii) Except as provided in this clause (ii) and clause (i) above, the
Optionee shall have, with respect to the Restricted Shares, all of the rights of
a shareholder of the Company, including the right to vote the Shares and the
right to receive any cash dividends. Stock dividends issued with respect to
Restricted Shares shall be treated as additional Restricted Shares that are
subject to the same restrictions and other terms and conditions that apply to
the Shares with respect to which such dividends are issued.
(iii) Subject to the applicable provisions of the Option Agreement and this
Section, upon Termination of Employment during the Restriction Period, all
Shares still subject to restriction will vest, or be forfeited, in accordance
with the terms and conditions established by the Committee at grant.
(iv) If and when the Restriction Period expires without a prior forfeiture
of the Restricted Shares, certificates for an appropriate number of unrestricted
Shares shall be delivered to the Optionee promptly.
(d) Termination of Employment. Except as provided in this Section 4.2(d) or
in the Option Agreement evidencing such an Option, in the event of a Termination
of Employment of an Optionee, all outstanding Options held by such Optionee
shall terminate immediately, provided that, if such Termination of Employment is
due to the Optionee's death, Permanent Disability, or Retirement or by the
Company, a Parent or a Subsidiary without Cause, all outstanding Options held by
such Optionee shall immediately become fully exercisable to the extent not so
exercisable, shall remain exercisable for a period of three months following
such Termination of Employment, and shall thereafter terminate. Notwithstanding
the foregoing, (i) the Committee may provide, either at the time an Option is
granted or thereafter, that the Option may be exercised after the period
provided for in this Section 4.2(d), but in no event beyond the term of the
Option, and (ii) no provision in this Section 4.2(d) shall extend the exercise
period of an Option beyond its original term.
4.3 NON-TRANSFERABILITY
No Option granted under the Plan shall be transferable by the Optionee to
whom granted otherwise than by will or the laws of descent and distribution, and
an Option may be exercised during the lifetime of such Optionee only by the
Optionee or his guardian or legal representative. The terms of such Option shall
be binding upon the beneficiaries, executors, administrators, heirs and
successors of the Optionee.
4.4 METHOD OF EXERCISE
The exercise of an Option shall be made only by a written notice delivered
in person or by mail to the Secretary of the Company at the Company's principal
executive office, specifying the number of Shares to be purchased and
accompanied by full payment therefor and otherwise in accordance with the Option
Agreement pursuant to which the Option was granted. The purchase price for any
Shares purchased pursuant to the exercise of an Option shall be paid in full
upon such exercise in cash, by check or, at the discretion of the Committee and
upon such terms and conditions as the Committee shall approve, by transferring
previously owned Shares to the Company, having Shares withheld or exercising
pursuant to a "cashless exercise" procedure, or any combination thereof. Any
Shares transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option. If requested by the Committee, the Optionee shall
deliver the Option Agreement evidencing the Option to the Secretary of the
Company who shall endorse thereon a notation of such exercise and return such
Option Agreement to the Optionee. Not less than one hundred (100) Shares may be
purchased at any time upon the exercise of an Option unless the number of Shares
so purchased constitutes the total number of Shares then purchasable under the
Option or the Committee determines otherwise in its sole discretion.
4.5 RIGHTS AS STOCKHOLDER
No Optionee shall be deemed for any purpose to be or to have the rights and
privileges of the owner of any Shares subject to any Option unless and until (a)
the Option shall have been exercised pursuant to the terms thereof, and (b) the
Company shall have issued the Shares to the Optionee.
5. CHANGE IN CONTROL PROVISIONS
5.1 IMPACT OF CHANGE IN CONTROL EVENT
Notwithstanding anything herein to the contrary, in the event of a Change
in Control (i) all outstanding Options, whether or not previously exercisable
and vested, shall terminate immediately and become null and void on the Change
in Control Date, and (ii) any Restricted Shares shall be redeemed by the Company
and canceled as of the Change in Control Date; and in either case the Company
shall pay such Optionee the amount, if any, determined in accordance with
Section 5.2 in lieu of such options or Restricted Shares.
5.2 PAYMENT FOR OPTIONS AND RESTRICTED SHARES
(a) NO OFFER OF COMPARABLE EMPLOYMENT. If an Optionee is not offered
Comparable Employment with the Company or any successor to the Company's
business on or prior to the Change in Control Date, the Company shall pay the
Optionee for each of his Options that was terminated pursuant to Section 5.1 an
amount equal to the excess, if any of the Change in Control Price over the
purchase price for the shares subject to such Option, and for each Restricted
Share that was redeemed and canceled, an amount equal to the Change in Control
Price. Such aggregate amount shall be paid to the Optionee by the Company in a
cash lump sum on the Payment Date.
(b) OFFER OF COMPARABLE EMPLOYMENT ACCEPTED. If an Optionee is offered and
accepts Comparable Employment with the Company or any successor to the Company's
business, the Company shall pay the Optionee for each of his Options that was
canceled pursuant to Section 5.1 an amount equal to the excess, if any, of the
Change in Control Price over the purchase price for the shares subject to such
Option, and for each Restricted Share that was redeemed and canceled, an amount
equal to the Change in Control Price. Such aggregate amount shall be paid to the
Optionee as follows:
(i) any amount attributable to Options that were vested on or prior to the
Change in Control Date shall be paid to the Optionee on the Payment Date.
(ii) any amount attributable to Options that would have become vested after
the Change in Control Date but prior to the second anniversary of the Change in
Control Date, or to Restricted Shares the transferability and forfeiture
restrictions on which would have lapsed during such period, shall be paid to the
Optionee on the date that the Options otherwise would have vested or the
restrictions on such Restricted Shares otherwise would have lapsed, as the case
may be; and
(iii) any other amounts due to the Optionee and not disbursed pursuant to
the preceding clauses (i) and (ii) shall be paid in two cash installments on the
first and second anniversary of the Change in Control Date, the first
installment being equal to one-half of the amount that would have been paid in
the absence of the preceding clause (ii) above minus the amount of any payment
made prior to such first installment pursuant to the preceding clause (ii), and
the second installment being equal to the remaining balance due to the Optionee.
Notwithstanding the foregoing, in the event of a Termination of Employment
of the Optionee at any time before such second anniversary, other than by reason
of (A) the Optionee's death, Permanent Disability or Retirement, (B) termination
by the Company or any successor to the Company's business without Cause, or (C)
termination by the Employee after his employment ceases for any reason to be
Comparable Employment, the Optionee shall forfeit any right to, an shall not be
paid, any unpaid installments. In the case of a Termination of Employment for
any reason specified in clause (A), (B) or (C) of the preceding sentence, all
unpaid installments shall be paid to the Optionee in a cash lump sum within
thirty (30) days of such Termination of Employment.
(c) OFFER OF COMPARABLE EMPLOYMENT REJECTED. If an Optionee is offered
Comparable Employment with the Company or any successor to the Company's
business and he rejects such offer, the Company will pay to the Optionee for
each of his Options that was fully vested immediately prior to the Change in
Control Date, an amount equal to the excess, if any, of the Change in Control
Price over the purchase price for the shares subject to such Option, and for
each Restricted Share that was redeemed and canceled an amount equal to the
lesser of (i) the Change in Control Price, or (ii) the amount paid by the
Optionee to acquire such Restricted Shares from the Company. Except as provided
in the preceding sentence, the Company shall not be required to pay, and the
Optionee shall not be entitled to receive, any amount under this Section 5 or
otherwise in connection with the cancellation of any other Options pursuant to
Section 5.1. Any amount payable to the Optionee hereunder shall be payable on
the Payment Date.
5.3 ESCROW OF DEFERRED PAYMENTS
(a) Any amount that may become payable to Optionees pursuant to Section
5.2(b) above shall be deposited on the Payment Date in escrow with a U.S. bank
with unrestricted capital and surplus of not less than $100,000,000. Such funds
shall be invested in securities issued or fully guaranteed as to both principal
and interest by the U.S. Government. Interest earned shall be allocated ratably
among the Optionees receiving payment of such funds and, if any amounts are
forfeited by an Optionee, to the Company, and shall be disbursed when such
payments are made.
(b) DISBURSEMENTS
(i) Subject to the following clauses (ii) and (iii), the escrow agreement
shall provide for disbursements to Optionees in accordance with a schedule
attached thereto and prepared in accordance with Section 5.2(b)(ii) and (iii).
(ii) If an Optionee forfeits his rights to any payments from the escrow,
the Company shall give written notice thereof contemporaneously to the escrow
agent and the Optionee by certified or registered mail (in the case of the
Optionee, to the last known address of the Optionee on the records of the
Company), stating the reason for such forfeiture and the amount thereof. The
escrow agent shall disburse the amount stated in such notice to the Company
thirty (30) days after receipt thereof unless prior to such time the escrow
agent receives written notice of objection from the Optionee. If a notice of
objection is received, the escrow agent shall disburse such funds only upon
order of a court of competent jurisdiction or upon written instructions signed
by both the Company and the Optionee.
(iii) If an Optionee or his successor in interest becomes entitled to a
payment from the escrow prior to the time stated in the schedule, the Optionee
or such successor shall give written notice thereof contemporaneously to the
escrow agent and the Company by certified or registered mail, stating the reason
for such accelerated payment and the amount thereof. The escrow agent shall
disburse the amount stated in such notice to the Optionee or such successor
thirty (30) days after receipt thereof unless prior to such time the escrow
agent receives written notice of objection from the Company. If a notice of
objection is received, the escrow agent shall disburse such funds only upon
order of a court of competent jurisdiction or upon written instructions signed
by both the Company and the Optionee.
5.4 PARACHUTE PAYMENTS
In the event that the aggregate present value of the payments to an
Optionee under this Plan, and any other plan, program, or arrangement maintained
by the Company (a Subsidiary or, if applicable, a Parent) constitutes an "excess
parachute payment" (within the meaning of Section 280G(b)(1) of the Code) and
the excise tax on such payment would cause the net parachute payments (after
taking into account federal, state and local income and excise taxes) to which
the Optionee otherwise would be entitled, to be less than what the Optionee
would have netted (after taking into account federal, state and local income
taxes) had the present value of his total parachute payments equaled $1.00 less
than three times his "base amount" (within the meaning of Section 280G(b)(3)(A)
of the Code), the Optionee's total "parachute payments" (within the meaning of
Section 280G(b)(2)(A) of the Code) shall be reduced (by the minimum possible
amount) so that their aggregate present value equals $1.00 less than three times
such base amount. For purposes of this calculation, it shall be assumed that the
Optionee's tax rate will be the maximum marginal federal, state and local income
tax rate on earned income, with such maximum federal rate to be computed with
regard to Section 1(g) of the Code, if applicable. In the event that the
Optionee and the Company or any successor to the Company's Business are unable
to agree as to the amount of the reduction described above, if any, the Optionee
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 payments as parachute payments) by the
Company regarding federal income tax or employee benefit matters and such law
firm or accounting firm shall determine, at the Company's expense, the amount of
such reduction and such determination shall be final and binding upon the
Optionee and the Company or such successor.
6. ADMINISTRATION
6.1 COMPENSATION COMMITTEE
The Plan shall be administered by the Committee which shall consist of at
least three directors of the Company, appointed by the Board and holding office
at the pleasure of the Board. All Committee members shall be members of the
Board. All members of the Committee must be "disinterested persons," as such
term is described in Rule 16b-3 adopted by the Securities and Exchange
Commission under the Exchange Act, if and as such Rule is in effect and to the
extent required by Section 162(m) of the Code and the Regulations promulgated
thereon, an "outside director" within the meaning thereof.
6.2 DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its terms and provisions. The Committee shall
have the power to interpret the Plan and the Option Agreements and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
6.3 MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a telephonic or other meeting or by a
memorandum or other written instrument signed by a majority of the Committee .
6.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee may receive such compensation for their services
as members as may be determined by the Board. All expenses and liabilities
incurred by members of the Committee in connection with the administration of
the Plan shall be borne by the Company. The Committee may employ attorneys,
consultants, accountants, appraisers, or other persons. The Committee, the
Company and its officers and directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Optionees, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Options, and all members of the Committee shall be fully protected by the
Company in respect to any such action, determination or interpretation.
7. OTHER PROVISIONS
7.1 EFFECTIVE DATE
(a) EFFECTIVE DATE. The Plan shall become effective as of the date of the
adoption of the Plan by the Board, subject to the approval of the Plan by a
majority of the Company's stockholders (the "Effective Date"), and shall
continue in effect until June 6, 2004 or until the Change in Control Date,
whichever is sooner; provided, that termination of the Plan shall not affect the
rights of any Optionee with respect to Options granted or Restricted Shares
acquired contemporaneously with or prior to such termination. Notwithstanding
anything herein or in any Option Agreement to the contrary, Options granted
hereunder shall not vest and may not be exercised prior to the date of
stockholder approval (the "Stockholder Approval Date"), and, in the event that
the Stockholder Approval Date has not occurred on or prior to June 6, 1995 (or
such later date as determined by the Board in its sole discretion), all Options
granted prior to such date shall be null and void and of no effect, retroactive
to the date of grant, and the Plan shall be null and void and of no effect,
retroactive to the date of Board approval.
(b) EFFECT OF CERTAIN AMENDMENTS. The amendments approved by the Board of
Directors on March 22, 1995, other than the amendments to sections 2.1, 3(b) and
6.1 hereof, shall be effective only with respect to Options granted after such
date, provided, however, that the Committee may enter into agreements with
Optionees whose options were granted prior to such date to make such amendments
applicable, in whole or in part, to such Options.
7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board; provided,
however, that, except as provided in Section 2.2, no amendment shall be
effective unless approved by the affirmative vote of a majority of the votes
eligible to be cast at a meeting of stockholders of the Company held within
twelve (12) months of the date of adoption of such amendment, where such
amendment will:
(a) increase the number of Shares as to which Options may be granted under
the Plan;
(b) change the class of persons eligible to participate in the Plan;
(c) change the minimum purchase price of Shares pursuant to Options as
provided herein;
(d) extend the maximum period for granting or exercising Options provided
herein; or
(e) otherwise materially increase the benefits accruing to Optionees under
the Plan.
From and after the Effective Date, neither the amendment, suspension nor
termination of the Plan shall, without the consent of the Optionee, alter or
impair any rights or obligations under any Option theretofore granted. No
Options may be granted during any period of suspension nor after termination or
expiration of the Plan.
7.3 EFFECT OF PLAN UPON OTHER COMPENSATION AND INCENTIVE PLANS
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan
shall be construed to limit the right of the Company or any Subsidiary to
establish any other forms of incentives or compensation for Employees of the
Company or any Subsidiary.
7.4 REGULATIONS AND OTHER APPROVALS; GOVERNING LAW
(a) The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Delaware
without giving effect to the choice of law principles thereof.
(b) The obligation of the Company to sell or deliver Shares with respect to
Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(c) The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority or to obtain
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder for Employees granted Incentive Stock Options.
(d) Each Option is subject to the requirement that, if at any time the
Committee determines, in its sole discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Committee.
(e) In the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act, and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required by the Securities
Act or regulations thereunder, and the Committee may require any individual
receiving Shares pursuant to the Plan, as a condition precedent to receipt of
such Shares, to represent to the Company in writing that the Shares acquired by
such individual are acquired for investment only and not with a view to
distribution. The certificate for such shall include any legend that the
Committee deems appropriate to reflect any restrictions on transfer.
7.5 WITHHOLDING OF TAXES
No later than the date as to which an amount first becomes includable in
the gross income of an Optionee for Federal income tax purposes with respect to
any Option granted under the Plan, the Optionee shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law or the Company to be
withheld with respect to such amount. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company, a
Parent and any Subsidiary shall, to the extent permitted by law have the right
to deduct any such taxes from any payment of any kind otherwise due to the
Optionee. In its discretion, the Committee may permit Optionees to satisfy
withholding obligations by delivering previously owned Shares or by electing to
have Shares withheld.
7.6 NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan or in any Option Agreement shall confer upon any
Optionee any right to continue in the employ of the Company, a Parent or any
Subsidiary or shall interfere with or restrict in any way the right of the
Company, a Parent and any Subsidiary, which are hereby expressly reserved, to
remove, terminate or discharge any Optionee at any time for any reason
whatsoever, with or without Cause.
7.7 TITLES; CONSTRUCTION
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan. The masculine pronoun
shall include the feminine and neuter and the singular shall include the plural,
when the context so indicates.
PRIOR TO AMENDMENT AND RESTATEMENT, SECTION 5, WHICH WILL CONTINUE TO
GOVERN CURRENTLY OUTSTANDING AWARDS OF STOCK OPTIONS AND RESTRICTED SHARES,
FORMERLY PROVIDED AS FOLLOWS:
5. CHANGE IN CONTROL PROVISIONS
In the event of a Change in Control, (a) all outstanding Options not
previously exercisable and vested shall immediately become fully exercisable and
vested, and (b) the transferability and forfeiture restrictions applicable to
any Restricted Shares to the extent not already lapsed, shall lapse and no
longer be applicable, and such Shares shall be deemed fully vested and owned by
the Optionee.
"Change in Control" shall mean the occurrence of any of the following
events at a time when New York Life Insurance Company, A New York mutual life
insurance company, or any successor thereto is not a Parent:
(i) any "person," as such term is used in Section 13(d) and 14(d) of the
Exchange Act, (other than the Company or a Related Entity, without the approval
of the Board, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power for the election of
directors of the Company's then outstanding securities;
(ii) during any period of two consecutive years beginning on or after the
effective date of the Plan, individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated by
a person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv)) whose election by the Board
or nomination for election by the Company's shareholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved (unless the approval of the election or
nomination for election of such new directors was in connection with an actual
or threatened election or proxy contest), cease for any reason to constitute at
least a majority thereof;
(iii) the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (x) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than eighty percent (80%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (y) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as defined above in clause (i)) acquires more than fifty
percent (50%) of the combined voting power for the election of directors of the
Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets or any transaction having a similar
effect.
<PAGE>
FIRST AMENDMENT TO
EXPRESS SCRIPTS, INC.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Company") has an Amended and Restated 1994
Stock Option Plan (the "Plan") which was amended and restated on March 22, 1995
and approved by the stockholders on May 24, 1995.
B. On January 29, 1997, the Board of Directors of the Company (the "Board")
approved an increase in the number of shares which may be issued pursuant to the
Plan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this First Amendment to the
Plan (the "First Amendment") shall be as defined in the Plan.
2. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
Plan is amended by deleting the number "210,000" in the first sentence thereof
and inserting in lieu thereof the number "460,000."
3. EFFECTIVE DATE OF THE FIRST AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this First Amendment shall be January 29, 1997. This First
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 28, 1997, and if not
approved by the stockholders this First Amendment shall be null and void.
<PAGE>
SECOND AMENDMENT TO
EXPRESS SCRIPTS, INC.
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Company") has an Amended and Restated 1994
Stock Option Plan which was amended and restated on March 22, 1995 and approved
by the stockholders on May 24, 1995, and which was subsequently amended by the
Board of Directors of the Company (the "Board") and approved by the stockholders
on January 29, 1997 and May 29, 1997, respectively (as amended, the "Plan").
B. On January 27, 1998, the Board approved an increase in the number of
shares which may be issued pursuant to the Plan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Second Amendment to the
Plan (the "Second Amendment") shall be as defined in the Plan.
2. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
Plan is amended by deleting the number "460,000" in the first sentence thereof
and inserting in lieu thereof the number "960,000."
3. EFFECTIVE DATE OF THE SECOND AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Second Amendment shall be January 27, 1998. This Second
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 27, 1998, and if not
approved by the stockholders this Second Amendment shall be null and void.
<PAGE>
THIRD AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1994 STOCK OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1994 Stock Option Plan, which was amended and restated on March 22, 1995 and
approved by the stockholders on May 24, 1995, and which was subsequently amended
by the Board of Directors of the Corporation (the "Board") on January 29, 1997
and January 27, 1998, and such subsequent amendments were approved by the
stockholders on May 28, 1997 and May 27, 1998, respectively (the "1994 Plan").
B. On March 24, 1999, the Board approved an increase in the number of
shares that the Company may issue pursuant to the 1994 Plan and certain
additional amendments to the 1994 Plan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Third Amendment to the
1994 Plan (the "Third Amendment") shall be as defined in the 1994 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "EARLY RETIREMENT". The definition
of the term "Early Retirement" in Section 1 of the 1994 Plan is amended by
inserting at the end of clause (ii) the additional language set forth below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
3. AMENDMENT TO SECTION 1, DEFINITION OF "NORMAL RETIREMENT". The
definition of the term "Normal Retirement" in Section 1 of the 1994 Plan is
amended by inserting at the end of clause (ii) the additional language set forth
below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
4. AMENDMENT TO SECTION 1, DEFINITION OF "PLAN". The definition of the term
"Plan" in Section 1 of the 1994 Plan is amended by deleting such definition in
its entirety and replacing it with the language set forth below:
"Plan" shall mean this Express Scripts, Inc. Amended and Restated 1994
Stock Option Plan, as amended from time to time.
5. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
1994 Plan is amended to read as follows in its entirety:
The maximum number of Shares that may be issued or transferred pursuant to
Options under this Plan shall be 2,920,000, which has been adjusted to reflect
the stock split effected on October 30, 1998. Such number of Shares shall
increase annually, effective as of each January 1, commencing on January 1, 2000
and ending on January 1, 2004, by an amount equal to one (1) percent of the
Company's total outstanding shares of Class A and Class B Common Stock on such
date. The Company shall reserve such number of Shares for the purposes of the
Plan out of its authorized but unissued Shares or out of Shares held in the
Company's treasury, or partly out of each. If any Shares that have been subject
to an Option cease to be subject thereto, or any Restricted Shares received by
an Optionee upon the exercise of an Option are forfeited to the Company in
accordance with the Option Agreement, such Shares may again be the subject of
Options hereunder.
6. AMENDMENT TO SECTION 2.2, CHANGES IN COMPANY'S SHARES. Section 2.2 of
the 1994 Plan is hereby amended by inserting at the end of the single paragraph
of such section the additional language set forth below:
and adjustments of the limitation in Section 3(b) of the maximum number of
Shares subject to Options that may be granted to any Employee.
7. AMENDMENT TO SECTION 3, ELIGIBILITY FOR OPTION GRANTS. Section 3 of the
1994 Plan is hereby amended by deleting paragraph (b) in its entirety and
replacing it with the language set forth below to reflect the stock split
effected on October 30, 1998:
(b) determine the number of Shares to be subject to each Option granted to
such selected Employees; provided, that in no event shall Options be granted to
any Employee in excess of 300,000;
8. AMENDMENT TO SECTION 4.4, METHOD OF EXERCISE. Section 4.4 of the 1994
Plan is hereby amended by deleting the second sentence thereof and replacing it
with the language set forth below:
The purchase price for any Shares purchased pursuant to the exercise of an
Option shall be paid in full upon such exercise in cash, by check or, at the
discretion of the Committee and upon such terms and conditions as the Committee
shall approve, by transferring previously owned Shares to the Company (including
by way of attestation of the Optionee's ownership of such Shares), having Shares
withheld or exercising pursuant to a "cashless exercise" procedure, or any
combination thereof.
9. AMENDMENT TO SECTION 6.1, COMPENSATION COMMITTEE. Section 6.1 of the
1994 Plan is hereby amended by deleting such section in its entirety and
replacing it with the language set forth below:
6.1 COMPENSATION COMMITTEE
The Plan shall be administered by the Committee which shall consist of at
least three directors of the Company, appointed by the Board and holding office
at the pleasure of the Board. All Committee members shall be members of the
Board.
10. EFFECTIVE DATE OF THE THIRD AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Third Amendment shall be March 24, 1999. This Third
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999, and, if not
approved by the stockholders, this Third Amendment shall be null and void.
<PAGE>
FOURTH AMENDMENT TO EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1994 STOCK
OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1994 Stock Option Plan, which was amended and restated on March 22, 1995 and
approved by the stockholders on May 24, 1995, and which was subsequently amended
by the Board of Directors of the Corporation (the "Board") on January 29, 1997
and January 27, 1998, and such subsequent amendments were approved by the
stockholders on May 28, 1997 and May 27, 1998, respectively (the "1994 Plan").
B. On March 24, 1999, the Board approved an increase in the number of
shares that the Company may issue pursuant to the 1994 Plan and certain
additional amendments to the 1994 Plan.
C. On March 24, 1999, the Board approved certain additional amendments to
the 1994 Plan pursuant to the Employment Agreement dated as of April 1, 1999
between the Corporation and Barrett A. Toan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Fourth Amendment to the
1994 Plan (the "Fourth Amendment") shall be as defined in the 1994 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "CHANGE IN CONTROL". The
definition of the term "Change in Control" in Section 1 of the 1994 Plan is
hereby amended by adding the following sentence to the end of such definition:
Notwithstanding anything to the contrary herein, "Change in Control" or any
other substantially similar term that is defined in the Employment Agreement
shall have the meaning given such term in the Employment Agreement in order to
give effect to the provisions of such Agreement.
3. AMENDMENT TO SECTION 1, DEFINITION OF "EMPLOYMENT AGREEMENT". The
definition of the term "Employment Agreement" is hereby added to Section 1 of
the 1994 Plan as set forth below:
"Employment Agreement" shall mean that certain employment agreement
effective as of April 1, 1999 between Barrett A. Toan and Express Scripts, Inc.,
as such agreement may be amended from time to time.
4. AMENDMENT TO SECTION 4.2. Section 4.2 of the 1994 Plan is hereby amended
by adding a new Section 4.2(e) as set forth below:
(e) EMPLOYMENT AGREEMENT. To the extent that the provisions of Section
4.2(c), Section 4.2(d) or any Option Agreement evidencing outstanding Options or
Restricted Shares conflict with any provisions of the Employment Agreement, the
Employment Agreement shall govern as to Options granted, and Restricted Shares
issued, to the employee named therein.
5. AMENDMENT TO SECTION 5.1. Section 5.1 of the 1994 Plan is hereby amended
by deleting such section in its entirety and replacing it with the language set
forth below:
5.1 IMPACT OF CHANGE OF CONTROL EVENT
Except as otherwise provided in the Employment Agreement with respect to
Options granted, and Restricted Shares issued, to the employee named therein and
notwithstanding any other provision of the Plan to the contrary, in the event of
a Change in Control (i) all outstanding Options, whether or not previously
exercisable and vested, shall terminate immediately and become null and void on
the Change in Control Date, and (ii) any Restricted Shares shall be redeemed by
the Company and canceled as of the Change in Control Date; and in either case
the Company shall pay such Optionee the amount, if any, determined in accordance
with Section 5.2 in lieu of such Options or Restricted Shares.
6. AMENDMENT TO SECTION 5.4. Section 5.4 of the 1994 Plan is hereby amended
by adding to the end of such Section the sentence set forth below:
To the extent that the provisions of this Section 5.4 or any Option
Agreement evidencing outstanding Options or Restricted Shares conflict with any
provisions of the Employment Agreement, the Employment Agreement shall govern as
to Options granted, and Restricted Shares issued, to the employee named therein.
7. AMENDMENT TO GRANDFATHER CLAUSE. The grandfather provision that
immediately follows Section 7.7 of the 1994 Plan is hereby amended by deleting
the italicized lead-in thereto and replacing it with the language set forth
below:
PRIOR TO AMENDMENT AND RESTATEMENT, SECTION 5, WHICH WILL CONTINUE TO
GOVERN CURRENTLY OUTSTANDING AWARDS OF STOCK OPTIONS AND RESTRICTED SHARES
(EXCEPT AS TO OPTIONS AND RESTRICTED SHARES HELD BY THE EMPLOYEE NAMED IN THE
EMPLOYMENT AGREEMENT), FORMERLY PROVIDED AS FOLLOWS:
8. EFFECTIVE DATE OF THE FOURTH AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Fourth Amendment shall be March 24, 1999. This Fourth
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999 or any
adjournment thereof, and, if not approved by the stockholders, this Fourth
Amendment shall be null and void.
<PAGE>
APPENDIX II
EXPRESS SCRIPTS, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
1. PURPOSES; DEFINITIONS
The purposes of the Plan are to further the growth, development and
financial success of the Company by providing incentives to those officers and
other key employees who have the capacity for contributing in substantial
measure toward the growth and profitability of the Company and to assist the
Company in attracting and retaining employees with the ability to make such
contributions.
To accomplish such purposes, the Plan provides that the Company may grant
Incentive Stock Options and Nonqualified Stock Options.
Whenever the following terms are used in the Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean the willful failure by an Employee to perform his duties
with the Company, a Parent or a Subsidiary or the willful engaging in conduct
which is injurious to the Company, a Parent or any Subsidiary, monetarily or
otherwise, as determined by the Committee in its sole discretion, provided that,
if the Employee has entered into an employment agreement with the Company, the
Committee, in its sole discretion, may determine to substitute the definition
set forth in such agreement.
"Change in Control" shall mean the following:
(i) The first date on which both of the following conditions shall exist:
(A) New York Life Insurance Company ("New York Life") shall have ceased to be a
Parent, and (B) a "person" (as such term is used in Section 13(d) and 14(d) of
the Exchange Act), other than the Company or a Related Entity is the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power for the election of directors of the Company's
then outstanding securities;
(ii) the shareholders of the Company approve a plan of complete liquidation
of the Company; or
(iii) the shareholders of the Company approve an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
or any transaction having a similar effect.
"Change in Control Date" shall mean, in the case of a Change in Control
defined in clause (i) or (ii) of the definition thereof, the date on which the
event occurs, and in the case of a Change in Control defined in clause (iii) of
the definition thereof, the date on which the transaction closes.
"Change in Control Price" shall mean, in a Change in Control transaction in
connection with which New York Life receives consideration for the transfer or
cancellation of its voting securities, the per share amount received by New York
Life; and in the case of any other Change in Control transaction, the greater of
the highest Fair Market Value or the highest price per share paid in a bona fide
transaction related to such Change in Control at any time during the 60 days
immediately preceding the Change in Control Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Compensation Committee of the Board, appointed
as provided in Section 6.1.
"Company" shall mean Express Scripts, Inc., a Delaware corporation, and any
successor corporation.
"Comparable Employment" shall mean employment with the Company any
successor to the Company's business following a Change in Control pursuant to
which:
(i) the responsibilities and duties of the Employee are substantially the
same as before the Change of Control (such changes as are a necessary
consequence of the fact that the securities of the Company are no longer
publicly traded if the Company's securities cease to be publicly traded as a
consequence of the Change of Control shall not be considered a change in
responsibilities or duties), and the other terms and conditions of employment
following the Change in Control do not impose on the Employee obligations
materially more burdensome than those to which the Employee was subject prior to
the Change in Control;
(ii) the aggregate compensation (including salary, bonus and other benefit
plans, including option plans) of such Employee is substantially economically
equivalent to or greater than such Employee's aggregate compensation immediately
prior to the Change in Control Date. In making such determination there shall be
taken into account all contingent or unvested compensation, under
performance-based compensation plans or otherwise, with appropriate adjustment
for rights of forfeiture, vesting rules and other contingencies to payment; and
(iii) the Employee is not required to relocate from the metropolitan area
of his or her residence immediately preceding the Change in Control (A) unless
the Company or such successor pays the cost of such relocation (including any
loss and expenses that the employee may incur upon the sale of his or her
residence), (B) if the relocation is to an area with a higher cost of living
than the area of the Employee's residence prior to such relocation, such
Employee's compensation is equitably adjusted to account for such difference,
(C) unless the Employee is employed under a written contract for a term of not
less than three (3) years, and (D) is required to make only one such move during
the first three years of the written contract.
"Effective Date" shall have the meaning set forth in Section 7.1.
"Employee" shall mean any employee (including any officer whether or not a
director) of the Company, or of any corporation which is then a Subsidiary that
has been designated by the Board to participate in the Plan.
"Early Retirement" shall mean retirement by an Employee from active
employment with the Company, a Parent or any Subsidiary (i) with the express
consent for purposes of the Plan of the Committee or such officer of the Company
as the Committee may designate from time to time, or (ii) pursuant to the early
retirement provisions of a pension plan maintained by the Company, a Parent or
any Subsidiary.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" per Share as of a particular date shall mean, unless
otherwise determined by the Committee:
(i) the closing sales price per Share on a national securities exchange for
the last preceding date on which there was a sale of Shares on such exchange;
(ii) if clause (i) does not apply and the Shares are then quoted on the
National Association of Securities Dealers Automated Quotation system (known as
"NASDAQ"), the closing price per Share as reported on such system for the last
preceding date on which a sale was reported;
(iii) if clause (i) or (ii) does not apply and the Shares are then traded
on an over-the-counter market, the average of the closing bid and asked prices
for the Shares in such over-the-counter market for the last preceding date on
which such bid and asked prices were quoted; or
(iv) if the Shares are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Committee in its
discretion may determine.
"Incentive Stock Option" shall mean an Option intended to be and designated
as an "incentive stock option" within the meaning of Section 422 of the Code.
"Nonqualified Stock Option" shall mean an Option that is not an Incentive
Stock Option.
"Normal Retirement" shall mean retirement by an Employee from active
employment with the Company, a Parent or any Subsidiary (i) on or after
attainment of age sixty-five (65), or (ii) pursuant to the normal retirement
provisions of a pension plan maintained by the Company, a Parent or any
Subsidiary.
"Option" shall mean an option to purchase Shares (including Restricted
Shares, if the Committee so determines) granted pursuant to the Plan.
"Option Agreement" shall mean an Option Agreement to be entered into
between the Company and an Optionee, which shall set forth the terms and
conditions of the Options granted to such Optionee.
"Optionee" shall mean an Employee to whom an Option has been granted
pursuant to the Plan.
"Parent" shall mean any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of the corporations (other
than the Company), or if each group of commonly controlled corporations, then
(i) is the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of one or more of the other corporations
in such chain representing fifty percent (50%) or more of the combined voting
power for the election of directors for such corporation, or (ii) if the
determination of whether a corporation is a Parent is being made to determine
whether the requirements governing Incentive Stock Options have been met, owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of such corporation.
"Payment Date" shall mean a date not later than ten (10) business days
following the Change in Control Date.
"Permanent Disability'" shall mean that the Employee has suffered physical
or mental incapacity of such nature as to prevent him from engaging in or
performing the principal duties of his customary employment or occupation on a
continuing or sustained basis, provided that, if an Employee has entered into an
employment agreement with the Company, the Committee, in its sole discretion,
may determine to substitute the definition set forth in such agreement. All
determinations as to the date and extent of disability of any Employee shall be
made by the Committee upon the basis of such evidence as it deems necessary or
desirable.
"Plan" shall mean this Express Scripts, Inc. 1992 Stock Option Plan, as
hereinafter amended from time to time.
"Related Entity" shall mean a Parent, a Subsidiary or any employee benefit
plan (including a trust forming a part of such Plan) maintained by the Company,
a Parent or a Subsidiary.
"Restricted Shares" shall mean Shares which are received by an Optionee
upon the exercise of an Option and are subject to the restrictions described in
Section 4.2(c).
"Restriction Period" shall mean the period during which Restricted Shares
are subject to the restrictions set forth in Section 4.2(c).
"Retirement" shall mean Early Retirement or Normal Retirement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share" shall mean a share of the Company's Class A Common Stock, .01 par
value.
"Stockholder Approval Date" shall have the meaning set forth in Section
7.1.
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation (other than
the last corporation in the unbroken chain), or if each group of commonly
controlled corporations, then owns fifty percent (50%) or more of the total
combined voting power in one of the other corporations in such chain.
"Ten-Percent Stockholder" shall mean an Employee, who, at the time an
Incentive Stock Option is to be granted to the Employee, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
a Parent or a Subsidiary.
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Employee and the Company, a Parent or a Subsidiary is
terminated for any reason whatsoever, but excluding any termination where there
is a simultaneous reemployment by either the Company, a Parent or a Subsidiary.
2. SHARES SUBJECT TO THE PLAN
2.1 SHARES SUBJECT TO PLAN
The maximum number of Shares that may be issued or transferred pursuant to
Options under this Plan shall initially be 700,000. Thereafter, such number of
Shares shall increase annually, effective as of each January 1, commencing with
January 1, 1993 and ending January 1, 1999, by 70,000 Shares. The Company shall
reserve such number of Shares for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each. If any Shares that have been subject to an Option cease
to be subject thereto, or any Restricted Shares received by an Optionee upon the
exercise of an Option are forfeited to the Company in accordance with the Option
Agreement, such Shares may again be the subject of Options hereunder.
2.2 CHANGES IN COMPANY'S SHARES
In the event that the outstanding Shares are hereafter changed into or
exchanged for a different number or kind of shares or other securities of the
Company, or of another corporation, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of warrants or rights, stock dividend, combination of shares or similar
event, appropriate adjustments shall be made by the Committee in the number and
kind of Shares subject to and which may be subject to Options under this Plan,
and the purchase price per Share, to prevent dilution or enlargement of the
benefits granted to, or available for, Optionees, including adjustments of the
limitations in Section 2.1 of the maximum number and kind of shares which may be
issued hereunder as Shares.
3. ELIGIBILITY FOR OPTION GRANTS
Any Employee who is employed on the senior staff, or as a member of the
sales force or who is designated by the Committee as a key Employee shall be
eligible to receive Options under this Plan. In no event shall any Options be
granted to any member of the Board who is not an Employee. The Committee shall
from time to time, in its sole discretion:
(a) select from among the eligible Employees (including Optionees who have
previously received Options) such of them as in its opinion should be permitted
to receive Options under this Plan;
(b) determine the number of Shares to be subject to each Option granted to
such selected Employees, provided that, in no event shall Options be granted to
any Employee in excess of 400,000;
(c) determine the terms and conditions applicable to each Option (which
need not be identical), consistent with the Plan; and
(d) establish such conditions as to the manner of exercise of such Options
as it may deem necessary, including but not limited to, requiring Optionees to
enter into agreements regarding transferability and other restrictions with
respect to Shares issuable upon exercise of such Options.
4. TERMS OF OPTIONS AND SHARES
4.1 OPTION AGREEMENT
Options shall be granted only pursuant to an Option Agreement, which shall
be executed by the Optionee and an authorized officer of the Company and which
shall contain such terms and conditions as the Committee shall determine,
consistent with the Plan, including appropriate vesting arrangements. The
aggregate Fair Market Value (determined as of the date of grant) of the Shares
with respect to which Incentive Stock Options granted under this Plan and all
other option plans of the Company, the Parent and any Subsidiary become
exercisable by an Employee during any calendar year shall not exceed $100,000.
To the extent the limitation set forth in the preceding sentence is exceeded,
the Options with respect to such excess amount shall be treated as Nonqualified
Stock Options.
4.2 TERMS
The Options granted hereunder shall have the following terms and
conditions:
(a) PRICE. The purchase price for the Shares subject to an Option, or the
manner in which such purchase price is to be determined, shall be determined by
the Committee, in its sole discretion, and set forth in the Option Agreement,
provided that the purchase price per Share shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share as of the date the Option is
granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder).
(b) TERM. Options shall be for such term as the Committee shall determine,
and as shall be set forth in each Option Agreement, provided that no Option
shall be exercisable after the expiration of ten years from the date it is
granted (five years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder).
(c) VESTING. Options shall be exercisable in such installments (which need
not be equal) and at such times as may be designated by the Committee and set
forth in the Option Agreement. To the extent not exercised, installments shall
accumulate and may be exercised, in whole or in part, at any time after becoming
exercisable, but not later than the date the Option expires. The Committee may
accelerate the exercisability of any Option, or the vesting of any Restricted
Shares, or portion thereof at any time.
The Committee may in its discretion provide that all or a part of the
Shares received by an Optionee upon the exercise of a Nonqualified Stock Option
shall be Restricted Shares subject to any or all of the following restrictions
or conditions:
(i) Subject to the provisions of the Plan and the Option Agreement, during
a period set by the Committee commencing with the date of the grant of the
Option (the "Restriction Period"), the Optionee may not be permitted to sell,
transfer, pledge or assign the Restricted Shares. The Committee in its
discretion may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as the Committee may determine
in its discretion,
(ii) Except as provided in this clause (ii) and clause (i) above, the
Optionee shall have, with respect to the Restricted Shares, all of the rights of
a shareholder of the Company, including the right to vote the Shares and the
right to receive any cash dividends. Stock dividends issued with respect to
Restricted Shares shall be treated as additional Restricted Shares that are
subject to the same restrictions and other terms and conditions that apply to
the Shares with respect to which such dividends are issued.
(iii) Subject to the applicable provisions of the Option Agreement and this
Section, upon Termination of Employment during the Restriction Period, all
Shares still subject to restriction will vest, or be forfeited, in accordance
with the terms and conditions established by the Committee at grant.
(iv) If and when the Restriction Period expires without a prior forfeiture
of the Restricted Shares, certificates for an appropriate number of unrestricted
Shares shall be delivered to the Optionee promptly.
(d) Termination of Employment. Except as provided in this Section 4.2(d) or
in the Option Agreement evidencing such an Option, in the event of a Termination
of Employment of an Optionee, all outstanding Options held by such Optionee
shall terminate immediately, provided that, if such Termination of Employment is
due to the Optionee's death, Permanent Disability, or Retirement or by the
Company, a Parent or a Subsidiary without Cause, all outstanding Options held by
such Optionee shall immediately become fully exercisable to the extent not so
exercisable, shall remain exercisable for a period of three months following
such Termination of Employment, and shall thereafter terminate. Notwithstanding
the foregoing, (i) the Committee may provide, either at the time an Option is
granted or thereafter, that the Option may be exercised after the period
provided for in this Section 4.2(d), but in no event beyond the term of the
Option, and (ii) no provision in this Section 4.2(d) shall extend the exercise
period of an Option beyond its original term.
4.3 NON-TRANSFERABILITY
No Option granted under the Plan shall be transferable by the Optionee to
whom granted otherwise than by will or the laws of descent and distribution, and
an Option may be exercised during the lifetime of such Optionee only by the
Optionee or his guardian or legal representative. The terms of such Option shall
be binding upon the beneficiaries, executors, administrators, heirs and
successors of the Optionee.
4.4 METHOD OF EXERCISE
The exercise of an Option shall be made only by a written notice
delivered in person or by mail to the Secretary of the Company at the Company's
principal executive office, specifying the number of Shares to be purchased and
accompanied by full payment therefor and otherwise in accordance with the Option
Agreement pursuant to which the Option was granted. The purchase price for any
Shares purchased pursuant to the exercise of an Option shall be paid in full
upon such exercise in cash, by check or, at the discretion of the Committee and
upon such terms and conditions as the Committee shall approve, by transferring
previously owned Shares to the Company, having Shares withheld or exercising
pursuant to a "cashless exercise" procedure, or any combination thereof. Any
Shares transferred to the Company as payment of the purchase price under an
Option shall be valued at their Fair Market Value on the day preceding the date
of exercise of such Option. If requested by the Committee, the Optionee shall
deliver the Option Agreement evidencing the Option to the Secretary of the
Company who shall endorse thereon a notation of such exercise and return such
Option Agreement to the Optionee. Not less than one hundred (100) Shares may be
purchased at any time upon the exercise of an Option unless the number of Shares
so purchased constitutes the total number of Shares then purchasable under the
Option or the Committee determines otherwise in its sole discretion.
4.5 RIGHTS AS STOCKHOLDER
No Optionee shall be deemed for any purpose to be or to have the rights and
privileges of the owner of any Shares subject to any Option unless and until (a)
the Option shall have been exercised pursuant to the terms thereof, and (b) the
Company shall have issued the Shares to the Optionee.
5. CHANGE IN CONTROL PROVISIONS
5.1 IMPACT OF CHANGE IN CONTROL EVENT
Notwithstanding anything herein to the contrary, in the event of a Change
in Control (i) all outstanding Options, whether or not previously exercisable
and vested, shall terminate immediately and become null and void on the Change
in Control Date, and (ii) any Restricted Shares shall be redeemed by the Company
and canceled as of the Change in Control Date; and in either case the Company
shall pay such Optionee the amount, if any, determined in accordance with
Section 5.2 in lieu of such options or Restricted Shares.
5.2 PAYMENT FOR OPTIONS AND RESTRICTED SHARES
(a) NO OFFER OF COMPARABLE EMPLOYMENT. If an Optionee is not offered
Comparable Employment with the Company or any successor to the Company's
business on or prior to the Change in Control Date, the Company shall pay the
Optionee for each of his Options that was terminated pursuant to Section 5.1 an
amount equal to the excess, if any of the Change in Control Price over the
purchase price for the shares subject to such Option, and for each Restricted
Share that was redeemed and canceled, an amount equal to the Change in Control
Price. Such aggregate amount shall be paid to the Optionee by the Company in a
cash lump sum on the Payment Date.
(b) OFFER OF COMPARABLE EMPLOYMENT ACCEPTED. If an Optionee is offered and
accepts Comparable Employment with the Company or any successor to the Company's
business, the Company shall pay the Optionee for each of his Options that was
canceled pursuant to Section 5.1 an amount equal to the excess, if any, of the
Change in Control Price over the purchase price for the shares subject to such
Option, and for each Restricted Share that was redeemed and canceled, an amount
equal to the Change in Control Price. Such aggregate amount shall be paid to the
Optionee as follows:
(i) any amount attributable to Options that were vested on or prior to the
Change in Control Date shall be paid to the Optionee on the Payment Date.
(ii) any amount attributable to Options that would have become vested after
the Change in Control Date but prior to the second anniversary of the Change in
Control Date, or to Restricted Shares the transferability and forfeiture
restrictions on which would have lapsed during such period, shall be paid to the
Optionee on the date that the Options otherwise would have vested or the
restrictions on such Restricted Shares otherwise would have lapsed, as the case
may be; and
(iii) any other amounts due to the Optionee and not disbursed pursuant to
the preceding clauses (i) and (ii) shall be paid in two cash installments on the
first and second anniversary of the Change in Control Date, the first
installment being equal to one-half of the amount that would have been paid in
the absence of the preceding clause (ii) above minus the amount of any payment
made prior to such first installment pursuant to the preceding clause (ii), and
the second installment being equal to the remaining balance due to the Optionee.
Notwithstanding the foregoing, in the event of a Termination of Employment
of the Optionee at any time before such second anniversary, other than by reason
of (A) the Optionee's death, Permanent Disability or Retirement, (B) termination
by the Company or any successor to the Company's business without Cause, or (C)
termination by the Employee after his employment ceases for any reason to be
Comparable Employment, the Optionee shall forfeit any right to, an shall not be
paid, any unpaid installments. In the case of a Termination of Employment for
any reason specified in clause (A), (B) or (C) of the preceding sentence, all
unpaid installments shall be paid to the Optionee in a cash lump sum within
thirty (30) days of such Termination of Employment.
(c) OFFER OF COMPARABLE EMPLOYMENT REJECTED. If an Optionee is offered
Comparable Employment with the Company or any successor to the Company's
business and he rejects such offer, the Company will pay to the Optionee for
each of his Options that was fully vested immediately prior to the Change in
Control Date, an amount equal to the excess, if any, of the Change in Control
Price over the purchase price for the shares subject to such Option, and for
each Restricted Share that was redeemed and canceled an amount equal to the
lesser of (i) the Change in Control Price, or (ii) the amount paid by the
Optionee to acquire such Restricted Shares from the Company. Except as provided
in the preceding sentence, the Company shall not be required to pay, and the
Optionee shall not be entitled to receive, any amount under this Section 5 or
otherwise in connection with the cancellation of any other Options pursuant to
Section 5.1. Any amount payable to the Optionee hereunder shall be payable on
the Payment Date.
5.3 ESCROW OF DEFERRED PAYMENTS
(a) Any amount that may become payable to Optionees pursuant to Section
5.2(b) above shall be deposited on the Payment Date in escrow with a U.S. bank
with unrestricted capital and surplus of not less than $100,000,000. Such funds
shall be invested in securities issued or fully guaranteed as to both principal
and interest by the U.S. Government. Interest earned shall be allocated ratably
among the Optionees receiving payment of such funds and, if any amounts are
forfeited by an Optionee, to the Company, and shall be disbursed when such
payments are made.
(b) DISBURSEMENTS
(i) Subject to the following clauses (ii) and (iii), the escrow agreement
shall provide for disbursements to Optionees in accordance with a schedule
attached thereto and prepared in accordance with Section 5.2(b)(ii) and (iii).
(ii) If an Optionee forfeits his rights to any payments from the escrow,
the Company shall give written notice thereof contemporaneously to the escrow
agent and the Optionee by certified or registered mail (in the case of the
Optionee, to the last known address of the Optionee on the records of the
Company), stating the reason for such forfeiture and the amount thereof. The
escrow agent shall disburse the amount stated in such notice to the Company
thirty (30) days after receipt thereof unless prior to such time the escrow
agent receives written notice of objection from the Optionee. If a notice of
objection is received, the escrow agent shall disburse such funds only upon
order of a court of competent jurisdiction or upon written instructions signed
by both the Company and the Optionee.
(iii) If an Optionee or his successor in interest becomes entitled to a
payment from the escrow prior to the time stated in the schedule, the Optionee
or such successor shall give written notice thereof contemporaneously to the
escrow agent and the Company by certified or registered mail, stating the reason
for such accelerated payment and the amount thereof. The escrow agent shall
disburse the amount stated in such notice to the Optionee or such successor
thirty (30) days after receipt thereof unless prior to such time the escrow
agent receives written notice of objection from the Company. If a notice of
objection is received, the escrow agent shall disburse such funds only upon
order of a court of competent jurisdiction or upon written instructions signed
by both the Company and the Optionee.
5.4 PARACHUTE PAYMENTS
In the event that the aggregate present value of the payments to an
Optionee under this Plan, and any other plan, program, or arrangement maintained
by the Company (a Subsidiary or, if applicable, a Parent) constitutes an "excess
parachute payment" (within the meaning of Section 280G(b)(1) of the Code) and
the excise tax on such payment would cause the net parachute payments (after
taking into account federal, state and local income and excise taxes) to which
the Optionee otherwise would be entitled, to be less than what the Optionee
would have netted (after taking into account federal, state and local income
taxes) had the present value of his total parachute payments equaled $1.00 less
than three times his "base amount" (within the meaning of Section 280G(b)(3)(A)
of the Code), the Optionee's total "parachute payments" (within the meaning of
Section 280G(b)(2)(A) of the Code) shall be reduced (by the minimum possible
amount) so that their aggregate present value equals $1.00 less than three times
such base amount. For purposes of this calculation, it shall be assumed that the
Optionee's tax rate will be the maximum marginal federal, state and local income
tax rate on earned income, with such maximum federal rate to be computed with
regard to Section 1(g) of the Code, if applicable. In the event that the
Optionee and the Company or any successor to the Company's Business are unable
to agree as to the amount of the reduction described above, if any, the Optionee
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 payments as parachute payments) by the
Company regarding federal income tax or employee benefit matters and such law
firm or accounting firm shall determine, at the Company's expense, the amount of
such reduction and such determination shall be final and binding upon the
Optionee and the Company or such successor.
6. ADMINISTRATION
6.1 COMPENSATION COMMITTEE
The Plan shall be administered by the Committee which shall consist of at
least three directors of the Company, appointed by the Board and holding office
at the pleasure of the Board. All Committee members shall be members of the
Board. All members of the Committee must be "disinterested persons," as such
term is described in Rule 16b-3 adopted by the Securities and Exchange
Commission under the Exchange Act, if and as such Rule is in effect and, to the
extent required by Section 162(m) of the Code and the Regulations promulgated
thereon, an "outside director" within the meaning thereof.
6.2 DUTIES AND POWERS OF COMMITTEE
It shall be the duty of the Committee to conduct the general administration
of the Plan in accordance with its terms and provisions. The Committee shall
have the power to interpret the Plan and the Option Agreements and to adopt such
rules for the administration, interpretation and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
6.3 MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a telephonic or other meeting or by a
memorandum or other written instrument signed by a majority of the Committee .
6.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee may receive such compensation for their services
as members as may be determined by the Board. All expenses and liabilities
incurred by members of the Committee in connection with the administration of
the Plan shall be borne by the Company. The Committee may employ attorneys,
consultants, accountants, appraisers, or other persons. The Committee, the
Company and its officers and directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Optionees, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Options, and all members of the Committee shall be fully protected by the
Company in respect to any such action, determination or interpretation.
7. OTHER PROVISIONS
7.1 EFFECTIVE DATE
(a) EFFECTIVE DATE. The Plan shall become effective as of the date of the
closing of the sale by the Company of shares of Common Stock to the public (the
"Effective Date") and shall continue in effect until March 31, 2002 or until the
Change in Control Date, whichever is sooner; provided, that termination of the
Plan shall not affect the rights of any Optionee with respect to Options granted
or Restricted Shares acquired contemporaneously with or prior to such
termination. Notwithstanding anything herein or in any Option Agreement to the
contrary, Options granted hereunder shall not vest and may not be exercised
prior to the Effective Date, and, in the event that the Effective Date has not
occurred on or prior to July 1, 1992 (or such later date as determined by the
Board in its sole discretion), all Options granted prior to such date shall be
null and void and of no effect, retroactive to the date of grant, and the Plan
shall be null and void and of no effect, retroactive to the date of Board
approval.
(b) EFFECT OF CERTAIN AMENDMENTS. The amendments approved by the Board of
Directors on March 22, 1995, other than the amendments to sections 2.1, 3(b) and
6.1 hereof, shall be effective only with respect to Options granted after such
date, provided, however, that the Committee may enter into agreements with
Optionees whose options were granted prior to such date to make such amendments
applicable, in whole or in part, to such Options.
7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board; provided,
however, that, except as provided in Section 2.2, no amendment shall be
effective unless approved by the affirmative vote of a majority of the votes
eligible to be cast at a meeting of stockholders of the Company held within
twelve (12) months of the date of adoption of such amendment, where such
amendment will:
(a) increase the number of Shares as to which Options may be granted under
the Plan;
(b) change the class of persons eligible to participate in the Plan;
(c) change the minimum purchase price of Shares pursuant to Options as
provided herein;
(d) extend the maximum period for granting or exercising Options provided
herein; or
(e) otherwise materially increase the benefits accruing to Optionees under
the Plan.
From and after the Effective Date, neither the amendment, suspension nor
termination of the Plan shall, without the consent of the Optionee, alter or
impair any rights or obligations under any Option theretofore granted. No
Options may be granted during any period of suspension nor after termination or
expiration of the Plan.
7.3 EFFECT OF PLAN UPON OTHER COMPENSATION AND INCENTIVE PLANS
The adoption of the Plan shall not affect any other compensation or
incentive plans in effect for the Company or any Subsidiary. Nothing in the Plan
shall be construed to limit the right of the Company or any Subsidiary to
establish any other forms of incentives or compensation for Employees of the
Company or any Subsidiary.
7.4 REGULATIONS AND OTHER APPROVALS; GOVERNING LAW
(a) The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Delaware
without giving effect to the choice of law principles thereof.
(b) The obligation of the Company to sell or deliver Shares with respect to
Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
(c) The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority or to obtain
the tax benefits under the applicable provisions of the Code and regulations
promulgated thereunder for Employees granted Incentive Stock Options.
(d) Each Option is subject to the requirement that, if at any time the
Committee determines, in its sole discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Committee.
(e) In the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act, and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required by the Securities
Act or regulations thereunder, and the Committee may require any individual
receiving Shares pursuant to the Plan, as a condition precedent to receipt of
such Shares, to represent to the Company in writing that the Shares acquired by
such individual are acquired for investment only and not with a view to
distribution. The certificate for such shall include any legend that the
Committee deems appropriate to reflect any restrictions on transfer.
7.5 WITHHOLDING OF TAXES
No later than the date as to which an amount first becomes includable in
the gross income of an Optionee for Federal income tax purposes with respect to
any Option granted under the Plan, the Optionee shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law or the Company to be
withheld with respect to such amount. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company, a
Parent and any Subsidiary shall, to the extent permitted by law have the right
to deduct any such taxes from any payment of any kind otherwise due to the
Optionee. In its discretion, the Committee may permit Optionees to satisfy
withholding obligations by delivering previously owned Shares or by electing to
have Shares withheld.
7.6 NO RIGHT TO CONTINUED EMPLOYMENT
Nothing in the Plan or in any Option Agreement shall confer upon any
Optionee any right to continue in the employ of the Company, a Parent or any
Subsidiary or shall interfere with or restrict in any way the right of the
Company, a Parent and any Subsidiary, which are hereby expressly reserved, to
remove, terminate or discharge any Optionee at any time for any reason
whatsoever, with or without Cause.
7.7 TITLES; CONSTRUCTION
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan. The masculine pronoun
shall include the feminine and neuter and the singular shall include the plural,
when the context so indicates.
PRIOR TO AMENDMENT AND RESTATEMENT, SECTION 5, WHICH WILL CONTINUE TO
GOVERN CURRENTLY OUTSTANDING AWARDS OF STOCK OPTIONS AND RESTRICTED SHARES,
FORMERLY PROVIDED AS FOLLOWS:
5. CHANGE IN CONTROL PROVISIONS
In the event of a Change in Control, (a) all outstanding Options not
previously exercisable and vested shall immediately become fully exercisable and
vested, and (b) the transferability and forfeiture restrictions applicable to
any Restricted Shares to the extent not already lapsed, shall lapse and no
longer be applicable, and such Shares shall be deemed fully vested and owned by
the Optionee.
"Change in Control" shall mean the occurrence of any of the following
events at a time when New York Life Insurance Company, A New York mutual life
insurance company, or any successor thereto is not a Parent:
(i) any "person," as such term is used in Section 13(d) and 14(d) of the
Exchange Act, (other than the Company or a Related Entity, without the approval
of the Board, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power for the election of
directors of the Company's then outstanding securities;
(ii) during any period of two consecutive years beginning on or after the
effective date of the Plan, individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated by
a person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv)) whose election by the Board
or nomination for election by the Company's shareholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved (unless the approval of the election or
nomination for election of such new directors was in connection with an actual
or threatened election or proxy contest), cease for any reason to constitute at
least a majority thereof;
(iii) the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (x) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than eighty percent (80%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (y) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as defined above in clause (i)) acquires more than fifty
percent (50%) of the combined voting power for the election of directors of the
Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets or any transaction having a similar
effect.
<PAGE>
FIRST AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
RECITALS
A. Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1992 Stock Option Plan (the "1992 Plan"), which was amended and restated on
March 22, 1995 and approved by the stockholders on May 24, 1995.
B. On March 24, 1999, the Board of Directors of the Corporation approved
certain amendments to the 1992 Plan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this First Amendment to the
1992 Plan (the "First Amendment") shall be as defined in the 1992 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "EARLY RETIREMENT". The definition
of the term "Early Retirement" in Section 1 of the 1992 Plan is amended by
inserting at the end of clause (ii) the additional language set forth below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
3. AMENDMENT TO SECTION 1, DEFINITION OF "NORMAL RETIREMENT". The
definition of the term "Normal Retirement" in Section 1 of the 1992 Plan is
amended by inserting at the end of clause (ii) the additional language set forth
below:
, provided, however, that a non-qualified deferred compensation plan shall
not be deemed to be a pension plan for purposes of this definition.
4. AMENDMENT TO SECTION 1, DEFINITION OF "PLAN". The definition of the term
"Plan" in Section 1 of the 1992 Plan is amended by deleting such definition in
its entirety and replacing it with the language set forth below:
"Plan" shall mean this Express Scripts, Inc. Amended and Restated 1992
Stock Option Plan, as amended from time to time.
5. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
1992 Plan is amended to read as follows in its entirety:
The maximum number of Shares that may be issued or transferred pursuant to
Options under this Plan shall be 2,380,000, which has been adjusted to reflect
the stock split effected on October 30, 1998. The Company shall reserve such
number of Shares for the purposes of the Plan out of its authorized but unissued
Shares or out of Shares held in the Company's treasury, or partly out of each.
If any Shares that have been subject to an Option cease to be subject thereto,
or any Restricted Shares received by an Optionee upon the exercise of an Option
are forfeited to the Company in accordance with the Option Agreement, such
Shares may again be the subject of Options hereunder.
6. AMENDMENT TO SECTION 2.2, CHANGES IN COMPANY'S SHARES. Section 2.2 of
the 1992 Plan is hereby amended by inserting at the end of the single paragraph
of such section the additional language set forth below:
and adjustments of the limitation in Section 3(b) of the maximum number of
Shares subject to Options that may be granted to any Employee.
7. AMENDMENT TO SECTION 3, ELIGIBILITY FOR OPTION GRANTS. Section 3 of the
1992 Plan is hereby amended by deleting paragraph (b) in its entirety and
replacing it with the language set forth below to reflect the stock split
effected on October 30, 1998:
(b) determine the number of Shares to be subject to each Option granted to
such selected Employees; provided, that in no event shall Options be granted to
any Employee in excess of 800,000;
8. AMENDMENT TO SECTION 4.4, METHOD OF EXERCISE. Section 4.4 of the 1992
Plan is hereby amended by deleting the second sentence thereof and replacing it
with the language set forth below:
The purchase price for any Shares purchased pursuant to the exercise of an
Option shall be paid in full upon such exercise in cash, by check or, at the
discretion of the Committee and upon such terms and conditions as the Committee
shall approve, by transferring previously owned Shares to the Company (including
by way of attestation of the Optionee's ownership of such Shares), having Shares
withheld or exercising pursuant to a "cashless exercise" procedure, or any
combination thereof.
9. AMENDMENT TO SECTION 6.1, COMPENSATION COMMITTEE. Section 6.1 of the
1992 Plan is hereby amended by deleting such section in its entirety and
replacing it with the language set forth below:
6.1 COMPENSATION COMMITTEE
The Plan shall be administered by the Committee which shall consist of at
least three directors of the Company, appointed by the Board and holding office
at the pleasure of the Board. All Committee members shall be members of the
Board.
10. EFFECTIVE DATE OF THE FIRST AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this First Amendment shall be March 24, 1999. This First
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999, and, if not
approved by the stockholders, this First Amendment shall be null and void.
<PAGE>
SECOND AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
RECITALS
A Express Scripts, Inc. (the "Corporation") has an Amended and Restated
1992 Stock Option Plan (the "1992 Plan"), which was amended and restated on
March 22, 1995 and approved by the stockholders on May 24, 1995.
B. On March 24, 1999, the Board of Directors of the Corporation approved
certain amendments to the 1992 Plan (the "First Amendment").
C. On March 24, 1999, the Board approved certain additional amendments to
the 1992 Plan pursuant to the Employment Agreement dated as of April 1, 1999
between the Corporation and Barrett A. Toan.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Second Amendment to the
1992 Plan (the "Second Amendment") shall be as defined in the 1992 Plan.
2. AMENDMENT TO SECTION 1, DEFINITION OF "CHANGE IN CONTROL". The
definition of the term "Change in Control" in Section 1 of the 1992 Plan is
hereby amended by adding the following sentence to the end of such definition:
Notwithstanding anything to the contrary herein, "Change in Control" or any
other substantially similar term that is defined in the Employment Agreement
shall have the meaning given such term in the Employment Agreement in order to
give effect to the provisions of such Agreement.
3. AMENDMENT TO SECTION 1, DEFINITION OF "EMPLOYMENT AGREEMENT". The
definition of the term "Employment Agreement" is hereby added to Section 1 of
the 1992 Plan as set forth below:
"Employment Agreement" shall mean that certain employment agreement
effective as of April 1, 1999 between Barrett A. Toan and Express Scripts, Inc.,
as such agreement may be amended from time to time.
4. AMENDMENT TO SECTION 4.2. Section 4.2 of the 1992 Plan is hereby amended
by adding a new Section 4.2(e) as set forth below:
(e) EMPLOYMENT AGREEMENT. To the extent that the provisions of Section
4.2(c), Section 4.2(d) or any Option Agreement evidencing outstanding Options or
Restricted Shares conflict with any provisions of the Employment Agreement, the
Employment Agreement shall govern as to Options granted, and Restricted Shares
issued, to the employee named therein.
5. AMENDMENT TO SECTION 5.1. Section 5.1 of the 1992 Plan is hereby amended
by deleting such section in its entirety and replacing it with the language set
forth below:
5.1 IMPACT OF CHANGE OF CONTROL EVENT
Except as otherwise provided in the Employment Agreement with respect to
Options granted, and Restricted Shares issued, to the employee named therein and
notwithstanding any other provision of the Plan to the contrary, in the event of
a Change in Control (i) all outstanding Options, whether or not previously
exercisable and vested, shall terminate immediately and become null and void on
the Change in Control Date, and (ii) any Restricted Shares shall be redeemed by
the Company and canceled as of the Change in Control Date; and in either case
the Company shall pay such Optionee the amount, if any, determined in accordance
with Section 5.2 in lieu of such Options or Restricted Shares.
6. AMENDMENT TO SECTION 5.4. Section 5.4 of the 1992 Plan is hereby amended
by adding to the end of such Section the sentence set forth below:
To the extent that the provisions of this Section 5.4 or any Option
Agreement evidencing outstanding Options or Restricted Shares conflict with any
provisions of the Employment Agreement, the Employment Agreement shall govern as
to Options granted, and Restricted Shares issued, to the employee named therein.
7. AMENDMENT TO GRANDFATHER CLAUSE. The grandfather provision that
immediately follows Section 7.7 of the 1992 Plan is hereby amended by deleting
the italicized lead-in thereto and replacing it with the language set forth
below:
PRIOR TO AMENDMENT AND RESTATEMENT, SECTION 5, WHICH WILL CONTINUE TO
GOVERN CURRENTLY OUTSTANDING AWARDS OF STOCK OPTIONS AND RESTRICTED SHARES
(EXCEPT AS TO OPTIONS AND RESTRICTED SHARES HELD BY THE EMPLOYEE NAMED IN THE
EMPLOYMENT AGREEMENT), FORMERLY PROVIDED AS FOLLOWS:
8. EFFECTIVE DATE OF THE SECOND AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Second Amendment shall be March 24, 1999. This Second
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999 or any
adjournment thereof, and, if not approved by the stockholders, this Second
Amendment shall be null and void.
<PAGE>
APPENDIX III
EXPRESS SCRIPTS, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
1. PURPOSE; DEFINITIONS.
The purpose of the Plan is to increase the proprietary and vested interest
of the Non-Employee Directors of the Company in the growth and performance of
the Company by granting them Options.
Whenever the following terms are used in the Plan, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean the following:
(i) the first date on which both of the following conditions shall exist:
(A) New York Life Insurance Company ("New York Life") shall have ceased to be a
Parent, and (B) a "person" (as such term is used in Section 13(d) and 14(d) of
the Exchange Act), other than the Company or a Related Entity is the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the combined voting power for the election of directors of the Company's
then outstanding securities;
(ii) the shareholders of the Company approve a plan of complete liquidation
of the Company; or
(iii) the shareholders of the Company approve an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets
or any transaction having a similar effect.
"Change in Control Date" shall mean, in the case of a Change in Control
defined in clause (i) or (ii) of the definition thereof, the date on which the
event occurs, and in the case of a Change in Control defined in clause (iii) of
the definition thereof, the date on which the transaction closes.
"Change in Control Price" shall mean, in a Change in Control transaction in
connection with which New York Life receives consideration for the transfer or
cancellation of its voting securities, the per share amount received by New York
Life; and in the case of any other Change in Control transaction, the greater of
the highest Fair Market Value or the highest price per share paid in a bona fide
transaction related to such Change in Control at any time during the 60 days
immediately preceding the Change in Control Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Company" shall mean Express Scripts, Inc., a Delaware corporation, and any
successor corporation.
"Effective Date" shall have the meaning set forth in Section 7.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" per Share as of a particular date shall mean:
(i) the closing sales price per Share on a national securities exchange for
the last preceding date on which there was a sale of Shares on such exchange;
(ii) if clause (i) does not apply and the Shares are then quoted on the
National Association of Securities Dealers Automated Quotation system (known as
"NASDAQ"), the closing price per Share as reported on such system for the last
preceding date on which a sale was reported;
(iii) if clause (i) or (ii) does not apply and the Shares are then traded
on an over-the-counter market, the average of the closing bid and asked prices
for the Shares in such over-the-counter market for the last preceding date on
which such bid and asked prices were quoted; or
(iv) if the Shares are not then listed on a national securities exchange or
traded in an over-the-counter market, such value as the Board in its discretion
may determine. "Non-Employee Director" shall mean a director of the Company who
is not an employee of the Company, a Parent or a Subsidiary and has not, within
one year immediately preceding the determination of such director's eligibility,
received any award under any plan of the Company, a Parent or a Subsidiary that
entitles the participants therein to acquire stock, stock options or stock
appreciation rights of any such company (other than any other plan under which
participants' entitlements are governed by provisions meeting the requirements
of Rule 16b-3(c)(2)(ii) promulgated under the Exchange Act).
"Option" shall mean an option to purchase Shares granted pursuant to the
Plan. Options granted under the Plan are not intended to be "incentive stock
options" within the meaning of Section 422 of the Code.
"Option Agreement" shall mean an Option Agreement to be entered into
between the Company and an Optionee, which shall set forth the terms and
conditions of the Options granted to such Optionee, and shall be substantially
in the form attached hereto as Exhibit A.
"Optionee" shall mean a Non-Employee Director to whom an Option has been
granted pursuant to the Plan.
"Parent" shall mean any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of the corporations (other
than the Company), or if each group of commonly controlled corporations, then is
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities in one or more of the other corporations
in such chain representing fifty percent (50%) or more of the combined voting
power for the election of directors for such corporation.
"Payment Date" shall mean a date not later than ten (10) business days
following the Change in Control Date.
"Plan" shall mean this Express Scripts, Inc. 1992 Stock Option Plan for
Outside Directors, as hereinafter amended from time to time.
"Related Entity" shall mean a Parent, a Subsidiary or any employee benefit
plan (including a trust forming a part of such Plan) maintained by the Company,
a Parent or a Subsidiary.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Share" shall mean a share of the Company's Class A Common Stock, .01 par
value.
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company, if each such corporation (other than
the last corporation in the unbroken chain), or if each group of commonly
controlled corporations, then owns fifty percent (50%) or more of the total
combined voting power in one of the other corporations in such chain.
2. SHARES SUBJECT TO THE PLAN
2.1 SHARES SUBJECT TO PLAN
The maximum number of Shares that may be issued or transferred pursuant to
Options under this Plan shall be 98,000. The Company shall reserve such number
of Shares for the purposes of the Plan, out of its authorized but unissued
Shares or out of Shares held in the Company's treasury, or partly out of each.
If any Shares that have been subject to an Option cease to be subject thereto,
such Shares may again be the subject of Options hereunder.
2.2 CHANGES IN COMPANY'S SHARES
In the event that the outstanding Shares are hereafter changed into or
exchanged for a different number or kind of shares or other securities of the
Company, or of another corporation, by reason of reorganization, merger or other
subdivision, consolidation, recapitalization, reclassification, stock split,
issuance of warrants or rights, stock dividend, combination of shares or similar
event, appropriate adjustments shall be made by the Board in the number and kind
of Shares subject to and which may be subject to Options under this Plan, and
the purchase price per Share, to prevent dilution or enlargement of the benefits
granted to, or available for, Optionees, including adjustments of the
limitations in Section 2.1 of the maximum number and kind of shares which may be
issued hereunder as Shares.
3. ELIGIBILITY FOR OPTION GRANTS
Each individual who is a Non-Employee Director on the Effective Date shall
receive an Option to purchase 14,000 Shares as of such date. Thereafter, any
other individual who is elected or appointed to the office of director as a
Non-Employee Director after the Effective Date, shall receive an Option to
purchase 14,000 Shares as of the date of the first meeting of the Board which
such individual attends in such capacity.
4. TERMS OF OPTIONS AND SHARES
4.1 OPTION AGREEMENT
Options shall be granted only pursuant to an Option Agreement, which shall
be executed by the Optionee and an authorized officer of the Company and which
shall contain such terms and conditions as the Board shall determine, consistent
with the Plan.
4.2 TERMS
The Options granted hereunder shall have the following terms and
conditions:
(a) PRICE. The purchase price for the Shares subject to an Option shall be
one hundred percent (100%) of the Fair Market Value of a Share as of the date
the Option is granted.
(b) TERM. The term of an Option shall be ten years from the date that it is
granted.
(c) VESTING. Subject to the provisions of Section 4.2(d) and Section 5, an
Option shall become exercisable in installments on a cumulative basis at a rate
of one-third (1/3) each year, beginning on the first anniversary of the date of
grant, until the date such Option expires or is terminated.
(d) TERMINATION OF SERVICE AS NON-EMPLOYEE DIRECTOR. Except as provided in
this Section 4.2(d), all outstanding Options held by an Optionee terminate
immediately if such individual ceases to be a Non-Employee Director for any
reason other than death or total disability, provided that, if the Optionee has
attained age sixty-five (65) at the time of such cessation, the portion of his
outstanding Options that have not become exercisable as of such date in
accordance with Section 4.2(c) shall terminate immediately, and the remaining
portion, if any, shall remain exercisable for a period of three months following
such cessation, and shall thereafter terminate. If an Optionee ceases to be a
Non-Employee Director due to his death or total disability, all outstanding
Options held by such Optionee shall immediately become fully exercisable to the
extent not so exercisable, shall remain exercisable for a period of three months
following such cessation, and shall thereafter terminate. Notwithstanding the
foregoing, no provision in this Section 4.3(d) shall extend the exercise period
of an Option beyond its original term. All determinations as to whether a
Non-Employee Director has become totally disabled shall be made by the Board
upon the basis of such evidence as it deems necessary or desirable, and shall be
final and binding on all interested persons.
4.3 NON-TRANSFERABILITY
No Option granted under the Plan shall be transferable by the Optionee to
whom granted otherwise than by will or the laws of descent and distribution, and
an Option may be exercised during the lifetime of such Optionee only by the
Optionee or his guardian or legal representative. The terms of such Option shall
be binding upon the beneficiaries, executors, administrators, heirs and
successors of the Optionee.
4.4 METHOD OF EXERCISE
The exercise of an Option shall be made only by a written notice delivered
in person or by mail to the Secretary of the Company at the Company's principal
executive office, specifying the number of Shares to be purchased and
accompanied by full payment therefor and otherwise in accordance with the Option
Agreement pursuant to which the Option was granted. The purchase price for any
Shares purchased pursuant to the exercise of an Option shall be paid in full
upon such exercise in cash, by check or, at the discretion of the Board and upon
such terms and conditions as the Board shall approve, by transferring previously
owned Shares to the Company, having Shares withheld or exercising pursuant to a
"cashless exercise" procedure, or any combination thereof. Any Shares
transferred to the Company as payment of the purchase price under an Option
shall be valued at their Fair Market Value on the day preceding the date of
exercise of such Option. If requested by the Board, the Optionee shall deliver
the Option Agreement evidencing the Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Option
Agreement to the Optionee. Not less than one hundred (100) Shares may be
purchased at any time upon the exercise of an Option unless the number of Shares
so purchased constitutes the total number of Shares then purchasable under the
Option or the Board determines otherwise in its sole discretion.
4.5 RIGHTS AS STOCKHOLDER
No Optionee shall be deemed for any purpose to be or to have the rights and
privileges of the owner of any Shares subject to any Option unless and until (a)
the Option shall have been exercised pursuant to the terms thereof, and (b) the
Company shall have issued the Shares to the Optionee.
5. CHANGE IN CONTROL PROVISIONS
Notwithstanding anything herein to the contrary, in the event of a Change
in Control, all outstanding options, whether or not previously exercisable and
vested, shall terminate immediately and become null and void on the Change in
Control Date, and the Company shall pay such Optionee an amount equal to the
excess, if any, of the Change in Control Price over the purchase price for the
shares subject to the option, in cash on the Payment Date.
6. ADMINISTRATION
The Plan shall be administered by the Board. Subject to the provisions of
the Plan, the Board shall be authorized to interpret the Plan, to establish,
amend, and rescind any rules and regulations relating to the Plan and to make
all other determinations necessary or advisable for the administration of the
Plan; provided, however, that the Board shall have no discretion with respect to
the selection of directors to receive Options under the Plan, the number of
Shares subject to any such Options, the purchase price thereunder or the timing
of grants of Options under the Plan. The determinations of the Board in the
administration of the Plan, as described herein, shall be final and conclusive.
The Secretary shall be authorized to implement the Plan in accordance with its
terms and to take such actions of a ministerial nature as shall be necessary to
effectuate the intent and purposes thereof.
7. OTHER PROVISIONS
7.1 EFFECTIVE DATE
(a) EFFECTIVE DATE. The Plan shall become effective as of the date of the
closing of the sale by the Company of shares of Common Stock to the public (the
"Effective Date") and shall continue in effect until March 31, 2002 or until the
Change in Control Date, whichever is sooner; provided, that termination of the
Plan shall not affect the right of any Optionee with respect to options granted
prior to such termination. Notwithstanding anything herein or in any Option
Agreement to the contrary, Options granted hereunder shall not vest and may not
be exercised prior to the Effective Date, and, in the event that the Effective
Date has not occurred on or prior to July 1, 1992 (or such later date as
determined by the Board in its sole discretion), all Options granted prior to
such date shall be null and void and of no effect, retroactive to the date of
grant, and the Plan shall be null and void and of no effect, retroactive to the
date of Board approval.
(b) EFFECT OF CERTAIN AMENDMENTS. The amendments approved by the Board of
Directors on March 22, 1995, shall be effective only with respect to Options
granted after such date.
7.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board; provided,
however, that, except as provided in Section 2.2, no amendment shall be
effective unless approved by the affirmative vote of a majority of the votes
eligible to be cast at a meeting of stockholders of the Company held within
twelve (12) months of the date of adoption of such amendment, where such
amendment will: (a) increase the number of Shares as to which Options may be
granted under the Plan, either individually or in the aggregate;
(b) change in any respect the class of persons who constitute Non-Employee
Directors eligible to participate in the Plan;
(c) change the requirement of Section 4.2(a) that the Option be priced at
Fair Market Value;
(d) extend the maximum period for granting or exercising Options provided
herein; or
(e) otherwise materially increase the benefits accruing to Optionees under
the Plan. The provisions of Sections 3 and 4 may not be amended more than once
every six months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act of 1974, as amended, or the rules or regulations
promulgated under either statute.
From and after the Effective Date, neither the amendment, suspension nor
termination of the Plan shall, without the consent of the Optionee, alter or
impair any rights or obligations under any Option theretofore granted. No
Options may be granted during any period of suspension nor after termination or
expiration of the Plan.
7.3 REGULATIONS AND OTHER APPROVALS; GOVERNING LAW
(a) The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the laws of the State of Delaware
without giving effect to the choice of law principles thereof.
(b) The obligation of the Company to sell or deliver Shares with respect to
Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Board.
(c) The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority.
(d) Each Option is subject to the requirement that, if at any time the
Board determines, in its sole discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the Board.
(e) In the event that the disposition of Shares acquired pursuant to the
Plan is not covered by a then current registration statement under the
Securities Act, and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required by the Securities
Act or regulations thereunder, and the Board may require any individual
receiving Shares pursuant to the Plan, as a condition precedent to receipt of
such Shares, to represent to the Company in writing that the Shares acquired by
such individual are acquired for investment only and not with a view to
distribution. the certificate for such shall include any legend that the Board
deems appropriate to reflect any restrictions on transfer.
7.4 TITLES; CONSTRUCTION
Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of the Plan. The masculine pronoun
shall include the feminine and neuter and the singular shall include the plural,
when the context so indicates.
PRIOR TO AMENDMENT AND RESTATEMENT, SECTION 5, WHICH WILL CONTINUE TO
GOVERN CURRENTLY OUTSTANDING AWARDS OF STOCK OPTIONS AND RESTRICTED SHARES,
FORMERLY PROVIDED AS FOLLOWS:
5. CHANGE IN CONTROL PROVISIONS
In the event of a Change in Control, (a) all outstanding Options not
previously exercisable and vested shall immediately become fully exercisable and
vested, and (b) the transferability and forfeiture restrictions applicable to
any Restricted Shares to the extent not already lapsed, shall lapse and no
longer be applicable, and such Shares shall be deemed fully vested and owned by
the Optionee.
"Change in Control" shall mean the occurrence of any of the following
events at a time when New York Life Insurance Company, A New York mutual life
insurance company, or any successor thereto is not a Parent:
(i) any "person," as such term is used in Section 13(d) and 14(d) of the
Exchange Act, (other than the Company or a Related Entity, without the approval
of the Board, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
fifty percent (50%) or more of the combined voting power for the election of
directors of the Company's then outstanding securities;
(ii) during any period of two consecutive years beginning on or after the
effective date of the Plan, individuals who at the beginning of such period
constitute the Board, and any new directors (other than a director designated by
a person who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv)) whose election by the Board
or nomination for election by the Company's shareholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was previously so approved (unless the approval of the election or
nomination for election of such new directors was in connection with an actual
or threatened election or proxy contest), cease for any reason to constitute at
least a majority thereof;
(iii) the shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (x) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than eighty percent (80%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (y) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as defined above in clause (i)) acquires more than fifty
percent (50%) of the combined voting power for the election of directors of the
Company's then outstanding securities; or
(iv) the shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets or any transaction having a similar
effect.
<PAGE>
FIRST AMENDMENT TO
EXPRESS SCRIPTS, INC.
AMENDED AND RESTATED 1992 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
RECITALS
1. Express Scripts, Inc. (the "Company") has an Amended and Restated 1992
Stock Option Plan for Outside Directors (the "Plan") which was amended and
restated on March 22, 1995 and approved by the stockholders on May 24, 1995.
2. On January 24, 1996, based on the recommendation of the Compensation
Committee of the Board of Directors of the Company (the "Board"), the Board
approved an increase in the number of stock options granted to the Company's
outside directors.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this First Amendment to the
Plan (the "First Amendment") shall be as defined in the Plan.
2. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
Plan is amended by deleting the figure "98,000" in the first sentence thereof
and inserting in lieu thereof the figure "192,000."
3. AMENDMENT TO SECTION 3, ELIGIBILITY FOR OPTION GRANTS. Section 3 of the
Plan is hereby amended by deleting such section in its entirety and replacing it
with the language set forth below:
Each individual who is first elected or appointed to the office of director
as a Non-Employee Director on or after the effective date of this First
Amendment shall receive an Option to purchase 24,000 Shares as of the date of
the first meeting of the Board which such individual attends in such capacity.
In addition, each individual who was first elected or appointed to the office of
director as a Non-Employee Director prior to the effective date of this First
Amendment (as hereinafter defined) and is still serving in such capacity shall
receive an Option to purchase 10,000 Shares as of the effective date of this
First Amendment, such Option to be in addition to any Options previously granted
to such Non-Employee Director.
4. AMENDMENT TO SECTION 4.2(C), VESTING. Subsection 4.2(c) of the Plan is
hereby amended by deleting much subsection in its entirety and replacing it with
the language set forth below:
(c) VESTING. Subject to provisions of Section 4.2 (d) and Section 5, an
Option shall become exercisable in installments on a cumulative basis at a rate
of one-fifth (1/5) each year, beginning on the first anniversary of the date of
grant, until the date such Option expires or is terminated; provided, HOWEVER,
that additional Options for 10,000 shares granted pursuant to the second
sentence of Section 3 hereof shall be vested in two installments of 5,000 Shares
each on June 16, 1996, and on June 16, 1997.
5. EFFECTIVE DATE OF THE FIRST AMENDMENT; SHAREHOLDER APPROVAL. The
effective date of this First Amendment shall be January 24, 1996. This First
Amendment shall be submitted for the approval of the shareholders of the
Corporation at the next annual meeting thereof on May 22, 1996, and if not
approved by the shareholders this First Amendment and any options granted
pursuant hereto prior to such approval shall be null and void.
<PAGE>
SECOND AMENDMENT TO
EXPRESS SCRIPTS, INC. AMENDED AND RESTATED 1992 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
RECITALS
A. Express Scripts, Inc. (the "Company") has an Amended and Restated 1992
Stock Option Plan for Outside Directors (the "Plan"), which was amended and
restated on March 22, 1995 and approved by the stockholders on May 24, 1995, and
further amended on January 24, 1996 and approved by the stockholders on May 22,
1996.
B. On January 27, 1999, based on the recommendation of the Compensation
Committee of the Board of Directors of the Company (the "Board"), the Board
approved additional awards of stock options to be granted to each of the
Company's outside directors.
AMENDMENT
1. DEFINITIONS. Capitalized terms set forth in this Second Amendment to the
Plan (the "Second Amendment") shall be as defined in the Plan.
2. AMENDMENT TO SECTION 2.1, SHARES SUBJECT TO PLAN. Section 2.1 of the
Plan is amended by deleting the phrase "192,000 Shares" in the first sentence
thereof and inserting in lieu thereof the figure "384,000 Shares", to reflect
the stock split effected on October 30, 1998.
3. AMENDMENT TO SECTION 3, ELIGIBILITY FOR OPTION GRANTS. Section 3 of the
Plan is hereby amended by deleting such section in its entirety and replacing it
with the language set forth below:
(a) Each individual who was a Non-Employee Director on the original
Effective Date of this Plan received an Option to purchase 28,000 Shares (as
adjusted to reflect the stock split effected on October 30, 1998) as of such
date;
(b) Each individual who was first elected or appointed to the office of
director as a Non-Employee Director prior to the effective date of the First
Amendment to this Plan and was still serving in such capacity on the effective
date of said First Amendment received an Option to purchase 20,000 Shares (as
adjusted to reflect the stock split effected on October 30, 1998), as of the
effective date of the First Amendment to this Plan (the "First Amendment
Additional Options"), such First Amendment Additional Options being in addition
to any Options previously granted to such Non-Employee Director;
(c) Each individual who is first elected or appointed to the office of
director as a Non-Employee Director on or after the effective date of the First
Amendment to the Plan shall receive an Option to purchase 48,000 Shares (as
adjusted to reflect the stock split effected on October 30, 1998), as of the
date of the first meeting of the Board which such individual attends in such
capacity; and
(d) Each individual who was first elected or appointed to the office of
director as a Non-Employee Director prior to the effective date of the Second
Amendment and is still serving in such capacity on the effective date of said
Second Amendment shall receive an Option to purchase 2,500 Shares as of the
effective date of said Second Amendment (the "Second Amendment Additional
Options"), such Second Amendment Additional Options to be in addition to any
Options previously granted to such Non-Employee Director.
4. AMENDMENT TO SECTION 4.2(C), VESTING. Subsection 4.2(c) of the Plan is
hereby amended by deleting such subsection in its entirety and replacing it with
the language set forth below:
(c) VESTING. Subject to provisions of Section 4.2 (d) and Section 5, an
Option shall become exercisable in installments on a cumulative basis at a rate
of one-fifth (1/5) each year, beginning on the first anniversary of the date of
grant, until the date such Option expires or is terminated; PROVIDED, HOWEVER,
that:
(i) the First Amendment Additional Options shall be vested in two
installments of 10,000 Shares each on June 16, 1996, and on June 16, 1997; and
(ii) the Second Amendment Additional Options shall vest in three
installments of 833, 833 and 834 on January 27, 2000, January 27, 2001 and
January 27, 2002, respectively.
5. EFFECTIVE DATE OF THE SECOND AMENDMENT; STOCKHOLDER APPROVAL. The
effective date of this Second Amendment shall be January 27, 1999. This Second
Amendment shall be submitted for the approval of the stockholders of the
Corporation at the next annual meeting thereof on May 26, 1999, and if not
approved by the stockholders this Second Amendment and any Second Amendment
Additional Options granted pursuant hereto prior to such approval shall be null
and void.
