STOCKHOLDER PROPOSALSProxy Item No. 3:
PROPOSAL TO ADOPT AN AMENDMENT TO THE BYLAWS
TO PERMIT STOCKHOLDERS TO CALL A SPECIAL MEETING
The board of directors unanimously recommends approval of an amendment to the Third Amended and Restated Bylaws of Express Scripts, Inc. (the “Bylaws”) that would permit holders of at least 35% of the voting power of the Company’s outstanding capital stock to call a special meeting of stockholders. Currently, special meetings of the stockholders may be only called by the chairman of the board or the chief executive officer or by resolution of the board of directors.
The board of directors believes that special meetings should be called only in extraordinary circumstances. Considering that special meetings are expensive for the Company and potentially disruptive to its normal business operations, matters requiring stockholder input should generally be considered at the annual meeting of stockholders. Accordingly, the board of directors believes that a small minority of stockholders should not be permitted to call an unlimited number of special meetings for any reason. Therefore, the board of directors believes that establishing an ownership threshold of 35%, along with certain procedural requirements and limitations, in order for stockholders to call a special meeting achieves a reasonable balance between enhancing stockholder rights and adequately protecting stockholder interests.
The proposed amendment to the Bylaws contains a number of procedural requirements for stockholders requesting such a meeting, such as provisions that a stockholder desiring to call a special meeting should provide information that is required for presenting stockholder proposals at annual meetings under the Company’s existing advance notice Bylaw provisions. The amended Bylaws would also include exceptions designed to prevent duplicative and unnecessary meetings. For example, a special meeting would not be held if:
| • | | the stockholders making the request do not comply with the requirements of the Bylaws; |
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| • | | in the case of a special meeting called by stockholders to elect nominees to the board, no nominee meets the eligibility criteria in the Bylaws; |
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| • | | the proposal in the request is not a proper subject for stockholder action under applicable law; |
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| • | | the request is received during a specified period prior to the time when the next annual meeting is expected to be held; |
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| • | | a substantially similar item (as determined in good faith by the board, a “Similar Item”) was presented at a meeting held within 120 days before the date of the request; |
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| • | | the board of directors called or calls for an annual or special meeting of stockholders to be held within 120 days of the date of the request and the business to be conducted at such meeting includes a Similar Item; or |
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| • | | the request is made in a manner that involves a violation of SEC proxy rules or other applicable law. |
The preceding description of the Bylaw amendment is only a summary and qualified by reference to the complete text, involving Sections 1.2, 1.11 and 1.12 of the Bylaws, which is set forth in Appendix A to this Proxy Statement.
The amendment to the Bylaws will become effective upon approval by the stockholders.
The board of directors unanimously recommends a vote FOR the amendment of the Bylaws to permit stockholders to call a special meeting.
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Proxy Item No. 4:
NON-BINDING VOTE ON EXECUTIVE COMPENSATION
Section 14A of the Securities Exchange Act requires that we include in this proxy statement a non-binding stockholder vote on our executive compensation as described in this proxy statement.
We encourage stockholders to review the Compensation Discussion & Analysis, or CD&A, beginning on page [*]. The CD&A provides additional details on our executive compensation program, including our philosophy and the objectives underpinning our executive compensation program, the individual elements of our executive compensation program and how our executive compensation plans are administered.
The board of directors believes that the executive compensation as disclosed in the CD&A, tabular disclosures, and other narrative executive compensation disclosures in this proxy statement aligns with our comparator group pay practices and coincides with our compensation philosophy. The board of directors strongly endorses the Company’s executive compensation program and recommends that stockholders vote in favor of the following resolution:
RESOLVED, that the stockholders approve the compensation of the named executive officers, as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis section and the tabular and narrative disclosure included on pages[*]to [*]of the Company’s 2011 annual meeting proxy statement.
Because the vote is advisory, it will not be binding upon the board of directors or the Compensation Committee and neither the board nor the committee will be required to take any action as a result of the outcome of the vote on this proposal. The board of directors values the opinions of the Company’s stockholders as expressed through their votes and other communications. Although the resolution is non-binding, the board of directors and the Compensation Committee will consider the outcome of the advisory vote on executive compensation and those opinions when making future compensation decisions.
The board of directors unanimously recommends a vote FOR the approval of the Company’s executive compensation.
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Proxy Item No. 5:
NON-BINDING VOTE ON THE FREQUENCY OF VOTES ON EXECUTIVE COMPENSATION
In accordance with the requirements of Section 14A of the Exchange Act, we are providing stockholders with the opportunity to vote, on a non-binding basis, on whether the advisory vote on executive compensation (Proxy Item No. 4 above) should occur every one, two or three years. The board of directors unanimously recommends that the advisory vote on executive compensation should occur every three years, for the following reasons:
| • | | As discussed in the CD&A, our compensation program rewards performance, with an emphasis on long-term performance. The value of the long-term incentive awards (stock options, restricted stock units and performance shares) depends on the Company’s performance over a multi-year performance period. A vote held every three years provides the stockholders a better opportunity to assess whether the compensation program achieves its objectives; and |
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| • | | We take a consistent approach to our carefully designed compensation programs, and we do not make frequent changes to it. Therefore, a frequent vote on executive compensation does not provide us useful input. Additionally, an advisory vote every three years gives the board of directors and the Compensation Committee appropriate time to thoughtfully consider the results of the vote and to implement any desired changes. |
Although the vote is non-binding, the board of directors and the Compensation Committee will take the results into account when reviewing whether any changes should be made to our compensation program and policies. In the periods between the advisory votes, the stockholders will have the opportunity to provide feedback on executive compensation through other means — for example, when we seek stockholder approval for new employee equity compensation plans, such as the 2011 Long-Term Incentive Plan (see Proxy Item No. 6 below), or when we wish to materially amend them. Further, as discussed under “Corporate Governance — Communicating with the Board of Directors,” we provide stockholders an opportunity to communicate directly with the board of directors, including on issues of executive compensation.
The board of directors unanimously recommends a vote to hold non-binding votes on executive compensation EVERY THREE YEARS.
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Proxy Item No. 6:
APPROVAL AND RATIFICATION OF THE EXPRESS SCRIPTS, INC.
2011 LONG TERM INCENTIVE PLAN (“2011 LTIP”)
The Board of Directors of the Company has adopted the 2011 LTIP for employees and non-employee directors of the Company and its affiliates, subject to stockholder approval. The 2011 LTIP will become effective as of June 1, 2011, subject to the approval and ratification by the Company’s stockholders at the meeting.
The 2011 LTIP provides for the grant of stock options, both incentive stock options and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other awards to eligible individuals. A summary of the principal provisions of the 2011 LTIP is set forth below. The summary is qualified by reference to the full text of the 2011 LTIP, which is attached as Appendix B to this Proxy Statement.
The Board believes that the 2011 LTIP will promote the success and enhance the value of the Company by linking the personal interests of participants to those of the Company’s stockholders and by providing participants with an incentive for outstanding performance. The Board believes it is in the best interest of the Company and its stockholders to approve the 2011 LTIP.
Summary of the Express Scripts, Inc. 2011 LTIP
The purpose of the 2011 LTIP is to motivate key personnel to produce a superior return to the Company’s stockholders by offering these individuals an opportunity to benefit from stock appreciation through stock ownership. The 2011 LTIP is intended to reward high levels of corporate performance and to facilitate the recruiting and retention of key personnel.
All full-time and part-time employees (including officers and directors who are employees) and non-employee directors (except with respect to grants of incentive stock options) of the Company and its affiliates will be eligible to participate in the 2011 LTIP at the discretion of the Compensation Committee. Approximately 12,900 individuals are currently eligible to participate in the 2011 LTIP. The Compensation Committee will make awards based on, among other factors, an individual’s capacity for contributing to the future growth and profitability of the Company. Each award will be evidenced by an agreement or certificate setting forth the terms and conditions of the award, including the term of the award, which will not be greater than ten years; provided, however, that the Compensation Committee may, in its discretion, grant awards with a longer term to individuals who are located outside the United States. All awards are non-transferable unless the agreement or certificate permits the transfer to the participant’s successor upon the participant’s death. The Board (which may delegate the determination to a committee of the Board) may determine that each individual who is elected or appointed to the office of director as a non-employee director receive an award (other than incentive stock options) as compensation. In determining the level and terms of such awards, the Board may consider such factors as compensation practices of comparable companies with respect to directors, consultants’ recommendations and such other information as the Board may deem appropriate.
The Compensation Committee administers the 2011 LTIP and grants awards under the 2011 LTIP, except with respect to awards for non-employee directors, in which case the Board administers the 2011 LTIP. The Compensation Committee has the power to interpret the 2011 LTIP, to determine the terms of the agreements or certificates, and to make all other determinations necessary or advisable for the administration of the 2011 LTIP. In addition, the Compensation Committee may delegate all or any part of its authority under the 2011 LTIP to one or more committees, or to senior managers of the Company, in each case to the extent permitted by Delaware law; provided that, determinations regarding the timing, pricing, amount, and terms of any award to participants who are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, shall be made only by the Compensation Committee, subject to certain limitations. No such delegation may be made that would cause awards or other transactions under the 2011 LTIP to cease to be exempt from Section 16(b) of the Exchange Act or cause an award not to qualify for, or to cease to qualify for, the favorable treatment under Section 162(m) of the Internal Revenue Code, or the “Code”. The Compensation Committee may revoke such delegation at any time.
The Compensation Committee shall not have the right, without stockholder approval, to:
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| • | | reduce or decrease the purchase price for an outstanding stock option or stock appreciation right, |
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| • | | cancel an outstanding stock option or stock appreciation right for the purpose of replacing or re-granting such stock option or stock appreciation right with a purchase price that is less than the original purchase price, |
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| • | | extend the expiration date of a stock option or stock appreciation right, |
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| • | | deliver payment in exchange for the cancellation of a stock option, the purchase price of which exceeds the fair market value of the shares underlying such stock option, |
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| • | | modify, amend, or waive the terms and conditions of awards to persons who are considered “reporting persons” for purposes of Section 16 of the Exchange Act, other than on account of death, disability, retirement, change in control, or a termination of employment in connection with a business transfer, or |
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| • | | waive or amend any terms, conditions, restrictions, or limitations on an award to a person who is not a “reporting person” for purposes of Section 16 of the Exchange Act, except to the extent that the terms and conditions which are modified, amended, or waived, relate to no more than five percent (5%) of the number of shares initially available under the 2011 LTIP. |
Any authority granted to the Compensation Committee may also be exercised by the Board or another committee of the Board, except to the extent that the grant or exercise of such authority would cause an award to cease to qualify for the favorable treatment under Section 162(m) of the Code.
The maximum number of shares available for awards under the 2011 LTIP will be Thirty Million (30,000,000) shares of Common Stock. Stock options and stock appreciation rights awarded will reduce the number of shares available for awards by one share for every one share subject to such award; provided that stock appreciation rights that may be settled only in cash will not reduce the number of shares available for awards. Awards of restricted stock, restricted stock units, performance shares, and other awards settled in shares will reduce the number of shares available for awards by one share for every one share awarded, up to twenty percent (20%) of the total number of shares available; beyond that, restricted stock, restricted stock units, performance shares, and other awards settled in shares will reduce the number of shares available for awards by three shares for every one share awarded. Restricted stock units that may be settled only in cash will not reduce the number of shares available for awards. Shares issued under the 2011 LTIP may be authorized and unissued shares or issued shares held as treasury shares. Shares purchased on the open market will not increase the shares available under the 2011 LTIP.
The following will not be applied to the share limitations:
| • | | dividends or dividend equivalents paid in cash in connection with outstanding awards, |
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| • | | awards which by their terms may be settled only in cash, |
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| • | | any shares subject to an award under the plan which award is forfeited, cancelled, terminated, expires or lapses for any reason, and |
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| • | | shares and any awards that are granted through the settlement, assumption, or substitution of outstanding awards previously granted, or through obligations to grant future awards, as the result of a merger, consolidation, or acquisition of the employing company with or by the Company. |
The full amount of any grants of options or SARs are counted against the total share authorization and any shares surrendered in connection with the exercise, whether to cover the exercise price, taxes or otherwise (i.e., net shares transactions), are not reusable. However, shares surrendered to cover taxes in connection with vesting of restricted stock, restricted stock units, performance shares or other awards (excluding options and SARs) do not count against the authorization and, as a result, are reusable.
The Company has previously made grants under the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended, the Express Scripts, Inc. Amended and Restated 1992 and 1994 Stock Option Plans, and the Express Scripts, Inc. Amended and Restated 1992 Stock Option Plan for Outside Directors (the “1992, 1994, and 2000 Plans”). The 1992, 1994, and 2000 Plans will remain in effect, but grants pursuant to the 1992, 1994, and 2000 Plans will not be made after the effective date of the 2011 LTIP. All grants and awards that are made under the 1992, 1994, and 2000 Plans will be governed by the terms of such plans.
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As of [*], 20[*], [*] shares remained available for issuance under the 1992, 1994, and 2000 Plans and no shares are available for issuance under any other/preceding plan, except with respect to outstanding awards. In addition, shares remaining under the 1992, 1994, and 2000 Plans will not be utilized for grants or awards under the 2011 LTIP, and all such unissued shares will be cancelled. Set forth below is a table which summarizes the equity grants made by the Company under 1992, 1994, and 2000 Plans for the last three fiscal years, excluding time based restricted stock which vested and non-qualified stock option exercises, during fiscal years 2008, 2009 and 2010:
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| | | 2008 | | 2009 | | 2010 |
| Non-Qualified Stock Option Granted | | | 3,675,688 | | | | 4,838,710 | | | | 2,499,483 | |
| Time-Based Restricted Stock Granted | | | 239,458 | | | | 343,048 | | | | 170,429 | |
| Performance-Based Restricted Stock Granted | | | 158,800 | | | | 233,032 | | | | 107,070 | |
| Time-Based Restricted Stock Forfeited | | | 157,708 | | | | 53,684 | | | | 60,510 | |
| Performance-Based Restricted Stock Forfeited | | | 45,576 | | | | 14,610 | | | | 27,404 | |
| Non-Qualified Stock Option Forfeited | | | 1,119,798 | | | | 464,768 | | | | 541,333 | |
| Performance-Based Restricted Stock Vested | | | — | | | | 298,774 | | | | 379,526 | |
No participant may receive any combination of awards relating to more than 1,000,000 shares (subject to adjustment) in the aggregate, or a cash-based bonus award with a value that exceeds $10,000,000 in the aggregate, in any fiscal year of the Company under the 2011 LTIP.
Types of Awards
General
The Compensation Committee has the discretion to award options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and other awards.
Options
Options may be either incentive stock options or non-qualified stock options. Only non-qualified stock options may be granted to non-employee directors. The purchase price of the option may not be less than 100% of the fair market value of the shares on the grant date, which generally means the closing sales price for the Common Stock on such date. The purchase price is payable in full at the time of exercise, provided that, to the extent permitted by law and in accordance with rules adopted by the Compensation Committee, participants may simultaneously exercise options and sell the shares thereby acquired pursuant to a brokerage or similar relationship and use the proceeds from such sale to pay the purchase price of such shares. The purchase price may be paid in cash or, if the Compensation Committee so permits, through delivery or tender to the Company of shares held, either actually or by attestation, by the participant or through a net or cashless form of exercise as permitted by the Compensation Committee, or, if the Compensation Committee so permits, a combination thereof, unless otherwise provided in the agreement or certificate. Further, the Compensation Committee, in its discretion, may approve other methods or forms of payment of the purchase price.
Each such award that vests solely on the basis of the passage of time (and not on the basis of any performance standards) will not vest more rapidly than ratably over a period of approximately three years from the grant date beginning on or about the first anniversary of the grant date. Such an award that vests based on performance standards may, in the discretion of the Compensation Committee, vest as rapidly as immediate vesting on or about the first anniversary of the grant date. Vesting of such award may be accelerated upon certain events as provided in a certificate or agreement.
A participant may not hold incentive stock options with a fair market value (determined as of the date of grant) in excess of $100,000 in the year in which they are first exercisable if such limitation is necessary to qualify the option as an incentive stock option. If, when an incentive stock option is granted, the participant possesses more that 10% of the total voting power of all of the stock of the Company and its subsidiaries, the option price for such incentive stock option will be at least 110% of the fair market value of the shares subject to the option on the grant date, and such option will expire five years after the grant date.
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Stock Appreciation Rights
Stock appreciation rights entitle the participant, subject to the terms and conditions determined by the Compensation Committee, to all or a portion of the excess of the fair market value of a specified number of shares on the exercise date over a specified price, which will not be less than 100% of the fair market value of the shares on the grant date. A stock appreciation right may be granted in connection with a previously or contemporaneously granted option, or independent of any option. If issued in connection with an option, the Compensation Committee may impose a condition that its exercise cancels the connected option and that exercise of the connected options cancels the stock appreciation right. Each stock appreciation right may be exercisable in whole or in part according to the agreement or certificate. Except as otherwise provided in the agreement or certificate, upon exercise of a stock appreciation right, the participant will receive cash, stock or a combination of cash and stock (as determined by the Compensation Committee if not otherwise specified in the award) as promptly as practicable after such exercise. The agreement or certificate may limit the amount or percentage of the total appreciation on which payment may be made in the event of the exercise of a stock appreciation right. Each such award that vests solely on the basis of the passage of time (and not on the basis of any performance standards) will not vest more rapidly than ratably over a period of approximately three years from the grant date beginning on or about the first anniversary of the grant date. Such an award that vests based on performance standards may, in the discretion of the Compensation Committee, vest as rapidly as immediate vesting on the first anniversary of the grant date. The vesting of such award may be accelerated upon certain events as provided in a certificate or agreement.
Performance Shares
Performance shares entitle the participant to future payments based upon the achievement of performance targets (as described below) established in writing by the Compensation Committee. The agreement or certificate may establish that a portion of the maximum amount of an award will be paid for performance that exceeds the minimum target but falls below the maximum target and will provide for the timing of such payment. The agreement or certificate may permit an acceleration of the performance period and an adjustment of performance targets and payments with respect to some or all of the performance shares awarded to a participant, upon such terms and conditions as will be set forth in the agreement or certificate, upon the occurrence of certain events, which may include a fundamental change, the participant’s death or disability, a change in accounting practices of the Company or its affiliates, a reclassification, stock dividend, stock split or stock combination, or other event as provided in the 2011 LTIP. A “fundamental change” generally means a dissolution or liquidation of the Company, a sale of substantially all of the Company’s assets, a merger or consolidation of the Company, regardless of whether the Company is the surviving entity, or a statutory share exchange. To the extent cash is distributed, a performance share earned after the conclusion of the performance period will have a value equal to the fair market value of a share of Common Stock on the last day of the performance period. Such an award will vest or be earned no more rapidly than immediate vesting on the first anniversary of the grant date, except as may be provided in a certificate or agreement.
Participants holding performance shares will have no voting rights with respect to such awards and will have no dividend rights with respect to shares subject to such awards other than as the Compensation Committee so provides, in its discretion, in an agreement or certificate; provided, that, any such dividends will be subject to such restrictions and conditions as the Compensation Committee may establish with respect to the performance shares and will be payable only at the same time as the underlying performance shares may become earned, vested, and payable.
Restricted Stock and Restricted Stock Units
All or any part of any restricted stock or restricted stock unit award may be subject to such conditions and restrictions as may be established by the Compensation Committee, and set forth in the applicable agreement or certificate, which may include, but are not limited to, continuous service with the Company, a requirement that a participant pay a purchase price for such award, the achievement of specific performance goals, and/or applicable securities laws restrictions. During any period during which such an award is restricted and subject to a substantial
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risk of forfeiture, (i) participants holding restricted stock may exercise full voting rights with respect to such shares and will be entitled to receive all dividends and other distributions paid with respect to such shares while they are so restricted and (ii) participants holding restricted stock units will have no voting rights with respect to such awards and will have no dividend rights with respect to shares subject to such restricted stock units other than as the Compensation Committee so provides, in its discretion, in an agreement or certificate. Any dividends or dividend equivalents may be paid currently or may be credited to a participant’s account and may be subject to such restrictions and conditions as the Compensation Committee may establish.
Each such award that vests solely on the basis of the passage of time (and not on the basis of any performance standards) will not vest more rapidly than ratably over a period of approximately three years from the grant date beginning on the first anniversary of the grant date, or, in the case of an award that vests based on performance standards, such award may, in the discretion of the Compensation Committee, vest as rapidly as immediate vesting on the first anniversary of the award grant date; provided, however, that up to five percent (5%) of the shares initially available under the 2011 LTIP may be granted as restricted stock awards that vest more rapidly than ratably over such three-year period or immediately following such one-year period, as applicable. The vesting of a restricted stock or restricted stock unit award may be accelerated upon certain events as provided in a certificate or agreement.
Other Awards
The Compensation Committee may also grant other awards in its sole discretion, including, without limitation, those awards pursuant to which a cash bonus may be made or shares may be acquired in the future, such as awards denominated in stock, stock units, securities convertible into stock and phantom securities.
Performance Conditions
The Compensation Committee may require the satisfaction of certain performance goals as a condition to the grant or vesting of any award under the 2011 LTIP.
Performance-Based Awards
If the Compensation Committee determines at the time any award is granted to a participant that such participant is, or is likely to be as of the end of the tax year in which the Company would claim a tax deduction in connection with such award, a “covered employee” within the meaning of Section 162(m)(3) of the Code, then the Compensation Committee may provide that the terms applicable to performance-based awards under the 2011 LTIP as described herein are applicable. The Compensation Committee may provide, in its discretion, that an award granted to any other participant is subject to such terms, to the extent the Compensation Committee deems appropriate, whether or not Section 162(m) of the Code is or would be applicable with respect to such participant.
Awards under the 2011 LTIP may be made subject to the achievement of performance goals established by the Compensation Committee relating to one or more business criteria (“Performance Criteria”) pursuant to Section 162(m) of the Code. Performance Criteria may be applied to the Company, an affiliate, a parent, a subsidiary, division, business unit, corporate group or individual or any combination thereof and may be measured in absolute levels or relative to another company or companies, a peer group, an index or indices or Company performance in a previous period. Performance may be measured annually or cumulatively over a longer period of time.
Performance Criteria that may be used to establish performance goals are:
| • | | earnings or earnings per share before income tax (profit before taxes), |
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| • | | net earnings or net earnings per share (profit after tax), |
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| • | | compound annual growth in earnings per share, |
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| • | | inventory, |
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| • | | total or net operating asset turnover, |
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| • | | operating income, total stockholder return, |
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| • | | compound stockholder return, |
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| • | | return on equity, |
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| • | | average return on invested capital, |
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| • | | pre-tax and pre-interest expense return on average invested capital, which may be expressed on a current value basis, |
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| • | | sales growth, |
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| • | | operating or profit margins, |
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| • | | market share or market penetration, |
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| • | | successful transition of the Company’s clients to new claim adjudication platforms, |
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| • | | achievement of post-merger integrations goals, |
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| • | | achievement of goals related to customer service, satisfaction or retention, |
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| • | | achievement of employee diversity, satisfaction or turnover goals, |
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| • | | achievement of general sales, marketing, operating or workplan goals. |
Performance will be evaluated by excluding the effect of any extraordinary, unusual or non-recurring items that occur during the applicable performance period. The performance goals for each participant and the amount payable if those goals are met will be established in writing for each specified period of performance by the Compensation Committee no later than 90 days after the commencement of the period of service to which the performance goals relate and while the outcome of whether or not those goals will be achieved is substantially uncertain. However, in no event will such goals be established after 25% of the period of service to which the goals relate has elapsed. The performance goals will be objective. Such goals and the amount payable for each performance period if the goals are achieved will be set forth in the applicable agreement or certificate. Following the conclusion or acceleration of each performance period, the Compensation Committee will determine the extent to which (i) Performance Criteria have been attained, (ii) any other terms and conditions with respect to an award relating to such performance period have been satisfied, and (iii) payment is due with respect to a performance-based award. No amounts will be payable to any participant for any performance period unless and until the Compensation Committee certifies that the Performance Criteria and any other material terms were in fact satisfied.
The Committee may adjust downwards, but not upwards, the amount payable pursuant to such award. The applicable agreement or certificate may permit an acceleration of the performance period and an adjustment of performance targets and payments with respect to some or all of the performance-based award(s) awarded to a participant, upon such terms and conditions as set forth in the agreement or certificate, upon the occurrence of certain events, which may, but need not, include without limitation a fundamental change (described above), death or disability, a change in accounting practices of the Company or its affiliates, a reclassification, stock dividend, stock split or stock combination, or other event as provided in the 2011 LTIP. Any such acceleration or adjustment will be made only to the extent and in a manner consistent with Section 162(m) of the Code. Such an award will vest or be earned no more rapidly than immediate vesting on the first anniversary of the award grant date, except as may be provided in a certificate or agreement.
Termination of Employment
Each certificate or agreement shall set forth the extent to which the participant shall have the right to exercise and/or retain an award following termination of employment. Such provisions shall be determined in the sole discretion of the Compensation Committee, shall be included in the certificate or agreement, need not be uniform, and may reflect distinctions based on the reasons for termination.
Change in Control
The 2011 LTIP specifically prohibits the acceleration of vesting of any awards due to a change in control prior to the change in control date (as defined). The 2011 LTIP generally defines change in control as:
| • | | a change in the composition of a majority of the Board of Directors without the approval of the incumbent directors (as defined); |
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| • | | an acquisition of more than 25% of the Company’s Common Stock or voting power, except certain acquisitions by specified types of affiliates; |
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| • | | a reorganization, merger, share exchange, or consolidation, unless (i) the Company’s stockholders possess more than 50% of the surviving company’s outstanding common stock and the combined voting power of the outstanding voting stock entitled to vote in the election of directors, (ii) no person or group who did not own 25% or more of the Company’s Common Stock or the outstanding voting stock entitled to vote in the election of directors before the change in control owns 25% or more of the common stock or the outstanding voting stock entitled to vote in the election of directors of the surviving company, and (iii) at least a majority of the board of directors of the surviving company were members of the incumbent directors of the Company before the change in control; |
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| • | | the sale or disposition of all or substantially all of the Company’s assets; or |
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| • | | a stockholder-approved liquidation or dissolution of the Company which is commenced. |
Under the 2011 LITP, the change in control date is, for the first four bulleted-items above, the date on which the event occurs, and, for fifth bulleted-item, the date on which the Company commences such liquidation or dissolution. The complete definitions of change in control and change in control date appear in Sections 2(g) and 2(h), respectively, of the 2011 LTIP, which should be reviewed for a complete statement of its terms.
Miscellaneous Provisions
Appropriate adjustments in the aggregate number and type of securities that may be issued, represented, and available for awards, in the limitations on the number and type of securities that may be issued to an individual participant, in the number and type of securities and amount of cash subject to awards then outstanding, in the option purchase price as to any outstanding options, in the exercise price as to any outstanding stock appreciation rights and, subject to the acceleration and adjustment of performance targets, in outstanding performance shares and payments with respect to outstanding performance shares, and comparable adjustments, if applicable, to any outstanding other award, automatically will be made to give effect to adjustments made in the number or type of shares through a fundamental change (as defined), divestiture, distribution of assets to stockholders (other than ordinary cash dividends), reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, stock combination or exchange, rights offering, spin-off or other relevant change, provided that fractional shares will be rounded to the nearest whole share, for which purpose one-half share will be rounded down to the nearest whole share.
The 2011 LTIP will remain in effect for a term of ten years following the date on which it is effective or until all shares subject to the 2011 LTIP have been purchased or acquired under the plan’s provisions, whichever occurs first, unless the 2011 LTIP is sooner terminated. The Company will withhold from any payment under the 2011 LTIP any required withholding taxes. The Board of Directors may amend, modify, terminate, or suspend the 2011 LTIP, and the Compensation Committee may amend any agreement or certificate, provided, in each instance, that any necessary approval of the stockholders is obtained and no participant’s rights are adversely affected unless otherwise permitted by an agreement or a certificate or the law. Amendments to the 2011 LTIP are subject to stockholder approval only as required by applicable law or regulation, or if the amendment increases the total number of shares available under the plan. The 2011 LTIP will be unfunded and will not require the segregation of any assets.
If any award would be considered deferred compensation as defined under Code Section 409A and would fail to meet the requirements of Code Section 409A, then such award will be null and void.
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Certain Federal Income Tax Consequences
The following is a summary of the United States federal income tax consequences that generally will arise with respect to awards granted under the 2011 LTIP and with respect to the sale of Common Stock acquired under the 2011 LTIP. This summary is based upon the provisions of the Code, and regulations promulgated thereunder, as in effect on the date of this proxy statement. Changes in the law may modify this discussion, and in some cases the changes may be retroactive. Further, this summary is not intended to be a complete discussion of all the federal income tax consequences associated with the 2011 LTIP. Accordingly, for precise advice as to any specific transaction or set of circumstances, participants should consult with their own tax and legal advisors. Participants should also consult with their own tax and legal advisors regarding the application of any state, local, and foreign taxes and any federal gift, estate, and inheritance taxes.
Incentive Stock Options
Some options may constitute “incentive stock options” within the meaning of Section 422 of the Code. If the Company grants an incentive stock option, the participant will not be required to recognize income upon the grant of the incentive stock option, and the Company will not be allowed to take a deduction.
Similarly, when the participant exercises any incentive stock options, provided the participant has not ceased to be an employee for more than three months before the date of exercise, the participant will not be required to recognize income, and the Company will not be allowed to take a deduction. For purposes of the alternative minimum tax, however, the amount by which the aggregate fair market value of Common Stock acquired on exercise of an incentive stock option exceeds the exercise price of that option generally will be an adjustment included in the participant’s alternative minimum taxable income for the year in which the incentive stock option is exercised. The Code imposes an alternative minimum tax on a taxpayer whose alternative minimum taxable income, as defined in Section 55(b)(2) of the Code, exceeds the taxpayer’s adjusted gross income.
Additional tax consequences will depend upon how long participants hold the shares of Common Stock received after exercising the incentive stock options. If a participant holds the shares for more than two years from the date of grant and one year from the date of exercise of the option, upon disposition of the shares, the participant will not recognize any ordinary income, and the Company will not be allowed to take a deduction. However, the difference between the amount the participant realizes upon disposition of the shares and the basis (i.e., the amount the participant paid upon exercise of the incentive stock option) in those shares will be taxed as a long-term capital gain or loss.
If the participant disposes of shares acquired upon exercise of an incentive stock option which he or she has held for less than two years from the date of grant or one year from the date of exercise (“Disqualifying Disposition”), the participant generally will recognize ordinary income in the year of the disposition. To calculate the amount of ordinary income that must be recognized upon a Disqualifying Disposition, make the following determinations and calculations:
| • | | determine which is smaller: the amount realized on disposition of the shares or the fair market value of the shares on the date of exercise; |
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| • | | next, subtract the basis in those shares from the smaller amount. This is the amount of ordinary income that the participant must recognize. |
To the extent that the participant recognizes ordinary income, the Company is allowed to take a deduction. In addition, the participant must recognize as short-term or long-term capital gain, depending on whether the holding period for the shares exceeds one year, any amount that the participant realizes upon disposition of those shares which exceeds the fair market value of those shares on the date the participant exercised the option. The participant will recognize a short-term or long-term capital loss, depending on whether the holding period for the shares exceeds one year, to the extent the basis in the shares exceeds the amount realized upon disposition of those shares.
As noted above, the excess of the fair market value of the shares at the time the participant exercises his or her incentive stock option over the exercise price for the shares is an item of tax preference that may be subject to the alternative minimum tax.
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Non-Qualified Stock Options
If the participant receives a non-qualified stock option, the participant will not recognize income at the time of the grant of the stock option; however, the participant will recognize ordinary income upon the exercise of the non-qualified stock option. The amount of ordinary income recognized equals the difference between (a) the fair market value of the stock on the date of exercise and (b) the amount of cash paid for the stock. The Company will be entitled to a deduction in the same amount. The ordinary income the participant recognizes will be subject to applicable tax withholding by the Company. When the participant sells these shares, any difference between the sales price and the exercise price, to the extent not already recognized as ordinary income, will be treated as a capital gain or loss.
Restricted Stock
Unless a timely 83(b) election is made, as described in the following paragraph, a participant generally will not recognize taxable income upon the grant of restricted stock because the restricted stock generally will be nontransferable and subject to a substantial risk of forfeiture. A participant will recognize ordinary income when the restrictions that impose a substantial risk of forfeiture of such shares of Common Stock or the transfer restrictions (collectively, the “Restrictions”) lapse. The amount recognized will be equal to the difference between the fair market value of such shares at such time and the original purchase price paid for the shares, if any. The ordinary income recognized by a participant with respect to restricted stock awarded under the 2011 LTIP will be subject to applicable tax withholding by the Company. If a timely 83(b) election has not been made, any dividends received with respect to Common Stock subject to the Restrictions will be treated as additional compensation income and not as dividend income.
A participant may elect, pursuant to Section 83(b) of the Code, to recognize as ordinary income the fair market value of the restricted stock upon grant, notwithstanding that the restricted stock would otherwise not be includable in gross income at that time. If such election is made within 30 days of the date of grant, then the participant would include in gross income an amount equal to the difference between the fair market value of the restricted stock on the date of grant and the purchase price paid for the restricted stock, if any. Any change in the value of the shares after the date of grant will be taxed as a capital gain or capital loss only if and when the shares are disposed of by the Participant.
The Section 83(b) election is irrevocable. If a Section 83(b) election is made and the participant then forfeits the restricted stock, the participant may not deduct as a loss the amount previously included in gross income.
A participant’s tax basis in shares of restricted stock received pursuant to the 2011 LTIP will be equal to the sum of the amount (if any) the participant paid for the Common Stock and the amount of ordinary income recognized by such participant as a result of making an 83(b) election or upon the lapse of the Restrictions. Unless a Section 83(b) election is made, the participant’s holding period for such shares for purposes of determining gain or loss on a subsequent sale will begin on the date the Restrictions on such shares lapse.
In general, the Company will be entitled to a deduction at the same time, and in an amount equal to, the ordinary income recognized by a participant with respect to shares of restricted stock awarded pursuant to the 2011 LTIP.
If, subsequent to the lapse of the Restrictions on the shares, the participant sells such shares, the difference, if any, between the amount realized from such sale and the tax basis of such shares to the participant will be taxed as a capital gain or capital loss.
Stock Appreciation Rights/Performance Shares/Restricted Stock Units
A participant generally will not recognize taxable income upon the grant of stock appreciation rights, performance shares, or restricted stock units. Instead, a participant will recognize as ordinary income, and the Company will have as a corresponding deduction, any cash delivered and the fair market value of any Common Stock delivered in payment of an amount due under the stock appreciation right, performance share, or restricted stock unit award. The ordinary income the participant recognizes will be subject to applicable tax withholding by the Company.
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Upon selling any Common Stock received by a participant in payment of an amount due under a stock appreciation right, performance share, or restricted stock unit award, the participant generally will recognize a capital gain or loss in an amount equal to the difference between the sale price of the Common Stock and the participant’s tax basis in the Common Stock.
Other Awards
The tax consequences associated with any other award granted under the 2011 LTIP will vary depending on the specific terms of such award, including whether the award has a readily ascertainable fair market value, whether or not the award is subject to forfeiture provisions or restrictions on transfer, the nature of the property to be received by the participant under the award, the applicable holding period and the participant’s tax basis.
Income Tax Rates on Capital Gain and Ordinary Income
Under current tax law, short-term capital gain and ordinary income will be taxable at a maximum federal rate of 35%. Phase outs of personal exemptions and reductions of allowable itemized deductions at higher levels of income may result in slightly higher marginal tax rates. Ordinary compensation income generally will also be subject to the Medicare tax and, under certain circumstances, a social security tax. On the other hand, long-term capital gain will be taxable at a maximum federal rate of 15%.
Section 409A of the Code
Pursuant to Section 409A of the Code, significant restrictions have been imposed on the ability to defer the taxation of compensation, including without limitation, the deferral of income pursuant to some of the arrangements described herein (e.g., performance shares). Violation of Section 409A of the Code triggers immediate inclusion in income and application of income and additional taxes.
Section 162(m) of the Code
Section 162(m) of the Code provides that no deduction will be allowed for certain remuneration with respect to a “covered employee” (as defined) to the extent such remuneration exceeds $1,000,000. Code Section 162(m) provides an exception from the deduction limit for compensation payable solely on account of the attainment of one or more performance goals, subject to certain requirements.
Section 280G of the Code and Section 4999 of the Code
Under Section 280G of the Code and Section 4999 of the Code, the Company is prohibited from deducting any “excess parachute payment” to an individual, and the individual must pay a 20% excise tax on any “excess parachute payment.” An individual’s “parachute payments” which exceed his or her average annual compensation will generally be treated as “excess parachute payments” if the present value of such payments equals or exceeds three times the individual’s average annual compensation. A payment generally may be considered a “parachute payment” if it is contingent on a change in control of the Company.
Non-United States Taxpayers
If the participant is subject to the tax laws of any country other than the United States, the participant should consult his or her own tax and legal advisors to determine the tax and legal consequences of any award received under the 2011 LTIP.
The Board of Directors recommends a vote FOR the approval and ratification of the Express Scripts, Inc. 2011 Long Term Incentive Plan.
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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table summarizes information as of December 31, 2010 relating to our equity compensation plans under which equity securities are authorized for issuance:
| | | | | | | | | | | | | |
| | | Number of securities to | | | Weighted-average | | | Number of securities remaining | |
| | | be issued upon exercise | | | exercise price of | | | available for future issuance under | |
| | | of outstanding options, | | | outstanding options, | | | equity compensation plans (excluding | |
| | | warrants and rights | | | warrants, rights | | | securities reflected in column (a)) | |
| Plan Category | | (a) | | | (b) | | | (c) | |
| Equity Compensation Plans approved by security holders | | | 13,448,222 | (1) | | $ | 27.8313 | (2) | | | 22,721,318 | (3) |
| | | | | | | | | | | | | |
| Equity Compensation Plans not approved by security holders | | | 0 | | | | 0 | | | | 0 | |
| |
| | | | | | | | | | |
| Total | | | 13,448,222 | (1) | | $ | 27.8313 | (2) | | | 22,721,318 | (3) (4) |
| | | | | | | | | | |
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| (1) | | Includes shares that were issued under our Employee Stock Purchase Plan for the month of January 2011. Does not include stock options, restricted stock or performance shares awarded since December 31, 2010. The following is a summary of our 2000 LTIP as of December 31, 2010: |
| | |
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| • | | There are 13,290,725 shares of stock to be issued upon exercise of outstanding options and SSARs, with a weight average grant price of $27.8313 and an average remaining term of 4.24 years. |
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| • | | The number of outstanding and unvested shares of restricted stock (including performance shares) granted under the 2000 LTIP is 950,279. |
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| (2) | | Shares allocated to the EDCP and shares which were issued for the month of January 2011 under our Employee Stock Purchase Plan are not included in the weighted average computation. |
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| (3) | | The number of shares available for distribution under the 2000 LTIP is increased by any shares made available as a result of forfeitures of awards made under the 2000 LTIP, or any of our Amended and Restated 1992 Stock Option Plan, Amended and Restated 1994 Stock Option Plan or Amended and Restated 1992 Stock Option Plan for Outside Directors. Includes 14,238,642 shares remaining available for future issuance under the 2000 LTIP, 5,897,544 shares remaining in the EDCP, and 2,585,132 shares remaining in the Employee Stock Purchase Plan. |
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| (4) | | As of December 31, 2010, there are 14,238,642 shares available for grant under the plan. The company expects to fund its 2011 annual grant from the existing plan, and up to 5,500,000 of these shares (with no more than 500,000 as full value grants) will be issued. Any remaining shares available for issuance after the adoption of the Company’s new 2011 LTIP will be cancelled. |
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STOCKHOLDER PROPOSAL FOR 2011 ANNUAL MEETING
Certain stockholders have submitted the proposal set forth below. The proposal has been carefully considered by our board of directors, which has concluded that its adoption would not be in our best interests or the best interests of our stockholders.For the reasons stated after the proposal, our Company’s board recommends a vote AGAINST the stockholder proposal.
The proposal and supporting statement are presented as received from the stockholders in accordance with SEC rules, and our board of directors and we disclaim any responsibility for their content. All references to “we” in the proposal and supporting statement are references to the proponents and not our other stockholders, us or our board of directors. We will furnish, orally or in writing as requested, the names, addresses and claimed stock ownership positions of the proponents of this proposal promptly upon written or oral request directed to our Corporate Secretary, Express Scripts, Inc., at One Express Way, St. Louis, Missouri 63121.
The stockholder proposal is required to be voted upon at the annual meeting only if properly presented at the meeting by one of the stockholder proponents. The proponents have informed us that each intends to present the proposal and related supporting statement at the annual meeting.
Information regarding the inclusion of proposals in the proxy statement for our 2012 annual meeting of stockholders can be found on
page [*] under “Other Matters — Future Stockholder Proposals.”
Proxy Item No. 7:
STOCKHOLDER PROPOSAL REQUESTING A REPORT ON POLITICAL CONTRIBUTIONS
Resolved, that the shareholders of Express Scripts (“Company”) hereby request that the Company provide a report, updated semi-annually, disclosing the Company’s:
| 1. | | Policies and procedures for political contributions and expenditures (both direct and indirect) made with corporate funds. |
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| 2. | | Monetary and non-monetary contributions and expenditures (direct and indirect) used to participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, and used in any attempt to influence the general public, or segments thereof, with respect to elections or referenda. The report shall include: |
| a. | | An accounting through an itemized report that includes the identity of the recipient as well as the amount paid to each recipient of the Company’s funds that are used for political contributions or expenditures as described above; and |
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| b. | | The title(s) of the person(s) in the Company who participated in making the decisions to make the political contribution or expenditure. |
The report shall be presented to the board of directors’ audit committee or other relevant oversight committee and posted on the Company’s website.
Stockholder Supporting Statement
As long-term shareholders of Express Scripts, we support transparency and accountability in corporate spending on political activities. These include any activities considered intervention in any political campaign under the Internal Revenue Code, such as direct and indirect political contributions to candidates, political parties, or political organizations; independent expenditures; or electioneering communications on behalf of federal, state or local candidates.
Disclosure is consistent with public policy, in the best interest of the company and its shareholders, and critical for compliance with federal ethics laws. Moreover, the Supreme Court’sCitizens Uniteddecision recognized the importance of political spending disclosure for shareholders when it said “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” Gaps in transparency and accountability may expose the company to reputational and business risks that could threaten long-term shareholder value.
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Express Scripts contributed at least $1.3 million in corporate funds since the 2002 election cycle. (CQ:http://moneyline.cq.com/pml/home.do and National Institute on Money in State Politics:http://www.followthemoney.org/index.phtml.)
However, relying on publicly available data does not provide a complete picture of the Company’s political expenditures. For example, the Company’s payments to trade associations used for political activities are undisclosed and unknown. In many cases, even management does not know how trade associations use their company’s money politically. The proposal asks the Company to disclose all of its political spending, including payments to trade associations and other tax-exempt organizations for political purposes. This would bring our Company in line with a growing number of leading companies, including Aetna, American Electric Power and Microsoft that support political disclosure and accountability and present this information on their websites.
The Company’s Board and its shareholders need complete disclosure to be able to fully evaluate the political use of corporate assets. Thus, we urge your support for this critical governance reform.
Directors’ Recommendation
The board of directors unanimously recommends a vote AGAINST this proposal for the reasons set forth below:
The Board of Directors and its Corporate Governance Committee have considered this proposal and concluded that its adoption is unnecessary and not in the best interests of our stockholders. While we support the transparency and accountability objectives of the proposal, we believe that the adoption of this proposal would be an unnecessary and unproductive use of the Company’s resources without a commensurate benefit as these contributions and expenditures are disclosed under our internal Corporate Contribution Disclosure Policy (as described below) and in accordance with existing disclosure requirements. Our stockholders defeated a similar proposal at last year’s annual meeting with 58% of the votes cast being against the proposal, and since that time the Company has nonetheless enhanced its disclosures as described below.
The Company has adopted a new internal Corporate Contribution Disclosure Policy. Under this policy, we disclose our policies and procedures for political contributions and expenditures made with corporate funds on our corporate website on a semi-annual basis. Further, we disclose monetary and non-monetary contributions and expenditures used to participate or intervene in any political campaign on behalf of any candidate for public office. All corporate political contributions are subject to a legal approval process, and all corporate political contributions are periodically reported to the Corporate Governance Committee of the Board of Directors. This disclosure includes any contributions made to political candidates, political parties, political committees, ballot measures and any other political entities organized and operating under Section 527 of the Internal Revenue Code.
Like many other organizations, including businesses, labor unions, and affinity groups, we believe participation in the political process through political contributions is an important and appropriate part of our business. In addition to the Corporate Contribution Disclosure Policy, the Company makes and discloses its political contributions in strict accordance with applicable laws and regulations. Where corporate funds are used for making political contributions, it is only done so where allowed by applicable law and where management has determined that such contributions will be an effective use of those funds.
All political contributions, whether by individuals, organizations, or groups, are subject to intense public scrutiny as well as regulation by federal and state governments, including detailed disclosure requirements. Additionally, all states generally require that recipients of any political contributions disclose the identity of donors and the dollar amount of the contributions. We review these requirements to ensure compliance and that our integrity procedures are effective. Reports on all of our political contributions are available on our corporate website as discussed above, upon request to our Company, or readily available today at numerous federal and state governments’ websites. For example, the Company submits periodic reports on lobbying expenditures to the Congress, which are publicly available.
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We participate in certain industry trade organizations with purposes that include, but are not limited to, enhancement of the public image of our industry, education about the industry, education about issues that affect the industry, industry best practices and standards, and leading industry products and technologies. While many of the trade organizations also engage in legislative activity related to matters that affect the industry as a whole, we do not make contributions to industry trade associations for political purposes. Moreover, because these organizations operate independently of their members and take a wide variety of positions on a number of matters, not all of which we support, disclosure of general contributions to such organizations would not provide our stockholders with a greater understanding of our strategies or philosophies or our political contributions.
In general, the Board of Directors does not support the adoption of duplicative and costly new disclosure obligations. Such disclosure would require additional time and expense, would further burden our participation in the political process and could work to our competitive disadvantage. We believe that the high level of disclosure that is already publicly available, including on the Company’s website, is sufficient to provide information to stockholders and others who are interested in the Company’s political activities. Also, we believe that the Company’s current approval and compliance procedures are sufficient to ensure accountability.
Accordingly, the Board of Directors unanimously recommends a vote AGAINST this proposal, and your proxy will be so voted if the proposal is presented unless you specify otherwise.
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OTHER MATTERS
Other Business at the Annual Meeting
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 the recommendation of management on such matters or motions, including any matters dealing with the conduct of the meeting. Certain stockholders have indicated their intention to present proposals requesting that the Company amend its bylaws to permit holders to call special meetings of stockholders. If either such proposal is properly presented, it is intended that the persons named in the proxy card will use their discretionary authority to vote against such proposal.
Future Stockholder Proposals
In accordance with our bylaws, a stockholder who, at any annual meeting of our stockholders, intends to nominate a person for election as director or present a proposal must so notify our Corporate Secretary, in writing, describing such nominee(s) or proposal and providing information concerning such stockholder and the underlying beneficial owner, if any, including, among other things, such information as name, address, occupation, shares, rights to acquire shares and other derivative securities or short interest held, and any relevant understandings or arrangements between the stockholder and beneficial owner, if any, and the reasons for and interest of such stockholder and beneficial owner, if any, in the proposal. Generally, to be timely, such notice must be received by our Corporate Secretary not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting, provided that in the event that no annual meeting was held the previous year or the date of the annual meeting has been changed by more than 30 days from the date of the previous year’s meeting, or in the event of a special meeting of stockholders called to elect directors, not later than the close of business on the tenth day following the day on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first. For our annual meeting to be held in 2009,2012, any such notice must be received by us at our principal executive offices between January 28, 20095, 2012 and February 27, 20094, 2012 to be considered timely for purposes of the 20092012 annual meeting. Any person interested in offering such a nomination or proposal should request a copy of the relevant bylaw provisions from our Corporate Secretary. These time periods also apply in determining whether notice is timely for purposes of rules adopted by the Securities and Exchange CommissionSEC relating to the exercise of discretionary voting authority, and are separate from and in addition to the Securities and Exchange Commission’sSEC’s requirements that a stockholder must meet to have a proposal included in our proxy statement.
Our bylaws also set out specific eligibility requirements that nominees for director must satisfy, which require nominees to:
| • | | complete and return a written questionnaire with respect to the background and qualification of the nominees and the background of any other person or entity on whose behalf the nomination is being made; and |
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| • | | provide a written representation and agreement that the nominee: |
| o | | will abide by the advance resignation requirements of our bylaws in connection with director elections; |
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| o | | is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such prospective nominee, if elected as a director, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to us or (2) any Voting Commitment that could limit or interfere with the nominee’s ability to comply, if elected as a director, with the nominee’s fiduciary duties under applicable law; |
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| o | | is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than us with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein; and |
| o | | would be in compliance if elected as a director and will comply with all of our applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines. |
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Stockholder proposals intended to be presented at the 20092012 annual meeting must be received by us at our principal executive office no later than December [ ], 2008,November 22, 2011, in order to be eligible for inclusion in our proxy statement and proxy relating to that meeting. Upon receipt of any proposal, we will determine whether to include such proposal in accordance with regulations governing the solicitation of proxies.
OTHER MATTERSHouseholding of Proxy Materials
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 the recommendation of management on such matters or motions, including any matters dealing with the conduct of the meeting.
HOUSEHOLDING OF PROXY MATERIALS
The Securities and Exchange CommissionSEC has adopted rules thatwhich permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statementsNotice of Internet Availability of Proxy Material with respect to two or more shareholders sharing the same address by delivering a single proxy statementNotice of Internet Availability of Proxy Material addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies. We and some brokers household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you currently receive multiple proxy statements and would prefer to participate in householding, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares. You can notify us by sending a written request to Express Scripts, Inc., Attention: Investor Relations, One Express Way, Saint Louis, Missouri 63121, or by telephone at 314.702.7516, and we will promptly deliver these documents to you or start householding following our receipt of such request.
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SOLICITATION OF PROXIESSolicitation of Proxies
We 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 therefore will be reimbursed by us. Solicitation will be made by mail and also may be made personally or by telephone, facsimile or other means by our officers, directors and employees, without special compensation for such activities. We have also hired MacKenzie Partners, Inc. to assist in the solicitation of proxies. MacKenzie will receive a fee for such services of approximately $[ ],$12,500, plus reasonable out-of-pocket expenses, which will be paid by us.
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| | By Order of the Board of Directors | | |
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| |  | | |
| | Keith J. Ebling | | |
| | Executive Vice President, General Counsel and Corporate Secretary | | |
March [*], 2011
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Appendix A
Marked Copy Showing Changes to Sections 1.2, 1.11 and 1.12 of the Third Amended and Restated Bylaws
1.2Special Meetings. (a) Subject to the rights of the holders of any series of preferred stock under the Certificate of Incorporation, as amended, of the corporation (the “Certificate of Incorporation”), special meetings of the stockholders may be called by the chairman of the Board or the chief executive officer or by resolution of Directorsthe Board, or, solely to the extent required by Section 1.2(b), by the secretary of the corporation.
Thomas M. Boudreau
Executive Vice President, Law & Strategy(b) (i) A special meeting of stockholders shall be called by the secretary upon the written request or requests (each, a “Special Meeting Request” and Corporate Secretarycollectively, the “Special Meeting Requests”) of the holders of record representing not less than thirty-five percent (35%) of the voting power of all capital stock issued and outstanding and entitled to vote on the matter or matters to be brought before the proposed special meeting (the “Requisite Percent”), subject to this Section 1.2(b) and all other applicable sections of these Bylaws (a “Stockholder Requested Special Meeting”). The secretary shall determine in good faith whether all requirements set forth in these Bylaws relating to a Stockholder Requested Special Meeting have been satisfied and such determination shall be binding on the corporation and its stockholders. For purposes of this Section 1.2(b) and for determining the Requisite Percent, a stockholder of record or a beneficial owner, as the case may be, shall be deemed to own the shares of capital stock of the corporation that such stockholder or, if such stockholder is a nominee, custodian or other agent that is holding the shares on behalf of another person (the “beneficial owner”), that the beneficial owner would be deemed to own pursuant to Rule 200(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), excluding any shares as to which such stockholder or beneficial owner, as the case may be, does not have the right to vote or direct the vote at the special meeting or as to which such stockholder or beneficial owner, as the case may be, has entered into a derivative or other agreement, arrangement or understanding that hedges or transfers, in whole or in part, directly or indirectly, any of the economic consequences of ownership of such shares. Whether shares are owned for these purposes shall be decided by the secretary in its good faith.
(ii) A Special Meeting Request shall be delivered by registered U.S. mail, return receipt requested or courier service, postage prepaid, to the attention of the secretary at the principal executive offices of the corporation. To be valid, a Special Meeting Request or Special Meeting Requests must be signed and dated by stockholders (or their duly authorized agents) representing the Requisite Percent and shall include:
April [14], 2008(1) a statement of the specific purpose(s) of the special meeting, a brief description of the business desired to be brought before the meeting, and the reasons for conducting such business at the special meeting;
(2) the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the corporation, the language of the proposed amendment);
(3) as to the stockholders requesting the special meeting and the beneficial owners, if any, on whose behalf the Special Meeting Request(s) are being made, the Proposing Stockholder Information as defined in Section 1.13(b) of these Bylaws required to be set forth in a stockholder’s notice required by Section 1.11(b) and 1.12(b) of these Bylaws, as applicable;
(4) in the case of any director nominations proposed to be presented at the Stockholder Requested Special Meeting, such other information regarding the nominees required to be provided pursuant to Section 1.11(a) of these Bylaws and required to be set forth in a stockholder’s notice required by Section 1.11(b) of these Bylaws (including, but not limited to, such other information required to be set forth in connection with a stockholder’s director nomination);
(5) in the case of any other business proposed to be conducted at the Stockholder Requested Special Meeting, such other information required to be set forth in a stockholder’s notice required by Section 1.12(b) of these Bylaws;
(6) documentary evidence that the stockholders requesting the special meeting own the Requisite Percent as of the date on which the Special Meeting Request(s) are delivered to the secretary;
52A-1
EXPRESS SCRIPTS, INC.
EMPLOYEE STOCK PURCHASE PLAN
(As amendedprovided, however, that if the stockholders of record making the request are not the beneficial owners of the shares representing the Requisite Percent, then to be valid, the Special Meeting Request(s) must also include documentary evidence (or, if not simultaneously provided with the Special Meeting Request(s), such documentary evidence must be delivered to the secretary within 10 days after the date on which the Special Meeting Request(s) are delivered to the secretary) that the beneficial owners on whose behalf the Special Meeting Request(s) are made beneficially own the Requisite Percent as of the date on which such Special Meeting Request(s) are delivered to the secretary; and restated Effective
(7) an agreement by the requesting stockholder(s) and the beneficial owner(s), if any, on whose behalf the Special Meeting Request(s) are being made, to notify the corporation immediately in the case of any disposition prior to the Stockholder Requested Special Meeting of shares of common stock of the corporation owned of record or beneficially owned, as applicable, and an acknowledgement that any such disposition shall be deemed a revocation of such Special Meeting Request, such that the number of shares disposed of shall not be included in determining whether the Requisite Percent has been reached or is maintained.
In addition, the stockholders requesting a special meeting of stockholders, the beneficial owners, if any, on whose behalf the Special Meeting Request(s) are being made, and the proposed nominees, if any, shall promptly provide any other information reasonably requested by the corporation, including as to the eligibility of any proposed nominee to serve as an independent director of the corporation and to comply with applicable law. Such stockholders, beneficial owners and nominees shall further update and supplement the information required under Section 1.2(b)(ii)(3)-(7) of these Bylaws not later than 10 days after the record date for the Offering Period Commencing Marchmeeting so that such information shall be true and correct as of the record date, and with respect to information required under Section 1.2(b)(ii)(6), as of a date not more than 5 business days before the scheduled date of the special meeting.
(iii) In determining whether a special meeting of stockholders has been requested by the record holders of shares representing in the aggregate at least the Requisite Percent, multiple Special Meeting Requests delivered to the secretary will be considered together only if each such Special Meeting Request (x) identifies substantially the same purpose or purposes of the special meeting and substantially the same matters proposed to be acted on at the special meeting (in each case as determined in good faith by the Board), and (y) has been dated and delivered to the secretary within sixty days of the earliest dated of such Special Meeting Requests.
(iv) Any requesting stockholder may revoke his, her or its Special Meeting Request at any time by written revocation delivered to the secretary at the principal executive offices of the corporation; provided, however, that if following such revocation (or any deemed revocation pursuant to Section 1.2(b)(ii)(7) above), the unrevoked valid Special Meeting Requests represent in the aggregate less than the Requisite Percent at any time prior to the Shareholder Requested Special Meeting, there shall be no requirement to hold a special meeting and the Board may, in its discretion, cancel such meeting. The first date on which unrevoked valid Special Meeting Requests constituting not less than the Requisite Percent shall have been delivered to the corporation is referred to herein as the “Request Receipt Date.”
(v) Notwithstanding the foregoing, a special meeting requested by stockholders shall not be held if:
(1) the stockholders, the beneficial owners, if any, on whose behalf the Special Meeting Request(s) are being made, or proposed nominees, if any, do not comply with the requirements of this Section 1.2(b);
(2) in the case of a Stockholder Requested Special Meeting that is called for the purpose of electing nominees to the Board, no proposed nominee meets the eligibility criteria set forth in Section 1.11(a) of these Bylaws;
(3) the Special Meeting Request relates to an item of business that is not a proper subject for stockholder action under applicable law;
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(4) the Request Receipt Date is during the period commencing ninety days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the earlier of (x) the date of the next annual meeting and (y) 30 days after the first anniversary of the date of the previous annual meeting;
(5) an identical or substantially similar item (as determined in good faith by the Board, a “Similar Item”) was presented at a meeting of the stockholders held not more than 120 days before the Request Receipt Date (for purposes of this clause (5), election or removal of directors shall be deemed to be a Similar Item with respect to all items of business involving the nomination, election or removal of directors, changing the size of the Board and filling of vacancies and/or newly created directorships resulting from any increase in the authorized number of directors);
(6) the Board has called or calls for an annual or special meeting of stockholders to be held within 120 days of the Request Receipt Date and the business to be conducted at such meeting includes a Similar Item; or
(7) the Special Meeting Request(s) was made in a manner that involved a violation of Regulation 14A under the Exchange Act, or other applicable law.
(vi) Special meetings shall be held at such date and time as specified by the Board in accordance with these Bylaws; provided; however, that a Stockholder Requested Special Meeting shall not be held more than ninety days after the Request Receipt Date.
(vii) If none of the stockholders who submitted the Special Meeting Request appears or sends a qualified representative to present the matters for consideration that were specified in the Stockholder Meeting Request, the corporation need not present such matters for a vote at such meeting, notwithstanding that proxies in respect of such matter may have been received by the corporation.
(viii) Business transacted at any Stockholder Requested Special Meeting shall be limited to (1) the purposes set forth in the valid Special Meeting Request(s) received from the Requisite Percent of record holders and (2) any additional matters that the Board of Directors determines to include in the Corporation’s notice of the meeting. Only business related to the purposes set forth in the notice of the meeting may be transacted at a special meeting called by the chairman of the Board or the chief executive officer or by resolution of the Board.
1.11Nominations of Directors. (a) Except as otherwise provided in Section 1.2(b), only persons who are nominated in accordance with the procedures set forth in this Section 1.11 shall be eligible for election by the stockholders as directors of the corporation. Nominations of persons for election to the Board may be made at a meeting of stockholders (i) pursuant to the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the meeting by or at the direction of the Board, or (iii) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the corporation who (A) is a stockholder of record at the time of giving of the notice provided for in this Section 1.11 and at the time of the meeting, (B) is entitled to vote for the election of directors at such meeting and (C) shall have complied with the procedures set forth in this Section 1.11; and except as otherwise provided in Section 1.2(b), clause (iii) shall be the exclusive means for a stockholder to make nominations of persons to the Board before or at a meeting of stockholders. No stockholder, other than the stockholders requesting a special meeting pursuant to and in compliance with Section 1.2(b), shall be permitted to submit nominations at any Stockholder Requested Special Meeting.
To be eligible to be a nominee for election or re-election as a director of the corporation, the prospective nominee (whether nominated by or at the direction of the Board or by a stockholder), or someone acting on such prospective nominee’s behalf, must deliver (in accordance with any applicable time periods prescribed for delivery of notice under this Section 1.11) to the secretary at the principal executive offices of the corporation a written questionnaire providing such information with respect to the background and qualifications of such person and the background of any other person or entity on whose behalf the nomination is being made that would be required to be disclosed to stockholders pursuant to applicable law or the rules and regulations of any stock exchange applicable to the corporation, including all information concerning such persons that would be required to be disclosed in solicitations of proxies for election of directors pursuant to and in
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accordance with Regulation 14A under the Exchange Act (which questionnaire shall be provided by the secretary upon written request). The prospective nominee must also provide a written representation and agreement, in the form provided by the secretary upon written request, that such prospective nominee: (i) will abide by the requirements of Section 1.5(b)(iii); (ii) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such prospective nominee, if elected as a director of the corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the corporation or (B) any Voting Commitment that could limit or interfere with such prospective nominee’s ability to comply, if elected as a director of the corporation, with such prospective nominee’s fiduciary duties under applicable law; (iii) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein; and (iv) would be in compliance if elected as a director of the corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation. For purposes of this Section 1.11, a “nominee” shall include any person being considered to fill a vacancy on the Board.
(b) Except as otherwise provided in Section 1.2(b), nominations by any stockholder must be made pursuant to timely notice in proper written form to the secretary of the corporation in accordance with this paragraph. To be timely, a stockholder’s notice must be delivered to and received by the secretary at the principal executive offices of the corporation (i) in the case of an annual meeting, not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 days or delayed by more than 60 days from the date of the previous year’s meeting, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or, if later, the tenth day following the day on which public disclosure (as defined in Section 1.13 hereof) of the date of the meeting is first made, and (ii) in the case of a special meeting at which the Board gives notice that directors are to be elected, not earlier than the opening of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or, if later, the tenth day following the day on which public disclosure is made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall any adjournment or postponement of a stockholders meeting or the public disclosure thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.
To be in proper written form, such stockholder’s notice to the secretary shall set forth in writing (i) as to each person whom such stockholder proposes to nominate for election or re-election as a director, (A) all information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected) as well as (B) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, on whose behalf the nomination is being made, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; (ii) as to the stockholder giving the notice and the beneficial owner on whose behalf the nomination is made, the Proposing Stockholder Information (as defined in Section 1.13 hereof); (iii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination; and (iv) a representation as to whether the stockholder or the beneficial owner, if any, intends, or is or intends to be part of a group that intends, (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of such nomination. At the request of the Board, any person nominated by the Board for election as a director shall furnish to the secretary that information required to be set
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forth in a stockholder’s notice of nomination which pertains to the nominee. The corporation may require any proposed nominee to furnish such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee. Stockholders making a nomination pursuant to this Section 1.11, beneficial owners on whose behalf the nomination is made, and nominees shall further update and supplement the information required under this Section 1.11 not later than 10 days after the record date for the meeting so that such information shall be true and correct as of the record date. Notwithstanding anything in this Section 1.11 to the contrary, in the event that the number of directors to be elected to the Board of the corporation at a stockholders meeting is increased effective at such meeting and there is no public disclosure by the corporation naming all the nominees proposed by the Board for the additional directorships at least 100 days in advance of the first anniversary of the preceding year’s annual meeting or in the event of a special meeting of stockholders called for the purpose of electing directors, a stockholder’s notice required by this Section 1.11 shall also be considered timely, but only with respect to nominees for such additional directorships, if it shall be delivered to and received by the secretary not later than the close of business on the tenth day following the day on which such public disclosure is first made by the corporation.
(c) Except as otherwise provided in Section 1.2(b), no person shall be eligible for election by the stockholders as a director unless nominated in accordance with the procedures set forth in this Section 1.11. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the person presiding over the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee in compliance with such stockholder’s representation as required by clause (b)(iv) of this Section 1.11); and if he or she shall so determine, then he or she shall so declare at the meeting that the defective nomination shall be disregarded.
1.12Stockholder Proposals. (a) At any special meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting pursuant to the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board pursuant to Section 1.2. At any annual meeting of the stockholders, only such business (other than nominations of directors, which must be made in compliance with, and shall be exclusively governed by Section 1.11) shall be conducted as shall have been brought before the meeting (i) pursuant to the corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the meeting by or at the direction of the Board, or (iii) by any stockholder of the corporation who is a stockholder of record at the time of giving of the notice provided for in this Section 1.12 and at the time of the meeting, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section 1.12; clause (iii) shall be the exclusive means for a stockholder to submit such business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the corporation’s notice of meeting) before or at an annual meeting of stockholders. No stockholder, other than the stockholders requesting a special meeting pursuant to and in compliance with Section 1.2(b), shall be permitted to submit business before or at any Stockholder Requested Special Meeting.
(b) For business properly to be brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a), the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice must be delivered to and received by the secretary at the principal executive offices of the corporation not less than 90 days nor more than 120 days in advance of the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that (i) no annual meeting was held in the previous year or (ii) the date of the annual meeting has been advanced by more than 30 days or delayed by more than 60 days from the date of the previous year’s meeting, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or, if later, the tenth day following the day on which public disclosure (as defined in Section 1.13 hereof) of the date of the meeting is first made. In no event shall any adjournment or postponement of a stockholders meeting or the public disclosure thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. To be in proper written form, such stockholder’s notice to the secretary shall set
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forth in writing (i) as to each matter the stockholder proposed to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at such meeting, and the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Bylaws of the corporation, the language of the proposed amendment), (ii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, the Proposing Stockholder Information (as defined in Section 1.13); (iii) any material interest of the stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (iv) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by the stockholder; (v) a representation that the stockholder is a holder of record of stock of the corporation, entitled to vote at such meeting, and intends to appear in person or by proxy at the meeting to propose such business; and (vi) a representation whether the stockholder or the beneficial owner, if any, intends, or is or intends to be part of a group that intends, (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation’s outstanding capital stock required to approve or adopt the proposal and/or (B) otherwise to solicit proxies from stockholders in support of such proposal. Stockholders proposing to bring business before the stockholders meeting pursuant to this Section 1.12 and beneficial owners on whose behalf the nomination is made shall further update and supplement the information required under this Section 1.12(b) not later than 10 days after the record date for the meeting so that such information shall be true and correct as of the record date.
(c) Notwithstanding anything in the Bylaws to the contrary, no business (other than the election of directors) shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1.12 or if it constitutes an improper subject for stockholder action under applicable law. The person presiding over an annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1.12 (including whether the stockholder or beneficial owner, if any, on whose behalf the proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s proposal in compliance with such stockholder’s representation as required by (b)(vi) of this Section 1.12, and, if he or she should so determine, he or she shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.
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Appendix B
Express Scripts, Inc. 2011 Long-Term Incentive Plan
1. Establishment and Purpose.Express Scripts, Inc. hereby establishes, effective June 1, 2008)
1. Purpose2011, an incentive compensation plan known as the “Express Scripts, Inc. 2011 Long-Term Incentive Plan” (“Plan”). The purpose of the Plan is to provide employeesmotivate key personnel to produce a superior return to the stockholders of the Company and its Designated Subsidiaries withAffiliates by offering such individuals an opportunity to purchase Common Stockrealize stock appreciation, by facilitating stock ownership, and by rewarding them for achieving a high level of corporate performance. This Plan is also intended to facilitate recruiting and retaining key personnel of outstanding ability.
2. Definitions.The capitalized terms used in this Plan have the meanings set forth below.
(a)“Affiliate” means any corporation that is a Subsidiary of the Company through accumulated payroll deductions. Itand, for purposes other than the grant of Incentive Stock Options, any limited liability company, partnership, corporation, joint venture, or any other entity in which the Company or any such Subsidiary owns an equity interest.
(b)“Agreement” means a written contract entered into between the Company or an Affiliate and a Participant or, in the discretion of the Committee, a written certificate issued by the Company or an Affiliate to a Participant, in either case, containing or incorporating the terms and conditions of an Award in such form (not inconsistent with this Plan) as the Committee approves from time to time, together with all amendments thereof, which amendments may be made unilaterally by the Company (with the approval of the Committee) unless such amendments are deemed by the Committee to be materially adverse to the Participant and are not required as a matter of law, or such other relevant written contract entered into between the Company or an Affiliate and a Participant and approved by the Committee.
(c)“Associate” means any full-time or part-time employee (including an officer or director who is the intentionalso an employee) of the Company or an Affiliate. Except with respect to havegrants of Incentive Stock Options, “Associate” shall also include any Non-Employee Director serving on the Company’s Board of Directors. References in this Plan to “employment” and related terms (except for references to “employee” in this definition of “Associate” or in Section 7(a)(i)) shall include the providing of services as a Non-Employee Director. Except as specifically provided herein with respect to Non-Employee Directors serving on the Company’s Board of Directors, the term “Associate” shall not include an individual who is determined in good faith by the Company to be an independent contractor. If, for any period of time, an individual has been determined in good faith by the Company not to be a common-law employee, and a court or government agency subsequently makes a determination that the individual was in fact a common-law employee during that period of time, then (i) such determination shall not entitle the individual to any retroactive rights under the Plan, qualify as an “Employee Stock Purchase Plan”and (ii) the individual’s prospective rights 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 participationdetermined solely in a manner consistentaccordance with the requirement of that sectionterms of the Code.Plan.
2. Definitions(d).“Award” means a grant made under this Plan in the form of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares or any Other Award, whether singly, in combination or in tandem.
a) “Board” shall mean(e)“Board” means the Board of Directors of the Company.
b) “Code”(f)“Cause” shall mean the willful failure by a Participant 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.
(g)“Change in Control” shall mean any of the following:
(i)Individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board;
(ii)More than 25% of the (x) combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (“Outstanding Company Voting Securities”) or (y) the then outstanding Shares of Stock
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(“Outstanding Company Common Stock”) is directly or indirectly acquired or beneficially owned (as defined in Rule 13d-3 under the Exchange Act, or any successor rule thereto) by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), provided, however, that the following acquisitions and beneficial ownership shall not constitute Changes in Control pursuant to this paragraph 2(f)(ii);
(A)any acquisition or beneficial ownership by the Company or a Subsidiary, or
(B)any acquisition or beneficial ownership by any employee benefit plan (or related trust) sponsored or maintained by the Company or one of more of its Subsidiaries.
(iii)Consummation of a reorganization, merger, share exchange or consolidation (a “Business Combination”), unless in each case following such Business Combination,
(A)all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or other governing body, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that as a result of such transaction owns the Company through one or more subsidiaries);
(B)no individual, entity or group (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, more than 25% of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors or other governing body of the entity resulting from such Business Combination, except to the extent that such individual, entity or group owned more than 25% of the Outstanding Company Common Stock or Outstanding Company Voting Securities prior to the Business Combination; and
(C)at least a majority of the members of the board of directors or other governing body of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, approving such Business Combination.
(iv)The Company shall sell or otherwise dispose of all or substantially all of the assets of the Company (in one transaction or a series of transactions).
(v)The stockholders of the Company shall approve a plan to liquidate or dissolve the Company and the Company shall commence such liquidation or dissolution.
(h)“Change in Control Date” shall mean, in the case of a Change in Control defined in clauses (i) through (iv) of the definition thereof, the date on which the event occurs, and in the case of a Change in Control defined in clause (v) of the definition thereof, the date on which the Company shall commence such liquidation or dissolution.
(i)“Code” means the Internal Revenue Code of 1986, as amended.amended and in effect from time to time, or any successor statute.
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c) “Common Stock”(j)“Committee” means the committee of directors appointed by the Board to administer this Plan. In the absence of a specific appointment, “Committee” shall mean the Common Stock (formerly Class A Common Stock), par value $0.01,Compensation Committee of the Company.Board.
d) “Company” shall mean(k)“Company” means Express Scripts, Inc., a Delaware corporation, and, unlessor any successor to all or substantially all of its businesses by merger, consolidation, purchase of assets, share exchange, reorganization or otherwise.
(l)“Disability” means that the context requires otherwise, any Designated Subsidiary.
e) “Compensation” shall mean all regular straight time gross earnings, overtime earnings, bonuses and commissions, and without reduction for contributionsParticipant has suffered physical or mental incapacity of such nature as to any 401(k) plan sponsored byprevent him from engaging in or performing the Company.
f) “Contributions” shall mean all amounts credited toprincipal duties of his customary employment or occupation on a continuing or sustained basis, provided that, if a Participant has entered into an employment agreement with the account of a participant pursuant toCompany, the Plan.
g) “Designated Subsidiary” shall mean any Subsidiary which has been designated by the Board from time to timeCommittee, in its sole discretion, may determine to substitute the definition set forth in such agreement. All determinations as eligible to participatethe date and extent of disability of any Participant shall be made by the Committee upon the basis of such evidence as it deems necessary or desirable.
(m)“Exchange Act” means the Securities Exchange Act of 1934, as amended; “Exchange Act Rule 16b-3” means Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor regulation.
(n)“Fair Market Value” as of any date means, unless otherwise expressly provided in this Plan:
(i)(A) the closing sales price of a Share on the composite tape for New York Stock Exchange (“NYSE”) listed shares, or if Shares are not quoted on the composite tape for NYSE listed shares, on the Nasdaq Global Select Market or any similar system then in use or, (B) if clause (i)(A) is not applicable, the mean between the closing “bid” and the closing “asked” quotation of a Share on the Nasdaq Global Select Market or any similar system then in use, or (C) if the Shares are not quoted on the NYSE composite tape or the Nasdaq Global Select Market or any similar system then in use, the closing sale price of a Share on the principal United States securities exchange registered under the Exchange Act on which the Shares are listed, in any case on the specified date, or, if no sale of Shares shall have occurred on that date, on the immediately preceding day on which a sale of Shares occurred, or
(ii)if clause (i) is not applicable, what the Committee determines in good faith to be 100% of the fair market value of a Share on that date.
In the case of an Incentive Stock Option, if such determination of Fair Market Value is not consistent with the then current regulations of the Secretary of the Treasury, Fair Market Value shall be determined in accordance with said regulations. The determination of Fair Market Value shall be subject to adjustment as provided in Section 13(f) hereof.
(o)“Fundamental Change” means a dissolution or liquidation of the Company, a sale of substantially all of the assets of the Company, a merger or consolidation of the Company with or into any other corporation, regardless of whether the Company is the surviving corporation, or a statutory share exchange involving capital stock of the Company.
(p)“Incentive Stock Option” means any Option designated as such and granted in accordance with the requirements of Section 422 of the Code or any successor to such section.
(q)“Incumbent Board” means the group of directors consisting of (i) those individuals who, as of the effective date of the Plan, constituted the Board; and (ii) any individuals who become directors subsequent to such effective date whose appointment, election or nomination for election by the stockholders of the Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board. The Incumbent Board shall exclude any individual whose initial assumption of office occurred (i) as a result of
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an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person (other than a solicitation of proxies by the Incumbent Board) or (ii) with the approval of the Incumbent Board but by reason of any agreement intended to avoid or settle a proxy contest.
(r)“Non-Employee Director” means a director of the Company who is not an employee of the Company, a Parent or a Subsidiary.
(s)“Non-Qualified Stock Option” means an Option other than an Incentive Stock Option.
(t)“Option” means a right to purchase Stock (or, if the Committee so provides in an applicable Agreement, Restricted Stock), including both Non-Qualified Stock Options and Incentive Stock Options.
(u)“Other Award” means an Award of Stock, an Award based on Stock other than Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units or Performance Shares, or a cash-based Award.
(v)“Parent” means a “parent corporation,” as that term is defined in Section 424(e) of the Code, or any successor provision.
(w)“Participant” means an Associate to whom an Award is made.
(x)“Performance Period” means the period of time as specified in an Agreement over which Awards are to vest or be earned.
(y)“Performance Shares” means a contingent award of a specified number of Performance Shares, with each Performance Share equivalent to one or more Shares or a fractional Share or a Unit expressed in terms of one or more Shares or a fractional Share, as specified in the Plan.applicable Agreement, a variable percentage of which may vest or be earned depending upon the extent of achievement of specified performance objectives during the applicable Performance Period.
(z)“Plan” means this 2011 Long-Term Incentive Plan, as amended and in effect from time to time.
h) “Employee”(aa)“Restricted Stock” means Stock granted under Section 10 hereof so long as such Stock remains subject to one or more restrictions.
(bb)“Restricted Stock Units” means Units of Stock granted under Section 10 hereof.
(cc)“Retirement” shall mean, except as otherwise provided in an Agreement, termination of employment after either (i) attainment of age 65, or (ii) the normal retirement age specified in the provisions of a retirement plan maintained by the Company for its employees generally.
(dd)“Senior Executive” means any personAssociate who is an employee of the Company for tax purposesand whose customary employment withbase salary is determined by reference to Salary Grades M3 and above (as such salary grades are in effect on the effective date of this Plan), or, if the Company is at least twenty (20) hours per week and more than five (5) monthsmodifies its salary grades after such effective date, in a calendar year. For purposesthe most nearly comparable salary grades for senior executives of the Plan, the employment relationship shall be treatedCompany under such modified system as continuing intact while the individual is on short term disability or other leave of absence approveddetermined by the Company. WhereCommittee in its sole discretion.
(ee)“Share” means a share of Stock.
(ff)“Stock” means the Company’s common stock, $0.01 par value per share (as such par value may be adjusted from time to time) or any securities issued in respect thereof by the Company or any successor to the Company as a result of an event described in Section 13(f).
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(gg)“Stock Appreciation Right” means a right, the value of which is determined relative to appreciation in value of Shares pursuant to an Award granted under Section 8 hereof.
(hh)“Subsidiary” means a “subsidiary corporation,” as that term is defined in Section 424(f) of the Code, or any successor provision.
(ii)“Successor” with respect to a Participant means the legal representative of an incompetent Participant and, if the Participant is deceased, the legal representative of the estate of the Participant or the person or persons who may, by bequest or inheritance, or under the terms of an Award or forms submitted by the Participant to the Committee under Section 13(h) hereof, acquire the right to exercise an Option or Stock Appreciation Right or receive cash and/or Shares issuable in satisfaction of an Award in the event of a Participant’s death.
(jj)“Term” means the period during which an Option or Stock Appreciation Right may be exercised or the period during which the restrictions placed on Restricted Stock or any other Award are in effect.
(kk)“Unit” means a bookkeeping entry that may be used by the Company to record and account for the grant of leave exceeds 90 daysStock, Units of Stock, Stock Appreciation Rights and Performance Shares expressed in terms of Units of Stock until such time as the individual’s rightAward is paid, canceled, forfeited or terminated.
(ll)“Vice President” means any Associate who is an employee of the Company and whose base salary is determined by reference to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminatedSalary Grades M1 through and including M2 (as such salary grades are in effect on the 91st dayeffective date of this Plan), or, if the Company modifies its salary grades after such leave.
i) “Enrollment Date” shall meaneffective date, in the first business day of each Participation Period.
j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
k) “Offering Date” shall mean the first business day of each Offering Periodmost nearly comparable salary grades for vice presidents of the Plan.Company under such modified system as determined by the Committee in its sole discretion.
l) “Offering Period” shall mean a period of one (1) month commencing on the first day of each calendar month except asExcept when otherwise indicated by the Company.context, reference to the masculine gender shall include, when used, the feminine gender and any term used in the singular shall also include the plural.
m) “Participation Period” shall mean a period of three (3) months commencing on January 1, April 1, July 1 and October 1 of each year except as otherwise indicated by the Company.
n) “Plan” shall mean this Employee Stock Purchase Plan.
o) “Plan Recordkeeper” shall mean a third-party vendor which may, at the discretion of the Company, be selected to administer the Plan.
p) “Purchase Date” shall mean the last day of each Offering Period of the Plan.
q) “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.
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3. Eligibility.Administration.
a) Any person who is an Employee(a) Authority of the Company as of the first Offering Date of a given Participation Period, who has continuously been an Employee for at least thirty-one (31) days, and who is not a “senior executive” of the Company, as such term may be defined from timeCommittee.The Committee shall administer this Plan or delegate its authority to time by the Board (or any committee administering the Plan in accordance with Section 13 hereof), shall be eligible to participate in Offering Periods of such Participation 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 stockand/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, each with a duration of one (1) month, with new Offering Periods commencing on the first day of each calendar month (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 durationand/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.
The Offering Periods shall be grouped in to three-month Participation Periods commencing on or about January 1, April 1, July 1 and October 1 of each year (or at such other time or times as may be determined by the Board of Directors). Employees shall be allowed to make elections with respect to their participation in the Plan with respect to each Participation Period (subject to Section 5 and the other terms hereof).
5. Participation.
a) An eligible Employee may become a participant in the Plan by enrolling through such procedures as may be provided by the Company from time to time, which may include enrollment through the Plan Recordkeeper. An enrollment in effect for a participant for a particular Participation Period will continue in effect for subsequent Participation Periods if the participant remains an eligible Employee and has not withdrawn from participation in the Plan pursuant to Section 10.
b) Payroll deductions shall commence on the first payroll following the Enrollment Date and shall end on the last payroll paid in the Participation Period to which the subscription agreement is applicable, unless sooner terminated by the participantdo so as provided in Section 103(c) hereof.
c) By enrolling The Committee shall have exclusive power (acting alone or, to the extent the Committee deems appropriate for purposes of Exchange Act Rule 16b-3, in conjunction with the full Board), subject to the limitations contained in this Plan, each participantto make Awards and to determine when and to whom Awards will be deemed to have authorizedgranted, and 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,form, amount and subject to, theother 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) Subjecteach Award, subject to the limitationsprovisions 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) (other than stock dividends which constitute, and are treated as, a change in capitalization under Section 18(a)) shall be paid to the participant as soon as practical.
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6. Method of Payment of Contributions.
a)this Plan. The participant shall elect to have payroll deductions made each pay period during the Participation 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 through such procedures as may be provided by the Company from time to time, which may include procedures provided through the Plan Recordkeeper. The change may be made at any time during a Participation Period but will not become effective sooner than the next pay period thereafter. The Board or the committee administering the Plan, at its discretion, may limit the number of participation rate changes during any Participation Period or 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 Participation 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 ninety-five percent (95%) 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 333 shares (subject to any adjustment pursuant to Section 18) and provided further that such purchase shall beCommittee, 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 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 Global Select Market or, in the event the Common Stock is listed on a different stock exchange, the fair market value per share shall be the closing sales price on such exchange on 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 Global Select 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
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with the accumulated Contributions in his or her account, subject to the limitationscontained in this Plan. The shares purchased upon exercise of an option hereunder shall be held in the participant’s account establishedPlan, may determine whether, to what extent and 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 participation in an Offering Period under the Plan at any time prior to five (5) business days prior to the Purchase Date of the Offering Period through such procedures aswhat circumstances Awards may be provided bysettled, paid or exercised in cash, Shares or other Awards or other property, or canceled, forfeited or suspended. The Committee shall have the Company from timeauthority to time including through the Plan Recordkeeper. Following such withdrawal from the Plan, no further Contributions for the purchase of shares will be made during the Participation Period and payroll deductions shall not resume at the beginning of the succeeding Participation Period unless the participant re-enrolls in the Plan. If a participant specifically requests, such participant may withdraw all, but not less than all, of the Contributions credited to his or her account under the Plan which have not been used to purchase shares of the Company’s Common Stock which will be paid to him or her as soon as practicable after the end of such Offering Period, and his or her option for the current period will be automatically terminated; otherwise, such Contributions shall be used to purchase shares of the Company’s Common Stock in the ordinary course.
b) A participant’s withdrawal from an offering will not have any effect upon his or her eligibility to participate in a succeeding Participation 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 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 theinterpret this Plan and Contributions creditedany Award or Agreement made under this Plan, 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 2,000,000 shares (adjusted for stock dividends in June 2001, June 2005 and June 2007), which amount shall be increased to 3,500,000 subject to, and effective upon, the approval of such increase by the Company’s stockholders at the Company’s 2008 Annual Meeting of Stockholders. The maximum number of shares available for purchase under the Plan shall be subject to further 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.
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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,establish, amend, waive and rescind any rules deemed desirable and appropriate forregulations relating to the administration of this Plan, to determine the Planterms and notprovisions of any Agreement entered into hereunder (not inconsistent with the Plan, to construe and interpret the Plan,this Plan), and to make all other determinations necessary or advisable for the administration of thethis Plan. The compositionCommittee may correct any defect, supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent it shall deem desirable. All determinations of the committeeCommittee in the administration of this Plan, as described herein, shall be final, binding and conclusive, including, without limitation, as to any adjustments pursuant to Section 13(f). A majority of the members of the Committee shall constitute a quorum for any meeting of the Committee. Notwithstanding the foregoing, in accordanceadministering this Plan with respect to Awards for Non-Employee Directors, the requirementsBoard shall exercise the powers of the Committee.
(b) Limitations.Notwithstanding anything herein to obtainthe contrary, the Committee shall not have the right, without stockholder approval, to (i) reduce or retaindecrease the purchase price for an outstanding Option or Stock Appreciation Right, (ii) cancel an outstanding Option or Stock Appreciation Right for the purpose of replacing or re-granting such Option or Stock Appreciation Right with a purchase price that is
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less than the original purchase price, (iii) extend the expiration date of an Option or Stock Appreciation Right, (iv) deliver payment in exchange for the cancellation of an Option, the purchase price of which exceeds the Fair Market Value of the Shares underlying such Option, (v) modify, amend, or waive the terms and conditions of Awards to persons who are considered “reporting persons” for purposes of Section 16 of the Exchange Act, other than on account of death, disability, retirement, Change in Control, or a termination of employment in connection with a business transfer, or (vi) waive or amend any terms, conditions, restrictions, or limitations on an Award to a person who is not a “reporting person” for purposes of Section 16 of the Exchange Act, except to the extent that the terms and conditions which are modified, amended, or waived, relate to no more than five percent (5%) of the number of Shares initially available exemptionunder the Plan.
(c) Delegation of Authority.The Committee may delegate all or any part of the administration of this Plan to one or more committees, or to senior managers of the Company, and may authorize further delegation by such committees to senior managers of the Company, in each case to the extent permitted by Delaware law; provided that, determinations regarding the timing, pricing, amount and terms of any Award to a “reporting person” for purposes of Section 16 of the Exchange Act shall be made only by the Committee; and provided further that, no such delegation may be made that would cause Awards or other transactions under this Plan to cease to be exempt from the operation of Section 16(b) of the Exchange Act pursuantor cause an Award intended toRule 16b-3 promulgated thereunder. To aid in the administration qualify for favorable treatment under Section 162(m) of the Plan,Code not to qualify for, or to cease to qualify for, the favorable treatment under Section 162(m) of the Code. Any such delegation may be revoked by the Committee at any time.
(d) Board Authority.Any authority granted to the Committee may also be exercised by the Board or theanother committee may appoint a Plan administrator and allocate to it certain limited responsibilities to carry out the directives of the Board, except to the extent that the grant or the committee in all phasesexercise of such authority would cause any Award intended to qualify for favorable treatment under Section 162(m) of the administrationCode to cease to qualify for the favorable treatment under Section 162(m) of the Code. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control. Without limiting the generality of the foregoing, to the extent the Board has delegated any authority under this Plan to another committee of the Board, such authority shall not be exercised by the Committee unless expressly permitted by the Board in connection with such delegation.
(e) Awards for Non-Employee Directors.The Board (which may delegate the determination to a Committee of the Board) may from time to time determine that each individual who is elected or appointed to the office of director as a Non-Employee Director receive an Award (other than Incentive Stock Options) as compensation, in whole or in part, for such individual’s services as a director. In determining the level and terms of such Awards for Non-Employee Directors, the Board may consider such factors as compensation practices of comparable companies with respect to directors, consultants’ recommendations, and such other information as the Board may deem appropriate.
4. Shares Available; Maximum Payouts.
(a) Shares Available.The maximum number of Shares available for Awards under the Plan shall be Thirty Million (30,000,000). Stock Options and Stock Appreciation Rights awarded shall reduce the number of shares available for Awards by one share for every one share subject to such Award; provided that Stock Appreciation Rights that may be settled only in cash shall not reduce the number of Shares available for Awards. Awards of Restricted Stock, Restricted Stock Units, Performance Shares, and Other Awards settled in Shares shall reduce the number of Shares available for Awards by one Share for every one Share awarded, up to twenty percent (20%) of the total number of Shares available; beyond that, Restricted Stock Restricted Stock Units, Performance Shares, and Other Awards settled in Shares shall reduce the number of Shares available for Awards by three Shares for every one Share awarded. Restricted Stock Units that may be settled only in cash shall not reduce the number of Shares available for Awards. Shares issued under this Plan may be authorized and unissued shares or issued shares held as treasury shares. Shares purchased on the open market shall not increase the Shares available under the Plan.
14. Designation(b) Shares Not Applied to Limitations.The following will not be applied to the Share limitations of Beneficiary.
a) A participantsubsection 4(a) above: (i) dividends or dividend equivalents paid in cash in connection with outstanding Awards, (ii) Awards which by their terms may designate a beneficiary who isbe settled only in cash, (iii) any Shares subject to receive shares and cash, if any, from the participant’s accountan Award under the Plan which Award is forfeited, cancelled, terminated, expires or lapses for
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any reason, and (iv) Shares and any Awards that are granted through the settlement, assumption, or substitution of outstanding awards previously granted, or through obligations to grant future awards, as the result of a merger, consolidation, or acquisition of the employing company with or by the Company. If a Participant tenders previously owned Shares or has the Company withhold Shares in satisfaction of any tax withholding requirement or payment of the purchase price of an Award, such Shares tendered or withheld will not be available again for an Award under the Plan; provided, however, that any Shares so used to satisfy tax withholdings for Restricted Stock, Restricted Stock Units, Performance Shares, or Other Awards may again be used for an Award under this Plan.
(c) Award Limitations.No Participant may receive any combination of Awards relating to more than 1,000,000 Shares in the aggregate, or a cash-based bonus Award with a value that exceeds $10,000,000 in the aggregate, in any fiscal year of the Company under this Plan (subject to adjustment under Section 13(f) hereof).
5. Eligibility.Awards may be granted under this Plan to any Associate at the discretion of the Committee.
6. General Terms of Awards.
(a) Awards.Awards under this Plan may consist of Options (either Incentive Stock Options or Non-Qualified Stock Options), Stock Appreciation Rights, Performance Shares, Restricted Stock, Restricted Stock Units, or Other Awards.
(b) Amount of Awards.Each Agreement shall set forth the number of Shares of Restricted Stock, Stock, Stock Units, or Performance Shares, or the amount of cash, subject to such Agreement, or the number of Shares to which the Option applies or with respect to which payment upon the exercise of the Stock Appreciation Right is to be determined, as the case may be, together with such other terms and conditions applicable to the Award (not inconsistent with this Plan) as determined by the Committee in its sole discretion.
(c) Term.Each Agreement, other than those relating solely to Awards of Stock without restrictions, shall set forth the Term of the Award and any applicable Performance Period, as the case may be, but in no event shall the Term of an Award or the Performance Period be longer than ten years after the date of grant; provided, however, that the Committee may, in its discretion, grant Awards with a longer term to Participants who are located outside the United States. An Agreement with a Participant may permit acceleration of vesting requirements and of the expiration of the applicable Term upon such terms and conditions as shall be set forth in the Agreement, which may, but, unless otherwise specifically provided in this Plan, need not, include, without limitation, acceleration resulting from the occurrence of the Participant’s death or Disability. Acceleration of the Performance Period of Performance Shares and other performance-based Awards shall be subject to Section 9(b) or Section 12 hereof, as applicable.
(d) Agreements.Each Award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions, as determined by the Committee, that shall apply to such Award, in addition to the terms and conditions specified in this Plan.
(e) Transferability.Except as otherwise permitted by the Committee, during the lifetime of a Participant to whom an Award is granted, only such Participant (or such Participant’s legal representative) may exercise an Option or Stock Appreciation Right or receive payment with respect to any other Award. Except as otherwise permitted by the Committee, no Award of Restricted Stock (prior to the expiration of the restrictions), Restricted Stock Units, Options, Stock Appreciation Rights, Performance Shares or Other Award (other than an award of Stock without restrictions) may be sold, assigned, transferred, exchanged, or otherwise encumbered, and any attempt to do so (including pursuant to a decree of divorce or any judicial declaration of property division) shall be of no effect. Notwithstanding the immediately preceding sentence, an Agreement may provide that an Award shall be transferable to a Successor in the event of such participant’s death subsequenta Participant’s death.
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(f) Termination of Employment.The extent to which the Participant shall have the right to exercise and/or retain an Award following termination of the Participant’s employment with the Company or its Affiliates, shall be as set forth in an Agreement. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Agreement, need not be uniform among Awards issued pursuant to this Plan, and may reflect distinctions based on the reasons for termination.
(g) Change in Control.The treatment of Awards upon a Change in Control shall be set forth in an Agreement; provided, however, that in no event may the vesting of any Award be accelerated as a result of a Change in Control until on or after the Change in Control Date. In the event the terms of the relevant Agreement and the terms of this Section 6(g) should conflict, the terms of this Section shall govern.
(h) Rights as Stockholder.A Participant shall have no right as a stockholder with respect to any securities covered by an Award until the date the Participant becomes the holder of record.
(i) Performance Conditions. The Committee may require the satisfaction of certain performance goals as a condition to the endgrant or vesting of any Award provided under the Plan.
7. Stock Options.
(a) Terms of All Options.
(i) Grants.Each Option shall be granted pursuant to an Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option. Only Non-Qualified Stock Options may be granted to Associates who are not employees of the Company or an Affiliate. In no event may Options known as reload options be granted hereunder.
(ii) Purchase Price.The purchase price of each Share subject to an Option shall be determined by the Committee and set forth in the applicable Agreement, but shall not be less than 100% of the Fair Market Value of a Share as of the date the Option is granted. The purchase price of the Shares with respect to which an Option is exercised shall be payable in full at the time of exercise, provided that, to the extent permitted by law and in accordance with rules adopted by the Committee, Participants may simultaneously exercise Options and sell the Shares thereby acquired pursuant to a brokerage or similar relationship and use the proceeds from such sale to pay the purchase price of such Shares. The purchase price may be paid in cash or, if the Committee so permits, through delivery or tender to the Company of Shares held, either actually or by attestation, by such Participant (in each case, such Shares having a Fair Market Value as of the date the Option is exercised equal to the purchase price of the Shares being purchased pursuant to the Option) or through a net or cashless form of exercise as permitted by the Committee, or, if the Committee so permits, a combination thereof, unless otherwise provided in the Agreement. Further, the Committee, in its discretion, may approve other methods or forms of payment of the purchase price, and establish rules and procedures therefor.
(iii) Exercisability.Each Option shall be exercisable in whole or in part on the terms provided in the Agreement. An Option that vests solely on the basis of the passage of time (and not on the basis of any performance standards) shall not vest more rapidly than ratably over a period of approximately three years from the grant date beginning on or about the first anniversary of the Option grant date. An Option that vests based on performance standards may, in the discretion of the Committee, vest as rapidly as immediate vesting on or about the first anniversary of the Option grant date. Notwithstanding the foregoing, vesting of an Offering Period but priorOption may be accelerated upon the occurrence of certain events as provided in the applicable Agreement. In no event shall any Option be exercisable at any time after its Term. When an Option is no longer exercisable, it shall be deemed to deliveryhave lapsed or terminated.
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(b) Incentive Stock Options.In addition to himthe other terms and conditions applicable to all Options:
(i)the aggregate Fair Market Value (determined as of the date the Option is granted) of the Shares with respect to which Incentive Stock Options held by an individual first become exercisable in any calendar year (under this Plan and all other incentive stock options plans of the Company and its Affiliates) shall not exceed $100,000 (or such other limit as may be required by the Code), if such limitation is necessary to qualify the Option as an Incentive Stock Option, and to the extent an Option or Options granted to a Participant exceed such limit such Option or Options shall be treated as Non-Qualified Stock Options;
(ii)an Incentive Stock Option shall not be exercisable and the Term of the Award shall not be more than ten years after the date of grant (or such other limit as may be required by the Code) if such limitation is necessary to qualify the Option as an Incentive Stock Option;
(iii)the Agreement covering an Incentive Stock Option shall contain such other terms and provisions which the Committee determines necessary to qualify such Option as an Incentive Stock Option; and
(iv)notwithstanding any other provision of this Plan if, at the time an Incentive Stock Option is granted, the Participant owns (after application of the rules contained in Section 424(d) of the Code, or its successor provision) Shares possessing more than ten percent of the total combined voting power of all classes of stock of the Company or its subsidiaries, (A) the option price for such Incentive Stock Option shall be at least 110% of the Fair Market Value of the Shares subject to such Incentive Stock Option on the date of grant and (B) such Option shall not be exercisable after the date five years from the date such Incentive Stock Option is granted.
8. Stock Appreciation Rights.
(a) Grant.An Award of a Stock Appreciation Right shall entitle the Participant, subject to terms and conditions determined by the Committee, to receive upon exercise of the Stock Appreciation Right all or a portion of the excess of (i) the Fair Market Value of a specified number of Shares as of the date of exercise of the Stock Appreciation Right over (ii) a specified price which shall not be less than 100% of the Fair Market Value of such Shares as of the date of grant of the Stock Appreciation Right (“purchase price”). A Stock Appreciation Right may be granted in connection with a previously or contemporaneously granted Option, or independent of any Option. If issued in connection with an Option, the Committee may impose a condition that exercise of a Stock Appreciation Right cancels the Option with which it is connected and exercise of the connected Option cancels the Stock Appreciation Right. Each Stock Appreciation Right may be exercisable in whole or in part on the terms provided in the applicable Agreement. No Stock Appreciation Right shall be exercisable at any time after its Term. When a Stock Appreciation Right is no longer exercisable, it shall be deemed to have lapsed or terminated. Except as otherwise provided in the applicable Agreement, upon exercise of a Stock Appreciation Right, payment to the Participant (or to his or her of such shares and cash. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. Such designationSuccessor) shall be made throughin the form of cash, Stock or a combination of cash and Stock (as determined by the Committee if not otherwise specified in the Award) as promptly as practicable after such proceduresexercise. The Agreement may provide for a limitation upon the amount or percentage of the total appreciation on which payment (whether in cash and/or Stock) may be made in the event of the exercise of a Stock Appreciation Right.
(b) Exercisability.Each Stock Appreciation Right shall vest in whole or in part on the terms provided in the Agreement. A Stock Appreciation Right that vests solely on the basis of the passage of time (and not on the basis of any performance standards) shall not vest more rapidly than ratably over a period of approximately three years from the grant date beginning on or about the first anniversary of the Stock Appreciation Right grant date. A Stock Appreciation Right that vests based on performance standards may, in the discretion of the Committee, vest as rapidly as immediate vesting on the first anniversary of the Option grant date. Notwithstanding the foregoing, the vesting of a Stock Appreciation Right may be accelerated upon the occurrence of certain events as provided in the applicable Agreement. In no event shall any Stock Appreciation Right be exercisable at any time after its Term. When a Stock Appreciation Right is no longer exercisable, it shall be deemed to have lapsed or terminated.
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9. Performance Shares.
(a) Initial Award.An Award of Performance Shares shall entitle a Participant (or a Successor) to future payments based upon the achievement of performance targets established in writing by the Committee. Payment shall be made in cash or Stock, or a combination of cash and Stock, as determined by the Committee. Such performance targets shall be determined by the Committee in its sole discretion. The Agreement may establish that a portion of the maximum amount of a Participant’s Award will be paid for performance which exceeds the minimum target but falls below the maximum target applicable to such Award. The Agreement shall also provide for the timing of such payment.
(b) Acceleration and Adjustment.The applicable Agreement may permit an acceleration of the Performance Period and an adjustment of performance targets and payments with respect to some or all of the Performance Shares awarded to a Participant, upon such terms and conditions as shall be set forth in the Agreement, upon the occurrence of certain events, which may, but need not, include without limitation a Fundamental Change, the Participant’s death or Disability, a change in accounting practices of the Company or its Affiliates, a reclassification, stock dividend, stock split or stock combination, or other event as provided in Section 13(f) hereof. Notwithstanding the foregoing, an Award subject to this Section 9 shall vest or be earned no more rapidly than immediate vesting on the first anniversary of the Award grant date, except as may be provided byin the Company fromapplicable Agreement.
(c) Valuation.To the extent that payment of a Performance Share is made in cash, a Performance Share earned after conclusion of a Performance Period shall have a value equal to the Fair Market Value of a Share on the last day of such Performance Period.
(d) Voting; Dividends.Participants holding Performance Shares shall have no voting rights with respect to such Awards and shall have no dividend rights with respect to Shares subject to such Performances Shares other than as the Committee so provides, in its discretion, in an Agreement; provided, that, any such dividends shall be subject to such restrictions and conditions as the Committee may establish with respect to the Performance Shares and shall be payable only at the same time to time including throughas the Plan Recordkeeper.underlying Performance Shares may become earned, vested, and payable.
10. Restricted Stock and Restricted Stock Unit Awards.
b) Such designation(a) Grant.All or any part of beneficiaryany Restricted Stock or Restricted Stock Unit Award may be changed by the participant (and his or her spouse, if any) at any time throughsubject to such proceduresconditions and restrictions as may be providedestablished by the Company from time to time including through the Plan Recordkeeper.. In the event of the death of a participantCommittee, and set forth in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death,applicable Agreement, which may include, but are not limited to, continuous service with the Company, a requirement that a Participant pay a purchase price for such Award, the achievement of specific performance goals, and/or applicable securities laws restrictions. During any period during which an Award of Restricted Stock or Restricted Stock Units is restricted and subject to a substantial risk of forfeiture, (i) Participants holding Restricted Stock Awards may exercise full voting rights with respect to such Shares and shall deliverbe entitled to receive all dividends and other distributions paid with respect to such sharesand/or cashShares while they are so restricted and (ii) Participants holding Restricted Stock Units shall have no voting rights with respect to such Awards and shall have no dividend rights with respect to Shares subject to such Restricted Stock Units other than as 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,Committee so provides, in its discretion, in an Agreement. Any dividends or dividend equivalents may deliver such sharesand/or cash to the spousebe paid currently 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 Contributionsbe credited to a participant’sParticipant’s account norand may be subject to such restrictions and conditions as the Committee may establish.
(b) Vesting.An Award of Restricted Stock or Restricted Stock Units that vests solely on the basis of the passage of time (and not on the basis of any rights with regardperformance standards) shall not vest more rapidly than ratably over a period of approximately three years from the grant date beginning on or about the first anniversary of the Award grant date, or, in the case of a Restricted Stock or Restricted Stock Units Award that vests based on performance standards, such Award may, in the discretion of the Committee, vest as rapidly as immediate vesting on the
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first anniversary of the Award grant date; provided, however, that up to five percent (5%) of the exercise of an option or to receive sharesShares initially available under the Plan may be assigned, transferred, pledgedgranted as Restricted Stock Awards that vest more rapidly than ratably over such three-year period or immediately following such one-year period, as applicable. Notwithstanding the foregoing, the vesting of a Restricted Stock or Restricted Stock Units Award may be accelerated upon the occurrence of certain events as provided in the applicable Agreement.
11. Other Awards.The Committee may from time to time grant Other Awards under this Plan, including without limitation those Awards pursuant to which a cash bonus award may be made or pursuant to which Shares may be acquired in the future, such as Awards denominated in Stock, Stock Units, securities convertible into Stock and phantom securities. The Committee, in its sole discretion, shall determine, and provide in the applicable Agreement for, the terms and conditions of such Awards provided that such Awards shall not be inconsistent with the terms and purposes of this Plan. The Committee may, in its sole discretion, direct the Company to issue Shares subject to restrictive legends and/or stop transfer instructions which are consistent with the terms and conditions of the Award to which such Shares relate. In addition, the Committee may, in its sole discretion, issue such Other Awards subject to the performance criteria under Section 12 hereof.
12. Performance-Based Awards.
(a) Application to Covered Employee. Notwithstanding any other provision of the Plan, if the Committee determines at the time any Award is granted to a Participant that such Participant is, or is likely to be as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a “covered employee” within the meaning of Section 162(m)(3) of the Code, then the Committee may provide that this Section 12 is applicable to such Award. Notwithstanding the foregoing, the Committee may provide, in its discretion, that an Award granted to any other Participant is subject to this Section 12, to the extent the Committee deems appropriate, whether or not Section 162(m) of the Code is or would be applicable with respect to such Participant.
(b) Performance Goals. Awards under the Plan may be made subject to the achievement of performance goals established by the Committee relating to one or more business criteria (“Performance Criteria”) pursuant to Section 162(m) of the Code. Performance Criteria may be applied to the Company, an Affiliate, a Parent, a Subsidiary, division, business unit, corporate group or individual or any combination thereof and may be measured in absolute levels or relative to another company or companies, a peer group, an index or indices or Company performance in a previous period. Performance may be measured annually or cumulatively over a longer period of time. Performance Criteria that may be used to establish performance goals are: earnings or earnings per share before income tax (profit before taxes), net earnings or net earnings per share (profit after tax), compound annual growth in earnings per share, inventory, total or net operating asset turnover, operating income, total stockholder return, compound stockholder return, return on equity, average return on invested capital, pre-tax and pre-interest expense return on average invested capital, which may be expressed on a current value basis, sales growth, operating or profit margins, market share or market penetration, successful transition of the Company’s clients to new claim adjudication platforms, achievement goals related to of post-merger integrations goals, achievement of goals related to customer service, satisfaction or retention, achievement of employee diversity satisfaction or turnover goals, and achievement of general sales, marketing, operating or workplan goals. Performance will be evaluated by excluding the effect of any extraordinary, unusual or non-recurring items that occur during the applicable Performance Period. The performance goals for each Participant and the amount payable if those goals are met shall be established in writing for each specified period of performance by the Committee no later than 90 days after the commencement of the period of service to which the performance goals relate and while the outcome of whether or not those goals will be achieved is substantially uncertain. However, in no event will such goals be established after 25% of the period of service to which the goals relate has elapsed. The performance goals shall be objective. Such goals and the amount payable for each performance period if the goals are achieved shall be set forth in the applicable Agreement. Following the conclusion or acceleration of each Performance Period, the Committee shall determine the extent to which (i) Performance Criteria have been attained, (ii) any other terms and conditions with respect to an Award relating to such Performance Period have been satisfied, and (iii) payment is due with respect to a performance-based Award. No amounts shall be payable to any Participant for any Performance Period unless and until the Committee certifies that the Performance Criteria and any other material terms were in fact satisfied.
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(c) Adjustment of Payment. With respect to any Award that is subject to this Section 12, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award. The applicable Agreement may permit an acceleration of the Performance Period and an adjustment of performance targets and payments with respect to some or all of the performance-based Award(s) awarded to a Participant, upon such terms and conditions as shall be set forth in the Agreement, upon the occurrence of certain events, which may, but need not, include without limitation a Fundamental Change, the Participant’s death or Disability, a change in accounting practices of the Company or its Affiliates, a reclassification, stock dividend, stock split or stock combination, or other event as provided in Section 13(f) hereof; provided, however, that any such acceleration or adjustment shall be made only to the extent and in a manner consistent with Section 162(m) of the Code. Notwithstanding the foregoing, an Award subject to this Section 12 shall vest or be earned no more rapidly than immediate vesting on the first anniversary of the Award grant date, except as may be provided in the applicable Agreement.
(d) Other Restrictions. The Committee shall have the power to impose such other restrictions on Awards subject to this Section 12 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code, or any successor provision thereto.
13. General Provisions.
(a) Effective Date of this Plan.This Plan shall become effective as of June 1, 2011,provided that this Plan is approved and ratified by the holders of the Company’s common stock in accordance with the Company’s Certificate of Incorporation at a meeting of the stockholders of the Company held no later than May 31, 2012. If this Plan is not so approved, any Award granted under this Plan subject to such approval shall be cancelled and be null and void.
(b) Duration of this Plan; Date of Grant.This Plan shall remain in effect for a term of ten years following the date on which it is effective (i.e., until June 1, 2021) or until all Shares subject to the Plan shall have been purchased or acquired according to the Plan’s provisions, whichever occurs first, unless this Plan is sooner terminated pursuant to Section 13(e) hereof. The date and time of approval by the Committee of the granting of an Award shall be considered the date and time at which such Award is made or granted, or such later effective date as determined by the Committee, notwithstanding the date of any Agreement with respect to such Award; provided, however, that the Committee may grant Awards other than Incentive Stock Options to Associates or to persons who are about to become Associates, to be effective and deemed to be granted on the occurrence of certain specified contingencies, provided that if the Award is granted to a non-Associate who is about to become an Associate, such specified contingencies shall include, without limitation, that such person becomes an Associate.
(c) Right to Terminate Employment.Nothing in this Plan or in any Agreement shall confer upon any Participant who is an employee of the Company the right to continue in the employment of the Company or any Affiliate or affect any right which the Company or any Affiliate may have to terminate or modify the employment of the Participant with or without cause.
(d) Tax Withholding.The Company shall withhold from any payment of cash or Stock to a Participant or other person under this Plan an amount sufficient to cover any required withholding taxes, including the Participant’s social security and Medicare taxes (FICA) and federal, state and local income tax with respect to income arising from payment of the Award. The Company shall have the right to require the payment of any such taxes before issuing any Stock pursuant to the Award. In lieu of all or any part of a cash payment from a person receiving Stock under this Plan, the Committee may, in the applicable Agreement or otherwise, disposedpermit a person to cover all or any part of the required withholdings, and to cover any additional withholdings up to the amount needed to cover the person’s full FICA and federal, state and local income tax with respect to income arising from payment of the Award, through a reduction of the numbers of Shares delivered to such person or a delivery or tender to the Company of Shares held by such person, in each case valued in the same manner as used in computing the withholding taxes under applicable laws.
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(e) Amendment, Modification and Termination of this Plan.Except as provided in this Section 13(e), the Board may at any waytime amend, modify, terminate or suspend this Plan. Except as provided in this Section 13(e), the Committee may at any time alter or amend any or all Agreements under this Plan to the extent permitted by law and subject to the requirements of Section 2(b), in which event, as provided in Section 2(b), the term “Agreement” shall mean the Agreement as so amended. Amendments are subject to approval of the stockholders of the Company only as required by applicable law or regulation, or if the amendment increases the total number of shares available under this Plan. No termination, suspension or modification of this Plan may materially and adversely affect any right acquired by any Participant (or a Participant’s legal representative) or any Successor or permitted transferee under an Award granted before the date of termination, suspension or modification, unless otherwise provided in an Agreement or otherwise or required as a matter of law. It is conclusively presumed that any adjustment for changes in capitalization provided for in Sections 9(b), 12(c) or 13(f) hereof does not adversely affect any right of a Participant or other person under an Award.
(f) Adjustment for Changes in Capitalization.Appropriate adjustments in the aggregate number and type of securities that may be issued, represented, and available for Awards under this Plan, in the limitations on the number and type of securities that may be issued to an individual Participant, in the number and type of securities and amount of cash subject to Awards then outstanding, in the Option purchase price as to any outstanding Options, in the purchase price as to any outstanding Stock Appreciation Rights, and, subject to Sections 9(b) and 12(c) hereof, in outstanding Performance Shares and payments with respect to outstanding Performance Shares, and comparable adjustments, if applicable, to any outstanding Other Award, automatically shall be made to give effect to adjustments made in the number or type of Shares through a Fundamental Change, divestiture, distribution of assets to stockholders (other than ordinary cash dividends), reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, stock combination or exchange, rights offering, spin-off or other relevant change, provided that fractional Shares shall be rounded to the nearest whole Share, for which purpose one-half share shall be rounded down to the nearest whole Share.
(g) Other Benefit and Compensation Programs.Payments and other benefits received by a participant under an Award shall not be deemed a part of a Participant’s regular, recurring compensation for purposes of any termination, indemnity or severance pay laws and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan, contract or similar arrangement provided by the Company or an Affiliate, unless expressly so provided by such other plan, contract or arrangement or the Committee determines that an Award or portion of an Award should be included to reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of competitive cash compensation.
(h) Beneficiary Upon Participant’s Death.To the extent that the transfer of a participant’s Award at death is permitted by this Plan or under an Agreement, (i) a Participant’s Award shall be transferable to the beneficiary, if any, designated on forms prescribed by and filed with the Committee and (ii) upon the death of the Participant, such beneficiary shall succeed to the rights of the Participant to the extent permitted by law and this Plan. If no such designation of a beneficiary has been made, the Participant’s legal representative shall succeed to the Awards, which shall be transferable by will theor pursuant to laws of descent and distribution to the extent permitted by this Plan or as provided in Section 14 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other dispositionunder an Agreement.
(i) Unfunded Plan.This Plan 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,unfunded and the Company shall not be obligatedrequired to segregate such Contributions.
17. Reports. Individual accounts willany assets that may at any time be maintained for each participant in therepresented by Awards under this 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. Such statements may be delivered electronically byNeither the Company, its Affiliates, the Committee, nor the Board shall be deemed to be a trustee of any amounts to be paid under this Plan nor shall anything contained in this Plan or any action taken pursuant to its provisions create or be construed to create a fiduciary relationship between the Company and/or its Affiliates, and a Participant or Successor. To the extent any person acquires a right to receive an Award under this Plan, Recordkeeper.such right shall be no greater than the right of an unsecured general creditor of the Company.
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(j) Limits of Liability.
18. Adjustments Upon Changes in Capitalization; Corporate Transactions(i).
a) Changes in Capitalization. Subject to any required action by the stockholdersAny liability of the Company the number of shares of Common Stock coveredto any Participant with respect to an Award shall be based solely upon contractual obligations created by each option under thethis Plan which has not yet been exercised and the numberAgreement.
(ii)Except as may be required by law, neither the Company nor any member or former member 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
57
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 administeringCommittee, nor any other person participating (including participation pursuant to a delegation of authority under Section 3(c) hereof) in any determination of any question under this Plan, whose determinationor in that respectthe interpretation, administration or application of this Plan, shall be final, bindinghave any liability to any party for any action taken, or not taken, in good faith under this Plan.
(iii)To the full extent permitted by law, each member 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 eventformer member of the proposed dissolutionCommittee and each person to whom the Committee delegates 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 optionhas delegated authority under thethis 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 such12-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 withRule 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 frequencyand/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 periodsand/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.
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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 specifiedindemnification by the Company at the location,against any loss, liability, judgment, damage, cost and reasonable expense incurred by such member, former member or other person by the person, designated by the Company for the receipt thereof.reason of any action taken, failure to act or determination made in good faith under or with respect to this Plan.
21. Conditions Upon Issuance of Shares(k) Compliance with Applicable Legal Requirements..
a) SharesThe Company shall not be issued with respectrequired to an optionissue or deliver a certificate for Shares distributable pursuant to this Plan unless the exerciseissuance of such option and the issuance and delivery of such shares pursuant thereto shall complycertificate complies with all applicable provisions of law, domestic or foreign,legal requirements including, without limitation, compliance with the provisions of applicable state securities laws, the Securities Act of 1933, as amended and in effect from time to time or any successor statute, the Exchange Act the rules and regulations promulgated thereunder, and the requirements of The Nasdaq Global Select Market orthe exchanges, if any, stock exchange uponon which the sharesCompany’s Shares may, thenat the time, be listed,listed.
(l) Deferrals and shallSettlements.The Committee may require or permit Participants to elect to defer the issuance of Shares or the settlement of Awards in cash under such rules and procedures as it may establish under this Plan. It may also provide that deferred settlements include the payment or crediting of interest on the deferral amounts.
14. Substitute Awards. Awards may be further subjectgranted under this Plan from time to time in substitution for Awards held by employees of other corporations who are about to become Associates, or whose employer is about to become a Subsidiary of the approvalCompany, as the result of counsel fora merger or consolidation of the Company or a Subsidiary of the Company with respect to such compliance.
b) As a condition ofanother corporation, the exercise of an option,acquisition by 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 became effective upon its adoption by the Board on November 24, 1998, subject to its approval by the stockholdersSubsidiary of the Company which was obtained May 26, 1999. The Plan has been amended and restatedof all or substantially all the assets of another corporation or the acquisition by the Compensation CommitteeCompany or a Subsidiary of the Board effective March 1, 2008Company of at least 50% of the issued and shall continue in effect for a termoutstanding stock of ten (10) years from March 1, 2008 unless sooner terminated under Section 19 hereof.
23. Additional Restrictions ofRule 16b-3.another corporation. The terms and conditions of optionsthe substitute Awards so granted hereundermay vary from the terms and conditions set forth in this Plan to andsuch extent as the purchase of shares by, persons subject to Section 16Board at the time of the Exchange Act shall comply withgrant may deem appropriate to conform, in whole or in part, to the applicable provisions ofRule 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 byRule 16b-3 to qualify for the maximum exemption from Section 16 of the Exchange ActAwards in substitution for which they are granted, but with respect to Awards which are Incentive Stock Options, no such variation shall be permitted which affects the status of any such substitute option as an Incentive Stock Option.
15. Governing Law.To the extent that federal laws do not otherwise control, this Plan transactions.and all determinations made and actions taken pursuant to this Plan shall be governed by the laws of Delaware, without giving effect to principles of conflicts of laws, and construed accordingly.
16. Severability.In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
17. Prior Plans.Notwithstanding the adoption of this Plan by the Board and approval of this Plan by the Company’s stockholders as provided by Section 13(a) hereof, the Express Scripts, Inc. 2000 Long-Term Incentive Plan, as amended, the Express Scripts, Inc. Amended and Restated 1992 and 1994 Stock Option Plans and the Express Scripts, Inc. Amended and Restated 1992 Stock Option Plan for Outside Directors (the “1992, 1994, and 2000 Plans”), as the same may have been amended from time to time, shall remain in effect, but grants pursuant to the 1992, 1994, and 2000 Plans shall not be made after the effective date of this Plan. All grants and awards that were made under the 1992, 1994, and 2000 Plans shall be governed by the terms of the 1992, 1994, and 2000 Plans, respectively.
18. Deferred Compensation.If any Award would be considered deferred compensation as defined under Code Section 409A and would fail to meet the requirements of Code Section 409A, then such Award shall be null and void.
59B-14
EXPRESS SCRIPTS, INC.
ONE EXPRESS WAY
ST. LOUIS, MO 63121
Preliminary Copy
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| | | | DETACH AND RETURN THIS PORTION ONLY |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Board of Directors recommends you vote FOR
the following proposal(s):
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EXPRESS SCRIPTS, INC.1.
Election of Directors
| | For
All | | Withhold
AllAgainst | | For All
ExceptAbstain |
THE BOARD OF DIRECTORS RECOMMEND A VOTE “FOR” ITEMS 1, 2, 3 AND 4.
Vote on Directors
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| 01 Gary G. Benanav | | o | | o | | o |
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| 02 Maura C. Breen | | o | | o | | o |
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| 03 Nicholas J. LaHowchic | | o | | o | | o |
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| 04 Thomas P. Mac Mahon | | o | | o | | o |
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| 05 Frank Mergenthaler | | o | | o | | o |
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| 06 Woodrow A Myers, Jr, MD | | o | | o | | o |
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| 07 John O. Parker, Jr. | | o | | o | | o |
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| 08 George Paz | | o | | o | | o |
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| 09 Samuel K. Skinner | | o | | o | | o |
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| 10 Seymour Sternberg | | o | | o | | o |
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1.The Board of Directors recommends you vote FOR the following proposal(s): | | ELECTION OF DIRECTORSFor | | Against | | Abstain | | |
| | | Nominees:o | | o | | o | | |
2 Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accountants for 2011 | | | | | |
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| | | 01) Gary G. BenanavFor | | 07) John O. Parker, Jr.Against | | Abstain | | |
3 To approve amendment to the Bylaws regarding calling of a special meeting. | | o | | o | | o | | |
| | | 02) Frank J. Borelli | | 08) George Paz | | | | |
4 To approve, by non-binding vote, executive compensation | | | | | | | | |
| | | 03) Maura C. BreenFor | | 09) Samuel K. SkinnerAgainst | | Abstain | | |
5 To recommend, by non-binding vote, the frequency of executive compensation votes | | o | | o | | o | | |
| | | 04) Nicholas J. LaHowchic | | 10) Seymour Sternberg | | | | |
| | | 05) Thomas P. Mac Mahon1 Year | 2 Years | 3 Years | Abstain |
6 To approve and ratify the Express Scripts, Inc. 2011 Long-Term Incentive Plan | o | o | o | o |
| | 11) Barrett A. ToanFor | | Against | | Abstain | | |
| | | 06) Woodrow A. Myers, Jr., M.D.o | | o | | o | | |
The Board of Directors recommends you vote AGAINST the following proposal(s): | | | | | |
| | For | | Against | | Abstain | | |
7 Stockholder Proposal regarding Report on
Political Contributions | | o | | o | | o | | |
To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.| | | | | | | | | |
Vote on Proposals | | For | | Against | | Abstain |
2. | | Approval and ratification of an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number ofPlease sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized shares of the Company’s common stock from 650,000,000 shares to 1,000,000,000 shares. | | o | | o | | o |
| | officer. | | | | | | |
3. | | Approval and ratification of an increase in the number of shares of the Company’s Common Stock authorized for issuance Under the Express Scripts, Inc. Employee Stock Purchase Plan from 2,000,000 shares to 3,500,000 shares. |
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| Signature [PLEASE SIGN WITHIN BOX] | | o |
| | oDate |
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| Signature (Joint Owners) | | |
| | Date |
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4. | | Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accountants for 2008. | | o | | o | | o |
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5. | | In their discretion, upon such other matters that may properly come before the meeting or any adjournment or adjournments thereof. | | o | | o | | o |
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The shares represented by this proxy when properly executed will be voted in the manner directed herein by the undersigned Stockholder(s).If no direction is made, this proxy will be voted FOR items 1, 2, 3 and 4.If any other matters properly come before the meeting, or if cumulative voting is required, the person named in this proxy will vote in their discretion. | | o | | o | | o |
Please sign your name exactly as it appears hereon. When signing as attorney, executor, administrator, trustee or guardian, please add your title as such. When signing as joint tenants, all parties in the joint tenancy must sign. If a signer is a corporation, please sign in full corporate name by duly authorized officer.
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Signature [PLEASE SIGN WITHIN BOX] Date | | | |
Signature (Joint Owners) Date | | |
Important Notice Regarding Internetthe Availability of Proxy Materials for the Annual Meeting:
The Annual Report, Notice and& Proxy Statement and Annual Reportis/ are available at www.proxyvote.com.www.proxyvote.com.
EXPRESS SCRIPTS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThis Proxy is solicited on behalf of the Board of Directors
Annual Meeting
ANNUAL MEETING OF STOCKHOLDERS
of Stockholders May 28, 20084, 2011
The stockholder(s) hereby appoint George Paz and Thomas M. Boudreau,Keith J. Ebling, or either of them, as proxies, each with the power to appoint (his/her) substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of Common Stock of Express Scripts, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting
of Stockholders to be held at 9:308:00 a.m. Central Time on May 28, 2008,4, 2011, at the offices of the Company,Company’s facility located at One Express Way, Saint Louis, Missouri 63121, and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTEDTHE PROXIES SHALL VOTE: (i) FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS, (ii) FOR PROPOSALS #2, #3, #4 and #6, (iii) A FREQUENCY OF 3 YEARS FOR PROPOSAL #5, (iv) AGAINST THE STOCKHOLDER PROPOSAL #7, AND FOR EACH PROPOSAL.(v) IN THEIR DISCRETION UPON OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE
CONTINUED AND TO BE SIGNED ON REVERSE SIDEContinued and to be signed on reverse side
