Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
     AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of March 1, 2009, by
and between HMS HOLDINGS CORP., a New York corporation (the “Company”), and
ROBERT M. HOLSTER (the “Employee”).
WITNESSETH:
     WHEREAS the Company, as the successor to Health Management Systems, Inc.,
and the Employee have entered into an Employment Agreement, dated as of April 1,
2001, as amended as of February 11, 2004 and as of July 16, 2007 (as so amended,
the “Prior Agreement”); and
     WHEREAS the Company and the Employee desire to amend and restate the Prior
Agreement in its entirety; and
     WHEREAS the Company desires to continue the employment of the Employee for
the period provided in this Agreement, and the Employee is willing to continue
such employment with the Company, all in accordance with the terms and
conditions set forth below;
     NOW, THEREFORE, for and in consideration of the premises hereof and the
mutual covenants contained herein, the parties hereto hereby covenant and agree
to amend and restate the Prior Agreement as follows:
          1. Employment.
          (a) The Company hereby agrees to employ the Employee, and the Employee
hereby agrees to accept such employment with the Company, beginning on the date
hereof and continuing for the period set forth in Section 2 hereof, all upon the
terms and conditions hereinafter set forth.
          (b) The Employee affirms and represents that as of the commencement of
his employment by the Company on the date hereof he is under no obligation to
any former employer or other party that is in any way inconsistent with, or that
imposes any restriction upon, the Employee’s acceptance of employment hereunder
with the Company, the employment of the Employee by the Company, or the
Employee’s undertakings under this Agreement.
          2. Term of Employment.
          (a) Unless earlier terminated as provided in this Agreement, the term
of the Employee’s employment under this Agreement shall be for a period
beginning on the date hereof and ending on February 28, 2011 (the “Term”).
          (b) The period from the date hereof until February 28, 2011 or, in the
event that the Employee’s employment hereunder is earlier terminated as provided
herein, such shorter period, as the case may be, is hereinafter called the
“Employment Term”.

 

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          3. Duties. The Employee shall be employed as the Chairman of the Board
of the Company, shall faithfully and competently perform such duties as inhere
in such position and as are specified in the By-laws of the Company and,
specifically, shall advise and assist the Chief Executive Officer of the Company
with regard to strategic planning, corporate development, regulatory affairs,
dispute resolution and investor and governmental relations. The Employee shall
also perform and discharge such other executive employment duties and
responsibilities as the Board of Directors of the Company (the “Board of
Directors”) shall from time to time determine. The Employee shall perform his
duties principally at such offices of the Company and its subsidiaries as their
respective businesses shall require, from time to time, with such travel to such
other locations from time to time as the Board of Directors may reasonably
prescribe, but the Employee shall not be required to perform his obligations
hereunder from any particular location. Except as may otherwise be approved in
advance by the Board of Directors, and except during vacation periods and
reasonable periods of absence due to sickness, personal injury or other
disability, the Employee shall devote sufficient business time throughout the
Employment Term to properly perform the services required of him hereunder, but
shall not be obligated to devote more than 50% of his business time to the
performance of such services. The Employee shall use his best efforts, judgment
and energy to improve and advance the business and interests of the Company and
its subsidiaries in a manner consistent with the duties of his positions.
Nothing contained in this Section 3 shall preclude the Employee from serving on
the boards of directors of other companies or from performing services for
charitable or not-for-profit community organizations, provided that such
activities do not interfere with the Employee’s performance of his duties and
responsibilities under this Agreement.
          4. Salary and Bonus.
          (a) Salary. As compensation for the performance by the Employee of the
services to be performed by the Employee hereunder during the Employment Term,
the Company shall pay the Employee a base salary at the annual rate of Two
Hundred Fifty Thousand Dollars ($250,000) (said amount, together with any
increases thereto as may be determined from time to time by the Board of
Directors in its sole discretion, being hereinafter referred to as “Salary”).
Any Salary payable hereunder shall be paid in regular intervals in accordance
with the Company’s payroll practices from time to time in effect.
          (b) Bonus. The Employee shall be eligible to receive bonus
compensation from the Company in respect of each fiscal year (or portion
thereof) during the Employment Term, in each case as may be determined by the
Board of Directors in its sole discretion on the basis of performance-based or
such other criteria as may be established from time to time by the Board of
Directors in its sole discretion. The Employee’s target bonus shall be equal to
65% of his Salary with award ranges calculated in a manner consistent with those
established by the Board of Directors for the Chief Executive Officer of the
Company.
          5. Other Benefits. During the Employment Term, the Employee shall:
          (a) be eligible to participate in employee fringe benefits and pension
and/or profit sharing plans that may be provided by the Company for its senior
executive employees in accordance with the provisions of any such plans, as the
same may be in effect from time to time;

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          (b) be eligible to participate in any medical and health plans or
other employee welfare benefit plans that may be provided by the Company for its
senior executive employees in accordance with the provisions of any such plans,
as the same may be in effect from time to time;
          (c) be entitled to all paid holidays given by the Company to its
senior executive officers;
          (d) be eligible for consideration by the Board of Directors for awards
of stock options under any stock option plan that may be established by the
Company for its and its subsidiaries’ key employees, the amount, if any, of
shares for which options may be granted to Employee to be in the sole discretion
of the Board of Directors;
          (e) be entitled to sick leave, sick pay and disability benefits in
accordance with any Company policy that may be applicable to senior executive
employees from time to time; and
          (f) be entitled to reimbursement for all reasonable and necessary
out-of-pocket business expenses incurred by the Employee in the performance of
his duties hereunder in accordance with the Company’s normal policies from time
to time in effect.
          6. Confidential Information. The Employee hereby covenants, agrees and
acknowledges as follows:
          (a) The Employee has and will have access to and will participate in
the development of or be acquainted with confidential or proprietary information
and trade secrets related to the business of the Company and any present or
future subsidiaries or affiliates of the Company (collectively with the Company,
the “Companies”), including but not limited to (i) customer lists; claims
histories, adjustments and settlements and related records and compilations of
information; the identity, lists or descriptions of any new customers, referral
sources or organizations; financial statements; cost reports or other financial
information; contract proposals or bidding information; business plans; training
and operations methods and manuals; personnel records; software programs;
reports and correspondence; and management systems, policies or procedures,
including related forms and manuals; (ii) information pertaining to future
developments such as future marketing or acquisition plans or ideas, and
potential new business locations; (iii) confidential or non-public information
relating to business operations and strategic plans of third parties with which
the Companies have or may be assessing commercial arrangements (“Third Party
Information”) and (iv) all other tangible and intangible property, that are used
in the business and operations of the Companies but not made public. The
information and trade secrets relating to the business of the Companies
described hereinabove (including Third Party Information) in this paragraph
(a) are hereinafter referred to collectively as the “Confidential Information”,
provided that the term Confidential Information shall not include any
information (x) that is or becomes generally publicly available (other than as a
result of violation of this Agreement by the Employee), (y) that the Employee
receives on a nonconfidential basis from a source (other than the Companies or
their representatives) or, in the case of Third Party Information, from a source
(other than the Companies, the third parties to which such information relates
or their respective representatives) that is not known by him to be

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bound by an obligation of secrecy or confidentiality to any of the Companies (or
such third parties, in the case of Third Party Information) or (z) that was in
the possession of the Employee prior to disclosure by the Companies (or such
third parties, in the case of Third Party Information).
          (b) The Employee shall not disclose, use or make known for his or
another’s benefit any Confidential Information or use such Confidential
Information in any way except as is in the best interests of the Companies in
the performance of the Employee’s duties under this Agreement. The Employee may
disclose Confidential Information when required by a third party and applicable
law or judicial process, but only after providing immediate notice to the
Company at any third party’s request for such information, which notice shall
include the Employee’s intent with respect to such request.
          (c) The Employee acknowledges and agrees that a remedy at law for any
breach or threatened breach of the provisions of this Section 6 would be
inadequate and, therefore, agrees that the Companies shall be entitled to
injunctive relief in addition to any other available rights and remedies in case
of any such breach or threatened breach by the Employee (and the Employee hereby
waives any requirement that any of the Companies provide a bond or other
security in connection with the issuance of any such injunction); provided,
however, that nothing contained herein shall be construed as prohibiting the
Companies from pursuing any other rights and remedies available for any such
breach or threatened breach.
          (d) The Employee agrees that, upon termination of his employment with
the Company for any reason, the Employee shall forthwith return to the Company
all Confidential Information in whatever form maintained (including, without
limitation, computer discs and other electronic media).
          (e) The obligations of the Employee under this Section 6 shall, except
as otherwise provided herein, survive the termination of the Employment Term and
the expiration or termination of this Agreement.
          (f) Without limiting the generality of Section 10 hereof, the Employee
hereby expressly agrees that the foregoing provisions of this Section 6 shall be
binding upon the Employee’s heirs, successors and legal representatives.
          7. Termination.
          (a) The Employee’s employment hereunder shall be terminated upon the
occurrence of any of the following:
          (i) the death of the Employee;
          (ii) the Employee’s inability to perform his duties on account of
disability or incapacity for a period of one hundred eighty (180) or more days,
whether or not consecutive, within any period of twelve (12) consecutive months;
          (iii) the Company giving written notice, at any time, to the Employee
that the Employee’s employment is being terminated “for cause” (as defined
below);

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          (iv) the Company giving written notice, at any time, to the Employee
that the Employee’s employment is being terminated other than pursuant to clause
(i), (ii) or (iii) above; or
          (v) the Employee terminates his employment hereunder for any reason
whatsoever (whether by reason of retirement, resignation or otherwise).
          The following actions, failures and events by or affecting the
Employee shall constitute “cause” for termination within the meaning of clause
(iii) above: (A) a conviction of the Employee of, or the entering of a plea of
nolo contendere by the Employee with respect to, a felony, (B) dependence on, or
habitual abuse of, controlled substances or alcohol (in the case of alcohol
abuse, that has a material adverse affect on Employee’s performance of his
obligations under this Agreement) or acts of dishonesty by the Employee that are
materially detrimental to one or more of the Companies, (C) willful misconduct
by the Employee that materially damages the business of one or more of the
Companies, (D) gross negligence by the Employee in the performance of, or
willful disregard by the Employee of, his material obligations under this
Agreement or otherwise relating to his employment, which gross negligence or
willful disregard continues unremedied for a period of fifteen (15) days after
written notice thereof to the Employee or (E) failure by the Employee to obey
the reasonable and lawful orders and policies of the Board of Directors that are
material to and consistent with the provisions of this Agreement (provided that,
in the case of an indictment described in clause (A) above, and in the case of
clauses (B), (C) and (E) above, the Employee shall have received written notice
of such proposed termination (which notice shall state the Sections of this
Agreement pursuant to which such termination is being effected and a description
of the facts supporting such termination) and a reasonable opportunity (together
with the Employee’s counsel) to discuss the matter with the Board of Directors,
followed by a notice that the Board of Directors adheres to its position).
          (b) In the event that (1) the Employee’s employment terminates
pursuant to clause (i) or (ii) of Section 7(a) above or (2) is terminated by the
Company pursuant to clause (iv) of Section 7(a) above, or the Employee
terminates his employment, in the case of either event described in this clause
(2), within 45 days of a Change of Control Transaction (as hereinafter defined),
then (i) during the period beginning on the date of such termination and ending
on the last day of the Applicable Period (as defined in Section 9(a)), the
Company shall pay to the Employee, as severance pay or liquidated damages or
both, monthly payments equal to one-twelfth of the rate per annum of his Salary
at the time of such termination, provided, however, that no such payments shall
be required to be made if the Employee fails to comply with his obligations
under Section 9 below; and (ii) the Company shall continue to provide the
Employee with the health insurance benefits provided to other employees of the
Company (including employer contributions) from the date of such termination
through February 28, 2011. For avoidance of doubt, the Company and the Employee
acknowledge that the obligations of the Company under the preceding sentence do
not apply in the event the Employee’s employment is terminated pursuant to
Section 7(a)(iii) for “cause” or voluntarily by the Employee other than in
connection with a Change of Control Transaction. If the successor company, in a
Change of Control Transaction, does not offer post termination health benefits
to the Employee, the Company will pay 135% of the COBRA cost for family coverage
for 18 months for health plan continuation in the plan the Employee was
participating in at the time of termination. As well, the Company will provide
for a period of six months 135% of the cost of premiums for a non-

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group family health plan of comparable benefits to the Company’s plan that
Employee was participating at the time of termination. The cost of such
non-group family health plan will be determined at the time of termination. Both
the cost of 18 months of COBRA continuation coverage and six months non-group
family health coverage will be paid in a lump sum at time of closing of the
Change of Control Transaction.
     For purposes of this Agreement, a “Change of Control Transaction” means the
sale or transfer of all or substantially all of the assets of the Company or any
merger, consolidation or other transaction that would result in the transfer,
directly or indirectly, of more than 50% of the then outstanding capital stock
of the Company to holders who were not holders of its capital stock immediately
prior to such merger. It is understood by the Company and the Employee that “a
sale of substantially all” the Company’s assets may occur, for purposes of the
New York Business Corporation Law, but that such an event will not constitute a
“Change of Control Transaction” for purposes of this Agreement unless the
Company has sold all its significant lines of business and intends to limit its
future activities to the distribution of the proceeds of such transaction.
          (c) Notwithstanding anything to the contrary expressed or implied
herein, except as required by applicable law and except as set forth in Section
7(b) above, the Company (and its affiliates) shall not be obligated to make any
payments to the Employee or on his behalf of whatever kind or nature by reason
of the Employee’s cessation of employment (including, without limitation, by
reason of termination of the Employee’s employment by the Company for “cause”),
other than (i) such amounts, if any, of his Salary as shall have accrued and
remained unpaid as of the date of said cessation and (ii) such other amounts, if
any, that may be then otherwise payable to the Employee pursuant to the terms of
the Company’s benefits plans.
          (d) No interest shall accrue on or be paid with respect to any portion
of any payments hereunder.
          8. Non-Assignability.
          (a) Neither this Agreement nor any right or interest hereunder shall
be assignable by the Employee or his beneficiaries or legal representatives
without the Company’s prior written consent; provided, however, that nothing in
this Section 8(a) shall preclude the Employee from designating a beneficiary to
receive any benefit payable hereunder upon his death or incapacity.
          (b) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge or hypothecation or to exclusion,
attachment, levy or similar process or to assignment by operation of law, and
any attempt, voluntary or involuntary, to effect any such action shall be null,
void and of no effect.
          9. Restrictive Covenants.
          (a) Competition. During the Employment Term and during the Applicable
Period (as defined below), the Employee shall not directly or indirectly (as a
director, officer, executive employee, manager, consultant, independent
contractor, advisor or otherwise) engage

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in competition with, or own any interest in, perform any services for,
participate in or be connected with any business or organization that engages in
competition with the Company or any of its subsidiaries within the meaning of
Section 9(d), provided, however, that the provisions of this Section 9(a) shall
not be deemed to prohibit the Employee’s ownership of not more than two percent
(2%) of the total outstanding shares of common stock of any publicly held
company, or ownership, whether through direct or indirect stock holdings or
otherwise, of one percent (1%) or more of the equity of any other business. For
purposes of this Agreement, the “Applicable Period” shall mean the period from
the termination of the Employee’s employment hereunder for any reason whatsoever
through and including February 28, 2011.
          (b) Non-Solicitation. During the Employment Term and during the
Applicable Period, the Employee shall not directly or indirectly induce or
attempt to induce any employee of the Company or any of its subsidiaries to
leave the employ of the Company or such subsidiary, or in any way interfere with
the relationship between the Company or any of its subsidiaries and any employee
thereof.
          (c) Non-Interference. During the Employment Term and during the
Applicable Period, the Employee will not directly or indirectly hire, engage,
send any work to, place orders with, or in any manner be associated with any
supplier, contractor, subcontractor or other business relation of the Company or
any of its subsidiaries if such action would be known by him to have a material
adverse effect on the business, assets or financial condition of the Company or
any of its subsidiaries or materially interfere with the relationship between
any such person or entity and the Company or any of its subsidiaries.
          (d) Certain Definitions. For purposes of this Section 9, a person or
entity (including, without limitation, the Employee) shall be deemed to be a
competitor of the Company or any of its subsidiaries, or a person or entity
(including, without limitation, the Employee) shall be deemed to be engaging in
competition with the Company or any of its subsidiaries, if such person or
entity engages in any business engaged in by the Company or such subsidiary at
the time of termination of the Employee’s employment with the Company, in either
case in the geographic region encompassing the service areas in which the
Company or any of its subsidiaries conduct, or had an established plan to begin
conducting, their businesses at the time of termination of the Employee’s
employment with the Company.
          (e) Certain Representations of the Employee. In connection with the
foregoing provisions of this Section 9, the Employee represents that his
experience, capabilities and circumstances are such that such provisions will
not prevent him from earning a livelihood. The Employee further agrees that the
limitations set forth in this Section 9 (including, without limitation, time and
territorial limitations) are reasonable and properly required for the adequate
protection of the current and future businesses of the Company and its
subsidiaries. It is understood and agreed that the covenants made by the
Employee in this Section 9 (and in Section 6 hereof) shall survive the
expiration or termination of this Agreement.
          (f) Injunctive Relief. The Employee acknowledges and agrees that a
remedy at law for any breach or threatened breach of the provisions of Section 9
hereof would be inadequate and, therefore, agrees that the Company and any of
its subsidiaries shall be entitled to injunctive relief in addition to any other
available rights and remedies in cases of any such

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breach or threatened breach (and the Employee hereby waives any requirement that
the Company or any such subsidiary provide a bond or other security in
connection with the issuance of any such injunction); provided, however, that
nothing contained herein shall be construed as prohibiting the Company or any of
its subsidiaries from pursuing any other rights and remedies available for any
such breach or threatened breach.
          10. Binding Effect. Without limiting or diminishing the effect of the
provisions affecting assignment of this Agreement, this Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
heirs, successors, legal representatives and assigns.
          11. Notices. All notices that are required or may be given pursuant to
the terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and (i) delivered personally, (ii) mailed by
certified or registered mail, return receipt requested and postage prepaid,
(iii) sent via a nationally recognized overnight courier or (iv) sent via
facsimile confirmed in writing to the recipient, if to the Company at the
Company’s principal place of business, and if to the Employee, at his home
address most recently filed with the Company, or to such other address or
addresses as either party shall have designated in writing to the other party
hereto, provided, however, that any notice sent by certified or registered mail
shall be deemed delivered on the date of delivery as evidenced by the return
receipt.
          12. Law Governing. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
          13. Severability. The Employee agrees that in the event that any court
of competent jurisdiction shall finally hold that any provision of Section 6 or
9 hereof is void or constitutes an unreasonable restriction against the
Employee, the provisions of such Section 6 or 9 shall not be rendered void but
shall apply with respect to such extent as such court may judicially determine
constitutes a reasonable restriction under the circumstances. If any part of
this Agreement other than Section 6 or 9 is held by a court of competent
jurisdiction to be invalid or incapable of being enforced in whole or in part by
reason of any rule of law or public policy, such part shall be deemed to be
severed from the remainder of this Agreement for the purpose only of the
particular legal proceedings in question and all other covenants and provisions
of this Agreement shall in every other respect continue in full force and effect
and no covenant or provision shall be deemed dependent upon any other covenant
or provision.
          14. Waiver. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not. be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of such right or power at any other time or times.
          15. Arbitration. With the exception of any dispute regarding the
Employee’s compliance with the provisions of Sections 6 and 9 above, any dispute
relating to or arising out of the provisions of this Agreement shall be decided
by arbitration in New York, New York, in accordance with the Expedited
Arbitration Rules of the American Arbitration Association then obtaining, unless
the parties mutually agree otherwise in a writing signed by both parties. This
undertaking to arbitrate shall be specifically enforceable. The decision
rendered by the arbitrator

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will be final and judgment may be entered upon it in accordance with appropriate
laws in any court having jurisdiction thereof. Each of the parties shall pay his
or its own legal fees associated with such arbitration.
          16. Entire Agreement; Modifications. This Agreement constitutes the
entire and final expression of the agreement of the parties with respect to the
subject matter hereof and supersedes all prior agreements, oral and written,
between the parties hereto with respect to the subject matter hereof. This
Agreement may be modified or amended only by an instrument in writing signed by
both parties hereto.
          17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
     IN WITNESS WHEREOF, the Company and the Employee have duly executed and
delivered this Agreement as of the day and year first above written.

              HMS HOLDINGS CORP.
 
       
 
  By:   /s/ William C. Lucia
 
            Name: William C. Lucia     Title: Chief Executive Officer
 
            /s/ Robert M. Holster           Robert M. Holster

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