EXHIBIT 10.6

 

FIRST AMENDMENT TO

THE EMPLOYMENT AGREEMENT

 

This First Amendment to the Employment Agreement effective as of May 6, 2003
(this “Amendment”) is entered into by and between AdvancePCS f/k/a/ Advance
Paradigm, Inc. (the “Company”) and _____________ (the “Employee”).

 

WHEREAS, the Company and Employee (collectively, the “Parties”) entered into
that certain Employment Agreement (including any Exhibits thereto) effective as
of __________ (the “Agreement”); and

 

WHEREAS, the Parties now desire to amend the Agreement as further described
below;

 

NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency is hereby acknowledged, the Parties
hereby agree to the following:

 

1. Capitalized terms used herein, unless otherwise defined herein, have the
meaning ascribed to such terms in the Agreement and, except as expressly
provided herein all provision of the Agreement shall remain in full force and
effect.

 

2. Section 2 of the Agreement is hereby amended in its entirety and replaced
with the following:

 

2. TERM. The employment of the Employee shall commence on the Effective Date and
shall end on October 2, 2004 (the “Term”); provided, however, that if a Change
in Control (as defined in Section 5(f) of this Agreement) shall have occurred
during the Term, the Term shall expire no earlier than the date which is one
year following the date of the Change in Control.

 

3. Section 4 of the Agreement is hereby amended by (i) adding the following new
Subsection “(e)” and (ii) redesignating Subsection “(e)” thereof as Subsection
“(f)” and Subsection “(f)” thereof as Subsection “(g)”:

 

(e) Certain Terminations Following Change in Control. Following a Change in
Control, the Employee’s employment hereunder may also be terminated by the
Company for CIC Cause (as defined in Section 5(f) of this Agreement) or by the
Employee for CIC Good Reason (as defined in Section 5(f) of this Agreement).

 

4. Section 5(c) of the Agreement is hereby amended in its entirety and replaced
with the following:

 

(c) Cause. If the Employee’s employment shall be terminated (i) for Cause prior
to a Change in Control or (ii) for CIC Cause on or after a Change in Control,
the Company’s obligations to the Employee shall terminate other than the
obligation to pay to the Employee the portion of Base Salary earned and balance
of paid time off earned by Employee through the Date of Termination plus the
amount of any compensation previously deferred by the Employee, if any,
consistent with Company policy.

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5. Section 5 of the Agreement is hereby amended by (i) adding the following new
Subsections “(e)” and “(f)” and (ii) redesignating Subsection “(e)” thereof as
Subsection “(g)”:

 

(e) Termination Following a Change in Control. If the Company shall terminate
the Employee’s employment (other than for CIC Cause or Disability and except if
the Employee’s employment is terminated as a result of the Employee’s death) or
if, the Employee shall terminate employment for CIC Good Reason, in either case,
within one (1) year following the occurrence of a Change in Control, the
Employee shall be entitled to the following payments and benefits (collectively,
the “Severance Payments”) in lieu of the payments and benefits set forth in
Section 5(d) of this Agreement:

 

  (1) a lump-sum severance payment, in cash, equal to two times the sum of (i)
the Employee’s Base Salary and the annual costs of the leased automobile
provided to the Employee by the Company pursuant to Exhibit A, each as in effect
immediately prior to the Date of Termination, or, if higher, in effect
immediately prior to the first occurrence of an event or circumstance
constituting CIC Good Reason, and (ii) the Employee’s target annual bonus under
any annual bonus or incentive plan maintained by the Company in respect of the
fiscal year in which occurs the Date of Termination or, if higher, the fiscal
year in which occurs the first event or circumstance constituting CIC Good
Reason;

 

  (2) those other obligations and benefits accrued or earned and vested (if
applicable) by the Employee as of the Date of Termination;

 

  (3)

Notwithstanding any provision of any annual or long-term incentive plan to the
contrary, the Company shall pay to the Employee a lump sum amount, in cash,
equal to the sum of (i) any unpaid incentive compensation which has been
allocated or awarded to the Employee for a completed fiscal year or other
measuring period preceding the Date of Termination under any such plan and
which, as of the Date of Termination, is contingent only upon the continued
employment of the Employee to a subsequent date, and (ii) a pro rata portion to
the Date of Termination of the aggregate value of all contingent incentive
compensation awards to the Employee for all then uncompleted

 

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     periods under any such plan, calculated as to each such award by
multiplying the award that the Employee would have earned on the last day of the
performance award period, assuming the achievement, at the target level, of the
individual and corporate performance goals established with respect to such
award, by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period through the
Date of Termination by the total number of months contained in such performance
award period; provided, however, that the payments contemplated by this clause
(ii) shall be offset by any amounts paid to the Employee, but only with respect
to the same performance award period, under any annual or long-term incentive
plan in which the Employee participates.

 

  (4) any stock options granted to the Employee shall become fully vested; and

 

  (5) For the twenty-four (24) month period immediately following the Date of
Termination (or such longer period as any plan, program, practice or policy may
provide), the Company shall arrange to provide the Employee and the Employee’s
dependents with the benefits to which Employee and the Employee’s dependents
would have been entitled under Section 3(c) immediately prior to the Date of
Termination or, if more favorable to the Employee, those provided to the
Employee and the Employee’s dependents immediately prior to the first occurrence
of an event or circumstance constituting CIC Good Reason, at no greater
after-tax cost to the Employee than the after-tax cost to the Employee
immediately prior to such date or occurrence; provided, however, that, unless
the Employee consents to a different method (after taking into account the
effect of such method on the calculation of “parachute payments” pursuant to
Section 5(e)(6) hereof), such benefits shall be provided through a third-party
insurer. Benefits otherwise receivable by the Employee pursuant to this Section
5(e)(5) shall be reduced to the extent benefits of the same type are received by
or made available to the Employee during the twenty-four (24) month period
following the Employee’s termination of employment (and any such benefits
received by or made available to the Employee shall be reported to the Company
by the Employee); provided, however, that the Company shall reimburse the
Employee for the excess, if any, of the after-tax cost of such benefits to the
Employee over such after-tax cost immediately prior to the Date of Termination
or, if more favorable to the Employee, the first occurrence of an event or
circumstance constituting CIC Good Reason.

 

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  (6)(a) Whether or not the Employee becomes entitled to the Severance Payments,
if any of the payments or benefits received or to be received by the Employee in
connection with a Change in Control or the Employee’s termination of employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) (all such
payments and benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the “Total Payments”) will be subject to the Excise Tax, the
Company shall pay to the Employee an additional amount (the “Gross-Up Payment”)
such that the net amount retained by the Employee, after deduction of any Excise
Tax on the Total Payments and any federal, state and local income and employment
taxes and Excise Tax upon the Gross-Up Payment, and after taking into account
the phase out of itemized deductions and personal exemptions attributable to the
Gross-Up Payment, shall be equal to the Total Payments.

 

    

(b) For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (1) all of the
Total Payments shall be treated as “parachute payments” (within the meaning of
section 280G(b)(2) of the Code) unless, in the opinion of tax counsel (“Tax
Counsel”) reasonably acceptable to the Employee and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company’s
independent auditor (the “Auditor”), such payments or benefits (in whole or in
part) do not constitute parachute payments, including by reason of section
280G(b)(4)(A) of the Code, (2) all “excess parachute payments” within the
meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of
the Base Amount allocable to such reasonable compensation, or are otherwise not
subject to the Excise Tax, and (3) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Auditor in accordance
with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Employee shall be deemed to
pay federal income tax at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Employee’s residence on the Date of Termination (or if there is
no Date of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section 5), net of the

 

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     maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.

 

     (c) In the event that the Excise Tax is finally determined to be less than
the amount taken into account hereunder in calculating the Gross-Up Payment, the
Employee shall repay to the Company, within five (5) business days following the
time that the amount of such reduction in the Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up Payment
being repaid by the Employee), to the extent that such repayment results in a
reduction in the Excise Tax and a dollar-for-dollar reduction in the Employee’s
taxable income and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at 120% of the
rate provided in section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder in
calculating the Gross-Up Payment (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Employee
with respect to such excess) within five (5) business days following the time
that the amount of such excess is finally determined. The Employee and the
Company shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.

 

  (7)

The payments provided in subsections 5(e)(1), (e)(3) and (e)(6) of this
Agreement shall be made not later than the fifth day following the Date of
Termination (or if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of Section 5 of this Agreement);
provided, however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Employee on such
day an estimate, as determined in good faith by the Employee or, in the case of
payments under Section 5(e)(6) of this Agreement, in accordance with Section
5(e)(6) of this Agreement, of the minimum amount of such payments to which the
Employee is clearly entitled and shall pay the remainder of such payments
(together with interest on the unpaid remainder (or on all such payments to the
extent the Company fails to make such payments when due) at 120% of the rate
provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can
be

 

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determined but in no event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall be repaid by
the Employee to the Company on the fifth (5th) business day after demand by the
Company (together with interest at 120% of the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments are made under this
Agreement, the Company shall provide the Employee with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing shall be
attached to the statement).

 

(f) Definitions. For purposes of this Section 5, the following definitions shall
apply:

 

  (i) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated
under Section 12 of the Exchange Act.

 

  (ii) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of
the Code.

 

  (iii) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.

 

  (iv) “Change in Control” shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:

 

  (1) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power
of the Company’s then outstanding securities (the “Beneficial Ownership Event”);
provided, however, a Beneficial Ownership Event shall not constitute a Change in
Control under this paragraph 1 if such Beneficial Ownership Event occurs in
connection with the consummation of a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other corporation
immediately following which the individuals who comprise the Board of Directors
immediately prior thereto constitute at least a majority of the board of
directors of the Company, the entity surviving such merger or consolidation or
any parent thereof; or

 

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  (2) the following individuals cease for any reason to constitute a majority of
the number of directors then serving: individuals who, on the date hereof,
constitute the Board of Directors of the Company and any new director (other
than a director whose initial assumption of office is in connection with an
actual or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board of Directors or nomination for election by
the Company’s stockholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors
on the date hereof or whose appointment, election or nomination for election was
previously so approved or recommended; or

 

  (3) there is consummated a merger or consolidation of the Company or any
direct or indirect subsidiary of the Company with any other corporation, other
than a merger or consolidation immediately following which the individuals who
comprise the Board of Directors immediately prior thereto constitute at least a
majority of the board of directors of the Company, the entity surviving such
merger or consolidation or any parent thereof; or

 

  (4) the stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company or there is consummated an agreement for the sale or
disposition by the Company of all or substantially all of the Company’s assets,
other than a sale or disposition by the Company of all or substantially all of
the Company’s assets immediately following which the individuals who comprise
the Board of Directors immediately prior thereto constitute at least a majority
of the board of directors of the entity to which such assets are sold or
disposed or any parent thereof.

 

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.

 

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  (v) “CIC Cause” means, following a Change in Control:

 

(a) any willful and material act or acts of personal dishonesty taken by the
Employee at the expense of the Company, or

 

(b) any willful and material violation by the Employee of the Employee’s
obligations under this Agreement, or

 

(c) the conviction of the Employee of a felony, or

 

(d) failure to meet reasonable performance criteria for the Employee’s position
as established by the Company, after Employee fails to cure such non-performance
within a reasonable time after receiving notice of the same.

 

For purposes of Section 5(f), (1) the term “willful” shall mean any act of the
Employee done in bad faith or without reasonable belief that the Employee’s
action was in the best interest of the Company and (2) with respect to any
termination of employment pursuant to clause (a), (b) or (d) of the definition
of CIC Cause contained herein, notwithstanding anything herein to the contrary,
a Notice of Termination for such CIC Cause shall include a copy of a resolution
duly adopted by the affirmative vote of not less than two-thirds (2/3) of the
entire membership of the Board of Directors at a meeting of the Board of
Directors which was called and held for the purpose of considering such
termination (after reasonable notice to the Employee and an opportunity for the
Employee, together with the Employee’s counsel, to be heard before the Board of
Directors) finding that, in the good faith opinion of the Board of Directors,
the Employee was guilty of conduct set forth in clause (a), (b) or (d), and
specifying the particulars thereof in detail. In the event of a dispute
concerning the application of this provision, no claim by the Company that CIC
Cause exists shall be given effect unless the Company establishes to the Board
of Directors by clear and convincing evidence that CIC Cause exists.

 

  (vi) “CIC Good Reason” shall mean, following a Change in Control, without the
Employee’s consent:

 

(a) the assignment to the Employee of any duties inconsistent in any material
respect with the Employee’s position authority, duties or responsibilities as
contemplated by Section 1 of this Agreement, or any other action by the Company
which results in a significant diminution in such, or new, position, authority,
duties or responsibilities, excluding any isolated and inadvertent action not
taken in bad faith and which is remedied by the Company within ten (10) days
after receipt of a notice thereof given by the Employee;

 

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(b) any failure by the Company to comply with any of the provisions of Section
3, “Compensation,” of this Agreement other than an isolated and inadvertent
failure not taken in bad faith and which is remedied by the Company within ten
(10) days after receipt of notice thereof given by the Employee;

 

(c) the Employee being required to relocate to a principal place of employment
more than twenty-five (25) miles from the Employee’s current principal place of
employment;

 

[(d) any change in the Chief Executive Officer of the Company; or][for Jon S.
Halbert, Leslie Simmons and Laura I. Johansen only]

 

(e) any purported termination by the Company of the Employee’s employment
otherwise than as expressly permitted by this Agreement.

 

  (vii) “Code” shall mean the Internal Revenue Code of 1986, as amended from
time to time.

 

  (viii) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended from time to time.

 

  (ix) “Excise Tax” shall mean any excise tax imposed under section 4999 of the
Code.

 

  (x) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

 

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.

 

ADVANCEPCS

By:      

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    [Employee]

 

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