Document:

exv10w12

 

 Exhibit 10.12

ORBITAL SCIENCES CORPORATION

NONQUALIFIED

MANAGEMENT DEFERRED

COMPENSATION PLAN

EFFECTIVE AS OF SEPTEMBER 1, 2003

 

 

ORBITAL SCIENCES CORPORATION

NONQUALIFIED MANAGEMENT DEFERRED COMPENSATION PLAN

EFFECTIVE: SEPTEMBER 1, 2003

               WHEREAS, Orbital Sciences Corporation (“Orbital”) has decided to establish
a deferred compensation plan for a select group of its key management and
highly compensated employees; and

               WHEREAS, the purpose of this Plan is to provide a select group of
management or highly compensated employees with a tax-deferred capital
accumulation program through their voluntary deferrals of Base Salary and Bonus
and the allocation of Company Discretionary Contributions; and

               WHEREAS, this Plan of deferred compensation is intended to be a “top-hat
plan” (i.e., an unfunded deferred compensation plan maintained for a select
group of management or highly compensated employees) pursuant to Sections
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act
of 1974 (“ERISA”).

               NOW, THEREFORE, the Orbital Sciences Corporation Nonqualified Management
Deferred Compensation Plan is hereby adopted in accordance with the following
terms and conditions:

ARTICLE 1 - Definitions

               Unless the context or subject matter otherwise requires, the following
definitions shall govern the Plan:

               Section 1.01 Base Salary — the base salary established by the Company to
be earned by a Participant during a calendar year.

               Section 1.02 Beneficiary — a person (other than the Participant) who is
entitled to receive benefits under the Plan because of his designation for such
benefits by the Participant under the provisions of this Plan.

               Section 1.03 Board — the Board of Directors of Orbital Sciences
Corporation.

               Section 1.04 Bonus — Management Incentive Plan compensation (or any
successor plan).

               Section 1.05 Committee — the Human Resources and Compensation Committee
appointed by the Board to administer the Plan.

               Section 1.06 Company — Orbital Sciences Corporation and its successors.

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               Section 1.07 Company Discretionary Contributions — the contributions made
by the Company pursuant to the provisions of Section 3.02 of the Plan.

               Section 1.08 Deferrals — the portion of a Participant’s Base Salary
and/or Bonus that is deferred pursuant to the provisions of Article 3 of the
Plan.

               Section 1.09 Deferral Account — the separate unfunded account established
and maintained on the books of the Company for each Participant pursuant to the
provisions of Article 6 of the Plan, which is credited with Company
Discretionary Contributions and Deferrals made on the Participant’s behalf.
The Deferral Account shall include account balances accumulated under the Prior
Plan that have been transferred to this Plan. To the extent necessary to
reflect different vesting schedules and/or distribution dates, a Participant’s
Deferral Account can include multiple sub-accounts.

               Section 1.10 Deferral Election Form — the form designated by the Company
for use by Participants to (a) contribute Deferrals to the Plan, (b) designate
the deemed investment of the Deferral Account, and (c) select the timing and
form of the distribution of Deferrals, Company Discretionary Contributions
and/or amounts transferred to the Plan from the Prior Plan. The Committee may
change the form at any time.

               Section 1.11 Effective Date — September 1, 2003.

               Section 1.12 First Plan Year — September 1, 2003-December 31, 2003.

               Section 1.13 Forfeiture — that portion of a Participant’s Deferral
Account that is attributable to Company Discretionary Contributions and that is
not Vested as of the date the Participant terminates employment with the
Company.

               Section 1.14 Involuntary Termination of Employment — events which result
in a separation from service with the Company and which are generally not
initiated by a Participant, including but not limited to a layoff, disability
or discharge by the Company for any reason.

               Section 1.15 Participant — an employee of the Company who is (a)
determined by the Company to be a member of a select group of the Company’s
management or highly compensated employees; and (b) designated by the Committee
as a Participant under the Plan.

               Section 1.16 Plan — this Nonqualified Management Deferred Compensation
Plan and any modification, amendment, extension or renewal thereof.

               Section 1.17 Plan Year — the calendar year ending each December 31.

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               Section 1.18 Prior Plan — the Orbital Sciences Corporation 1995 Deferred
Compensation Plan as in existence immediately prior to the transfer of assets
and liabilities from such plan to this Plan, effective as of September 1, 2003.

               Section 1.19 Valuation Date — the date on which a Participant’s Deferral
Account is credited with Deferrals and earnings. For purposes of this Plan,
and in accordance with the terms set forth by CIGNA, the Plan’s third-party
administrator, a Participant’s Deferral Account will be subject to daily
valuation.

               Section 1.20 Vested — a Participant’s nonforfeitable interest in a
portion of his Deferral Account. A Participant’s Vested interest shall be
determined in accordance with the provisions of Article 5 of the Plan.

               Section 1.21 Voluntary Termination of Employment — events, other than
those classified as an Involuntary Termination of Employment, which are
initiated by the Participant and which result in a separation from service with
the Company. For purposes of this Plan, a Participant’s death will constitute
a Voluntary Termination of Employment.

ARTICLE 2 — Eligibility and Participation

               Section 2.01 Eligible Persons. Eligibility to participate in the Plan is
limited to (a) those management or highly compensated employees of the Company
with a Base Salary of $125,000 or greater on January 1 of any Plan Year, and
(b) any additional management or highly compensated employees of the Company
who are designated as Participants by the Committee.

               Section 2.02 Notice of Participation. The Committee shall notify in
writing each Participant of his designation to participate in the Plan.

               Section 2.03 Date of Entry. A person eligible to participate in the Prior
Plan as of August 31, 2003 shall become a Participant on the Effective Date of
this Plan. Those persons who are designated to participate in the Plan on or
after the Effective Date shall become a Participant thirty (30) days after they
are notified in writing of their designation to participate in the Plan.

               Section 2.04 Application for Participation. A person who is eligible to
participate in this Plan must initially complete a Deferral Election Form. If,
with respect to any Plan Year, a Participant fails to submit the form in a
timely manner, he will be ineligible to make Deferrals in that Plan Year.

               Section 2.05 Limitation on Participants. The Committee, in its sole
discretion, may determine who qualifies as a Participant and may change the
criteria (including salary requirements) at any time. The effective date of
such change shall be determined by the

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Committee.

               Section 2.06 Removal from Participation. The Committee may terminate a
Participant’s participation for any reason. A Participant who is prospectively
terminated from participating in this Plan is ineligible to make Deferrals or
receive an allocation of Company Discretionary Contributions effective as of
the date of termination in the Plan as determined by the Committee.

ARTICLE 3 — Participant Deferrals and Company Contributions

               Section 3.01 Participant Deferrals. As set forth more fully below, a
Participant may defer a portion of his Base Salary, which would otherwise be
earned and payable during the First Plan Year and any subsequent Plan Year, by
executing a Deferral Election Form pursuant to subsection (a) of this Section.
A Participant may defer a portion of his Bonus, which would otherwise be earned
and payable during any Plan Year, by executing a Deferral Election Form
pursuant to subsection (b) of this Section. Subject to the rules set forth by
the Committee and the limitations set forth below, the maximum Deferral is one
hundred percent (100%) of the Participant’s Base Salary and Bonus. No deferral
election shall reduce a Participant’s compensation below the amount necessary
to satisfy the following obligations: applicable employment taxes (e.g.,
FICA/Medicare) on amounts paid or deferred; withholding requirements of a
Company-sponsored benefit plan; or income tax withholding for compensation that
is not deferred.

               (a) Salary Deferral Contribution.

                    (i) Submission of Deferral Election Form.

                         (A) First Plan Year. Each Participant who wishes to participate in the
Plan and defer a portion of his Base Salary must submit a Deferral Election
Form to the Committee no later than August 15, 2003 or as otherwise determined
by the Committee. The Deferral Election Form, once properly completed and
submitted to the Committee, shall be effective as of the first pay period for
that portion of a Participant’s Base Salary earned between September 1, 2003
and December 31, 2003. In the case of a person who becomes a Participant after
the Effective Date, but within the First Plan Year, the Deferral Election Form
must be filed with the Committee no later than thirty (30) days after he
becomes eligible to participate in the Plan or as otherwise determined by the
Committee. However, such election shall be prospective and shall apply only to
Base Salary earned after the election is made. If, with respect to the First
Plan Year, a Participant fails to submit the form in a timely manner, he will
be ineligible to make Deferrals in the First Plan Year. Unless a Participant
files a new Deferral Election Form by December 15, 2003, the existing Deferral
Election Form shall only remain effective until December 31, 2003 and shall not
be effective for subsequent Plan Years.

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                         (B) Plan Years On and After January 1, 2004. Each Participant who wishes
to participate in the Plan and defer a portion of his Base Salary must submit a
Deferral Election Form to the Committee no later than December 15 of the year
immediately prior to the Plan Year with respect to which the election is to be
effective or as otherwise determined by the Committee. The Deferral Election
Form, once properly completed and submitted to the Committee, shall be
effective as of the first pay period of the following Plan Year. In the case
of a person who becomes a Participant after the first day of a Plan Year, the
Deferral Election Form must be filed with the Committee no later than thirty
(30) days after he becomes eligible to participate in the Plan or as otherwise
determined by the Committee. However, such election shall be prospective and
shall apply only to Base Salary earned after the election is made. If, with
respect to any Plan Year, a Participant fails to submit the form in a timely
manner, he will be ineligible to make Deferrals in that Plan Year. The
Deferral Election Form is effective for one 12-month period only. A
Participant must file a new Deferral Election Form each year as determined by
the Committee.

                    (ii) Modification of Salary Deferral Contribution. An election under
Section 3.01(a) may only be modified or continued by filing a new Deferral
Election Form by December 15th of the Plan Year (or First Plan Year, if
applicable) prior to the effective date of the change. Any such modification
or continuation will become effective as of the first pay period of the
following Plan Year. Notwithstanding the forgoing, once during a Plan Year (or
First Plan Year, if applicable), an election under Section 3.01(a) may be
decreased by filing a new Deferral Election Form. Any such decrease will be
effective as of the first pay period beginning after the date the election form
is received by the Committee and shall remain in effect until the end of the
Plan Year (or First Plan Year, if applicable).

                    (iii) Deferral Period. The Deferral Election Form will establish the
deferral period for the Base Salary. The deferral period shall begin on the
first day of the Plan Year (or First Plan Year, if applicable) with respect to
which the Deferral Election Form is filed (or, in the case of Participants
becoming eligible after the Effective Date, on the first day of a pay period
following the filing of a Deferral Election Form). The deferral period shall
end on the earlier of: (A) a Participant’s termination of employment; or (B)
the scheduled in-service withdrawal date specified on the Deferral Election
Form (such scheduled in-service withdrawal dates shall be a minimum of two
years from the date the deferral period commenced). The Participant may
designate different deferral periods for the Base Salary contributed in the
First Plan Year and each subsequent Plan Year by filing a separate Deferral
Election Form in accordance with Section 3.01(a)(i).

                    (b) Bonus Deferral Contribution.

                         (i) Submission of Deferral Election Form. Each Participant who wishes to
defer a portion of his Bonus must submit a Deferral Election Form to the
Committee in accordance with procedures determined by the Committee in its sole
discretion. The Deferral Election Form with respect to Bonuses is effective
for one 12-month period only. A Participant

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must file a new Deferral Election Form in order to defer the Bonus that is
earned during the subsequent 12-month period commencing each January 1.

                         (ii) Deferral Period. If a Participant has elected to defer his Base
Salary, the deferral period corresponding to the Base Salary deferred in a Plan
Year (or for the First Plan Year, if applicable) will govern the deferral
period for the Bonus earned with respect to that Plan Year. If a Participant
has not elected to defer his Base Salary, the Deferral Election Form with
respect to the Bonus will establish the deferral period for the Bonus. Such
deferral period shall begin on the January 1 following the Plan Year with
respect to which the Bonus was earned and shall end on the earlier of: (A) a
Participant’s termination of employment; or (B) the scheduled in-service
withdrawal date specified on the Deferral Election Form (such scheduled
in-service withdrawal dates shall be a minimum of two years from the date the
deferral period commenced). If a Participant has not elected to defer his Base
Salary, the Participant may designate different deferral periods by filing a
separate Deferral Election Form for each Bonus.

               Section 3.02 Company Discretionary Contributions. The Company, in its
sole and absolute discretion, may at any time commencing with and including the
First Plan Year credit a Company Discretionary Contribution to a Participant’s
Deferral Account. The Company shall determine the amount of the Company
Discretionary Contribution, which Participants are eligible to share in the
allocation of the Company Discretionary Contribution, and the vesting of the
Company Discretionary Contribution. Participants who, with respect to any Plan
Year, are not making Deferrals may, in the sole discretion of the Committee, be
eligible for the allocation of a Company Discretionary Contribution for such
Plan Year. In the event a Participant has not established a Deferral Account,
the Company shall determine how the Company Discretionary Contribution will be
deemed invested until such time as the Participant directs otherwise.

               Section 3.03 Amounts Transferred from Prior Plan. Effective September 1,
2003, all assets and liabilities attributable to the Prior Plan were
transferred to and became payable under this Plan. Each Participant who was a
participant in the Prior Plan must submit a Deferral Election Form to the
Committee no later than September 1, 2003 establishing the deferral period for
amounts attributable to the Prior Plan held in his Deferral Account. The
deferral period shall begin on September 1, 2003 and shall end on the earlier
of: (A) a Participant’s termination from employment; or (B) the scheduled
in-service withdrawal date specified on the Deferral Election Form (which date
shall not be prior to September 1, 2005). If a Participant fails to submit
such a Deferral Election Form, the amount held in Deferral Account attributable
to the Prior Plan shall be paid in a lump sum following his termination from
employment (whether on account of an Involuntary Termination of Employment or a
Voluntary Termination of Employment).

ARTICLE 4 — Investment of Deferral Account

               Section 4.01 Participant Election. The Participant may elect in writing
to have a specified percentage of his Deferral Account deemed invested in one
or more investment fund(s) made available by the Company from time to time
provided that the specified percentage is in

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whole numbers, the minimum designation is one percent (1%) and the sum of
the percentages allocated does not exceed one hundred percent (100%). The
Participant agrees on behalf of himself and his Beneficiary to assume all risks
in connection with any decrease in the value of funds credited to the
Participant’s Deferral Account that are deemed so invested or which continue to
be deemed to be invested in accordance with the provisions of the Plan. The
Committee may add, delete or otherwise alter the deemed investments allowed
under this Plan at any time.

               Section 4.02 Change of Deemed Investment Election. In accordance with any
procedures established by the Committee, each Participant may elect to change
the deemed investment of all or a portion of his Deferral Account among the
investments then allowed by the Plan on a daily basis by providing the
Committee with such completed forms as the Committee may require.

               Section 4.03 Investment Options. In addition to those investment funds
made available by the Company from time to time, any funds credited to the
Deferral Account may be kept in cash or invested and reinvested in mutual
funds, stocks, bonds, securities, insurance contracts, or any other assets as
may be selected by the Committee. Notwithstanding the foregoing, the Committee
may (but is not required to) invest the funds reflected in the Deferral Account
of a Participant in accordance with the Participant’s deemed investment
directions.

ARTICLE 5 — Vesting and Forfeiture of Benefits

               Section 5.01 Participant Deferral. Each Participant will be Vested in the
amounts in his Deferral Account attributable to Deferrals and his account
balance accumulated under the Prior Plan (and associated earnings thereof) at
all times.

               Section 5.02 Company Contributions. Each Participant will be Vested in
the amounts in his Deferral Account attributable to Company Discretionary
Contributions upon the earlier of: (i) the date the Participant satisfies the
vesting schedule established below; (ii) the date the Participant reaches age
sixty (60) provided the Participant is still employed by the Company; or (iii)
the date the Participant becomes disabled (as determined by the Committee in
its sole discretion). Notwithstanding the above, if a Participant dies while
in the employ of the Company, all amounts credited to the Participant’s
Deferral Account will be Vested.

               Each Participant shall vest in the Company Discretionary Contributions
credited to his Deferral Account in accordance with the following schedule: a
Participant who completes one year of service with the Company will be 33%
Vested in all Company Discretionary Contributions allocated to his Deferral
Account; a Participant who completes two years of service with the Company will
be 66% Vested in all Company Discretionary Contributions allocated to his
Deferral Account; and a Participant who completes three years of service with
the Company will be 100% Vested in all Company Discretionary Contributions
allocated to his

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Deferral Account.

               For purposes of calculating years of service under the aforementioned
vesting schedule, a Participant will be credited with one year of service for
each Plan Year in which he works 1,000 hours of service. The term “hours of
service” shall have the same meaning ascribed thereto in the Deferred Salary &
Profit Sharing Plan For Employees of Orbital Sciences Corporation.

               Notwithstanding the above, the Committee may modify the aforementioned
vesting schedule for Company Discretionary Contributions not yet made to the
Plan at any time.

               Section 5.03 Forfeitures. All Forfeitures in a Participant’s Deferral
Account as of the date the Participant terminates employment with the Company
shall be cancelled, and the Participant shall forfeit any right to the payment
to him of such Forfeitures.

ARTICLE 6 — Deferral Account

               Section 6.01 Deferral Accounts. The Committee shall establish and
maintain a Deferral Account for each Participant under the Plan. Each
Participant’s Deferral Account shall be further divided into separate
sub-accounts (“investment fund sub-accounts”), each of which corresponds to a
deemed investment fund elected by the Participant pursuant to Section 4.01.
The Participant’s Deferral Account shall be credited as follows:

                         (a) As of each Valuation Date, the Committee shall credit the investment
fund sub-accounts of the Participant’s Deferral Account with (i) an amount
equal to the Deferrals made by the Participant during each pay period in
accordance with the Participant’s elections under Section 4.01 and (ii) an
amount equal to the Company Discretionary Contributions allocated to the
Participant during any such pay period. The portion of the Participant’s
Deferrals or Company Discretionary Contributions that the Participant has
elected to be deemed to be invested in a certain type of investment fund shall
be credited to the investment fund sub-account corresponding to that investment
fund.

                         (b) As of each Valuation Date, each deemed investment fund sub-account of
the Participant’s Deferral Account shall be credited with earnings or losses.

               Section 6.02 Quarterly Reports. The Committee shall make available
Deferral Account information to Participants at least quarterly.

               Section 6.03 Title to Assets. The Company shall not be required to
segregate any assets of any kind to meet the obligation of the Plan. Any claim
of title to and beneficial ownership of any assets which the Company has
designated to pay the deferred compensation benefits hereunder shall at all
times be that of a general unsecured creditor of the Company, and a Participant
shall have no property rights in those assets.

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ARTICLE 7- Benefit Distributions

               Section 7.01 In General. Unless they are forfeited in accordance with
Article 5, the terms and conditions of benefit payments to a Participant who is
eligible to receive benefits under the Plan are set forth in this Article.
Distributions pursuant to Section 7.02, 7.03 and 7.08 will commence as soon as
administratively feasible after the last day of the month following the month
that contains the Participant’s separation from service date. Distributions
pursuant to Section 7.04, 7.05 and 7.06 shall be made as soon as
administratively feasible after the requested distribution is approved by the
Committee.

               Section 7.02 Voluntary Termination of Employment. Upon a Participant’s
Voluntary Termination of Employment, the Participant is entitled to a
distribution of benefits from the Vested portion of his Deferral Account. The
form of distribution is elected on the Deferral Election Form. The Participant
may request a change to the form of distribution previously elected by
submitting a written request to the Committee. The Committee may approve or
deny the request at its sole discretion. The forms of distribution permitted
are set forth below:

                         (a) Normal Form of Distribution. The normal form of distribution is a
lump sum payment.

                         (b) Optional Forms of Distribution. Participants who properly complete
and submit a Deferral Election Form in accordance with Article 3 may elect to
receive their distribution of benefits in monthly installment payments not to
exceed six years and/or 72 installment payments. Such monthly installment
payments must be paid out in 12-month increments, e.g., a Participant may only
request 12, 24, 36, 48, 60 or 72 installment payments.

                         (c) Distribution of Small Benefits. Notwithstanding the foregoing, if the
Participant’s Deferral Account is twenty-five thousand dollars ($25,000) or
less, a distribution for any reason shall be made in the form of a lump-sum
payment.

               Section 7.03 Involuntary Termination of Employment. Upon a Participant’s
Involuntary Termination of Employment, the Participant is entitled to a
distribution of benefits from the Vested portion of his Deferral Account. The
form of distribution is elected on the Deferral Election Form. The Participant
may request a change to the form of distribution previously elected by
submitting a written request to the Committee. The Committee may approve or
deny the request at its sole discretion. The forms of distribution permitted
are set forth in Sections 7.02(a), (b) and (c) above.

               Section 7.04 Scheduled In-Service Withdrawals. Subject to Section
7.04(a), a Participant who properly completes and submits a Deferral Election
Form and elects to receive a distribution prior to his termination of
employment will receive benefits in one (1) lump sum

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payment or in monthly installment payments not to exceed six years and/or
72 installment payments. Such monthly installment payments must be paid out in
12-month increments, e.g., a Participant may only request 12, 24, 36, 48, 60 or
72 installment payments.

                         (a) Criteria to Elect Scheduled In-Service Withdrawal. In order to select
a scheduled in-service withdrawal date, a Participant must complete a Deferral
Election Form and elect a distribution date that is at least two (2) years from
the date the deferral period commenced. Notwithstanding any provision of this
Plan to the contrary, a Participant shall not be entitled to receive the
unvested portion of his Deferral Account. In this case, the deferral period
with respect to the unvested portion shall be automatically extended until the
Participant becomes Vested in such amount. If the Participant elected to
receive a lump sum payment prior to becoming Vested, the portion of his
Deferral Account that was unvested at his scheduled in-service withdrawal date
shall be paid in a lump sum as soon as practical after he becomes Vested in
such amount. If the Participant elected to receive monthly installment
payments prior to becoming Vested, the portion of his Deferral Account that was
unvested at his scheduled in-service withdrawal date shall be paid out after he
becomes Vested in monthly installments equal to the number of payments
remaining in the scheduled in-service withdrawal.

                         (b) Election to Extend Scheduled In-Service Withdrawal. Subject to the
consent of the Committee, a Participant may elect to postpone or terminate the
scheduled in-service withdrawal date (and form of distribution) specified on a
Deferral Election Form by filing with the Committee a subsequent Deferral
Election Form specifying a later scheduled in-service withdrawal date (and, if
necessary a new form of distribution) or cancel the in-service withdrawal and
elect to receive a distribution upon termination from employment.

                         Such an election to postpone or terminate the scheduled in-service
withdrawal date must be made at least one year prior to the scheduled
in-service withdrawal date and may only be made once. The extension of the
scheduled in-service withdrawal must be for a minimum period of two years.

                         (c) Termination of Employment Prior to Scheduled In-Service Withdrawal
Date. In the event the Participant terminates employment prior to his
scheduled in-service withdrawal date, the Committee has the discretion to
distribute the benefits in the Participant’s Deferral Account in one (1) lump
sum payment.

               Section 7.05 Nonscheduled In-Service Withdrawals. A Participant may
request to receive all the benefits in the Vested portion of his Deferral
Account in the form of a lump sum payment at any time. Subject to the approval
of the Committee, a Participant who elects this type of benefit distribution
will receive ninety percent (90%) of the Vested portion of his Deferral Account
and will forfeit the remaining ten-percent (10%). As a result of such
non-scheduled in-service withdrawal, the Participant will be ineligible to
participate in the Plan for purposes of making Deferrals for the duration of
the Plan Year in which he received the lump

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sum payment and for the following Plan Year.

               Section 7.06 Hardship Distributions — Withdrawal of Deferrals. Upon
application, the Committee may, when in its sole discretion it determines that
a Participant has incurred a hardship, permit such Participant to withdraw all
or part of the Vested portion of his Deferral Account. While such a
determination shall be within the discretion of the Committee, a hardship
withdrawal request shall only be considered upon satisfactory demonstration
that the Participant has incurred an immediate financial need arising out of
unforeseeable events beyond the control of the Participant.

               Section 7.07 Forfeiture of Company Discretionary Contributions.
Notwithstanding any provisions of this Plan to the contrary, if (a) a
Participant’s termination from employment (whether on account of an Involuntary
Termination of Employment or a Voluntary Termination of Employment) is due to
theft, proven dishonesty, gross misconduct, embezzlement, fraud, conviction of
a felony (whether or not related to the employment relationship), disclosure of
trade secrets or business information of the Company or use of the facilities,
premises or other assets of the Company to conduct unlawful or unauthorized
activities or transactions, or (b) a Participant, subsequent to termination of
employment, violates the terms of any restrictive covenant applicable to the
Participant, then all unpaid amounts credited to the Participant’s Deferral
Account attributable to Company Discretionary Contributions shall be forfeited.
All determinations as to the applicability of this Section 7.07 shall be
determined by the Committee in its sole discretion and shall be conclusive.

               Section 7.08 Death Benefits.

                         (a) Death Before Separation from Service. In the event that a Participant
incurs a Voluntary Termination of Employment because of death, his Beneficiary
shall be entitled to receive a death benefit that shall equal the value of the
Participant’s Deferral Account, as of the Valuation Date immediately preceding
the distribution date. The portion of the death benefit attributable to the
Participant’s Deferral Account shall be paid in accordance with the
distribution form selected by the Participant (but subject to 7.02(c)).

                         (b) Death After Separation from Service. In the event that a Participant
who is receiving a monthly distribution of benefits after incurring a Voluntary
or Involuntary Termination of Employment dies, his Beneficiary shall be
entitled to receive the remaining installment payments from the Participant’s
Deferral Account as they become due. Payment of benefits under this Section
shall be made in the form of payment selected by the Participant.
Notwithstanding the foregoing, the Committee, in its sole discretion, may elect
to pay any remaining benefit payable to the Beneficiary in the form of a lump
sum payment as soon as reasonably practicable after the date of death.

               Section 7.09 Tax Liability. In the event the Plan is required to
distribute benefits to any Participant in compliance with a change in the law,
the Participant shall bear all tax

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consequences associated with the premature payment of his Deferral
Account. Notwithstanding the above, the Participant will be responsible for all
taxes in conjunction with the deferral or distribution of his benefits.

ARTICLE 8 — Administration

               Section 8.01 Responsibilities and Powers of Committee. The Committee
shall be the agent for service of legal process regarding any litigation
arising out of the operation and administration of the Plan. The Plan shall be
administered by the Committee. The Committee shall have the authority to
delegate some or all of its powers with respect to the Plan to designated
representatives, including, but not limited to, the Company’s Pension and
Retirement Committee. The Committee shall also have the discretionary power to
establish and revise rules and procedures relating to the administration of the
Plan, interpret the provisions of the Plan and answer all questions and settle
all disputes which may arise in connection with the Plan.

               Section 8.02 Interpretation of Plan. The Committee shall, subject to the
requirements of the law, be the sole judge of the standard of proof required in
any case and the application and interpretation of this Plan, and decisions of
the Committee shall be final and binding on all parties. The Committee shall
have the exclusive right and discretionary authority to construe the terms of
the Plan, to resolve any ambiguities, and to determine any questions which may
arise with the Plan’s application or administration, including but not limited
to, determination of eligibility for benefits. Whenever in the Plan the
Committee is given discretionary powers, the Committee shall exercise such
powers in a uniform and nondiscriminatory manner. The Committee shall process
a claim for benefits as speedily as is feasible, consistent with the need for
adequate information and proof necessary to establish the Participant’s benefit
rights and to commence payment of benefits.

ARTICLE 9 — Application for Benefits and Claims Procedure

               Section 9.01 Notice of Denial of Benefit. In the event that a request for
distribution of benefits is denied in whole or in part, a Participant whose
request for benefits has been denied shall be notified of such denial in
writing by the Committee. The denial notice shall specify the reason or
reasons for the denial, make specific references to pertinent Plan provisions,
describe any additional material or information necessary for the Participant
to perfect the claim, and shall advise the Participant of the procedure for the
appeal of such denial.

               Section 9.02 Appeals Procedure. All appeals shall be made in accordance
with the following procedure:

                         (a) The Participant or his duly authorized representative shall file with
the Committee a request to appeal the denial within sixty (60) days of
notification by the Committee of the claim denial. The request shall be made
in writing, and shall set forth all of the facts upon

12

 

which the appeal is based. Appeals not timely filed shall be barred.

                         (b) The Committee shall consider the merits of the Participant’s written
presentations, the merits of any facts or evidence in support of the denial of
benefits, and such other facts and circumstances as it shall deem relevant.

                         (c) Within forty-five (45) days after a request for review has been
received, the Committee shall render a decision upon the appealed claim that
shall be in writing and shall include specific reasons for the decision and
specific references to the pertinent Plan provisions on which the decision was
based. The decision rendered by the Committee shall be binding on all parties.

ARTICLE 10 — General Provisions

               Section 10.01 No Alienation or Assignment of Benefits. Payments of
benefits under this Plan to any Participant shall not be subject to any claim
of any creditor of such Participant, and, in particular, to the fullest extent
permitted by law, all such payments shall be free from attachment,
garnishments, trustee’s process, or any other legal or equitable process
available to any creditor of such Participant. No Participant shall have the
right to alienate, anticipate, commute, pledge, encumber, assign, sell, or
transfer any potential payment of benefits hereunder.

               Section 10.02 No Contract of Employment. Nothing contained herein shall
be construed as conferring upon a Participant the right to continue in the
employ of the Company.

               Section 10.03 Other Retirement Plans. Any compensation deferred under
this Plan shall not be deemed salary or other compensation to a Participant for
the purpose of computing benefits to which he may be entitled under any
ERISA-covered benefit plan of the Company, provided it is permissible to do so
under such plan.

               Section 10.04 Heirs, Assigns and Successors. This agreement is binding
upon and inures to the benefit of the Company, its successors and assigns and
the Participant and his heirs, executors, administrators and legal
representatives.

               Section 10.05 Amendment or Termination. The Committee has the right to
amend the Plan with retroactive effect if necessary, at any time; provided
that, in no event shall the Committee have the authority to adopt any amendment
having a significant cost to the Company. Notwithstanding the foregoing, the
Board retains the right to modify the powers of the Committee to amend the
Plan, to amend the Plan (with retroactive effect if necessary) or to terminate
the Plan, at any time.

               Section 10.06 Severability of Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions

13

 

hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.

               Section 10.07 Controlling Law. This Plan shall be construed in accordance
with and governed by the laws of the Commonwealth of Virginia.

               Section 10.08 Grammatical Construction. Pronouns or other words
indicating the masculine gender shall be deemed to include the feminine gender,
and singular words shall include the plural in all cases where such meaning
would be appropriate.

               Section 10.9 Unauthorized Representations. The Company shall not be bound
by the representations of any person, other than the Committee, regarding
eligibility for benefits under the Plan or any other matter relating to the
Plan.

               Section 10.10 Designation of Death Benefit Beneficiary. Each Participant
may designate any person or persons (primarily or contingently) as his
Beneficiary to whom his Plan benefits shall be paid if he dies prior to receipt
of all such benefits. Such Beneficiary designation shall be effective only if
in writing on forms provided by the Committee and if such form is delivered to
the Committee during the lifetime of the Participant. If a Participant has a
spouse, an election to name a primary designated Beneficiary other than or in
addition to the spouse shall be ineffective unless the Participant’s spouse
consents in writing on a form provided by the Committee to such designation.

14<PAGE>

                                                                   EXHIBIT 10.33

                             [EXPRESS SCRIPTS LOGO]

                                 October 2, 2003

Barbara Hill
XXXXXXXXX
XXXXXXXXX

         This letter will set forth certain agreements regarding the terms of
your separation from Express Scripts.

         1.       In consideration of your reaffirmation of your undertakings in
Article V of the Executive Employment Agreement between you and Express Scripts
dated as of April 15, 2002 (the "Employment Agreement"), as amended by section 2
of this letter, and in consideration of your continuing compliance with such
undertakings, Express Scripts will pay to you, in addition to the amounts
otherwise due to you under the Employment Agreement upon a termination of
employment by the Company without Cause, the sum of $1,634,000 payable to you in
a lump sum in cash, net of any required income and employment tax withholding,
as soon as practicable following your acceptance of this letter. Such payments
shall be and remain subject to the terms of Section 4.2(c) of the Employment
Agreement.

         2.       The "Noncompete Period" under the Employment Agreement shall
be twenty-four (24) months from the date of termination of employment.

         3.       We hereby confirm that with respect to the items listed below,
you are vested as follows:

                  a)       Deferred Bonus - $540,941.98

                  b)       Restricted Stock - 9,744 shares

                  c)       Stock Options - 40,000 options

         4.       You agree to tender your resignation from the Board of
Directors of Express Scripts, Inc., effective immediately, with your acceptance
of this letter.

         5.       We have agreed on the text of a press announcement to be
issued no later than October 2, 2003, and on a statement of reference that the
Company will give in

<PAGE>

Barbara Hill
October 2, 2003
Page Two

response to inquiries from potential future employers. Copies of such documents
are attached.

         6.       The effective date of termination of your employment is
October 2, 2003.

         7.       Except as otherwise expressly provided in this letter, the
terms of the Employment Agreement relating to termination of your employment
shall remain in full force and effect.

         We wish you the best of luck in your future endeavors and thank you for
your service and dedication to Express Scripts.

                                                  Sincerely,

                                                  /s/ Barrett A. Toan

                                                  Barrett A. Toan

Accepted:

  /s/ Barbara Hill
----------------------
Barbara Hill

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