Document:

Ex-10.33

 

EXHIBIT
10.33

EXECUTION COPY 

CONFIDENTIAL

Management Rights Letter

March 19, 2004

New Mountain Partners, L.P.

712 Fifth Avenue

New York, New York 10019

Dear Sirs:

This letter will confirm our agreement that, in connection with your investment in National Medical
Health Card Systems, Inc., a Delaware corporation (the
“Company”), pursuant to the Amended and
Restated Preferred Stock Purchase Agreement, dated as of November 26, 2003, by and among New
Mountain Partners, L.P., a Delaware limited partnership
(“Investor”), the Company, and such other
parties who may be signatories thereto from time to time (as such agreement may be amended from
time to time, the “Preferred Stock Purchase Agreement”), the Investor will be entitled to
the following contractual management rights relating to the Company
(collectively, the “Management
Rights”). Any capitalized terms used herein but not defined herein shall have the meanings assigned
to such terms in the Preferred Stock Purchase Agreement.

	1.	 	Investor shall be entitled to routinely consult with and advise management of the Company
with respect to operations of the Company and its direct and indirect subsidiaries, including
all the Company’s business and financial matters and management’s proposed annual operating
plans, and management will, upon Investor’s request, meet with representatives of Investor
(the “Representatives”) at reasonable intervals at the Company’s facilities at mutually
agreeable times for such consultation and advice, including to review progress in achieving
said plans. The Company shall give Investor reasonable advance written notice of any
significant new initiatives or material changes to existing operating plans of the Company and
its direct and indirect subsidiaries and shall afford Investor adequate time to meet with
management to consult on such initiatives or changes prior to implementation. The Company
agrees to give due consideration to the advice given and any proposals made by Investor.
	 
	2.	 	Investor may, upon notice during normal business hours, inspect all documents, contracts,
books, records, personnel, offices and other facilities and properties of the Company and its
direct and indirect subsidiaries and, to the extent available to the Company after the Company
uses reasonable efforts to obtain them, the records of its legal advisors and accountants,
including the accountants’ work papers, and Investor may make such copies and inspections
thereof as Investor may reasonably request. The Company shall furnish Investor with such
financial and operating data and other information with respect to the business and properties
of the Company and its direct and indirect subsidiaries as the Investor may reasonably
request. The Company shall permit the Representatives to discuss the affairs, finances and
accounts of the Company and its direct and indirect subsidiaries with the principal officers
of the Company and to make proposals and furnish advice with respect thereto to such persons.

 

 

	3.	 	At any time during which Investor does not have a right pursuant to the certificate of
designations setting forth the designation, powers and preferences of the Company’s Series A
Convertible Preferred Stock to designate at least one member to the Company’s board of
directors (the “Board”), the Company shall, after receiving notice from Investor as to
the identity of such person (a “Board Observer”),
(i) permit a Board Observer to attend all
meetings of the Board and all committees thereof as a non-voting observer; (ii) provide the
Board Observer advance notice of each such meeting, including such meeting’s time and place,
at the same time and in the same manner as such notice is provided to the members of the
Board (or such committee thereof); (iii) provide the Board Observer with copies of all
materials, including notices, minutes and consents, distributed to the members of the Board
(or such committee thereof) at the same time as such materials are distributed to such Board
(or such committee thereof) and permit the Board Observer to have the same access to
information concerning the business and operations of the Company and its direct and
indirect subsidiaries as is provided to the members of the Board; and (iv) permit the Board
Observer to discuss the affairs, finances and accounts of the Company and its direct and
indirect subsidiaries with, and to make proposals and furnish advice with respect thereto
to, the Board, without voting, and the Board and the Company’s officers shall give due
consideration to such proposals or advice; provided, however that the Board Observer may be
excluded from access to any materials or attendance at any meeting or portion thereof or
upon advice of counsel (which may be the Company’s general counsel) that such exclusion is
reasonably necessary to preserve the attorney-client privilege or to comply with applicable
law. Reasonable documented costs and expenses incurred by the Board Observer for the
purposes of attending Board (or committee) meetings and conducting other Company business
will be paid by the Company.
	 
	4.	 	The Company shall deliver to Investor:

	 	(a)	 	for so long as the Company or any direct or indirect subsidiary is required by
law or pursuant to the terms of any outstanding indebtedness of the Company or any
direct or indirect subsidiary to prepare such reports, any annual reports; quarterly
reports and other periodic reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, prepared by the Company or any direct or indirect
subsidiary as soon as available; and
	 
	 	(b)	 	in the event that the Company is no longer required by law or pursuant to the
terms of any outstanding indebtedness to prepare annual reports, quarterly reports or
other periodic reports pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended:

	 	(i)	 	as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year of the
Company, consolidated balance sheets of the Company and its direct and indirect
subsidiaries as of the end of such period then ended, and consolidated
statements of income and cash flows of the Company and its direct and indirect
subsidiaries for

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	 	 	 	the period then ended, in each case prepared in conformity with generally
accepted accounting principles in the United States applied on a consistent
basis, except as otherwise noted therein and subject to the absence of
footnotes and to year-end adjustments; and
	 
	 	(ii)	 	as soon as available and in any event within 120 days
after the end of each fiscal year of the Company, a consolidated balance sheet
of the Company and its direct and indirect subsidiaries as of the end of such
year, and consolidated statements of income and cash flows of the Company and
its direct and indirect subsidiaries for the year then ended, in each case
prepared in conformity with generally accepted accounting principles in the
United States applied on a consistent basis, except as otherwise noted therein,
together with an auditor’s report thereon of a firm of established national
reputation.

     The Investor’s rights described herein shall terminate and be of no further force or effect
upon the Investor ceasing to be the holder of at least one percent (1%) of shares of Common Stock
(as defined in the Purchase Agreement) issued and/or issuable upon the conversion of the Preferred
Stock (as defined in the Purchase Agreement); provided, however, that the Investor’s rights shall
not terminate by reason of this paragraph in the event that the Investor notifies the Company, in
writing, that it has made a good faith determination that it is necessary for the Investor to
continue to have the rights described herein in order to maintain Investor’s status as a “venture
capital operating company” for purposes of the Department of Labor’s “plan assets” regulations (but
without regard for whether there are other actions that could be taken to maintain such status).

     Investor hereby agrees, and any Representative that Investors may appoint will agree, to hold
in confidence and trust and not use or disclose any non-public information (“Confidential
Information”), in whatever form or format and however it may be embodied, concerning the
Company that is furnished, made available, or otherwise disclosed to Investor by or on behalf of
the Company, orally or in writing, in connection with any of Investor’s rights under this letter
agreement, unless otherwise required by law or unless such confidential information otherwise
becomes publicly available or available to it other than through this letter agreement. Any
Representative or other officer, partner, employee or agent of Investor that will have access to
the Company’s information shall be advised of these confidentiality restrictions before receiving
any Confidential Information concerning the Company.

     The rights set forth in this letter agreement are intended to satisfy the requirement of
contractual management rights for purposes of qualifying Investor’s interests in the Company as
venture capital investments for purposes of the Department of Labor’s “plan assets” regulations,
and in the event that, after the date hereof, as a result of any change in applicable law or
regulation or a judicial or administrative interpretation of applicable law or regulation, it is
determined that such rights are not satisfactory for such purpose, Investor and the Company shall
reasonably cooperate in good faith to agree upon mutually satisfactory management rights which
satisfy such regulations.

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	 	Very truly yours, 
 

NATIONAL MEDICAL HEALTH CARD

     SYSTEMS, INC.

 	 
	 	By:  	/s/ James J. Bigl
 	 
	 	 	James J. Bigl  	 
	 	 	Chief Executive Officer 	 
	 

	 	 	 	 	 	 	 
	AGREED AND ACCEPTED THIS

19th day of March, 2004	 	 
	 
	 	 	 	 	 	 
	NEW MOUNTAIN PARTNERS, L.P.	 	 
	 
	 	 	 	 	 	 
	By:	 	New Mountain Investments, L.P.,

its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	New Mountain GP, LLC,	 	 
	 

	 	 	 	its general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Steven B. Klinsky
 

	 	 
	 

	 	 	 	Steven B. Klinsky

Chief Executive Officer	 	 

Management Rights LetterEx-10.35

 

EXHIBIT
10.35

GENERAL RELEASE

(PLEASE READ CAREFULLY. THIS GENERAL RELEASE HAS IMPORTANT LEGAL CONSEQUENCES.)

     This General Release (this “Release”) is between National Medical Health Card Systems, Inc.
(“Company”) and Bill Masters (“Employee”) and is a complete, final and binding settlement of all
claims and potential claims, if any, with respect to their employment relationship. Employee and
the Company may sometimes be referred to collectively as the “Parties.”

     WHEREAS, the Company and Employee were parties to an Employment Agreement dated on or about
October 4, 2004 (the “Employment Agreement”); and

     WHEREAS, the Company and Employee were parties to a letter dated November 28, 2005 (the
“Severance Letter”); and

     WHEREAS, the Company and Employee are parties to a Consulting Agreement and Departure
Agreement and General Release (the “Departure Agreement”); and

     WHEREAS, the Company and Employee have agreed on certain terms and conditions regarding the
termination of Employee’s employment under the Departure Agreement; and

     WHEREAS, the Company’s obligation to pay Employee severance compensation as contemplated in
the Departure Agreement is conditioned upon the execution and delivery (without revocation) of this
Release by Employee;

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, be it
agreed as follows:

     1. As of June 28, 2007, Employee’s employment relationship as a consultant with the Company
will terminate (the “Consulting Period Termination Date”). This Release has been presented to
Employee on or before the Consulting Period Termination Date and will become effective seven (7)
days (the “Effective Date”) after the execution of this Release by the Employee (the “Execution
Date”).

     2. For purposes of the National Medical Health Card Systems, Inc. 1999 Stock Option Plan, as
amended (the “Stock Option Plan”), and the National Medical Health Card Systems, Inc. Amended and
Restated 2000 Restricted Stock Grant Plan (the “Restricted Stock Plan”), the termination of
Employee’s employment will be considered as an involuntary termination without cause. Accordingly,
under the terms of the Stock Option Plan, Employee will have 90 days following the Termination Date
to exercise any of his vested options. The Parties acknowledge that, on the Termination Date,
Employee will forfeit and have no further right, title or interest in or with respect to, any and
all non-vested options, shares of restricted stock and restricted stock unit awards held by
Employee under the Stock Option Plan and/or the Company’s Restricted Stock Plan. Employee affirms
the provision of any Restricted Stock

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Agreement that the Company shall have the right to instruct the Company’s transfer agent to
transfer any unvested restricted stock to the Company.

     3. Release Provisions.

     (a) In consideration for the Company’s payments to Employee as set forth in the
Departure Agreement, and for other good and valuable consideration, as and for Employee’s
complete release of all statutory, contract, tort and all other claims against the Company
and each of its current and former owners (including, without limitation, New Mountain
Capital, L.L.C., New Mountain Partners, L.P., New Mountain Affiliated Investors, L.P., and
their respective affiliates), predecessors, assigns, employees, representatives, attorneys,
benefit plans, insurers, parent companies, divisions, subsidiaries, affiliates, directors,
managers, partners, members, and officers, including any and all persons acting by, through,
or under or in concert with any of them (collectively “Releasees”), Employee hereby releases
and forever discharges the Releasees from any all actions, causes of action, suits, dues,
sums of money, reckonings, covenants, contracts, bonuses, controversies, agreements, claims,
promises, charges, obligations, complaints and demands whatsoever in law or equity, which
Employee (and Employee’s heirs, executors, administrators, successors and/or assigns) may
now have or hereafter can, shall, may, or may have had for, upon, or by reason of any
matter, cause or actual or alleged act, omission, transaction, practice, conduct,
occurrence, or other matter up to and including the execution of this Release by the
Employee, including without limitation, any claim arising out of or relating to the
Employee’s employment by the Company and each of its subsidiaries and affiliated entities,
and any and all obligations and liabilities of the Company under the Employment Agreement,
Departure Agreement and Severance Letter or any other agreement between the Employee and any
of the Releasees, and the ownership, acquisition, offer or sale of, or rights to any equity
interest, or any option to purchase or acquire any equity interest in the Company, excepting
only the rights and obligations (i) created by this Release; (ii) that may exist under (A)
any indemnification agreement or the Company’s Certificate of Incorporation and Bylaws, as
amended, to indemnify Employee or (B) the Company’s D&O insurance coverage; (iii) Employee’s
rights under state worker’s compensation laws (for occupational illness or injury only);
(iv) Employee’s vested rights under the Company’s health, dental, pharmacy and 401(k)
benefit plans and (v) to receive payments under paragraph 4 of the Departure Agreement.

     (b) Without limiting the generality of the foregoing, this Release is intended to and
shall release Releasees from any and all claims, whether known or unknown, which Employee
ever had, has, or may have against any Releasee with respect to Employee’s employment, the
terms, benefits, and conditions of that employment, and/or the termination thereof,
including without limitation those arising under the Civil Rights Act of 1866, 42 U.S.C.A.
Section 1981, the Civil Rights Act of 1964, as amended, 42 U.S.C.A. Section 2000e, et seq.,
the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C.A. Section 621 et
seq., the National Labor Relations Act, 29 U.S.C.A. Section 151 et seq., the Fair Labor
Standards Act, 29 U.S.C.A. Section 201 et seq., the Labor Management Reporting and
Disclosure Act of 1959, as amended, 29 U.S.C.A. Section 401 et seq., the Americans with
Disabilities Act, 42 U.S.C.A.

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Section 12101, et. Seq., the Constitution and the laws of the United States and the
State of New York, including specifically, New York’s Human Rights Law, Executive Law
Section 290 et seq., or any other federal, state, or local human rights, civil rights,
wage-hour, pension, or labor laws, rules and/or regulation, public policy, contract or tort
law; and any and all claims arising out of the ownership, acquisition, offer or sale of, or
rights to any equity interest, or relating to any option to purchase or acquire any equity
interest in the Company, that Employee has held at any time in the Company or any of its
predecessors or affiliates, including any claims, arising under the Securities Act of 1933,
as amended, the Securities Exchange Act of 1934, as amended, any federal, state or local
securities law, the rules or regulations promulgated under any of them, or any doctrine of
common law or equity applicable to the ownership, acquisition or sale of securities or the
solicitation of proxies with respect thereto; and any and all claims for attorneys’ fees,
costs, disbursements, or any action similar thereto.

EMPLOYEE SPECIFICALLY ACKNOWLEDGES AND AGREES THAT BY EXECUTING THIS
RELEASE, HE IS WAIVING ALL RIGHTS OR CLAIMS, IF ANY, THAT HE HAS OR
MAY HAVE UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT, AS AMENDED.
EMPLOYEE FURTHER ACKNOWLEDGES AND AGREES THAT HIS WAIVER OF SUCH
RIGHTS OR CLAIMS IS KNOWING AND VOLUNTARY.

     (c) Employee promises never to initiate, be represented or participate in, submit or
file, or permit to be submitted or filed on or in his behalf, any lawsuit, charge, claim,
complaint or other proceeding against any Releasee with any administrative agency, court,
arbitrator or other forum, based upon claims that were released pursuant to this Release.
This covenant not to sue (and the remedies provided in this Release, including those in
paragraph 3(d)) does not affect Employee’s right to test the knowing and voluntary nature of
his waiver of rights. Nothing in this Release shall be construed to affect the rights and
responsibilities of the Equal Employment Opportunity Commission, or any other state or local
agency with similar responsibilities (the “Commission”), to enforce any laws pertaining to
employment discrimination or retaliation. Likewise, this waiver will not be used to justify
interfering with the protected right of any employee to file a charge or participate in an
investigation or proceeding conducted by the Commission; however, Employee waives the right
to any benefits or recovery arising out of any such proceeding.

     (d) Subject to paragraph 3(c), if Employee materially breaches any of his promises
contained in this paragraph 3 by filing a lawsuit or administrative charge based on claims
that he has released, Employee will indemnify the Company and/or any Releasee for any costs,
including reasonable attorneys’ fees, that the Company and/or any Releasee may incur as the
result of Employee’s breach. In addition, if Employee materially breaches the promises made
in any provision of this Release or the Departure Agreement, he must repay all benefits
previously received in accordance with the Departure Agreement, upon the Company’s
reasonable demand, and Company shall cease making further payments, if any, pursuant to the
Departure Agreement.

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     4. Employee acknowledges and agrees that, for the time periods set forth in the Employment
Agreement, he shall comply with paragraphs 6 through 11 of the Employment Agreement and that such
provisions shall survive the termination of the Employment Agreement. Company acknowledges and
agrees that the provisions of paragraph 9 of the Employment Agreement are not intended to prevent
Employee’s employment or service with (i) companies that supply products and services to the PBM
industry, but do not themselves provide PBM Services, so long as Employee’s services are not the
services prohibited by paragraph 9 of the Employment Agreement; or (ii) subsidiaries, operating
divisions, or other business entities of companies that provide PBM Services, so long as Employee’s
services are not directly for the benefit of the PBM functions of those companies and are not the
services prohibited by paragraph 9 of the Employment Agreement. Employee acknowledges
and agrees that the provisions of paragraphs 6 through 11 of the Employment Agreement are fully
enforceable and reasonable to protect the legitimate business interests of the Company.
Furthermore, Employee represents and warrants that he has returned to the Company any and all
identification cards, files, books, records, materials, equipment or documents in his possession or
under his control that were provided to or obtained by him in connection his employment.

     5. Employee further agrees to never to make any statements or comments, whether oral or
written to any person or entity that would tend to disparage or harm the Company; provided,
however, that this sentence shall not be construed to constrain Employee from providing truthful
testimony when required by law in the course of a legal or administrative proceeding. Employee
understands and agrees that violation of this paragraph shall be treated as a material breach of
this Release.

     6. Employee expressly agrees that this Release is not and shall not in any way be deemed to
constitute an admission or evidence of any breach of contract, wrongdoing or liability on the part
of the Company, nor of any violation of any federal, state or municipal statute, regulation or
principle of common law or equity.

     7. Employee agrees to make himself reasonably available in connection with any information the
Company requires relating to the services Employee had provided to Company, including any
litigation the Company is or may become involved in to which the Employee has knowledge. Company
agrees to provide Employee with reasonable notice in connection with any depositions or court
appearances where his presence is necessary or reasonably desirable. The Company shall pay
Employee’s travel expenses in this regard. Employee and Company shall agree on a reasonable per
diem fee for any time greater than three full days the Employee is required to make himself
available in person pursuant to this paragraph.

     8. Employee and the Company acknowledge and agree:

     (a) that each of them has read and understands the contents of this Release;

     (b) that this Release does not waive rights or claims that may arise after the date
that this Release is executed;

     (c) that Employee waives rights or claims only in exchange for consideration that the
Employee would not be entitled to but for executing this Release;

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     (d) that the Company has informed Employee that Employee should consult with an
attorney in connection with this Release; and

     (e) that Employee’s decision to consult with an attorney or not to consult with any
attorney was made without influence by the Company.

     9. Both Parties understand that the Employee shall have 21 days (the “Review Period”) to
consider this Release before signing. Both Parties understand that the Employee shall have seven
(7) days (the “Revocation Period”) in which to revoke this Release after signing, and that this
Release shall not become effective or enforceable until the expiration of seven (7) days after
signing, and the severance compensation payable under the Departure Agreement shall not be due and
owing until after the Effective Date set forth herein and the fulfillment of all conditions set
forth herein. To accept the Release, Employee must send a signed copy to Neil Carfagna, National
Medical Health Card Systems, Inc., 26 Harbor Park Drive, Port Washington, New York 11050, (516) 605
6802, (516) 626 4632 (facsimile), NCarfagna@nmhc.com, such that it is received no later than 21
days after the date that this Release has been presented to Employee. Any notice of revocation
must also be sent such that it is received prior to the end of the seven day Revocation Period by
Neil Carfagna, National Medical Health Card Systems, Inc., 26 Harbor Park Drive, Port Washington,
New York 11050, (516) 605 6802, (516) 626 4632 (facsimile), NCarfagna@nmhc.com.

     10. This Release is made in the State of New York. This Release is to be interpreted under
the laws of the State of New York without regard to conflict of laws principles. The Parties agree
that the federal and state courts sitting in Nassau County, New York, shall be the exclusive venue
for the resolution of any dispute arising out of or relating to this Release.

     11. Except as provided in this Release, this is the entire agreement between the Employee and
the Company and supersedes any and all prior agreements or understandings between the Parties,
whether written or oral, pertaining to Employee’s employment with the Company. This Release may
only be amended or modified by a written document signed by both Parties. The Company has made no
promises to Employee other than those in this Release. Notwithstanding anything to the contrary in
this paragraph 11, except as explicitly provided otherwise in this Release, (i) paragraphs 6
through 11 of the Employment Agreement, and (ii) any obligation of the Company under any
indemnification agreement or the Company’s Certificate of Incorporation and Bylaws, as amended, to
indemnify Employee shall survive the execution of this Release in accordance with their respective
terms and conditions.

     12. Should any provision of this Release be declared or determined by any court to be illegal,
invalid or unenforceable, the validity of the remaining parts, terms and provisions shall not be
effected thereby and any said illegal, invalid or unenforceable part, terms or provisions shall be
deemed stricken and severed from this Release.

     13. This Release may be executed in one or more counterparts, and each effective counterpart
shall be effective as a signed original.

     14. Company makes no representations to Employee concerning the tax consequences arising out
of any payments under this Release, including, without limitation, whether any of the

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payments hereunder are subject to 26 U.S.C. § 409A. Company urges Employee to obtain his own
tax counsel with regard to any tax consequences arising out of or relating to this Release.

     15. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS CAREFULLY READ THIS RELEASE; THAT EMPLOYEE HAS HAD
AT LEAST 21 DAYS IN WHICH TO CONSIDER AND RETURN THIS RELEASE; THAT EMPLOYEE HAS HAD AN OPPORTUNITY
TO CONSULT WITH ANY ATTORNEY OF EMPLOYEE’S CHOICE IN CONNECTION WITH THIS RELEASE; THAT EMPLOYEE
FULLY UNDERSTANDS THE TERMS, CONDITIONS, AND SIGNIFICANCE AND CONSEQUENCES OF THIS RELEASE; AND
THAT EMPLOYEE HAS EXECUTED THIS RELEASE KNOWINGLY AND VOLUNTARILY, AND OF EMPLOYEE’S OWN FREE WILL.

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IN WITNESS WHEREOF, the Parties hereto have executed this Release as of the date below.

NATIONAL MEDICAL HEALTH CARD SYSTEMS, INC.

	 	 	 	 	 
	By:
	 	/s/ Stuart Diamond	 	 
	 

	 	 	 	 
	 

	 	                        , its authorized representative
	 	 
	 
	 	 	 	 
	Date: June 4, 2007	 	 
	 
	 	/s/ Bill Masters	 	 
	 	 	 
	Bill

	 	 Masters	 	 

Date:
May 31, 2007

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