Exhibit 10.02
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated and effective as of January 8, 2003 (the
"Effective Date") is made and entered into by and between Cardinal Health, Inc.,
an Ohio corporation (the "Company"), and Xxxxxx X. Xxxxx (the "Executive").
WHEREAS, the Company and the Executive desire to set forth in
a written agreement the terms and conditions under which the Executive will
render services to the Company from and after the Effective Date.
NOW, THEREFORE, the parties hereto, in consideration of the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, agree as follows:
1. EMPLOYMENT PERIOD. The Company shall employ, or shall
cause one of its subsidiaries or affiliates to employ, the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, during the three-year period beginning on the Effective Date and
ending on the third (3rd) anniversary of the Effective Date, unless prior to
such date the employment of the Executive is terminated in accordance with
Section 4 of this Agreement (such period, the "Employment Period"). For purposes
of this Agreement, any reference to the "Company" shall mean, where appropriate,
the actual Cardinal subsidiary or affiliate that employs the Executive. The
Employment Period may be extended by mutual written agreement of the parties.
2. POSITION AND DUTIES. (a) During the Employment
Period, the Executive shall serve as President--Nuclear Pharmacy Services, with
the duties and responsibilities customarily assigned to such position, and such
other duties and responsibilities as President and Chief Executive Officer--Life
Sciences Products and Services shall from time to time assign to the Executive;
provided that the Company may change the Executive's title, duties and
responsibilities (including reporting responsibilities) at any time without
violating this provision, so long as the Executive remains in an executive
position.
(b) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled under the
practices and policies of the Company as in effect from time to time, the
Executive shall devote the Executive's full business attention and time to the
business and affairs of the Company, and shall use the Executive's reasonable
best efforts to carry out such responsibilities faithfully and efficiently. It
shall not be considered a violation of the foregoing for the Executive to (A)
serve on corporate boards or committees with the prior consent of the President
and Chief Executive Officer--Life Sciences Products and Services, (B) serve on
civic or charitable boards or committees, (C) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (D) manage personal
investments, so long as such activities do not materially interfere with the
performance of the Executive's responsibilities as an employee of the Company in
accordance with this Agreement.
(c) As of the Effective Date, the Executive's services
shall be performed primarily at the Company's offices located in Dublin, Ohio;
provided, however, that, during the Employment Period, the Company may require
that the Executive's services be performed primarily at the Company's offices
located in Woodland Hills, California. In the event that the Executive elects,
by a written notice to the Company, not to so relocate, he shall be eligible to
receive the severance benefits provided under Section 4(c) of this Agreement,
provided that the Executive shall remain employed in the position of
President--Nuclear Pharmacy Services for a transition period to be mutually
agreed in writing between the Executive and the Company and shall not be
eligible for such severance benefits until the expiration of such transition
period.
3. COMPENSATION. (a) SALARY. During the Employment
Period, as compensation for the Executive's services hereunder, the Company
shall pay to the Executive an annual base salary (the "Base Salary") at the rate
of not less than $435,000, payable at such times and intervals as the Company
customarily pays the base salaries of its other executive employees; provided
that the Base Salary may be reduced as part of a reduction that applies
proportionately to all employees who are otherwise similar to the Executive with
respect to amount of compensation and level of managerial responsibility before
such reduction.
(b) ANNUAL BONUS. In addition to the Base Salary, during
the Employment Period the Executive shall be eligible to receive an annual bonus
(an "Annual Bonus") determined and paid at the sole discretion of the Company
pursuant to the terms and conditions of the Company bonus plan for which the
Executive is then eligible, as such plan is in effect from time to time, or any
successor thereto (the "Bonus Plan"). The parties hereto agree and acknowledge
that the Executive's Annual Bonus target under this Agreement shall be equal to
eighty percent (80%) of the Base Salary.
(c) OPTION GRANT. As of the Effective Date, the Company
shall grant the Executive an option to purchase 50,000 common shares, without
par value, of the Company (the "Option") pursuant to the terms and conditions
set forth in the Nonqualified Stock Option Agreement attached to this Agreement
as Exhibit A (the "Option Agreement"). The Executive acknowledges and agrees
that he will not be eligible to receive an annual grant of options to purchase
common shares of the Company during the Company's 2004 fiscal year, unless any
such grant is authorized by the Human Resources and Compensation Subcommittee of
the Board of Directors of the Company.
(d) EMPLOYEE BENEFITS. During the Employment Period, the
Executive shall be entitled to receive employee benefits (including, without
limitation, medical, life insurance and other welfare benefits and benefits
under retirement and savings plans) and vacation to the same extent as, and on
the same terms and conditions as, other similarly situated executives of the
Company from time to time.
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(e) EXPENSES. The Executive shall be entitled to receive
prompt reimbursement for all reasonable expenses incurred by the Executive
during the Employment Period in carrying out the Executive's duties under this
Agreement, provided that the Executive complies with the policies, practices and
procedures of the Company then applicable to the Executive for submission of
expense reports, receipts, or similar documentation of such expenses.
(f) RELOCATION BENEFITS. In the event that the Company
requires that the Executive's services be performed primarily at the Company's
offices located in Woodland Hills, California and the Executive agrees to such
relocation, the Company shall provide the Executive with relocation benefits in
connection with the relocation of himself, his family and his possessions from
Dublin, Ohio, to the Woodland Hills, California area. Such relocation benefits
shall be provided pursuant to the Company's standard relocation policy for
similarly situated executives.
4. EMPLOYMENT TERMINATION. (a) TERMINATION BY THE
COMPANY. During the Employment Period, the Executive's employment may be
terminated by the Company under any of the following circumstances: (i) upon the
inability of the Executive to perform the essential functions of his position
with or without reasonable accommodation, which inability continues for a
consecutive period of 120 days or longer or an aggregate period of 180 days or
longer ("Incapacity"), in either instance during the Employment Period; (ii) for
"Cause," defined as (A) any willful or grossly negligent conduct by Executive
that demonstrably and materially injures the Company; (B) any act by the
Executive of fraud or intentional misrepresentation or embezzlement,
misappropriation or conversion of assets of the Company or any subsidiary; (C)
the Executive being convicted of, confessing to, or becoming the subject of
proceedings that provide a reasonable basis for the Company to believe the
Executive has engaged in, a felony or any crime involving dishonesty or moral
turpitude; (D) the Executive's intentional and repeated violation of the written
policies or procedures of the Company; (E) the Executive violating any provision
of Section 5 of this Agreement; or (F) the Executive's willful and continued
failure for a significant period of time to perform Executive's duties; and
(iii) for any other reason (a termination without "Cause"). The Company shall
give the Executive notice of termination specifying which of the foregoing
provisions is applicable and (in the case of clause (i) or (ii)) the factual
basis therefor, and the termination shall be effective upon the 30th day after
such notice is given (hereinafter, the date on which the Executive ceases to be
an employee of the Company for any reason (including, without limitation, by
action of the Executive), whether or not during the Employment Period, is
referred to as the "Date of Termination").
(b) TERMINATION BY THE EXECUTIVE. The Executive may
terminate his employment during the Employment Period for any reason upon 30
days advanced written notice to the Company.
(c) CONSEQUENCES OF TERMINATION BY THE COMPANY WITHOUT
CAUSE. (i) If the Executive is terminated by the Company without Cause during
the Employment Period,
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the Executive shall not be entitled to any further compensation or benefits
provided for under this Agreement except (x) as provided in the Option Agreement
and (y) as provided in the following sentence. Under such circumstance, the
Company shall:
(i) pay to the Executive an amount equal to one
times the sum of (x) the Executive's Base Salary, at the rate in effect on the
day immediately prior to the Date of Termination and (y) the Executive's Annual
Bonus target for the fiscal year of the Company in which the Date of Termination
occurs, such amount to be paid monthly in equal installments over the twelve
(12) month period immediately following the Date of Termination; and
(ii) provide the vested benefits, if any,
required to be paid or provided by law.
Notwithstanding the foregoing, the Company's obligations to the Executive under
this Section 4(c) shall immediately terminate, and the Executive shall not be
entitled to any further compensation or benefits provided for under this
Agreement or the Option Agreement in the event that the Executive violates any
of the provisions of Section 5 of this Agreement.
(d) OTHER EMPLOYMENT TERMINATIONS. If, during the
Employment Period, the Executive's employment is terminated for any reason other
than by the Company without Cause, including, without limitation, termination by
the Executive, the Executive's retirement, Incapacity, death, or termination by
the Company for Cause (subject only to Section 4(e) of this Agreement), the
Executive shall not be entitled to any compensation provided for under this
Agreement, other than (i) the Base Salary through the Date of Termination; (ii)
benefits under any long-term disability insurance coverage in the case of
termination because of Incapacity; (iii) vested benefits, if any, required to be
paid or provided by law; and (iv) the benefits provided for under the Option
Agreement, if any.
(e) TERMINATION AFTER A CHANGE OF CONTROL. In the event
that during the Employment Period (i) the Executive's employment is terminated
by the Company within one year after a "Change of Control" (as defined in the
Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended
from time to time, or any successor plan thereto) for any reason other than
because of the Executive's death, retirement, Incapacity or by the Company for
Cause, or (ii) the Executive has experienced a material diminution of his duties
under Section 2(a) of this Agreement, other than actions that are not taken in
bad faith and are remedied by the Company within ten business days after receipt
of written notice thereof from the Executive, and as a result the Executive
terminates his employment within one year after a Change of Control (as so
defined), then the Company shall pay to the Executive the severance payments and
benefits as set forth in Section 4(c) of this Agreement.
5. COVENANTS. (a) INTRODUCTION. The parties acknowledge
that the provisions and covenants contained in this Section 5 are ancillary and
material to this Agreement and the Option Agreement and that the limitations
contained herein are reasonable in
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geographic and temporal scope and do not impose a greater restriction or
restraint than is necessary to protect the goodwill and other legitimate
business interests of the Company. The parties also acknowledge and agree that
the provisions of this Section 5 do not adversely affect the Executive's ability
to earn a living in any capacity that does not violate the covenants contained
herein. The parties further acknowledge and agree that the provisions of Section
11(a) below are accurate and necessary because (i) this Agreement is entered
into in the State of Ohio, (ii) Ohio has a substantial relationship to the
parties and to this transaction, (iii) Ohio is the headquarters state of the
Company, which has operations nationwide and has a compelling interest in having
its employees treated uniformly within the United States, (iv) the use of Ohio
law provides certainty to the parties in any covenant litigation in the United
States, and (v) enforcement of the provision of this Section 5 would not violate
any fundamental public policy of Ohio or any other jurisdiction.
(b) CONFIDENTIAL INFORMATION. The Executive shall hold in
a fiduciary capacity for the benefit of the Company and all of its subsidiaries,
partnerships, joint ventures, limited liability companies, and other affiliates
(collectively, the "Cardinal Group"), all secret or confidential information,
knowledge or data relating to the Cardinal Group and its businesses (including,
without limitation, any proprietary and not publicly available information
concerning any processes, methods, trade secrets, research, secret data, costs,
names of users or purchasers of their respective products or services, business
methods, operating procedures or programs or methods of promotion and sale) that
the Executive has obtained or obtains during the Executive's employment by the
Cardinal Group and that is not public knowledge (other than as a result of the
Executive's violation of this Section 5(b)) ("Confidential Information"). For
the purposes of this Section 5(b), information shall not be deemed to be
publicly available merely because it is embraced by general disclosures or
because individual features or combinations thereof are publicly available. The
Executive shall not communicate, divulge or disseminate Confidential Information
at any time during or after the Executive's employment with the Cardinal Group,
except with the prior written consent of the Cardinal Group, as applicable, or
as otherwise required by law or legal process. All records, files, memoranda,
reports, customer lists, drawings, plans, documents and the like that the
Executive uses, prepares or comes into contact with during the course of the
Executive's employment shall remain the sole property of the Company and/or the
Cardinal Group, as applicable, and shall be turned over to the applicable
Cardinal Group company upon termination of the Executive's employment.
(c) NON-RECRUITMENT OF EMPLOYER'S EMPLOYEES, ETC. Executive
shall not, at any time during the Restricted Period (as defined in this Section
5(c)), without the prior written consent of Cardinal Health, Inc., directly or
indirectly, contact, solicit, recruit, or employ (whether as an employee,
officer, director, agent, consultant or independent contractor) any person who
was or is at any time during the previous twelve (12) months an employee,
representative, officer or director of the Cardinal Group. Further, during the
Restricted Period, Executive shall not take any action that could reasonably be
expected to have the effect of encouraging or inducing any employee,
representative, officer or director of the Cardinal Group to cease their
relationship with the Cardinal Group for any reason. This
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provision does not apply to recruitment of employees within or for the Cardinal
Group. The "Restricted Period" means the period of Executive's employment with
the Cardinal Group and the additional period that ends 24 months after the
Executive's Date of Termination.
(d) NO COMPETITION--SOLICITATION OF BUSINESS. During the
Non-Competition Period (as defined in this Section 5(d)), the Executive shall
not (either directly or indirectly or as an officer, agent, employee, partner or
director of any other company, partnership or entity) solicit, service, or
accept on behalf of any competitor of the Cardinal Group the business of (i) any
customer of the Cardinal Group at the time of the Executive's employment or Date
of Termination, or (ii) potential customer of the Cardinal Group which the
Executive knew to be an identified, prospective purchaser of services or
products of the Cardinal Group. The "Non-Competition Period" means the period of
Executive's employment with the Cardinal Group and the additional period that
ends twelve (12) months after the Executive's Date of Termination.
(e) NO COMPETITION--EMPLOYMENT BY COMPETITOR. During the
Non-Competition Period, the Executive shall not invest in (other than in a
publicly traded company with a maximum investment of no more than 1% of
outstanding shares), counsel, advise, or be otherwise engaged or employed by,
any entity or enterprise that competes with the Cardinal Group, by developing,
manufacturing or selling any product or service of a type, respectively,
developed, manufactured or sold by the Cardinal Group.
(f) NO DISPARAGEMENT. (i) The Executive shall at all
times refrain from taking actions or making statements, written or oral, that
(A) denigrate, disparage or defame the goodwill or reputation of the Cardinal
Group or any of its trustees, officers, security holders, partners, agents or
former or current employees and directors, or (B) are intended to, or may be
reasonably expected to, adversely affect the morale of the employees of the
Cardinal Group. The Executive further agrees not to make any negative statements
to third parties relating to the Executive's employment or any aspect of the
businesses of the Cardinal Group and not to make any statements to third parties
about the circumstances of the termination of the Executive's employment, or
about the Cardinal Group or its trustees, officers, security holders, partners,
agents or former or current employees and directors, except as may be required
by a court or governmental body.
(ii) The Executive further agrees that, following
termination of employment for any reason, the Executive shall assist and
cooperate with the Company with regard to any matter or project in which the
Executive was involved during the Executive's employment with the Company,
including but not limited to any litigation that may be pending or arise after
such termination of employment. Further, the Executive agrees to notify the
Company at the earliest opportunity of any contact that is made by any third
parties concerning any such matter or project. The Company shall not
unreasonably request such cooperation of Executive and shall compensate the
Executive for any lost wages or expenses associated with such cooperation and
assistance.
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(g) INVENTIONS. All plans, discoveries and improvements,
whether patentable or unpatentable, made or devised by the Executive, whether
alone or jointly with others, from the date of the Executive's initial
employment by the Company and continuing until the end of the Employment Period
and any subsequent period when the Executive is employed by the Cardinal Group,
relating or pertaining in any way to the Executive's employment with or the
business of the Cardinal Group, shall be promptly disclosed in writing to the
Chief Executive Officer and are hereby transferred to and shall redound to the
benefit of the Company, and shall become and remain its sole and exclusive
property. The Executive agrees to execute any assignments to the Company or its
nominee, of the Executive's entire right, title and interest in and to any such
discoveries and improvements and to execute any other instruments and documents
requisite or desirable in applying for and obtaining patents, trademarks or
copyrights, at the expense of the Company, with respect thereto in the United
States and in all foreign countries, that may be required by the Company. The
Executive further agrees, during and after the Employment Period, to cooperate
to the extent and in the manner required by the Company, in the prosecution or
defense of any patent or copyright claims or any litigation, or other proceeding
involving any trade secrets, processes, discoveries or improvements covered by
this Agreement, but all necessary expenses thereof shall be paid by the Company.
(h) ACKNOWLEDGMENT AND ENFORCEMENT. (i) The Executive
acknowledges and agrees that: (A) the purpose of the foregoing covenants,
including without limitation the noncompetition covenants of Sections 5(d) and
(e), is to protect the goodwill, trade secrets and other Confidential
Information of the Company; (B) because of the nature of the business in which
the Cardinal Group is engaged and because of the nature of the Confidential
Information to which the Executive has access, the Company would suffer
irreparable harm and it would be impractical and excessively difficult to
determine the actual damages of the Cardinal Group in the event the Executive
breached any of the covenants of this Section 5; and (C) remedies at law (such
as monetary damages) for any breach of the Executive's obligations under this
Section 5 would be inadequate. The Executive therefore agrees and consents that
if the Executive commits any breach of a covenant under this Section 5 or
threatens to commit any such breach, the Company shall have the right (in
addition to, and not in lieu of, any other right or remedy that may be available
to it) to temporary and permanent injunctive relief from a court of competent
jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage.
(ii) In addition, in the event of a violation of
this Section 5, the Company shall have the right to require the Executive to pay
to the Company all or any portion of the Clawback Amount (as defined below)
within 30 days following written notice by the Company to the Executive (the
"Company Notice") that it is imposing such requirement. The "Clawback Amount"
means an amount equal to the gross option gain realized or obtained by the
Executive or any transferee resulting from the exercise of any stock options
granted to the Executive by the Cardinal Group within three years before a
violation of Section 5(b), 5(c), 5(f) or 5(g) or within one year before a
violation of Section 5(d) or 5(e),
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measured at the date of exercise (i.e., the difference between the fair market
value of the purchased stock on the date of exercise and the exercise price paid
by the Executive therefor).
In addition to the foregoing, in the event of a violation of this Section 5, all
outstanding stock options granted to the Executive by the Cardinal Group (or any
part thereof) that have not been exercised shall immediately and automatically
terminate, be forfeited, and cease to be exercisable at any time.
(iii) With respect to any provision of this
Section 5 finally determined by a court of competent jurisdiction to be
unenforceable, the Executive and the Company hereby agree that such court shall
have jurisdiction to reform this Agreement or any provision hereof so that it is
enforceable to the maximum extent permitted by law, and the parties agree to
abide by such court's determination. If any of the covenants of this Section 5
are determined to be wholly or partially unenforceable in any jurisdiction, such
determination shall not be a bar to or in any way diminish the Company's right
to enforce any such covenant in any other jurisdiction.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Cardinal Group for which the
Executive may qualify, nor, subject to Section 9 below, shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under
any contract or agreement with the Cardinal Group. Vested benefits and other
amounts that the Executive is otherwise entitled to receive under any plan,
policy, practice or program of, or any contract or agreement with, the Cardinal
Group on or after the Date of Termination shall be payable in accordance with
such plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement. Notwithstanding the foregoing,
the Executive waives all of the Executive's rights to receive severance payments
and benefits under any severance plan, policy or practice of the Cardinal Group
or any entity merged with or into the Cardinal Group (or any part thereof)
except to the extent provided for in this Agreement.
7. NO MITIGATION. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.
8. NOTICES. (a) METHODS. Each notice, demand, request,
consent, report, approval or communication (hereinafter, "Notice") which is or
may be required to be given by any party to any other party in connection with
this Agreement, shall be in writing, and given by facsimile, personal delivery,
receipted delivery services, or by certified mail, return receipt requested,
prepaid and properly addressed to the party to be served as shown in Section
8(b) below.
(b) ADDRESSES. Notices shall be effective on the date
sent via facsimile, the date delivered personally or by receipted delivery
service, or three days after the date mailed:
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If to the Company: Cardinal Health, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attn.: Chief Legal Officer
Facsimile: (000) 000-0000
If to the Executive: At the Executive's residence
address most recently on the books
and records of the Company.
(c) CHANGES. Each party may designate by Notice to the
other in writing, given in the foregoing manner, a new address to which any
Notice may thereafter be so given, served or sent.
9. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements with respect thereto.
10. SUCCESSORS. (a) EXECUTIVE. This Agreement is personal
to the Executive and, without the prior written consent of the Company, shall
not be assignable by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) THE COMPANY. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns.
(c) The Company may assign this Agreement to any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company that expressly agrees to assume and perform this Agreement in the same
manner and to the same extent that the Company would have been required to
perform it if no such assignment had taken place. As used in this Agreement,
"Company" shall mean both the Company as defined above and any such successor
that assumes and agrees to perform this Agreement, by operation of law or
otherwise.
11. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement
shall be governed by, and construed in accordance with, the laws of Ohio,
without reference to principles of conflict of laws. In addition, all legal
actions or proceedings relating to this Agreement shall be brought in state or
federal courts located in Franklin County, Ohio, and the parties executing this
Agreement hereby consent to the personal jurisdiction of such courts. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
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(b) SEVERABILITY. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement. If any provision of this Agreement
shall be held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall remain
valid and enforceable and continue in full force and effect to the fullest
extent consistent with law.
(c) TAX WITHHOLDING. Notwithstanding any other provision
of this Agreement, the Company may withhold from amounts payable under this
Agreement all federal, state, local and foreign taxes that are required to be
withheld by applicable laws or regulations.
(d) NO WAIVER. The Executive's or the Company's failure
to insist upon strict compliance with any provision of, or to assert any right
under, this Agreement shall not be deemed to be a waiver of such provision or
right or of any other provision of or right under this Agreement.
(e) WARRANTY. The Executive hereby warrants that the
Executive is free to enter into this Agreement and to perform the services
described herein.
(f) HEADINGS. The Section headings contained in this
Agreement are for convenience only and in no manner shall be construed as part
of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
(h) SURVIVAL. The obligations under this Agreement of the
Executive and the Company that by their nature and terms require (or may
require) satisfaction after the end of the Employment Period shall survive such
event and shall remain binding upon such parties.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization of the Executive Committee of its Board of
Directors, the Company has caused this Agreement to be executed in its name on
its behalf, all as of the day and year first above written.
EXECUTIVE
/s/ Xxxxxx X. Xxxxx
---------------------------
Xxxxxx X. Xxxxx
CARDINAL HEALTH, INC.
By /s/ Xxxxxx X. Xxxxxx
------------------------
Xxxxxx X. Xxxxxx
Chief Executive Officer
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CARDINAL HEALTH, INC.
12. NONQUALIFIED STOCK OPTION AGREEMENT
Dollars at Work: $3,124,000
Grant Date: January 8, 2003
Exercise Price: $62.48
Grant vesting date: January 8, 2006
Grant expiration date: January 8, 2013
Cardinal Health, Inc., an Ohio corporation (the "Company"), has granted to
Xxxxxx X. Xxxxx ("Grantee"), an option (the "Option") to purchase 50,000 shares
(the "Shares") of common stock in the Company for a total purchase price
(typically known as Dollars at Work) of $3,124,000, (i.e., the equivalent of
$62.48 for each full Share). The Option has been granted pursuant to the
Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended
(the "Plan"), and shall include and be subject to all provisions of the Plan,
which are hereby incorporated herein by reference, and shall be subject to the
provisions of this agreement. Capitalized terms used herein which are not
specifically defined herein shall have the meanings ascribed to such terms in
the Plan. This option shall be exercisable at any time on or after January 8,
2006 and prior to January 8, 2013, subject to the termination provisions of the
Plan and this agreement.
By:/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
Chairman and CEO
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1. Method of Exercise and Payment of Price
(a) Method of Exercise. At any time when the Option is exercisable under the
Plan and this agreement, the Option shall be exercised from time to time by
written notice to the Company which shall:
(i) state the number of Shares with respect to which the Option is being
exercised; and
(ii) if the Option is being exercised by anyone other than the Grantee, be
accompanied by proof satisfactory to counsel for the Company of the right of
such person or persons to exercise the Option under the Plan and all applicable
laws and regulations.
(b) Payment of Price. The full exercise price for the Option shall be paid to
the Company as provided in the Plan.
2. Transferability. The Option shall be transferable (I) at the Grantee's
death, by the Grantee by will or pursuant to the laws of descent and
distribution, and (II) by the Grantee during the Grantee's lifetime, without
payment of consideration, to (a) the spouse, former spouse, parents,
stepparents, grandparents, parents-in-law, siblings, siblings-in-law, children,
stepchildren, children-in-law, grandchildren, nieces, or nephews of the Grantee,
or any other persons sharing the Grantee's household (other than tenants or
employees) ("Family Members"), (b) a trust or trusts for the primary benefit of
the Grantee or such Family Members, (c) a foundation in which the Grantee or
such Family Members control the management of assets, or (d) a partnership in
which the Grantee or such Family Members are the majority or controlling
partners, provided that subsequent transfers of the transferred Option shall be
prohibited except (X) if the transferee is an individual, at the transferee's
death by the transferee by will or pursuant to the laws of descent and
distribution and (Y) without payment of consideration to the individuals or
entities listed in subitems II(a), (b), or (c), above, with respect to the
original Grantee. The Human Resources and Compensation Committee of the Board of
Directors of the Company (the "Committee") may, in its discretion, permit
transfers to other persons and entities as permitted by the Plan. Neither a
transfer under a domestic relations order in settlement of marital property
rights nor a transfer to an entity in which more than fifty percent of the
voting interests are owned by the Grantee or Family Members in exchange for an
interest in that entity shall be considered to be a transfer for consideration.
Within ten days of any transfer, the Grantee shall notify the Stock Option
Administrator of the Company in writing of the transfer. Following transfer, the
Option shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer and, except as otherwise provided in
the Plan or this agreement, references to the original Grantee shall be deemed
to refer to the transferee. The events of termination of employment of the
Grantee provided in item 3 hereof shall continue to be applied with respect to
the original Grantee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods, specified in item 3. The
Company shall have no obligation to notify any transferee of the Grantee's
termination of employment with the Company for any reason. The conduct
prohibited of Grantee in items 5 and 6 hereof
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shall continue to be prohibited of Grantee following transfer to the same extent
as immediately prior to transfer and the Option (or its economic value, as
applicable) shall be subject to forfeiture by the transferee and recoupment from
the Grantee to the same extent as would have been the case of the Grantee had
the Option not been transferred. The Grantee shall remain subject to the
recoupment provisions of items 5 and 6 of this agreement and tax withholding
provisions of Section 13(d) of the Plan following transfer of the Option.
3. Termination of Relationship.
(a) Termination by Death. If the Grantee's employment by the Company and its
subsidiaries (collectively, the "Cardinal Group") terminates by reason of death,
then, unless otherwise determined by the Committee within sixty days of such
death, any unvested portion of the Option shall vest upon and become exercisable
in full from and after the sixtieth day after such death. The Option may
thereafter be exercised by any transferee of the Option, if applicable, or by
the legal representative of the estate or by the legatee of the Grantee under
the will of the Grantee for a period of one year (or such other period as the
Committee may specify at or after grant or death) from the date of death or
until the expiration of the stated term of the Option, whichever period is
shorter.
(b) Termination by Reason of Retirement or Disability. If the Grantee's
employment by the Cardinal Group terminates prior to the Grant Vesting Date by
reason of retirement or disability (each as defined in the Plan), then, unless
otherwise determined by the Committee within sixty days of such retirement or
disability, a Ratable Portion (defined below) of the Option will vest on the
Grant Vesting Date. Such "Ratable Portion" shall be an amount equal to the
number of Shares subject to the Option, multiplied by a fraction the numerator
of which shall be the number of full months between the Grant Date and the date
of retirement or disability, and the denominator of which shall be the number of
full months from the Grant Date to the Grant Vesting Date. The Option may be
exercised after the Grant Vesting Date by the Grantee (or any transferee, if
applicable) until the earlier of the fifth anniversary of the date of such
retirement or disability or the expiration of the stated term of the Option (the
"Exercise Period"); provided, that any vesting that would otherwise occur during
the sixty-day period beginning immediately after such retirement or disability
shall not occur until the end of such sixty-day period. If the Grantee has at
least fifteen years of service with the Cardinal Group at the time of
retirement, the Option may be exercised after the Grant Vesting Date by the
Grantee (or any transferee, if applicable) until the expiration of the stated
term of the Option. Notwithstanding the foregoing, if the Grantee dies after
retirement or disability but before the expiration of the Exercise Period,
unless otherwise determined by the Committee within 60 days of such death, the
Ratable Portion of the Option shall vest upon, and the Option may be exercised
by any transferee of the Option, if applicable, or by the legal representative
of the estate or by the legatee of the Grantee under the will of the Grantee
from and after, the sixtieth day after such death for a period of one year (or
such other period as the Committee may specify at or after grant or death) from
the date of death or until the expiration of the Exercise Period, whichever
period is shorter.
-14-
(c) Termination Without Cause. If the Grantee's employment by the Cardinal Group
is terminated without Cause (as used in this agreement, "Cause" shall have the
meaning set forth in the Employment Agreement dated as of January 8, 2003,
between the Company and the Grantee), then any vested and unexercised portion of
the Option may thereafter be exercised by the Grantee (or any transferee, if
applicable) until the end of the Exercise Period. However, with respect to any
and all unvested options as of the date of such termination without Cause, they
shall all be forfeited, unless the Committee determines otherwise within 60 days
of such termination.
(d) Termination by the Cardinal Group for Cause. If the Grantee's employment by
the Cardinal Group is terminated for Cause, all outstanding Options that have
not been exercised shall immediately and automatically terminate, be forfeited,
and cease to be exercisable at any time without regard to whether such Options
are vested.
(e) Other Termination of Employment. If the Grantee's employment by the Cardinal
Group terminates for any reason other than death, retirement, disability or
termination by the Company with or without Cause (subject to Section 10 of the
Plan regarding acceleration of the vesting of the Option upon a Change of
Control), any unexercised portion of the Option which has not vested on such
date of termination will automatically terminate on the date of such
termination. Unless otherwise determined by the Committee at or after grant or
termination, the Grantee (or any transferee, if applicable) will have ninety
days (or such other period as the Committee may specify at or after grant or
termination) from the date of termination or until the expiration of the stated
term of the Option, whichever period is shorter, to exercise any portion of the
Option that is then vested and exercisable on the date of termination.
4. Restrictions on Exercise. The Option is subject to all restrictions in
this agreement and/or in the Plan, and is subject to the covenants contained in
Section 5 of the Employment Agreement. As a condition of any exercise of the
Option, the Company may require the Grantee or his transferee or successor to
make any representation and warranty to comply with any applicable law or
regulation or to confirm any factual matters (including Grantee's compliance
with the terms of items 5 and 6 of this agreement or any employment or severance
agreement between any member of the Cardinal Group and the Grantee, including,
without limitation, the terms of Section 5 of the Employment Agreement)
reasonably requested by the Company.
5. Triggering Conduct/Competitor Triggering Conduct. As used in this
agreement, "Triggering Conduct" shall include disclosing or using in any
capacity other than as necessary in the performance of duties assigned by the
Cardinal Group any confidential information, trade secrets or other business
sensitive information or material concerning the Cardinal Group; violation of
Company policies, including conduct which would constitute a breach of any of
the Certificates of Compliance with Company Policies and/or Certificate of
Compliance with Company Business Ethics Policies signed by the Grantee, directly
or indirectly employing,
-15-
contacting concerning employment or participating in any way in the recruitment
for employment (whether as an employee, officer, director, agent, consultant or
independent contractor) any person who was or is an employee, representative,
officer or director of the Cardinal Group at any time within the twelve months
prior to the termination of Grantee's employment with the Cardinal Group; any
action by Grantee and/or his representatives that either does or could
reasonably be expected to undermine, diminish or otherwise damage the
relationship between the Cardinal Group and any of its customers and/or
potential customers, vendors and/or suppliers that were known to Grantee, and
breaching any provision of any employment or severance agreement with a member
of the Cardinal Group, including, without limitation, the terms of Section 5 of
the Employment Agreement. As used herein, "Competitor Triggering Conduct" shall
include, either during Grantee's employment or within one year following
Grantee's termination of employment with the Cardinal Group, accepting
employment with or serving as a consultant, advisor, or in any other capacity to
an entity that is in competition with the business conducted by any member of
the Cardinal Group (a "Competitor"), including, but not limited to, employment
or another business relationship with any Competitor if Grantee has been
introduced to trade secrets, confidential information or business sensitive
information during Grantee's employment with the Cardinal Group and such
information would aid the Competitor because the threat of disclosure of such
information is so great that, for purposes of this agreement, it must be assumed
that such disclosure would occur.
6. Special Forfeiture/Repayment Rules For so long as Grantee continues as
an employee with the Cardinal Group and for three years following Grantee's
termination of employment with the Cardinal Group regardless of the reason,
Grantee agrees not to engage in Triggering Conduct. If Grantee engages in such
Triggering Conduct during the time period set forth in the preceding sentence or
in Competitor Triggering Conduct during the time period set forth in Section 5
above, then:
(a) the Option (or any part thereof that has not been exercised) shall
immediately and automatically terminate, be forfeited, and shall cease to be
exercisable at any time; and
(b) the Grantee shall, within 30 days following written notice from the Company,
pay the Company an amount equal to the gross option gain realized or obtained by
the Grantee or any transferee resulting from the exercise of such Option,
measured at the date of exercise (i.e., the difference between the market value
of the Option Shares on the exercise date and the exercise price paid for such
Option Shares), with respect to any portion of the Option that has already been
exercised at any time within three years prior to the Triggering Conduct (the
"Look-Back Period"), less $1.00. If Grantee engages only in Competitor
Triggering Conduct, then the Look-Back Period shall be shortened to exclude any
period more than one year prior to Grantee's termination of employment with the
Cardinal Group, but including any period between the time of Grantee's
termination and engagement in Competitor Triggering Conduct. The Grantee may be
released from Grantee's obligations under this item 6 only if the Committee (or
its duly appointed designee) determines, in writing and in its sole discretion,
that such action is in the best interests of the Company. Nothing in this item 6
-16-
constitutes a so-called "noncompete" covenant. However, this item 6 does
prohibit certain conduct while Grantee is associated with the Cardinal Group and
thereafter and does provide for the forfeiture or repayment of the benefits
granted by this agreement under certain circumstances, including but not limited
to the Grantee's acceptance of employment with a Competitor. Grantee agrees to
provide the Company with at least ten days written notice prior to directly or
indirectly accepting employment with or serving as a consultant, advisor, or in
any other capacity to a Competitor, and further agrees to inform any such new
employer, before accepting employment, of the terms of this item 6 and the
Grantee's continuing obligations contained herein. No provisions of this
agreement shall diminish, negate, or otherwise impact any separate noncompete or
other agreement to which Grantee may be a party, including but not limited to
any of the Certificates of Compliance with Company Policies and/or Certificate
of Compliance with Company Business Ethics Policies. Grantee acknowledges and
agrees that the provisions contained in this item 6 are being made for the
benefit of the Company in consideration of Grantee's receipt of the Option, in
consideration of employment, in consideration of exposing Grantee to the
Company's business operations and confidential information, and for other good
and valuable consideration, the adequacy of which consideration is hereby
expressly confirmed. Grantee further acknowledges that the receipt of the Option
and execution of this agreement are voluntary actions on the part of Grantee,
and that the Company is unwilling to provide the Option to Grantee without
including this item 6. Further, the parties agree and acknowledge that the
provisions contained in items 5 and 6 are material provisions to and part of an
otherwise enforceable agreement at the time the agreement is made.
7. Right of Set-Off. By accepting this Option, the Grantee consents to a
deduction from and set-off against any amounts owed to the Grantee by any member
of the Cardinal Group from time to time (including but not limited to amounts
owed to the Grantee as wages, severance payments, or other fringe benefits) to
the extent of the amounts owed to the Cardinal Group by the Grantee under this
agreement.
8. Governing Law/Venue. This agreement shall be governed by the laws of
the State of Ohio, without regard to principles of conflicts of law, except to
the extent superceded by the laws of the United States of America. The parties
agree and acknowledge that the laws of the State of Ohio bear a substantial
relationship to the parties and/or this agreement and that the Option and
benefits granted herein would not be granted without the governance of this
agreement by the laws of the State of Ohio. In addition, all legal actions or
proceedings relating to this agreement shall be brought in state or federal
courts located in Franklin County, Ohio, and the parties executing this
agreement hereby consent to the personal jurisdiction of such courts. Grantee
acknowledges that the covenants contained in items 5 and 6 of this agreement are
reasonable in nature, are fundamental for the protection of the Company's
legitimate business and proprietary interests, and do not adversely affect the
Grantee's ability to earn a living in any capacity that does not violate such
covenants. The parties further agree that in the event of any violation by
Grantee of any such covenants, the Company will suffer immediate and irreparable
injury for which there is no adequate remedy at law. In the event of any
violation or attempted violations of item 5 or 6 of this agreement, the Company
shall be entitled to
-17-
specific performance and injunctive relief or other equitable relief without any
showing of irreparable harm or damage, and Grantee hereby waives any requirement
for the securing or posting of any bond in connection with such remedy, without
prejudice to the rights and remedies afforded the Company hereunder or by law.
In the event that it becomes necessary for the Company to institute legal
proceedings under this agreement, Grantee shall be responsible to the Company
for all costs and reasonable legal fees incurred by the Company with regard to
such proceedings. Any provision of this agreement which is determined by a court
of competent jurisdiction to be invalid or unenforceable should be construed or
limited in a manner that is valid and enforceable and that comes closest to the
business objectives intended by such provision, without invalidating or
rendering unenforceable the remaining provisions of this agreement.
9. Action by the Committee. The parties agree that the interpretation of
this agreement shall rest exclusively and completely within the good faith
province and discretion of the Committee. The parties agree to be bound by the
decisions of the Committee with regard to the interpretation of this agreement
and with regard to any and all matters set forth in this agreement. The
Committee may delegate its functions under this agreement to an officer of the
Cardinal Group designated by the Committee (hereinafter the "designee"). In
fulfilling its responsibilities hereunder, the Committee or its designee may
rely upon documents, written statements of the parties, or such other material
as the Committee or its designee deems appropriate. The parties agree that there
is no right to be heard or to appear before the Committee or its designee and
that any decision of the Committee or its designee relating to this agreement,
including without limitation whether particular conduct constitutes Triggering
Conduct or Competitor Triggering Conduct, shall be final and binding unless such
decision is arbitrary and capricious.
10. Prompt Acceptance of Agreement. The Option grant evidenced by this
agreement shall, at the discretion of the Committee, be forfeited if this
agreement is not executed by the Grantee and returned to the Company within
ninety days of the Grant Date set forth on the first page of this agreement.
-18-
ACCEPTANCE OF AGREEMENT
The Grantee hereby: (a) acknowledges receiving a copy of the Plan, which has
either been previously delivered or is provided with this agreement, and
represents that he is familiar with and understands all provisions of the Plan
and this agreement; and (b) voluntarily and knowingly accepts this agreement and
the Option granted to him under this agreement subject to all provisions of the
Plan and this agreement. The Grantee further acknowledges receiving a copy of
the Company's most recent Annual Report and other communications routinely
distributed to the Company's shareholders and a copy of the Plan Description
dated November 18, 2002, pertaining to the Plan.
/s/ Xxxxxx X. Xxxxx
--------------------------------
Signature
Xxxxxx X. Xxxxx
--------------------------------
Print Name
________________________________
Grantee's Social Security Number
January 8, 2003
--------------------------------
Date
-19-
