EMPLOYMENT AGREEMENT
Exhibit 10.01
This EMPLOYMENT AGREEMENT by and between Cardinal Health, Inc., an Ohio corporation (the
“Company”) and R. Xxxxx Xxxxx (the “Executive”) is dated as of the 17th day of April, 2006 (the
“Agreement”).
IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The “Effective Date” shall mean the date hereof.
2. Employment Period. The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to serve the Company, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on June 30, 2009, unless
prior to such date the employment of the Executive is terminated pursuant to this Agreement (the
“Employment Period”).
3. Terms of Employment. (a) Position and Duties. (i) (A) During the
Employment Period, the Executive shall serve as President and Chief Executive Officer of the
Company with such authority, duties and responsibilities as are customarily assigned to such
position. The Executive shall report directly to the Board of Directors of the Company (the
“Board”). The Executive shall serve on the Board, and prior to the end of the Employment Period
shall be named Chairman of the Board; and (B) the Executive’s services shall be performed in
Dublin, Ohio.
(ii) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote his full business attention and
time to the business and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the Employment Period,
it shall not be a violation of this Agreement for the Executive to (A) continue to serve on the
board of directors of Textron, Inc. and, subject to the approval of the Board, serve on other
corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) 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.
(iii) No later than August 31, 2007, the Executive shall establish and maintain his primary
residence in the Dublin, Ohio area and will relocate his family and possessions to such primary
residence.
(b) Compensation (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (“Annual Base Salary”) at a rate of not less than
$1,400,000 payable in accordance with the Company’s normal payroll policies. The Executive’s
Annual Base Salary shall be reviewed, and may be increased but not decreased, at least annually
by the Board pursuant to its normal performance review policies for senior executives. Any
increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as
so increased.
(ii) Annual Bonus. With respect to each fiscal year ending during the Employment
Period, the Executive shall be eligible to receive an annual bonus (“Annual Bonus”) determined and
paid at the sole discretion of the Company pursuant to terms and conditions of the Company bonus
plan for which Executive is then eligible. Executive’s Annual Bonus target under this Agreement
shall be equal to not less than 160% of the Executive’s Annual Base Salary (the “Reference Bonus”).
The actual Annual Bonus, which could be higher or lower than the Reference Bonus, shall be based
on the attainment of performance objectives as determined no later than 90 days after the beginning
of the fiscal year by the Human Resources and Compensation Committee of the Board (the “Committee”)
in consultation with the Executive, and shall be paid, subject to any effective deferral elections
that may be made by the Executive pursuant to any deferred compensation plans that the Company may
maintain, within two and a half months following the end of the fiscal year for which the Annual
Bonus is earned. Notwithstanding the foregoing, for the period from the Effective Date through
June 30, 2006, the Executive shall receive a bonus equal to the product of (x) $2,240,000 and (y) a
fraction, the numerator of which is the number of days from the Effective Date until June 30, 2006,
and the denominator of which is 365. For fiscal year 2007, the Executive’s Annual Bonus shall be
no less than $1,120,000.
(iii) Equity-Based Grants and Long-Term Incentives. On the Effective Date, the
Company shall grant the Executive 110,600 restricted stock units (the “Initial RSUs”) and 665,000
Company stock options (the “Initial Options”) with a strike price of $70, all in accordance with
the terms of the Company’s Restated and Amended Equity Incentive Plan (the “LTIP”). For each
fiscal year thereafter, commencing with the August 2007 award Executive shall receive a target
long-term incentive award of 600% of his Annual Base Salary in accordance with the terms of the
LTIP. The Executive shall also be eligible to participate in the Company’s Long-Term Incentive
Cash Plan.
(iv) Other Employee Benefit Plans. During the Employment Period, the Executive and/or
the Executive’s family, as the case may be, shall be eligible for participation in and shall
receive all benefits under savings and retirement plans that are tax-qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the “Code”), in plans that are supplemental to
any such tax-qualified plans, and welfare benefit plans, practices, policies and programs provided
by the Company, but not any severance plan, practice, policy or program, on a basis that is no less
favorable than those generally applicable or made available to other senior executives of the
Company. The Executive shall be eligible for participation in fringe benefits and perquisite
plans, practices, policies and programs (including, without limitation, expense reimbursement
plans, practices, policies and programs) on a basis that is commensurate with his position and no
less favorable than those generally applicable or made available to other most senior executives of
the Company.
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(v) Expenses. The Company shall reimburse the Executive on an after-tax basis for all
reasonable expenses incurred in connection with the relocation of his primary residence to Dublin,
Ohio, and his temporary living expenses prior to such relocation, and the negotiation of this
Agreement. During the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all expenses incurred by the Executive in accordance with the Company’s policies
for its senior executives.
(vi) Vacation. During the Employment Period, the Executive shall be entitled to paid
vacation in accordance with the plans, policies, programs and practices of the Company as in effect
with respect to the senior executives of the Company.
4. Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically upon the Executive’s death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has occurred during
the Employment Period (pursuant to the definition of Disability set forth below), it may provide
the Executive with written notice in accordance with Section 10(b) of this Agreement of its
intention to terminate the Executive’s employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt of such notice by the Executive
(the “Disability Effective Date”), provided that, within the 30 days after such receipt,
the Executive shall not have returned to full-time performance of the Executive’s duties. For
purposes of this Agreement, “Disability” shall mean the absence of the Executive from the
Executive’s duties with the Company on a full-time basis for 120 consecutive days or longer (or an
aggregate period of 180 days or longer) as a result of incapacity due to mental or physical
illness[ which is determined to be total and permanent by a physician selected by the Company or
its insurers and acceptable to the Executive or the Executive’s legal representative].
(b) Cause. The Company may terminate the Executive’s employment during the Employment
Period for Cause. For purposes of this Agreement, “Cause” shall mean:
(i) the willful and continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or its representative, which specifically
identifies the manner in which the Board believes that the Executive has not substantially
performed the Executive’s duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company or its affiliates, or
(iii) conviction of a felony or any crime involving dishonesty or moral turpitude or guilty or
nolo contendere plea by the Executive with respect thereto; or
(iv) a material breach of Section 8 of this Agreement.
For purposes of this provision, no act or failure to act on the part of the Executive shall be
considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or
without reasonable belief that the Executive’s act or omission was in the best interests of the
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Company. Any act, or failure to act, based upon express authority given pursuant to a resolution
duly adopted by the Board with respect to such act or omission or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company. The cessation of employment of the
Executive shall not be deemed to be for Cause unless and until there shall have been delivered to
the Executive a copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (not including the executive) at a meeting of
the Board called and held for such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard before the Board),
finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i), (ii), or (iv) above, and specifying the particulars thereof in
detail.
(c) Good Reason. The Executive’s employment may be terminated by the Executive for
Good Reason. For purposes of this Agreement, “Good Reason” shall mean in the absence of a written
consent of the Executive:
(i) the assignment to the Executive of any duties materially inconsistent in any respect with
the Executive’s position (including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 3(a) of this Agreement, or any other action
by the Company which results in a material diminution in such position, authority, duties or
responsibilities, excluding for this purpose any action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of Section 3(b) of this
Agreement, other than a failure not occurring in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(iii) the Company requiring the Executive to be based at any office or location more than 35
miles from that provided in Section 3(a)(i)(B) hereof, provided that reasonable travel required in
connection with Executive’s reporting relationships and responsibilities to the Board shall not be
deemed a breach hereof;
(iv) any purported termination by the Company of the Executive’s employment otherwise than as
expressly permitted by this agreement;
(v) any failure by the Company to comply with Section 9(c) of this Agreement; or
(vi) the failure of the Company to appoint the Executive Chairman of the Board on or before
June 30, 2008.
(d) Notice of Termination. Any termination by the Company for Cause, or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 10(b) of this Agreement. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the specific
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termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth
in reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than 30 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.
(e) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive with or without Good Reason,
the date of receipt of the Notice of Termination or any later date specified therein within 30 days
of such notice, as the case may be, (ii) if the Executive’s employment is terminated by the Company
other than for Cause or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive’s employment is terminated by
reason of death or Disability, the Date of Termination shall be the date of death of the Executive
or the Disability Effective Date, as the case may be.
(f) Resignation. Upon termination of the Executive’s employment for any reason, the
Executive agrees to resign, as of the Date of Termination, to the extent applicable, from any
positions that the Executive holds with the Company and its affiliated companies, the Board (and
any committees thereof) and the Board of Directors (and any committees thereof) of any of the
affiliated companies.
5. Obligations of the Company upon Termination. (a) Good Reason; Other Than for
Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the
Executive’s employment other than for Cause, death or Disability or the Executive shall terminate
employment for Good Reason:
(i) subject to the execution by the Executive and the Company of a mutual release of claims in
favor of the Company, the Company shall pay to the Executive in a lump sum in cash within 30 days
after the Date of Termination the aggregate of the following amounts:
A. the sum of (1) the Executive’s accrued Annual Base Salary and any accrued
vacation pay through the Date of Termination, (2) the Executive’s business expenses
that have not been reimbursed by the Company as of the Date of Termination that were
incurred by the Executive prior to the Date of Termination in accordance with the
applicable Company policy, and (3) the Executive’s Annual Bonus earned for the
fiscal year immediately preceding the fiscal year in which the Date of Termination
occurs if such bonus has not been paid as of the Date of Termination (the sum of the
amounts described in clauses (1) through (3), shall be hereinafter referred to as
the “Accrued Obligations”); and
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B. the product of (1) the Reference Bonus, and (2) a fraction, the numerator of
which is the number of days from July 1 in the fiscal year in which the Date of
Termination occurs through the Date of Termination, and the denominator of which is
365 (the “Pro Rata Bonus”); and
(ii) the Company shall pay to the Executive in 24 equal monthly installments, the amount equal
to the product of (1) a fraction, the numerator of which is the number of days from the Date of
Termination until June 30, 2009 and the denominator of which is 365, and (2) the sum of (x) the
Executive’s Annual Base Salary and (y) the Reference Bonus; provided that such amount shall not be
less than 1.5 times the sum of the Annual Base Salary and the Reference Bonus; and
(iii) the Initial RSUs and the Initial Stock Options shall vest and become immediately
exercisable, as the case may be and all vested stock options held by the Executive shall be
exercisable for the remainder of their term, without regard to any provisions relating to earlier
termination of the stock options based on termination of employment (the “Equity Benefits”); and
(iv) until June 30, 2009, the Company shall continue to provide medical and dental benefits to
the Executive and his eligible dependents as if the Executive remained an active employee of the
Company (collectively “Welfare Benefits”); and
(v) to the extent not theretofore paid or provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to be paid or provided or which the Executive
is eligible to receive under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies through the Date of Termination (such other amounts and
benefits shall be hereinafter referred to as the “Other Benefits”). As used in this Agreement, the
term “affiliated companies” shall include any company controlled by, controlling or under common
control with the Company.
Notwithstanding the foregoing provisions of this Section 5(a), to the extent required in order to
comply with Section 409A of the Code, cash amounts that would otherwise be payable under this
Section 5(a) during the six-month period immediately following the Date of Termination shall
instead be paid, with interest on any delayed payment at the applicable federal rate provided for
in Section 7872(f)(2)(A) of the Code (“Interest”), on the first business day after the date that is
six months following the Executive’s “separation from service” within the meaning of Section 409A.
(b) Death. If the Executive’s employment is terminated by reason of the Executive’s
death during the Employment Period, this Agreement shall terminate without further obligations to
the Executive’s legal representatives under this Agreement, other than for (i) payment of Accrued
Obligations, (ii) the timely payment or provision of Other Benefits, (iii) payment of the Pro Rata
Bonus, (iv) the Welfare Benefits and (v) the Equity Benefits. Accrued Obligations shall be paid to
the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the
Date of Termination and the Pro Rata Bonus shall be paid to the Executive’s estate or beneficiary,
as applicable, on the date specified in Section 5(a)(i). With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 5(b)
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shall include death benefits for which the Company pays as in effect on the date of the
Executive’s death and the continued provision of the Welfare Benefits. The applicable period of
health benefit continuation under COBRA shall begin on the Date of Termination. In the event of
the Executive’s death after his termination of employment, but prior to the receipt of all amounts
to which he is entitled under this Agreement, all remaining amounts to which he is entitled shall
be paid to his estate or beneficiary, as applicable.
(c) Disability. If the Executive’s employment is terminated by the Company by reason
of the Executive’s Disability during the Employment Period, this Agreement shall terminate without
further obligations to the Executive, other than for (i) payment of Accrued Obligations, (ii) the
timely payment or provision of Other Benefits, (iii) payment of the Pro Rata Bonus, (iv) the
Welfare Benefits and (v) the Equity Benefits, provided, that to the extent required in order to
comply with Section 409A of the Code, amounts and benefits to be paid or provided under this
Section 5(c) shall be paid, with Interest, or provided to the Executive on the first business day
after the date that is six months following the Executive’s “separation from service” within the
meaning of Section 409A. Accrued Obligations shall be paid to the Executive’s estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination and the
Pro Rata Bonus shall be paid to the Executive’s estate or beneficiary, as applicable, on the date
specified in Section 5(a)(i). With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 5(c) shall include, and the Executive shall be entitled after
the Disability Effective Date to receive, disability and the continued provision of Welfare
Benefits. The applicable period of health benefit continuation under COBRA shall begin on the Date
of Termination.
(d) Cause; Other than for Good Reason. If the Executive’s employment shall be
terminated by the Company for Cause or the Executive terminates his employment without Good Reason
during the Employment Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (i) the Accrued Obligations through the
Date of Termination and (ii) Other Benefits, in each case to the extent theretofore unpaid.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination, provided, that to the extent required in order to comply with Section 409A of the
Code, amounts and benefits to be paid or provided under this sentence of Section 5(d) shall be
paid, with Interest, or provided to the Executive on the first business day after the date that is
six months following the Executive’s “separation from service” within the meaning of Section 409A.
6. Full Settlement. The Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may
have against the Executive or others. 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 whether or not
the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by
law, all legal fees and expenses which the Executive may reasonably incur as a result of any
contest by either party (including, as the case may be, the Company, any of its affiliates or their
respective predecessors, successors or assigns, or the Executive, his estate, beneficiaries or
their respective successors and assigns) of the validity or
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enforceability of, or liability under, any provision of this Agreement (including as a result
of any contest by the Executive about the amount of any payment pursuant to this Agreement); plus
in each case interest on any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code, if the Executive prevails on any material claim made by him, and
disputed by the Company under the terms of this Agreement.
7. Certain Additional Payments by the Company. (a) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment or distribution by
the Company or any of its affiliates to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section 7) (a “Payment”)
would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”) or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, but excluding any income taxes and penalties
imposed pursuant to Section 409A, the Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 7(c), all determinations required to be made under
this Section 7, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by Ernst & Young LLC or such other nationally recognized certified public accounting firm
reasonably acceptable to the Executive as may be designated by the Company (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall
be paid by the Company to the Executive or directly to the Internal Revenue Service, in the sole
discretion of the Company, within five days of the later of (i) the due date for the payment of any
Excise Tax, and (ii) the receipt of the Accounting Firm’s determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made (“Underpayment”), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.
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(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 7(c), the Company shall control all proceedings taken in connection with such
contest, and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of such claim and may,
at its sole option, either pay the tax claimed to the appropriate taxing authority on behalf of the
Executive and direct the Executive to xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that, if the Company pays such
claim and directs the Executive to xxx for a refund, the Company shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such payment or with respect to any imputed
income in connection with such payment; and provided, further, that any extension
of the statute of limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company’s control of the contest shall be limited to issues
with respect to which the Gross-Up Payment would be payable hereunder, and the Executive shall be
entitled to
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settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of a payment by the Company of an amount on the
Executive’s behalf pursuant to Section 7(c), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon and after taxes applicable thereto). If, after payment by
the Company of an amount on the Executive’s behalf pursuant to Section 7(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then the amount of such payment shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Covenants. (a) Introduction. The parties acknowledge that the provisions and
covenants contained in this Section 8 are ancillary and material to this Agreement and that the
limitations contained herein are reasonable in 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 8 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 10(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 8 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 8(b)) (“Confidential Information”). For the purpose of this
Section 8(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 prior
written consent of the applicable Cardinal Group company, 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
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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 Cardinal Group Employees, etc. Executive shall not, at any time during
the Restricted Period (as defined in this Section 8(c)), without the prior written consent of the
Company, engage in the following conduct (a “Solicitation”): (i) 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 months an
employee, representative, officer or director of the Cardinal Group; or (ii) take any action to
encourage or induce any employee, representative, officer or director of the Cardinal Group to
cease their relationship with the Cardinal Group for any reason. A “Solicitation” does not include
any recruitment of employees within or for the Cardinal Group. The “Restricted Period” means the
period of Executive’s employment with the Cardinal Group (without regard to any period during which
Executive serves as a consulting employee) and the additional period ending on the second
anniversary of the Executive’s Date of Termination or date of retirement, as applicable.
(d) No Competition — Solicitation of Business. During the Restricted Period, 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) any potential customer of the Cardinal Group
which the Executive knew to be an identified, prospective purchaser of services or products of the
Cardinal Group.
(e) No Competition — Employment by Competitor. During the Restricted 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
(each such person described and not excepted, as a customer, potential customer or a competitor
under Section 8(d) or this Section 8(e) is a “Competitor”).
(f) No Disparagement
(i) The Executive and the Company shall at all times refrain from taking action or making
statement, written or oral, that (A) denigrate, disparage or defame the goodwill or reputation of
Executive or the Cardinal Group, as the case may be, 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 statement to third parties relating to the
Executive’s employment or any aspect of the businesses of 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, directors,
11
officer, security holders, partners, agents or former or current employees and directors,
except as may be required by a court or government 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 reasonable 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 cooperate with the Executive in
scheduling any assistance by the Executive taking into account the Executive’s business and
personal affairs and shall compensate the Executive for any lost wages or expenses associated with
such cooperation and assistance.
(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 any period during
which 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 Secretary of the Board and are hereby transferred to and shall redound to the
benefit of the Company and shall become and remain its ole and exclusive property. The Executive
agrees to execute any assignment 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) Acknowledgement and Enforcement. The Executive acknowledges and agrees that: (A) the
purpose of the foregoing covenants, including without limitation the noncompetition covenants of
Section 8(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 8; and (C) remedies at law (such as monetary damages) for any breach of
the Executive’s obligations under this Section 8 would be inadequate. The Executive therefore
agrees and consents that if the Executive commits any breach of a covenant under this Section 8 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
12
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.
9. Successors. (a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive. This Agreement shall
inure to the benefit of and be enforceable by the Executive’s legal representatives, heirs or
legatees and the Executive by written notice to the Company may designate any beneficiary with
respect to any amounts due under this Agreement upon the Executive’s death.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company will require 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 to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
10. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to principles of conflict of laws.
If, under any such law, any portion of this Agreement is at any time deemed to be in conflict with
any applicable statute, rule, regulation or ordinance, such portion shall be deemed to be modified
or altered to conform thereto. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be amended or modified otherwise than
by a written agreement executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other parties or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
13
If to the Executive:
|
At the most recent address | |
| on file at the Company. | ||
With a copy to:
|
Mayer, Brown, Xxxx & Maw LLP | |
| 00 Xxxxx Xxxxxx Xxxxx | ||
| Xxxxxxx, XX 00000 | ||
| Attention: Xxxxxxx X. Xxxxxxx | ||
If to the Company:
|
Cardinal Health, Inc. | |
| 0000 Xxxxxxxx Xxxxx | ||
| Xxxxxx, Xxxx 00000 | ||
| Attention: Chief Legal Officer |
or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.
(c) 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 the law.
(d) Notwithstanding any other provision of this Agreement, the Company may withhold from any
amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Section 4(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this Agreement, except as
specifically provided in a written consent pursuant to Section 4(c).
(f) Except as otherwise expressly provided herein, from and after the Effective Time, this
Agreement shall supersede any other employment, severance or change of control agreement between
the parties and between the Executive with respect to the subject matter hereof . Any provision of
this Agreement that by its terms continues after the expiration of the Employment Period or the
termination of the Executive’s employment shall survive in accordance with its terms.
(g) If any compensation or benefits provided by this Agreement may result in the application
of Section 409A of the Code, the Company shall, in consultation with the Executive, modify the
Agreement in the least restrictive manner necessary in order to exclude such compensation from the
definition of “deferred compensation” within the meaning of such Section 409A or in order to comply
with the provisions of Section 409A, other applicable provision(s) of the Code and/or any rules,
regulations or other regulatory guidance issued under
14
such statutory provisions and without any diminution in the value of the payments to the
Executive.
(h) The Executive hereby warrants that the Executive is free to enter into this Agreement and
to perform the services described herein. The Company hereby warrants that this Agreement and the
equity awards provided hereunder have been duly authorized.
15
IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from 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.
| R. XXXXX XXXXX |
||||
| /s/ R. Xxxxx Xxxxx | ||||
| CARDINAL HEALTH, INC. |
||||
| By /s/ Xxxxxx X. Xxxxxx | ||||
| Name: | Xxxxxx X. Xxxxxx | |||
| Title: | Executive Chairman of the Board | |||
