Exhibit 10.01
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement") by and
among Cardinal Health, Inc., an Ohio corporation (the "Company"), and ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (the "Executive"), amends and restates, as of February 1, 2004 (the
"Amendment Date"), that certain Employment Agreement dated November 20, 2001,
between the Company and the Executive.
The Company has determined that because of the unique nature of the
Executive's services to the Company it is in its best interests and those of its
shareholders to assure that the Company will have the continued dedication of
the Executive, and to provide the Company with the continuity of management the
Company considers crucial to ensuring the Company's continued success.
Therefore, in order to accomplish these objectives, the Board of
Directors and the Company have caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effective Date. The "Effective Date" shall mean November
20, 2001.
2. Employment Period. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to be employed by the Company subject
to the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on February 1, 2007 ("Initial Term"); provided,
commencing on February 1, 2006, the employment period shall be extended each day
by one day to create a new one year term until, at any time at or after such
date, the Company or the Executive delivers a written notice to the other party
that the employment period shall expire at the end of such one year term (the
Initial Term as so extended is the "Employment Period").
3. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period (A) the Executive
shall serve as the Chairman and Chief Executive Officer of the Company
with such authority, duties and responsibilities as are commensurate
with such position and as may be consistent with such position,
reporting directly to the Board of Directors of the Company (the
"Board"), and (B) the Executive's services shall be performed at such
locations selected by the Executive, consistent with his obligations
under Section 3(a)(ii) of this Agreement.
(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 substantially all of his attention and
time during normal business hours 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) serve on
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 significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in
accordance with this Agreement. It is expressly understood and agreed
that to the extent that any such activities have been conducted by the
Executive prior to the Amendment Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Amendment Date shall thereafter be deemed
not to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of
no less than $1,000,000. During the Employment Period, the Annual Base
Salary shall be reviewed at the time that the salaries of all of the
executive officers of the Company are reviewed. 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. For each fiscal year completed
during the Employment Period, the Executive shall receive an annual
cash bonus ("Annual Bonus") based upon performance targets that are
established by the Board or an appropriate committee of the Board,
provided that the Executive shall have a target Annual Bonus of at
least 250% of his Annual Base Salary.
(iii) Incentive Awards. The Executive shall be
eligible for equity and non-equity awards under the Company's stock
incentive and other long-term incentive compensation plans during the
Employment Period as determined by the Board or an appropriate
committee of the Board, consistent with past practice and CEO
competitive pay practices, provided that during the Employment Period
the Executive shall receive an annual stock option award with a value
of no less than 3,000% of Annual Base Salary in terms of "dollars at
work."
(iv) Retirement Benefits. The Executive shall be
eligible to participate in any supplemental executive retirement
program established by the Company during the Employment Period.
(v) Deferrable Restricted Share Unit Award. As of the
Effective Date, the Executive was granted 150,000 shares of deferrable
restricted stock units of the Company ("Restricted Share Unit Award"),
which may be settled only in Company common stock, in accordance with
the form of grant attached hereto as Exhibit A. Except as otherwise
provided herein and in such deferrable restricted stock unit agreement,
stock subject to such Restricted Share Unit Award will not be
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distributable until the later to occur of (A) the Executive's 62nd
birthday or (B) the first date on which the Executive ceases to be a
"covered employee" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended, of the Company, or such earlier date
as may be approved by the Board. To the extent that dividends are paid
on Company common stock after the Effective Date and prior to the date
that the Company common stock subject to a Restricted Share Unit Award
is issued to the Executive, the Executive shall be entitled to a cash
payment in an amount equal to the dividends that he would have been
entitled to receive had he been the owner of such unissued shares on
the date such dividends are paid. Such cash payment shall be made at
the same time as payment of dividends are made to other shareholders of
Company common stock. The issuance of any Company common stock pursuant
to a Restricted Share Unit Award shall be subject to the satisfaction
of any and all conditions necessary for the issuance of such shares
under applicable law.
(vi) Extension of Vesting. As of the Amendment Date,
the Executive agrees, (A) with respect to the Restricted Share Unit
Award, to an extension of the vesting date from June 30, 2004 to
January 15, 2006, and (B) with respect to the options granted to the
Executive on November 19, 2001, to an extension of the grant vesting
date from November 19, 2004 to January 15, 2006. The Restricted Share
Units Agreement dated November 20, 2001, between the Company and the
Executive (the "2001 RSU Agreement") and the Nonqualified Stock Option
Agreement dated November 19, 2001 between the Company and the Executive
(the "2001 Option Agreement"), respectively, are hereby amended to
reflect the vesting date extensions described in the preceding
sentence. Except as expressly modified herein, the ▇▇▇▇ ▇▇▇ Agreement
and the 2001 Option Agreement remain unchanged.
(vii) Other Benefits. During the Employment Period,
the Executive shall be entitled to participate in all employee pension,
welfare, perquisites, fringe benefit, and other benefit plans,
practices, policies and programs generally applicable to the most
senior executives of the Company on a basis and on terms no less
favorable than that provided to the Executive immediately prior to the
Effective Date.
(viii) Expenses. 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.
(ix) 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 give to the
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Executive written notice in accordance with Section 11(a) 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 180
consecutive calendar days 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 guilty or nolo
contendere plea by the Executive with respect thereto; or
(vi) a material breach of Section 9 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 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), (iii) or (iv) above, and specifying the
particulars thereof in detail. The definition of "Cause" hereunder shall
supersede any provision of any Plan or Agreement (as hereafter defined) that
provides for a Forfeiture or Payment (as
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hereafter defined) upon the Executive's violation of a Company policy or similar
such conduct under such Plan or Agreement.
(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 10 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 and
satisfy Section 10(b) of this Agreement;
(vi) the Company giving Executive a notice of the
termination of the Employment Period effective at the end of or after
the Initial Term, pursuant to Section 2 prior to the Executive's
attaining age 62; or
(vii) the occurrence of a Change of Control (as
hereinafter defined).
(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 11(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific 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 thirty
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
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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 for 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, subject to the provisions of Section 5(d), 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.
5. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause. 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) except as specified below, 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 Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, and (2) the product of (x) the average Annual Bonus
paid to the Executive in respect of the three completed fiscal years
prior to the Date of Termination, provided that such amount shall not
be less than Executive's Annual Bonus at target hereunder (the "Recent
Average Bonus"), and (y) a fraction, the numerator of which is the
number of days in the fiscal year in which the Date of Termination
occurs through the Date of Termination, and the denominator of which is
365, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1) and (2), shall be hereinafter referred
to as the "Accrued Obligations"); and
B. the amount equal to the product of (x)
two, or if the Date of Termination is within three years after a Change
of Control, three and (y) the sum of (I) the Executive's Annual Base
Salary and (II) the Recent Average Bonus; and
(ii) any stock options, restricted stock and
restricted share units held by the Executive or a permitted transferee
(whether granted under this Agreement or otherwise) shall vest
immediately (with option exercisability continuing until the end of the
option term); and
(iii) 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,
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policy or practice or contract or agreement of the Company and its
affiliates (such amounts and benefits, the "Other Benefits") in
accordance with the terms and normal procedures of each such plan,
program, policy or practice; provided that Executive and his eligible
dependents shall continue to participate in the Company's welfare
benefit plans for the period during which severance is measured
commencing on the Date of Termination.
For purposes of this Agreement, "Change of Control" shall mean any of
the following events:
(i) the acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act)(a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty-five
percent (25%) or more of either (x) the then
outstanding common shares of the Company (the
"outstanding Company Common Shares") or (y) the
combined voting power of the then outstanding voting
securities of the Company entitled to vote generally
in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that
for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the
Company or any corporation controlled by the Company,
(B) any acquisition by the Company or any corporation
controlled by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by
any corporation that is a Non-Control Acquisition (as
defined in (iii) below); or
(ii) the individuals who, as of the Effective Date
constitute the Board of the Company (the "Incumbent
Board") cease for any reason to constitute at least a
majority of the Board of the Company provided,
however, that any individual becoming a director
subsequent to the Effective Date whose election, or
nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the
Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result
of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the
Board; or
(iii) consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition by the Company of assets or shares of
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another corporation (a "Business Combination"),
unless such Business Combination is a Non-Control
Acquisition. A "Non-Control Acquisition" means a
Business Combination where, following such Business
Combination, (x) all or substantially all of the
individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company
Common Shares and Outstanding Company Voting
Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of, respectively, the
then outstanding shares of common stock and the
combined voting power of the then outstanding voting
securities entitled to vote generally in the election
of directors, as the case may be, of the corporation
resulting from such Business Combination (including,
without limitation a corporation which as a result of
such transaction owns the Company all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership
immediately prior to such Business Combination of the
Outstanding Company Common Shares and Outstanding
Company Voting Securities, as the case may be, (y) no
Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination)
beneficially owns, directly or indirectly,
twenty-five percent (25%) or more of, respectively,
the then outstanding shares of common stock of the
corporation resulting from such Business Combination
or the combined voting power of the then outstanding
voting securities of such corporation except to the
extent that such ownership existed prior to the
Business Combination (including any ownership that
existed in the Company or the company being acquired,
if any) and (z) at least a majority of the members of
the board of directors of the corporation resulting
from such Business Combination were members of the
Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(b) Cause; Other than for Good Reason. If the Executive's
employment shall be terminated 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 or provide to the Executive an amount equal to the amount set
forth in clause (1) of Section 5(a)(i)(A) above, and the timely payment or
provision of the Other Benefits, in each case to the extent theretofore unpaid,
and subject also to the provisions of Section 5(d), below. In the event the
Executive gives the Company notice of termination of the Employment Period
effective at the end of or after the Initial Term, pursuant
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to Section 2, the Company shall pay Executive the amount provided for in
Section 5(a)(i)(A)(1), and shall provide the Executive (and his spouse, as
applicable) Other Benefits.
(c) 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 payment of Accrued
Obligations and the timely payment or provision of the Other Benefits.
Additionally, any stock options, restricted stock and restricted stock units
held by the Executive or a permitted transferee (granted under this Agreement or
otherwise) shall immediately vest (with option exercisability continuing until
the end of the option term). 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.
(d) Disability; Retirement. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment Period,
this Agreement shall terminate without further obligations to the Executive,
other than for payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. Additionally,
unless the award agreement with respect to an individual stock option,
restricted stock or restricted share unit award otherwise provides for immediate
and full vesting, for purposes of the vesting of any stock options, restricted
stock or restricted share units held by the Executive or a permitted transferee
(granted under this Agreement or otherwise), if the Executive's employment is
terminated by reason of the Executive's Disability during the Employment Period
or the Executive's employment is terminated by reason of the Executive's
retirement at any time after June 30, 2004, the Executive shall be treated as a
consulting employee and any such stock options, restricted stock or restricted
share units shall continue to vest in accordance with their original vesting
schedule (with option exercisability continuing until the end of the option
term), provided, that, the Executive and the Company shall enter into an
agreement reasonably acceptable to the Executive pursuant to which the Executive
will continue as a consulting employee from the Date of Termination or the
retirement date, as applicable, until the third anniversary of the Date of
Termination or the retirement date, as applicable. In the event that the
Executive retires prior to June 30, 2004, all restricted stock, restricted share
units and stock options shall continue to vest or be forfeited, as the case may
be, in accordance with their original terms, provided that the Company (or an
instrumentality thereof) may only exercise any right it may have to curtail
vesting if the Executive is indicted for a felony involving moral turpitude or
grievous bodily harm within 60 days after the Date of Termination. If the
Executive shall die after termination by reason of his retirement or Disability,
all stock options, restricted stock and restricted share units (other than with
respect to the Restricted Share Unit Award in the event of death following a
retirement prior to June 30, 2004) shall immediately vest and all stock options
shall remain exercisable until the end of the option term. With respect to the
provision of Other Benefits upon the Executive's Disability, the term Other
Benefits as utilized in this Section 5(d) shall include, and the Executive shall
be entitled after the Disability Effective Date to receive, disability and other
benefits as in effect at any time thereafter generally with respect to senior
executives of the Company.
6. Non-exclusivity of Rights. Except as specifically provided,
nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan,
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program, policy or practice provided by the Company, or any of its affiliates
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any contract or agreement with the Company, or its affiliates. Amounts
which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Company or its affiliates at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement. As used in this Agreement, the terms "affiliated companies" and
"affiliates" shall include any company controlled by, controlling or under
common control with the Company.
7. 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
the Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (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 Internal Revenue Code of 1986, as amended (the "Code"), if
the Executive prevails on any material claim made by him, and disputed by the
Company under the terms of this Agreement.
8. Certain Additional Payments by the Company. If at any time
for any reason any payment or distribution (a "Payment") by the Company or any
other person or entity to or for the benefit of the Executive is determined to
be a "parachute payment" (within the meaning of Section 280G (b) (2) of the
Code), whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise in connection with or arising out of his
employment with the Company or a change in ownership or excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by the
Executive ( the "Excise Tax"), then within a reasonable period of time after
such determination is reached the Company shall pay to the Executive an
additional payment (the "Gross-Up Payment") in an amount such that the net
amount retained by the Executive, after deduction of any Excise Tax on such
Payment and any federal, state or local income or employment tax or other taxes
and Excise Tax on the Gross-Up Payment, shall equal the amount of such Payment
(including any interest or penalties with respect to any of the foregoing). All
determinations concerning the application of the foregoing shall be made by a
nationally recognized firm of independent accountants (together with legal
counsel of its choosing) selected by the Company after consultation with the
Executive (which may be the Company's independent auditors), whose determination
shall be conclusive and binding on all parties. The fees and expenses of such
accountants and counsel (including counsel for the Executive) shall be borne by
the Company. If such independent auditors determine that no Excise Tax is
payable by the Executive, it shall furnish the Executive with an opinion that
the Executive has substantial authority not to report any Excise Tax on his
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Federal income tax return. In the event the Internal Revenue Service assesses
the Executive an amount of Excise Tax in excess of that determined in accordance
with the foregoing, the Company shall pay to the Executive an additional
Gross-Up Payment, calculated as described above in respect of such excess Excise
Tax, including a Gross-Up Payment in respect of any interest or penalties
imposed by the Internal Revenue Service with respect to such excess Excise Tax.
9. Covenants.
(a) Introduction. The parties acknowledge that the provisions
and covenants contained in this Section 9 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 9 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 9 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 9(b))("Confidential Information"). For the
purposes of this Section 9(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 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 9(c)), without the prior
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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 six 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 (other than an entity or enterprise with annual revenues of 10% or
less of the Company's revenues controlled by any of the Executive's sons,
including without limitation BoundTree Medical, Talisman Capital Partners or
Inchord Communications, and which such foregoing exception shall apply for the
purpose of the covenant of this Section 9(e) as well as any covenant or other
limitation under any restricted stock, stock option or other stock incentive
held by Executive) 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 9(d) or this Section 9(e) is a "Competitor").
(f) No Disparagement
(i) The Executive and the Company 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
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 statements 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, officers,
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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.
(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 sole 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 at all times,
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 Sections 9(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 9; and (C) remedies at law (such
as monetary damages) for any breach of the Executive's obligations under this
Section 9 would be inadequate. The Executive therefore agrees and consents that
if the Executive commits any breach of a covenant under this Section 9 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.
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(i) Any provision of any agreement between the Company (or
other member of the Cardinal Group) and the Executive or of any plan, program,
policy or practice of the Company (or other member of the Cardinal Group)
affecting the Executive, (including, without limitation, any stock option grant
agreement, restricted stock agreement and the Restricted Share Unit Award
agreement) (collectively, "Plan or Agreement") to the contrary notwithstanding,
(x) no covenant or other restriction under any such Plan or Agreement respecting
the Executive's conduct (which is sometimes referred to therein as "Triggering
Conduct" or "Competitor Triggering Conduct") shall be enforceable, to cause a
forfeiture or obligation to pay an amount realized by Executive (or his
permitted transferees thereunder) as provided under such Plan or Agreement (a
"Forfeiture or Payment"), except as a result of any breach of such covenant or
restriction by the Executive prior to the second anniversary of the date on
which the Executive's rights under such Plan or Agreement shall have vested (or
to the extent of such vesting) (except that the last day of the Restricted
Period shall be substituted for such second anniversary (only if the Restricted
Period expires before such second anniversary) respecting any grant of
restricted stock made to the Executive prior to the Effective Date); and (y) the
definition of a "Solicitation" at Section 9(c) and of a "Competitor" at Section
9(e) hereof shall supersede any definition of such conduct that is less
beneficial to the Executive under such a covenant or restriction under any such
Plan and Agreement. In furtherance thereof, (i) no such covenant or restriction
shall be enforceable to cause a Forfeiture or Payment against the Executive (or
his permitted transferees) under any Plan or Agreement to the extent that the
Executive's rights thereunder vested two or more years prior to the Effective
Date, (ii) the Executive shall not be subject to any Forfeiture or Payment under
any such Plan or Agreement until he shall have been afforded Due Process (as
hereafter defined), and (iii) any such Plan or Agreement entered into after the
Effective Date shall be subject to the provisions of this Section 9(i) and to
the definition of "Cause" under Section 4(c) hereof unless such Plan or
Agreement specifically refers to this Section 9(i) or Section 4(c) as the case
may be and specifically states that the provisions of this Section 9(i) or the
definition of "Cause" under Section 4(c) shall not apply. "Due Process" shall
mean: (A) the Executive has been given not less than 60 days prior written
notice of such conduct ("Conduct Notice") by the Board, (B) upon such notice to
the Executive, the Executive is given an opportunity, together with counsel, to
be heard before the Board at a meeting of the Board called and held for the
purpose of reviewing such conduct, (C) in the good faith opinion of the Board at
such meeting and delivery of 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) finding that the Executive is guilty of such
conduct, (D) the Executive fails to cure such conduct, if it is capable of cure,
on or before the later of the 60th day following the Conduct Notice or the 14th
day after delivery of such resolution, and (E) the Company shall promptly pay
all professional fees incurred by the Executive to defend such allegation of a
breach of such covenant or restriction (unless such three-quarters majority of
the Board adopts such resolution in which case the provisions of Section 7
hereof shall govern any subsequent dispute resolution proceedings or settlement
of the parties).
10. 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 otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable
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by the Executive's legal representatives. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of its business and/or assets 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.
11. 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. The parties hereto irrevocably agree to submit to the
jurisdiction and venue of the courts of the State of Ohio, in any action or
proceeding brought with respect to or in connection with this Agreement. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect. This Agreement 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 party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
At the most recent address on file for the Executive at the Company.
If to the Company:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Legal Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Except as otherwise specifically provided
herein, 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.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
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(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 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.
(f) From and after the Effective Date, this Agreement shall
supersede any other employment, severance or change of control agreement between
the parties and any other Plan or agreement with respect to the subject matter
hereof. In the case of any conflict between the terms of this Agreement (the
"Terms") and the provisions of any such employment, severance or change of
control agreement or any other Plan or agreement as in effect from time to time
(the "Provisions"), the Executive's rights and the Company's obligations shall
be established by whichever of the Terms or Provisions would be more beneficial
to the Executive.
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 these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
Execution Date: February 5, 2004 /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ HEALTH, INC.
Execution Date: February 4, 2004 By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
Executive Vice President &
Chief Administrative Officer
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