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 Robert D.

Walter (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

 

 

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         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 2001 RSU 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

 

 

 

                                       10

<PAGE>

 

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

 

 

                                       11

<PAGE>

 

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,

 

 

 

                                       12

<PAGE>

 

         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.

 

 

                                       13

<PAGE>

 

                  (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

 

 

                                       14

<PAGE>

 

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:

 

         7000 Cardinal Place

         Dublin, Ohio 43017

 

         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.

 

 

                                       15

<PAGE>

 

                  (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/ Robert D. Walter

                                               ---------------------

                                                  ROBERT D. WALTER

 

 

 

                                               CARDINAL HEALTH, INC.

 

 

Execution Date:  February 4, 2004              By:   /s/ Anthony J. Rucci

                                                   -----------------------

                                                   Anthony J. Rucci,

                                                   Executive Vice President &

                                                   Chief Administrative Officer