EMPLOYEE MATTERS AGREEMENT

Exhibit 10.1

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

CARDINAL HEALTH, INC.

AND

CAREFUSION CORPORATION

DATED AS OF

AUGUST 31, 2009

EMPLOYEE MATTERS AGREEMENT

This EMPLOYEE MATTERS AGREEMENT (the “ Agreement ”), dated as of August 31, 2009 is by and between Cardinal Health, Inc., an Ohio corporation (“ Cardinal Health ”), and CareFusion Corporation, a Delaware corporation (“ CareFusion ”, and together with Cardinal Health, each a “ Party ” and collectively, the “ Parties ”).

WHEREAS, the board of directors of Cardinal Health has determined that it is in the best interests of Cardinal Health and its shareholders to create a new publicly traded company which shall operate the CareFusion Business (as such term is defined herein);

WHEREAS, in furtherance of the foregoing, Cardinal Health and CareFusion have entered into a Separation Agreement, dated as of July 22, 2009 (the “ Separation Agreement ”), and have entered or will enter into other Transaction Documents that will govern certain matters relating to the Distribution and the relationship of Cardinal Health, CareFusion and their respective Affiliates prior to and following the Distribution Date; and

WHEREAS, pursuant to the Separation Agreement, Cardinal Health and CareFusion have agreed to enter into this Agreement for the purpose of allocating assets, liabilities and responsibilities with respect to certain human resources, employee compensation and benefits matters between them to the extent not provided in, or varying from, the Separation Agreement.

NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby, agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions . The following terms shall have the following meanings:

1.1.1 “ Adjusted Cardinal Health Option ” has the meaning ascribed thereto in Section 6.1(b) of this Agreement.

1.1.2 “ Adjusted Cardinal Health Option Price ” has the meaning ascribed thereto in Section 6.1(b) of this Agreement.

1.1.3 “ Adjusted CareFusion Option Price ” has the meaning ascribed thereto in Section 6.1(c) of this Agreement.

1.1.4 “ Affiliate ” (including, with a correlative meaning, “ affiliated ”) means, when used with respect to a specified Person, a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specified Person. For the purpose of this definition, “ control ” (including with correlative meanings, “ controlled by ” and “ under common control with ”), when used with respect to any specified Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract, agreement, obligation, indenture, instrument, lease, promise, arrangement, release, warranty, commitment, undertaking or otherwise. It is expressly agreed that, from and after the Effective Time and for purposes of this Agreement and the other Transaction Documents, no member of the CareFusion Group shall be deemed to be an Affiliate of any member of the Cardinal Health Group, and no member of the Cardinal Health Group shall be deemed to be an Affiliate of any member of the CareFusion Group.

1.1.5 “ Agreement ” has the meaning ascribed thereto in the preamble to this Agreement.

1.1.6 “ Assets ” shall have the meaning ascribed thereto in the Separation Agreement.

1.1.7 “ Benefit Plan ” means, with respect to an entity, each plan, program, arrangement, agreement or commitment that is an employment, consulting, non-competition or deferred compensation agreement, or an executive compensation, incentive bonus or other bonus, employee pension, profit-sharing, savings, retirement, supplemental retirement, stock option, stock purchase, stock appreciation rights, restricted stock, other equity-based compensation, severance pay, salary continuation, life, health, hospitalization, sick leave, vacation pay, paid time-off, disability or accident insurance plan, corporate-owned or key-man life insurance or other employee benefit plan, program, arrangement, agreement or commitment, including any “employee benefit plan” (as defined in Section 3(3) of ERISA), sponsored or maintained by such entity (or to which such entity contributes or is required to contribute).

 

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1.1.8 “ Cardinal Health 401(k) Plan ” means the Cardinal Health 401(k) Savings Plan.

1.1.9 “ Cardinal Health Annual Bonus Plan ” has the meaning ascribed thereto in Section 7.1(a) of this Agreement.

1.1.10 “ Cardinal Health Arrangement ” has the meaning ascribed thereto in Section 5.8 of this Agreement.

1.1.11 “ Cardinal Health Benefit Plan ” means any Benefit Plan sponsored, maintained or contributed to by Cardinal Health or any of its Affiliates.

1.1.12 “ Cardinal Health Business ” means (i) (A) the businesses and operations conducted prior to the Effective Time by any member of the Cardinal Health Group that are not included in the CareFusion Business and (B) the businesses set forth on Schedule 1.1(a) of the Separation Agreement and (ii) the Cardinal Health Former Businesses.

1.1.13 “ Cardinal Health Canadian Capital Accumulation Plans ” shall have the meaning ascribed thereto in Section 4.2(b) of this Agreement.

1.1.14 “ Cardinal Health Committee ” means the Human Resources and Compensation Committee of the Board of Directors of Cardinal Health.

1.1.15 “ Cardinal Health Common Share ” shall mean a common share, without par value, of Cardinal Health.

1.1.16 “ Cardinal Health DC Plan ” has the meaning ascribed thereto in Section 7.2(a) of this Agreement.

1.1.17 “ Cardinal Health Director ” means a current or former member of the Board of Directors of Cardinal Health, excluding any CareFusion Director.

1.1.18 “ Cardinal Health Equity Plans ” means, collectively, (i) the Cardinal Health 2005 Long-Term Incentive Plan (including the underlying Long-Term Incentive Cash Program for Fiscal Years 2008-2010 and Long-Term Incentive Cash Program for Fiscal Years 2009-2011), (ii) the Cardinal Health Equity Incentive Plan, (iii) the Cardinal Health Broadly-based Equity Incentive Plan, (iv) the Cardinal Health Outside Directors Equity Incentive Plan, (v) the Cardinal Health 2007 Nonemployee Directors Equity Plan, (vi) Alaris Medical Systems, Inc. 1996 Stock Option Plan, (vii) Alaris Medical Systems, Inc. 2004 Stock Incentive Plan, (viii) Allegiance Corporation 1996 Incentive Compensation Program, (ix) Bindley Western Industries, Inc. 2000 Stock Option and Incentive Plan, (x) Bindley Western Industries, Inc. 1993 Stock Option and Incentive Plan, (xi) Bindley Western Industries, Inc. 1998 Stock Option and Incentive Plan, (xii) Central Pharmacy Services, Inc. 1993 Stock Option Plan, (xiii) Syncor International Corporation 2000 Master Stock Incentive Plan, (xiv) Syncor International Corporation New Employee Stock Option Plan, (xv) Syncor International Corporation 1990 Master Stock Incentive Plan, (xvi) Syncor International Corporation Universal Performance Equity Participation

 

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Plan, (xvii) VIASYS Healthcare, Inc. Equity Incentive Plan, and any other stock option or stock incentive compensation plan or arrangement for Employees of Cardinal Health or any of its Affiliates, in all cases, as amended.

1.1.19 “ Cardinal Health Former Businesses ” means the Former Businesses set forth on Schedule 1.1(b) of the Separation Agreement and any Former Business (other than the CareFusion Business or the CareFusion Former Businesses) that, at the time of sale, conveyance, assignment, transfer, disposition, divestiture (in whole or in part) or discontinuation, abandonment, completion or termination of the operations, activities or production thereof, was primarily managed by or associated with the Cardinal Health Business as then conducted.

1.1.20 “ Cardinal Health Group ” means Cardinal Health and each Person (other than any member of the CareFusion Group) that is an Affiliate of Cardinal Health immediately after the Effective Time.

1.1.21 “ Cardinal Health Group Benefit Plan ” has the meaning ascribed thereto in Section 5.1(a) of this Agreement.

1.1.22 “ Cardinal Health Group Employee ” means any Employee of Cardinal Health or any of its Affiliates who, as of July 1, 2009, is an Employee of the Cardinal Health Business or is employed by a member of the Cardinal Health Group, including any such Employee who is on an approved leave at such time other than long-term disability leave, except as otherwise required by applicable local Laws; provided , however , that any such Employee who transfers from employment in the Cardinal Health Business or with a member of the Cardinal Health Group to the CareFusion Business or a member of the CareFusion Group during the period beginning on July 1, 2009 and ending at the Effective Time shall be a CareFusion Group Employee from and after such transfer (and not a Cardinal Health Group Employee from and after such transfer). For the avoidance of doubt, Employees of the CareFusion Business located in the U.S. who are on long-term disability leave as of July 1, 2009 shall not be Cardinal Health Group Employees.

1.1.23 “ Cardinal Health LTIP ” shall mean the Cardinal Health 2005 Long-Term Incentive Plan, as amended and restated as of November 5, 2008 (including the underlying Long-Term Incentive Cash Program for Fiscal Years 2008-2010 and Long-Term Incentive Cash Program for Fiscal Years 2009-2011).

1.1.24 “ Cardinal Health Option ” means an option to purchase Cardinal Health Common Shares granted pursuant to one of the Cardinal Health Equity Plans.

1.1.25 “ Cardinal Health Participant ” means any Employee of Cardinal Health or one of its Affiliates who is an Employee of the Cardinal Health Business or a Former Employee and who is, at any time prior to, on, or after the Effective Time, a participant in the applicable Cardinal Health Benefit Plan or is a beneficiary, dependent or alternate payee of such a participant.

1.1.26 “ Cardinal Health Restricted Share ” means a Cardinal Health Common Share granted by Cardinal Health or one of its Affiliates pursuant to one of the Cardinal Health Equity Plans that is subject to a vesting requirement that has not been satisfied at the Effective Time.

 

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1.1.27 “ Cardinal Health Restricted Share Unit ” means a unit granted by Cardinal Health or one of its Affiliates pursuant to one of the Cardinal Health Equity Plans representing a general unsecured promise by Cardinal Health or one of its Affiliates to deliver a Cardinal Health Common Share and/or dividend equivalents, if applicable, after the Effective Time.

1.1.28 “ Cardinal Health Severance Benefits Program ” has the meaning ascribed thereto in Section 7.3(a)(i) of this Agreement.

1.1.29 “ CareFusion ” has the meaning ascribed thereto in the preamble to this Agreement.

1.1.30 “ CareFusion 401(k) Plan ” has the meaning ascribed thereto in Section 4.1(a) of this Agreement.

1.1.31 “ CareFusion Annual Bonus Plan ” has the meaning ascribed thereto in Section 7.1(a) of this Agreement.

1.1.32 “ CareFusion Arrangement ” has the meaning ascribed thereto in Section 5.8 of this Agreement.

1.1.33 “ CareFusion Benefit Plan ” means any Benefit Plan sponsored, maintained or contributed to by a member of the CareFusion Group after the Effective Time, but excluding the Cardinal Health Group Benefit Plan.

1.1.34 “ CareFusion Business ” means (i) the businesses and operations conducted prior to the Effective Time by any member of the CareFusion Group, but excluding those businesses set forth on Schedule 1.1(a) of the Separation Agreement, (ii) any other businesses or operations conducted primarily through the use of the CareFusion Assets, (iii) the businesses and operations set forth on Schedule 1.1(c) of the Separation Agreement and (iv) the CareFusion Former Businesses.

1.1.35 “ CareFusion Canadian Capital Accumulation Plans ” shall have the meaning ascribed thereto in Section 4.2(b) of this Agreement.

1.1.36 “ CareFusion Canadian Participants ” has the meaning ascribed thereto in Section 4.2(b) of this Agreement.

1.1.37 “ CareFusion Common Stock ” shall mean a share of common stock, par value $0.01 per share, of CareFusion.

1.1.38 “ CareFusion DC Plan ” has the meaning ascribed thereto in Section 7.2(a) of this Agreement.

 

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1.1.39 “ CareFusion Director ” means a member of the Board of Directors of CareFusion as of the Effective Time, who is no longer a member of the Board of Directors of Cardinal Health as of the Effective Time.

1.1.40 “ CareFusion Equity Plan ” has the meaning ascribed thereto in Section 6.5(a) of this Agreement.

1.1.41 “ CareFusion Former Businesses ” means the Former Businesses set forth on Schedule 1.1(g) of the Separation Agreement and any Former Business that, at the time of sale, conveyance, assignment, transfer, disposition, divestiture (in whole or in part) or discontinuation, abandonment, completion or termination of the operations, activities or production thereof, was primarily managed by or associated with the CareFusion Business (including the businesses and operations set forth on Schedule 1.1(c) of the Separation Agreement) as then conducted.

1.1.42 “ CareFusion Group ” means CareFusion, each Subsidiary of CareFusion immediately after the Effective Time and each other Person that is controlled directly or indirectly by CareFusion immediately after the Effective Time.

1.1.43 “ CareFusion Group Employee ” means any Employee of Cardinal Health or any of its Affiliates who, as of July 1, 2009, is an Employee of the CareFusion Business or is employed by a member of the CareFusion Group, including any such Employee who is on an approved leave at such time other than long-term disability leave, except as otherwise required by applicable local Laws; provided , however , that any such Employee who transfers from employment in the CareFusion Business or with a member of the CareFusion Group to the Cardinal Health Business or a member of the Cardinal Health Group during the period beginning on July 1, 2009 and ending at the Effective Time shall be a Cardinal Health Group Employee from and after such transfer (and not a CareFusion Group Employee from and after such transfer). For the avoidance of doubt, Employees of the CareFusion Business located in the U.S. who are on long-term disability leave as of July 1, 2009 shall not be CareFusion Group Employees.

1.1.44 “ CareFusion Option ” has the meaning ascribed thereto in Section 6.1(a) of this Agreement.

1.1.45 “ CareFusion Option Price ” has the meaning ascribed thereto in Section 6.1(a) of this Agreement.

1.1.46 “ CareFusion Participant ” means any Employee of the CareFusion Business or of a member of the CareFusion Group who was, prior to the Effective Time, a participant in the applicable Cardinal Health Benefit Plan or is, after the Effective Time, a participant in a CareFusion Benefit Plan, or is a beneficiary, dependent or alternate payee of such a participant.

1.1.47 “ CareFusion Ratio ” has the meaning ascribed thereto in Section 6.1(a) of this Agreement.

 

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1.1.48 “ CareFusion Restricted Share ” means a share of CareFusion Common Stock granted by CareFusion that is subject to a vesting requirement, which share is issued pursuant to one of the CareFusion Equity Plans as an adjustment to or replacement for an award of Cardinal Health Restricted Shares in connection with the Distribution.

1.1.49 “ CareFusion Restricted Share Unit ” shall mean a unit granted by CareFusion representing a general unsecured promise by CareFusion to deliver a share of CareFusion Common Stock or dividend equivalents, if applicable, that is subject to a vesting requirement, which unit is issued pursuant to one of the CareFusion Equity Plans as an adjustment to or replacement for an award of Cardinal Health Restricted Share Units in connection with the Distribution.

1.1.50 “ CareFusion SAR ” has the meaning ascribed thereto in Section 6.1(a) of this Agreement.

1.1.51 “ CareFusion Stock Fund ” means an investment alternative under an individual account retirement plan maintained by a member of either the Cardinal Health Group or the CareFusion Group that holds, or is deemed to hold, CareFusion Common Stock.

1.1.52 “ CareFusion Stock Price ” means the price per share at which CareFusion Common Stock first trades on the NYSE immediately following the Effective Time.

1.1.53 “ CHAPP ” means the Cardinal Health Acquired Pensions Plan.

1.1.54 “ CHAPP Transfer Date ” has the meaning ascribed thereto in Section 3.1(a) of this Agreement.

1.1.55 “ COBRA ” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and as codified in Code Section 4980B and Sections 601 through 608 of ERISA, and any similar state group health plan continuation Law, together with all regulations and proposed regulations promulgated thereunder, including any amendments or other modifications of such Laws and regulations that may be made from time to time.

1.1.56 “ Code ” means the U.S. Internal Revenue Code of 1986, as amended.

1.1.57 “ Competitive Business ” has the meaning ascribed thereto in Section 7.3(b) of this Agreement.

1.1.58 “ Distribution ” shall mean the distribution to the holders of the issued and outstanding Cardinal Health Common Shares as of the close of business on the Record Date, by means of a pro rata distribution, of the issued and outstanding shares of CareFusion Common Stock, on the basis of one-half (  ¹ / 2 ) share of CareFusion Common Stock for every one (1) Cardinal Health Common Share.

 

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1.1.59 “ Distribution Date ” means August 31, 2009, or such other time as determined by Cardinal Health in accordance with Section 3.3 of the Separation Agreement.

1.1.60 “ DOL ” means the U.S. Department of Labor.

1.1.61 “ Effective Time ” means the time at which the Distribution occurs on the Distribution Date, which shall be deemed to be 11:59 p.m., New York City Time, on the Distribution Date.

1.1.62 “ Employee ” means any individual who is a full or part-time common law employee of the applicable entity.

1.1.63 “ Employer ” has the meaning ascribed thereto in Section 7.3(b) of this Agreement.

1.1.64 “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

1.1.65 “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made.

1.1.66 “ Force Majeure ” has the meaning ascribed thereto in the Separation Agreement.

1.1.67 “ Foreign Cardinal Health Benefit Participants ” has the meaning ascribed thereto in Section 4.2(a) of this Agreement.

1.1.68 “ Foreign Cardinal Health Benefit Plan ” means a Cardinal Health Benefit Plan which is maintained or contributed to by a member of the Cardinal Health Group located outside of the U.S., and not by any member of the Cardinal Health Group located in the U.S.

1.1.69 “ Foreign Cardinal Health Group Employee ” means a Cardinal Health Group Employee who, as of July 1, 2009, is an Employee of the Cardinal Health Business located outside of the U.S. or is employed by a member of the Cardinal Health Group located outside of the U.S., including any such Employee who is on approved leave of absence at such time (including without limitation, long-term disability leave).

1.1.70 “ Foreign Cardinal Health Welfare Participant ” has the meaning ascribed thereto in Section 5.3(a) of this Agreement.

1.1.71 “ Foreign Cardinal Health Welfare Plan ” means a Foreign Cardinal Health Benefit Plan that is a Welfare Plan.

1.1.72 “ Foreign CareFusion Benefit Participants ” has the meaning ascribed thereto in Section 4.2(a) of this Agreement.

 

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1.1.73 “ Foreign CareFusion Benefit Plan ” means a Benefit Plan which is maintained or contributed to by a member of the CareFusion Group located outside of the U.S., and not by any member of the CareFusion Group located in the U.S.

1.1.74 “ Foreign CareFusion Group Employee ” means a CareFusion Group Employee who, as of July 1, 2009, is an Employee of the CareFusion Business located outside of the U.S. or is employed by a member of the CareFusion Group located outside of the U.S., including any such Employee who is on approved leave of absence at such time (including without limitation, long-term disability leave).

1.1.75 “ Foreign CareFusion Welfare Participant ” has the meaning ascribed thereto in Section 5.3(a) of this Agreement.

1.1.76 “ Foreign CareFusion Welfare Plan ” means a Foreign CareFusion Benefit Plan that is a Welfare Plan.

1.1.77 “ Former Business ” means any corporation, partnership, entity, division, business unit or business, including any business within the meaning of Rule 11-01(d) of Regulation S-X (in each case, including any assets and liabilities comprising the same) that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part) to a Person that is not a member of the Cardinal Health Group or the CareFusion Group or the operations, activities or production of which has been discontinued, abandoned, completed or otherwise terminated (in whole or in part), in each case, prior to the Effective Time.

1.1.78 “ Former Employee ” means any former Employee of Cardinal Health or an Affiliate, as of immediately prior to the Effective Time, whether having last been employed in the Cardinal Health Business or the CareFusion Business, including retired, deferred vested, non-vested and other inactive terminated Employees. For clarification purposes, former Employees who are on long-term disability leave as of the Effective Time and who were either employed in the Cardinal Health Business or the CareFusion Business located in the U.S. prior to being on long-term disability leave, shall be considered Former Employees for purposes of this Agreement.

1.1.79 “ FY 2008-2010 Cash Program ” has the meaning ascribed thereto in Section 6.4(a) of this Agreement.

1.1.80 “ FY 2009-2011 Cash Program ” has the meaning ascribed thereto in Section 6.4(b) of this Agreement.

1.1.81 “ Governmental Authority ” means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof.

 

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1.1.82 “ HIPAA ” means the Health Insurance Portability and Accountability Act of 1996, as amended.

1.1.83 “ Information ” has the meaning ascribed thereto in the Separation Agreement.

1.1.84 “ Law ” means any national, supranational, federal, state, provincial, local or similar law (including common law), statute, code, order, ordinance, rule, regulation, treaty (including any income tax treaty), license, permit, authorization, approval, consent, decree, injunction, binding judicial or administrative interpretation or other requirement, in each case, enacted, promulgated, issued or entered by a Governmental Authority.

1.1.85 “ Liabilities ” shall have the meaning ascribed thereto in the Separation Agreement.

1.1.86 “ Parties ” has the meaning ascribed thereto in the preamble to this Agreement.

1.1.87 “ PBGC ” means the Pension Benefit Guaranty Corporation.

1.1.88 “ Person ” means any individual, corporation, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company, Governmental Authority or other entity.

1.1.89 “ Post-Distribution Cardinal Health Option ” has the meaning ascribed thereto in Section 6.1(a) of this Agreement.

1.1.90 “ Post-Distribution Cardinal Health Option Price ” has the meaning ascribed thereto in Section 6.1(a) of this Agreement.

1.1.91 “ Post-Distribution Cardinal Health SAR ” has the meaning ascribed thereto in Section 6.1(a) of this Agreement.

1.1.92 “ Post-Distribution Cardinal Health Share Price ” means the price per share at which Cardinal Health Common Shares first trade on the NYSE immediately following the Effective Time.

1.1.93 “ Pre-Distribution Cardinal Health Option Price ” means the exercise price of a Cardinal Health Option prior to the Effective Time, as set forth in the applicable option agreement.

1.1.94 “ Pre-Distribution Cardinal Health Share Price ” means the price per share at which Cardinal Health Common Shares trading “regular way” last trade on the NYSE immediately prior to the Effective Time.

1.1.95 “ Record Date ” means August 25, 2009.

 

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1.1.96 “ Released Parties ” has the meaning ascribed thereto in Section 7.3(b) of this Agreement.

1.1.97 “ SEC ” means the Securities and Exchange Commission.

1.1.98 “ Separated Employee ” has the meaning ascribed thereto in Section 7.3(b) of this Agreement.

1.1.99 “ Separation Agreement ” has the meaning ascribed thereto in the recitals to this Agreement.

1.1.100 “ Subsidiary ” or “ subsidiary ” means, with respect to any Person, any corporation, limited liability company, joint venture or partnership of which such Person (i) beneficially owns, either directly or indirectly, more than fifty percent (50%) of (A) the total combined voting power of all classes of voting securities of such Person, (B) the total combined equity interests, or (C) the capital or profit interests, in the case of a partnership, or (ii) otherwise has the power to vote, either directly or indirectly, sufficient securities to elect a majority of the board of directors or similar governing body.

1.1.101 “ Tax ” has the meaning set forth in the Tax Matters Agreement.

1.1.102 “ Transaction Documents ” means this Agreement, the Transition Services Agreement, the Tax Matters Agreement (as defined in the Separation Agreement), the Separation Agreement, the Intellectual Property Agreements (as defined in the Separation Agreement), the Stockholder’s and Registration Rights Agreement (as defined in the Separation Agreement), the Intercompany Agreements (as defined in the Separation Agreement) and the Transfer Documents (as defined in the Separation Agreement).

1.1.103 “ Transition Period Expiration Time ” means 11:59 pm, New York City Time, on December 31, 2009 or such later time as provided in the applicable schedules to the Transition Services Agreement.

1.1.104 “ Transition Services Agreement ” means the Transition Services Agreement in substantially the form attached to the Separation Agreement as Exhibit A, to be entered into by and between Cardinal Health and CareFusion on or prior to the Distribution Date.

1.1.105 “ U.S. ” means the United States of America.

1.1.106 “ U.S. CareFusion Group Employees ” has the meaning ascribed thereto in Section 5.1(a) of this Agreement.

1.1.107 “ U.S. CareFusion Welfare Plan ” means a Welfare Plan which is maintained or contributed to by a member of the CareFusion Group located in the U.S., but excluding the Cardinal Health Group Benefit Plan.

1.1.108 “ Welfare Plan ” means a plan that provides for health, welfare or other insurance benefits (within the meaning of Section 3(1) of ERISA).

 

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ARTICLE II

CONTINUATION OF EMPLOYMENT

2.1 Continuation of Employment .

(a) Continuation of Employment . Except as otherwise provided on Schedule 2.1(a) of this Agreement or as required by applicable local Law, no later than immediately prior to July 1, 2009, Cardinal Health and its Affiliates have taken all actions necessary to ensure that, as of immediately prior to July 1, 2009, (i) all Employees of the CareFusion Business were employed by a member of the CareFusion Group and (ii) all Employees of the Cardinal Health Business were employed by a member of the Cardinal Health Group, subject to such adjustment as the Parties agree at any time through the Effective Time.

(b) Service Recognition . CareFusion shall give, or shall cause its Affiliates to give, each CareFusion Group Employee who is employed immediately following the Effective Time by a member of the CareFusion Group full credit for all purposes under any CareFusion Benefit Plan for such CareFusion Group Employee’s service with Cardinal Health or any of its Affiliates prior to the Effective Time in accordance with the Cardinal Health Service Credit Guidelines, or to the same extent such service was recognized by the corresponding Cardinal Health Benefit Plan immediately prior to the Effective Time; provided , however , that such service shall not be recognized to the extent that such recognition would result in the duplication of benefits or as otherwise provided by applicable local Law.

(c) No Severance .

(i) The Distribution and the assignment, transfer, or continuation of employment of any Employee of Cardinal Health or any of its Affiliates in connection therewith (including in accordance with Section 2.1(a) hereof) shall not be deemed a separation from service or termination of employment entitling such Employee to be eligible to participate in, or to receive payment of, severance benefits under any applicable Law, severance plan, policy, practice, or arrangement of Cardinal Health, CareFusion, or any of their respective Affiliates; provided , however , that any Employee of Cardinal Health or any of its Affiliates whose employment is not intended to be continued by Cardinal Health or any of its Affiliates following the Effective Time and is not assigned to a member of the CareFusion Group, and whose employment is terminated as of the Effective Time, shall be deemed to have incurred a separation from service and shall be eligible to receive severance and benefits as set forth in Section 7.3 of this Agreement.

(ii) Notwithstanding anything herein to the contrary, in the event any Employee of the Cardinal Health Business located outside of the U.S. or the CareFusion Business located outside of the U.S. (1) receives on or prior to the Effective Time, an offer of employment by a member of the Cardinal Health Group or the CareFusion Group, as applicable, with salary and wages and with employee benefits that are substantially comparable in the aggregate to those provided to such Employee by the Cardinal Health

 

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Business or the CareFusion Business, as applicable, prior to Effective Time and (2) does not accept such comparable offer of employment, then such Employee shall not be eligible to receive any severance or benefits, unless such Employee is employed in one of the locations listed on Schedule 2.1(c)(ii) as required by applicable local Law.

(d) Labor Relations . To the extent required by applicable Law or any agreement with a labor union, works council or similar employee organization, Cardinal Health and CareFusion and their applicable Affiliates shall mutually cooperate to provide notice, engage in consultation and take any similar action which may be required on their part in respect of the workforce in connection with the Distribution either prior to, as of, or following the Effective Time.

ARTICLE III

CARDINAL HEALTH ACQUIRED PENSIONS PLAN

3.1 Transfer of Cardinal Health Acquired Pensions Plan .

(a) Assumption of CHAPP Sponsorship and Liabilities . As of the Effective Time (the “ CHAPP Transfer Date ”), CareFusion shall assume sponsorship and all Assets and Liabilities of the Cardinal Health Acquired Pensions Plan (the “ CHAPP ”), a U.S. defined benefit pension plan. Cardinal Health shall provide such information within its possession or control as may be reasonably requested by CareFusion, or the trustees or managers of the CHAPP for purposes of its transfer and administration.

(b) Continuation of Elections . As of the CHAPP Transfer Date, CareFusion (acting directly or through its Affiliates) shall cause the CHAPP to recognize and maintain all existing elections, including beneficiary designations, payment form elections and rights of alternate payees under qualified domestic relations orders with respect to participants under the CHAPP as in effect immediately prior to the CHAPP Transfer Date.

(c) Action in the Event of PBGC Intervention . Notwithstanding any provision of this Agreement to the contrary, in the event that, within six (6) months of the Effective Time, the PBGC asserts that the Distribution may provide justification for the PBGC to seek termination of the CHAPP pursuant to Section 4042 of ERISA or otherwise asserts that the transaction may increase unreasonably the long-run loss to the PBGC (within the meaning of Section 4042(a)(4) of ERISA) with respect to the CHAPP, Cardinal Health and CareFusion shall enter into negotiations with the PBGC to resolve these issues. Notwithstanding the results of such negotiations, CareFusion shall fully comply with the terms of this Section 3.1.

(d) Reservation of Rights . The Parties hereby acknowledge that nothing in this Article III shall be construed to require CareFusion to continue the CHAPP after acceptance of sponsorship of the CHAPP under the terms prescribed in this Article III. The Parties agree that CareFusion reserves the right, in its sole discretion, to amend or terminate the CHAPP at any time following the CHAPP Transfer Date in accordance with its terms and applicable Law.

 

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ARTICLE IV

RETIREMENT PLANS

4.1 The Cardinal Health 401(k) Plan and CareFusion 401(k) Plan .

(a) Establishment of the CareFusion 401(k) Plan . As of the Effective Time, CareFusion shall, or shall cause one of its Affiliates to, establish a defined contribution plan and trust for the benefit of the CareFusion Participants (the “ CareFusion 401(k) Plan ”), which initially shall include a provision allowing for the acceptance of rollovers (including loan rollovers) and participant investment direction. CareFusion shall be responsible for taking all necessary, reasonable and appropriate action to establish, maintain and administer the CareFusion 401(k) Plan so that it is qualified under Section 401(a) of the Code and meets the requirements of Section 401(k) of the Code and that the related trust thereunder is tax-exempt under Section 501(a) of the Code. CareFusion (acting directly or through its Affiliates) shall be responsible for any and all Liabilities (including Liability for funding) and other obligations with respect to the CareFusion 401(k) Plan. Cardinal Health shall have no fiduciary or funding obligations with respect to the CareFusion 401(k) Plan.

(b) Vesting and Distribution of CareFusion Participants’ Account Balances . As of the Effective Time, CareFusion Participants shall become vested in their entire account balances under the Cardinal Health 401(k) Plan. As of the Effective Time, members of the CareFusion Group shall cease to be participating companies in the Cardinal Health 401(k) Plan, each CareFusion Participant shall cease to accrue any benefits under the Cardinal Health 401(k) Plan, and each CareFusion Participant shall be treated as having incurred a severance from employment under the Cardinal Health 401(k) Plan as of the Effective Time, making each CareFusion Participant eligible for a distribution under the Cardinal Health 401(k) Plan of his or her entire account balance. As soon as reasonably practicable following the date the contributions described in Section 4.1(e) are made to the Cardinal Health 401(k) Plan, CareFusion shall permit CareFusion Participants to elect a direct rollover of cash and any outstanding loan balances distributed from the Cardinal Health 401(k) Plan into the CareFusion 401(k) Plan.

(c) Outstanding Loans under the Cardinal Health 401(k) Plan . From the Effective Time and until the date of rollover or other distribution of their account balances, the CareFusion Participants who have outstanding loans originally made from the Cardinal Health 401(k) Plan shall be permitted to continue to repay such loans during their employment with the CareFusion Group.

(d) Stock Considerations under the Cardinal Health 401(k) Plan . To the extent that accounts of Cardinal Health Participants in the Cardinal Health 401(k) Plan receive shares of CareFusion Common Stock in connection with the Distribution in respect of Cardinal Health Common Shares held in such accounts, such shares will be deposited in

 

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a CareFusion Stock Fund under the Cardinal Health 401(k) Plan, and will be held in such plan subject to its terms and, as applicable, the discretion of the Cardinal Health 401(k) Plan fiduciary. Cardinal Health shall assume sole responsibility for ensuring that its 401(k) Plan is maintained in compliance with applicable Laws with respect to holding shares of CareFusion Common Stock.

(e) Contributions under the Cardinal Health 401(k) Plan as of the Effective Time . All contributions accrued by CareFusion Participants under the Cardinal Health 401(k) Plan with respect to all employer contributions, including employee deferrals, matching contributions (including any true-up contributions, if applicable), profit-sharing contributions, employer non-elective contributions, and Cardinal Health share contributions for CareFusion Participants through the Effective Time, determined in accordance with the terms and provisions of the Cardinal Health 401(k) Plan, ERISA and the Code, and based on all service performed and compensation accrued prior to the Effective Time, shall be deposited by Cardinal Health to the Cardinal Health 401(k) Plan as soon as administratively feasible following the Effective Time.

4.2 Foreign Plans .

(a) General . Except as provided in Section 5.3(b) and Schedule 2.1(a) of this Agreement, as of July 1, 2009, each member of the Cardinal Health Group located outside of the U.S. has, as of July 1, 2009, ceased to be a participating company in any Foreign CareFusion Benefit Plans, and each participant, who is a Former Employee of the Cardinal Health Business located outside of the U.S. or a Foreign Cardinal Health Group Employee (a “ Foreign Cardinal Health Benefit Participant ”), has ceased to be eligible to participate in any Foreign CareFusion Benefit Plans. Except as provided in Section 5.3(b) and Schedule 2.1(a) of this Agreement, each member of the CareFusion Group located outside of the U.S. has, as of July 1, 2009, ceased to be a participating company in any Foreign Cardinal Health Benefit Plans, and each participant, who is a Former Employee of the CareFusion Business located outside of the U.S. or a Foreign CareFusion Group Employee (a “ Foreign CareFusion Benefit Participant ”), has ceased to be eligible to participate in any Foreign Cardinal Health Benefit Plans.

(b) Canadian Capital Accumulation Plans .

(i) As of July 1, 2009, each member of the CareFusion Group located in Canada (1) ceased to be participating companies in any deferred profit sharing plan or registered retirement savings plan maintained by any member of the Cardinal Health Group located in Canada (the “ Cardinal Health Canadian Capital Accumulation Plans ”) and (2) has established a deferred profit sharing plan and a registered retirement savings plan and related trusts that are substantially similar to the Cardinal Health Canadian Capital Accumulation Plans and their related trusts (the “ CareFusion Canadian Capital Accumulation Plans ”) for the benefit of the participants in the Cardinal Health Canadian Capital Accumulation Plans who are Foreign CareFusion Group Employees or Former Employees of the CareFusion Business (the “ CareFusion Canadian Participants ”).

 

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(ii) As of July 1, 2009, each CareFusion Canadian Participant (1) became vested in his or her entire account balance under the applicable Cardinal Health Canadian Capital Accumulation Plans, (2) ceased to accrue any benefits under the applicable Cardinal Health Canadian Capital Accumulation Plan, (3) has been treated as having incurred a separation from service or termination of employment under the applicable Cardinal Health Canadian Capital Accumulation Plan as of July 1, 2009, (4) has been eligible for a distribution under the applicable Cardinal Health Canadian Capital Accumulation Plan of his or her vested account balance, and (5) has been eligible to elect, in his or her sole discretion, to roll over his or her vested account balance under the applicable Cardinal Health Canadian Capital Accumulation Plan into the corresponding CareFusion Canadian Capital Accumulation Plan.

4.3 Reservation of Rights . The Parties hereby acknowledge that nothing in this Article IV shall be construed to require (a) Cardinal Health or any of its Affiliates to continue the Cardinal Health 401(k) Plan, the Cardinal Health Canadian Capital Accumulation Plans or any Foreign Cardinal Health Benefit Plan before or after the Effective Time, and (b) CareFusion or any of its Affiliates to continue the CareFusion 401(k) Plan, the CareFusion Canadian Capital Accumulation Plans or any Foreign CareFusion Benefit Plan after establishment of such plans under the terms prescribed in this Article, as applicable, after the Effective Time. The Parties agree that (i) Cardinal Health reserves the right, in its sole discretion, to amend or terminate the Cardinal Health 401(k) Plan, the Cardinal Health Canadian Capital Accumulation Plans and any Foreign Cardinal Health Benefit Plan at any time following the date of this Agreement in accordance with their terms and applicable Law, and (ii) CareFusion reserves the right, in its sole discretion, to amend or terminate the CareFusion 401(k) Plan, the CareFusion Canadian Capital Accumulation Plans and any Foreign CareFusion Benefit Plan at any time following the date of this Agreement in accordance with their terms and applicable Law.

ARTICLE V

HEALTH AND WELFARE PLANS

5.1 U.S. CareFusion Health and Welfare Plans .

(a) Transition Period . Effective as of July 1, 2009, all CareFusion Group Employees employed by a member of the CareFusion Group located in the U.S. (including U.S. expatriates) (the “ U.S. CareFusion Group Employees ”) have been, and, through the Transition Period Expiration Time, shall continue to be eligible to participate in the Cardinal Health Group Benefit Plan, as in effect from time to time (the “ Cardinal Health Group Benefit Plan ”), subject to the terms of the Transition Services Agreement with respect to the costs of participation and provision of administrative services. As of the Transition Period Expiration Time, each member of the CareFusion Group located in the U.S. shall cease to be a participating company in the Cardinal Health Group Benefit Plan, and each U.S. CareFusion Group Employee shall cease to be eligible to participate in the Cardinal Health Group Benefit Plan.

 

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(b) Establishment of the U.S. CareFusion Welfare Plan . Immediately following the Transition Period Expiration Time, CareFusion shall, or shall cause its applicable Affiliates located in the U.S., to adopt a U.S. CareFusion Welfare Plan for the benefit of the U.S. CareFusion Group Employees and their beneficiaries and dependents.

(c) Waiver of Conditions . CareFusion (acting directly or through its Affiliates) shall cause the U.S. CareFusion Welfare Plan to (i) waive all limitations as to preexisting conditions, exclusions, and service conditions with respect to participation and coverage requirements applicable to any U.S. CareFusion Group Employee, other than limitations that were in effect with respect to the U.S. CareFusion Group Employee under the Cardinal Health Group Benefit Plan as of the Transition Period Expiration Time, and (ii) waive any waiting period limitation or evidence of insurability requirement applicable to a U.S. CareFusion Group Employee other than limitations or requirements that were in effect with respect to such U.S. CareFusion Group Employee under the Cardinal Health Group Benefit Plan as of the Transition Period Expiration Time. Such waivers described in clauses (i) and (ii) of the foregoing sentence, with respect to the U.S. CareFusion Welfare Plan, shall apply to initial enrollment effective immediately following the Transition Period Expiration Time. Following the initial enrollment, pre-existing condition limitations, exclusions, and services conditions under the U.S. CareFusion Welfare Plan shall apply only to the extent allowable under HIPAA.

5.2 Allocation of Certain U.S. Welfare Plan Obligations .

(a) Allocation of Certain U.S. Liabilities . CareFusion shall be responsible with regard to claims by any U.S. CareFusion Group Employees under any short-term disability, supplemental short-term disability, severance, tuition reimbursement and adoption assistance plans incurred under the Cardinal Health Group Benefit Plan on or before the Transition Period Expiration Time. Except as otherwise provided in Sections 5.2(c) and 5.2(d), CareFusion shall be responsible for all claims incurred by the U.S. CareFusion Group Employees under the U.S. CareFusion Welfare Plan.

(b) COBRA and HIPAA Compliance . Cardinal Health shall continue to be responsible for compliance with the health care continuation requirement