Exhibit 10.1
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT (the
“Agreement”) by and between CareFusion Corporation, a
Delaware corporation (the “Company”) and David L.
Schlotterbeck (the “Executive”) is effective as of the
31 day of August 2009 (the “Agreement”).
IT IS HEREBY AGREED AS
FOLLOWS:
1. Effective Date . The
effective date of this Agreement (the “Effective Date”)
shall be the effective date of the spin-off of the Company from
Cardinal Health, Inc.
2. Employment Period . The
Company hereby agrees to employ the Executive, and the Executive
hereby agrees to serve the Company, subject to the terms and
conditions of this Agreement, for the period commencing on the
Effective Date and ending on the date of the Company’s annual
meeting of stockholders next following the third anniversary of the
Effective Date (the “Employment Period”), unless prior
to such date the employment of the Executive is terminated pursuant
to this Agreement. At least one-hundred and eighty (180) days
before the end of the Employment Period, the parties will discuss
either succession planning or the potential for extension of this
Agreement. If the Executive remains employed with the Company after
the end of the Employment Period without an extension of the
Agreement, he will be an employee “at-will.”
3. Terms of Employment .
(a) Position and Duties . (i) During the
Employment Period, the Executive shall serve as Chairman of the
Board of Directors and Chief Executive Officer of the Company with
such authority, duties and responsibilities as are customarily
assigned to such positions. The Executive shall report directly to
the Board of Directors of the Company (the “Board”).
The Executive’s services shall be performed in San Diego,
California.
(ii) During the Employment Period,
and excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote his full
business attention and time to the business and affairs of the
Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period, it
shall not be a violation of this Agreement for the Executive to
(A) serve on the board of directors of, or own shares or hold
options to purchase shares in, Virtual Radiologic, Inc.,
(B) subject to the approval of the Board (which shall not be
unreasonably withheld), serve on other corporate, civic or
charitable boards or committees, (C) deliver lectures, fulfill
speaking engagements or teach at educational institutions,
(D) manage personal investments, so long as such activities do
not materially interfere with the performance of the
Executive’s responsibilities as an employee of the Company in
accordance with this Agreement, and (E) own shares in
companies that are not competitors of the Company.
(b) Compensation (i)
Base Salary . During the Employment Period, the Company
shall pay Executive an annual base salary (“Annual Base
Salary”) at a rate of not less than $1,000,000 payable in
accordance with the Company’s normal payroll policies. The
Executive’s Annual Base Salary shall be reviewed, and may be
increased but not decreased, at least annually by the
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Human Resources and Compensation Committee of
the Board (the “Committee”) pursuant to its normal
performance review policies for senior executives. Any increase in
Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall thereafter
refer to Annual Base Salary as so increased.
(ii) Annual Bonus . With
respect to each fiscal year ending during the Employment Period,
the Executive shall be eligible to receive an annual cash bonus
(“Annual Bonus”) determined and paid at the sole
discretion of the Company pursuant to terms and conditions of the
Company bonus plan for which the Executive is then eligible.
Executive’s Annual Bonus target under this Agreement for any
fiscal year (the fiscal year’s “Target Bonus”)
shall be an amount equal to 120% of Executive’s Annual Base
Salary. The actual Annual Bonus, which could be higher or lower
than the Target Bonus, shall be based on the attainment of
performance objectives as determined no later than 90 days after
the beginning of the fiscal year by the Committee in consultation
with the Executive, and shall be paid, subject to any effective
deferral elections that may be made by the Executive pursuant to
any deferred compensation plans that the Company may maintain,
within two and one-half months following the end of the fiscal year
for which the Annual Bonus is earned. Notwithstanding anything
herein to the contrary, to the extent permitted or required by
governing law, the Committee shall have discretion to require the
Executive to repay to the Company the amount of any Annual Bonus to
the extent the Committee determines that such bonus was not
actually earned by the Executive due to (A) the amount of such
payment was based on the achievement of financial results that were
subsequently the subject of a material accounting restatement that
occurs within three years of such payment (except in the case of a
restatement due to a change in accounting policy or simple error);
(B) the Executive has engaged in fraud, gross negligence or
intentional misconduct; or (C) the Executive has deliberately
misled the market or the Company’s stockholders regarding the
Company’s financial performance.
(iii) Retention Award . The
Executive shall receive a retention award (“Retention
Award”) consisting of restricted stock units
(“RSUs”) and stock options (“Options”) to
be granted in 2009 on the date that annual equity awards are
granted to employees (the “Grant Date”). The Retention
Award will be determined as follows, subject to the following terms
and conditions:
A. RSUs. The number of RSUs
granted will equal two million dollars ($2 million), divided by the
closing price of the Company’s common stock on the Grant
Date.
B. Options. The number of
Options granted will be determined by dividing two million dollars
($2 million) by the option value per share of the Company’s
common stock (as determined by the Committee, and with the
volatility determined by the Company using the average volatility
of similar medical technology companies). The Options will be
granted with an exercise price equal to the closing price of the
Company’s common stock on the Grant Date.
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C. Vesting. The Retention
Awards will vest and become exercisable in the case of Options, and
payable in the case of RSUs, as follows; provided ,
however , that, except as provided below, the Executive must
remain employed through the Employment Period (but not thereafter)
and continue to comply with the restrictive covenants set
forth in Section 7 of this Agreement (the
“Covenants”) as of each applicable vesting
date:
1. One-third of the Retention Award
will vest on the third anniversary of the Effective
Date;
2. One-third of the Retention Award
will vest on the fourth anniversary of the Effective Date;
and
3. One-third of the Retention Award
will vest on the fifth anniversary of the Effective
Date.
In the event that the
Executive’s employment is terminated, prior to the third
anniversary of the Effective Date, by the Company without Cause, or
the Executive terminates employment with the Company for Good
Reason, then the outstanding unvested Retention Awards will become
fully vested on the Executive’s Date of Termination but will
not be exercisable or payable at that time. Rather, the vested
Retention Awards will become exercisable in the case of Options,
and payable in the case of RSUs, in equal installments on the Date
of Termination (as hereinafter defined) and the first and second
anniversaries of the Executive’s Date of Termination, without
regard to compliance with the Covenants.
All outstanding unvested Retention
Awards will become fully vested and exercisable in the case of
Options, and payable in the case of RSUs, upon Executive’s
death or Disability.
All vested and unvested Retention
Awards will be immediately forfeited and terminate if Executive is
terminated by the Company for Cause. All unexercised and unpaid
Retention Awards will be immediately forfeited and terminate if
Executive does not comply with the Covenants during the Restricted
Period that begins upon Executive’s termination of employment
at or after the end of the Employment Period.
D. RSU Settlement. Vested
RSUs are paid in fully tradable shares of the Company’s
common stock within 30 days following the date on which they become
payable in accordance with the foregoing provisions.
E. Option Exercises. Vested
Options granted as part of the Retention Award that are or become
exercisable remain exercisable for the remaining term of the
Option, subject to the provisions of Section 3(b)(iii)C
above.
F. Award Agreements Control.
The terms and conditions of the Retention Award will be
substantially in the form set forth in separate equity award
agreements attached hereto as Exhibit A and
Exhibit B . In the event of any discrepancy between
this Agreement and the provisions of the applicable award
agreements, the provisions of the applicable award
agreements
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other than price, vesting and exercisability
provisions will control; provided however, to the extent the
provisions of the applicable award agreements that relate to price,
vesting or exercisability are more favorable to Executive than
those in this Agreement, such provisions of the applicable award
agreements will control.
(iv) Annual Equity Grants .
The Executive is eligible to receive annual equity-based grants
(“Annual Equity Grants”) during the Employment Period
as determined in the discretion of the Committee. The terms and
conditions of Annual Equity Grants (other than exercisability and
forfeiture, which are described below) will be established by the
Committee at the time of grant and set forth in separate award
agreements; in the event of any discrepancy between this Agreement
and the provisions of the applicable award agreements, the
provisions of the applicable award agreements will
control.
Notwithstanding the foregoing, the
Company will grant to Executive an Annual Equity Grant in 2009, on
the date on which annual employee grants are made, in addition to
the Retention Award, with a total value of seven million dollars
($7 million) on the date of grant. The Committee will determine the
type of awards comprising the Annual Equity Grant in its
discretion. The number of Options will be determined by dividing
that portion of the seven million dollars ($7 million) which the
Committee determines will be granted in Options by the option value
per share of the Company’s common stock (as determined by the
Committee, and with the volatility determined by the Company using
the average volatility of similar medical technology
companies).
All Annual Equity Grants will be
subject to the following terms and conditions:
A. Vesting, Exercisability, and
Forfeiture. Because the Executive is eligible for retirement
under the Company’s 2009 Long-Term Incentive Plan (the
“LTIP”), all Annual Equity Grants will be fully vested
upon grant, but the Options will be subject to restrictions on
exercisability as described in the applicable award agreements, and
RSUs and performance share units (“PSUs”) will be
payable as described in the applicable award agreements.
Notwithstanding the
foregoing,
(i) all outstanding Annual
Equity Grants that are Options will become fully exercisable upon
termination of Executive’s employment by the Company without
Cause, Executive’s termination of employment with the Company
for Good Reason, or Executive’s death or
Disability;
(ii) all outstanding Annual Equity
Grants that are RSUs, other than PSUs, will become payable upon
termination of Executive’s employment by the Company without
Cause, Executive’s termination of employment with the Company
for Good Reason, or Executive’s death or Disability and under
the foregoing circumstances, PSUs will paid based on actual
performance compared to target, at the same time payment of PSUs is
made to other senior executives; and
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(iii) all outstanding Annual Equity
Grants will continue to become exercisable or payable, as
applicable, in accordance with their terms in the event of
voluntary termination by the Executive without Good
Reason.
In addition, all outstanding Annual
Equity Grants will become fully exercisable and payable upon a
“Change of Control” of the Company, as defined in the
LTIP, and with respect to Annual Equity Grants that are RSUs
subject to Section 409A of the Internal Revenue Code and the
Treasury Regulations thereunder (“Section 409A”),
provided that such “Change of Control” is also a
“change in control event” as described in
Section 409A. All unexercised and unpaid Annual Equity Grants
will be immediately forfeited and terminate if Executive is
terminated by the Company for Cause.
B. Options . Annual Equity
Grants that are Options will be granted with an exercise price
equal to the closing price of the Company’s common stock on
the grant date. Annual Equity Grants that are Options will remain
exercisable for the entire term of the Option unless earlier
forfeited and terminated as described above.
(v) Other Employee Benefit
Plans . During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under savings and
retirement plans that are tax-qualified under Section 401(a)
of the Internal Revenue Code of 1986, as amended (the
“Code”), in plans that are supplemental to any such
tax-qualified plans, and welfare benefit plans, practices, policies
and programs provided by the Company, but not any severance plan,
practice, policy or program, on a basis that is no less favorable
than those generally applicable or made available to other senior
executives of the Company. The Executive shall be eligible for
participation in fringe benefits and perquisite plans, practices,
policies and programs (including, without limitation, expense
reimbursement plans, practices, policies and programs) on a basis
that is commensurate with his position and no less favorable than
those generally applicable or made available to most other senior
executives of the Company.
(vi) 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.
(vii) Use of Aircraft .
During the Employment Period, the Executive, and his immediate
family when accompanied by Executive, shall be entitled to personal
use of Company aircraft, subject to availability, up to a value of
$100,000 per fiscal year of the Company determined in accordance
with the SEC’s rules for valuing personal use of corporate
aircraft for purposes of proxy disclosure, at no cost and without
reimbursement to the Company; provided however, that income will be
imputed to Executive for tax purposes pursuant to Company policy as
established by the Board or Committee and consistent with
applicable tax regulations. Any use in excess of the dollar value
limit described above must be approved by the Committee in
advance.
(viii) 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 other senior executives of
the Company.
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(c) Indemnification . Company
shall indemnify and hold harmless Executive in accordance with the
provisions of the CareFusion Officer and Director Indemnification
Agreement attached hereto as Exhibit C .
(d) Rabbi Trust . Executive
may defer compensation pursuant to the CareFusion Corporation
Deferred Compensation Plan, as it may be amended from time to time,
and deferrals shall be held in a rabbi trust, subject to the
Company’s policies with respect to maintaining a rabbi trust
for such purpose.
4. Termination of Employment
. (a) Death or Disability . The Executive’s
employment shall terminate automatically upon the Executive’s
death during the Employment Period. If the Company determines in
good faith that the Disability of the Executive has occurred during
the Employment Period (pursuant to the definition of Disability set
forth below), it may provide the Executive with written notice
after such determination in accordance with Section 11(b) of
this Agreement of its intention to terminate the Executive’s
employment. In such event, the Executive’s employment with
the Company shall terminate effective on the 30th day after receipt
of such notice by the Executive (the “Disability Effective
Date”), provided that, within thirty (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, other than with respect to vesting and payment
of RSUs subject to Section 409A, “Disability”
shall mean the absence of the Executive from the Executive’s
duties with the Company on a full-time basis for not less than 120
consecutive days (or an aggregate period of not less than 180 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. For purposes of vesting and
payment of RSUs, to the extent necessary to comply with
Section 409A, “Disability” shall have the meaning
provided in Section 409A.
(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 (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 willfully and continuously failed
to perform substantially the Executive’s duties with the
Company;
(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;
(iii) conviction of a felony;
or
(iv) a material breach of
Section 7 of this Agreement subject to the cure provisions of
Section 7(a).
For purposes of this
Section 4(b), 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
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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 (3/4) 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 engaged in the conduct described in Section 4(b)
(i), (ii), or (iv) above, and specifying the particulars
thereof in detail.
(c) Good Reason . The
Executive’s employment may be terminated by the Executive for
Good Reason. For purposes of this Agreement, “Good
Reason” shall mean, in the absence of a written consent of
the Executive:
(i) the assignment to the Executive
of any duties materially inconsistent in any respect with the
Executive’s position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a) of this Agreement, or any other
action by the Company which results in a material diminution in
such position, authority, duties or responsibilities, excluding for
this purpose any action not taken in bad faith and which is
remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to
comply with any of the provisions of Sections 3(a) or 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) hereof, provided that
reasonable travel required in connection with Executive’s
reporting relationships and responsibilities to the Board shall not
be deemed a breach hereof;
(iv) any purported termination by
the Company of the Executive’s employment otherwise than as
expressly permitted by this Agreement;
(v) any failure by the Company to
comply with Section 9(c) of this Agreement; or
(vi) any failure of the Board or
shareholders of the Company to elect Executive as a member of the
Board, or the removal of Executive from the Board for reasons other
than those justifying or requiring such removal under the other
provisions of this Agreement.
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(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
(30) days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination
any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the
Company, respectively, hereunder or preclude the Executive or the
Company, respectively, from asserting such fact or circumstance in
enforcing the Executive’s or the Company’s rights
hereunder.
(e) Date of Termination .
“Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for
Cause, or by the Executive with or without Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein within thirty (30) days of such notice, as the case
may be, (ii) if the Executive’s employment is terminated
by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the
Executive’s employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
(f) Resignation . Upon
termination of the Executive’s employment for any reason, the
Executive agrees to resign, as of the Date of Termination, to the
extent applicable, from any positions that the Executive holds with
the Company and its affiliated companies, the Board (and any
committees thereof) and the Board of Directors (and any committees
thereof) of any of the affiliated companies.
5. Obligations of the Company
upon Termination . (a) Good Reason; Other Than for
Cause or Disability . If, during the Employment Period,
(i) the Company shall terminate the Executive’s
employment other than for Cause or Disability, or (ii) the
Executive shall terminate employment for Good Reason:
(i) Subject to the execution by the
Executive and the Company of a release of claims in favor of the
Company, substantially in the form attached hereto as
Exhibit D , the Company shall pay to the
Executive the aggregate of the following amounts:
A. The sum of (1) the
Executive’s accrued but unpaid Annual Base Salary and any
accrued vacation pay through the Date of Termination, (2) the
Executive’s business expenses that have not been reimbursed
by the Company as of the Date of Termination that were incurred by
the Executive prior to the Date of Termination in accordance with
the applicable Company policy, and (3) the Executive’s
Annual Bonus earned for the fiscal year immediately preceding the
fiscal year in which the Date of Termination occurs if such bonus
has not been paid as of the Date of Termination (the sum of
the
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amounts described in clauses
(1) through (3), shall be hereinafter referred to as the
“Accrued Obligations”). The Accrued Obligations shall
be paid in a lump sum on the Date of Termination of
Executive’s employment; provided that notwithstanding
the foregoing, if the Executive has made an irrevocable election
under any deferred compensation arrangement subject to
Section 409A to defer any portion of the Annual Bonus
described above, then for all purposes of this Section 5, such
deferral election, and the terms of the applicable arrangement
shall apply, and such portion shall not be considered as part of
the “Accrued Obligations” but shall instead be an
“Other Benefit” (as defined below).
B. A pro rata Annual Bonus
for the year of termination (“Pro Rata Bonus”), based
upon the actual achievement of the performance objectives as
determined by the Committee for the fiscal year of termination, to
be paid in a lump sum at the same time as the Annual Bonus is paid
to other senior executives of the Company, but in no event later
than two and one-half months following the end of the fiscal year
in which occurs the Date of Termination; provided that
notwithstanding the foregoing, if the Executive has made an
irrevocable election under any deferred compensation arrangement
subject to Section 409A to defer any portion of the Annual
Bonus described above, then for all purposes of this
Section 5, such deferral election, and the terms of the
applicable arrangement shall apply, and such portion shall not be
considered as part of the “Accrued Obligations” but
shall instead be an “Other Benefit” (as defined
below).
(ii) The Company shall pay as
severance to the Executive an amount equal to twice the sum of
(1) the Executive’s Annual Base Salary and (2) the
Target Bonus in respect of the fiscal year of termination or, if
the Target Bonus has not been established for such fiscal year, in
respect of the immediately preceding fiscal year, payable in
twenty-four (24) equal monthly installments commencing on the
later of (A) thirty (30) days following the expiration of
any review and revocation period set forth in the release of claims
required by this Section 5, or (B) the first business day
after the date that is six (6) months following the
Executive’s Separation from Service (as defined in
Section 10).
(iii) The Company shall pay the
premiums for COBRA continuation coverage for the Executive and his
eligible dependents through the earliest of: (a) the
Executive’s coverage under a health insurance plan of another
employer; or (b) eighteen (18) months following the Date
of Termination.
(iv) To the extent not theretofore
paid or provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies through the Date of
Termination (such other amounts and benefits shall be hereinafter
referred to as the “Other Benefits”), in accordance
with the terms of such plan, program, policy or practice or
contract or agreement. As used in this Agreement, the term
“affiliated companies” shall include any company
controlled by, controlling or under common control with the
Company.
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Notwithstanding the foregoing or
anything else to the contrary in this Agreement, payments under
this Section 5(a) shall be subject to the provisions of
Section 10, including but not limited to the provisions of
paragraph (f) thereof.
(b) Death . If the
Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period the Company
shall have no further obligations to the Executive’s legal
representatives under this Agreement, other than for
(i) payment of Accrued Obligations, (ii) the timely
payment or provision of Other Benefits in accordance with their
terms, (iii) payment of the Pro Rata Bonus, and
(iv) vesting, exercisability, and payment of the awards as
described in Sections 3(b)(iii) and 3(b)(iv). Accrued Obligations
shall be paid to the Executive’s estate or beneficiary, as
applicable, in a lump sum in cash within thirty (30) days of
the Date of Termination and the Pro Rata Bonus shall be paid to the
Executive’s estate or beneficiary, as applicable, on the date
specified in Section 5(a)(i)(B). In the event of the
Executive’s death after his termination of employment, but
prior to the receipt of all amounts to which he is entitled under
this Agreement, all remaining amounts to which he is entitled shall
be paid to his estate or beneficiary, as applicable.
(c) Disability . If the
Executive’s employment is terminated by the Company by reason
of the Executive’s Disability during the Employment Period,
the Company shall have no further obligations to the Executive,
other than for (i) payment of Accrued Obligations,
(ii) the timely payment or provision of Other Benefits in
accordance with their terms, (iii) payment of the Pro Rata
Bonus, and (iv) vesting, exercisability, and payment of the
awards as described in Sections 3(b)(iii) and 3(b)(iv). Accrued
Obligations shall be paid to the Executive in a lump sum in cash on
the Date of Termination and the Pro Rata Bonus shall be paid to the
Executive on the date specified in Section 5(a)(i)(B).
Notwithstanding the foregoing or anything else to the contrary in
this Agreement, payments under this Section 5(c) shall be
subject to the provisions of Section 10, including but not
limited to the provisions of paragraph (f) thereof.
(d) Cause; Other than for Good
Reason . If the Executive’s employment shall be
terminated by the Company for Cause or the Executive terminates his
employment without Good Reason during the Employment Period, the
Company shall have no further obligations to the Executive other
than the obligation to pay and provide to the Executive the Accrued
Obligations through the Date of Termination to the extent
theretofore unpaid.
(e) Retirement .
Notwithstanding anything herein to the contrary, in the event the
Executive terminates employment due to his retirement (i.e.,
termination of employment on or after the attainment of age 65),
the Executive shall be entitled to payment of the Pro Rata Bonus in
Section 5(a)(i)(B).
6. Full Settlement . The
Company’s obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment. The
Company agrees to
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pay (within thirty (30) days following the
Company’s receipt of an invoice from the Executive) at any
time from the Effective Date through he Executive’s remaining
lifetime, (or, if longer, through the 20 th anniversary of the Effective Date), to the full
extent permitted by law, all legal fees and expenses which the
Executive may reasonably incur as a result of any contest by either
party (including, as the case may be, the Company, any of its
affiliates or their respective predecessors, successors or assigns,
or the Executive, his estate, beneficiaries or their respective
successors and assigns) of the validity or enforceability of, or
liability under, any provision of this Agreement (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement); plus in each case interest on
any delayed payment at the applicable Federal rate provided for in
Section 7872(f)(2)(A) of the Code, if the Executive prevails
on any material claim made by him, and disputed by the Company
under the terms of this Agreement.
7. Covenants . (a)
Introduction . The parties acknowledge that the provisions
and covenants contained in this Section 7 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 7 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 also
acknowledge that before Executive shall be determined to have
breached any provision or covenant contained in this
Section 7, Executive shall have been given notice of any such
alleged breach and been given forty-five (45) days after
receipt of such notice of such breach to cure or remedy any such
breach that is reasonably susceptible of cure or remedy.
(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 “CareFusion Group”), all secret or
confidential information, knowledge or data relating to the
CareFusion Group and its businesses (including, without limitation,
any proprietary and not publicly available information concerning
any processes, methods, trade secrets, intellectual property,
research secret data, costs, names of users or purchasers of their
respective products or services, business methods, operating or
manufacturing procedures, or programs or methods of promotion and
sale) that the Executive has obtained or obtains during the
Executive’s employment by the CareFusion Group and that is
not public knowledge (other than as a result of the
Executive’s violation of this Section 7(b))
(“Confidential Information”). The Executive shall not
communicate, divulge or disseminate Confidential Information at any
time during or after the Executive’s employment and/or
service as a consultant with the CareFusion Group, except with
prior written consent of a corporate officer of 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 CareFusion
Group, as applicable, and shall be turned over to the applicable
CareFusion Group company upon termination of the Executive’s
employment.
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(c) Non-Recruitment of CareFusion
Group Employees, etc . Executive understands and agrees that
any information regarding Company employees is confidential and
constitutes trade secrets. In recognition of the confidential
nature of information regarding Company employees, Executive agrees
that he shall not, at any time during the Restricted Period (as
defined in this Section 7(c)), without the prior written
consent of the Company, engage in the following conduct (a
“Solicitation”): (i) directly or indirectly,
contact, solicit, or recruit (whether as an employee, officer,
director, agent, consultant, or independent contractor) any person
who was or is at any time during the previous twelve months an
employee, representative, officer or director of the CareFusion
Group for the purpose of offering them employment by any other
entity, business or individual; or (ii) take any action to
encourage or induce any employee, representative, officer or
director of the CareFusion Group to cease their relationship with
the CareFusion Group for any reason. A “Solicitation”
does not include any recruitment of employees within or for the
CareFusion Group. The “Restricted Period” means the
period of the Executive’s employment with the CareFusion
Group and the additional period ending on (i) in the event of
a termination of employment prior to the end of the Employment
Period, the second anniversary of the Date of Termination, or
(ii) in the event of a termination of employment on or after
the end of the Employment Period, the second anniversary of the end
of the Employment Period.
(d) Non-Solicitation of
Business . Executive acknowledges and agrees that
Company’s customers and any information regarding
Company’s customers is confidential and constitutes trade
secrets. In recognition of the confidential and trade secret nature
of information regarding Company’s customers, Executive
agrees that 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 on behalf of any competitor of the CareFusion Group the
business of (i) any customer of the CareFusion Group at the
time of the Executive’s employment or Date of Termination, or
(ii) any potential customer of the CareFusion Group which the
Executive knew to be an identified, prospective purchaser of
services or products of the CareFusion Group.
(e) Employment by Competitor
. During the Restricted Period, the Executive shall not invest in
(other than in a publicly traded company with a maximum investment
of no more than 1% of outstanding shares), counsel, advise, or be
otherwise engaged or employed by, any entity or enterprise that
competes with the CareFusion Group, by developing, manufacturing or
selling any product or service of a type, respectively, developed,
manufactured or sold by the CareFusion Group.
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(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 CareFusion
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
CareFusion Group. The Executive further agrees not to make any
negative statement to third parties relating to the
Executive’s employment or any aspect of the businesses of
CareFusion Group and not to make any statements to third parties
about the circumstances of the termination of the Executive’s
employment, or about the CareFusion Group or its trustees,
directors, officer, security holders, partners, agents or former or
current employees and directors, except as may be required by a
court or government body.
(ii) The Executive further agrees
that, following termination of employment for any reason, the
Executive shall assist and cooperate with the Company with regard
to any matter or project in which the Executive was involved during
the Executive’s employment with the Company, including but
not limited to any litigation that may be pending or arise after
such termination of employment. Further, the Executive agrees to
notify the Company at the earliest reasonable opportunity of any
contact that is made by any third parties concerning any such
matter or project. The Company shall not unreasonably request such
cooperation of Executive and shall cooperate with the Executive in
scheduling any assistance by the Executive taking into account the
Executive’s business and personal affairs and shall
compensate the Executive for any lost wages or expenses associated
with such cooperation and assistance.
(g) Inventions . All plans,
discoveries and improvements, whether patentable or unpatentable,
made or devised by the Executive, whether alone or jointly with
others, from the date of the Executive’s initial employment
by the Company and continuing until the end of any period during
which the Executive is employed by the CareFusion Group, relating
or pertaining in any way to the Executive’s employment with
or the business of the CareFusion 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, during and after the Employment Period,
to cooperate to the extent and in the manner required by the
Company, in the prosecution or defense of any patent or copyright
claims or any litigation, or other proceeding involving any trade
secrets, processes, discoveries or improvements covered by this
Agreement, but all necessary expenses thereof shall be paid by the
Company.
(h) Acknowledgement and
Enforcement . The Executive acknowledges and agrees that:
(A) the purpose of the foregoing covenants is to protect the
goodwill, trade secrets and other Confidential Information of the
Company; (B) because of the nature of
13
the business in which the CareFusion 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 CareFusion Group
in the event the Executive breached any of the covenants of this
Section 7; and (C) remedies at law (such as monetary
damages) for any breach of the Executive’s obligations under
this Section 7 would be inadequate. The Executive therefore
agrees and consents that (X) if the Executive commits any
breach of a covenant under this Section 7 during the
Restricted Period upon termination of employment at or after the
end of the Employment Period, all unexercised and unpaid Retention
Awards will be immediately forfeited and terminate, and (Y) if
the Executive commits any breach of a covenant under this
Section 7 or threatens to commit any such breach at any time,
the Company shall have the right (in addition to, and not in lieu
of, any other right or 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.
(i) Similar Covenants in Other
Agreements Unaffected . The Executive may be or become subject
to covenants contained in other agreements (including but limited
to stock option and restricted stock unit agreements) which are
similar to those contained in this Section 7. Further, a
breach of the covenants contained in this Section 7 may have
implications under the terms of such other agreements, including
but not limited to a forfeiture of equity awards and long-term cash
compensation. The Executive acknowledges the foregoing and
understands that the covenants contained in this Section 7 are
in addition to, and not in substitution of, the similar covenants
contained in any such other agreements. The Company agrees that any
forfeiture or repayment obligation under any such agreement shall
only be imposed after a determination by the Board of Directors
(after providing the Executive with reasonable notice and an
opportunity to be heard with counsel) that the Executive has
violated any such covenant or has willfully engaged in any other
material misconduct which may be a basis for forfeiture or a
repayment obligation thereunder.
8. Certain Additional Payments by
the Company . (a) Notwithstanding anything in this
Agreement to the contrary, in the event it shall be determined that
any payment or distribution by the Company or any of its affiliates
to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 8) (a
“Payment”) would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to su
