RESTATED CODE OF REGULATIONS
OF
CARDINAL HEALTH, INC.
AMENDED NOVEMBER 5, 2021
TABLE OF CONTENTS
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Page
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ARTICLE 1
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Meetings of Shareholders
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1
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§1.1
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Annual Meeting
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1
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§1.2
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Special Meetings
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1
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§1.3
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Place of Meetings
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1
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§1.4
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Notice of Meetings
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1
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§1.5
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Notice of Shareholder Business and Nominations
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2
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§1.6
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Proxy Access for Director Nominations
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8
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§1.7
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Waiver of Notice
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16
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§1.8
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Quorum
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16
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§1.9
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Conduct of Meetings
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16
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§1.10
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Voting Standards
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17
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§1.11
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Record Date
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17
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ARTICLE 2
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Board of Directors
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17
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§2.1
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General Powers of Board
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17
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§2.2
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Number of Directors
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18
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§2.3
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Compensation and Expenses
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18
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§2.4
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Election of Directors
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18
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§2.5
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Term of Office
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18
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§2.6
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Removal of Directors
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18
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§2.7
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Vacancies
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18
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§2.8
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Organization of Meetings
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18
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§2.9
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Calling of Meetings
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18
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§2.10
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Notices of Meetings
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18
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§2.11
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Notice of Adjournment of Meeting
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19
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§2.12
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Quorum and Manner of Acting
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19
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§2.13
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Order of Business
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19
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§2.14
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Action in Writing in Lieu of Meeting
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19
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§2.15
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Committees
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19
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§2.16
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Emergency Regulations
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20
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ARTICLE 3
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Officers
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20
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§3.1
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Number and Titles
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20
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§3.2
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Election, Terms of Office, Vacancies
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20
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ARTICLE 4
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Shares and Their Transfer
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21
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§4.1
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Certificates for Shares
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21
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§4.2
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Transfer of Shares
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21
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§4.3
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Regulations
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21
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§4.4
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Lost, Destroyed or Stolen Certificates
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21
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ARTICLE 5
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Indemnification and Insurance
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22
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§5.1
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Costs Incurred
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22
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§5.2
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Advance Payment of Costs
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22
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§5.3
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Requested Service
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22
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§5.4
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Non-Exclusive
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22
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§5.5
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Insurance
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22
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§5.6
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Survival
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23
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§5.7
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Successors
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23
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§5.8
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Elimination or Impairment of Indemnification Rights
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23
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ARTICLE 6
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Fiscal Year
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23
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ARTICLE 7
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Control Share Acquisitions
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23
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ARTICLE 8
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Forum for Adjudication of Disputes
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23
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ARTICLE 9
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Amendment of Regulations
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24
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ARTICLE 1
Meetings of Shareholders
§1.1 Annual Meeting. The annual meeting of shareholders (the "Annual Meeting"), for the purpose of electing directors and transacting such other business as may come before the meeting, shall be held on such date and at such time during the first six months of each fiscal year of Cardinal Health, Inc. (the "Company") as may be fixed by the board of directors and stated in the notice of the meeting.
§1.2 Special Meetings.
(a) A special meeting of shareholders may be called by the chairman of the board, the chief executive officer or the president, or a majority of the directors acting with or without a meeting.
(b) A special meeting of shareholders shall be called by the Company upon the request of the holders of shares entitling them to exercise 10 percent of the voting power of the Company entitled to be voted at the meeting. Upon delivery to the chairman, president or secretary of a proper request in writing for a shareholders’ meeting, which request must specify the purposes of the meeting and include the information that would be required to be set forth in a shareholder’s notice with respect to an Annual Meeting pursuant to Section 1.5(c) of these regulations, the Company shall give notice to the shareholders. Any such meeting shall be held on a date and at a time and location fixed by the board of directors, the chairman, the president or the secretary, which date shall not be less than 14 days nor more than 80 days after receipt of a proper request. If this notice is not given within 20 days after receipt of a proper request by shareholders entitled to call a meeting, the persons making the request may fix the time of the meeting by giving notice in the manner provided in Section 1.4 of these regulations or cause such notice to be given by their designated representative.
§1.3 Place of Meetings. All meetings of shareholders shall be held at such place or places, within or without the State of Ohio, as may be fixed by the board of directors or such officers as provided for in Section 1.2(b) of these regulations.
§1.4 Notice of Meetings. A notice of each annual or special meeting of shareholders shall be given to shareholders in accordance with and to the extent required by applicable law by the chairman, chief executive officer, president or secretary not less than seven nor more than 60 days before the date of the meeting. A record date may be fixed for determining the shareholders entitled to notice of any meeting of shareholders, in accordance with the provisions of Section 1.11 of these regulations. Only the business provided for in such notice shall be considered at the meeting. Notice of the adjournment of a meeting need not be given if the time and place to which the meeting is adjourned are fixed and announced at the meeting.
§1.5 Notice of Shareholder Nominations and Business.
(a) Annual Meeting of Shareholders.
(i) Nominations of persons for election to the board of directors of the Company may be made at an Annual Meeting (A) by or at the direction of the board of directors of the Company, (B) by any shareholder of the Company who (1) is a shareholder of record at the time of giving of notice provided for in this Section 1.5 and at the time of the Annual Meeting, (2) is entitled to vote at the meeting, and (3) complies with the notice procedures set forth in this Section 1.5 as to such nomination, or (C) by any Eligible Shareholder (as defined in Section 1.6(b)(ii) below) whose Shareholder Nominee (as defined in Section 1.6(a) below) is included in the Company’s proxy statement and form of proxy for that Annual Meeting pursuant to Section 1.6. In order to assure that shareholders and the Company have a reasonable opportunity to consider director nominations proposed to be brought before an Annual Meeting and to allow for full information to be distributed to shareholders, compliance with clauses (B) and (C) of this Section 1.5(a)(i) shall be the exclusive means for a shareholder to make director nominations at an Annual Meeting.
(ii) Proposals of other business to be considered by the shareholders may be made at an Annual Meeting (A) by or at the direction of the board of directors of the Company or (B) by any shareholder of the Company who (1) is a shareholder of record at the time of giving of notice provided for in this Section 1.5 and at the time of the Annual Meeting, (2) is entitled to vote at the meeting, and (3) complies with the notice procedures set forth in this Section 1.5 as to such business. In order to assure that shareholders and the Company have a reasonable opportunity to consider other business proposed to be brought before an Annual Meeting and to allow for full information to be distributed to shareholders, compliance with clause (B) of this Section 1.5(a)(ii) shall be the exclusive means for a shareholder to submit other business at an Annual Meeting (other than matters properly brought under Rule 14a-8 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)).
(iii) For any nominations or any other business to be properly brought at an Annual Meeting by a shareholder pursuant to Section 1.5(a)(i)(B) or Section 1.5(a)(ii)(B) of these regulations, the shareholder must have given timely notice thereof in proper written form to the secretary and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder’s notice must be delivered to the secretary at the principal executive offices of the Company not later than the Close of Business (as defined below) on the 90th day nor earlier than the Close of Business on the 120th day prior to the first anniversary of the preceding year’s Annual Meeting; provided, however, that in the event that the date of the Annual Meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered (A) not earlier than the Close of Business on the 120th day prior to such Annual Meeting and (B) not later than the Close of Business on the later of the 90th day prior to such Annual Meeting or the 10th day following the day on which a Public Announcement (as defined below) of the date of such meeting is first made by the Company. In no event shall an adjournment or recess of an Annual Meeting, or a postponement of an Annual Meeting for which notice of the meeting has been given, commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above.
(b) Special Meetings of Shareholders.
(i) As provided under Section 1.4 of these regulations, only business set forth in the notice of meeting may be conducted at a special meeting of shareholders and no shareholder may bring any nominations of persons for election to the board of directors or any other business before a special meeting of shareholders other than the nominations and business specified by the shareholders requesting the special meeting of shareholders in the meeting request required by Section 1.2(b) of these regulations. If the notice of special meeting of shareholders indicates that persons may be elected to the board of directors of the Company, then nominations of persons for election to the board of directors may be made (A) by or at the direction of the board of directors of the Company or (B) by any shareholder of the Company who (1) is a shareholder of record at the time of giving of notice provided for in this Section 1.5 and at the time of the special meeting of shareholders, (2) is entitled to vote at the meeting, and (2) complies with the notice procedures set forth in this Section 1.5 as to such nomination.
(ii) For any nominations to be properly brought before a special meeting of shareholders by a shareholder pursuant to Section 1.5(b)(i)(B) of these regulations, the shareholder must have given timely notice thereof in proper written form to the secretary. To be timely, a shareholder’s notice must be delivered to the secretary at the principal executive offices of the Company (A) not earlier than the Close of Business on the 120th day prior to such special meeting of shareholders and (B) not later than the Close of Business on the later of the 90th day prior to such special meeting of shareholders or the 10th day following the day on which a Public Announcement of the date of such meeting and of the nominees proposed by the board of directors of the Company to be elected at such meeting is first made by the Company. In no event shall an adjournment or recess of a special meeting of shareholders, or a postponement of a special meeting of shareholders for which notice of the meeting has been given, commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above.
(c) Shareholder’s Notice. To be in proper written form, a shareholder’s notice given to the secretary pursuant to Section 1.5(a)(i)(B), Section 1.5(a)(ii)(B) or Section 1.5(b)(i)(B) of these regulations must:
(i) set forth, as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
(A) the name and address of such shareholder, as they appear on the Company’s books, and the name and address of such beneficial owner;
(B) the class and number of shares of the Company that are held of record by such shareholder as of the date of the notice, and a representation that the shareholder will notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company held of record by such shareholder on such record date;
(C) the class and number of shares of the Company that are held of record or are beneficially owned (within the meaning of Section 13(d) of the Exchange Act) by such beneficial owner as of the date of the notice, and a representation that the shareholder will notify the Company in writing within five business days after the record date for such meeting of the class and number of shares of the Company that are held of record or are beneficially owned by such beneficial owner on such record date;
(D) any other information relating to such shareholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for, as applicable, the proposal or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and
(E) such shareholder’s and beneficial owner’s written consent to the public disclosure of information provided to the Company pursuant to this Section 1.5;
(ii) set forth, as to the shareholder giving the notice or, if given on behalf of a beneficial owner, as to the beneficial owner on whose behalf the nomination or proposal is made:
(A) any agreements, arrangements or understandings entered into by the shareholder or beneficial owner, as appropriate, and its affiliates with respect to equity securities of the Company, including any put or call arrangements, derivative securities, short positions, borrowed shares or swap or similar arrangements, specifying in each case the effect of such agreements, arrangements or understandings on any voting or economic rights of equity securities of the Company, in each case as of the date of the notice and in each case describing any changes in voting or economic rights which may arise pursuant to the terms of such agreements, arrangements or understandings;
(B) to the extent not covered in clause (A) above, any disclosures that would be required pursuant to Item 5 or Item 6 of Schedule 13D under the Exchange Act (regardless of whether the requirement to file a Schedule 13D is applicable to the shareholder or beneficial owner); and
(C) a representation that the shareholder will notify the Company in writing within five business days after the record date for such meeting of the information set forth in clauses (A) and (B) above as of such record date;
(iii) if the notice relates to any business other than a nomination of a director or directors that the shareholder proposes to bring before the meeting, set forth, as to each proposal:
(A) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, in such business;
(B) the text of any proposal or resolution proposed for consideration, including the language of any proposed amendment to the articles or these regulations; and
(C) a description of all agreements, arrangements and understandings between such shareholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such shareholder;
(iv) if the notice relates to nomination of a person for election or reelection to the board of directors of the Company, set forth, as to each nominee in an attachment signed by the nominee:
(A) all information relating to such person that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);
(B) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 of Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate therewith or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant;
(C) a written representation by each proposed nominee that the person is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the person, if elected as a director of the Company, will act or vote on any issue or question that has not been disclosed to the Company (a “Voting Commitment”) or (2) any Voting Commitment that could limit or interfere with such nominee’s ability to comply, if elected as a director of the Company, with such nominee’s fiduciary duties under applicable law;
(D) a written representation by each proposed nominee that the person is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Company with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed to the Company; and
(E) a written representation by each proposed nominee that the person, if elected as a director of the Company, will comply with all of the Company’s corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines, and any other Company policies and guidelines applicable to directors;
(v) set forth a representation that such shareholder intends to appear in person or by proxy (such proxy to be delivered to the Company no later than the Close of Business on the third business day prior to the making of a nomination or proposal) at the meeting to bring such nomination or other business before the meeting;
(vi) set forth such other information as may reasonably be required by the board of directors of the Company as described in the Company’s proxy statement for the preceding year’s Annual Meeting; and
(vii) be followed, within five business days after the record date for such meeting, by the written notice providing the information described in clauses (i)(B) and (i)(C) and clause (ii)(C) above.
For purposes of this Section 1.5(c), if a shareholder or beneficial owner is an entity, information required of such entity by clauses (i), (ii) and (iii)(C) must also be provided as to each director, executive officer, partner, managing director or similar control person (regardless of title or position) of the entity and of each entity that controls or has the ability to control such entity.
If the shareholder providing the notice intends to nominate a person for election or reelection to the board of directors of the Company, the Company may require any proposed nominee to furnish, and such
nominee must promptly (but in no event within five business days after such request) furnish, completed and signed questionnaires that the Company requires of its own director nominees and such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as an independent director of the Company or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee.
(d) General.
(i) Except as otherwise provided by law, the articles or these regulations, the board of directors of the Company (or a designated committee thereof or the chairman of the meeting appointed pursuant to Section 1.9 of these regulations) shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.5 or Section 1.6 of these regulations and, if any proposed nomination or business is not in compliance with this Section 1.5 or Section 1.6, as the case may be, to declare that such defective proposal or nomination shall be disregarded.
(ii) For purposes of this Section 1.5 and Section 1.6 of these regulations, the “Close of Business” shall mean 5:00 p.m. local time at the principal office of the Company on any calendar day, whether or not the day is a business day, and a “Public Announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Company with the Securities and Exchange Commission (the “SEC”) pursuant to Sections 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.
(iii) Notwithstanding the foregoing provisions of this Section 1.5, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.5; provided, however, that any references in this Section 1.5 to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to Section 1.5(a)(i)(B), Section 1.5(a)(ii)(B) or Section 1.5(b)(i)(B) of these regulations.
(iv) Nothing in this Section 1.5 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Company’s proxy statement pursuant to Rule 14a-8 under the Exchange Act by satisfying the notice and other requirements of Rule 14a-8 in lieu of satisfying the requirements of this Section 1.5.
§1.6 Proxy Access for Director Nominations.
(a) Eligibility. Subject to the terms and conditions of these regulations, in connection with an Annual Meeting at which directors are to be elected, the Company shall include in its proxy statement and on its form of proxy the names of, and shall include in the proxy statement the Additional Information (as defined below) relating to, a number of nominees, as specified pursuant to Section 1.6(b)(i), for election to the board of directors submitted pursuant to this Section 1.6 (each nominee, a “Shareholder Nominee”) if:
(i) the Shareholder Nominee satisfies the eligibility requirements in this Section 1.6;
(ii) the Shareholder Nominee is identified in a timely notice (the “Shareholder Notice”) that satisfies this Section 1.6 and is delivered by a shareholder that qualifies as, or is acting on behalf of, an Eligible Shareholder (as defined below);
(iii) the Eligible Shareholder expressly elects at the time of the delivery of the Shareholder Notice to have the Shareholder Nominee included in the Company’s proxy materials; and
(iv) the additional requirements of these regulations are met.
(b) Definitions.
(i) The maximum number of Shareholder Nominees appearing in the Company’s proxy materials with respect to an Annual Meeting (the “Authorized Number”) may not exceed the greater of (A) two or (B) 20 percent of the number of directors in office as of the last day on which a Shareholder Notice may be delivered pursuant to this Section 1.6 with respect to the Annual Meeting, or if the amount is not a whole number, the closest whole number (rounding down) below 20 percent, except that the Authorized Number will be reduced (Y) by the number of Shareholder Nominees submitted for inclusion in the Company’s proxy materials pursuant to this Section 1.6 but whom the board of directors decides to nominate as a board nominee and (Z) by the number of nominees elected to the board of directors as a Shareholder Nominee at any of the preceding two Annual Meetings and who is nominated for election at the Annual Meeting by the board of directors as a board nominee. The Authorized Number will also be reduced, but not below one, by the number of directors in office or director nominees that in either case will be included in the Company’s proxy materials with respect to the Annual Meeting as an unopposed (by the Company) nominee pursuant to an agreement, arrangement or other understanding between the Company and a shareholder or group of shareholders (other than any agreement, arrangement or understanding entered into in connection with an acquisition of capital stock from the Company), other than any director who at the time of the Annual Meeting will have served as a director continuously, as a nominee of the board of directors, for at least two annual terms. In the event that one or more director vacancies occurs for any reason after the date of the Shareholder Notice but before the Annual Meeting and the board of directors resolves to reduce the size of the board of directors, the Authorized Number will be calculated based on the number of directors in office as so reduced.
(ii) To qualify as an “Eligible Shareholder,” a shareholder or a group as described in this Section 1.6 must:
(A) Own and have Owned (as defined below), continuously for at least three years as of the date of the Shareholder Notice, a number of shares (as adjusted to account for any stock dividend, stock split, subdivision, combination, reclassification or recapitalization of shares) that represents at least three percent of the outstanding shares of the Company that are entitled to vote in the election of directors as of the date of the Shareholder Notice (the “Required Shares”); and
(B) thereafter continue to Own the Required Shares through the Annual Meeting.
For purposes of satisfying the percentage ownership requirements of this Section 1.6(b)(ii), the shares that one or more shareholders or beneficial owners individually Owned continuously for at least three years as of the date of the Shareholder Notice may be aggregated if the number of shareholders and beneficial owners does not exceed 20 and all requirements and obligations for an Eligible Shareholder set forth in this Section 1.6 are satisfied by each such shareholder or beneficial owner (except with respect to aggregation). No shares may be attributed to more than one Eligible Shareholder and no shareholder or beneficial owner (including any of its affiliates) may qualify as or constitute more than one Eligible Shareholder (either on its own or as a member of a group) under this Section 1.6. A group of any two or more collective investment funds that are (X) under common
management and investment control, (Y) under common management and funded primarily by a single employer or (Z) publicly offered and part of the same Family of Funds (as defined below), will be treated as one shareholder or beneficial owner for purposes of the limitation on aggregation set forth in this Section 1.6. For purposes of this Section 1.6, the terms “affiliate” or “affiliates” have the meanings ascribed to them under the rules and regulations promulgated under the Exchange Act and the term “Family of Funds” means two or more investment companies or funds (whether organized in the U.S. or outside the U.S.) that hold themselves out to investors as related companies for purposes of investment and investor services.
(iii) For purposes of this Section 1.6:
(A) A shareholder or beneficial owner is deemed to “Own” only those outstanding shares of the Company as to which the person possesses both (1) full voting and investment rights pertaining to the shares and (2) full economic interest in (including the opportunity for profit and risk of loss on) the shares, except that the number of shares calculated in accordance with clauses (1) and (2) does not include any shares (I) sold by the person in any transaction that has not been settled or closed, (II) borrowed by the person for any purposes or purchased by the person pursuant to an agreement to resell or (III) subject to any option, warrant, forward contract, swap, contract of sale, derivative or other instrument, agreement or understanding entered into by the person, regardless of whether the instrument, agreement or understanding is to be settled with shares or with cash based on the notional amount or value of outstanding shares of the Company or otherwise, if the instrument, agreement or understanding has, or is intended to have, or if exercised would have, the purpose or effect of (y) reducing in any manner, to any extent or at any time in the future, the person’s full right to vote or direct the voting of the shares or (z) hedging, offsetting or altering to any degree any gain or loss arising from the full economic ownership of the shares by the person, other than any such arrangements solely involving an exchange-listed multi-industry market index fund in which shares of the Company represent at the time of entry into such arrangement less than 10 percent of the proportionate value of such index. The terms “Owned,” “Owning” and other variations of the word “Own,” when used with respect to a shareholder or beneficial owner, have correlative meanings and the term “person” includes its affiliates.
(B) A shareholder or beneficial owner “Owns” shares held in the name of a nominee or other intermediary so long as the person retains the right to instruct how the shares are voted with respect to the election of directors and the right to direct the disposition thereof and possesses the full economic interest in the shares. The person’s Ownership of shares is deemed to continue during any period in which the person has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement that is revocable at any time by the shareholder.
(C) A shareholder or beneficial owner’s Ownership of shares continues during any period in which the person has loaned the shares if the person has the power to recall the loaned shares on five business days’ notice.
(iv) For purposes of this Section 1.6, the “Additional Information” referred to in Section 1.6(a) that the Company will include in its proxy statement is:
(A) the information set forth in the Schedule 14N provided with the Shareholder Notice concerning each Shareholder Nominee and the Eligible Shareholder that is required
to be disclosed in the Company’s proxy statement by the applicable requirements of the Exchange Act and the rules and regulations thereunder; and
(B) if the Eligible Shareholder so elects, a written statement of the Eligible Shareholder (or, in the case of a group, a written statement of the group), not to exceed 500 words, in support of its Shareholder Nominee(s), which must be provided at the same time as the Shareholder Notice for inclusion in the Company’s proxy statement for the Annual Meeting.
Notwithstanding anything to the contrary contained in this Section 1.6, the Company may omit from its proxy materials any information or statement that it, in good faith, believes is untrue in any material respect (or omits a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law, rule, regulation or listing standard. Nothing in this Section 1.6 limits the Company’s ability to solicit against and include in its proxy materials its own statements relating to any Eligible Shareholder or Shareholder Nominee.
(c) Shareholder Notice and Other Information Requirements.
(i) The Shareholder Notice must set forth all information, representations and agreements required under Section 1.5(c)(i), (ii) and (iv) of these regulations (and for these purposes, references in Section 1.5(c) to the “beneficial owner” on whose behalf the nomination is made refers to the “Eligible Shareholder” and, in the case of a group, the information, representations and agreements must be provided for each shareholder or beneficial owner whose shares are aggregated for purposes of constituting an Eligible Shareholder). In addition, the Shareholder Notice must include:
(A) a copy of the Schedule 14N that has been or concurrently is filed with the SEC under the Exchange Act;
(B) a statement of the Eligible Shareholder (and in the case of a group, the written agreement of each shareholder or beneficial owner whose shares are aggregated for purposes of constituting an Eligible Shareholder), which statement(s) must also be included in the Schedule 14N filed with the SEC: (1) setting forth and certifying to the number of shares of the Company the Eligible Shareholder Owns and has Owned (as defined in Section 1.6(b)(iii) above) continuously for at least three years as of the date of the Shareholder Notice, (2) agreeing to continue to Own the shares through the Annual Meeting and (3) setting forth whether or not it intends to maintain Ownership of the Required Shares for at least one year following the Annual Meeting;
(C) the written agreement of the Eligible Shareholder (and in the case of a group, the written agreement of each shareholder or beneficial owner whose shares are aggregated for purposes of constituting an Eligible Shareholder) addressed to the Company, setting forth the following additional agreements, representations and warranties:
(1) it will provide (I) within five business days after the record date for the Annual Meeting, both the information required under Section 1.5(c)(i)(B) and Section 1.5(c)(i)(C) and notification in writing verifying the Eligible Shareholder’s continuous Ownership of the Required Shares, in each case, as of the record date and (II) immediate notice to the Company if the Eligible Shareholder ceases to Own any of the Required Shares prior to the Annual Meeting;
(2) it (I) acquired the Required Shares in the ordinary course of business and not with the intent to change or influence control at the Company, and does not presently have this intent, (II) has not nominated and will not nominate for election to the board of directors at the Annual Meeting any person other than the Shareholder Nominee(s) being nominated pursuant to this Section 1.6, (III) has not engaged and will not engage in, and has not been and will not be a participant (as defined in Item 4 of Schedule 14A under the Exchange Act) in, a solicitation within the meaning of Rule 14a-1(l) under the Exchange Act, in support of the election of any individual as a director at the Annual Meeting other than its Shareholder Nominee or a nominee of the board of directors, (IV) will not distribute to any shareholder any form of proxy for the Annual Meeting other than the form distributed by the Company, (V) will provide facts, statements and other information in all communications with the Company and its shareholders that are and will be true and correct in all material respects and do not and will not fail to state a material fact necessary in order to make the statements made not misleading and (VI) will otherwise comply with all applicable laws, rule and regulations in connection with any actions take pursuant to this Section 1.6; and
(3) it will (I) assume all liability stemming from any legal or regulatory violation arising out of the Eligible Shareholder’s communications with the shareholders of the Company or out of the information that the Eligible Shareholder provided to the Company, (II) indemnify and hold harmless the Company and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the Company or any of its directors, officers or employees arising out of the Eligible Shareholder’s communications with the shareholders of the Company or out of the information that the Eligible Shareholder provided to the Company, (III) comply with all laws, rules, regulations and listing standards applicable to any solicitation in connection with the Annual Meeting, (IV) file with the SEC any solicitation or other communication by or on behalf of the Eligible Shareholder relating to the Company’s Annual Meeting, one or more of the Company’s directors or director nominees or any Shareholder Nominee, regardless of whether the filing is required under Regulation 14A under the Exchange Act or whether any exemption from filing is available for the materials under Regulation 14A under the Exchange Act and (V) provide to the Company any additional information that it may reasonably request within five business days after the request; and
(D) in the case of a nomination by a group, the designation by all group members of one group member that is authorized to act on behalf of all members of the group with respect to the nomination and matters related thereto, including withdrawal of the nomination.
(ii) To be timely under this Section 1.6, the Shareholder Notice must be delivered by a shareholder to the secretary at the principal executive offices of the Company not later than the Close of Business (as defined in Section 1.5(d)(ii) above) on the 120th day nor earlier than the Close of Business on the 150th day prior to the first anniversary of the date (as stated in the Company’s proxy materials) that the definitive proxy statement was first sent to shareholders in connection with the preceding year’s Annual Meeting, except that in the event that the date of the Annual Meeting is
more than 30 days before or more than 60 days after the anniversary date, or if no Annual Meeting was held in the preceding year, to be timely, the Shareholder Notice must be delivered (A) not earlier than the Close of Business on the 150th day prior to the Annual Meeting and (B) not later than the Close of Business on the later of the 120th day prior to the Annual Meeting or the 10th day following the day on which a Public Announcement (as defined in Section 1.5(d)(ii) above) of the date of the meeting is first made by the Company. In no event will an adjournment or recess of an Annual Meeting, or a postponement of an Annual Meeting for which notice of the meeting has been given, commence a new time period (or extend any time period) for the giving of the Shareholder Notice as described above.
(iii) An Eligible Shareholder must:
(A) within five business days after the date of the Shareholder Notice, provide to the Company one or more written statements from the record holder(s) of the Required Shares and from each intermediary through which the Required Shares are or have been held, in each case during the requisite three-year holding period, specifying the number of shares that the Eligible Shareholder Owns, and has Owned continuously in compliance with this Section 1.6; and
(B) in the case of any group, within five business days after the date of the Shareholder Notice, provide to the Company documentation reasonably satisfactory to the Company demonstrating that the number of shareholders or beneficial owners within the group does not exceed 20, including whether a group of funds qualifies as one shareholder or beneficial owner within the meaning of Section 1.6(b)(ii).
The information provided pursuant to this Section 1.6(c)(iii) is deemed part of the Shareholder Notice for purposes of this Section 1.6.
(iv) Within the time period for delivery of the Shareholder Notice, a written representation and agreement of each Shareholder Nominee must be delivered to the secretary at the principal executive offices of the Company, which must be signed by each Shareholder Nominee and must set forth all information, representations and agreements required under Section 1.5(c)(iv) above with respect to director nominees and also represent and agree that the Shareholder Nominee consents to being named in the Company’s proxy statement and form of proxy as a nominee and to serve as a director if elected. In addition, at the request of the Company, the Shareholder Nominee must promptly, but in any event within five business days after the request, submit all completed and signed questionnaires required of the Company’s directors and provide to the Company other information as it may reasonably request. The Company may request additional information as necessary to permit the board of directors to determine if each Shareholder Nominee satisfies the requirements of this Section 1.6.
(v) In the event that any information or communications provided by the Eligible Shareholder or any Shareholder Nominee to the Company or its shareholders is not, when provided, or at any point thereafter ceases to be, true, correct and complete in all material respects, the Eligible Shareholder or Shareholder Nominee, as the case may be, must promptly notify the secretary and provide the information that is required to make the information or communication true, correct, complete and not misleading; it being understood that providing the notification does not cure any defect or limit the Company’s right to omit a Shareholder Nominee from its proxy materials as provided in this Section 1.6.
(d) Proxy Access Procedures.
(i) Notwithstanding anything to the contrary contained in this Section 1.6, the Company may omit from its proxy materials any Shareholder Nominee, and the nomination will be disregarded and no vote on the Shareholder Nominee will occur, notwithstanding that proxies in respect of a vote may have been received by the Company, if:
(A) the Eligible Shareholder or Shareholder Nominee breaches any of its agreements, representations, or warranties set forth in the Shareholder Notice (or otherwise submitted pursuant to this Section 1.6), any of the information in the Shareholder Notice (or otherwise submitted pursuant to this Section 1.6) was not, when provided, true, correct and complete, or the Eligible Shareholder or applicable Shareholder Nominee otherwise fails to comply with its obligation pursuant to these regulations, including, but not limited to, its obligations under this Section 1.6;
(B) the Shareholder Nominee (1) is not independent under any applicable listing standards, any applicable rules of the SEC, and any publicly disclosed standards used by the board of directors in determining the independence of the Company’s directors, (2) is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended, (3) is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in a criminal proceeding (excluding traffic violations and other minor offenses) or (IV) is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended;
(C) the Company has received a notice (whether or not subsequently withdrawn) that a shareholder intends to nominate any candidate for election to the board of directors pursuant to the advance notice requirements for shareholder nominees for director in Section 1.5(a)(i)(B) of these regulations; or
(D) the election of the Shareholder Nominee to the board of directors would cause the Company to violate the articles, these regulations or any applicable law, rule, regulation or listing standard.
(ii) An Eligible Shareholder submitting more than one Shareholder Nominee for inclusion in the Company’s proxy materials pursuant to this Section 1.6 must rank the Shareholder Nominees based on the order that the Eligible Shareholder desires the Shareholder Nominees to be selected for inclusion in the Company’s proxy statement and include the specified rank in its Shareholder Notice submitted to the Company. In the event that the number of Shareholder Nominees submitted by Eligible Shareholders pursuant to this Section 1.6 exceeds the Authorized Number, the Company will determine which Shareholder Nominees will be included in the Company’s proxy materials in accordance with the following provisions: the highest ranking Shareholder Nominee of each Eligible Shareholder who qualifies for inclusion in the Company’s proxy materials will be selected for inclusion until the Authorized Number is reached, going in order of the number (largest to smallest) of shares of the Company that each Eligible Shareholder disclosed as Owned in its Shareholder Notice submitted to the Company. If the Authorized Number is not reached after each Eligible Shareholder has had one Shareholder Nominee selected, this selection process will repeat as many times as necessary, following the same order each time, until the Authorized Number is reached. Following this determination, if any Shareholder Nominee who satisfies the eligibility requirements in this Section 1.6 is nominated by the board of directors, is not included in the Company’s proxy materials
or is not submitted for director election for any reason (including the Eligible Shareholder’s or Shareholder Nominee’s failure to comply with this Section 1.6), no other nominee or nominees will be included in the Company’s proxy materials or otherwise submitted for election as a director at the applicable Annual Meeting in substitution for the Shareholder Nominee.
(iii) Any Shareholder Nominee who is included in the Company’s proxy materials for a particular Annual Meeting but withdraws from or becomes ineligible or unavailable for election at the Annual Meeting for any reason, including for the failure to comply with any provision of these regulations, will be ineligible to be a Shareholder Nominee pursuant to this Section 1.6 for the next two Annual Meetings.
(iv) The board of directors (and any other person or body authorized by the board of directors) has the power and authority to interpret this Section 1.6 and to make any and all determinations necessary or advisable to apply this Section 1.6 to any persons, facts or circumstances, in each case acting in good faith. Notwithstanding the foregoing provisions of this Section 1.6, unless otherwise required by law or otherwise determined by the chairman of the meeting or the board of directors, if the shareholder who delivered the Shareholder Notice does not appear at the Annual Meeting in person or by proxy (such proxy to be delivered to the Company no later than the Close of Business on the third business day prior to the making of a nomination or proposal) to present its Shareholder Nominee or Shareholder Nominees, the nomination or nominations will be disregarded, notwithstanding that proxies in respect of the election of the Shareholder Nominee or Shareholder Nominees may have been received by the Company. This Section 1.6 is the exclusive method for shareholders to include nominees for director election in the Company’s proxy materials.
§1.7 Waiver of Notice. Any shareholder, either before or after any meeting, may waive any notice required by law, the articles or these regulations. Waivers must be in writing and filed with or entered upon the records of the meeting. Notice of a meeting will be deemed to have been waived by any shareholder who attends the meeting either in person or by proxy, and who does not, before or at the commencement of the meeting, protest the lack of proper notice.
§1.8 Quorum. The holders of shares entitling them to exercise a majority of the voting power of the Company entitled to vote at a shareholders meeting, present in person or by proxy, shall constitute a quorum for the transaction of business, except when a greater number is required by law, the articles or these regulations. In the absence of a quorum at any shareholders meeting or any adjournment of the meeting, the chairman of the meeting or the holders of shares entitling them to exercise a majority of the voting power of the Company entitled to vote at a shareholders meeting, present in person or by proxy, may adjourn the meeting from time to time. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called.
§1.9 Conduct of Meetings. At each shareholders meeting the chairman of the board, or, in the chairman’s absence, any officer whom the board of directors or the chairman of the board appoints, shall act as chairman of the meeting, and the secretary of the Company, or, in the secretary’s absence, any person whom the chairman of the meeting appoints, shall act as secretary of the meeting. Unless otherwise determined by the board of directors prior to the meeting, the chairman of the meeting shall determine in his or her sole discretion the order of business of each shareholders meeting and the rules of procedure therefor, and shall have the authority to regulate the conduct of any such meeting as he or she deems appropriate. Such rules may include, without limitation: (i) an agenda for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at, or participation in, the meeting to only shareholders entitled to vote at the meeting, their duly authorized and constituted proxies and such other persons as the chairman of the meeting shall permit;
(iv) restrictions on entry to the meeting after the time fixed for the commencement of the meeting; (v) limitations on the time allotted for consideration of each agenda item and for questions and comments by participants; (vi) regulations for the opening and closing of the polls for balloting and matters which are to be voted on by ballot (if any); and (vii) procedures (if any) requiring attendees to provide the Company advance notice of their intent to attend the meeting. Subject to any rules and regulations adopted by the board of directors, the chairman of the meeting may convene and, for any or no reason, from time to time, adjourn or recess any meeting of shareholders. The chairman of the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall have the power and duty to declare that a nomination or other business was not properly brought before the meeting if the facts warrant, and if the chairman of the meeting should so declare, that nomination shall be disregarded or that other business shall not be transacted.
§1.10 Voting Standards. Except as otherwise expressly provided by law, the articles or these regulations, at any meeting of shareholders at which a quorum is present, all business properly brought before such meeting to be approved by a vote of the shareholders (including by non-binding or advisory vote) shall be approved if authorized by the affirmative vote of a majority of the votes cast (and for purposes of this provision an abstention is not a vote cast), whether in person or by proxy.
§1.11 Record Date. The board of directors may fix a record date for any lawful purpose, including without limitation the determination of shareholders entitled to: (a) receive notice of or to vote at any shareholders meeting; (b) receive payment of any dividend or other distribution; (c) receive or exercise rights of purchase of, subscription for, or exchange or conversion of, shares or other securities, subject to any contract right with respect thereto; or (d) participate in the execution of written consents, waivers or releases. Any such record date shall not be more than 60 days preceding the date of the meeting, the date fixed for the payment of any dividend or other distribution, or the date fixed for the receipt or the exercise of rights, as the case may be.
ARTICLE 2
Board of Directors
§2.1 General Powers of Board. All of the authority of the Company shall be exercised by or under the direction of the board of directors, except as otherwise provided by law, the articles or these regulations.
§2.2 Number of Directors. The number of directors of the Company shall be fixed from time to time by the board of directors; provided, however, that in no case shall the number of directors be decreased to fewer than nine nor increased to more than 16; and provided, further, that no decrease in the number of directors shall have the effect of shortening the term of any director.
§2.3 Compensation and Expenses. The directors shall be entitled to such compensation as the board of directors may from time to time determine. No director shall be precluded from serving the Company as an officer or in any other capacity or from receiving compensation for so serving. Directors may be reimbursed for their reasonable expenses incurred in the performance of their duties, including the expense of traveling to and from meetings of the board.
§2.4 Election of Directors. The articles set forth voting standards applicable in the election of directors at each meeting of shareholders to elect directors.
§2.5 Term of Office. Directors shall be elected at the Annual Meeting. A director is elected to serve until the next Annual Meeting and until his or her successor is elected and qualified or until his or her earlier resignation, removal from office or death.
§2.6 Removal of Directors. All the directors or any individual director may be removed from office, without assigning any cause, by the affirmative vote of the holders of record of not less than a majority of the shares having voting power of the Company with respect to the election of directors.
§2.7 Vacancies. A vacancy in the board of directors, including a vacancy created by an increase in the number of directors, may be filled by a majority vote of the remaining directors, even though they are less than a quorum.
§2.8 Organization of Meetings. At each meeting of the board of directors, the chairman of the board, or, in his or her absence, the lead director (if one is designated by the directors), or, in his or her absence, a chairman chosen by a majority of the directors present, shall act as chairman. The secretary of the Company, or, if the secretary shall not be present, an assistant secretary or any other person whom the chairman of the meeting shall appoint, shall act as secretary of the meeting.
§2.9 Calling of Meetings. Meetings of the board of directors shall be held whenever called by the chairman of the board, if any, the lead director (if one is designated by the directors), the chief executive officer or by one-third of the directors.
§2.10 Notices of Meetings. Unless waived, notice of each board of directors meeting or a meeting of any committee of directors shall be given to each director by the person calling such meeting in any of the following ways:
(a) By orally informing him or her of the meeting in person or by telephone not later than 12 hours before the date and time of the meeting.
(b) By delivering notice by fax, electronic mail or other electronic communication not later than one day before the date of the meeting.
(c) By delivering notice by U.S. mail or overnight courier at least two days before the meeting addressed to him or her at the address furnished by him or her to the secretary of the Company, or to such other address as the person sending the notice shall know to be correct.
Unless otherwise required by law, the articles or these regulations, the notice of any meeting need not specify the purposes of the meeting. Notice of any meeting of the board of directors may be waived by any director, either before, at or after the meeting, in writing or by any other legally sufficient means. Notice of a meeting will be deemed to have been waived by any director who attends the meeting, and who does not, before or at the commencement of the meeting, protest the lack of proper notice.
§2.11 Notice of Adjournment of Meeting. Notice of adjournment of a meeting of the board of directors need not be given if the time and place to which it is adjourned are fixed and announced at the meeting.
§2.12 Quorum and Manner of Acting. A majority of the number of directors established pursuant to Section 2.2 of these regulations as of the time of any meeting of the board of directors must be present at such meeting in order to constitute a quorum for the transaction of business; provided, that meetings of the directors may include participation by directors through any communications equipment if all directors participating can hear each other, and such participation in a meeting shall constitute presence at such meeting. The act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors. In the absence of a quorum, a majority of those present may adjourn a meeting from time to time until a quorum is present without further notice or waiver thereof. The directors shall act only as a board of directors. Individual directors shall have no power as such other than in connection with a director’s actions as the sole member of a committee of the board of directors.
§2.13 Order of Business. The order of business at meetings of the board of directors shall be such as the chairman of the meeting may prescribe or follow, subject to modification by a majority of the directors present.
§2.14 Action in Writing in Lieu of Meeting. Any action which may be authorized or taken at a meeting of the directors may be authorized or taken without a meeting with the affirmative approval of, and in a writing or writings signed by, all the directors. A fax, electronic mail or an electronic or other transmission capable of authentication that appears to have been sent by a director and that contains an affirmative vote or approval of the director is a signed writing for the purposes of this Section 2.14. The date on which that fax, electronic mail or electronic or other transmission is sent is the date on which the writing is signed.
§2.15 Committees. The directors may create and from time to time abolish or reconstitute one or more committees of directors each to consist of one or more directors, and may delegate to any such committee or committees any or all of the authority of the directors, however conferred, other than that of filling vacancies in the board of directors or in any committee of directors and other than the authority to adopt, amend or repeal these regulations. The directors may adopt, or authorize the committees to adopt, provisions with respect to the governance of any such committee or committees which are not inconsistent with applicable law, the articles or these regulations. An act or authorization of any act by any such committee within the authority properly delegated to it by the directors shall be as effective for all purposes as the act or authorization of the directors. Meetings of committees shall be held whenever called by the chairman of the committee or by a majority of the committee members.
§2.16 Emergency Regulations. Notwithstanding any other provision in this Article 2, in the event of any emergency, as defined in Section 1701.01 of the Ohio Revised Code, as a result of which a quorum cannot readily be convened for action, a meeting of the directors may be called by any officer or director. Notice of the time and place, if any, of such meeting shall be given to such of the directors as it may be feasible to reach at the time and by the means of communication, written or oral, personal or mass, as may be practicable at the time. The director or directors present at any such meeting that has been duly called and notice of which has been duly given shall constitute a quorum for such meeting.
ARTICLE 3
Officers
§3.1 Number and Titles. The officers of the Company shall be a chief executive officer, a president, a secretary, a treasurer and such other officers and assistant officers as the board may select, including a chairman of the board. If there is more than one vice president, the board of directors may, in its discretion, establish designations for the vice presidencies so as to distinguish among them as to their functions or their order, or both. Any two or more offices may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity if such instrument is required to be executed, acknowledged or verified by two or more officers. For purposes of these regulations and Ohio law, the chief executive officer shall serve all of the functions of, and shall be deemed, the president unless the board of directors specifically designates a president.
§3.2 Election, Terms of Office, Vacancies. The officers shall be elected by the board of directors. Each shall be elected for an indeterminate term and shall hold office at the pleasure of the board of directors. The board of directors may delegate to any officer or committee the power to appoint any subordinate officer, agents or committees. Any vacancy in any office may be filled by the board of directors.
ARTICLE 4
Shares and Their Transfer
§4.1 Certificates for Shares. Every owner of one or more shares of the Company shall be entitled to a certificate or certificates, which shall be in such form as may be approved by the board of directors, certifying the number and class of shares in the Company owned by him or her. The certificates for the respective classes of such shares shall be numbered in the order in which they are issued and shall be signed in the name of the Company by the chairman or the president and the secretary; provided, that if such certificates are countersigned by a transfer agent or registrar, the signatures of such officers upon such certificates may be facsimiles, stamped or printed. If an officer who has signed or whose facsimile signature has been used, stamped or printed on any certificates ceases to be such officer because of death, resignation or other reason before such certificates are delivered by the Company, such certificates shall nevertheless be conclusively deemed to be valid if countersigned by any such transfer agent or registrar. The board of directors may provide by resolution that some or all of any or all classes and series of shares of the Company shall be uncertificated shares to the extent permitted by Ohio law.
§4.2 Transfer of Shares. Shares of the Company shall be transferable in person or by attorney (and, if issued in certificated form, upon the surrender of the certificate to the Company or any transfer agent for the Company (for the class of shares represented by the certificate surrendered) and cancellation of the certificate), if properly endorsed for transfer or accompanied by a duly executed assignment and power of transfer provided in connection therewith, together with such assurances as the Company or its transfer agent may require as to the genuineness and effectiveness of each necessary instrument.
§4.3 Regulations. The board of directors may make such rules and regulations as it may deem expedient or advisable, not inconsistent with these regulations, concerning the issue, transfer and registration of shares. It may appoint one or more transfer agents or one or more registrars, or both, and may require all certificates for shares to bear the signature of either or both.
§4.4 Lost, Destroyed or Stolen Certificates. A new share certificate or certificates or uncertificated shares may be issued in place of any certificate theretofore issued by the Company which is alleged to have been lost, destroyed, or wrongfully taken upon: (a) the execution and delivery to the Company by the person claiming the certificate to have been lost, destroyed or wrongfully taken of an affidavit of that fact in form satisfactory to the Company, specifying whether or not the certificate was endorsed at the time of such alleged loss, destruction or taking, and (b) the receipt by the Company of a surety bond, indemnity agreement or any other assurances satisfactory to the Company and to all transfer agents and registrars of the class of shares represented by the certificate against any and all losses, damages, costs, expenses, liabilities or claims to which they or any of them may be subjected by reason of the issue and delivery of such new certificate or certificates or uncertificated shares or with respect to the original certificate.
ARTICLE 5
Indemnification and Insurance
§5.1 Costs Incurred. The Company shall, to the fullest extent authorized by law, including but not limited to the laws of the State of Ohio, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director, officer or employee of the Company, or is or was serving at the written request of the Company as a director, trustee, officer, employee, member or manager of another corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding. The Company shall indemnify a director, trustee, officer, employee, member or manager seeking indemnity in connection with an action, suit or proceeding (or part of an action, suit or proceeding) initiated by such person only if the action, suit or proceeding (or part of the action, suit or proceeding) initiated by such person was authorized by the board of directors of the Company.
§5.2 Advance Payment of Costs. The Company shall pay expenses, including attorneys’ fees, incurred by an officer of the Company in defending any action, suit or proceeding referred to in Section 5.1 of these regulations as they are incurred, in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Company. The Company shall pay expenses, including attorneys’ fees, incurred by a director of the Company as specified in the Ohio Revised Code or any successor.
§5.3 Requested Service. Any person shall be deemed to be serving at the written request of the Company if such person (a) is serving as a director, trustee, officer, employee, member or manager of another organization of which a majority of the outstanding voting securities representing the present right to vote for the election of its directors or equivalent executives is owned directly or indirectly by the Company (a “Subsidiary”), (b) is serving as a director, trustee or manager of any employee benefit plan of the Company or a Subsidiary, or (c) is appointed by the Company or a Subsidiary as a director, trustee or manager of another organization of which the Company or a Subsidiary has the right to appoint a member or members of the board of directors or similar governing body of such organization.
§5.4 Non-Exclusive. The indemnification authorized in this Article 5 shall not be deemed exclusive of any other rights to which persons seeking indemnification may be entitled under any agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office.
§5.5 Insurance. The Company may purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of the Company, or is or was serving at the request of the Company as a director, trustee, officer, employee, member or manager of another corporation, domestic or foreign, nonprofit or for profit, limited liability company, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the Company would have the power to indemnify him or her against such liability under this Article 5 or under Chapter 1701 of the Ohio Revised Code.
§5.6 Survival. The indemnification authorized in this Article 5 shall continue as to a person who has ceased to be a director, trustee, officer, employee, member or manager.
§5.7 Successors. The indemnification authorized in this Article 5 shall inure to the benefit of the heirs, executors and administrators of any person entitled to indemnification under this Article 5.
§5.8 Elimination or Impairment of Indemnification Rights. No amendment, termination or repeal of this Article 5, nor, to the fullest extent permitted by law, any modification of law, shall adversely affect or impair in any way the rights to be indemnified or to advancement of expenses pursuant to this Article 5 with respect to any actions, omissions, transactions or facts occurring prior to the final adoption of such amendment, modification, termination or repeal.
ARTICLE 6
Fiscal Year
The fiscal year of the Company shall begin on the first day of July and end on the last day of June each year.
ARTICLE 7
Control Share Acquisitions
Section 1701.831 of the Ohio Revised Code shall not apply to control share acquisitions of shares of the Company.
ARTICLE 8
Forum for Adjudication of Disputes
Unless the Company consents in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer or other employee of the Company to the Company or to the Company’s shareholders, (c) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of Chapter 1701 of the Ohio Revised Code or the articles or these regulations, or (d) any action asserting a claim against the Company or any director or officer or other employee of the Company governed by the internal affairs doctrine shall be the United States District Court for the Southern District of Ohio, Eastern Division, or in the event that court determines that it lacks jurisdiction to hear such action, the Franklin County, Ohio Court of Common Pleas.
ARTICLE 9
Amendment of Regulations
These regulations may be amended or repealed or new regulations may be adopted: (a) at any meeting of the shareholders held for such purpose by the affirmative vote of the holders of record of shares entitling them to exercise a majority of the voting power on such proposal; (b) without a meeting of the shareholders, by the written consent of the holders of record of shares entitling them to exercise a majority of the voting power on such proposal; or (c) by the board of directors (to the extent permitted by the Ohio Revised Code).
CARDINAL HEALTH, INC.
PERFORMANCE SHARE UNITS AGREEMENT
This Performance Share Units Agreement (this “Agreement”) is entered into in Franklin County, Ohio. On [grant date] (the “Grant Date”), Cardinal Health, Inc., an Ohio corporation (the “Company”), has awarded to [employee name] (“Awardee”) [target # of units] performance-based Stock Units (the “Performance Share Units” or “Award”). The Performance Share Units have been granted pursuant to the Amended Cardinal Health, Inc. 2011 Long-Term Incentive Plan (the “Plan”), and are subject to all provisions of the Plan, which are incorporated in this Agreement by reference, and are subject to the provisions of this Agreement. Capitalized terms used in this Agreement which are not specifically defined have the meanings ascribed to them in the Plan.
1.Vesting of Performance Share Units. Subject to the provisions of this Agreement, zero to [maximum percentage] of the Performance Share Units vest when the Administrator certifies the payout level (“Payout Level”) as a result of achievement of specific performance criteria (the “Performance Goals”) for a performance period (“Performance Period”) set forth in Exhibit A attached hereto.
2.Transferability. The Performance Share Units are not transferable.
3.Termination of Employment.
a.General. Except to the extent that vesting occurs pursuant to Paragraphs 3(b), (c), (d) or (e) or Paragraph 5, if a Termination of Employment occurs prior to the [applicable payment date in Paragraph 6(a) (the “Payment Date”)]1 / [First Payment Date (as defined in Paragraph 6(a))]2 associated with a Performance Period, any Performance Share Units allocated to that Performance Period, whether vested or unvested, are forfeited by Awardee.
b.Death or Disability. If a Termination of Employment by reason of Awardee’s death or Disability occurs at least 6 months after the Grant Date, then the outstanding unvested Performance Share Units for a Performance Period will vest as if Awardee had remained employed through the [First]2 Payment Date.
c.[Retirement. If a Termination of Employment by reason of Awardee’s Retirement occurs at least 6 months after the Grant Date, then the outstanding unvested Performance Share Units for a Performance Period will vest in an amount equal to the number of Performance Share Units that would have vested if Awardee had remained employed through the [First]2 Payment Date multiplied by a fraction, the numerator of which is the number of days in the Performance Period up to the date of such Termination of Employment, and the denominator of which is the total number of days in such Performance Period.]3
d.Involuntary Termination with Severance. If (i) neither Paragraph 3(c) nor Paragraph 3(e) is applicable, but Awardee has attained either (A) age 53 and at least eight years of continuous service with the Company and its Affiliates (collectively, the “Cardinal Group”), or (B) age 59 and at least four years of continuous service with the Cardinal Group, in each case including service with an Affiliate of the Company prior to the time that such Affiliate became an Affiliate of the Company, (ii) a Termination of Employment by the Cardinal
1 For awards without deferred settlement.
2 For awards with deferred settlement.
3 This provision is an alternative that may not be included in every award agreement.
Group (other than a Termination for Cause) occurs at least 6 months after the Grant Date, and (iii) no later than 45 days after the Termination of Employment, Awardee enters into a written separation agreement and general release with the Cardinal Group (in such form as may reasonably be presented by the Company) (a “Separation Agreement”), and Awardee does not timely revoke such Separation Agreement, then the outstanding unvested Performance Share Units for a Performance Period will vest in an amount equal to the number of Performance Share Units that would have vested if Awardee had remained employed through the [First]2 Payment Date multiplied by a fraction, the numerator of which is the number of days in the Performance Period up to the date of such Termination of Employment, and the denominator of which is the total number of days in such Performance Period.
e.Involuntary Termination After Completion of a Performance Period. If a Termination of Employment by the Cardinal Group (other than a Termination for Cause) occurs after the completion of a Performance Period but prior to the [First]2 Payment Date, then the Performance Share Units for the applicable Performance Period will vest as if Awardee had remained employed through the [First]2 Payment Date.
4.Special Forfeiture and Repayment Rules. This Agreement contains special forfeiture and repayment rules intended to encourage conduct that protects the Cardinal Group’s legitimate business assets and discourage conduct that threatens or harms those assets. The Company does not intend to have the benefits of this Agreement reward or subsidize conduct detrimental to the Company, and therefore will require the forfeiture of the benefits offered under this Agreement and the repayment of gains obtained from this Agreement, according to the rules specified below. Activities that trigger the forfeiture and repayment rules are divided into two categories: Misconduct and Competitor Conduct.
a.Misconduct. During employment with the Cardinal Group and for three years after the Termination of Employment for any reason, Awardee agrees not to engage in Misconduct. If Awardee engages in Misconduct during employment or within three years after the Termination of Employment for any reason, then
i.Awardee immediately forfeits the Performance Share Units that have not yet vested or that vested at any time within three years prior to the date the Misconduct first occurred and have not yet been paid pursuant to Paragraph 6, and those forfeited Performance Share Units automatically terminate, and
ii.Awardee shall, within 30 days following written notice from the Company, pay to the Company in cash an amount equal to: (A) the gross gain to Awardee resulting from the payment of the Performance Share Units pursuant to Paragraph 6 that had vested at any time within three years prior to the date the Misconduct first occurred less (B) $1.00. The gross gain is the Fair Market Value of the Shares represented by the Performance Share Units on the [Payment Date]1 / [applicable payment date]2.
As used in this Agreement, “Misconduct” means
A.disclosing or using any of the Cardinal Group’s confidential information (as defined by the applicable Cardinal Group policies and agreements) without proper authorization from the Cardinal Group or in any capacity other than as necessary for the performance of Awardee’s assigned duties for the Cardinal Group;
B.violation of the Standards of Business Conduct or any successor code of conduct or other applicable Cardinal Group policies, including but not limited to conduct which would constitute a breach of any representation or certificate of compliance signed by Awardee;
C.fraud, gross negligence or willful misconduct by Awardee, including but not limited to fraud, gross negligence or willful misconduct causing or contributing to a material error resulting in a restatement of the financial statements of any member of the Cardinal Group;
D.directly or indirectly soliciting or recruiting for employment or contract work on behalf of a person or entity other than a member of the Cardinal Group, any person who is an employee, representative, officer or director in the Cardinal Group or who held one or more of those positions at any time within the 12 months prior to Awardee’s Termination of Employment;
E.directly or indirectly inducing, encouraging or causing an employee of the Cardinal Group to terminate his/her employment or a contract worker to terminate his/her contract with a member of the Cardinal Group;
F.any action by Awardee and/or his or her representatives that either does or could reasonably be expected to undermine, diminish or otherwise damage the relationship between the Cardinal Group and any of its customers, prospective customers, vendors, suppliers or employees known to Awardee; or
G.breaching any provision of any employment or severance agreement with a member of the Cardinal Group.
Nothing in this Agreement will prevent Awardee from testifying truthfully as required by law, prohibit or prevent Awardee from filing a charge with or participating, testifying or assisting in any investigation, hearing, whistleblower proceeding or other proceeding before any federal, state or local government agency (e.g., Equal Employment Opportunity Commission, National Labor Relations Board, Securities and Exchange Commission, etc.), or prevent Awardee from disclosing Cardinal Group’s confidential information in confidence to a federal, state or local government official for the purpose of reporting or investigating a suspected violation of law.
b.Competitor Conduct. If Awardee engages in Competitor Conduct during employment or within one year after the Termination of Employment for any reason, then
i.Awardee immediately forfeits the Performance Share Units that have not yet vested or that vested at any time within one year prior to the date the Competitor Conduct first occurred and have not yet been paid pursuant to Paragraph 6, and those forfeited Performance Share Units automatically terminate, and
ii.Awardee shall, within 30 days following written notice from the Company, pay the Company an amount equal to: (A) the gross gain to Awardee resulting from the payment of Performance Share Units pursuant to Paragraph 6 that had vested at any time since the earlier of one year prior to the date the Competitor Conduct first occurred or one year prior to the Termination of Employment, if applicable, less (B) $1.00. The gross gain is the Fair Market Value of the Shares represented by the Performance Share Units on the [Payment Date]1 / [applicable payment date]2.
As used in this Agreement, “Competitor Conduct” means accepting employment with, or directly or indirectly providing services to, a Competitor in the United States. If Awardee has a Termination of Employment and Awardee’s responsibilities to the Cardinal Group were limited to a specific territory or territories within or outside the United States during the 24 months prior to the Termination of Employment, then Competitor Conduct is limited to that specific territory or territories. A “Competitor” means any person or business that competes with the products or services provided by a member of the Cardinal Group for which Awardee had business responsibilities within 24 months prior to Termination of Employment or about which Awardee obtained confidential information (as defined by the applicable Cardinal Group policies or agreements).
c. General.
i.Nothing in this Paragraph 4 constitutes or is to be construed as a “noncompete” covenant or other restraint on employment or trade. The provisions of this Paragraph 4 do not prevent, nor are they intended to prevent, Awardee from seeking or accepting employment or other work outside the Cardinal Group. The execution of this Agreement is voluntary. Awardee is free to choose to comply with the terms of this Agreement and receive the benefits offered or else reject this Agreement with no adverse consequences to Awardee’s employment with the Cardinal Group.
ii.Awardee agrees to provide the Company with at least 10 days written notice prior to accepting employment with or providing services to a Competitor within one year after Termination of Employment.
iii.Awardee acknowledges receiving sufficient consideration for the requirements of this Paragraph 4, including Awardee’s receipt of the Performance Share Units. Awardee further acknowledges that the Company would not provide the Performance Share Units to Awardee without Awardee’s promise to abide by the terms of this Paragraph 4. The parties also acknowledge that the provisions contained in this Paragraph 4 are ancillary to, or part of, an otherwise enforceable agreement at the time this Agreement is made.
iv.Awardee may be released from the obligations of this Paragraph 4 if and only if the Administrator determines, in writing and in the Administrator’s sole discretion, that a release is in the best interests of the Company.
5.Change of Control.
a.Valuation. In the event of a Change of Control prior to [a Payment Date]2 / [the First Payment Date]3, the Administrator, as constituted immediately before such Change of Control, shall determine and certify the Payout Level (the “Change of Control Payout Level”) based on (i) actual performance through the most recent date prior to the Change of Control for which achievement of the Performance Goals can reasonably be determined; and (ii) the expected performance for the remainder of the Performance Period based on information reasonably available.
b.Vesting and Substitute Awards.
i.In the event of a Change of Control prior to [a Payment Date]1 / [the First Payment Date]2, the percentage of the Performance Share Units determined in accordance with Exhibit A at the Change of Control Payout Level vests unless an award meeting the requirements of Paragraph 5(b)(ii) (a “Substitute Award”) is provided to Awardee to replace or adjust the Award. If a Substitute Award is provided, any Performance Share Units that (A) except to the extent that clause (B) applies, would vest in accordance with Paragraphs 3(b) or (c) in connection with Awardee’s Retirement or Disability if Awardee’s Termination of Employment occurred on the date of the Change of Control or (B) are eligible to vest in accordance with Paragraph 3(d) as a result of Awardee’s Termination of Employment that actually occurs prior to the Change of Control, vest at the time of the Change of Control. No Substitute Award will be provided in the event of Awardee’s Termination of Employment by reason of death, Disability, Retirement or the circumstances described in Paragraph 3(d) prior to a Change of Control.
ii.An award meets the conditions of this Paragraph 5(b)(ii) (and hence qualifies as a Substitute Award) if, as determined by the Administrator as constituted immediately before the Change of Control, (A) it has a value at the time of grant or adjustment at least equal to the value of the Performance Share Units that would vest under Paragraph 5(b)(i) if there were no Substitute Award; (B) it is paid in publicly traded equity securities of the Company or its successor in the Change of Control or another entity that is affiliated with the Company or its successor following the Change of Control; (C) it is a restricted stock unit award with vesting and payment not conditioned on the achievement of any performance criteria or conditions; (D) it vests in full upon (1) a Termination for Good Reason by Awardee, (2) a Termination of Employment by the Company or its successor in the Change of Control other than a Termination for Cause, or (3) Awardee’s death or Disability, in each case, occurring at or during the period of two years after the Change of Control; (E) if Awardee is subject to U.S. federal income tax under the Code, the tax consequences to Awardee under the Code of the Substitute Award are not less
favorable to Awardee than the tax consequences of the Award; and (F) its other terms and conditions are not less favorable to Awardee than the terms and conditions of the Award (including the provisions that would apply in the event of a subsequent Change of Control). Without limiting the generality of the foregoing, the Substitute Award may take the form of a continuation of the Award if the modifications required by the preceding sentence are satisfied.
6.Payment.
a.General. [The Company shall pay Performance Share Units in Shares. Subject to the provisions of Paragraph 4 and Paragraphs 6(b) and (c), Awardee is entitled to receive from the Company (without any payment on behalf of Awardee other than as described in Paragraph 10) one Share for each vested Performance Share Unit not later than the 60th day after the end of a Performance Period, except that if Awardee’s Termination of Employment occurs due to death after the end of the Performance Period, Awardee is entitled to receive the corresponding Shares from the Company on the date of death.]1 / [The Company shall pay Performance Share Units in Shares. Subject to the provisions of Paragraph 4, Awardee is entitled to receive from the Company (without any payment on behalf of Awardee other than as described in Paragraph 10) one Share for each vested Performance Share Unit. Subject to the provisions of Paragraph 6(b) and (c), payment with respect to any vested Performance Share Units shall be made in three installments. The first installment, which shall be with respect to [percentage] of the total number of vested Performance Share Units, shall be paid no later than the 60th day after the end of the Performance Period (the “First Payment Date”). The second installment, which shall be with respect to [percentage] of the total number of vested Performance Share Units, shall be paid on the first anniversary of the last day of the Performance Period. [The third installment, which shall be with respect to [percentage] of the total number of vested Performance Share Units, shall be paid on the second anniversary of the last day of the Performance Period.] Notwithstanding the above, in the event of an Awardee's death after the end of the Performance Period, Awardee is entitled to receive, with respect to any Performance Shares Units which are not subject to a “substantial risk of forfeiture” as determined for purposes of Section 409A of the Code on the date of Awardee’s death, the corresponding Shares from the Company on account of any vested Performance Share Units which have not yet been paid as soon as practical following the date of death. Payment shall be made at each of the times specified above unless the Administrator makes a finding that the number of vested Performance Share Units shall be reduced pursuant to Paragraph 4 due to Misconduct or Competitor Conduct.]2
b.Change of Control. Notwithstanding Paragraph 6(a), to the extent that the performance and service vesting requirements have been satisfied for the Performance Share Units on the dates set forth below, payment with respect to such Performance Share Units will be made as follows:
i.On the date of a Change of Control, Awardee is entitled to receive one Share for each vested Performance Share Unit, subject to any adjustments made pursuant to Section 16(a) of the Plan, from the Company; provided, however, that if such Change of Control would not qualify as a permissible date of distribution under
Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder, and where Section 409A of the Code applies to such distribution as a deferral of compensation, Awardee is entitled to receive the corresponding Shares from the Company on the date that would have otherwise applied pursuant to Paragraphs 6(a), 6(b)(ii), or 6(b)(iii).
ii.If Awardee’s separation from service occurs during the period of two years following a Change of Control (and such Change of Control constitutes a change of control event as defined in accordance with Section 409A(a)(2)(A)(v) of the Code and the regulations thereunder), Awardee is entitled to receive one Share for each vested Performance Share Unit from the Company on the date of Awardee’s separation from service; provided, in such event that if Awardee on the date of separation from service is a “specified employee” (certain employees of the Cardinal Group within the meaning of Section 409A of the Code determined using the identification methodology selected by the Company from time to time), Awardee is entitled to receive the corresponding Shares from the Company on the first day of the seventh month after the date of Awardee’s separation from service or, if earlier, the date of Awardee’s death.
iii.On the date of Awardee's Termination of Employment due to death following a Change of Control, Awardee is entitled to receive one Share for each vested Performance Share Unit from the Company on the date of death.
c.Elections to Defer Receipt. Elections to defer receipt of the Shares beyond the [Payment Date]1 / [applicable payment date]2 applicable payment date may be permitted in the discretion of the Administrator pursuant to procedures established by the Administrator in compliance with the requirements of Section 409A of the Code. [Any election to defer will be valid only if the elected payment date is a date that is later than the date payment would have otherwise occurred.]2
7.Dividend Equivalents. Awardee is not entitled to receive cash dividends on the Performance Share Units but will receive a dividend equivalent payment from the Company in an amount equal to the dividends that would have been paid on each Share underlying the Performance Share Units if it had been outstanding between the Grant Date and the [applicable]2 payment date of any such Share (i.e., based on the record date for cash dividends). Subject to an election to defer receipt as permitted under Paragraph 6(c), the Company shall pay dividend equivalent payments in cash as soon as reasonably practicable after the [applicable]2 payment date of (and to the same extent as) the Performance Share Units to which such dividend equivalents relate.
8.Right of Set-Off. By accepting the Performance Share Units, Awardee consents to a deduction from, and set-off against, any amounts owed to Awardee that are not treated as “non-qualified deferred compensation” under Section 409A of the Code by any member of the Cardinal Group from time to time (including, but not limited to, amounts owed to Awardee as wages, severance payments or other fringe benefits) to the extent of the amounts owed to the Cardinal Group by Awardee under this Agreement.
9.No Shareholder Rights. Awardee has no rights of a shareholder with respect to the Performance Share Units, including no right to vote any Shares represented by the Performance Share Units, until such Shares are paid to Awardee.
10.Withholding Tax.
a.Generally. Awardee is liable and responsible for all taxes owed in connection with the Performance Share Units (including taxes owed with respect to the cash payments described in Paragraph 7), regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Performance Share Units. The Company does not make any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the grant, vesting or payment of the Performance Share Units or the subsequent sale of Shares issuable pursuant to vested Performance Share Units. The Company does not commit and is under no obligation to structure the Performance Share Units to reduce or eliminate Awardee’s tax liability.
b.Payment of Withholding Taxes. Prior to any event in connection with the Performance Share Units (e.g., vesting or payment) that the Company determines may result in any domestic or foreign tax withholding amounts being paid by the Company, whether national, federal, state or local, including any employment tax obligation (the “Tax Withholding Obligation”), Awardee is required to arrange for the satisfaction of the minimum amount of such Tax Withholding Obligation in a manner acceptable to the Company. Awardee’s acceptance of this Agreement constitutes Awardee’s instruction and authorization to the Company to withhold on Awardee’s behalf the number of Shares from those Shares issuable to Awardee under this Award as the Company determines to be sufficient to satisfy the Tax Withholding Obligation. In the case of any amounts withheld for taxes pursuant to this provision in the form of Shares, the amount withheld may not exceed the amount legally required and withholding above the minimum withholding requirements shall be available only if and to the extent that the Administrator has authorized such. The Company has the right to deduct from all cash payments paid pursuant to Paragraph 7 the amount of any taxes which the Company is required to withhold with respect to such payments.
11.Governing Law/Venue for Dispute Resolution/Costs and Legal Fees. This Agreement is governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. The parties agree and acknowledge that the laws of the State of Ohio bear a substantial relationship to the parties and/or this Agreement and that the Performance Share Units and benefits granted in this Agreement would not be granted without the governance of this Agreement by the laws of the State of Ohio. In addition, all legal actions or proceedings relating to this Agreement must be brought exclusively in state or federal courts located in Franklin County, Ohio and the parties executing this Agreement hereby consent to the personal jurisdiction of such courts. Awardee acknowledges that the covenants contained in Paragraph 4 are reasonable in nature, are fundamental for the protection of the Company’s legitimate business and proprietary interests, and do not adversely affect Awardee’s ability to earn a living. In the event that it becomes necessary for the Company to institute legal proceedings under this Agreement, Awardee is responsible to the Company for all costs and reasonable legal fees incurred by the Company in connection with the proceedings. Any provision of this Agreement which is determined by a court
of competent jurisdiction to be invalid or unenforceable or to disqualify the Award under any Applicable Law should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by the provision, without invalidating or rendering unenforceable the remaining provisions of this Agreement.
12.Defend Trade Secrets Act Notice. Under the U.S. Defend Trade Secrets Act of 2016, Awardee will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; (b) is made to Awardee’s attorney in relation to a lawsuit for retaliation against Awardee for reporting a suspected violation of law; or (c) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
13.Action by the Administrator. The parties agree that the interpretation of this Agreement rests exclusively and completely within the sole discretion of the Administrator. The parties agree to be bound by the decisions of the Administrator with regard to the interpretation of this Agreement and with regard to any and all matters set forth in this Agreement. In fulfilling its responsibilities under this Agreement, the Administrator may rely upon documents, written statements of the parties, financial reports or other material as the Administrator deems appropriate. The parties agree that there is no right to be heard or to appear before the Administrator and that any decision of the Administrator relating to this Agreement, including whether particular conduct constitutes Misconduct or Competitor Conduct, is final and binding. The Administrator may delegate its functions under this Agreement to an officer of the Cardinal Group designated by the Administrator, to the extent permitted under the Plan.
14.Prompt Acceptance of Agreement. The Performance Share Units grant evidenced by this Agreement will, at the discretion of the Administrator, be forfeited if this Agreement is not manually executed and returned to the Company, or electronically executed by Awardee by indicating Awardee’s acceptance of this Agreement in accordance with the acceptance procedures set forth on the Company’s third-party equity plan administrator’s web site, within 90 days of the Grant Date.
15.Electronic Delivery and Consent to Electronic Participation. The Company may, in its sole discretion, decide to deliver any documents related to the Performance Share Unit grant under and participation in the Plan or future Performance Share Units that may be granted under the Plan by electronic means or to request Awardee’s consent to participate in the Plan by electronic means. Awardee hereby consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of performance share unit grants and the execution of performance share unit agreements through electronic signature.
16.Notices. All notices, requests, consents and other communications required or provided under this Agreement to be delivered by Awardee to the Company will be in writing and will be deemed sufficient if delivered by hand, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to the Company at the address set forth below:
Cardinal Health, Inc.
7000 Cardinal Place
Dublin, Ohio 43017
Attention: Chief Legal and Compliance Officer
All notices, requests, consents and other communications required or provided under this Agreement to be delivered by the Company to Awardee may be delivered by e-mail or in writing and will be deemed sufficient if delivered by e-mail, hand, facsimile, nationally recognized overnight courier, or certified or registered mail, return receipt requested, postage prepaid, and will be effective upon delivery to Awardee.
17.Employment Agreement, Offer Letter or Other Arrangement. To the extent a written employment agreement, offer letter or other arrangement (“Employment Arrangement”) that was approved by the Human Resources and Compensation Committee or the Board of Directors or that was approved in writing by an officer of the Company pursuant to delegated authority of the Human Resources and Compensation Committee provides for greater benefits to Awardee with respect to vesting of the Award on Termination of Employment by reason of specified events than provided in this Agreement or in the Plan, then the terms of such Employment Arrangement with respect to vesting of the Award on Termination of Employment by reason of such specified events supersede the terms of this Agreement to the extent permitted by the terms of the Plan.
18.Recoupment. This Agreement will be administered in compliance with Section 10D of the Exchange Act and any applicable rules or regulations promulgated by the Securities and Exchange Commission or any national securities exchange or national securities association on which the Shares may be traded. In its discretion, moreover, the Administrator may require repayment to the Company of all or any portion of this Award if the amount of the Award was calculated based upon the achievement of financial results that were subsequently the subject of a restatement of the Company’s financial statements, Awardee engaged in misconduct that caused or contributed to the need for the restatement of the financial statements, and the amount payable to Awardee would have been lower than the amount actually paid to Awardee had the financial results been properly reported. This Paragraph 18 is not the Company’s exclusive remedy with respect to such matters. Except as otherwise required by Applicable Law, this Paragraph 18 will not apply after a Change of Control.
19.Amendment. Any amendment to the Plan is deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment may impair the rights of Awardee with respect to an outstanding Performance Share Unit unless agreed to by Awardee and the Company, which agreement must be in writing and signed by Awardee and the Company. Other than following a Change of Control, no such agreement is required if the Administrator determines in its sole discretion that such amendment either (a) is required or advisable in order for the Company, the Plan or the Performance Share Units to satisfy any Applicable Law or to meet the requirements of any accounting standard or (b) is not reasonably likely to significantly diminish the benefits provided under the Performance Share Units, or that any such diminishment has been adequately compensated, including pursuant to Section 16(c) of the Plan.
20.Adjustments. The number of Shares issuable for each Performance Share Unit and the other terms and conditions of the Award evidenced by this Agreement are subject to adjustment as provided in Section 16 of the Plan.
21.Compliance with Section 409A of the Code. To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code. This Agreement shall be administered in a manner consistent with this intent, and any provision that would cause this Agreement or the Plan to fail to satisfy Section 409A of the Code shall have no force or effect until amended to comply with Section 409A of the Code (which amendment may be retroactive to the extent permitted by Section 409A of the Code and may be made by the Company without the consent of Awardee).
22.No Right to Future Awards or Employment. The grant of the Performance Share Units under this Agreement to Awardee is a voluntary, discretionary award being made on a one-time basis and it does not constitute a commitment to make any future awards. The grant of the Performance Share Units and any payments made under this Agreement will not be considered salary or other compensation for purposes of any severance pay or similar allowance, except as otherwise required by law. Nothing contained in this Agreement confers upon Awardee any right to be employed or remain employed by the Company or any of its Affiliates, nor limits or affects in any manner the right of the Company or any of its Affiliates to terminate the employment or adjust the compensation of Awardee.
23.Successors and Assigns. Without limiting Paragraph 2, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Awardee, and the successors and assigns of the Company.
CARDINAL HEALTH, INC.
By:
Its:
ACCEPTANCE OF AGREEMENT
Awardee hereby: (a) acknowledges that he or she has received a copy of the Plan, a copy of the Company’s most recent annual report to shareholders and other communications routinely distributed to the Company’s shareholders, and a copy of the Plan Description pertaining to the Plan; (b) accepts this Agreement and the Performance Share Units granted to him or her under this Agreement subject to all provisions of the Plan and this Agreement, including the provisions in this Agreement regarding “Special Forfeiture and Repayment Rules” set forth in Paragraph 4 and “Recoupment” set forth in Paragraph 18; (c) represents that he or she understands that the acceptance of this Agreement through an on-line or electronic system, if applicable, carries the same legal significance as if he or she manually signed the Agreement; and (d) agrees that no transfer of the Shares delivered in respect of the Performance Share Units may be made unless the Shares have been duly registered under all applicable Federal and state securities laws pursuant to a then-effective registration which contemplates the proposed transfer or unless the Company has received a written opinion of, or satisfactory to, its legal counsel that the proposed transfer is exempt from such registration.
[
Awardee’s Signature
Date]
Statement Regarding Forward-Looking Information
As used in this exhibit, “we,” “our,” “us” and similar pronouns refer to Cardinal Health, Inc. and its subsidiaries, unless the context requires otherwise. Our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (the “2021 Form 10-K”), and our quarterly reports on Form 10-Q, including this one, and our current reports on Form 8-K (along with any exhibits and amendments to such reports), as well as our news releases or any other written or oral statements made by or on behalf of us, including materials posted on our website, may include, directly or by incorporation by reference, forward-looking statements that reflect our current view (as of the date the forward-looking statement is first made) about future events, prospects, projections or financial performance. The matters discussed in these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied in or by such statements. These risks and uncertainties include:
•risks arising from the COVID-19 pandemic, including the possibility that we will experience additional inventory reserves as a result of future decreases in demand or selling price; the risk that we may not be able to offset significant cost increases for certain personal protective equipment (PPE) products or inflationary pressures impacting our Medical segment; the possibility that sustained reduced demand for generic pharmaceutical product may continue to adversely impact our pharmaceutical generics program; and the possibility that we could experience employee attrition as a result of our COVID-19 vaccine mandate or the expected governmental mandates;
•competitive pressures in the markets in which we operate, including pricing pressures;
•uncertainties relating to the pricing of and demand for generic pharmaceuticals;
•uncertainties relating to the timing, frequency and profitability of generic pharmaceutical launches or other components of our pharmaceutical generics program;
•changes in manufacturer approaches to pricing branded pharmaceutical products and risks related to our compensation under contractual arrangements with manufacturers being set as a percentage of the wholesale acquisition cost of branded pharmaceuticals and where a part of our compensation is based on branded pharmaceutical price appreciation, changes in the magnitude of such price appreciation;
•changes in the timing or frequency of the introduction of branded pharmaceuticals;
•risks associated with the resolution and defense of the lawsuits and investigations in which we have been or will be named relating to the distribution of prescription opioid pain medication, including risks associated with the proposed settlement agreement and process designed to resolve lawsuits and claims brought by states and local governmental entities, including the risk that we could fail to reach a final resolution and that any injunctive or non-monetary relief that we may agree to could have unintended consequences; and the risk that the outcome of other opioid-related lawsuits and investigations could have a material adverse effect on our results of operations, financial condition, cash flows or liquidity or the operations of our business;
•potential damage to our reputation, adverse operational impacts or other effects that may result from the national opioid epidemic, the allegations that have been made about our role in such epidemic and the ongoing unfavorable publicity surrounding the lawsuits and investigations against us;
•risks associated with the tax benefit from our self-insurance loss claims, including risks associated with the letter certain industry participants, including us, received from the U.S. House of Representatives' Committee on Oversight and Reform questioning, among other things, our plans to take tax deductions for opioid-related losses, including the net operating loss carryback provisions under the CARES Act and deductibility under the Tax Act; the possibility that we may receive additional negative or unfavorable publicity or that the IRS may not agree with our underlying assumptions and judgments;
•potential adverse impact to our financial results from enacted and proposed state taxes or other assessments on the sale or distribution of opioid medications;
•our high sales concentration with certain key customers, including CVS Health Corporation and OptumRx;
•our ability to maintain the benefits of our generic pharmaceutical sourcing venture with CVS Health Corporation;
•costs or claims resulting from quality issues, whether related to the manufacture of some of our sterile surgical gowns or pre-filled syringes, or other potential errors or defects in our manufacturing of medical devices or other products or in our compounding, repackaging, information systems or pharmacy management services that may injure persons or damage property or operations, including costs from recalls, remediation efforts, and related product liability claims and lawsuits, including class action lawsuits;
•actions of regulatory bodies and other governmental authorities, including the U.S. Drug Enforcement Administration, certain agencies within the U.S. Department of Health and Human Services (including the U.S. Food and Drug Administration, Centers for Medicare and Medicaid Services, the Office of Inspector General and the Office for Civil Rights), the U.S. Nuclear Regulatory Commission, the U.S. Federal Trade Commission, the U.S. Customs and Border Protection, various state boards of pharmacy, state controlled substance authorities, state health departments, state insurance departments, state Medicaid departments or comparable regulatory bodies or governmental authorities or foreign equivalents that, in each case, could delay, limit or suspend product development, manufacturing, distribution, importation or sales or result in warning letters, recalls, seizures, injunctions or monetary sanctions;
•any compromise of our information systems or of those of a third-party service provider, including unauthorized access to or use or disclosure of company or customer information, disruption of access and ancillary risks associated with our ability to effectively manage any issues arising from any such compromise or disruption;
•significantly increased costs for commodities and other materials used in the Medical segment manufacturing, including various components, compounds, raw materials or energy such as oil-based resins, pulp, cotton, latex and other commodities and the possibility that we may not successfully offset or mitigate these increases;
•shortages in commodities, components, compounds, raw materials or energy used by our businesses, including supply disruptions of radioisotopes;
•the loss of, or default by, one or more key suppliers for which alternative suppliers may not be readily available;
•uncertainties related to our Medical segment's Cardinal Health Brand products, including our ability to manage cost, infrastructure and to retain margin or improve its performance;
•risks associated with the realignment of our Medical segment's supply chain and other businesses, including our ability to achieve the expected benefits from such realignment;
•uncertainties with respect to our cost-savings initiatives or IT infrastructure activities, including the ability to achieve the expected benefits from such initiatives, the risk that we could incur unexpected charges, and the risk that we may fail to retain key personnel;
•difficulties or delays in the development, production, manufacturing, sourcing and marketing of new or existing products and services, including difficulties or delays associated with obtaining or maintaining requisite regulatory consents, whether our own or third parties', or approvals associated with those activities;
•manufacturing disruptions, whether due to regulatory action, including regulatory action to reduce Ethylene Oxide emissions, production quality deviations, safety issues or raw material shortages or defects, or because a key product is manufactured at a single manufacturing facility with limited alternate facilities;
•risks associated with industry reliance on ethylene oxide ("EtO") to sterilize certain medical products that we manufacture or distribute, including the possibility that regulatory actions to reduce EtO emissions could become more widespread, which may result in increased costs or supply shortages; and risks that the lawsuits against us alleging personal injury resulting from EtO exposure could become more widespread;
•the possibility that we could be subject to adverse changes in the tax laws or challenges to our tax positions, including the possibility that the corporate tax rate in the U.S. could be increased;
•risks arising from possible violations of healthcare fraud and abuse laws;
•risks arising from possible violations of the U.S. Foreign Corrupt Practices Act and other similar anti-corruption laws in other jurisdictions and U.S. and foreign export control, trade embargo and customs laws;
•risks arising from our collecting, handling and maintaining patient-identifiable health information and other sensitive personal and financial information, which are subject to federal, state and foreign laws that regulate the use and disclosure of such information;
•risks arising from certain of our businesses being Medicare-certified suppliers or participating in other federal and state healthcare programs, such as state Medicaid programs and the federal 340B drug pricing program, which businesses are subject to accreditation and quality standards and other rules and regulations, including applicable reporting, billing, payment and record-keeping requirements;
•risks arising from certain of our businesses manufacturing pharmaceutical and medical products or repackaging pharmaceuticals that are purchased or reimbursed through, or are otherwise governed by, federal or state healthcare programs, which businesses are subject to federal and state laws that establish eligibility for reimbursement by such programs and other applicable standards and regulations;
•changes in laws or changes in the interpretation or application of laws or regulations, as well as possible failures to comply with applicable laws or regulations, including as a result of possible misinterpretations or misapplications;
•material reductions in purchases, pricing changes, non-renewal, early termination, or delinquencies or defaults under contracts with key customers;
•unfavorable changes to the terms or with our ability to meet contractual obligations of key customer or supplier relationships, or changes in customer mix;
•risks arising from changes in U.S. or foreign tax laws and unfavorable challenges to our tax positions and payments to settle these challenges, which may adversely affect our effective tax rate or tax payments;
•uncertainties due to possible government healthcare reform, including proposals related to Medicare drug rebate arrangements, possible repeal or replacement of major parts of the Patient Protection and Affordable Care Act, proposals related to prescription drug pricing transparency and the possible adoption of Medicare-For-All;
•reductions or limitations on governmental funding at the state or federal level or efforts by healthcare insurance companies to limit payments for products and services;
•changes in manufacturers' pricing, selling, inventory, distribution or supply policies or practices;
•changes in legislation or regulations governing prescription drug pricing, healthcare services or mandated benefits;
•changes in hospital buying groups or hospital buying practices;
•changes in distribution or sourcing models for pharmaceutical and medical and surgical products, including an increase in direct and limited distribution;
•changes to the prescription drug reimbursement formula and related reporting requirements for generic pharmaceuticals under Medicaid;
•continuing consolidation in the healthcare industry, which could give the resulting enterprises greater bargaining power and may increase pressure on prices for our products and services or result in the loss of customers;
•disruption, damage or lack of access to, or failure of, our or our third-party service providers' information systems, our critical facilities, including our national logistics center, or our distribution networks;
•risks to our business and information and controls systems in the event that business process improvements, infrastructure modernizations or initiatives to use third-party service providers for key systems and processes are not effectively implemented;
•the results, costs, effects or timing of any commercial disputes, government contract compliance matters, patent infringement claims, qui tam actions, government investigations, shareholder lawsuits or other legal proceedings;
•possible losses relating to product liability lawsuits and claims regarding products for which we cannot obtain product liability insurance or for which such insurance may not be adequate to cover our losses, including the product liability lawsuits we are currently defending relating to alleged personal injuries associated with the use of Cordis inferior vena cava filter products;
•our ability to maintain adequate intellectual property protections;
•the costs, difficulties and uncertainties related to the integration of acquired businesses, including liabilities relating to the operations or activities of such businesses prior to their acquisition, and uncertainties relating to our ability to achieve the anticipated results from acquisitions;
•risks associated with the divestiture of the Cordis business, including the risk that the costs associated with exit or disposal activities could ultimately be greater than we currently expect or that we could incur greater stranded costs than expected;
•our ability to manage and complete divestitures or other strategic business combination transactions, including our ability to find buyers or other strategic exit opportunities and risks associated with the possibility that we could experience greater dis-synergies than anticipated or otherwise fail to achieve our strategic objectives;
•bankruptcy, insolvency or other credit failure of a customer or supplier that owes us a substantial amount;
•risks associated with global operations, including the effect of local economic environments, inflation, recession, currency volatility and global competition, in addition to risks associated with compliance with U.S. and international laws relating to global operations;
•uncertainties with respect to U.S. or international trade policies, tariffs, excise or border taxes and their impact on our ability to source products or materials that we need to conduct our business;
•risks associated with our use of and reliance on the global capital and credit markets, including our ability to access credit and our cost of credit, which may adversely affect our ability to efficiently fund our operations or undertake certain expenditures;
•our ability to introduce and market new products and our ability to keep pace with advances in technology;
•significant charges to earnings if goodwill or intangible assets become impaired;
•uncertainties relating to general political, business, industry, regulatory and market conditions; and
•other factors described in the “Risk Factors” section of the 2021 Form 10-K.
The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “would,” “project,” “continue,” “likely,” and similar expressions generally identify “forward-looking statements,” which speak only as of the date the statements were made, and also include statements reflecting future results or guidance, statements of outlook and expense accruals. We undertake no obligation to update or revise any forward-looking statements, except to the extent required by applicable law.