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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/X/ Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CARDINAL HEALTH, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CARDINAL HEALTH, INC.
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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[Cardinal Bird Logo]
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 8, 1994
------------------------
Notice is hereby given that the Annual Meeting of Shareholders of Cardinal
Health, Inc., an Ohio corporation (the "Company"), will be held at the Company's
corporate offices at 655 Metro Place South, 4th Floor, Dublin, Ohio, on Tuesday,
November 8, 1994, at 9:00 a.m. Eastern Time, for the following purposes:
1. To elect four Directors, each to serve for a term of three years and
until his successor is duly elected and qualified; and
2. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only shareholders of record on September 26, 1994, are entitled to notice
of and to vote at the meeting or any adjournment or postponement thereof.
By Order of the Board of Directors.
GEORGE H. BENNETT, JR., Secretary
October 14, 1994
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
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[Cardinal Bird Logo]
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
on behalf of the Board of Directors of Cardinal Health, Inc., an Ohio
corporation (the "Company"), for use at the Annual Meeting of Shareholders to be
held on Tuesday, November 8, 1994, at the Company's corporate offices at 655
Metro Place South, 4th Floor, Dublin, Ohio, at 9:00 a.m. Eastern Time and at any
adjournment or postponement thereof. This statement and the accompanying proxy,
together with the Company's Annual Report to Shareholders for the fiscal year
ended June 30, 1994, are first being sent to shareholders on or about October
14, 1994.
The close of business on September 26, 1994, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting. At that date, the Company had outstanding 41,438,545 common shares,
without par value ("Class A Common Shares"), and 203,191 Class B common shares,
without par value ("Class B Common Shares"). Holders of Class A Common Shares
are entitled to one vote per share for the election of Directors and upon all
matters on which shareholders are entitled to vote. Holders of Class B Common
Shares are entitled to one-fifth of one vote per share in the election of
Directors and upon all matters on which shareholders are entitled to vote.
The address of the Company's principal executive offices is 655 Metro Place
South, Suite 925, Dublin, Ohio 43017.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of fourteen members,
divided into two classes of five members each and a third class of four members.
The Company's Restated Code of Regulations, as amended, provide that the number
of Directors may be increased or decreased by action of the Board of Directors
upon the majority vote of the Board, but in no case shall the number of
Directors be fewer than nine or more than fourteen without an amendment approved
by the affirmative vote of the holders of not less than 75% of the shares having
voting power with respect to that proposed amendment. At the meeting, Class A
Common Shares and Class B Common Shares (collectively, "Common Shares")
represented by proxies, unless otherwise specified, will be voted for the
election of the four nominees hereinafter named, each to serve for a term of
three years and until his successor is duly elected and qualified. If, by reason
of death or other unexpected occurrence, any one or more of the nominees should
not be available for election, the proxies will be voted for the election of
such substitute nominee(s) as the Board of Directors may propose. Proxies may
not be voted at the annual meeting for a greater number of persons than the four
nominees named in this proxy statement, although additional nominations may be
made by shareholders at the meeting.
If notice in writing is given by any shareholder to the President, a
Vice-President or the Secretary of the Company not less than 48 hours before the
time fixed for holding the meeting that he desires that the voting for election
of Directors be cumulative, and if an announcement of the giving of such notice
is made upon the convening of such meeting by the Chairman or Secretary, or by
or on behalf of the shareholder giving such notice, each shareholder shall have
the right to cumulate such voting power as he possesses at such election and to
give one nominee a number of votes equal to the number of Directors to be
elected multiplied by the number of shares he holds (or, in the case of Class B
Common Shares, multiplied by one fifth of the number of shares he holds), or to
distribute his votes on the same basis among two or more nominees, as he sees
fit. If voting for the election of Directors is cumulative, the persons named in
the enclosed proxy will vote the shares
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represented thereby and by other proxies held by them so as to elect as many of
the four nominees named below as possible.
Listed below are the names of each person nominated for election as a
Director of the Company (each is currently a Director of the Company), and of
the Directors of the Company whose terms of office will continue after the
meeting, their principal occupations, other directorships (which are shown
parenthetically), ages, the year in which each first became a Director of the
Company or the Company's predecessor in interest, and the year in which each
such Director's term as a Director will expire:
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION(1) SINCE EXPIRES
- - ------------------------- --- ------------------------------------------ -------- --------
<S> <C> <C> <C> <C>
John F. Finn............. 46 Chairman and Chief Executive Officer of 1994 1994
Gardner Inc., an outdoor power equipment
distributor.
John F. Havens........... 67 Retired Chairman and Director Emeritus of 1979 1994
Banc One Corporation, a bank holding
company (Worthington Industries, Inc.).
L. Jack Van Fossen....... 57 President and Chief Executive Officer of 1983 1994
Red Roof Inns, Inc., a lodging company
(The Scotts Company).
Robert D. Walter (2)..... 49 Chairman and Chief Executive Officer of 1971 1994
the Company (Banc One Corporation,
Columbia/HCA Healthcare Corporation).
</TABLE>
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION(1) SINCE EXPIRES
- - ------------------------- --- ------------------------------------------ -------- --------
<S> <C> <C> <C> <C>
Mitchell J. Blutt, M.D. 37 Executive Partner of Chemical Venture 1994 1996
(3).................... Partners, an investment partnership which
is the general partner of Chemical Equity
Associates (Hanger Orthopedic Group, Inc.
and Cyberonics, Inc.).
Robert L. Gerbig......... 49 President and Chief Executive Officer of 1975 1995
Gerbig, Snell/Weisheimer & Associates,
Inc., an advertising agency.
Michael S. Gross (3)..... 33 Vice President of Apollo Capital 1994 1996
Management, Inc., which is the general
partner of Apollo Advisors, L.P., the
general partner of Apollo Investment Fund,
L.P. and AIF II, L.P., securities
investment funds (Buster Brown Apparel,
Inc., Interco Incorporated, Hills Stores,
Inc. and Cole National Corp.).
James L. Heskett......... 61 Professor, Harvard University Graduate 1982 1996
School of Business Administration
(Equitable of Iowa Companies).
John C. Kane (2)......... 54 President and Chief Operating Officer of 1993 1996
the Company.
</TABLE>
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<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION(1) SINCE EXPIRES
- - ------------------------- --- ------------------------------------------ -------- --------
<S> <C> <C> <C> <C>
George R. Manser......... 63 Chairman of Uniglobe Travel (Capital 1977 1995
Cities) Inc., a travel planning services
company (AmeriLink Corporation and State
Auto Financial Corporation).
John B. McCoy............ 51 Chairman and Chief Executive Officer of 1987 1996
Banc One Corporation, a bank holding
company (Banc One Corporation, Federal
Home Loan Mortgage Corporation, Tenneco
Incorporated and Ameritech Corporation).
Michael E. 61 Partner, Baker & Hostetler, a law firm. 1971 1995
Moritz(2)(4)...........
Jerry E. Robertson....... 61 Retired Executive Vice President of the 1991 1995
Life Sciences Sector and Corporate
Services of Minnesota Mining and
Manufacturing Company, a manufacturer of
industrial commercial, health care and
consumer products (Manor Care, Inc.,
Allianz Life Insurance Company of North
America, Coherent, Inc., Haemonetics
Corporation, Life Technologies, Inc. and
Steris Corporation).
Melburn G. Whitmire(2)... 55 Vice Chairman of the Company. 1994 1995
<FN>
- - ---------------
(1) Each of the above Directors, except Messrs. Gross, Kane, Manser, Van Fossen,
and Whitmire, either has had the positions shown or has had other executive
positions with the same employer for more than five years. Mr. Gross was,
prior to joining Apollo Capital Management, Inc. in 1990, an associate of
Drexel Burnham Lambert, Incorporated, an investment banking firm. Mr. Kane,
prior to joining the Company in February 1993, was employed by Abbott
Laboratories, a pharmaceutical and health care products manufacturer, where
he served most recently as president of the Ross Laboratories Division. Mr.
Manser, prior to his retirement in June 1994, was a director and Chairman of
the Board of North American National Corporation, an insurance holding
company. Mr. Van Fossen, prior to his resignation in June 1988, was the
President and Chief Executive Officer of Chemlawn Corporation, a lawn care
company, and pursued private investment interests until his appointment to
his position with Red Roof Inns, Inc. in May 1991. Mr. Whitmire was named to
his additional post as Vice Chairman of the Company in February 1994
following the Company's merger with Whitmire Distribution Corporation, while
retaining his title as Chairman, President, and Chief Executive Officer of
Whitmire.
(2) Messrs. Kane, Walter and Whitmire are officers and directors of various
subsidiaries of the Company. Mr. Moritz served as an officer of various
subsidiaries of the Company from the formation of the Company in 1979 to
July 1994.
(3) See footnote 14 on page 8 of this Proxy Statement for discussion of an
arrangement pursuant to which Dr. Blutt and Mr. Gross were elected to the
Board of Directors.
(4) Baker & Hostetler served as outside counsel to the Company and its
subsidiaries during the fiscal year ended June 30, 1994, and is serving as
outside counsel during the current fiscal year.
</TABLE>
Five meetings of the Company's Board of Directors were held during the
fiscal year ended June 30, 1994. Each Director, other than Messrs. Gross, Van
Fossen and Dr. Heskett, attended 75% or more of the meetings of the Board and
Board committees on which he served.
Messrs. Manser, Moritz, Walter and Whitmire are the current members of the
Board's Executive Committee, which is empowered to exercise all powers and
perform all duties of the Board of Directors when the Board is not in session
other than the authority to fill vacancies among the Directors or in any
committee of the Directors. The Executive Committee met two times during the
last fiscal year and acted numerous times by written action without a meeting
pursuant to Ohio law.
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Messrs. Gross, Manser, Moritz, Van Fossen and Dr. Robertson are the current
members of the Board's Audit Committee, which is empowered to exercise all
powers and authority of the Board of Directors with respect to the Company's
annual audit, accounting policies, financial reporting and internal controls.
The Audit Committee met four times during the last fiscal year.
Messrs. Finn, Havens, McCoy and Dr. Heskett are the current members of the
Board's Compensation Committee, which is empowered to exercise all powers and
authority of the Board of Directors with respect to compensation of the
employees of the Company, sales to employees of stock in the Company, or grants
to employees of options to purchase stock in the Company. The Compensation
Committee met six times during the last fiscal year and acted several times by
written action without a meeting pursuant to Ohio law.
The Company's Board of Directors does not have a nominating committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
BUSINESS TRANSACTIONS
A property which includes parts of the Company's former Columbus food
distribution center is leased by the Company from a limited partnership in which
the general partner is Mr. Walter and the limited partners include certain
shareholders and directors of the Company or their affiliates. The Company has
subleased this property to third parties at rentals substantially in excess of
the rentals it is required to pay. The initial term of the Company's lease
expired February 29, 1984, and the lease is currently in its second ten-year
renewal term. The Company has options to renew the lease for two additional
ten-year terms. The rent payable by the Company is $92,000 per annum during each
of the first two renewal terms, and the fair rental value of the premises during
each of the last two renewal terms. The Company has a first-refusal option to
purchase the premises in the event the lessor proposes to sell the premises to a
third party.
In the opinion of management, the transaction described above is on terms
at least as favorable as could be obtained from unaffiliated third parties.
TRANSACTIONS IN CONNECTION WITH THE WHITMIRE MERGER
Company Common Shares Issued in the Merger
As a result of the Company's merger with Whitmire Distribution Corporation
in February 1994 (the "Whitmire Merger"), the persons listed in the table below
received either Class A Common Shares or Class B Common Shares of the Company in
exchange for Whitmire common stock or Whitmire class B common stock (including
Whitmire stock acquired upon the exercise of warrants):
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON SHARES COMMON SHARES
------------- --------------
<S> <C> <C>
Melburn G. Whitmire.......................... 672,801 -0-
Gary E. Close................................ 167,000 -0-
James E. Clare............................... 62,625 -0-
Apollo Investment Fund, L.P. (1)(2).......... 3,333,921 -0-
Chemical Equity Associates (1)(2)............ 290,428 2,971,375
<FN>
- - ---------------
(1) At the time of the Whitmire Merger, the Whitmire stock was held of record by
M.D. Investors, L.P. ("MD"), a limited partnership whose general partner was
Apollo Investment Fund, L.P. ("Apollo") and whose limited partner was
Chemical Equity Associates ("CEA"). The Class B Common Shares are
convertible into Class A Common Shares, on a one-for-one basis, only under
the circumstances set forth in the Company's Amended and Restated Articles
of Incorporation, as amended. Shortly following the Whitmire Merger, MD was
dissolved and the Common Shares of the Company issued in the Whitmire Merger
were distributed to MD's partners. The numbers shown in the table above
reflect the Common Shares held by Apollo and CEA following the dissolution
of MD.
(2) In September 1994, in connection with an underwritten public offering in
which the Company and certain shareholders of the Company sold an aggregate
of 8,050,000 Class A Common Shares (the "Public Offering"): (i) Apollo sold
2,768,184 Class A Common Shares; and (ii) immediately following the
conversion of 2,768,184 Class B Common Shares into Class A Common Shares,
CEA sold such
</TABLE>
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Class A Common Shares. Immediately following completion of the Public
Offering, Apollo held 565,737 Class A Common Shares, and CEA held 290,428
Class A Common Shares and 203,191 Class B Common Shares.
Conversion of Options
In connection with the Whitmire Merger, options to purchase Whitmire common
stock were automatically converted into options to purchase a number of Class A
Common Shares equal to the number of shares of Whitmire common stock issuable
immediately prior to the Whitmire Merger multiplied by the exchange ratio used
for the Whitmire Merger. Accordingly, options to purchase Whitmire common stock
held by Messrs. Whitmire, Close and Clare were converted into options to
purchase Class A Common Shares of the Company ("Cardinal Exchange Options") at
exercise prices ranging from less than $.01 to $2.20 per share as follows: Mr.
Whitmire -- 532,333 shares; Mr. Close --146,125 shares; Mr. Clare -- 52,187
shares. In connection with the Public Offering, Messrs. Whitmire, Close and
Clare exercised options to purchase 375,000, 100,000 and 45,000 Class A Common
Shares, respectively, and sold these shares in the Public Offering.
Redemption of Whitmire Preferred Stock
Immediately prior to the completion of the Whitmire Merger, and as a
condition to such completion, Whitmire redeemed all of its issued and
outstanding Senior Preferred Stock and Series A Preferred Stock at the
redemption price of $100 per share, plus cumulated and unpaid dividends,
resulting in redemption payments to MD and CEA of $13,598,000 and $6,558,000,
respectively. As described above, MD was dissolved shortly following the
Whitmire Merger. Of the $13,598,000 in redemption payments to MD, $10,200,182
was for the benefit of Apollo and $3,398,248 was for the benefit of CEA.
Whitmire Registration Rights Agreement
In connection with the Whitmire Merger, the Company granted to Apollo, CEA,
and Mr. Whitmire (collectively, the "Whitmire Stockholders") certain rights to
require the Company to register under the Securities Act of 1933, as amended
(the "Securities Act"), Class A Common Shares held by them (including Class A
Common Shares issuable to CEA upon conversion of Class B Common Shares). These
rights include "demand" and "piggyback" registration rights and are contained in
the Registration Rights Agreement dated as of October 11, 1993, as amended (the
"Registration Rights Agreement"), among the Company, the Whitmire Stockholders,
and Robert D. Walter, Chairman of the Company. Under the Registration Rights
Agreement, the Whitmire Stockholders are entitled to require the Company to file
a registration statement under the Securities Act with the Securities and
Exchange Commission covering the sale of their shares (a "Required
Registration") up to seven times in the five-year period ending April 25, 1999,
unless earlier terminated or extended as provided below. The Whitmire
Stockholders may only request up to four Required Registrations during the
three-year period ending April 25, 1997. The Company will pay all expenses
incurred in connection with up to four Required Registrations, exclusive of the
fees and expenses of counsel for selling Whitmire Stockholders. In addition, the
selling Whitmire Stockholders will be responsible for any underwriters'
discounts and commissions attributable to the sale of their shares.
The Company is not required to effect the first Required Registration under
the Registration Rights Agreement unless Whitmire Stockholders (together with
certain permitted transferees) making the request hold at least 1,250,000 Common
Shares, and the Company is not required to effect subsequent Required
Registrations unless such persons hold (i) at least 937,500 Common Shares
acquired in the Whitmire Merger, or (ii) Common Shares acquired in the Whitmire
Merger with a fair market value of at least $25 million. The Whitmire
Stockholders may not make a request for a Required Registration until 180 days
have elapsed since the completion of a prior Required Registration. In addition,
the Company has the right to delay for up to 90 days the filing of a
registration statement with respect to a Required Registration if the Company's
Board of Directors determines such action is in the best interests of the
Company's shareholders, but the Company may not invoke a delay if at least 12
months have not elapsed from the end of any previous delay period. These delays
and certain other events will extend on a day-for-day basis the five-and
three-year periods referred to in the preceding and following paragraphs.
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The Registration Rights Agreement also provides that the Whitmire
Stockholders have the right to include their Class A Common Shares in
registration statements filed by the Company in connection with primary or
secondary offerings for cash (with certain exceptions). These "piggyback"
registration rights also terminate on April 25, 1999, unless earlier terminated
or extended.
The demand and piggyback registration rights granted to (i) CEA, its
affiliates and successors (the "Chemical Holders"), and (ii) Apollo, its
affiliates and successors (the "Apollo Holders"), terminate prior to April 25,
1999, if the Chemical Holders or the Apollo Holders, as the case may be, either
(i) shall beneficially own fewer than 312,500 Common Shares or (ii) shall
acquire more than an additional 625,000 Common Shares without the Company's
consent. The Registration Rights Agreement also limits the grant by the Company
of additional registration rights.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Common Shares as of September 27, 1994, by:
(a) Company Directors; (b) each other person who is known by the Company to own
beneficially more than 5% of the outstanding Class A Common Shares; (c) the
Company's Chief Executive Officer and the other four most highly compensated
executive officers named in the Summary Compensation Table; and (d) the
Company's executive officers and Directors as a group. Except as otherwise
described in the notes below, the following beneficial owners have sole voting
power and sole investment power with respect to all Class A Common Shares set
forth opposite their names. Chemical Equity Associates is the beneficial owner
of all of the issued and outstanding Class B Common Shares.
<TABLE>
<CAPTION>
NUMBER OF CLASS A PERCENT
COMMON SHARES OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- - --------------------------------------------------------------- ------------------ -------
<S> <C> <C>
Robert D. Walter (1)(2)(3)..................................... 3,332,225 8.03%
FMR Corp. (4).................................................. 4,769,220 11.51
Firstar Corporation (5)........................................ 2,147,863 5.18
Melburn G. Whitmire (3)(6)..................................... 830,134 2.00
Apollo Investment Fund, L.P. (7)............................... 565,737 1.37
Michael E. Moritz (1)(8)(9).................................... 551,233 1.33
Chemical Equity Associates (10)................................ 493,619 1.19
John C. Kane (3)............................................... 58,250 *
George R. Manser (9)........................................... 52,598 *
Robert L. Gerbig (9)........................................... 38,642 *
John B. McCoy (9)(11).......................................... 33,434 *
L. Jack Van Fossen (9)......................................... 29,724 *
James L. Heskett (9)(12)....................................... 18,521 *
John F. Havens (9)............................................. 12,805 *
Jerry E. Robertson (9)......................................... 8,056 *
John F. Finn (9)(13)........................................... 7,257 *
Michael S. Gross (9)(14)....................................... 2,865 *
Mitchell J. Blutt, M.D. (9)(14)................................ 2,865 *
James F. Millar (3)............................................ 40,780 *
David Bearman (3).............................................. 40,296 *
All Executive Officers and Directors as a Group (15)(20
Persons)..................................................... 4,812,243 11.50%
<FN>
- - ---------------
(1) Mr. Walter's address is 655 Metro Place South, Suite 925, Dublin, Ohio
43017. Mr. Walter, Edward D. Esping and members of his family (the
"Espings"), and Mr. Moritz are parties to a Shareholders Agreement dated
July 13, 1984, as amended (the "Shareholders Agreement"), pursuant to which
they have agreed to act jointly in voting certain Class A Common Shares
(the "Pooled Shares") owned by each of them in a manner determined
desirable by the holders of a majority of the Pooled Shares. The Pooled
Shares are owned as follows: Mr. Walter -- 2,525,146 shares; the Espings --
173,505 shares; and Mr. Moritz -- 528,428 shares. Since Mr. Walter owns a
majority of the Pooled Shares, he controls the voting of the Pooled Shares.
The Pooled Shares are subject to a right of first refusal in favor of the
owners of the remaining Pooled Shares. The terms of the Shareholders
Agreement will continue through September 14, 1999, unless earlier
terminated by, among other things, the decision by then-holders of a
majority of the Pooled Shares, any event which results in Mr. Walter not
owning a majority of the Pooled Shares, or the release from the
Shareholders Agreement of more than 50% of the original Pooled Shares. Mr.
Walter has sole investment power with respect to the 2,525,146 Pooled
Shares he owns of record and, as a result of the Shareholders Agreement, he
has shared voting power with respect to all the Pooled Shares (which
include such 2,525,146 shares).
(2) Bank One Trust Company, N.A. is the trustee of separate trusts (the "Walter
Trusts") for the benefit of each of Mr. Walter's three children. Each such
trust owns 45,897 Class A Common Shares. Class A Common Shares listed as
being beneficially owned by Mr. Walter exclude the 137,691 Class A
</TABLE>
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<PAGE> 10
Common Shares owned by the Walter Trusts, and Mr. Walter disclaims
beneficial ownership of such Class A Common Shares.
(3) Class A Common Shares and the percent of class listed as being beneficially
owned by the Company's named executive officers include outstanding options
to purchase Class A Common Shares which are exercisable within 60 days of
September 27, 1994, as follows: Mr. Walter -- 54,375 shares; Mr. Kane --
-0-shares; Mr. Whitmire -- 157,333 shares; Mr. Bearman -- 24,052 shares;
and Mr. Millar -- 14,514 shares.
(4) Based on information obtained from a Schedule 13G filed by FMR Corp. with
the Securities and Exchange Commission on or about October 6, 1994. The
address of FMR Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
(5) Based on information obtained from a Schedule 13G filed by Firstar
Corporation with the Securities and Exchange Commission on or about
February 11, 1994. The address of Firstar Corporation is 777 E. Wisconsin
Avenue, Milwaukee, Wisconsin 53202.
(6) Includes 4,801 Class A Common Shares held by Mr. Whitmire and his wife as
custodian for the benefit of their minor daughter.
(7) The address of Apollo Investment Fund, L.P. ("Apollo") is c/o Apollo
Advisors, L.P., Two Manhattanville Road, Purchase, New York 10577. Apollo's
managing general partner is Apollo Advisors, L.P., whose general partner is
Apollo Capital Management, Inc. Michael S. Gross, who also serves as a
Director of the Company, is a Vice President of Apollo Capital Management,
Inc. Mr. Gross expressly disclaims beneficial ownership of such shares.
(8) Mr. Moritz has sole investment power with respect to all but 10,000 Class A
Common Shares listed as being beneficially owned by him in the table above,
which 10,000 shares are held by a family partnership of which Mr. Moritz
and his spouse are general partners and over which he has shared investment
and voting power. As a result of the Shareholders Agreement described in
Note (1) above, Mr. Moritz has shared voting power with respect to the
Pooled Shares owned by him.
(9) Class A Common Shares and the percent of class listed as being beneficially
owned by the listed Company Directors (except for Messrs. Kane, Walter and
Whitmire) include outstanding options to purchase Class A Common Shares
which are exercisable under the Company's Directors' Stock Option Plan as
follows: Dr. Robertson -- 8,056 shares; Messrs. Gross, Blutt, and Finn --
2,865 shares each; and each other listed Director (except for Messrs.,
Kane, Walter and Whitmire) -- 10,120 shares.
(10) The address of Chemical Equity Associates ("CEA") is 270 Park Avenue (5th
Floor), New York, New York 10017. Class A Common Shares and the percent of
class listed as being beneficially owned by CEA include 203,191 Class A
Common Shares issuable upon the conversion of the same number of Class B
Common Shares, which conversion is possible only under the circumstances
set forth in the Company's Articles. At September 27, 1994, CEA was the
beneficial owner of all of the Company's 203,191 Class B Common Shares
issued and outstanding. Mitchell J. Blutt, M.D., who serves as a Director
of the Company and as an Executive Partner of Chemical Venture Partners,
the sole general partner of CEA. Dr. Blutt expressly disclaims beneficial
ownership of the Common Shares owned by CEA.
(11) Includes 2,827 Class A Common Shares which are held by Mr. McCoy in trust
for the benefit of his children, but does not include Class A Common Shares
owned by Banc One Corporation and its subsidiaries.
(12) Includes 686 Class A Common Shares held by Dr. Heskett in trust for the
benefit of his children.
(13) Includes 2,625 Class A Common Shares held jointly by Mr. Finn and his wife,
306 Class A Common Shares held in his wife's individual retirement account,
and 62 Class A Common Shares held for the benefit of each of Mr. Finn's two
minor children.
(14) Does not include Common Shares beneficially owned by Apollo, in the case of
Mr. Gross, or by CEA, in the case of Dr. Blutt (see Notes (7) and (10)). As
a result of the Whitmire Merger, Apollo acquired the right to designate two
nominees for election as Directors of the Company and will continue to have
this right for so long as (A) Apollo, including any of its affiliates and
any of its accounts under common management and control (the "Apollo
Group"), and (B) any former shareholder of Whitmire
8
<PAGE> 11
(exclusive of Apollo Advisors, L.P. and any such shareholders who were
current or former employees of Whitmire as of October 11, 1993, or any
family members of such employees or trusts for their benefit ("Management
Shareholders")) each continue to have a pecuniary interest in 1,250,000 or
more Common Shares issued to such person in the Whitmire Merger (the
"Threshold Amount"). Further, Apollo Advisors, L.P. has the right to
designate one individual for so long as only one of the Apollo Group or any
former shareholder of Whitmire (exclusive of Apollo Advisors, L.P. or
Management Shareholders) shall continue to have a pecuniary interest in a
number of Common Shares which equals or exceeds the Threshold Amount. In
connection with the Whitmire Merger, Apollo designated Messrs. Gross and
Blutt as nominees for Directors of the Company and they were elected by the
Company's shareholders. In addition, until the Apollo Group no longer has a
pecuniary interest in a number of Common Shares equal to or exceeding the
Threshold Amount, the Company must include as a member of its Audit
Committee one Director designated by the Apollo Group and, if Mr. Whitmire
ceases to be a member of the Company's Executive Committee, one Director
designated by the Apollo Group on the Company's Executive Committee.
Effective September 26, 1994 upon completion of the Public Offering,
neither the Apollo Group nor any other former shareholder of Whitmire had a
pecuniary interest in the Class A Common Shares or the Class B Common
Shares which equals or exceeds the Threshold Amount.
(15) Class A Common Shares and percent of class listed as being beneficially
owned by all executive officers and Directors as a group include: (a) all
Pooled Shares, including those Pooled Shares owned by the Espings; and (b)
outstanding options to purchase Class A Common Shares which are exercisable
within 60 days of September 27, 1994, but do not include any Class A Common
Shares beneficially owned by Apollo, CEA or Banc One Corporation or its
subsidiaries (including the 137,691 Class A Common Shares owned by the
Walter Trusts).
9
<PAGE> 12
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
compensation committee (the "Compensation Committee") of the Company's Board of
Directors, which has responsibility for reviewing all aspects of the
compensation program for the executive officers of the Company. The Compensation
Committee is comprised of the four Directors listed at the end of this report,
none of whom is a current or former employee of the Company and each of whom
qualifies as a disinterested person for purposes of Rule 16b-3 under the
Securities Exchange Act of 1934.
The Compensation Committee's primary objective with respect to executive
compensation is to establish programs which attract and retain key managers and
align their compensation with the Company's overall business strategies, values,
and performance. To this end, the Compensation Committee has established and the
Board of Directors has endorsed an executive compensation philosophy which
includes the following considerations:
- A "pay-for-performance" orientation that differentiates compensation
results based upon corporate, business unit, and individual performance;
- An emphasis on stock incentives as a significant component of total
compensation in order to more closely align the interests of Company
executives with the long-term interests of shareholders;
- An emphasis on total compensation vs. cash compensation, under which
base salaries are generally set somewhat below competitive levels but which
motivates and rewards Company executives with total compensation (including
incentive programs) at or above competitive levels, if performance is
superior;
- Recognition that as an executive's level of responsibility
increases, a greater portion of the total compensation opportunity should
be based upon stock and other performance incentives and less on salary and
employee benefits; and
- An appropriate mix of short-term and long-term compensation which
facilitates retention of talented executives and encourages Company stock
ownership and capital accumulation.
The primary components of the Company's executive compensation program are:
(a) base salaries; (b) annual cash incentive opportunities; (c) long-term
incentive opportunities in the form of stock options and restricted shares; and
(d) participation in the Company's profit-sharing and retirement savings plan.
Each primary component of pay is discussed below.
Base Salaries. Base salaries for Company executives are generally subject
to annual review and adjustment on the basis of individual and Company
performance, level of responsibility, and competitive, inflationary, and
internal equity considerations. The Compensation Committee generally attempts to
set base salaries of executive officers at a level which is below the "market"
rate, as determined from information gathered by the Company from independent
compensation consulting firms. With respect to the $484,000 base salary
established for Mr. Walter in April 1994 (a 9% increase from his previous base
salary determined in May 1993), the Compensation Committee took into account the
factors described above for other executive officers as well as Mr. Walter's
expanded responsibilities associated with the Company's rapid growth and the
acquisition of Whitmire Distribution Corporation in February 1994.
Annual Cash Incentives. Company executives are eligible to receive annual
cash bonus awards to focus attention on achieving key goals. Target incentive
amounts are established each year on an individualized basis, with targeted
amounts varying as a percentage of base salary depending upon each executive's
level of responsibility and function. Performance objectives are established for
the Company and for each significant business unit within the Company at the
beginning of each fiscal year, and are designed to provide competitive incentive
pay only for superior performance. These objectives include specific targets for
both earnings growth and corporate value creation. In addition, individual
performance objectives are established for each executive which include both
specific performance goals and other, more qualitative and developmental,
criteria. Historically, actual payouts have fluctuated significantly above and
below the targeted amounts for perform-
10
<PAGE> 13
ance in excess of or below business unit and personal objectives, subject to a
cap of 160% of the targeted amount but with no floor.
As of March 1, 1994, the Company changed its fiscal year end from March 31
to June 30 to correspond with the fiscal year end of Whitmire. As a result of
this change, Company managers were eligible to receive cash bonus awards for
both the twelve months ended March 31, 1994 (the "Annual Bonuses"), and the
three months ended June 30, 1994 (the "Stub Period Bonuses"). In the future,
Company managers will be eligible to receive annual cash bonus awards on a
fiscal year basis, commencing with the fiscal year ending June 30, 1995. In
conjunction with the fiscal year end change and effective for the Stub Period
Bonuses, the Committee increased targeted incentive amounts as a percentage of
base salaries for Company executives and, at the same time, eliminated the
opportunity to exceed 100% of the targeted amount.
Each of the Company's executive officers, other than Messrs. Whitmire,
Clare and Close (who instead received bonuses for the twelve months ended June
30, 1994, consistent with Whitmire's established practices) was awarded both an
Annual Bonus and a Stub Period Bonus. In determining Mr. Walter's Annual Bonus
of $307,000 (75% of which was allocable to the Company's fiscal year ended June
30, 1994) and Stub Period Bonus of $103,455 (all of which was allocable to the
Company's fiscal year ended June 30, 1994) the Compensation Committee took into
account the Company's growth in fully diluted earnings per share compared to the
Company's targeted earnings growth for each period, five acquisitions
successfully completed, certain qualitative factors associated with the
Company's financial performance (including an upgrade in the Company's financial
ratings, the Company's development as a national vs. regional distributor, and
the Company's superior performance relative to other industry participants),
progress made in improving the Company's strategic positioning, and achievement
of other individual performance objectives. Bonuses for the Company's other
named executive officers were approved by the Committee based on similar
corporate, business unit, and individual performance criteria.
Long-Term Stock Incentives. The Company's Stock Incentive Plan (the "Stock
Plan") is designed to align a significant portion of the executive compensation
package with the long-term interests of the Company's shareholders by providing
an incentive that focuses attention on managing the Company from the perspective
of an owner with an equity stake in the business. The Stock Plan was originally
adopted and approved by shareholders in 1987, and provides for the grant of
several types of equity-based awards, including both stock options and
restricted shares.
The Company makes annual grants of stock options to its management
personnel, including its executive officers. This annual grant program is
designed to provide Company managers, over a number of years, with multiple
stock options, each granted with an exercise price equal to the market price for
Company shares on the date of the grant. Individual option grants are determined
by the Compensation Committee based on a manager's current performance,
potential for future responsibility, and salary multiples designed to increase
the portion of the total compensation opportunity represented by stock
incentives as a manager's level of responsibility increases. The Compensation
Committee places a relatively heavy emphasis on stock options as a percentage of
total compensation, consistent with its philosophy that stock incentives more
closely align the interests of Company managers with the long-term interests of
shareholders.
Grants of restricted shares are generally limited to the Company's
executive officers and other senior management personnel to reward exceptional
performance with a long-term benefit, to facilitate stock ownership, and to
deter recruitment of key Company managers by competitors and others. Unlike the
Company's stock option program, restricted share grants are not made on an
annual or other regularly established basis. Recipients of restricted share
grants are subject to restrictions on the disposition of the stock during a
period determined by the Compensation Committee at the time of grant. Restricted
stock awards are forfeited by their terms if the recipient terminates employment
with the Company prior to the expiration of the restricted period.
Consistent with the Company's philosophy of linking total compensation to
stock performance for all of its executive officers, a significant portion of
Mr. Walter's overall compensation package is comprised of stock incentives. In
October 1993, the Compensation Committee granted Mr. Walter options to purchase
34,500 Common Shares with an exercise price of $34.60 per share as part of a
special option grant made to Company
11
<PAGE> 14
executives in recognition of their expanded responsibilities associated with the
Whitmire transaction. In April 1994, the Compensation Committee granted Mr.
Walter options to purchase 39,463 Common Shares with an exercise price of $38.60
per share as part of the annual option grant normally made to Company
executives. In making these grants, the Compensation Committee considered the
target range established for the Company's most senior officers, the completion
of the Whitmire and other acquisitions, the improvement in the Company's
strategic positioning, and Mr. Walter's progress in accomplishing personal
objectives. Mr. Walter's options vest on the third anniversary of the respective
grant dates and are generally exercisable for a period of seven years following
the vesting date. Mr. Walter also received restricted share grants of: (a) 6,250
shares in October 1993, and (b) 3,125 shares in May 1994, reflecting the
Committee's intent to provide long-term rewards for superior performance. These
awards will vest in 50% increments on each of the third and sixth anniversaries
of the respective grant dates;
Profit Sharing and Retirement Savings Plans. The Company's executive
officers are eligible to participate in the Company's Profit Sharing and
Retirement Savings Plan (the "Savings Plan"). Under the Savings Plan,
participants may authorize pre-tax payroll deductions for addition to their plan
accounts, and the Company provides a matching contribution equal to 75% of the
employee contribution (but not more than 2.25% of credited compensation). The
Company also makes a profit sharing contribution to the Savings Plan each plan
year, the amount of which is determined at the discretion of the Company's Board
of Directors based upon the recommendation of the Compensation Committee. In
April 1994, the Committee also approved an incentive deferred compensation plan
(the "Supplemental Plan") for senior executives. The Supplemental Plan is
designed primarily to replace benefits lost by executives with compensation in
excess of $150,000 due to recent tax law changes adversely impacting the level
of Company contributions which would otherwise be made to the Savings Plan. The
total Company contribution to the Savings Plan and Supplemental Plan accounts of
Mr. Walter for the twelve months ended June 30, 1994 was $22,671 and was
determined under the standard provisions of those plans.
Impact of 1993 Tax Act Changes. The Budget Reconciliation Act of 1993 (the
"Act") added a new Section 162(m) to the Internal Revenue Code of 1986, as
amended (the "Code"). That section prohibits a deduction to any publicly held
corporation for compensation paid to a "covered employee" in excess of $1
million per year (the "Dollar Limitation"). A covered employee is any employee
who appears in the Summary Compensation Table who is also employed by the
Company on the last day of the Company's fiscal year. As a result of the amount
of the Dollar Limitation, currently proposed exclusions of certain compensation
under the Company's Stock Incentive Plan, and salary deferral elections by Mr.
Walter, the Committee does not expect the deductibility of compensation paid in
fiscal 1995 to be affected by the Act. However, the Committee may consider
alternatives to its existing compensation programs in the future with respect to
qualifying executive compensation for deductibility.
Conclusion. As described above, the Company's executive compensation
program provides a significant link between total compensation and the Company's
performance and long-term stock price appreciation consistent with the
compensation philosophies set forth above. This program has been established for
a number of years, and has been a significant factor in the Company's growth and
profitability and the resulting gains achieved by the Company's shareholders.
John B. McCoy, Chairman
John F. Finn
John F. Havens
James L. Heskett
12
<PAGE> 15
<TABLE>
The following information is set forth with respect to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers.
I. SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION
---------------------------------- AWARDS
OTHER ------------------------- ALL
ANNUAL RESTRICTED SECURITIES OTHER
FY- COMPEN- STOCK UNDERLYING COMPEN-
NAME AND ENDED SALARY BONUS SATION AWARDS OPTIONS SATION
PRINCIPAL POSITION (1) ($) ($) ($)(2) ($)(3) (#) ($)(4)
- - ------------------------- ----- -------- -------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Walter 1994 $463,458 $333,705 -- $ 336,563 73,963 $153,306(5)
Chairman and Chief 1993 424,046 190,000 $102,967 -0- 17,250 23,544
Executive Officer 1992 387,808 256,000 -- 1,140,000 16,250 --
John C. Kane (6) 1994 360,789 255,472 -- 251,850 51,225 22,298
President and Chief 1993 13,269 -0- -- 1,470,000 68,750 --
Operating Officer
Melburn G. Whitmire (6) 1994 120,385 300,000 -- -0- -0- 193,530(7)
Vice Chairman
David Bearman 1994 239,989 127,754 -- 73,950 24,425 23,545
Executive Vice President 1993 223,170 87,000 20,381 -0- 5,000 58,178(8)
and Chief Financial 1992 213,308 99,000 -- -0- 4,813 --
Officer
James F. Millar 1994 201,375 110,515 106,451 65,250 22,225 22,224
Executive Vice 1993 178,846 68,400 -- 147,538 4,625 22,794
President-- 1992 165,847 62,000 -- 122,648 4,250 --
Northern Group
<FN>
- - ---------------
(1) On March 1, 1994, the Company changed its fiscal year end from March 31 to
June 30. As such, the information presented for 1994 includes compensation
earned, awarded or paid during the fiscal year ended June 30, 1994, and the
information presented for prior fiscal years includes compensation earned,
awarded or paid during those fiscal years ended March 31.
(2) Amounts shown represent reimbursements paid by the Company for taxes
incurred by the executive.
(3) Aggregate restricted share holdings and values at June 30, 1994, for the
named executive officers are as follows: (i) Mr. Walter -- 47,265 shares,
$1,852,788; (ii) Mr. Kane -- 44,500 shares, $1,744,400; (iii) Mr. Whitmire
-- 0 shares; (iv) Mr. Bearman -- 8,716 shares, $341,667; and (v) Mr. Millar
-- 12,487 shares, $489,490. Dividends are paid on restricted shares at the
same rate as all shares of record. The restrictions on all shares granted to
the named executive officers in fiscal year 1994 lapse 50% on the third
anniversary of the grant and 50% on the sixth anniversary of the grant. The
restrictions on the shares granted to Mr. Walter on May 23, 1991 (fiscal
year 1992) lapse(d) as follows -- 30% on December 23, 1992, 10% on each of
the third through sixth anniversaries of the grant, and 30% on the seventh
anniversary of the grant. The restrictions on the shares granted to Mr. Kane
on February 17, 1993 (fiscal year 1993) lapse 20% on each of the third
through seventh anniversaries of the grant; provided that if Mr. Kane's
employment with the Company continues through the fifth anniversary of the
grant and is thereafter terminated by the Company other than for cause, then
the restrictions on the remaining unvested shares shall lapse as of such
termination date. The restrictions on the shares granted to Mr. Millar on:
(i) July 2, 1991 (fiscal year 1992) lapsed on April 30, 1994; and (ii) June
18, 1992 (fiscal year 1993) lapse on April 30, 1995.
(4) Amounts shown represent Company contributions to the executive's account
under the Company's Profit Sharing and Retirement Savings Plan in the case
of Messrs. Walter, Kane, Bearman and Millar; and contributions under the
Whitmire Retirement Savings Plan in the case of Mr. Whitmire.
(5) Includes $130,635 for premiums paid by the Company on a split-dollar life
insurance arrangement among the Company, Mr. Walter, and a trust for Mr.
Walter's family. The Company will recover all such premiums paid by it, plus
interest at the rate of 3% per annum, upon the earlier to occur of January
12, 2003, or the death of the survivor of Mr. Walter and his spouse.
</TABLE>
13
<PAGE> 16
(6) Mr. Kane joined the Company in February 1993. Mr. Whitmire joined the
Company in February 1994 following the Whitmire Merger. Compensation
included in the Summary Compensation Table for Mr. Whitmire excludes all
compensation paid by Whitmire prior to the Whitmire Merger (including the
Cardinal Exchange Options described in "Certain Relationships and Related
Transactions-Transactions in Connection with the Whitmire Merger").
(7) Includes $10,000 for Company funded matching contributions and $85,000 for
premiums paid by the Company on a split-dollar insurance arrangement between
the Company and Mr. Whitmire under the Whitmire Selective Deferred
Compensation Plan. The Company will recover all such premiums paid by it
upon the death of Mr. Whitmire. Also includes $90,000 for previously accrued
vacation time paid to Mr. Whitmire in connection with the Whitmire Merger.
(8) Includes $34,634 for expenses related to relocation.
<TABLE>
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(3)
GRANTED IN FISCAL PRICE EXPIRATION ----------------------------------
NAME (#)(1) YEAR(2) ($/SH) DATE 0% ($) 5% ($) 10% ($)
- - --------------------- --------- ---------- -------- -------- ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Walter 34,500(4) 4.74% $34.60 10/13/03 $-0- $750,712 $1,902,450
39,463(5) 5.42 38.60 4/08/04 -0- 957,977 2,427,703
John C. Kane 25,000(4) 3.43 34.60 10/13/03 -0- 543,994 1,378,587
26,225(5) 3.60 38.60 4/08/04 -0- 636,621 1,613,322
Melburn G. Whitmire N/A N/A N/A N/A N/A N/A N/A
David Bearman 11,250(4) 1.55 34.60 10/13/03 -0- 244,797 620,364
13,175(5) 1.81 38.60 4/08/04 -0- 319,828 810,506
James F. Millar 10,000(4) 1.37 34.60 10/13/03 -0- 217,598 551,435
12,225(5) 1.68 38.60 4/08/04 -0- 296,766 752,063
<FN>
- - ---------------
(1) All options granted during the fiscal year to the named executives were
nonqualified stock options.
(2) Based on 728,058 options granted to all employees during the fiscal year
ended June 30, 1994.
(3) These amounts are based on hypothetical appreciation rates of 0%, 5% and 10%
and are not intended to forecast the actual future appreciation of the
Company's stock price. No gain to optionees is possible without an actual
increase in the price of the Company's shares, which increase benefits all
of the Company's shareholders.
(4) Option is exercisable on and after October 13, 1996.
(5) Option is exercisable on and after April 8, 1997.
</TABLE>
<TABLE>
III. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FY-END AT FY-END
(#) ($)
SHARES ACQUIRED -------------- -----------------
ON EXERCISE VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- - ------------------------- --------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Robert D. Walter -0- $ -0- 38,125/107,463 $960,278/$735,202
John C. Kane -0- -0- -0-/119,975 -0-/1,395,735
Melburn G. Whitmire(1) -0- -0- 532,333/-0- 19,986,259/-0-
David Bearman -0- -0- 19,239/34,238 503,125/221,406
James F. Millar 1,788 65,262 10,264/31,100 260,355/199,985
</TABLE>
14
<PAGE> 17
- - ---------------
(1) Prior to the Whitmire Merger, Mr. Whitmire held options to purchase 51,002
shares of common stock, $0.01 par value, of Whitmire. In connection with the
Whitmire Merger, these options were automatically converted into options to
purchase 532,333 Class A Common Shares of the Company (as adjusted to
reflect the Company's 5-for-4 stock split paid June 30, 1994). In connection
with the Public Offering, Mr. Whitmire exercised options to purchase 375,000
Class A Common Shares and sold these shares in the Public Offering.
SHAREHOLDER PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return of
Class A Common Shares with the cumulative total return of the Standard & Poor's
Composite -- 500 Stock Index and an index based on a "line of business" peer
group of companies. The graph assumes in each case an initial investment of $100
as of March 31, 1989 based on the market prices at: (a) the end of each fiscal
year through and including March 31, 1993; and (b) June 30, 1994 (the last day
of the Company's fiscal year ended 1994), with the peer group investment
weighted on the basis of market capitalization at the beginning of each such
fiscal year and assuming reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period Cardinal
(Fiscal Year Covered) S&P 500 Peer Group Health, Inc.
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 119.27 119.18 140.09
1991 136.46 127.28 290.03
1992 151.53 123.23 314.78
1993 174.60 140.57 305.47
1994 177.22 204.42 504.94
<FN>
- - ---------------
(1) On March 1, 1994, the Company changed its fiscal year end from March 31 to
June 30. The information presented in the graph and table above for the
years 1989 through 1993 is as of March 31, and the same information for the
year 1994 is as of June 30, 1994.
</TABLE>
The companies in the peer group index are Bergen Brunswig Corporation,
Bindley Western Industries, Inc., FoxMeyer Corporation, McKesson Corporation,
and Owens & Minor, Inc.
EMPLOYMENT AGREEMENTS
In connection with the Whitmire Merger, Messrs. Whitmire, Clare and Close
each entered into an employment agreement with Whitmire, the performance of
which was guaranteed by the Company. The employment agreements provide for an
employment term of three years commencing February 7, 1994, and payment of a
base salary of $275,000 for Mr. Whitmire, $98,400 for Mr. Clare and $180,000 for
Mr. Close,
15
<PAGE> 18
such base salaries to be reviewed for possible increase at least annually. The
agreements also provide for an annual bonus payable in accordance with the bonus
plan in which other Company executive officers participate from time to time.
The employment agreements provide that individual parties to the employment
agreements will be entitled to participate in group health, life, disability
insurance, retirement savings and other employee benefit plans which are
substantially equivalent in the aggregate to either (i) Whitmire's group benefit
plans in effect at the time of the Whitmire Merger or (ii) the group benefit
plans maintained from time to time by the Company in which the other executives
of the Company participate. In addition, the employment agreements contain
noncompete covenants effective throughout the employment term, and for up to two
additional one year periods following the employment term (the "Extension
Period"). As consideration for his noncompete covenants, Mr. Whitmire will
receive two consecutive annual payments of $600,000 each, with the first such
payment to be paid on the 30th day after the earlier of the termination of Mr.
Whitmire's employment or February 7, 1999. As consideration for their respective
noncompete covenants following the termination of their employment with the
Company, each of Messrs. Clare and Close may, if the noncompete covenants are
triggered by the Company during the Extension Period, at its election, continue
to receive during the Extension Period base salary, 50% of their bonus target,
and participation in certain group benefit plans.
COMPENSATION OF DIRECTORS
The Company's non-employee Directors are paid $2,000 per quarter plus
$1,000 for each Board meeting attended. Non-employee Directors are also entitled
to receive $600 for each Committee meeting attended. Employee Directors do not
receive compensation in their capacity as a Director.
Pursuant to the Company's Directors' Stock Option Plan, as amended (the
"Directors' Option Plan"), options to purchase that number of Class A Common
Shares having a fair market value of $50,000 on the date of grant are
automatically granted on an annual basis to each non-employee Director who has
served as such for three consecutive annual meetings. The exercise price of
these options is the fair market value of the Class A Common Shares on the date
of grant. In addition, options to purchase that number of Class A Common Shares
having a fair market value of $100,000 on the date of grant are automatically
made to each non-employee Director subsequently added to the Board. The exercise
price of these options is the fair market value of Class A Common Shares on the
date of grant. All grants under the Directors' Option Plan vest immediately, are
exercisable for ten years from the date of grant, and are subject to adjustment
for subsequent stock dividends, splits, and other changes in the Company's
capital structure. If a Director ceases to serve as such, then options
previously granted under the Directors' Option Plan lapse unless exercised
within six months (twelve months in the case of a Director's death). Options
granted under the Directors' Option Plan are treated as "nonqualified options"
under the Code.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John F. Finn, John F. Havens, James L. Heskett and John B. McCoy are the
members of the Company's Compensation Committee. Mr. McCoy is Chairman and Chief
Executive Officer of Banc One Corporation ("Banc One"). Robert D. Walter,
Chairman and Chief Executive Officer of the Company, is a director of Banc One.
Banc One is the parent corporation of Bank One, Columbus, N.A. ("Bank One,
Columbus"), a bank with which the Company conducts business. As of June 30,
1994, the Company had lines of credit totaling $46 million with Bank One,
Columbus, of which $4 million was drawn upon at June 30, 1994. Banc One is also
the parent corporation of Bank One, Indianapolis, N.A. ("Bank One,
Indianapolis"), which serves as the transfer agent for the Company's Class A
Common Shares and as Trustee under the Indentures pertaining to the Company's 8%
Notes due 1997 and its 6 1/2% Notes due 2004.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the Company's 1995
Annual Meeting of Shareholders for inclusion in the proxy statement and form of
proxy relating to that meeting is advised that the proposal must be received by
the Company at its principal executive offices not later than June 15, 1995. The
16
<PAGE> 19
Company will not be required to include in its proxy statement a form of proxy
or shareholder proposal which is received after that date or which otherwise
fails to meet the requirements for shareholder proposals established by
regulations of the Securities and Exchange Commission.
SELECTION OF INDEPENDENT AUDITORS
On August 17, 1994, the Company's Board of Directors selected Deloitte &
Touche to serve as the independent auditors for the Company and its subsidiaries
for the fiscal year ending June 30, 1995. The selection of Deloitte & Touche as
the auditors for the Company was recommended to the Company's Board of Directors
by the Audit Committee of the Board. Representatives of Deloitte & Touche are
expected to be present at the meeting, with the opportunity to make a statement
about the Company's financial condition, if they desire to do so, and to respond
to appropriate questions.
OTHER MATTERS
The solicitation of proxies is made by and on behalf of the Board of
Directors. The cost of the solicitation will be borne by the Company, including
the reasonable expenses of brokerage firms or other nominees for forwarding
proxy materials to beneficial owners. In addition to solicitation by mail,
proxies may be solicited by telephone, telegraph, or personally. Proxies may be
solicited by Directors, officers, and employees of the Company without
additional compensation.
If the enclosed proxy is executed and returned, the shares represented
thereby will be voted in accordance with any specifications made by the
shareholder. In the absence of any such specification with respect to the
election of Directors, they will be voted to elect four Directors as set forth
under "Election of Directors" above. Although management does not presently
anticipate cumulating votes pursuant to proxies it obtains as a result of this
solicitation, it reserves the right to cumulate such votes and vote for less
than all of the Director nominees named herein. Under Ohio law and the Company's
Articles of Incorporation, broker non-votes and abstaining votes will not be
counted in favor of or against election of any nominee.
The presence of any shareholder at the meeting will not operate to revoke
his proxy. A proxy may be revoked at any time insofar as it has not been
exercised by giving written notice to the Company or in open meeting.
If any other matters shall properly come before the meeting, the persons
named in the proxy, or their substitutes, will vote thereon in accordance with
their judgment. The Board of Directors does not know of any other matters which
will be presented for action at the meeting.
By Order of the Board of Directors.
GEORGE H. BENNETT, JR., Secretary
October 14, 1994
17
<PAGE> 20
<TABLE>
<S> <C>
CARDINAL HEALTH, INC. PROXY
655 Metro Place South, Suite 925
Dublin, Ohio 43017 This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert D. Walter and George H. Bennett, Jr., and each of them, the attorneys and proxies of the
undersigned with full power of substitution to vote as indicated herein, all the common shares, without par value, of Cardinal
Health, Inc. held of record by the undersigned on September 26, 1994, at the annual meeting of shareholders to be held on November
8, 1994, or any postponements or adjournments thereof, with all the powers the undersigned would possess if then and there
personally present.
1. / / WITH or / / WITHOUT authority to vote (except as marked to the contrary below) for the election of each of the nominees
listed below:
John F. Finn, John F. Havens, L. Jack Van Fossen, Robert D. Walter
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- - --------------------------------------------------------------------------------------------------------------------------------
2. In their discretion, to vote upon such other business as may properly come before the meeting.
</TABLE>
<PAGE> 21
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
SHAREHOLDER. IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED TO ELECT
THE NOMINEES DESCRIBED IN ITEM 1 ABOVE AND WITH DISCRETIONARY AUTHORITY ON ALL
MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY POSTPONEMENTS
OR ADJOURNMENTS THEREOF.
Receipt of Notice of Annual Meeting of Shareholders and the related Proxy
Statement is hereby acknowledged.
Dated , 1994
---------------------------
---------------------------------------
---------------------------------------
---------------------------------------
Signature(s) of Shareholder(s)
Please sign as your name appears hereon.
If shares are held jointly, all holders
must sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title.
If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person, indicating where
proper, official position or
representative capacity.
<PAGE> 22
<TABLE>
<S> <C>
CARDINAL HEALTH, INC. PROXY
655 Metro Place South, Suite 925
Dublin, Ohio 43017 This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert D. Walter and George H. Bennett, Jr., and each of them, the attorneys and proxies of the
undersigned with full power of substitution to vote as indicated herein, all the Class B common shares, without par value, of
Cardinal Health, Inc. held of record by the undersigned on September 26, 1994, at the annual meeting of shareholders to be held on
November 8, 1994, or any postponements or adjournments thereof, with all the powers the undersigned would possess if then and there
personally present.
1. / / WITH or / / WITHOUT authority to vote (except as marked to the contrary below) for the election of each of the nominees
listed below:
John F. Finn, John F. Havens, L. Jack Van Fossen, Robert D. Walter
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
- - --------------------------------------------------------------------------------------------------------------------------------
2. In their discretion, to vote upon such other business as may properly come before the meeting.
</TABLE>
<PAGE> 23
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
SHAREHOLDER. IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED TO ELECT
THE NOMINEES DESCRIBED IN ITEM 1 ABOVE AND WITH DISCRETIONARY AUTHORITY ON ALL
MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY POSTPONEMENTS
OR ADJOURNMENTS THEREOF.
Receipt of Notice of Annual Meeting of Shareholders and the related Proxy
Statement is hereby acknowledged.
Dated , 1994
---------------------------
---------------------------------------
---------------------------------------
---------------------------------------
Signature(s) of Shareholder(s)
Please sign as your name appears hereon.
If shares are held jointly, all holders
must sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give your full title.
If a corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person, indicating where
proper, official position or
representative capacity.
