<PAGE> 1
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 (AMENDMENT NO. ___)
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary Proxy Statement Confidential, for Use of the
- --- --- Commission Only (as permitted
by Rule 14a-6(e)(2))
X Definitive Proxy Statement
- ---
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)
NA
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
- ---
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
- ---
(1) Title of each class of securities to which transaction applies:
- ---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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___ Fee paid previously with preliminary materials:
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___ 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[CARDINAL HEALTH, INC. LOGO]
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 5, 1997
----------------------
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 5555 Glendon Court, Dublin, Ohio, on Wednesday,
November 5, 1997, at 8:00 a.m., local time, for the following purposes:
1. To elect four Directors, each to serve for a term of
three years and until his or her successor is duly
elected and qualified;
2. To vote on a proposal to amend the Company's Equity
Incentive Plan as described in the Company's Proxy
Statement; and
3. To transact such other business as may properly come
before the meeting or any adjournment or postponement
thereof.
Only shareholders of record on September 12, 1997, 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 13, 1997
SHAREHOLDERS, WHETHER OR NOT THEY 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.
<PAGE> 3
[CARDINAL HEALTH, INC. LOGO]
PROXY STATEMENT
This proxy statement is being 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 the
shareholders of the Company (the "Annual Meeting") to be held on Wednesday,
November 5, 1997, at the Company's corporate offices at 5555 Glendon Court,
Dublin, Ohio, at 8:00 a.m. local time and at any adjournment or postponement
thereof. This proxy statement and the accompanying proxy, together with the
Company's Annual Report to Shareholders for the fiscal year ended June 30, 1997,
are first being sent to shareholders on or about October 13, 1997.
The close of business on September 12, 1997, has been fixed as the
record date for the determination of shareholders of the Company entitled to
notice of and to vote at the Annual Meeting. At that date, the Company had
outstanding 109,202,649 common shares, without par value ("Common Shares").
Except as set forth below, holders of Common Shares at the record date are
entitled to one vote per share for the election of Directors and upon all
matters on which shareholders are entitled to vote.
The address of the Company's principal executive office is 5555 Glendon
Court, Dublin, Ohio 43016.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of twelve members,
divided into three classes of four members each. The Company's Restated Code of
Regulations, as amended, provides 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, 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 or her 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.
Under Ohio law, if notice in writing is given by any shareholder
entitled to vote at the Annual Meeting 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 such shareholder 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 entitled to
vote at the Annual Meeting 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 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 represented thereby and
by other proxies held by them so as to elect as many of the four nominees named
below as possible. Under Ohio law and the Company's Articles of Incorporation,
broker non-votes will not be counted in favor of or
<PAGE> 4
against election of any nominee. The four nominees receiving the greatest number
of votes will be elected Directors.
Listed below are the names of those persons nominated for election as
Directors 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 as of September 12, 1997, 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>
NAME AGE PRINCIPAL OCCUPATION(1) DIRECTOR TERM
- ---- --- ----------------------- -------- ----
SINCE EXPIRES
----- -------
<S> <C> <C> <C> <C>
John F. Finn............... 49 Chairman and Chief Executive Officer 1994 1997
of Gardner, Inc., an outdoor power
equipment distributor.
John F. Havens............. 70 Retired Chairman and Director Emeritus 1979 1997
of Banc One Corporation, a bank holding
company (Worthington Industries, Inc.).
L. Jack Van Fossen......... 60 Retired President and Chief Executive 1983 1997
Officer of Red Roof Inns, Inc., a lodging
company (The Scotts Company).
Robert D. Walter........... 52 Chairman and Chief Executive Officer of the 1971 1997
Company (Banc One Corporation, Karrington
Health, Inc., and Westinghouse Electric
Corporation). (2)
</TABLE>
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION(1) DIRECTOR TERM
- ---- --- ----------------------- -------- ----
SINCE EXPIRES
----- -------
<S> <C> <C> <C> <C>
Robert L. Gerbig........... 52 President and Chief Executive Officer of 1975 1998
Gerbig, Snell/Weisheimer & Associates,
Inc., an advertising agency.
George R. Manser........... 66 Chairman of Uniglobe Travel (Capital 1977 1998
Cities) Inc. and Director of Corporate
Finance of Uniglobe Travel (U.S.A.) LLC,
travel planning services companies; and
Advisory Director to Corporate Finance
Dept. of J.C. Bradford & Co., a financial
services company (AmeriLink Corporation,
Checkfree Corporation, Hallmark Financial
Services, Inc., and State Auto Financial
Corporation).
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION(1) DIRECTOR TERM
- ---- --- ----------------------- -------- ----
SINCE EXPIRES
----- -------
<S> <C> <C> <C> <C>
Jerry E. Robertson......... 64 Retired Executive Vice President of the 1991 1998
Life Sciences Sector and Corporate
Services of Minnesota Mining &
Manufacturing Company, a manufacturer of
industrial commercial, health care and
consumer products (Manor Care, Inc.,
Coherent, Inc., Haemonetics Corporation,
Steris Corporation, Medwave, Inc., and
Choice Hotels International, Inc.).
Melburn G. Whitmire........ 58 Vice Chairman of the Company. (2) 1994 1998
Regina E. Herzlinger....... 53 Professor, Harvard University Graduate 1995 1999
School of Business Administration (C.R.
Bard, Inc., Deere & Company, Manor Care,
Inc., Schering-Plough Corporation, and
Total Renal Care Holdings, Inc.).
J. Michael Losh............ 51 Executive Vice President and Chief 1996 1999
Financial Officer of General Motors
Corporation, an automobile manufacturing
company.
John C. Kane............... 57 President and Chief Operating Officer of 1993 1999
the Company (Connetics Corporation). (2)
John B. McCoy.............. 54 Chairman and Chief Executive Officer of 1987 1999
Banc One Corporation, a bank holding
company (Banc One Corporation, Federal
Home Loan Mortgage Corporation, Tenneco
Incorporated, and Ameritech Corporation).
</TABLE>
(1) Each of the above Directors, except Messrs. 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. 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
retired from Red Roof Inns in June 1995. Prior to the Company's merger
transaction in February 1994 with Whitmire Distribution Corporation
("Whitmire"), Mr. Whitmire was Chairman, President, and Chief Executive
Officer of Whitmire.
(2) Messrs. Kane and Walter are officers and directors of various
subsidiaries of the Company; Mr. Whitmire is an officer of Whitmire.
Four regular meetings and two special meetings of the Company's Board
of Directors were held during the fiscal year ended June 30, 1997. Each
Director, except Dr. Robertson, attended 75% or more of the meetings of the
Board and Board committees on which he or she served.
3
<PAGE> 6
Messrs. Manser, McCoy, 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 did not meet during the last
fiscal year, but acted numerous times by written action without a meeting
pursuant to Ohio law.
Messrs. Finn and Gerbig, Mrs. Herzlinger, 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. Losh, Manser, and Van Fossen are the current members of the
Board's Compensation and Personnel 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, and
grants to employees of options to purchase stock in the Company. The
Compensation and Personnel Committee met five times during the last fiscal year
and acted several times by written action without a meeting pursuant to Ohio
law.
Messrs. Losh and McCoy and Dr. Robertson are the current members of the
Board's Nominating Committee, which is empowered to exercise all powers and
authority of the Board of Directors with respect to selection of nominees to
serve on the Board and its various committees. The Nominating Committee will
consider nominees recommended by shareholders upon submission in writing to the
Secretary of the Company of the names of such nominees, together with their
qualifications for service as a Director of the Company. The Nominating
Committee did not meet during the fiscal year ended June 30, 1997.
CERTAIN RELATIONSHIPS AND RELATED 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 Mr. Walter.
The Company has subleased this property to third parties at rentals
substantially in excess of the rentals it is required to pay to the limited
partnership. 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 limited partnership proposes to sell the premises to a third party.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All executive officers and Directors of the Company except Mr. Whitmire
timely filed all reports required under Section 16(a) of the Securities Exchange
Act of 1934 during the fiscal year ended June 30, 1997. Mr. Whitmire's Form 5
reporting one gift transaction in 100 Common Shares was filed late.
4
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Shares as of September 12, 1997,
by: (a) Company Directors; (b) each other person who is known by the Company to
own beneficially more than 5% of the outstanding 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 Common Shares set forth
opposite their names:
<TABLE>
<CAPTION>
Number of
Common Shares
Name of Beneficial Owner Beneficially Owned Percent of Class
- ------------------------ ------------------ ----------------
<S> <C> <C>
Robert D. Walter (1) (2) 4,696,298 4.3%
Putnam Investments, Inc. (3) 6,231,800 5.7%
Melburn G. Whitmire (4) 1,054,623 *
John C. Kane (2) 262,358 *
James F. Millar (2) 97,494 *
George R. Manser (5)(6) 81,216 *
David Bearman (2) 74,255 *
Robert L. Gerbig (5) 61,943 *
John B. McCoy (5) (7) 47,218 *
L. Jack Van Fossen (5) 43,808 *
David A. Abrahamson (2) 29,928 *
John F. Havens (5) (8) 18,949 *
John F. Finn (5) (9) 14,450 *
Jerry E. Robertson (5) 13,364 *
J. Michael Losh (5) 3,821 *
Regina E. Herzlinger (5) 2,843 *
All Executive Officers and Directors as a 5,715,658 5.2%
Group (10) (20 Persons)
</TABLE>
- ----------
(1) Includes 1,435,778 Common Shares held in Mr. Walter's grantor retained
annuity trusts. Mr. Walter, Edward D. Esping and members of his family
(the "Espings"), and Michael E. 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 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 -
2,061,974 shares; the Espings - 147,754 shares; and Mr. Moritz -
769,735 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
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 2,061,974 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 2,061,974 shares).
(2) Common Shares and the percent of class listed as being beneficially
owned by the Company's named executive officers include outstanding
options to purchase Common Shares which are exercisable within
5
<PAGE> 8
60 days of September 12, 1997, as follows: Mr. Walter - 218,383 shares;
Mr. Kane - 179,963 shares; Mr. Millar - 62,050 shares; Mr. Bearman -
61,905 shares; and Mr. Abrahamson - 12,626 shares.
(3) Based on information obtained from a Schedule 13G filed by Putnam
Investments, Inc. with the Securities and Exchange Commission on or
about January 31, 1997. The address of Putnam Investments, Inc. is One
Post Office Square, Boston, Massachusetts 02109. The Schedule 13G
indicates that Putnam Investments, Inc. shared voting power with
respect to 851,654 Common Shares and shared dispositive power with
respect to all 6,231,800 Common Shares.
(4) Includes 7,556 Common Shares held by Mr. Whitmire and his wife as
custodian for the benefit of their minor daughter.
(5) 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 Common Shares
which are exercisable under the Company's Directors' Stock Option Plan
and Equity Incentive Plan as follows: Mr. Finn - 5,248 shares; Mrs.
Herzlinger - 2,843 shares; Mr. Losh - 2,321 shares; Messrs. Manser and
McCoy - 7,078 shares; Dr. Robertson - 3,980 shares; and each other
listed Director (except for Messrs. Kane, Walter and Whitmire) - 11,106
shares.
(6) Includes 30,000 Common Shares which are held in a Manser family
partnership.
(7) Includes 4,240 Common Shares which are held by Mr. McCoy in trust for
the benefit of his children, but does not include Common Shares owned
by Banc One Corporation or its subsidiaries.
(8) Includes 5,722 Common Shares held in trust for the benefit of Mr.
Havens' spouse and children.
(9) Includes 8,427 Common Shares held jointly by Mr. Finn and his wife, 459
Common Shares held in his wife's individual retirement account, and 93
Common Shares held for the benefit of each of Mr. Finn's two minor
children.
(10) 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
Mr. Moritz; and (b) outstanding options to purchase Common Shares which
are exercisable within 60 days of September 12, 1997, but do not
include any Common Shares beneficially owned by Banc One Corporation or
its subsidiaries.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation and Personnel 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 Messrs. Losh, Manser and Van Fossen. 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:
o A "pay-for-performance" orientation that differentiates compensation
results based upon corporate, business unit, and individual
performance;
6
<PAGE> 9
o 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;
o 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;
o 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
o 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; and (c)
long-term incentive opportunities in the form of stock options and restricted
shares. 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 relative weights assigned to each factor
vary from executive to executive. 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 surveys. The companies evaluated for this purpose
include but are not the same as those in the Peer Group or the Value Line Health
Care Index utilized in the Shareholder Performance Graph set forth on page 13,
and represent a broader spectrum of wholesale, retail and manufacturing
companies which the Compensation Committee believes to be a more representative
measure of the market for competitive executive talent. With respect to the
$700,000 base salary established for Mr. Walter effective in April 1997, the
Compensation Committee took into account the factors described above for other
executive officers, weighting most heavily competitive compensation
considerations and Company performance.
Annual Cash Incentives. Company executives are eligible to receive
annual cash incentive awards to focus attention on achieving key goals, pursuant
to the Company's Management Incentive Plan ("MIP"). Maximum MIP incentive
amounts are established each year on an individualized basis, with such 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 a specific target
for Company earnings growth, which target was met for the fiscal year ended June
30, 1997. In addition, individual performance objectives are established for
each executive which include both specific performance goals and other, more
qualitative and developmental, criteria. For managers with primarily staff or
corporate responsibilities, 60% of the MIP amount is weighted to achievement of
the Company's corporate performance objectives and 40% to achievement of
individual performance objectives. For managers with primarily operating unit
responsibilities, 50% of the MIP amount is weighted to performance of the
relevant business unit, 30% to achievement of individual performance objectives,
and 20% to achievement of the Company's corporate performance objectives.
Incentive awards for the fiscal year ended June 30, 1997, for the Company's
named executive officers other than Mr. Walter were approved by the Compensation
Committee based upon these corporate, business unit, and individual performance
criteria.
Mr. Walter's annual incentive award was not paid under the MIP, but
instead was paid pursuant to the Cardinal Health, Inc. Performance-Based
Incentive Compensation Plan (the "Performance-Based Plan"). The Budget
Reconciliation Act of 1993 (the "Act") amended the Internal Revenue Code of
1986, as amended (the "Code"), to add Section 162(m), which prohibits a
deduction to any publicly held corporation for compensation
7
<PAGE> 10
paid to a "covered employee" in excess of $1 million per year (the "Dollar
Limitation"). A covered employee is an employee who, on the last day of the
Company's taxable year, is the chief executive officer of the Company or an
employee who appears in the Summary Compensation Table by reason of being one of
the four most highly compensated executive officers for the taxable year (other
than the chief executive officer). In anticipation that the deductibility of
compensation paid to Mr. Walter and other executive officers could be affected
by the Act, in August 1996, the Company's Board of Directors adopted the
Performance-Based Plan, the material terms of the performance goals of which
were approved by the Company's shareholders in November 1996. Compensation paid
in accordance with the Performance-Based Plan generally will not be applied
toward the Dollar Limitation. The performance goals established by the
Compensation Committee under the Performance-Based Plan for Mr. Walter for the
fiscal year ended June 30, 1997, were fully satisfied, resulting in payment to
Mr. Walter of an annual incentive award of $700,000. Mr. Walter currently is the
only executive officer participating in the Performance-Based Plan.
Long-Term Stock Incentives. The Company's Stock Incentive Plan (the
"1987 Plan"), which was approved by the Company's shareholders in 1987, and the
Company's Equity Incentive Plan (the "1995 Plan"), which was approved by the
Company's shareholders in November 1995 and which replaced the 1987 Plan as to
ongoing grants, are designed to align a significant portion of the executive
compensation package with the long-term interests of Company 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 1987 Plan
provided and 1995 Plan 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
Common 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. Because a primary
intent of granting stock options is to encourage positive future performance,
when granting options, the Compensation Committee does not consider the number
of options granted to an individual in previous years. The Company's standard
stock option agreement contains provisions providing for forfeiture of the
option or option value received in the event the option holder engages in
certain behavior in competition with or contrary to the interests of the
Company. 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 in lieu of cash, 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. Restricted stock awards are, in most instances, also forfeited by their
terms if the recipient engages in certain behavior in competition with or
contrary to the interests of the Company.
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
March 1997, the Compensation Committee granted Mr. Walter options to purchase
44,626 Common Shares with an exercise price of $60.875 per share (the market
price on the date of grant) 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 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 grant date and are generally exercisable for a period
of seven years following the vesting date consistent with grants made to other
option recipients. Mr. Walter also received 11,700 restricted
8
<PAGE> 11
shares during the fiscal year, reflecting the Committee's intent to provide a
non-cash award designed to incent and reward long-term service to the Company.
The restricted shares will vest in seven equal increments on each of the third
through ninth anniversaries of the grant date.
Impact of 1993 Tax Act Changes. As discussed above, Section 162(m) of
the Code prohibits a deduction to any publicly held corporation for compensation
paid to a covered employee in excess of the Dollar Limitation. As a result of
the amount of the Dollar Limitation, exclusions of certain compensation under
the 1987 Plan, 1995 Plan and the Performance-Based Plan, and salary deferral
elections made by Mr. Walter, the deductibility of compensation paid in fiscal
year 1997 was not affected by the Act.
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 it is believed to have been a significant factor in the
Company's growth and profitability and the resulting gains achieved by the
Company's shareholders.
J. Michael Losh, Chairman
George R. Manser
L. Jack Van Fossen
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
<TABLE>
<CAPTION>
============================================================================================================================
ANNUAL COMPENSATION LONG TERM COMPENSATION
AWARDS
-------------------------------------- -------------------------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
FY - COMPEN- STOCK UNDERLYING COMPEN-
NAME AND ENDED SALARY BONUS SATION AWARDS OPTIONS SATION
PRINCIPAL POSITION ($) ($) ($) ($)(1)(2) (#)(2) ($)(3)
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Walter 1997 $582,494 $700,000 $72,217(4) $650,286 44,626 $190,518(5)
------------------------------------------------------------------------------------------------
Chairman & Chief 1996 531,456 399,000 -0- -0- 39,647 184,800
------------------------------------------------------------------------------------------------
Executive Officer 1995 495,649 446,039 -0- -0- 60,495 162,340
------------------------------------------------------------------------------------------------
John C. Kane 1997 440,096 $440,069 -0- $216,762 28,263 $ 28,583
------------------------------------------------------------------------------------------------
President & Chief 1996 420,732 283,982 -0- -0- 26,156 27,565
------------------------------------------------------------------------------------------------
Operating Officer 1995 393,924 334,799 -0- -0- 40,500 9,705
------------------------------------------------------------------------------------------------
James F. Millar 1997 $290,762 $218,084 -0- $ 50,022 16,569 $ 28,583
------------------------------------------------------------------------------------------------
Executive Vice President 1996 262,241 118,115 -0- -0- 19,685 27,565
------------------------------------------------------------------------------------------------
& Group President - 1995 214,548 129,824 -0- -0- 16,800 19,100
Cardinal Distribution
------------------------------------------------------------------------------------------------
David Bearman 1997 $275,420 $165,246 -0- $ 83,370 11,841 $ 28,583
------------------------------------------------------------------------------------------------
Executive Vice President 1996 261,555 116,652 -0- -0- 15,072 27,565
------------------------------------------------------------------------------------------------
& Chief Financial Officer 1995 248,154 147,387 -0- -0- 18,630 9,705
------------------------------------------------------------------------------------------------
David A. Abrahamson 1997 $264,344 $156,454 -0- $ 33,348 8,327 $ 4,908
------------------------------------------------------------------------------------------------
Executive Vice President 1996 160,452 90,625 -0- $257,475 26,076 3,848
------------------------------------------------------------------------------------------------
& President - Medicine
Shoppe International,
Inc.(6)
============================================================================================================================
</TABLE>
9
<PAGE> 12
(1) Aggregate restricted share holdings and values at June 30, 1997 (based upon
the closing price of the Common Shares on such date), for the named
executive officers are as follows: (i) Mr. Walter - 62,674 shares,
$3,588,087; (ii) Mr. Kane - 46,275 shares, $2,649,244; (iii) Mr. Millar -
2,305 shares, $131,961; (iv) Mr. Bearman - 3,093 shares, $177,074; and (v)
Mr. Abrahamson - 10,726 shares, $614,064. Dividends are paid on restricted
shares at the same rate as all Common Shares of record. The restrictions on
all shares granted to Messrs. Millar, Bearman and Abrahamson in fiscal year
1997 lapse 1/3 on each of the third, fourth and fifth anniversaries of the
grant; the restrictions on all shares granted to Mr. Kane in fiscal year
1997 lapse 1/5 on each of the third through seventh anniversaries of the
grant; the restrictions on all shares granted to Mr. Walter in fiscal year
1997 lapse 1/7 on each of the third through ninth anniversaries of the
grant.
(2) All numbers have been adjusted to reflect the 3-for-2 split of the
Company's Common Shares in December 1996.
(3) Amounts shown represent Company contributions to the executive's account
under the Company's Profit Sharing and Retirement Savings Plan and the
Company's Incentive Deferred Compensation Plan for fiscal 1997 as follows:
Mr. Walter - $28,583, Mr. Kane - $28,583, Mr. Millar - $28,583, and Mr.
Bearman - $28,583. Amounts shown represent Medicine Shoppe International,
Inc. ("Medicine Shoppe") contributions to Mr. Abrahamson's account under
the Medicine Shoppe International, Inc. Profit Sharing Plan for fiscal 1997
in the amount of $4,908.
(4) Includes $56,037 relating to personal use of the Company airplanes.
(5) Includes $161,935 for premiums paid by the Company on a split-dollar life
insurance arrangement among the Company, Mr. Walter, and a trust for Mr.
Walter's family. The Company will recover all such premiums paid by it,
plus interest at the rate of 3% per annum, upon the earlier to occur of
January 12, 2003, or the death of the survivor of Mr. Walter and his
spouse.
(6) Mr. Abrahamson joined the Company in November 1995 following the
acquisition (the "Medicine Shoppe Acquisition") by the Company of Medicine
Shoppe. Compensation included in the Summary Compensation Table for Mr.
Abrahamson excludes all compensation paid by Medicine Shoppe prior to the
Medicine Shoppe Acquisition.
10
<PAGE> 13
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
=======================================================================================================================
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(4)
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR(2) ($/SH)(3) DATE 0% ($) 5% ($) 10% ($)
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Walter 44,626 5.37% $60.875 03/03/07 $-0- $1,708,460 $4,329,573
- -----------------------------------------------------------------------------------------------------------------------
John C. Kane 28,263 3.40 60.875 03/03/07 -0- 1,082,020 2,742,050
- -----------------------------------------------------------------------------------------------------------------------
James F. Millar 16,569 1.99 60.875 03/03/07 -0- 634,327 1,607,509
- -----------------------------------------------------------------------------------------------------------------------
David Bearman 11,841 1.42 60.875 03/03/07 -0- 453,320 1,148,803
- -----------------------------------------------------------------------------------------------------------------------
David A. Abrahamson 8,327 1.00 60.875 03/03/07 -0- 318,791 807,878
=======================================================================================================================
</TABLE>
(1) All options granted during the fiscal year to the named executives are
nonqualified stock options and are exercisable on and after March 3, 2000.
(2) Based on 831,653 options granted to all employees during the fiscal year
ended June 30, 1997 under the stock plans of the Company.
(3) Market price on date of grant.
(4) These amounts are based on hypothetical appreciation rates of 0%, 5% and
10% and are not intended to forecast the actual future appreciation of the
Company's stock price. No gain to optionees is possible without an actual
increase in the price of the Company's Common Shares, which increase
benefits all of the Company's shareholders.
11
<PAGE> 14
III. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
================================================================================================================
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT FY-END OPTIONS
(#) AT FY-END ($) (2)
SHARES VALUE -------------------------------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) (1) UNEXERCISABLE UNEXERCISABLE
================================================================================================================
<S> <C> <C> <C> <C>
Robert D. Walter -0- $ -0- 218,383/144,768 $8,490,655/$2,154,086
- ----------------------------------------------------------------------------------------------------------------
John C. Kane -0- -0- 179,963/94,919 6,995,246/1,435,408
- ----------------------------------------------------------------------------------------------------------------
James F. Millar -0- -0- 62,050/53,054 2,391,190/748,541
- ----------------------------------------------------------------------------------------------------------------
David Bearman 18,312 912,487 61,905/45,543 2,303,536/712,975
- ----------------------------------------------------------------------------------------------------------------
David A. Abrahamson 9,386 375,450 12,626/42,821 494,434/865,709
================================================================================================================
</TABLE>
(1) Value calculated as the difference between the fair market value of the
Common Shares on the date of exercise and the option exercise price.
(2) Value calculated as the difference between the fair market value of the
Common Shares on June 30, 1997 and the option exercise price.
SHAREHOLDER PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return
of Common Shares with the cumulative total return of the Standard & Poor's
Composite - 500 Stock Index, an index based on a "line of business" peer group
of companies (the "Peer Group") and the Value Line Health Care Sector Index (the
"Value Line Health Care Index"). The graph assumes in each case an initial
investment of $100 as of March 31, 1992 based on the market prices at the end of
each fiscal year through and including June 30, 1997, with the Peer Group and
Value Line Index investment weighted on the basis of market capitalization at
the beginning of each such fiscal year and assuming reinvestment of dividends
(and taking into account all stock splits). The companies in the Peer Group are
Amerisource Health Corporation (starting in fiscal year 1995 when Amerisource's
stock began trading publicly), Bergen Brunswig Corporation, Bindley Western
Industries, Inc., FoxMeyer Corporation (through fiscal year 1996 after which
FoxMeyer was acquired by McKesson Corporation), McKesson Corporation, and Owens
& Minor, Inc. Over the past few years the Company has expanded its scope of
business from that of primarily a pharmaceutical wholesale distributor to that
of a broader health care service provider offering an array of value-added
pharmaceutical distribution services and pharmaceutical-related products and
services to a broad base of customers. As a result of this expansion, management
of the Company believes that the Peer Group is no longer the most relevant group
of companies against which to compare the Company's stock performance.
Management has determined the Value Line Health Care Index, which includes more
than 70 companies in the health care industry, to be a more appropriate
comparison.
12
<PAGE> 15
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
====================================================================================
Fiscal Year (1) 1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 100.00 114.98 117.18 147.21 185.09 248.48
- ------------------------------------------------------------------------------------
Peer Group 100.00 117.25 170.21 256.07 286.53 427.37
- ------------------------------------------------------------------------------------
Cardinal Health, Inc. 100.00 97.04 160.31 193.60 296.01 353.00
- ------------------------------------------------------------------------------------
Value Line Health Care Index 100.00 83.81 85.49 123.34 167.62 247.63
====================================================================================
</TABLE>
(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 1992 through 1993 is as of March 31, and the same information for the
years 1994 through 1997 is as of June 30.
EMPLOYMENT AGREEMENTS
The Company's Stock Incentive Plan and Equity Incentive Plan each
provide for acceleration of the vesting of stock options and restricted share
awards based upon the occurrence of a change of control of the Company. A change
of control is defined generally as acquisition by an individual or group of 25%
or more of the Common Shares, an involuntary change in the composition of at
least a majority of the members of the Board of Directors, or approval by the
Company's shareholders of a merger, reorganization, consolidation, liquidation,
or sale of substantially all of the assets of the Company.
In connection with the Medicine Shoppe Acquisition, Mr. Abrahamson
entered into an employment agreement (the "Employment Agreement") with Medicine
Shoppe, the performance of which was guaranteed by
13
<PAGE> 16
the Company. The Employment Agreement provides for an employment term of five
years commencing on November 13, 1995. In addition to a base salary, the
Employment Agreement also provides for an annual incentive award payable under
the incentive plan in which other Company executive officers participate from
time to time. The Employment Agreement provides that Mr. Abrahamson will be
entitled to participate in Medicine Shoppe's group health, life, and disability
plans, as well as Medicine Shoppe's profit sharing and retirement savings plan
during the term of the Employment Agreement. In addition, the Employment
Agreement contains noncompete covenants effective throughout the employment
term, and for up to five years following the employment term.
COMPENSATION OF DIRECTORS
The Company's non-employee Directors ("Outside Directors") are paid
$4,000 per quarter plus $1,750 for each Board meeting attended in person and
$900 for each Board meeting attended telephonically. Outside Directors are also
entitled to receive $900 for each Committee meeting attended (in person or
telephonically). The Company also reimburses Outside Directors for out-of-pocket
travel expenses incurred in connection with attendance at Board and Committee
meetings. Employee Directors do not receive additional compensation in their
capacity as a Director.
Pursuant to the Company's Equity Incentive Plan (the "Plan") as
currently in effect, options to purchase that number of Common Shares having a
fair market value of $50,000 on the date of grant are automatically granted on
an annual basis to each Outside Director who has served as such for three
consecutive annual meetings. The exercise price of these options is the fair
market value of the Common Shares on the date of grant. In addition, options to
purchase that number of Common Shares having a fair market value of $100,000 on
the date of grant are automatically made to each Outside Director subsequently
added to the Board. The exercise price of these options is the fair market value
of Common Shares on the date of grant. All grants to Outside Directors under the
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 an Outside Director ceases to
serve as such, then options previously granted under the Plan lapse unless
exercised within six months (one year in the case of an Outside Director's
death). Options granted under the Plan are treated as "nonqualified options"
under the Code. On October 29, 1996, Messrs. Finn, Gerbig, Havens, Manser,
McCoy, and Van Fossen and Dr. Robertson each were granted an option to purchase
950 Common Shares in accordance with the provisions of the Plan.
On August 13, 1997, the Board of Directors approved amendments to the
Plan pertaining to the options granted to Outside Directors. Shareholder
approval of the amendments is being sought at the Annual Meeting, as described
under PROPOSAL 1 below.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In October 1996, the composition of the Compensation Committee changed
from that of Messrs. Havens, Losh, Manser, and McCoy to Messrs. Losh, Manser and
Van Fossen. 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.
PROPOSAL 1 - AMENDMENT OF THE CARDINAL HEALTH, INC. EQUITY INCENTIVE PLAN TO
REVISE PROVISIONS PERTAINING TO OUTSIDE DIRECTOR OPTIONS
GENERAL
There will be submitted for the approval of shareholders at the Annual
Meeting a proposal to approve the amendments described below to the Cardinal
Health, Inc. Equity Incentive Plan (the "Plan"). In 1995, the Company's Board of
14
<PAGE> 17
Directors adopted and the shareholders approved the Plan. On August 13, 1997,
the Board of Directors approved the amendments to the Plan described below,
subject to the approval of such amendments by the Company's shareholders.
Under the Plan, in addition to awards to employees, grants of options
to purchase Common Shares ("Outside Director Options") are made automatically to
Outside Directors pursuant to a formula as specified below. The amendments
approved by the Board of Directors modify this formula. The Outside Director
Options are not intended to and do not qualify as incentive stock options under
Section 422 of the Code. Presently, the Company has nine Outside Directors.
Shareholder approval of the amendments to the Plan is being sought as required
under the provisions of the Plan.
DESCRIPTION OF THE AMENDMENTS
Under the Plan as presently in effect: (a) each Outside Director first
elected or appointed to serve as a Director, upon such election or appointment,
automatically is granted Outside Director Options (the "Initial Grant") for that
number of Common Shares having a fair market value of $100,000 (fair market
value being defined as the last sale price of the Common Shares on the date of
election or appointment, or, if no sale occurred on that date, on the next
previous day on which a sale occurred, as listed on the New York Stock Exchange
Composite Tape); and (b) on an annual basis, each Outside Director whose term
does not expire at an annual meeting of shareholders and who has then served as
a Director for a consecutive period of time that includes each of the last three
annual meetings (including the annual meeting then just adjourned) automatically
is granted additional Outside Director Options (each an "Annual Grant") for that
number of Common Shares having a fair market value of $50,000 (determined as
previously described).
Under the Plan as proposed to be amended: (a) each Outside Director
first elected or appointed to serve as a Director, upon such election or
appointment, automatically will be granted an Initial Grant for that number of
Common Shares having a fair market value of $150,000 (determined as previously
described); and (b) on an annual basis, each Outside Director whose term does
not expire at an annual meeting of shareholders and who has then served as a
Director for a consecutive period of time that includes each of the last three
annual meetings (including the annual meeting then just adjourned) automatically
will be granted an Annual Grant for that number of Common Shares having a fair
market value of $100,000 (determined as previously described). Beginning on July
1, 2000 and on every third July 1 thereafter, the dollar value of the Initial
Grants and Annual Grants will automatically be increased by a percentage equal
to that percentage by which the fair market value per Common Share has increased
in the immediately preceding three-year period, not to exceed a 45% aggregate
increase over any such three-year period.
The Company believes that its current compensation to its Outside
Directors is below the market standard for non-employee directors. One of the
purposes of the proposed amendments is to eliminate this discrepancy. The
proposed amendments also are consistent with the Company's emphasis on stock
awards, as an alternative to cash compensation. The effect of such emphasis is
to more closely align the interests of the Company and Directors with the
long-term interests of shareholders. The Company believes that such amendments
are necessary to continue to retain and attract highly qualified and experienced
individuals to serve on the Company's Board of Directors.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Company's Compensation Committee. The
Compensation Committee may adopt any rules it considers appropriate for the
administration of the Plan, make interpretations of the Plan which it deems
consistent with the Plan's provisions, and take any other actions it considers
appropriate in connection with the Plan.
EXERCISE OF OUTSIDE DIRECTOR OPTIONS
Outside Director Options have an option exercise price equal to the
fair market value of the Common Shares on the date of grant, based upon the last
sale price of the Common Shares on the date of grant (or, if no sale
15
<PAGE> 18
occurred on that date, on the next previous day on which a sale occurred) as
listed on the New York Stock Exchange Composite Tape. The last sale price of the
Common Shares on September 12, 1997 was $67.75.
All Outside Director Options are fully vested on the date of grant. No
Outside Director Option may be exercised more than ten years from the date it is
granted. Payment for the exercise of Outside Director Options may be made in
cash or by delivery of Common Shares already owned by the Outside Director, by
delivery of cash on the extension of credit by a broker-dealer, or by a
combination of these payment methods. If an Outside Director ceases to be a
member of the Company's Board of Directors, the Outside Director's Options must
be exercised within six months of such event and otherwise in accordance with
the terms of the Outside Director Options. If an Outside Director ceases to be a
member of the Company's Board as a result of death, the six month period
described above becomes a one-year period. Notwithstanding the foregoing, upon
the discharge of any Outside Director for cause, all unexercised Options awarded
to such Outside Director will immediately lapse and be of no further force or
effect.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend, alter or discontinue the
Plan, provided no such amendment, alteration or discontinuance will affect the
rights of any grantee (including any Outside Director) with respect to prior
awards. In addition, shareholder approval is required to amend the Plan to
increase the total number of Common Shares reserved for purposes of the Plan,
change the class of individuals to participate in the Plan, extend the maximum
option period of options granted to employees or Outside Director Options, or
increase materially the benefits under the Plan. The Compensation Committee may
amend the terms of any award theretofore granted (except for Outside Director
Options), but no such amendment may impair the rights of any holder without the
holder's consent and no stock option (including Outside Director Options) may be
amended to decrease the exercise price to reflect a decrease in the fair market
value of the underlying Common Shares.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the general federal income tax
consequences of transactions in Outside Director Options under current law. This
summary is not intended to be exhaustive and does not describe foreign, state or
local tax consequences.
With respect to Outside Director Options, generally, (a) no income is
realized by the Outside Director at the time the Outside Director Option is
granted, (b) upon exercise of the Outside Director Option, the Outside Director
realizes ordinary income in an amount equal to the excess, if any, of the fair
market value of the Common Shares on the date of exercise over the option
exercise price paid for the Common Shares, and the Company is entitled to a tax
deduction in the amount of ordinary income realized, and (c) upon disposition of
the Common Shares received upon the exercise of the Outside Director Option, the
Outside Director receives, either short-term, mid-term, or long-term gain (or
loss), depending upon the length of time that the Outside Director has held the
shares, on the difference between the amount realized and the fair market value
of the Common Shares on the date of exercise and no corresponding deduction is
available to the Company.
With respect to the exercise of an Outside Director Option and the
payment of the option exercise price by the delivery of Common Shares, to the
extent that the number of Common Shares received does not exceed the number of
Common Shares surrendered, no taxable income will be realized by the Outside
Director at that time, the tax basis of the Common Shares received will be the
same as the tax basis of the Common Shares surrendered, and the Outside
Director's holding period in the Common Shares received will include his or her
holding period in the Common Shares surrendered. To the extent that the number
of Common Shares received exceeds the number of Common Shares surrendered,
ordinary income will be realized by the Outside Director at that time in the
amount of the fair market value of such excess Common Shares, the tax basis of
such excess Common Shares will be such fair market value, and the holding period
of the Outside Director will begin on the date such Common Shares are
transferred to the Outside Director.
16
<PAGE> 19
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the Common Shares
present or represented at the Annual Meeting is required for the approval of
this proposal. Broker non-votes and abstentions will be treated as votes against
the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the Company's 1998
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, 1998. The
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 13, 1997, the Company's Board of Directors selected Deloitte
& Touche LLP to serve as the independent auditors for the Company and its
subsidiaries for the fiscal year ending June 30, 1998. The selection of Deloitte
& Touche LLP 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 LLP are expected to be present at the Annual 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
This 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. In
addition to solicitation by mail, proxies may be solicited by Directors,
officers and employees of the Company in person or by telephone, telegraph, or
other means of communication. These persons will receive no additional
compensation for solicitation of proxies but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. The Company has
retained Morrow & Co., Inc. at an estimated cost of $10,000, plus reimbursement
of expenses, to assist in its solicitation of proxies from brokers, nominees,
institutions and individuals. Arrangements will also be made by the Company with
custodians, nominees, and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and the Company will reimburse such custodians,
nominees and fiduciaries for reasonable expenses incurred in connection
therewith.
If the enclosed proxy is executed and returned, the Common Shares
represented thereby will be voted in accordance with any specifications made by
the shareholder. In the absence of any such specification, such proxies will be
voted FOR adoption of the amendment to the Company's Equity Incentive Plan. With
respect to the election of Directors, proxies returned without specifications
made by the shareholder 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.
17
<PAGE> 20
The presence of any shareholder at the Annual Meeting will not operate
to revoke his or her 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 or
by executing and forwarding a later-dated proxy to the Company.
If any other matters shall properly come before the Annual Meeting, the
persons named in the proxy, or their substitute, 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 Annual Meeting.
By order of the Board of Directors.
GEORGE H. BENNETT, JR., Secretary
October 13, 1997
18
<PAGE> 21
APPENDIX TO CARDINAL HEALTH, INC. PROXY STATEMENT FILING
NOT PROVIDED TO SECURITY HOLDERS
FILED PURSUANT TO SCHEDULE 14A, ITEM 10, INSTRUCTION 3
CARDINAL HEALTH, INC.
EQUITY INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of the Cardinal Health, Inc. Equity Incentive Plan (the
"Plan") is to assist Cardinal Health, Inc. ("CAH") and its subsidiaries (CAH and
its subsidiaries, collectively, the "Company") in attracting and retaining
capable employees and directors. The Plan provides for long and short term
incentives to employees by encouraging and enabling them to participate in the
Company's future prosperity and growth. The Plan provides for equity ownership
opportunities and appropriate incentives to better match the interests of
employees and directors with those of shareholders.
These objectives will be promoted through the granting to employees of
equity-based awards (the "awards") including (i) Incentive Stock Options
("ISOs"), which are intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"); (ii) options which are not
intended to so qualify ("NQSOs") (ISOs and NQSOs are referred to together
hereinafter as "Stock Options"); (iii) Restricted Shares; (iv) Performance
Shares; (v) Performance Share Units and (vi) Incentive Compensation Restricted
Shares. Members of CAH's Board of Directors (the "Board") who do not serve as
employees of the Company ("Outside Directors") shall receive NQSOs from the Plan
only as provided herein.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Compensation and Personnel
Committee (the "Committee") of the Board which shall have the power and
authority to grant to eligible employees Stock Options, Restricted Shares,
Performance Shares, Performance Share Units and Incentive Compensation
Restricted Shares. In particular, the Committee shall have the authority to: (i)
select employees of the Company as recipients of awards; (ii) determine the
number and type of awards to be granted; (iii) determine the terms and
conditions, not inconsistent with the terms hereof, of any award; (iv) adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall, from time to time, deem advisable; (v) interpret the terms
and provisions of the Plan and any award granted and any agreements relating
thereto; and (vi) take any other actions the Committee considers appropriate in
connection with, and otherwise supervise the administration of, the Plan. All
decisions made by the Committee pursuant to the provisions hereof shall be made
in the Committee's sole discretion and shall be final and
<PAGE> 22
binding on all persons. Members of the Committee shall be "disinterested
persons" within the meaning of Rule 16b-3 ("Rule 16b-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
The Committee may designate persons other than its members to carry out
its responsibilities under such conditions and limitations as it may set, other
than its authority with regard to awards granted to persons subject to Section
16 of the Exchange Act ("Reporting Persons").
SECTION 3. ELIGIBILITY.
Employees of the Company and its subsidiaries who are responsible for
or contribute to the management, growth and/or profitability of the business of
the Company and/or subsidiary, in each case as determined by the Committee, are
eligible to be granted awards. The participants under the Plan who are not
Outside Directors shall be selected from time to time by the Committee, in its
sole discretion, from among those eligible. In addition, Outside Directors are
eligible to receive NQSOs as set forth in Section 9 ("Outside Director
Options"), and may not receive any other awards under this Plan. Members of the
Committee are eligible to receive Outside Director Options.
SECTION 4. SHARES SUBJECT TO PLAN.
The total number of the Company's common shares, without par value,
("Shares") reserved and available for distribution pursuant to awards hereunder
shall be 2,000,000 Shares, no more than 50% of which shall be granted in the
form of Restricted Shares, Incentive Compensation Restricted Shares, Performance
Shares and Performance Share Units. Such Shares may consist, in whole or in
part, of authorized and unissued Shares or treasury Shares. The maximum number
of Shares with respect to which Stock Options, Performance Shares and
Performance Share Units may be granted to any single participant during any
single fiscal year of the Company shall be 250,000 Shares.
If any Shares that have previously been the subject of a Stock Option
cease to be the subject of a Stock Option or Outside Director Option (other than
by reason of exercise), or if any such Shares that are subject to any Restricted
Share (including any Incentive Compensation Restricted Share) or Performance
Share award granted hereunder are forfeited by the holder, or if any such Stock
Option or other award otherwise terminates without a payment being made to the
participant in the form of Shares, or if any Shares (whether or not restricted)
previously distributed under the Plan are returned to the Company in connection
with the exercise of an award (including in payment of the exercise price or tax
withholding), such Shares shall again be available for distribution in
connection with future awards under the Plan.
In the event of any stock dividend, stock split, share combination,
corporate separation or division (including, but not limited to, split-up,
spin-off, split-off or distribution to CAH shareholders other than a normal cash
dividend), or partial or complete liquidation, or any other corporate
transaction or event having any effect similar
<PAGE> 23
to any of the foregoing, then the aggregate number of Shares reserved for
issuance under the Plan, the limitation on the number of Shares available under
the Plan for issuance of Restricted Shares, Incentive Compensation Restricted
Shares, Performance Shares and Performance Share Units, the limitations on the
number of Shares subject to Stock Options or Performance Shares or Performance
Share Units granted to any single participant, the number and exercise price of
Shares subject to outstanding Stock Options, the purchase price for Restricted
Shares, the financial Performance Goals, if any, of the Shares the subject of a
Performance Share or Performance Share Unit award, the number of Shares subject
to a Performance Share or Performance Share Unit award or granted by a
Restricted Share or Incentive Compensation Restricted Share award, and any other
characteristics or terms of the awards or Plan limitations as the Committee
shall deem necessary or appropriate to reflect equitably the effects of such
changes, shall be appropriately substituted for new shares or adjusted, as
determined by the Committee in its discretion. Any such adjustments made to
NQSOs shall also be made to Outside Director Options.
If any recapitalization, reorganization, reclassification,
consolidation, merger of CAH or the Company or any sale of all or substantially
all of CAH's or the Company's assets to another person or entity or other
transaction which is effected in such a way that holders of Shares are entitled
to receive (either directly or upon subsequent liquidation) stock, securities,
or assets with respect to or in exchange for Shares (each an "Organic Change")
shall occur, in lieu of the Shares issuable upon exercise of a Stock Option or
Outside Director Option or pursuant to any other award under the Plan, the Stock
Option or Outside Director Option shall thereafter be exercisable for and other
awards shall be issuable in such shares of stock, securities or assets
(including cash) as may be issued or payable with respect to or in exchange for
the number of Shares immediately theretofore acquirable pursuant to such award
had such Organic Change not taken place (whether or not such Stock Option or
Outside Director Option is then exercisable or other awards are then vested)
after giving effect to any adjustments otherwise required or permitted under
this Plan.
SECTION 5. STOCK OPTIONS.
References to Stock Options in this Section 5 shall not apply to
Outside Director Options. Stock Options may be granted alone or in addition to
other awards granted under the Plan. Any Stock Options granted under the Plan
shall be in such form as the Committee may from time to time approve and the
provisions of Stock Option awards need not be the same with respect to each
optionee. Stock Options granted under the Plan may be either ISOs or NQSOs. The
Committee may grant to any optionee ISOs, NQSOs or both types of Stock Options.
Anything in the Plan to the contrary notwithstanding, without the
consent of the optionee(s) affected, no provision of this Plan relating to ISOs
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so
<PAGE> 24
exercised, so as to disqualify the Plan under Section 422 of the Code or to
disqualify any ISO under such Section 422.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions not
inconsistent with the terms of the Plan as the Committee deems appropriate. Each
Stock Option grant shall be evidenced by an agreement executed on behalf of the
Company by an officer designated by the Committee and accepted by the optionee.
Such agreement shall describe the Stock Options and state that such Stock
Options are subject to all the terms and provisions of the Plan and shall
contain such other terms and provisions, not inconsistent with the Plan, as the
Committee may approve.
(a) Exercise Price. The exercise price per Share issuable upon exercise
of a Stock Option shall be no less than the fair market value per share on the
date the Stock Option is granted; provided, that if the optionee, at the time an
ISO is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of CAH or any subsidiary, the exercise price shall
be at least 110% of the fair market value of the Shares subject to the ISO on
the date of grant. Fair market value on the date of grant shall be determined by
the Committee in good faith.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten years after
the date such Stock Option is granted.
(c) Exercise of Stock Options. Stock Options shall become exercisable
at such time or times and subject to such terms and conditions (including,
without limitation, installment or cliff exercise provisions) as shall be
determined by the Committee. The Committee shall have the authority, in its
discretion, to accelerate the time at which a Stock Option shall be exercisable
whenever it may determine that such action is appropriate by reason of changes
in applicable tax or other law or other changes in circumstances occurring after
the award of such Stock Options.
(d) Method of Exercise. Stock Options may be exercised in whole or in
part by giving written notice of exercise to the Company specifying the number
of Shares to be purchased. Payment in full of the exercise price shall be paid
in cash, or such other instrument as may be permitted in accordance with rules
or procedures adopted by the Committee. If approved by the Committee, payment in
full or in part may also be made: (i) by delivering Shares already owned by the
optionee having a total fair market value on the date of such delivery equal to
the option exercise price; (ii) by the delivery of cash on the extension of
credit by a broker-dealer to whom the optionee has submitted a notice of
exercise or an irrevocable election to effect such extension of credit; or (iii)
by any combination of the foregoing. No Shares shall be transferred until full
payment therefor has been made.
<PAGE> 25
(e) Transferability of Stock Options. Except as otherwise provided
hereunder, Stock Options shall be transferable by the optionee only with prior
approval of the Committee and only in compliance with the restrictions imposed
under Section 16(b) of the Exchange Act and Section 422 of the Code, if
applicable. Any attempted transfer without Committee approval shall be null and
void. Unless Committee approval of the transfer shall have been obtained, all
Stock Options shall be exercisable during the optionee's lifetime only by the
optionee or the optionee's legal representative. Without limiting the generality
of the foregoing, the Committee may, in the manner established by the Committee,
provide for the irrevocable transfer, without payment of consideration, of any
Stock Option other than any ISO by an optionee to a member of the optionee's
family or to a trust or partnership whose beneficiaries are members of the
optionee's family. In such case, the Stock Option shall be exercisable only by
such transferee. For purposes of this provision, an optionee's "family" shall
include the optionee's spouse, children, grandchildren, nieces and nephews.
(f) Termination by Death. If an optionee's employment by or service to
the Company terminates by reason of death, then, unless otherwise determined by
the Committee within five days of such death, each Stock Option held by such
optionee shall thereafter be exercisable in full and any unvested portion
thereof shall immediately vest. Each Stock Option held by such optionee may
thereafter be exercised by the legal representative of the estate or by the
legatee of the optionee under the will of the optionee, for a period of one year
(or such other period as the Committee may specify at or after grant or death)
from the date of death or until the expiration of the stated term of such Stock
Option, whichever period is shorter.
(g) Termination by Reason of Retirement. If an optionee's employment by
or service to the Company terminates by reason of retirement, then, unless
otherwise determined by the Committee within sixty days of such retirement each
Stock Option held by such optionee may thereafter be exercised by the optionee
for a period of ninety days (or such other period as the Committee may specify
at or after grant or retirement) from the date of such termination of employment
or service, or until the expiration of the stated term of such Stock Option,
whichever period is shorter; provided, however, that, if the optionee dies
within such ninety day period (or such other period), any unexercised Stock
Option held by such optionee shall thereafter be exercisable, in full, for a
period of one year (or such other period as the Committee may specify at or
after grant or death) from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is shorter. In the event of
termination of employment by reason of retirement, if an ISO is exercised after
the expiration of the exercise periods that apply for purposes of Section 422 of
the Code, such ISO shall thereafter be treated as an NQSO. For purposes of the
Plan, retirement shall mean voluntary termination of employment by a participant
from the Company after attaining age 55 and having at least three years of
service with the Company.
(h) Other Termination of Employment. If an optionee's employment by or
service to the Company terminates for any reason other than death or retirement,
any Stock
<PAGE> 26
Option held by such optionee which has not vested on such date of termination
will automatically terminate on the date of such termination. Unless otherwise
determined by the Committee at or after grant or termination, the optionee will
have ninety days (or such other period as the Committee may specify at or after
grant or termination) from the date of termination to exercise any and all Stock
Options that are then exercisable on the date of termination; provided, however,
that if the termination was for Cause, any and all Stock Options held by that
optionee may be immediately canceled by the Committee. For purposes of the Plan,
"Cause" means on account of any act of fraud or intentional misrepresentation or
embezzlement, misappropriation or conversion of assets of the Company or any
subsidiary, or the intentional and repeated violation of the written policies or
procedures of the Company.
(i) Effect of Termination of Optionee on Transferee. Except as
otherwise permitted by the Committee in its absolute discretion, no Stock Option
held by a transferee of an optionee pursuant to the fourth sentence of Section
5(e) shall remain exercisable for any period of time longer than would otherwise
be permitted under Sections 5(f), 5(g) or 5(h) without specification of other
periods by the Committee as provided in those Sections.
(j) ISO Limitations. To the extent required for "incentive stock
option" status under Section 422 of the Code, the aggregate fair market value
(determined as of the time of grant) of the Shares with respect to which ISOs
are exercisable for the first time by the optionee during any calendar year
under the Plan and any other stock option plan of the Company and its
affiliates, shall not exceed $100,000.
SECTION 6. RESTRICTED SHARES.
Restricted Shares may be granted alone or in addition to other awards
granted under the Plan. Any Restricted Shares granted under the Plan shall be
subject to the following restrictions and conditions, and shall contain such
additional terms and conditions not inconsistent with the terms of the Plan as
the Committee deems appropriate. The provisions of Restricted Share awards need
not be the same with respect to each recipient.
(a) Price. The purchase price for Restricted Shares shall be any price
set by the Committee and may be zero. Payment in full of the purchase price, if
any, shall be made in cash, or such other instrument as may be permitted in
accordance with rules or procedures adopted by the Committee. If approved by the
Committee, payment in full or part may also be made: (i) by delivering Shares
already owned by the grantee having a total fair market value on the date of
such delivery equal to the Restricted Share price; (ii) by the delivery of cash
on the extension of credit by a broker-dealer or an irrevocable election to
effect such extension of credit; or (iii) by any combination of the foregoing.
(b) Restricted Share Award Agreement. Each Restricted Share grant shall
be evidenced by an agreement executed on behalf of the Company by an officer
designated by the Committee. Such Restricted Share Award Agreement shall
describe the Restricted
<PAGE> 27
Shares and state that such Restricted Shares are subject to all the terms and
provisions of the Plan and shall contain such other terms and provisions,
consistent with the Plan, as the Committee may approve. At the time the
Restricted Shares are awarded, the Committee may determine that such Shares
shall, after vesting, be further restricted as to transferability or be subject
to repurchase by the Company upon occurrence of certain events determined by the
Committee, in its sole discretion, and specified in the Restricted Share Award
Agreement. Awards of Restricted Shares must be accepted by a grantee thereof
within a period of 30 days (or such other period as the Committee may specify at
grant) after the award date by executing the Restricted Share Award Agreement
and paying the price, if any, required under Section 6(a).
The prospective recipient of a Restricted Share award shall not have
any rights with respect to such award, unless and until such recipient has
executed an agreement evidencing the award and has delivered a fully executed
copy thereof to the Company, and has otherwise complied with the applicable
terms and conditions of such award.
(c) Share Restrictions. Subject to the provisions of this Plan and the
applicable Restricted Share Award Agreement, during a period set by the
Committee commencing with the date of such award and ending on such date as
determined by the Committee at grant (the "Restriction Period"), the participant
shall not be permitted to sell, transfer, pledge, assign or otherwise encumber
shares of Restricted Shares awarded under the Plan. In no event shall more than
10% of the Shares authorized for issuance under this Plan (as adjusted as
provided in Section 4) be granted in the form of Restricted Shares having a
restriction period of less than 3 years. The Committee shall have the authority,
in its absolute discretion, to accelerate the time at which any or all of the
restrictions shall lapse with respect to any Restricted Shares or to remove any
or all restrictions after the grant of such Restricted Shares, provided,
however, that such discretion shall be exercised subject to the limitations set
forth in the preceding sentence, excluding discretion exercised in connection
with a Grantee's termination of employment from the Company. Unless otherwise
determined by the Committee at or after grant or termination, if a participant's
employment by or service to the Company terminates during the Restriction
Period, all Restricted Shares held by such participant still subject to
restriction shall be forfeited by the participant.
(d) Stock Certificate and Legends. Each participant receiving a
Restricted Share award shall be issued a stock certificate in respect of such
Restricted Shares. Such certificate shall be registered in the name of such
participant. The Committee may require that the stock certificates evidencing
such shares be held in custody by the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Shares award, the
participant shall have delivered a stock power, endorsed in blank, relating to
the Shares covered by such award.
(e) Shareholder Rights. Except as provided in this Section 6, the
recipient shall have, with respect to the Restricted Shares covered by any
award, all of the rights of a shareholder of the Company, including the right to
vote the Shares, and the right to
<PAGE> 28
receive any dividends or other distributions, with respect to the Shares, but
subject, however, to those restrictions placed on such Shares pursuant to this
Plan and as specified by the Committee in the Restricted Share Award Agreement.
(f) Expiration of Restriction Period. If and when the Restriction Period
expires without a prior forfeiture of the Restricted Shares subject to such
Restriction Period, unrestricted certificates for such shares shall be delivered
to the participant.
SECTION 7. PERFORMANCE SHARES AND PERFORMANCE SHARE UNITS.
Subject to the terms and conditions described herein, Performance
Shares and Performance Share Units may be granted to eligible participants at
any time and from time to time as determined by the Committee.
(a) Price. The purchase price for Performance Shares and Performance
Share Units shall be zero unless otherwise specified by the Committee.
(b) Performance Share Agreement. Subject to the provisions of this
Plan, all the terms and conditions of an award of Performance Shares or
Performance Share Units shall be determined by the Committee in its discretion.
Each Performance Share and Performance Share Unit shall be evidenced by an
agreement executed by the recipient of the Performance Share or Performance
Share Unit and on behalf of the Company by an officer designated by the
Committee. Such Performance Share or Performance Share Unit Award Agreement
shall describe the Performance Share or Performance Share Unit and state that
such Performance Share or Performance Share Unit is subject to all the terms and
provisions of the Plan and shall contain such other terms and provisions, not
inconsistent with the Plan, as the Committee may approve. Award of Performance
Shares and Performance Share Units must be accepted by a grantee thereof within
a period of 60 days (or such other period as the Committee may specify at grant)
after the award date by executing the Performance Share or Performance Share
Unit Award Agreement, and paying the price, if any, as required under Section
7(a).
(c) Performance Periods. Any time period (the "Performance Period")
relating to a Performance Share or Performance Share Unit award shall be at
least one year in length. No more than two Performance Periods may begin in any
one fiscal year of the Company.
(d) Performance Goals. Performance Shares and Performance Share Units
shall be earned based upon the financial performance of the Company or an
operating group of the Company during a Performance Period. As to each
Performance Period, within such time as established by Section 162(m) of the
Code, the Committee will establish in writing targets for one of the following
performance measures of the Company (and/or an operating group of the Company,
if applicable) over the Performance Period ("Performance Goals"): (i) earnings,
(ii) return on capital, or (iii) any Performance Goal approved by the
shareholders of the Company in accordance with Section 162(m) of the Code. The
Performance Goals, depending on the extent to which they are satisfied, will
<PAGE> 29
determine the number of Performance Shares or Performance Share Units, if any,
that will be earned by each participant. Attainment of the Performance Goals
will be calculated from the consolidated financial statements of the Company but
shall exclude (i) the effects of changes in federal income tax rates, (ii) the
effects of unusual, non-recurring and extraordinary items as defined by
Generally Accepted Accounting Principles ("GAAP"), and (iii) the cumulative
effect of changes in accounting principles in accordance with GAAP. The
Performance Goals may vary for different Performance Periods and need not be the
same for each participant receiving an award for a Performance Period. The
Committee may, in its absolute discretion, subject to the limitations of Section
11, vary the terms and conditions of any Performance Share or Performance Share
Unit award, including, without limitation, the Performance Period and
Performance Goals, without shareholder approval, as applied to any recipient who
is not a "covered employee" with respect to the Company as defined in Section
162(m) of the Code. In the event applicable tax or securities laws change to
permit the Committee discretion to alter the governing performance measures as
they pertain to covered employees without obtaining shareholder approval of such
changes, the Committee shall have sole discretion to make such changes without
obtaining shareholder approval.
(e) Earning of Performance Shares. Performance Shares shall be issued
to each recipient thereof on the later of such time as the Performance Goals are
established or the first day of the applicable Performance Period. The number of
Performance Shares awarded at such time shall be calculated based upon the
assumption that the Performance Goals for the applicable Performance Period will
be satisfied to the fullest extent. The Company, or its designated agent, shall
hold all Performance Shares issued to recipients prior to completion of the
Performance Period. Participants shall be entitled to all dividends and other
distributions earned in respect of such Performance Shares and shall be entitled
to vote such Performance Shares during the period from the initial award date to
the final adjustment of the Performance Shares. After the applicable Performance
Period shall have ended, the Committee shall certify in writing the extent to
which the established Performance Goals have been achieved. Subsequently, the
number of Performance Shares, if any, earned by the recipient over the
Performance Period shall be determined as a function of the extent to which the
Performance Goals for such Performance Period were achieved. If the Performance
Goals are not satisfied to the fullest extent, a recipient may earn less than
the number of Performance Shares originally awarded, or no Performance Shares at
all. In addition, whether or not the Performance Goals are satisfied to the
fullest extent, the Committee may exercise negative discretion to reduce the
number of Performance Shares or Performance Share Units to be issued if, in the
Committee's sole judgment, such negative discretion is appropriate in order to
act in the best interest of the Company and its shareholders. The factors to be
taken into account by the Committee when exercising negative discretion include,
but are not limited to, the achievement of measurable individual performance
objectives established by the Committee and communicated to the participant no
later than the ninetieth day of the Performance Period, and competitive pay
practices. Performance Shares shall be paid in the form of Shares. Unrestricted
certificates representing such number of Shares as equals
<PAGE> 30
the number of Performance Shares earned under the award shall be delivered to
the participant as soon as practicable after the end of the applicable
Performance Period.
(f) Earning of Performance Share Units. An account documenting
Performance Share Units awarded shall be established for each recipient thereof
on the later of such time as the Performance Goals are established or the first
day of the applicable Performance Period. The number of Performance Share Units
credited to a recipient's account at such time shall be calculated based upon
the assumption that the Performance Goals for the applicable Performance Period
will be satisfied to the fullest extent. After the applicable Performance Period
shall have ended, the Committee shall certify in writing the extent to which the
established Performance Goals have been achieved. Subsequently, the number of
Performance Share Units, if any, earned by the recipient over the Performance
Period shall be determined as a function of the extent to which the Performance
Goals for such Performance Period were achieved, adjusted, if applicable, in
accordance with the negative discretion of the Committee. A recipient may earn
less than the number of Performance Share Units originally awarded, or no
Performance Share Units at all. Performance Share Units shall be paid in the
form of Company check, the amount of which shall be calculated by multiplying
the fair market value per Share on the last day of the Performance Period by the
number of Performance Share Units, as adjusted pursuant to the last paragraph of
Section 4.
(g) Termination of Employment or Service Due to Death or at the Request
of the Company Without Cause. In the event the employment by or service of a
participant is terminated by reason of death, or by the Company without Cause
during a Performance Period, unless determined otherwise by the Committee, the
participant or his legal representative, as applicable, shall receive a prorated
payout with respect to the Performance Shares and Performance Share Units
relating to such Performance Period. The prorated payout shall be based upon the
length of time that the participant held the Performance Shares or Performance
Share Units during the Performance Period and the progress toward achievement of
the established Performance Goals. Distribution of earned Performance Shares and
Performance Share Units, if any, shall be made at the same time payments are
made to participants who did not terminate employment during the applicable
Performance Period.
(h) Termination of Employment or Service for Other Reasons. In the
event that a participant's employment or service terminates for any reason other
than those reasons set forth in paragraph (g) of this Section 7, all Performance
Shares and Performance Share Units shall be forfeited by the participant to the
Company, except as otherwise determined by the Committee.
(i) Nontransferability. Except as otherwise provided herein, no
Performance Share or Performance Share Unit may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated. Further, a participant's rights
under the Plan shall be exercisable during the participant's lifetime only by
the participant or the participant's legal representative.
<PAGE> 31
SECTION 8. INCENTIVE COMPENSATION RESTRICTED SHARES.
Each employee participating in this Plan who also participates in the
Company's Management Incentive Plan (the "Incentive Compensation Plan") may be
eligible, in the Committee's sole discretion, to elect to receive all or a
portion of the annual incentive compensation ("Incentive Compensation") payable
to the employee under the Incentive Compensation Plan in the form of Incentive
Compensation Restricted Shares. To elect the payout of all or a portion of
annual Incentive Compensation in Incentive Compensation Restricted Shares, an
employee must complete and submit to the Committee an Incentive Compensation
Restricted Shares Election Form after the Committee has determined the factor
set forth in Section 8(c)(B) and the vesting schedule of the Incentive
Compensation Restricted Shares, but in any event, prior to the date established
by the Committee for election of such deferral. The Incentive Compensation
Restricted Shares shall be evidenced by an Incentive Compensation Restricted
Shares Agreement executed on behalf of the Company by an officer designated by
the Committee and accepted by the employee. Such agreement shall describe the
Incentive Compensation Restricted Shares and state that such Incentive
Compensation Restricted Shares are subject to all terms and provisions, not
inconsistent with the Plan, as the Committee may approve. Terms and conditions
of Incentive Compensation Restricted Shares shall include the following:
(a) Deferral Election. Within such limits as the Committee may
establish, any portion of annual Incentive Compensation can be elected for
payout in Incentive Compensation Restricted Shares, in a dollar amount or as a
percentage of total Incentive Compensation, or as a percentage of total
Incentive Compensation with a stated maximum dollar amount.
(b) Issuance of Incentive Compensation Restricted Shares. Incentive
Compensation Restricted Shares will be issued on the same date that cash payouts
are made under the Incentive Compensation Plan, based on the fair market value
of the Shares on the date of the issuance.
(c) Number of Shares. The number of Incentive Compensation Restricted
Shares granted to an employee will equal the product of (A) that number of
Shares as have an aggregate fair market value equal to the dollar amount of the
annual Incentive Compensation to be received in the form of Incentive
Compensation Restricted Shares multiplied by (B) a factor greater than or equal
to 1.00, but less than or equal to 1.30, as determined by the Committee prior to
the date established by the Committee for the deferral election to be made.
(d) Termination of Employment Due to Death, Disability or Retirement or
at the Request of the Company Without Cause. If the employee's employment is
terminated by reason of death, disability or retirement or by the Company
without Cause, all of the restrictions applicable to unvested Incentive
Compensation Restricted Shares shall be waived and all Incentive Compensation
Restricted Shares shall be immediately vested. If
<PAGE> 32
the employee's employment is terminated for any other reason, the Incentive
Compensation Restricted Shares held by that employee will be forfeited as of the
date of such termination; provided, however, that the Committee may, in its sole
discretion, provide that such Incentive Compensation Restricted Shares will not
so terminate. In such event, such Incentive Compensation Restricted Shares will
vest in accordance with the vesting schedule set forth in the Incentive
Compensation Restricted Shares Agreement or on such accelerated basis as the
Committee may determine at or after grant or termination of employment.
(e) Application of Section 6. Except to the extent inconsistent with
this Section 8, the provisions of Section 6 and all other provisions of the Plan
pertaining to Restricted Shares shall be applicable to Incentive Compensation
Restricted Shares.
SECTION 9. OUTSIDE DIRECTOR OPTIONS.
(a) Administration. Outside Directors shall be eligible to participate
in the Plan only as expressly set forth in this Section 9. The Committee shall
have no power to determine which Outside Directors will receive Outside Director
Options, the amount of such Outside Director Options, or the terms of such
Outside Director Options to the extent provided in subsections (b) through (i)
below. None of the provisions of Section 5 applicable to Stock Options shall be
applicable to Outside Director Options.
(b) Eligibility and Grant. Outside Director Options shall be NQSOs. All
Outside Director Options shall be evidenced by a written agreement, which shall
be dated as of the date on which an Outside Director Option is granted, signed
by an officer of the Company authorized by the Committee, and signed by the
Outside Director. Such agreement shall describe the Outside Director Options and
state that such Outside Director Options are subject to all terms and provisions
of the Plan.
(c) Vesting. All Outside Director Options shall be fully vested on the
date of grant.
(d) Number of Shares. Each individual first elected or appointed to
serve as a director of the Company at or after adjournment of the Company's
annual meeting of shareholders (an "Annual Meeting") in 1995 who is an Outside
Director shall, upon such election or appointment, automatically be granted
options for that number of Shares having a fair market value of $100,000. In
addition, commencing immediately after the adjournment of the Annual Meeting in
1995 and continuing on an annual basis, immediately following the adjournment of
each succeeding Annual Meeting thereafter during the term of this Plan each
Outside Director whose term did not expire at that Annual Meeting and who has
then served as a director of the Company for a consecutive period of time which
includes each of the last three Annual Meetings (i.e., including the Annual
Meeting then just adjourned) shall automatically be granted additional Outside
Director Options for that number of Shares having a fair market value of
$50,000. For purposes of this Section 9, fair market value means the last sale
price of the Shares on the
<PAGE> 33
applicable date (or, if no sale of Shares occurs on such date, on the next
preceding date on which a sale occurred) as reported on the New York Stock
Exchange Composite Tape.
(e) Exercise Price. The exercise price per Share purchasable under an
Outside Director Option shall be equal to the fair market value on the day the
Outside Director Option is granted.
(f) Maximum Term. Each Outside Director Option shall be exercisable for
ten years from the date of grant; provided, however, that in the event an
Outside Director's service to the Company is terminated for Cause, each Outside
Director Option held by that Outside Director on the date of termination shall
be canceled effective as of such termination date.
(g) Transferability of Outside Director Options. Outside Director
Options shall be transferable to the maximum extent permissible under Rule
16b-3, as amended from time to time.
(h) Method of Exercise. Outside Director Options may be exercised in
whole or in part by giving written notice of exercise to the Company specifying
the number of Shares to be purchased. No Shares shall be transferred until full
payment therefor has been made. Payment for exercise of an Outside Director
Option may be made (i) in cash, (ii) by delivery of Shares already owned by the
Outside Director, (iii) by delivery of cash on the extension of credit by a
broker-dealer to whom the Outside Director has submitted a notice of exercise or
an irrevocable election to effect such extension of credit, or (iv) by any
combination of the foregoing.
(i) Termination of Option. Except as otherwise provided herein, if an
Outside Director ceases to be a member of the Board for any reason, then all
Outside Director Options or any unexercised portion of such Outside Director
Options which otherwise are exerciseable shall terminate unless such Outside
Director Options are exercised within six months after the date such Outside
Director ceases to be a member of the Board (but in no event after expiration of
the original term of such Outside Director Options); provided that if such
Outside Director ceases to be a member of the Board by reason of such Outside
Director's death, the six-month period shall instead be a one-year period.
(j) Applicability of Other Provisions to Outside Director Options.
Except for Section 5 and except to the extent inconsistent with the provisions
of this Section 9, all other terms applicable to Stock Options set forth in
other sections of this Plan are applicable to Outside Director Options.
SECTION 10. CHANGE OF CONTROL PROVISIONS.
(a) Impact of Event. In the event of a "Change of Control" as defined
in Section 10(b), the following acceleration and valuation provisions shall
apply:
<PAGE> 34
(i) On the date that such Change of Control is determined to
have occurred, any or all Stock Options awarded under this Plan not previously
exercisable and vested shall become fully exercisable and vested.
(ii) The restrictions applicable to any or all Restricted
Shares, Incentive Compensation Restricted Shares, Performance Shares and
Performance Share Units shall lapse and such shares and awards shall be fully
vested.
(b) Definition of "Change of Control". For purposes of Section 10(a), a
"Change of Control" shall mean:
(i) the acquisition by any individual, entity or group (within
the meaning of Section 13(d) (3) or 14(d) (2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of either (x) the then outstanding common shares of
CAH (the "outstanding CAH Common Shares") or (y) the combined voting power of
the then outstanding voting securities of CAH entitled to vote generally in the
election of directors (the "Outstanding CAH Voting Securities"); provided,
however, that for purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition directly from CAH
or any corporation controlled by CAH, (B) any acquisition by CAH or any
corporation controlled by CAH, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by CAH or any corporation controlled
by CAH or (D) any acquisition by any corporation pursuant to a transaction which
complies with clauses (x), (y) and (z) of subsection (iii) of this Section
10(b); or
(ii) individuals who, as of the Effective Date of this Plan,
constitute the Board of CAH (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of CAH; provided, however, that any
individual becoming a director subsequent to the Effective Date whose election,
or nomination for election by CAH's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) approval by the shareholders of CAH of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company or the acquisition of assets of another corporation
(a "Business Combination"), in each case, unless, following such Business
Combination, (x) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding CAH Common Shares
and Outstanding CAH Voting Securities immediately prior to such Business
Combination beneficially own, directly
<PAGE> 35
or indirectly, more than 50% (or such lower percentage as may be determined by
the Board of Directors of CAH prior to such Business Combination) of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns CAH or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding CAH Common
Shares and Outstanding CAH Voting Securities, as the case may be, (y) no Person
(excluding any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination (including any ownership that existed in the
Company or the company being acquired, if any) and (z) at least a majority of
the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(iv) approval by the shareholders of CAH of a complete
liquidation or dissolution of CAH.
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may amend, alter or discontinue the Plan; provided, however,
no amendment, alteration or discontinuation shall be made which would impair the
rights of an optionee, participant or transferee pursuant to Section 5(e) under
any award theretofore granted, without the optionee's, participant's or
transferee's consent, or which, without the approval of CAH's shareholders,
would:
(a) except as expressly provided in the Plan, increase the total number
of Shares reserved for purposes of the Plan;
(b) change the class of individuals eligible to participate in the
Plan;
(c) extend the maximum option period of Stock Options or Outside
Director Options; or
(d) increase materially the benefits under the Plan.
The Committee may amend the terms of any award theretofore granted
(except an Outside Director Option), prospectively or retroactively; provided no
such amendment shall impair the rights of any holder without the holder's
consent; provided, further, no
<PAGE> 36
Stock Option may be amended so as to decrease the exercise price of such Stock
Option to reflect a decrease in the fair market value of the underlying stock.
The provisions regarding Outside Director Options pursuant to Section 9
above shall not in any case be amended more often than once in any six-month
period other than to comply with changes in the Code or ERISA, or the rules
thereunder.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in applicable tax and securities
laws and accounting rules, as well as other developments.
SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments or deliveries of Shares not
yet made by the Company to a participant, optionee or transferee, nothing
contained herein shall give any such participant, optionee or transferee any
rights that are greater than those of a general creditor of the Company. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Shares or payments hereunder
consistent with the foregoing.
SECTION 13. GENERAL PROVISIONS.
(a) Share Transfer and Distribution. The Committee may require each
person purchasing Shares pursuant to a Stock Option, Outside Director Option,
Performance Share, Restricted Share or Incentive Compensation Restricted Share
award under the Plan to represent to and agree with the Company in writing that
the optionee or participant is acquiring the Shares without a view to the
distribution thereof. Any certificates for such Shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All Shares or other securities delivered under the Plan shall be
subject to such stop-transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Shares are
then listed and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any certificates evidencing
such Shares to make appropriate reference to such restrictions.
The Company shall not be required to deliver any Shares or other
securities under the Plan prior to such registration or other qualification of
such Shares or other securities under any state or federal law, rule or
regulation as the Committee shall determine to be necessary or advisable.
<PAGE> 37
(b) Additional Arrangements. Nothing contained in this Plan shall
prevent the Company from adopting other or additional compensation arrangements
for its employees, consultants or Outside Directors.
(c) No Right to Award or Employment. No person shall have any claim or
right to be granted an award under this Plan and the grant of an award shall not
confer upon any participant any right to be retained as an employee or director
of CAH or any subsidiary, nor shall it interfere in any way with the right of
CAH or any subsidiary to terminate the employment or service as a director of
any of the Plan's participants at any time.
(d) Tax Withholding. The Company shall have the right to require the
grantee of Restricted Shares, Incentive Compensation Restricted Shares,
Performance Shares or Performance Share Units or other person receiving such
Shares to pay the Company the amount of any taxes which the Company is required
to withhold with respect to such Shares or, in lieu thereof, to retain, or sell
without notice, a sufficient number of Shares held by it to cover the amount
required to be withheld. The Company shall have the right to deduct from all
dividends paid with respect to Restricted Shares, Incentive Compensation
Restricted Shares, and Performance Shares the amount of any taxes which the
Company is required to withhold with respect to such dividend payments.
The Company shall also have the right to require an optionee to pay to
the Company the amount of any taxes which the Company is required to withhold
with respect to the receipt by the optionee of Shares pursuant to the exercise
of a Stock Option, or, in lieu thereof, to retain, or sell without notice, a
number of Shares sufficient to cover the amount required to be withheld.
(e) Beneficiaries. The Committee shall establish such procedures as it
deems appropriate for a participant to designate a beneficiary to whom any
amounts payable in the event of the participant's death are to be paid.
(f) Laws Governing. The Plan and all awards made and action taken
thereunder shall be governed by and construed in accordance with the laws of the
State of Ohio, except to the extent superseded by federal law.
(g) Government Regulation. Notwithstanding any provisions of the Plan
or any agreement made pursuant to the Plan, the Company's obligations under the
Plan and such agreement shall be subject to all applicable laws, rules and
regulations and to such approvals as may be required by any governmental or
regulatory agencies.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective on the date (the "Effective Date") it is
approved by the shareholders of CAH. No grants shall be made under this Plan
prior to the Effective Date.
<PAGE> 38
SECTION 15. TERM OF PLAN.
No award shall be granted pursuant to the Plan on or after the tenth
anniversary of the Effective Date of the Plan, but awards granted prior to such
tenth anniversary may extend beyond that date.
SECTION 16. INDEMNIFICATION.
No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any award
granted under the Plan. Each person who is or shall have been a member of the
Committee or of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by him in connection with or resulting from any claim,
action, suit or proceeding to which he may be a party or in which he may be
involved by reason of any action taken or failure to act under or in connection
with this Plan or any award granted under this Plan and against and from any and
all amounts paid by him in settlement thereof, with the Company's approval, or
paid by him, except a judgment based upon a finding of bad faith, provided he
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the Company's
Articles of Incorporation or Code of Regulations, contained in any
indemnification agreements, as a matter of law, or otherwise, or any power that
the Company may have to indemnify him or hold him harmless.
SECTION 17. SAVINGS CLAUSE.
In case any one or more of the provisions of this Plan shall be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby and the invalid, illegal or unenforceable provision shall be
deemed null and void; however, to the extent permissible by law, any provision
which could be deemed null and void shall first be construed, interpreted or
revised retroactively to permit this Plan to be construed so as to foster the
intent of this Plan.
This Plan is intended to comply in all respects with applicable law and
regulation, including Code Section 422 and, with respect to Reporting Persons,
Rule 16b-3. In case any one or more of the provisions of this Plan shall be held
to violate or be unenforceable in any respect under Code Section 422 or Rule
16b-3, then to the extent permissible by law, any provision which could be
deemed to violate or be unenforceable under Code Section 422 or Rule 16b-3 shall
first be construed, interpreted, or revised retroactively to permit the Plan to
be in compliance with Code Section 422 and Rule 16b-3. Notwithstanding anything
in this Plan to the contrary, the Committee, in its sole and absolute
discretion, may bifurcate this Plan so as to restrict, limit or condition the
use of
<PAGE> 39
any provision of this Plan to participants who are Reporting Persons or covered
employees as defined under Code Section 162(m) without so restricting, limiting
or conditioning this Plan with respect to other participants.
<PAGE> 40
PROPOSED AMENDMENT TO
SECTION 9(d) OF THE
CARDINAL HEALTH, INC.
EQUITY INCENTIVE PLAN
(d) Number of Shares. Each individual first elected or appointed to
serve as a director of the Company at or after adjournment of the Company's
annual meeting of shareholders (an "Annual Meeting") in 1997 who is an Outside
Director shall, upon such election or appointment, automatically be granted
options for that number of Shares having a fair market value of $150,000 (each
an "Initial Grant"). In addition, commencing immediately after the adjournment
of the Annual Meeting in 1997 and continuing on an annual basis, immediately
following the adjournment of each succeeding Annual Meeting thereafter during
the term of this Plan each Outside Director whose term did not expire at that
Annual Meeting and who has then served as a director of the Company for a
consecutive period of time which includes each of the last three Annual Meetings
(i.e., including the Annual Meeting then just adjourned) shall automatically be
granted additional Outside Director Options for that number of Shares having a
fair market value of $100,000 (each an "Annual Grant"). Beginning on July 1,
2000 and on every third July 1 thereafter, the dollar value of the Initial
Grants and Annual Grants shall automatically be increased under this Plan by a
percentage equal to that percentage by which the fair market value per Share has
increased in the immediately preceding three-year period, not to exceed a 45%
aggregate increase over any such three-year period. For purposes of this Section
9, fair market value means the last sale price of the Shares on the applicable
date (or, if no sale of Shares occurs on such date, on the next preceding date
on which a sale occurred) as reported on the New York Stock Exchange Composite
Tape.
<PAGE> 41
CARDINAL HEALTH, INC.
PROXY
5555 GLENDON COURT
DUBLIN, OHIO 43016
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
12, 1997, at the annual meeting of shareholders to be held on November 5, 1997,
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. [ ] FOR or [ ] AGAINST or [ ] ABSTAIN -- Proposal to amend the Company's
Equity Incentive Plan as described in the Company's Proxy Statement.
3. In their discretion, to vote upon such other business as may properly come
before the meeting.
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, FOR PROPOSAL 2, AND WITH DISCRETIONARY AUTHORITY ON
ALL OTHER 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 , 1997
------------------------------
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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.
