<PAGE> 1
As filed with the Securities and Exchange Commission on February 4, 1999
Registration No. 333-68819-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
POST-EFFECTIVE AMENDMENT
NO. 1
ON
FORM S-8
TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933*
-----------------------
Cardinal Health, Inc.
(Exact name of registrant as specified in its charter)
Ohio 31-0958666
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
5555 Glendon Court, Dublin, Ohio 43016
(Address of Principal Executive Offices) (Zip Code)
---------------
ALLEGIANCE CORPORATION 1996 OUTSIDE DIRECTOR INCENTIVE COMPENSATION PLAN
ALLEGIANCE CORPORATION 1996 INCENTIVE COMPENSATION PROGRAM
ALLEGIANCE CORPORATION 1998 INCENTIVE COMPENSATION PROGRAM
(Full title of the plans)
---------------
Steven Alan Bennett, Esq.
Executive Vice President, General Counsel and Secretary
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
(Name and address of agent for service)
(614) 717-5000
(Telephone number, including area code, of agent for service)
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of securities to Amount to be offering price aggregate offering Amount of
registered registered(1) per share price registration fee
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares,
without par value 10,333,000 (2) (2) (2)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Also includes an indeterminable number of additional shares that may
become issuable pursuant to the anti-dilution provisions of the Plans.
(2) Not applicable. All filing fees payable in connection with the
registration of the issuance of these securities were paid in
connection with the filing of (a) preliminary proxy materials on
Schedule 14A of Cardinal Health, Inc. on December 2, 1998, and (b) the
Registrant's Form S-4 Registration Statement (333-68819) on December
14, 1998.
* Filed as a Post-Effective Amendment on Form S-8 to such Form S-4
Registration Statement pursuant to the procedure described in Part II
under "Introductory Statement."
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
INTRODUCTORY STATEMENT
Cardinal Health, Inc. (the "Company" or the "Registrant") hereby amends
its Registration Statement on Form S-4 (No. 333-68819) (the "Form S-4") by
filing this Post-Effective Amendment No. 1 on Form S-8 ("Amendment No. 1") with
respect to up to 10,333,000 of the Registrant's Common Shares, without par
value ("Common Shares"), issuable in connection with the following plans of
Allegiance Corporation ("Allegiance"):
(a) Allegiance Corporation 1996 Outside Director Incentive
Compensation Plan;
(b) Allegiance Corporation 1996 Incentive Compensation Program;
and
(c) Allegiance Corporation 1998 Incentive Compensation Program
(collectively, the "Plans").
All such Common Shares were previously included in the Form S-4.
On February 3, 1999, Boxes Merger Corp., a Delaware corporation and a
wholly owned subsidiary of the Registrant ("Boxes"), was merged with and into
Allegiance (the "Merger") pursuant to an Agreement and Plan of Merger dated
October 8, 1998 among the Registrant, Boxes and Allegiance (the "Merger
Agreement"). As a result of the Merger, each outstanding share of Allegiance
Common Stock (with certain specified exceptions) was converted into .6225 Common
Shares of the Registrant (the "Exchange Ratio"). Also as a result of the Merger,
shares of Allegiance Common Stock are no longer issuable upon the exercise of
options to purchase Allegiance Common Stock ("Allegiance Options") pursuant to
the Plans. Participants in the Plans will receive in lieu of Allegiance Common
Stock that number of Common Shares of the Registrant equal to the number of
shares of Allegiance Common Stock issuable immediately prior to the effective
time of the Merger upon exercise of an Allegiance Option multiplied by the
Exchange Ratio of .6225 with an exercise price for such option equal to the
exercise price which existed under the corresponding Allegiance Option divided
by the Exchange Ratio of .6225.
The designation of Amendment No. 1 as Registration No. 333-68819-01
denotes that Amendment No. 1 relates only to the Common Shares issuable pursuant
to the Plans and that this is the first Post-Effective Amendment to the S-4
filed with respect to such shares.
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The documents listed in (a) through (h) below are incorporated by
reference in the registration statement. All documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), subsequent to the date of the filing
of this registration statement and prior to the filing of a post-effective
amendment that indicates that all securities registered hereunder have been
sold, or that de-registers all securities then remaining unsold, shall be deemed
to be incorporated by reference in the registration statement and to be a part
hereof from the date of the filing of such documents.
(a) The Annual Report on Form 10-K of the Company for the fiscal
year ended June 30, 1998 filed with the Securities and
Exchange Commission (the "Commission") on September 1, 1998
(excluding Items 7 and 8) ("Form 10-K");
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<PAGE> 3
(b) The information contained in the Company's Proxy Statement
dated September 28, 1998 for its Annual Meeting of
Shareholders held on November 23, 1998 that has been
incorporated by reference in its Form 10-K;
(c) The Company's Current Report on Form 8-K/A filed with the
Commission on September 28, 1998, amending the Company's
Current Report on Form 8-K filed with the Commission on August
10, 1998;
(d) The Company's Current Report on Form 8-K filed with the
Commission on October 13, 1998;
(e) The Company's Current Report on Form 8-K filed with the
Commission on November 24, 1998;
(f) The Company's Current Report on Form 8-K filed with the
Commission on January 21, 1999;
(g) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998, filed with the Commission on
November 13, 1998; and
(h) The description of the Company's Common Shares contained in
the Company's Registration Statement on Form 8-A dated August
19, 1994, pursuant to Section 12 of the Exchange Act.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL.
The legality of the Common Shares offered hereby has been passed upon
for the Company by Paul S. Williams, Assistant General Counsel of the Company.
Mr. Williams holds vested and unvested options to purchase Common Shares of the
Company, and unvested restricted Common Shares of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1701.13(E) of the Ohio Revised Code sets forth conditions and
limitations governing the indemnification of officers, directors, and other
persons.
Article 6 of the Company's Restated Code of Regulations ("Code of
Regulations"), as amended and restated, contains certain indemnification
provisions adopted pursuant to authority contained in Section 1701.13(E) of the
Ohio Revised Code. The Company's Code of Regulations provides for the
indemnification of its officers, directors, employees, and agents against all
expenses with respect to any judgments, fines, and amounts paid in settlement,
or with respect to any threatened, pending, or completed action, suit, or
proceeding to which they were or are parties or are threatened to be made
parties by reason of acting in such capacities, provided that it is determined,
either by a majority vote of a quorum of disinterested directors of the Company
or the shareholders of the Company or otherwise as provided in Section
1701.13(E) of the Ohio Revised Code, that (a) they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interest of
the Company; (b) in any action, suit, or proceeding by or in the right of the
Company, they were not, and have not been adjudicated to have been, negligent or
guilty of misconduct in the performance of their duties to the Company; and (c)
with respect to any criminal action or proceeding, that they had no reasonable
cause to believe that their conduct was unlawful. Section 1701.13(E) provides
that to the extent a director, officer, employee, or agent has been successful
on the merits or otherwise in defense of any such action, suit, or proceeding,
such individual shall be indemnified against expenses reasonably incurred in
connection therewith. At present there are no material claims, actions, suits,
or proceedings pending where
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<PAGE> 4
indemnification would be required under these provisions, and the Company does
not know of any such threatened claims, actions, suits, or proceedings which may
result in a request for such indemnification.
The Company has entered into indemnification contracts with each of its
directors and executive officers. These contracts generally: (i) confirm the
existing indemnity provided to them under the Company's Code of Regulations and
assure that this indemnity will continue to be provided; (ii) provide that if
the Company does not maintain directors' and officers' liability insurance, the
Company will, in effect, become a self-insurer of the coverage; and (iii)
provide that, in addition, the directors and officers shall be indemnified to
the fullest extent permitted by law against all expenses (including legal fees),
judgments, fines, and settlement amounts incurred by them in any action or
proceeding on account of their service as a director, officer, employee, or
agent of the Company, or at the request of the Company as a director, officer,
employee, trustee, fiduciary, manager, member or agent of another corporation,
partnership, trust, limited liability company, employee benefit plan or other
enterprise and; (iv) provide for the mandatory advancement of expenses to the
executive officer or director in connection with the defense of any proceedings,
provided that the executive officer or director agrees to reimburse the Company
for that advancement if it is ultimately determined that the executive officer
or director is not entitled to the indemnification for that proceeding under the
agreement. Coverage under the contracts is excluded: (A) on account of conduct
which is finally adjudged to be knowingly fraudulent, deliberately dishonest, or
willful misconduct; or (B) if a final court of adjudication shall determine that
such indemnification is not lawful; or (C) in respect of any suit in which
judgment is rendered for violations of Section 16(b) of the Securities and
Exchange Act of 1934, as amended, or provisions of any federal, state, or local
statutory law; or (D) on account of any remuneration paid which is finally
adjudged to have been in violation of law; or (E) on account of conduct
occurring prior to the time the executive officer or director became an officer,
director, employee or agent of the Company or its subsidiaries (but in no event
earlier than the time such entity became a subsidiary of Cardinal); or (F) with
respect to proceedings initiated or brought voluntarily by the executive officer
or director and not by way of defense, except for proceedings brought to enforce
rights under the indemnification contract.
The Company maintains a directors' and officers' insurance policy which
insures the officers and directors of the Company from any claim arising out of
an alleged wrongful act by such persons in their respective capacities as
officers and directors of the Company.
ITEM 8. EXHIBITS.
Exhibit Number Description of Exhibit
- -------------- ----------------------
5 Opinion of Paul S. Williams as to legality of the
Common Shares being registered
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Ernst & Young LLP
23(c) Consent of PricewaterhouseCoopers LLP (Cardinal)
23(d) Consent of Arthur Andersen LLP
23(e) Consent of Paul S. Williams (included in Opinion
filed as Exhibit 5 hereto)
24(a) Power of Attorney(1)
99(a) Allegiance Corporation 1996 Outside Director
Incentive Compensation Plan
-3-
<PAGE> 5
99(b) Allegiance Corporation 1996 Incentive Compensation
Program (the "1996 Program")
99(b)(1) Allegiance Corporation Stock Option Plan adopted
September 16, 1996 pursuant to the 1996 Program
99(b)(2) Allegiance Corporation Stock Option Plan adopted
November 5, 1998 pursuant to the 1996 Program
99(c) Allegiance Corporation 1998 Incentive Compensation
Program (the "1998 Program")
99(c)(1) Allegiance Corporation Stock Option Plan adopted May
7, 1998 pursuant to the 1998 Program
99(c)(2) Allegiance Corporation Long Term Incentive Stock
Option Plan adopted May 7, 1998 pursuant to the 1998
Program
(1) Previously filed with Amendment No. 1 to the Registration Statement on
Form S-4 (333-68819) filed with the Commission on December 14, 1998 and
identified by exhibit number 24.
ITEM 9. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as
amended (the "Securities Act"); (ii) to reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement; provided, however, that clauses (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
clauses is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE> 6
C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 6 above or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
[Signatures on Following Page]
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<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this
Post-Effective Amendment No. 1 on Form S-8 to the Registrant's Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dublin, State of Ohio, on the 4th day of
February, 1999.
CARDINAL HEALTH, INC.
By: /s/ Robert D. Walter
-------------------------------
Robert D. Walter, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Post
Effective Amendment No. 1 on Form S-8 to the Registration Statement on Form S-4
has been signed by the following persons in the capacities indicated on the 4th
day of February, 1999.
Signature Title
- --------- -----
* Chairman, Chief Executive
- --------------------------- Officer (principal executive officer)
Robert D. Walter and Director
* Vice President, Acting Chief
- --------------------------- Financial Officer and Controller
Richard J. Miller (principal financial officer
and principal accounting officer)
* Director
- ---------------------------
Aleksander Erdeljan
* Director
- ---------------------------
John F. Finn
* Director
- ---------------------------
Robert L. Gerbig
* Director
- ---------------------------
John F. Havens
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<PAGE> 8
* Director
- ---------------------------
Regina E. Herzlinger
* Director
- ---------------------------
John C. Kane
* Director
- ---------------------------
J. Michael Losh
* Director
- ---------------------------
George R. Manser
* Director
- ---------------------------
John B. McCoy
* Director
- ---------------------------
Jerry E. Robertson
* Director
- ---------------------------
L. Jack Van Fossen
* Director
- ---------------------------
Melburn G. Whitmire
Director
- ---------------------------
Silas S. Cathcart
Director
- ---------------------------
Michael D. O'Halleran
Director
- ---------------------------
Lester B. Knight
* By: /s/ Robert D. Walter
---------------------
Robert D. Walter,
Attorney-in-fact
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<PAGE> 9
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
5 Opinion of Paul S. Williams as to legality of the
Common Shares being registered
23(a) Consent of Deloitte & Touche LLP
23(b) Consent of Ernst & Young LLP
23(c) Consent of PricewaterhouseCoopers LLP
23(d) Consent of Arthur Andersen LLP
23(e) Consent of Paul S. Williams (included in Opinion
filed as Exhibit 5 hereto)
24(a) Power of Attorney(1)
99(a) Allegiance Corporation 1996 Outside Director
Incentive Compensation Plan
99(b) Allegiance Corporation 1996 Incentive Compensation
Program (the "1996 Program")
99(b)(1) Allegiance Corporation Stock Option Plan adopted
September 16, 1996 pursuant to the 1996 Program
99(b)(2) Allegiance Corporation Stock Option Plan adopted
November 5, 1998 pursuant to the 1996 Program
99(c) Allegiance Corporation 1998 Incentive Compensation
Program (the "1998 Program")
99(c)(1) Allegiance Corporation Stock Option Plan adopted May
7, 1998 pursuant to the 1998 Program
99(c)(2) Allegiance Corporation Long Term Incentive Stock
Option Plan adopted May 7, 1998 pursuant to the 1998
Program
(1) Previously filed with Amendment No. 1 to the Registration Statement on Form
S-4 (333-68819) filed with the Commission on December 14, 1998 and
identified by exhibit number 24.
<PAGE> 1
EXHIBIT 5
February 4, 1999
Cardinal Health, Inc.
5555 Glendon Court
Dublin, OH 43016
Gentlemen:
I have acted as counsel to Cardinal Health, Inc., an Ohio
corporation (the "Company"), in connection with Post-Effective Amendment No. 1
on Form S-8 to the Company's Registration Statement on Form S-4 (the
"Registration Statement") filed under the Securities Act of 1933, as amended
(the "Act") relating to the issuance of up to 10,333,000 common shares, without
par value (the "Common Shares"), of the Company pursuant to the following
plans (the "Plans"): (a) the Allegiance Corporation 1996 Outside Director
Incentive Compensation Plan, (b) the Allegiance Corporation 1996 Incentive
Compensation Program and (c) the Allegiance Corporation 1998 Incentive
Compensation Program.
In connection with the foregoing, I have examined: (a) the
Amended and Restated Articles of Incorporation, as amended, and Restated Code of
Regulations, as amended, of the Company, (b) the Plans, and (c) such records of
the corporate proceedings of the Company and such other documents as I deemed
necessary to render this opinion.
Based on such examination, I am of the opinion that the Common
Shares available for issuance under the Plans, when issued, delivered and paid
for in accordance with the terms and conditions of the Plans, will be legally
issued, fully paid and nonassessable.
I hereby consent to the filing of this Opinion as Exhibit 5 to
the Registration Statement and the reference to me in Item 5 of Part II of the
Registration Statement. In giving such consent, I do not thereby admit that I am
in the category of person whose consent is required under Section 7 of the Act
or the rules and regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ Paul S. Williams
Paul S. Williams, Esq.
Assistant General Counsel
<PAGE> 1
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Cardinal Health, Inc. on Form S-8 Filed as Post Effective Amendment No. 1 to
Registration Statement No. 333-68819 on Form S-4 of our report dated August 12,
1998 (which report expresses an unqualified opinion that such financial
statements are in conformity with generally accepted accounting principles
applicable after consolidated financial statements are issued for a period which
includes the date of consummation of the business combination of Cardinal
Health, Inc. and R.P. Scherer Corporation), appearing in Cardinal Health, Inc.'s
Current Report on Form 8-K/A filed September 28, 1998.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
February 1, 1999
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
Cardinal Health, Inc. (the "Company") on Form S-8 filed as Post Effective
Amendment No. 1 on Form S-4 (No. 333-68819) of our report, with respect to the
consolidated financial statements of Pyxis Corporation (not presented) dated
August 2, 1996, appearing in the Company's Current Report on Form 8-K/A dated
September 28, 1998.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Diego, California
February 1, 1999
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 filed as Post Effective Amendment No. 1 to Registration
Statement No. 333-68819 on Form S-4 of Cardinal Health, Inc. of our report dated
January 30, 1997 related to the financial statements of Owen Healthcare, Inc.
which appears on page 5 of Cardinal Health, Inc.'s Current Report on Form 8-K/A
dated September 28, 1998.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Houston, Texas
February 1, 1999
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of Cardinal Health, Inc. on Form S-8
filed as Post-Effective Amendment No. 1 to Registration Statement No. 333-68819
on Form 4 of our report with respect to R.P. Scherer Corporation dated April
27, 1998 (except with respect to the matter discussed in Note 16, as to which
the date is May 17,1998) included in the Current Report on Form 8-K/A
(Amendment No. 1, dated September 28, 1998) of Cardinal Health, Inc. and to all
references to our Firm included in this Registration Statement.
/s/ Arthur Andersen LLP
Arthur Anderson LLP
Detroit, Michigan
February 1, 1999.
<PAGE> 1
Exhibit 99(a)
ALLEGIANCE CORPORATION
----------------------
1996 OUTSIDE DIRECTOR INCENTIVE COMPENSATION PLAN
-------------------------------------------------
1. PURPOSE. The purpose of the Allegiance Corporation 1996 Outside
Director Incentive Compensation Plan (the "Plan") is to foster and
promote the long-term financial success of Allegiance Corporation (the
"Company") by (i) more closely aligning the personal interests of the
directors with those of the Company's stockholders and (ii) attracting
and retaining outstanding persons to serve as directors by enabling
them to participate in the Company's growth through stock ownership.
2. SHARES RESERVED.
2.1 NUMBER OF SHARES RESERVED. There is hereby reserved for
issuance under the Plan an aggregate of 350,000 shares of
Common Stock of the Company ("Common Stock") which may be
authorized and unissued or treasury shares. If the Company
shall at any time change the number of issued shares of Common
Stock without new consideration to the Company (such as by
stock dividend or stock split), the number of shares reserved
for issuance under this Plan shall be correspondingly changed.
2.2 REUSAGE OF SHARES. In the event of the termination (by reason
of expiration, cancellation, surrender, or otherwise) of any
Annual Option under the Plan, that number of shares of Common
Stock that was subject to the Annual Option but not delivered
shall be available again for an Annual Option under the Plan.
2.3 ADJUSTMENTS TO SHARES RESERVED. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff,
stock dividend, stock split, reverse stock split, exchange, or
other distribution with respect to shares of Common Stock or
other change in the corporate structure or capitalization
affecting the Common Stock, the type and number of shares of
stock which are or may be subject to Annual Options under the
Plan and the terms of any outstanding Annual Option (including
the Option Price ) shall be equitably adjusted by the Board of
Directors to preserve the value of the Annual Options awarded
or to be awarded under the Plan.
3. PARTICIPATION. Participation in this Plan is limited to members of the
Board of Directors of the Company (a "Director") who are not salaried
officers or employees of the Company or any subsidiary (an "Outside
Director"). Each Outside Director shall begin participation in the Plan
on the first day of his or her first term as a Director and
participation shall continue until the Outside Director no longer
serves as a Director.
4. ADMINISTRATION. This Plan is intended to be self-governing. All grants
of options to Outside Directors under the Plan shall be automatic and
nondiscretionary and shall be made strictly in accordance with the
terms of the Plan. To the extent that questions of
<PAGE> 2
administration arise, they shall be resolved by the entire Board of
Directors and the Board of Directors shall comply with all applicable
law in administering the Plan.
5. PAYMENT OF ANNUAL RETAINER IN OPTIONS. As soon as practicable after the
first day of each Term Year (as defined below), in lieu of an annual
cash retainer, each Outside Director shall be granted an option to
purchase shares of Common Stock (an "Annual Option"). The terms of each
Annual Option shall be as follows:
5.1 TERM. The term of the Annual Option shall be ten (10)
years.
5.2 EXERCISE. Except as provided in subsection 6.2 below,
the Annual Option shall be exercisable only while the
Outside Director remains a Director of the Company.
5.3 OPTION PRICE. The exercise price per share of Common
Stock (the "Option Price") shall equal the Fair
Market Value of a share of Common Stock determined on
the date the Annual Option is granted.
5.4 VESTING. Subject to subsection 6.2 below, the Annual
Option shall become exercisable as to all of the
shares subject to the option on the last day of the
Term Year in which the Annual Option is granted.
5.5 NUMBER OF SHARES. Each Annual Option shall be to
purchase 10,000 shares of Common Stock; provided,
that in the case of a Term Year which is other than
12 months in duration, the Annual Option shall be to
purchase that number of shares of Common Stock which
is equal to 10,000 multiplied by a fraction the
numerator of which is the number of months in the
Term Year and the denominator of which is 12.
For purposes of this Section 5, a "Term Year" shall mean the period
beginning on the first day following the annual meeting of the
Company's stockholders, or if later, the first day a person first
serves as an Outside Director, and ending on the day of the succeeding
annual meeting; provided, that with respect to the Outside Directors
serving on the effective date of the Plan, the first Term Year for such
Outside Directors shall mean the period beginning October 1, 1996 and
ending on the day of the annual meeting of the Company's stockholders
occurring in 1998.
6. OPTION EXERCISES.
6.1 MANNER AND EFFECT OF EXERCISE. An Annual Option may
be exercised by notice to the Company specifying the
number of shares of Common Stock to be purchased and
shall be accompanied by payment of the option price
by check or by the delivery of shares of Common Stock
then owned by the Outside Director or certification
of such ownership. Payment may also be made by
delivering a properly-executed exercise notice to the
Company, together with a copy of irrevocable
instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds to pay
the exercise price. The exercise notice shall include
such other
-2-
<PAGE> 3
documentation as the Company or broker or transfer
agent, if applicable, shall require to effect an
exercise of the Annual Option and delivery to the
Company of the sale or loan proceeds required to pay
the exercise price. An Annual Option may not be
exercised for a fraction of a share. A share
certificate for the number of shares of Common Stock
acquired shall be issued to the Outside Director as
soon as practicable after exercise of an Annual
Option. No adjustment shall be made for a dividend or
other right for which the record date is prior to the
date the stock certificate is issued, except as
provided in Section 2. An exercise of an Annual
Option in any manner shall result in a decrease in
the number of shares of Common Stock which thereafter
may be available, both for purposes of the Plan and
for sale under the Annual Option, by the number of
shares of Common Stock as to which the Annual Option
is exercised.
6.2 TERMINATION OF OUTSIDE DIRECTOR. In the event an
Outside Director's status as a Director terminates
for any reason, all of the Outside Director's Annual
Options shall become fully exercisable and all such
Annual Options shall remain exercisable for a period
of twelve (12) months following the date the Outside
Director's status as a Director terminates (but in no
event later than the expiration of the ten (10) year
term of any Annual Option). To the extent that the
terminating Outside Director does not exercise any
Annual Option within the time specified herein, the
Annual Option shall terminate.
7. GENERAL
7.1 EFFECTIVE DATE. The Plan will become effective upon
its approval by Baxter International, Inc., the
Company's sole stockholder.
7.2 DURATION. The Plan shall remain in effect until all
Annual Options granted under the Plan have been
satisfied by the issuance of shares of Common Stock,
or have been terminated in accordance with the terms
of the Plan. No option may be granted under the Plan
after the tenth anniversary of its effective date.
7.3 NON-TRANSFERABILITY OF OPTION. No Annual Option
granted under the Plan may be transferred, pledged,
or assigned by an Outside Director except by will or
the laws of descent and distribution in the event of
death, and the Company shall not be required to
recognize any attempted assignment of such rights by
any Outside Director. During an Outside Director's
lifetime, options may be exercised only by the
Outside Director or by the Outside Director's
guardian or legal representative. Notwithstanding the
foregoing, an Outside Director may transfer an Annual
Option to members of the Director's immediate family
or trusts or family partnerships for the benefit of
such persons, subject to such terms and conditions as
may be established by the Board of Directors.
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<PAGE> 4
7.4 COMPLIANCE WITH APPLICABLE LAW. The award of any
Annual Option under the Plan may also be made subject
to such other provisions as may be appropriate to
comply with federal and state securities laws or
stock "exchange requirements. If, at any time, the
Company determines that the listing, registration, or
qualification of any Annual Option, or the shares of
Common Stock issuable pursuant thereto, is necessary
on any securities exchange or under any federal or
state securities or blue sky law, or that the consent
or approval of any governmental regulatory body is
necessary or desirable, the issuance of shares of
Common Stock pursuant to any Annual Option, or the
removal of any restrictions imposed on shares subject
to an Annual Option, may be delayed until such
listing, registration, qualification, consent, or
approval is effected.
7.5 NO CONTINUED RETAINER. Participation in the Plan will
not give any Outside Director the right to be
retained as a Director of the Company or any right or
claim to any benefit under the Plan unless such right
or claim has specifically accrued under the terms of
the Plan.
7.6 TREATMENT AS A STOCKHOLDER. No Annual Option granted
to an Outside Director under the Plan shall create
any rights in such Outside Director as a stockholder
of the Company until shares of Common Stock are
registered in the name of the Outside Director.
7.7 AMENDMENT OR DISCONTINUATION OF THE PROGRAM. The
Board of Directors may amend, suspend or discontinue
the Plan at any time; provided, however, that no
amendment, suspension or discontinuance shall
adversely affect any outstanding Annual Option and if
any law, agreement or exchange on which the Company's
Common Stock is traded requires stockholder approval
for an amendment to become effective, no such
amendment shall become effective unless approved by
vote of the Company's stockholders.
7.8 FAIR MARKET VALUE. Except as otherwise determined by
the Board of Directors, the Fair Market Value of a
share of Common Stock as of any date shall be equal
to the closing sale price of a share of Common Stock
on that date as reported on the New York Stock
Exchange Composite Reporting Tape.
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<PAGE> 1
EXHIBIT 99(b)
ALLEGIANCE CORPORATION
1996 INCENTIVE COMPENSATION PROGRAM
1. PURPOSE. The purpose of the Allegiance Corporation 1996 Incentive
Compensation Program ("Program") is to increase stockholder value and
to advance the interests of Allegiance Corporation ("Allegiance") and
its subsidiaries (collectively, the "Company") by providing a variety
of economic incentives designed to attract, retain, and motivate
officers and other key employees and by strengthening the mutuality of
interest between such employees and the Company's stockholders. As used
in this Program, the term "subsidiary" means any business, whether or
not incorporated, in which Allegiance has a direct or indirect
ownership interest.
2. ADMINISTRATION.
2.1 ADMINISTRATION BY COMMITTEE. The Program shall be administered
by the Compensation Committee of the Allegiance Board of
Directors ("Committee"), which shall consist of two or more
non-employee directors within the meaning of Rule 16b-3 of the
Securities Exchange Act of 1934, as amended ("Exchange Act")
who also qualify as outside directors within the meaning of
Section 162(m) and the related regulations under the Internal
Revenue Code of 1986, as amended. The Chief Executive Officer
of the Company may exercise any or all authority otherwise
delegated to the Committee under the terms of the Program with
respect to the grant or administration of incentives made to
or held by persons who, at the time of the exercise of such
authority, are not subject to Section 16(a) of the Exchange
Act.
2.2 AUTHORITY. Subject to the provisions of the Program, the
Committee shall have the authority to (a) interpret the
provisions of the Program, and prescribe, amend, and rescind
rules and procedures relating to the Program, (b) grant
incentives under the Program, in such forms and amounts and
subject to such terms and conditions as it deems appropriate,
including, without limitation, incentives which are made in
combination with or in tandem with other incentives (whether
or not contemporaneously granted) or compensation or in lieu
of current or deferred compensation, (c) modify the terms of,
cancel and reissue, or repurchase outstanding incentives,
subject to subsection 12.7, and (d) make all other
determinations and take all other actions as it deems
necessary or desirable for the administration of the Program;
provided, however, that in no event shall the Committee cancel
any outstanding stock option for the purpose of reissuing an
option to the option holder at a lower exercise price. The
determination of the Committee on matters within its authority
shall be conclusive and binding on the Company and all other
persons. The Committee shall comply with all applicable law in
administering the Plan.
3. PARTICIPATION. Subject to the terms and conditions of the Program, the
Committee shall designate from time to time the employees of the
Company (including employees who are directors of Allegiance) who shall
receive incentives under the Program
<PAGE> 2
("Participants"). All officers and other full-time employees of the
Company are eligible to receive incentives under the Program.
Participation, the grant of incentives and any related performance
goals for persons subject to Section 16(a) of the Exchange Act must be
determined by the Committee.
4. SHARES SUBJECT TO THE PROGRAM
4.1 NUMBER OF SHARES RESERVED. Subject to adjustment in accordance
with subsections 4.2 and 4.3, the aggregate number of shares
of Allegiance Common Stock ("Common Stock") available for
incentives under the Program shall be 9,683,000 shares. All
shares of Common Stock issued under the Program may be
authorized and unissued shares or treasury shares. All of such
shares may, but need not, be issued pursuant to the exercise
of Incentive Stock Options. The maximum number of shares of
Common Stock which may be granted in the form of Restricted
Stock shall be 750,000. The maximum number of shares that may
be granted in the form of a Stock Option or Stock Appreciation
Right pursuant to any award granted in any fiscal year to a
Participant shall be 1,000,000 shares.
4.2 REUSAGE OF SHARES.
(a) In the event of the exercise or termination (by
reason of forfeiture, expiration, cancellation,
surrender, or otherwise) of any incentive under the
Program, that number of shares of Common Stock that
was subject to the incentive but not delivered shall
be available again for incentives under the Program.
(b) In the event that shares of Common Stock are
delivered under the Program and are thereafter
forfeited or reacquired by the Company pursuant to
rights reserved upon the award thereof, such
forfeited or reacquired shares shall be available
again for incentives under the Program.
4.3 ADJUSTMENTS TO SHARES RESERVED. In the event of any merger,
consolidation, reorganization, recapitalization, spinoff,
stock dividend, stock split, reverse stock split, exchange, or
other distribution with respect to shares of Common Stock or
other change in the corporate structure or capitalization
affecting the Common Stock, the type and number of shares of
stock which are or may be subject to incentives under the
Program and the terms of any outstanding incentives (including
the price at which shares of stock may be issued pursuant to
an outstanding incentive) shall be equitably adjusted by the
Committee, in its sole discretion, to preserve the value of
incentives awarded or to be awarded to Participants under the
Program.
5. STOCK OPTIONS.
5.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom options to
purchase shares of Common Stock ("Stock Options") are to be
awarded under the Program and shall determine the number,
type, and terms of the Stock Options to be awarded to each of
them.
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<PAGE> 3
Each Stock Option shall expire not later than 10 years and one
day after the date of grant. The option price per share
("Option Price") for any Stock Option awarded shall not be
less than the Fair Market Value of a share of Common Stock on
the date the Stock Option is granted. Each Stock Option
awarded under the Program shall be a "nonqualified stock
option" for tax purposes unless the Stock Option satisfies all
of the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended, and the Committee designates such
Stock Option as an "Incentive Stock Option".
5.2 MANNER OF EXERCISE. A Stock Option may be exercised by notice
to the Company specifying the number of shares of Common Stock
to be purchased and shall be accompanied by payment of the
Option Price by check or, in the discretion of the Committee,
by the delivery of shares of Common Stock then owned by the
Participant or certification of such ownership. In the
discretion of the Committee, payment may also be made by
delivering a properly executed exercise notice to the Company,
together with a copy of irrevocable instructions to a broker
to deliver promptly to the Company the amount of sale or loan
proceeds to pay the exercise price.
5.3 DIVIDEND EQUIVALENTS. The Committee may grant dividend
equivalents in connection with any option granted under this
Program. Such dividend equivalents may be payable in cash or
in shares of Common Stock upon such terms and conditions as
the Committee in its sole discretion deems appropriate.
6. STOCK APPRECIATION RIGHTS.
6.1 GRANT OF SARS. Subject to the terms and conditions of the
Program, the Committee shall designate the employees to whom
stock appreciation rights ("SARs") are to be awarded under the
Program and shall determine the number, type and terms of the
SARs to be awarded to each of them. An SAR may be granted in
tandem with a stock option granted under the Program, or the
SAR may be granted on a free-standing basis. Tandem SARs may
be granted either at or after the time of grant of a stock
option, provided that, in the case of an Incentive Stock
Option a tandem SAR may be granted only at the time of the
grant of such option. The grant price of a tandem SAR shall
equal the option price of the related option. The grant price
of a free-standing SAR shall be equal to the Fair Market Value
of a share of Common Stock on the date of grant of the SAR.
6.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all
or part of the shares subject to the related option upon the
surrender of the right to exercise the equivalent portion of
the related option. A tandem SAR shall terminate and no longer
be exercisable upon termination or exercise of the related
stock option. A tandem SAR may be exercised only with respect
to the shares for which its related option is then
exercisable.
6.3 EXERCISE OF FREE-STANDING SARS. Free-standing SARs may be
exercised upon such terms and conditions as the Committee, in
its sole discretion, determines.
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<PAGE> 4
6.4 TERM OF SARS. The term of an SAR granted under the Program
shall be determined by the Committee in its sole discretion;
provided, however, that such term shall not exceed the option
term in the case of a tandem SAP, or ten years in the case of
a free-standing SAR.
6.5 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from the Company in an
amount determined by multiplying:
(a) The excess of the Fair Market Value of a share of
Common Stock on the date of exercise over the grant
price of the SAR by
(b) The number of shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment to be made
upon an SAR exercise may be in cash, in shares of Common Stock
of equivalent value, or in some combination thereof.
7. STOCK AWARDS. Subject to the terms and conditions of the Program, the
Committee shall designate the employees who shall be awarded shares of
Common Stock without restrictions ("Stock Awards"), under the Program
and shall determine the number and terms of the Stock Awards to be
awarded to each of them. No person subject to Section 16(a) of the
Exchange Act may receive a Stock Award, and no person eligible to
receive a Stock Award may receive a Stock Award representing more than
2,500 shares of Common Stock in any calendar year.
8. RESTRICTED STOCK.
8.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom shares of
Common Stock, subject to restrictions ("Restricted Stock"),
shall be awarded or sold under the Program and determine the
number of shares and the terms and conditions of each such
award.
8.2 RESTRICTIONS. All shares of Restricted Stock shall be subject
to such restrictions as the Committee may determine,
including, without limitation, any of the following:
(a) a prohibition against the sale, assignment, transfer,
pledge, hypothecation, or other encumbrance of the
shares of Restricted Stock for a specified period;
(b) a requirement that the holder of shares of Restricted
Stock forfeit (or in the case of shares sold to a
Participant, resell to the Company at his or her
cost) such shares in the event of termination of his
or her employment during any period in which such
shares are subject to restrictions; or
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<PAGE> 5
(c) a prohibition against employment of the holder by any
competitor of the Company or against such holder's
dissemination of any confidential information
belonging to the Company.
All restrictions shall expire at such time as the Committee
shall specify.
8.3 STOCKHOLDER RIGHTS. Shares of Restricted Stock shall be
registered in the name of the Participant. Each Participant
who has been awarded shares of Restricted Stock shall have
such rights of a stockholder with respect to such shares as
the Committee may designate at the time of the award,
including the right to vote such shares and the right to
receive dividends paid on such shares. Unless otherwise
provided by the Committee, stock dividends or non-cash
dividends and any other securities distributed with respect to
Restricted Stock shall be subject to the same restrictions and
other terms and conditions as the Restricted Stock to which
they are attributable.
8.4 LAPSE OF RESTRICTIONS. Shares of Restricted Stock will be
delivered free of all restrictions to the Participant (or to
the Participant's legal representative, beneficiary, or heir)
when the shares are no longer subject to forfeiture or
restrictions on transfer.
9. PERFORMANCE SHARES.
9.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom
Performance Shares are to be awarded and determine the number
of shares and the terms and conditions of each such award.
Each Performance Share shall entitle the Participant to a
payment in the form of one share of Common Stock upon the
attainment of performance goals and other terms and conditions
specified by the Committee.
9.2 NO ADJUSTMENTS. Except as otherwise provided by the Committee
or in section 4.3 hereof, no adjustment shall be made in
Performance Shares awarded on account of cash dividends which
may be paid or other rights which may be provided to the
holders of Common Stock prior to the end of any performance
period.
9.3 SUBSTITUTION OF CASH. The Committee may, in its sole
discretion, substitute cash equal to the Fair Market Value
(determined as of the date of the issuance) of shares of
Common Stock otherwise required to be issued to a Participant
hereunder.
10. OTHER INCENTIVES. In addition to the incentives described in Sections 5
through 9 above and subject to the terms and conditions of the Program,
the Committee may grant other incentives ("Other Incentives"), payable
in cash or in stock, under the Program as it determines to be in the
best interest of the Company.
11. PERFORMANCE GOALS. Awards of Restricted Stock, Performance Shares and
other incentives under the Program may be made subject to the
attainment of performance
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<PAGE> 6
goals relating to one or more business criteria within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended,
including, but not limited to, stock price, market share, sales,
earnings per share, return on equity, costs and cash flow, as
determined by the Committee from time to time.
12. GENERAL
12.1 EFFECTIVE DATE. The Program will become effective upon its
approval by Baxter International, Inc., Allegiance's sole
stockholder.
12.2 DURATION. The Program shall remain in effect until all
incentives granted under the Program have been satisfied by
the issuance of shares of Common Stock, lapse of restrictions
or the payment of cash, or have been terminated in accordance
with the terms of the Program or the incentive. No incentive
may be granted under the Program after the tenth anniversary
of its effective date.
12.3 NON-TRANSFERABILITY OF INCENTIVES. No incentive granted under
the Program may be transferred, pledged, or assigned by the
employee except by will or the laws of descent and
distribution in the event of death, and the Company shall not
be required to recognize any attempted assignment of such
rights by any Participant. During a Participant's lifetime,
awards may be exercised only by the Participant or by the
Participant's guardian or legal representative.
Notwithstanding the foregoing, at the discretion of the
Committee, a grant of an award may permit the transfer of the
award by the Participant solely to members of the
Participant's immediate family or trusts or family
partnerships for the benefit of such persons, subject to such
terms and conditions as may be established by the Committee.
12.4 COMPLIANCE WITH APPLICABLE LAW AND WITHHOLDING.
(a) The award of any benefit under the Program may also
be made subject to such other provisions as the
Committee determines appropriate, including, without
limitation, provisions to comply with federal and
state securities laws or stock exchange requirements.
(b) If, at any time, the Company, in its sole discretion,
determines that the listing, registration, or
qualification of any type of incentive, or the shares
of Common Stock issuable pursuant thereto, is
necessary on any securities exchange or under any
federal or state securities or blue sky law, or that
the consent or approval of any governmental
regulatory body is necessary or desirable, the
issuance of shares of Common Stock pursuant to any
incentive, or the removal of any restrictions imposed
on shares subject to an incentive, may be delayed
until such listing, registration, qualification,
consent, or approval is effected.
(c) The Company shall have the right to withhold from any
award under the Program or to collect as a condition
of any payment under the Program, as applicable, any
taxes required by law to be withheld. To the extent
permitted by the Committee, a Participant may elect
to have any
6
<PAGE> 7
distribution, or a portion thereof, otherwise
required to be made under the Program to be withheld
or to surrender to the Company previously owned
shares of Common Stock to fulfill any tax withholding
obligation.
12.5 NO CONTINUED EMPLOYMENT. Participation in the Program will not
give any Participant the right to be retained in the employ of
the Company or any right or claim to any benefit under the
Program unless such right or claim has specifically accrued
under the terms of any incentive under the Program.
12.6 TREATMENT AS A STOCKHOLDER. No incentive granted to a
Participant under the Program shall create any rights in such
Participant as a stockholder of the Company until shares of
Common Stock related to the incentive are registered in the
name of the Participant.
12.7 AMENDMENT OR DISCONTINUATION OF THE PROGRAM. The Board of
Directors may amend, suspend, or discontinue the Program at
any time; provided, however, that no amendment, suspension or
discontinuance shall adversely affect any outstanding benefit
and if any law, agreement or exchange on which Common Stock of
Allegiance is traded requires stockholder approval for an
amendment to become effective, no such amendment shall become
effective unless approved by vote of Allegiance's
stockholders.
12.8 ACCELERATION OF INCENTIVES. Notwithstanding any provision in
this Program to the contrary or the normal terms of vesting in
any incentive, (a) the restrictions on all shares of
Restricted Stock shall lapse immediately, (b) all outstanding
Stock Options will become exercisable immediately, and (c) all
performance goals shall be deemed to be met and payment made
immediately if a Change in Control occurs. For purposes of
this Program, a "Change in Control" shall have occurred if:
(1) any "Person", as such term is used in Section 13(d)
and 14(d) of the Exchange Act (other than Allegiance,
any corporation owned, directly or indirectly, by the
stockholders of Allegiance in substantially the same
proportions as their ownership of stock of
Allegiance, and any trustee or other fiduciary,
holding securities under an employee benefit plan of
Allegiance or such proportionately owned
corporation), is or becomes the "beneficial owner"
(as defined in Rule l3d-3 under the Exchange Act),
directly or indirectly, of securities of Allegiance
representing 20% or more of the combined voting power
of Allegiance's then outstanding securities;
(2) during any period of not more than 24
months, individuals who at the beginning of such
period constitute the Board of Directors of
Allegiance, and any new director (other than a
director designated by a Person who has entered into
an agreement with Allegiance to effect a transaction
described in paragraph (1), (3), or (4) of this
subsection 13.8) whose election by the board or
nomination for election by Allegiance's stockholders
was approved by a vote of at least two-thirds of the
directors then still in office who either were
directors at the beginning of the period or whose
election
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<PAGE> 8
or nomination for election as previously so approved,
cease for any reason to constitute at least a
majority thereof,
(3) the stockholders of Allegiance approve a merger or
consolidation of Allegiance with any other
corporation, other than (A) a merger or consolidation
which would result in the voting securities of
Allegiance outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than 60% of
the combined voting power of the voting securities of
Allegiance or such surviving entity outstanding
immediately after such merger or consolidation, or (B)
a merger or consolidation effected to implement a
recapitalization of Allegiance (or similar
transaction) in which no Person acquires more than 20%
of the combined voting power of Allegiance's then
outstanding securities; or
(4) the stockholders of Allegiance approve a plan of
complete liquidation of Allegiance or an agreement
for the sale or disposition by Allegiance of all or
substantially all of its assets (or any transaction
having a similar effect).
The Committee may also determine, in its discretion, that a
sale of a substantial portion of Allegiance's assets or one of
its businesses constitutes a "Change of Control" with respect
to incentives held by Participants employed in the affected
operation.
12.9 DEFINITION OF FAIR MARKET VALUE. Except as otherwise
determined by the Committee, the Fair Market Value of a share
of Common Stock as of any date shall be equal to the closing
sale price of a share of Common Stock on that date as reported
on the New York Stock Exchange Composite Reporting Tape.
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<PAGE> 1
EXHIBIT 99(b)(1)
ALLEGIANCE CORPORATION
STOCK OPTION PLAN ADOPTED SEPTEMBER 16, 1996
TERMS AND CONDITIONS
1. PURPOSE
This Stock Option Plan ("Plan") is adopted pursuant to the Allegiance 1996
Incentive Compensation Program ("Program") for the purposes stated in the
Program.
2. PARTICIPANTS
Participants in this Plan ("Optionee") shall be valued employees of Allegiance
Corporation or its subsidiaries ("Company") who have been selected by the
Committee, as defined in the Program ("Committee"), and to whom the Committee
makes an award of an option ("Option") under this Plan.
3. AWARDS
Each Option shall consist of a Stock Option as defined in the Program and is
granted under the terms and conditions contained in the Program and this Plan.
To the extent that any of the terms and conditions contained in this Plan are
inconsistent with the Program, the terms of the Program shall control. Terms
defined in the Program shall have the same meaning in these Terms and
Conditions. The Option is not intended to qualify as an Incentive Stock Option
within the meaning of section 422 of the United States Internal Revenue Code.
4. VESTING, EXERCISE AND EXPIRATION
4.1 The Option will vest in three equal installments on the first, second and
third anniversary of the grant. The Option shall not vest more than three years
after the Optionee's employment is terminated by retirement at or after age 55
but shall otherwise continue to vest until the Option expires pursuant to
section 4.4.
4.2 When vested and until it expires, the Option may be exercised in whole or in
part in the manner specified by the Stockholder Services Department of
Allegiance Corporation. If exercised in part, the Option must be exercised in
installments consisting of at least 100 shares or, if options for less than 100
shares are then exercisable, for the number of shares then exercisable. Shares
of Common Stock may not be used to pay the exercise price of the Option unless
certificates representing such shares have been issued and are delivered by the
Optionee in accordance with the requirements specified by the Stockholder
Services Department. Residents of the United Kingdom may not use shares of
Common Stock to pay the exercise price of the Option in any circumstances.
4.3 If the Optionee's employment by the Company is terminated by death or
disability more than twelve (12) months after the date on which the Option is
granted, the Optionee or the Optionee's legal representative or the person or
persons to whom the
<PAGE> 2
Optionee's rights under the Option are transferred by will or the laws of
descent and distribution shall have the right to exercise the Option until it
expires in accordance with its terms with respect to all or any part of the
shares remaining subject to the Option (whether or not such shares were
purchasable by the Optionee under section 4.1 at the time of death).
4.4 The Option shall expire at the close of business on the earlier of a date
determined as follows or, if such date is not a Business Day, then the last
Business Day preceding such date: (i) one year after the date on which
employment of the Optionee by the Company shall have been terminated by the
Optionee's death or disability; (ii) five years after the date on which
employment of the Optionee by the Company shall have been terminated by
retirement at or after age 55; (iii) three months after the date on which
employment of the Optionee by the Company shall have terminated except as
provided in subsection 4.4(i) and (ii), unless the Optionee dies or becomes
disabled during said three-month period, in which case the relevant date shall
be one year after the termination; or (iv) ten years from the date on which the
Option was granted. "Business Day" shall mean any day, other than Saturday or
Sunday, when the corporate headquarters of the Company is open for the
transaction of business and when the Common Stock is traded on the New York
Stock Exchange. A transfer of an Optionee from employment by one corporation to
another among Allegiance Corporation and its subsidiaries, or a transfer of an
Optionee to employment by another corporation which assumes the Option or issues
a substitute Option in a transaction to which section 424 of the Internal
Revenue Code applies, shall not be considered a termination of employment for
purposes of the Option.
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<PAGE> 1
EXHIBIT 99(b)(2)
ALLEGIANCE CORPORATION
STOCK OPTION PLAN ADOPTED NOVEMBER 5, 1998
TERMS AND CONDITIONS
1. PURPOSE
This Stock Option Plan dated November 5, 1998 ("Plan") is adopted pursuant to
the Allegiance 1996 Incentive Compensation Program ("Program") for the purposes
started in the Program.
2. PARTICIPANTS
Participants in this Plan ("Optionee") shall be valued employees of Allegiance
Corporation or its subsidiaries ("Company") who have been selected by the
Committee, as defined in the Program ("Committee"), and to whom the Committee
makes an award of an option ("Option") under this Plan.
3. AWARDS
Each Option shall consist of a Stock Option as defined in the Program and is
granted under the terms and conditions contained in the Program and this Plan.
Not more than 200,000 Options in total may be awarded by the Committee under
this Plan. Terms defined in the Program shall have the same meaning when used in
the Plan and to the extent that any of the terms and conditions contained in
this Plan are inconsistent with the Program, the terms of the Program shall
control. However, it shall be a condition to receipt of Options under this Plan
that the Optionee waive the right to immediate exercise of the Options under
Section 12.8 of the Program in connection with the consummation of the
transactions contemplated by that certain agreement and plan of merger among
Allegiance Corporation, Cardinal Health, Inc. and Cardinal Health, Inc. Merger
Corp. dated on or about October 8, 1998. No Option issued under the Plan is
intended to qualify as an Incentive Stock Option within the meaning of Section
422 of the United States Internal Revenue Code.
4. VESTING, EXERCISE AND EXPIRATION
4.1 Each Option will vest in three equal installments on the first, second and
third anniversary of the grant. Each Option shall not vest more than three years
after the Optionee's employment is terminated by retirement at or after age 55
but shall otherwise continue to vest until the Option expires pursuant to
Section 4.4
4.2 When vested and until it expires, each Option may be exercised in whole or
in part in the manner specified by the Stockholder Services Department of
Allegiance Corporation. If exercised in part, the Option must be exercised in
installments consisting of at least 100 shares or, if options for less than 100
shares are then exercisable, for the number of shares then exercisable. Shares
of Common Stock may
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<PAGE> 2
not be used to pay the exercise price of the Option unless certificates
representing such shares have been issued and are delivered by the Optionee in
accordance with the requirements specified by the Stockholder Services
Department. Residents of the United Kingdom may not use shares of Common Stock
to pay the exercise price of the Option in any circumstances.
4.3 If the Optionee's employment by the Company is terminated by death or
disability more than twelve (12) months after the date on which the Option is
granted, the optionee or the Optionee's legal representative or the person or
persons to whom the Optionee's rights under the Option are transferred by will
or the laws of descent and distribution shall have the right to exercise the
Option until it expires in accordance with its terms with respect to all or any
part of the shares remaining subject to the Option (whether or not such shares
were purchasable by the Optionee under Section 4.1 at the time of death).
4.4 Each Option shall expire at the close of business on the earlier of a date
determined as follows or, if such data is not a Business Day, then the last
Business Day preceding such date: (i) one year after the date on which
employment of the Optionee by the Company shall have been terminated by the
Optionee's death or disability; (ii) five years after the date on which
employment of the Optionee by the Company shall have been terminated by
retirement at or after age 55; (iii) three months after the date on which
employment of the Optionee by the Company shall have terminated except as
provided in subsection 4.4(i) and (ii), unless the Optionee dies or becomes
disabled during said three-month period, in which case the relevant date shall
be one year after the termination; or (iv) ten years from the date on which the
Option was granted. "Business Day" shall mean any day, other than Saturday or
Sunday, when the corporate headquarters of the Company is open for the
transaction of business and when the Common Stock is traded on the New York
Stock Exchange. A transfer of an Optionee from employment by one corporation to
another among Allegiance Corporation and its subsidiaries, or a transfer of an
Optionee to employment by another corporation which assumes the Option or issues
a substitute Option in a transaction to which Section 424 of the Internal
Revenue Code applies, shall not be considered a termination of employment for
purposes of the Option.
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EXHIBIT 99(c)
ALLEGIANCE CORPORATION
1998 INCENTIVE COMPENSATION PROGRAM
1. PURPOSE. The purpose of the Allegiance Corporation 1998 Incentive
Compensation Program (the "Program") is to increase stockholder value
and to advance the interests of Allegiance Corporation ("Allegiance")
and its subsidiaries (collectively, the "Company") by providing a
variety of economic incentives designed to attract, retain, and
motivate officers and other employees and by strengthening the
mutuality of interest between such employees and the Company's
stockholders. As used in this Program, the term "subsidiary" means any
business, whether or not incorporated, in which the Company has a
direct or indirect ownership interest.
2. ADMINISTRATION.
2.1 ADMINISTRATION BY COMMITTEE. The Program shall be administered
by the Compensation and Nominating Committee of the Allegiance
Board of Directors (the "Committee"), which shall consist of
two or more nonemployee directors within the meaning of Rule
16b-3 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") who also qualify as outside directors within
the meaning of Section 162(m) and the related regulations
("Section 162(m)"), under the Internal Revenue Code of 1986 as
amended (the "Code"). The Chief Executive Officer of the
Company may exercise any or all authority otherwise delegated
to the Committee under the terms of the Program with respect
to the grant or administration of incentives (a) made to or
held by persons who, at the time of the exercise of such
authority, are not subject to Section 16(a) of the Exchange
Act, or (b) that are not intended to comply with Section
162(m).
2.2 AUTHORITY. Subject to the provisions of the Program, the
Committee shall have the authority to: (a) interpret the
provisions of the Program, and prescribe, amend, and rescind
rules and procedures relating to the Program; (b) grant
incentives under the Program, in such forms and amounts and
subject to such terms and conditions as it deems appropriate,
including, without limitation, incentives that are made in
combination with or in tandem with other incentives (whether
or not contemporaneously granted) or compensation or in lieu
of current or deferred compensation, and to determine the
terms and conditions of incentives, including the vesting and
exercisability provisions of options to purchase shares of
Common Stock (as defined in Section 4.1) ("Stock Options") and
stock appreciation rights ("SARs"), the restrictions on awards
of shares of Common Stock subject to restrictions ("Restricted
Stock"), and the performance goals, measures and period for
performance-based awards; (c) modify the terms of, cancel and
reissue, or repurchase outstanding incentives, subject to
Section 12.7; and (d) make all other determinations and take
all other actions as it deems
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necessary or desirable for the administration of the Program;
provided, however, that in no event shall the Committee cancel
any outstanding Stock Option for the purpose of reissuing an
option to the option holder at a lower exercise price. The
determination of the Committee on matters within its authority
shall be conclusive and binding on the Company and all other
persons. The Committee shall comply with all applicable law in
administering the Program.
3. PARTICIPATION. Subject to the terms and conditions of the Program, the
Committee shall designate from time to time the employees of the
Company (including employees who are directors of Allegiance) who
shall receive incentives under the Program ("Participants"). All
officers and other full-time or part-time employees of the Company are
eligible to receive incentives under the Program. Participation, the
grant of incentives and any related performance goals that are
intended to satisfy the requirements of Section 162(m), must be
determined by the Committee.
4. SHARES SUBJECT TO THE PROGRAM.
4.1 NUMBER OF SHARES RESERVED. Subject to adjustment in accordance
with Sections 4.2 and 4.3, the aggregate number of shares of
Allegiance Common Stock ("Common Stock") available for
incentives under the Program shall be four million (4,000,000)
shares. All shares of Common Stock issued under the Program
may be authorized and unissued shares, treasury shares, or
shares that shall have been or may be reacquired by Allegiance
in the open market, in private transactions or otherwise. All
of such shares may, but need not, be issued pursuant to the
exercise of Incentive Stock Options (as defined in Section
5.1). The maximum number of shares of Common Stock that may be
granted in the form of Restricted Stock pursuant to an award
or awards granted in any fiscal year to a Participant shall be
200,000, subject to adjustment in accordance with Section 4.3.
The maximum number of shares of Common Stock that may be
granted in total under the Program in the form of Restricted
Stock shall be 1,000,000, subject to adjustment in accordance
with Section 4.3. The maximum number of shares of Common Stock
that may be granted in the form of performance shares
("Performance Shares") pursuant to an award or awards granted
in any fiscal year to a Participant shall be 200,000, subject
to adjustment in accordance with Section 4.3. The maximum
number of shares of Common Stock that may be granted in total
under the Program in the form of Performance Shares shall be
1,000,000, subject to adjustment in accordance with Section
4.3. The maximum number of shares that may be granted in the
form of a Stock Option or SAR pursuant to an award or awards
granted in any fiscal year to a Participant shall be 750,000
shares, subject to adjustment in accordance with Section 4.3.
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The shares made available for incentives hereunder are in
addition to the shares made available for incentives under Allegiance's
1996 Incentive Compensation Program.
4.2 REUSAGE OF SHARES.
(a) In the event of the exercise or termination (by
reason of forfeiture, expiration, cancellation,
surrender, or otherwise) of any incentive under the
Program, that number of shares of Common Stock that
was subject to the incentive but not delivered shall
be available again for incentives under the Program.
(b) In the event that shares of Common Stock are
delivered under the Program and are thereafter
forfeited or reacquired by Allegiance pursuant to
rights reserved upon the award thereof, such
forfeited or reacquired shares shall be available
again for incentives under the Program.
(c) In the event that shares of Common Stock are
delivered by an optionee in full or partial payment
to Allegiance for the exercise price of any option
under the Program, that number of shares of Common
Stock delivered shall be available again for
incentives under the Program.
(d) In the event shares of Common Stock are retained by
Allegiance pursuant to a Participant's tax
withholding election or are delivered by the
Participant to satisfy his or her tax withholding
obligation, the number of shares retained or
delivered shall be available again for incentives
under the Program.
4.3 ADJUSTMENTS TO SHARES RESERVED. In the event of any merger,
consolidation, reorganization, recapitalization, spin-off,
stock dividend, stock split, exchange, or other distribution
with respect to shares of Common Stock or other change in the
corporate structure or capitalization affecting the Common
Stock, the type and number of shares of stock that are or may
be subject to incentives under the Program, the maximum number
of shares that may be granted in the form of Restricted Stock,
shares of Common Stock without restrictions ("Stock Awards"),
Performance Shares, a Stock Option or an SAR, and the terms of
any outstanding incentives (including the price at which
shares of stock may be issued pursuant to an outstanding
incentive) shall be equitably adjusted by the Committee, in
its sole discretion, to preserve the value of incentives
awarded or to be awarded to Participants under the Program.
5. STOCK OPTIONS.
5.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom Stock
Options are to
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be awarded under the Program and shall determine the number,
type, and terms of the Stock Options to be awarded to each of
them. Each Stock Option shall expire not later than 10 years
after the date of grant. The option price per share for any
Stock Option awarded shall not be less than the Fair Market
Value (as defined in Section 12.9) of a share of Common Stock
on the date the Stock Option is granted ("Option Price"). The
Committee shall designate each Stock Option awarded under the
Program as either a "nonqualified stock option" for tax
purposes or, with respect to a Stock Option that satisfies the
applicable requirements of Section 422 of the Code, as an
"Incentive Stock Option."
5.2 MANNER OF EXERCISE. A Stock Option may be exercised by notice
to Allegiance specifying the number of shares of Common Stock
to be purchased and prompt delivery to Allegiance of the
payment of the Option Price by check or, in the discretion of
the Committee, by the delivery of shares of Common Stock then
owned by the Participant and having been held by such
Participant for at least six months, or certification of such
ownership, or in such other manner as the Committee, in its
sole discretion, shall determine. In the discretion of the
Committee, payment may also be made by delivering a properly
executed exercise notice to Allegiance, together with a copy
of irrevocable instructions to a broker to deliver promptly to
Allegiance the amount of sale of the Common Stock received
upon option exercise or loan proceeds to pay the exercise
price, all in accordance with Federal Reserve Board Regulation
T, if applicable.
5.3 DIVIDEND EQUIVALENTS. The Committee may grant dividend
equivalents in connection with any option granted under this
Program. Such dividend equivalents may be payable in cash or
in shares of Common Stock upon such terms and conditions as
the Committee in its sole discretion deems appropriate.
6. STOCK APPRECIATION RIGHTS.
6.1 GRANT OF SARS. Subject to the terms and conditions of the
Program, the Committee shall designate the employees to whom
SARs are to be awarded under the Program and shall determine
the number, type and terms of the SARs to be awarded to each
of them. An SAR may be granted in tandem with a stock option
granted under the Program, or the SAR may be granted on a
free-standing basis. Tandem SARs may granted either at or
after the time of grant of a Stock Option, provided that, in
the case of an Incentive Stock Option, a tandem SAR may be
granted only at the time of the grant of such option. The
grant price of a free-standing SAR shall be equal to the Fair
Market Value of a share of Common Stock on the date of grant
of the SAR.
6.2 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all
or part of the shares subject to the related option upon the
surrender of the right to exercise the equivalent portion of
the related option. A tandem
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SAR shall terminate and no longer be exercisable upon
termination or exercise of the related Stock Option. A tandem
SAR may be exercised only with respect to the shares for which
its related option is then exercisable.
6.3 EXERCISE OF FREE-STANDING SARS. Free-standing SARs may be
exercised upon such terms and conditions as the Committee, in
its sole discretion, determines.
6.4 TERM OF SARS. The term of an SAR granted under the Program
shall be determined by the Committee in its sole discretion;
provided, however, that such term shall not exceed the option
term in the case of a tandem SAR, or ten years in the case of
a free-standing SAR.
6.5 PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant
shall be entitled to receive payment from Allegiance in an
amount determined by multiplying (a) the excess of the Fair
Market Value of a share of Common Stock on the date of
exercise over the grant price of the SAR by (b) the number of
shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment to be made
upon an SAR exercise may be in cash, in shares of Common Stock
of equivalent value, or in some combination thereof.
7. STOCK AWARDS. Subject to the terms and conditions of the Program, the
Committee shall designate the employees who shall be awarded Stock
Awards under the Program and shall determine the number and terms of
the Stock Awards to be awarded to each of them. No person eligible to
receive a Stock Award may receive a Stock Award representing more than
5,000 shares of Common Stock in any calendar year, subject to
adjustment in accordance with Section 4.3.
8. RESTRICTED STOCK.
8.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom Restricted
Stock shall be awarded or sold under the Program and determine
the number of shares and the terms and conditions of each such
award.
8.2 RESTRICTIONS. All shares of Restricted Stock shall be subject
to such restrictions as the Committee may determine,
including, without limitation, any of the following:
(a) a prohibition against the sale, assignment, transfer,
pledge, hypothecation, or other encumbrance of the
shares of Restricted Stock for a specified period;
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(b) a requirement that the holder of shares of Restricted
Stock forfeit (or in the case of shares sold to a
Participant, resell to Allegiance at his or her cost)
such shares in the event of termination of his or her
employment during any period in which such shares are
subject to restrictions;
(c) a prohibition against employment of the holder by any
competitor of the Company or against such holder's
dissemination of any confidential information
belonging to the Company; or
(d) the attainment of pre-established performance
criteria.
All restrictions shall expire at such time as the Committee
shall specify.
8.3 STOCKHOLDER RIGHTS. Shares of Restricted Stock shall be
registered in the name of the Participant. Each Participant
who has been awarded shares of Restricted Stock shall have
such rights of a stockholder with respect to such shares as
the Committee may designate at the time of the award,
including the right to vote such shares and the right to
receive dividends paid on such shares. Unless otherwise
provided by the Committee, stock dividends or other non-cash
dividends and any other securities distributed with respect to
Restricted Stock shall be subject to the same restrictions and
other terms and conditions as the Restricted Stock to which
they are attributable.
8.4 LAPSE OF RESTRICTIONS. Shares of Restricted Stock will be
delivered free of all restrictions to the Participant (or to
the Participant's legal representative, beneficiary, or heir)
when the shares are no longer subject to forfeiture or
restrictions on transfer.
9. PERFORMANCE SHARES.
9.1 AWARDS. Subject to the terms and conditions of the Program,
the Committee shall designate the employees to whom
Performance Shares are to be awarded and determine the number
of shares and the terms and conditions of each such award.
Each Performance Share shall entitle the Participant to a
payment in the form of one share of Common Stock upon the
attainment of performance goals and other terms and conditions
specified by the Committee.
9.2 NO ADJUSTMENTS. Except as otherwise provided by the Committee
or in Section 4.3, no adjustment shall be made in Performance
Shares awarded on account of cash dividends which may be paid
or other rights which may be provided to the holders of Common
Stock prior to the end of any performance period.
9.3 SUBSTITUTION OF CASH. The Committee may, in its sole
discretion, substitute cash equal to the Fair Market Value
(determined as of the date
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of the issuance) of shares of Common Stock otherwise required
to be issued to a Participant hereunder.
10. OTHER INCENTIVES. In addition to the incentives described in Sections 5
through 9 above and subject to the terms and conditions of the Program,
the Committee may grant other incentives ("Other Incentives"), payable
in cash or in Common Stock, under the Program as it determines to be in
the best interest of the Company. Other Incentives may be in the form
of annual awards, long-term awards, or such other form of award as the
Committee may, in its sole discretion determine. The maximum dollar
amount that may be earned by any one Participant in any fiscal year for
all annual cash awards granted under the Program to such Participant
shall be $2,000,000. The maximum dollar amount that may be earned by
any one Participant in any fiscal year for all long-term cash awards
granted under the Program to such Participant shall be $5,000,000.
11. PERFORMANCE GOALS. Awards of Restricted Stock, Performance Shares and
Other Incentives under the Program may be made subject to the
attainment of performance goals relating to one or more business
criteria within the meaning of Section 162(m), which shall include one
or more of the following objective business criteria: stock price,
sales, unit sales earnings, earnings per share, net earnings after tax,
return on equity, return on investments, return on invested capital,
pre-tax profit, post-tax profit, consolidated net income, operating
expenses, free cash flow, discounted cash flow, value added,
production, unit production volume and total stockholder return, as
determined by the Committee from time to time.
The Program is designed so that certain awards granted
thereunder are intended to comply with the requirements for
"performance-based compensation" under Section 162(m). Insofar as may
be applicable to such awards, the Program shall be interpreted in a
manner consistent with such requirements. With respect to awards
intended to comply with Section 162(m), the Committee shall specify in
a timely manner the performance goals with respect thereto, and the
performance period during which such performance goals are to be
achieved. The performance goals must be based on the objective business
criteria described in the foregoing paragraph. Any award that is not
intended to satisfy Section 162(m) shall be bifurcated from awards that
are so intended. Unless otherwise determined by the Committee in
connection with either a specified termination of employment or the
occurrence of a Change in Control (as defined in Section 12.8), payment
with respect to awards that are intended to satisfy Section 162(m)
shall be made only if, and to the extent that, the performance goals
with respect to the performance period are attained, and only after the
Committee has certified that the performance goals have been attained.
Performance goals may include a level of performance below which no
payment may be made, and levels of performance at which specified
percentages (which may be greater than 100) of the awards shall be paid
or credited.
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12. GENERAL.
12.1 EFFECTIVE DATE. The Program, which was adopted by the
Allegiance Board of Directors, shall be subject to the
approval by a majority of the Allegiance stockholders present
and voting on the matter at the 1998 annual stockholders'
meeting. Upon approval of the stockholders, the effective date
of the Program shall be February 5, 1998.
12.2 DURATION. The Program shall remain in effect until all
incentives granted under the Program have been satisfied by
the issuance of shares of Common Stock, lapse of restrictions
or the payment of cash, or have been terminated in accordance
with the terms of the Program or the incentive. No incentive
may be granted under the Program after the tenth anniversary
of its effective date.
12.3 NONTRANSFERABILITY OF INCENTIVES. Except as otherwise provided
by the Committee, no incentive granted under the Program may
be transferred, pledged, or assigned by the employee except by
will or the laws of descent and distribution in the event of
death, and Allegiance shall not be required to recognize any
attempted assignment of such rights by any Participant. Except
as otherwise provided by the Committee, during a Participant's
lifetime, awards may be exercised only by the Participant or
by the Participant's guardian or legal representative. The
Committee may provide that a grant of an award may permit the
transfer of the award by the Participant solely to members of
the Participant's immediate family or trusts or family
partnerships for the benefit of such persons, subject to such
terms and conditions as may be established by the Committee.
12.4 COMPLIANCE WITH APPLICABLE LAW AND WITHHOLDING.
(a) The award of any benefit under the Program may also
be made subject to such other provisions as the
Committee determines appropriate, including, without
limitation, provisions to comply with federal and
state securities laws or stock exchange requirements.
(b) If, at any time, Allegiance, in its sole discretion,
determines that the listing, registration, or
qualification of any type of incentive, or the shares
of Common Stock issuable pursuant thereto, is
necessary on any securities exchange or under any
federal or state securities or blue sky law, or that
the consent or approval of any governmental
regulatory body is necessary or desirable, the
issuance of shares of Common Stock pursuant to any
incentive, or the removal of any restrictions imposed
on shares subject to an incentive, may be delayed
until such listing, registration, qualification,
consent, or approval is effected.
(c) Allegiance shall have the right to withhold from any
award under the Program or to collect as a condition
of any payment under the
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Program, as applicable, any taxes required by law to
be withheld. To the extent permitted by the
Committee, a Participant may elect to have any
distribution, or a portion thereof, otherwise
required to be made under the Program to be withheld
or to surrender to Allegiance previously owned shares
of Common Stock to fulfill any tax withholding
obligation.
12.5 NO CONTINUED EMPLOYMENT. Participation in the Program will not
give any Participant the right to be retained in the employ of
the Company or any right or claim to any benefit under the
Program unless such right or claim has specifically accrued
under the terms of any incentive under the Program.
12.6 TREATMENT AS A STOCKHOLDER. No incentive granted to a
Participant under the Program shall create any rights in such
Participant as a stockholder of the Company until shares of
Common Stock related to the incentive are registered in the
name of the Participant.
12.7 AMENDMENT OR DISCONTINUATION OF THE PROGRAM. The Board of
Directors may amend, suspend, or discontinue the Program at
any time; provided, however, that no amendment, suspension or
discontinuance shall adversely affect any outstanding benefit
and if any law, agreement or exchange on which Common Stock of
Allegiance is traded requires stockholder approval for an
amendment to become effective, no such amendment shall become
effective unless approved by requisite vote of Allegiance's
stockholders.
12.8 ACCELERATION OF INCENTIVES. Notwithstanding any provision in
this Program to the contrary or the normal terms of vesting in
any incentive, (a) the restrictions on all shares of
Restricted Stock shall lapse immediately, (b) all outstanding
Stock Options will become exercisable immediately, and (c) all
performance goals shall be deemed to be met and payment made
immediately if a Change in Control occurs. For purposes of
this Program, a "Change in Control" shall have occurred if:
(1) any "Person," as such term is used in Section 13(d)
and 14(d) of the Exchange Act (other than Allegiance,
any corporation owned, directly or indirectly, by the
stockholders of Allegiance in substantially the same
proportions as their ownership of stock of
Allegiance, and any trustee or other fiduciary,
holding securities under an employee benefit plan of
Allegiance or such proportionately owned
corporation), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Allegiance
representing 20% or more of the combined voting power
of Allegiance's then outstanding securities;
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(2) during any period of not more than 24 months,
individuals who at the beginning of such period
constitute the Board of Directors of Allegiance, and
any new director (other than a director designated by
a Person who has entered into an agreement with
Allegiance to effect a transaction described in
paragraph (1), (3), or (4) of this Section 12.8)
whose election by the Board of Directors or
nomination for election by Allegiance's stockholders
was approved by a vote of at least two-thirds of the
directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute at least
a majority thereof;
(3) the stockholders of Allegiance approve a merger or
consolidation of Allegiance with any other
corporation, other than (A) a merger or consolidation
which would result in the holders of the voting
securities of Allegiance outstanding immediately
prior thereto continuing to represent (either by
remaining outstanding or by being converted into
voting securities of the surviving entity) more than
60% of the combined voting power of the voting
securities of Allegiance or such surviving entity
outstanding immediately after such merger or
consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of
Allegiance (or similar transaction) in which no
Person acquires more than 20% of the combined voting
power of Allegiance's then outstanding securities; or
(4) the stockholders of Allegiance approve a plan of
complete liquidation of Allegiance or an agreement
for the sale or disposition by Allegiance of all or
substantially all of its assets (or any transaction
having a similar effect).
The Committee may also determine, in its discretion, that a sale of a
substantial portion of Allegiance's assets or one of its businesses
constitutes a "Change in Control" with respect to incentives held by
Participants employed in the affected operation.
12.9 DEFINITION OF FAIR MARKET VALUE. Except as otherwise determined by the
Committee, the Fair Market Value of a share of Common Stock as of any
date shall be equal to the closing sale price of a share of Common
Stock on that date as reported on the New York Stock Exchange Composite
Reporting Tape.
12.10 SEVERABILITY. Whenever possible, each provision in the Program and in
every award at any time granted under the Program shall be interpreted
in such manner as to be effective and valid under applicable law, but
if any provision of the Program or any award at any time granted under
the Program shall be held to be prohibited by or invalid under
applicable law, then (a) such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the
fullest extent permitted by law, and (b) all other provisions and
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every award at any time granted under the Program shall remain in
full force and effect.
12.11 NO STRICT CONSTRUCTION. No rule of strict construction shall be applied
against the Company, the Board of Directors, the Committee, or any
other person in the interpretation of any of the terms of the Program,
any award granted under the Program or any rule or procedure
established by the Board of Directors or the Committee.
12.12 GOVERNING LAW. The Program and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of
Delaware without giving effect to the conflict of laws principles
thereof.
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EXHIBIT 99(c)(1)
ALLEGIANCE CORPORATION
STOCK OPTION PLAN ADOPTED MAY 7, 1998
TERMS & CONDITIONS
1. PURPOSE
This Stock Option Plan ("Plan") is adopted pursuant to the Allegiance
Corporation 1998 Incentive Compensation Program ("Program") for the purposes
stated in the Program.
2. PARTICIPANTS
Participants in this Plan ("Optionee") shall be valued employees of Allegiance
Corporation or its subsidiaries ("Company") who have been selected by the
Committee, as defined in the Program ("Committee"), and to whom the Committee
makes an award of an option ("Option") under this Plan.
3. AWARDS
Each Option shall consist of a Stock Option as defined in the Program and is
granted under the terms and conditions contained in the Program and this Plan.
Terms defined in the Program shall have the same meaning as terms used in this
Plan. To the extent that any of the terms and conditions contained in this Plan
are inconsistent with the Program, the terms of the Program shall control. The
Option is not intended to qualify as an Incentive Stock Option within the
meaning of section 422 of the United States Internal Revenue Code.
4. VESTING, EXERCISE AND EXPIRATION
4.1 The Option will vest in three equal installments on the first, second and
third anniversary of the grant date. The Option shall continue to vest until it
expires pursuant to Sections 4.2 and 4.4 except that the Option shall continue
to vest for three years after the Optionee's employment is terminated at or
after age 55.
4.2 If the Optionee's employment by the Company is terminated by death or
disability more than twelve (12) months after the date on which the Option is
granted, all outstanding shares will become immediately exercisable and the
Optionee or the Optionee's legal representative or the person or persons to whom
the Optionee's rights under the Option are transferred by will or the laws of
descent and distribution shall have the right to exercise the Option until it
expires pursuant to Section 4.4.
If the Optionee's employment by the Company is terminated by death or
disability within the first twelve (12) months after the date on which the
Option is granted, the Option shall vest for one year after the Optionee's death
or disability date. The Optionee or the Optionee's legal representative or the
person or persons to whom the Optionee's rights under the Option are transferred
by will or the laws of descent and
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distribution shall have the right to exercise the Option until it expires
pursuant to Section 4.4.
If the Optionee's employment by the Company is terminated for any other
reason (except as described in Section 4.1 or paragraphs one or two of Section
4.2), the Option shall vest for three months from the date of termination.
4.3 When vested and until it expires, the Option may be exercised in whole or in
part in the manner specified by the Company. If exercised in part, the Option
must be exercised in installments consisting of at least 100 shares or, if
options for less than 100 shares are then exercisable, for the number of shares
then exercisable. Shares of Common Stock may not be used to pay the exercise
price of the Option unless certificates representing such shares have been
issued and are delivered by the Optionee in accordance with the requirements
specified by the Company. Residents of the United Kingdom may not use shares of
Common Stock to pay the exercise price of the Option in any circumstances.
4.4 The Option shall expire at the close of business on the earlier of a date
determined as follows or, if such date is not a Business Day, then the last
Business Day preceding such date: (i) five years after the date on which
employment of the Optionee by the Company shall have been terminated by
retirement at or after age 55; (ii) one year after the date on which employment
of the Optionee by the Company shall have been terminated by the Optionee's
death or disability; (iii) three months after the date on which employment of
the Optionee by the Company shall have terminated except as provided in
subsection 4.4 (i) and (ii), unless the Optionee dies or becomes disabled during
said three-month period, in which case the relevant date shall be one year after
the termination; or (iv) ten years from the date on which the Option was
granted. "Business Day" shall mean any day, other than Saturday or Sunday, when
the corporate headquarters of the Company is open for the transaction of
business and when the Common Stock is traded on the New York Stock Exchange. A
transfer of an Optionee from employment by one corporation to another among
Allegiance Corporation and its subsidiaries, or a transfer of an Optionee to
employment by another corporation which assumes the Option or issues a
substitute Option in a transaction to which section 424 of the Internal Revenue
Code applies, shall not be considered a termination of employment for purposes
of the Option.
2
<PAGE> 1
EXHIBIT 99(c)(2)
ALLEGIANCE CORPORATION
1998-2000 LONG TERM INCENTIVE STOCK OPTION PLAN ADOPTED MAY 7, 1998
TERMS & CONDITIONS
1. PURPOSE
This 1998-2000 Long Term Incentive Stock Option Plan ("Plan") is adopted
pursuant to the Allegiance Corporation 1998 Incentive Compensation Program
("Program") for the purposes stated in the Program.
2. PARTICIPANTS
Participants in this Plan ("Optionee") shall be valued employees of Allegiance
Corporation or its subsidiaries ("Company") who have been selected by the
Committee, as defined in the Program ("Committee"), and to whom the Committee
makes an award of an option ("Option") under this Plan.
3. AWARDS
Each Option shall consist of a Stock Option as defined in the Program and is
granted under the terms and conditions contained in the Program and this Plan.
Terms defined in the Program shall have the same meaning as terms used in this
Plan. To the extent that any of the terms and conditions contained in this Plan
are inconsistent with the Program, the terms of the Program shall control. The
Option is not intended to qualify as an Incentive Stock Option within the
meaning of section 422 of the United States Internal Revenue Code.
4. VESTING, EXERCISE AND EXPIRATION
4.1 The Option will vest in three equal installments on the first day of January
in the years 2000, 2001 and 2002. The Option shall continue to vest until it
expires pursuant to Sections 4.2 and 4.4 except that the Option shall continue
to vest for three years after the Optionee's employment is terminated at or
after age 55.
4.2 If the Optionee's employment by the Company is terminated by death or
disability more than twelve (12) months after the date on which the Option is
granted, all outstanding shares will become immediately exercisable and the
Optionee or the Optionee's legal representative or the person or persons to whom
the Optionee's rights under the Option are transferred by will or the laws of
descent and distribution shall have the right to exercise the Option until it
expires pursuant to Section 4.4.
If the Optionee's employment by the Company is terminated by death or
disability within the first twelve (12) months after the date on which the
Option is granted, the Option shall vest for one year after the Optionee's death
or disability date. The Optionee or the Optionee's legal representative or the
person or persons to whom the Optionee's rights under the Option are transferred
by will or the laws of descent and
<PAGE> 2
distribution shall have the right to exercise the Option until it expires
pursuant to Section 4.4.
If the Optionee's employment by the Company is terminated for any
other reason (except as described in Section 4.1 or paragraphs one or two of
Section 4.2), the Option shall vest for three months from the date of
termination.
4.3 When vested and until it expires, the Option may be exercised in whole or in
part in the manner specified by the Company. If exercised in part, the Option
must be exercised in installments consisting of at least 100 shares or, if
options for less than 100 shares are then exercisable, for the number of shares
then exercisable. Shares of Common Stock may not be used to pay the exercise
price of the Option unless certificates representing such shares have been
issued and are delivered by the Optionee in accordance with the requirements
specified by the Company. Residents of the United Kingdom may not use shares of
Common Stock to pay the exercise price of the Option in any circumstances.
4.4 The Option shall expire at the close of business on the earlier of a date
determined as follows or, if such date is not a Business Day, then the last
Business Day preceding such date: (i) five years after the date on which
employment of the Optionee by the Company shall have been terminated by
retirement at or after age 55; (ii) one year after the date on which employment
of the Optionee by the Company shall have been terminated by the Optionee's
death or disability; (iii) three months after the date on which employment of
the Optionee by the Company shall have terminated except as provided in
subsection 4.4 (i) and (ii), unless the Optionee dies or becomes disabled during
said three-month period, in which case the relevant date shall be one year after
the termination; or (iv) ten years from the date on which the Option was
granted. "Business Day" shall mean any day, other than Saturday or Sunday, when
the corporate headquarters of the Company is open for the transaction of
business and when the Common Stock is traded on the New York Stock Exchange. A
transfer of an Optionee from employment by one corporation to another among
Allegiance Corporation and its subsidiaries, or a transfer of an Optionee to
employment by another corporation which assumes the Option or issues a
substitute Option in a transaction to which section 424 of the Internal Revenue
Code applies, shall not be considered a termination of employment for purposes
of the Option.
2
