<PAGE> 1
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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
CARDINAL HEALTH, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[CARDINAL HEALTH LOGO] PRELIMINARY FILING
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 1, 2000
----------------------
Notice is hereby given that the Annual Meeting of Shareholders of
Cardinal Health, Inc., an Ohio corporation (the "Company"), will be held at the
Company's corporate offices at 7000 Cardinal Place, Dublin, Ohio, on Wednesday,
November 1, 2000, at 8:00 a.m., local time, for the following purposes:
1. To elect four Directors, each to serve for a term of three
years and until his successor is duly elected and qualified;
2. To vote on a proposal to adopt an amendment to the Company's
Articles of Incorporation to increase the number of
authorized Company Common Shares, without par value, from
five hundred million to seven hundred and fifty million;
3. To vote on a proposal to re-approve the Material Terms of the
Performance Goals under the Cardinal Health, Inc.
Performance-Based Incentive Compensation Plan;
4. To vote on a shareholder proposal to phase out PVC use in
manufacture of medical supplies, if such proposal is
presented at the meeting; and
5. To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ELECTION OF
DIRECTORS LISTED IN ITEM 1 OF THE PROXY CARD, FOR ITEMS 2 AND 3 OF THE PROXY
CARD, AND AGAINST ITEM 4 OF THE PROXY CARD.
Only shareholders of record on September 8, 2000, are entitled to
notice of and to vote at the meeting or any adjournment or postponement thereof.
By Order of the Board of Directors.
STEVEN ALAN BENNETT, Secretary
September ____, 2000
SHAREHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING IN
PERSON, ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN
THE ENCLOSED POSTAGE-PAID ENVELOPE, OR TO VOTE BY TELEPHONE OR INTERNET PURSUANT
TO INSTRUCTIONS PROVIDED WITH THE PROXY CARD.
<PAGE> 3
[CARDINAL HEALTH LOGO] PRELIMINARY FILING
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Cardinal Health,
Inc., an Ohio corporation (the "Company"), for use at the annual meeting of the
shareholders of the Company (the "Annual Meeting") to be held on Wednesday,
November 1, 2000, at the offices of the Company, located at 7000 Cardinal Place,
Dublin, Ohio 43017, at 8:00 a.m. local time and at any adjournment or
postponement thereof. This Proxy Statement and the accompanying proxy, together
with the Company's Annual Report to Shareholders for the fiscal year ended June
30, 2000, are first being sent to shareholders on or about September __, 2000.
The close of business on September 8, 2000, has been fixed as the
record date for the determination of shareholders of the Company entitled to
notice of and to vote at the Annual Meeting. At that date, the Company had
outstanding __________ common shares, without par value ("Common Shares").
Except as set forth below, holders of Common Shares at the record date are
entitled to one vote per share for the election of Directors and upon all
matters on which shareholders are entitled to vote.
The address of the Company's principal executive office is 7000
Cardinal Place, Dublin, Ohio 43017.
ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of fourteen
members, divided into two classes of five members each and one class of four
members. The Company's Restated Code of Regulations, as amended (the "Code of
Regulations"), currently provides that the number of Directors may be increased
or decreased by action of the Board of Directors upon the majority vote of the
Board, but in no case may the number of Directors be fewer than nine or more
than sixteen without an amendment to the Code of Regulations approved by the
affirmative vote of the holders of not less than 75% of the shares having voting
power with respect to the proposed amendment. Silas S. Cathcart, a current
member of the Company's Board of Directors, whose term will expire at the Annual
Meeting, has expressed his intention to retire from the Board upon the
expiration of his term as of the Annual Meeting. The Board does not intend to
fill the vacancy created by Mr. Cathcart's retirement and intends to reduce the
size of the Board from fourteen to thirteen members upon the expiration of Mr.
Cathcart's current term.
At the Annual Meeting, the Company's shareholders will be asked to vote
for the election of the four nominees hereinafter named, each to serve for a
term of three years and until his successor is duly elected and qualified. (See
PROPOSAL 1 below.) Common Shares represented by proxies unless otherwise
specified will be voted for the named nominees. If, by reason of death or other
unexpected occurrence, any one or more of the nominees should not be available
for election, the proxies will be voted for the election of any substitute
nominee(s) as the Board of Directors may propose. Proxies may not be voted at
the Annual Meeting for more than four nominees.
Under Ohio law, if notice in writing is given by any shareholder
entitled to vote at the Annual Meeting to the President, a Vice President or the
Secretary of the Company not less than 48 hours before the time fixed for
holding the meeting that such shareholder desires that the voting for election
of Directors be cumulative, and if an announcement of the giving of such notice
is made upon the convening of such meeting by the Chairman or
<PAGE> 4
Secretary, or by or on behalf of the shareholder giving such notice, each
shareholder entitled to vote at the Annual Meeting shall have the right to
cumulate such voting power as he possesses at such election and to give one
nominee a number of votes equal to the number of Directors to be elected
multiplied by the number of shares he holds, or to distribute his votes on the
same basis among two or more nominees, as he sees fit. If voting for the
election of Directors is cumulative, the persons named in the enclosed proxy
will vote the shares represented thereby and by other proxies held by them so as
to elect as many of the four nominees named below as possible. Under Ohio law
and the Company's Articles of Incorporation, as amended (the "Articles of
Incorporation"), broker non-votes will not be counted in favor of or against
election of any nominee. The four nominees receiving the greatest number of
votes will be elected Directors.
Listed below are the names of those persons nominated for election as
Directors of the Company (each is currently a Director of the Company), and of
the Directors of the Company whose terms of office will continue after the
Annual Meeting, their principal occupations, other public companies of which
they are directors (which are shown parenthetically), ages, the year in which
they first became a Director of the Company or the Company's predecessor in
interest, and the year in which their term as a Director is scheduled to expire
(information provided as of September 8, 2000):
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION (1) SINCE EXPIRES
---- --- ------------------------ -------- -------
<S> <C> <C> <C> <C>
Dave Bing................. 46 Chairman, The Bing Group LLC, an automotive May 2000 2000
and industrial parts supplier and service
provider (Lear Corporation, Steelcase
Corporation, DTE Energy Company, Standard
Federal Bank Corporation, Inc.).
John F. Finn.............. 52 Chairman and Chief Executive 1994 2000
Officer of Gardner, Inc., an
outdoor power equipment distributor.
John F. Havens............ 73 Director Emeritus and Retired Chairman of Bank 1979 2000
One Corporation, a bank holding
company (Worthington Industries, Inc.).
Robert D. Walter.......... 55 Chairman and Chief Executive Officer of the 1971 2000
Company (Bank One Corporation, Infinity
Broadcasting Corporation, Viacom, Inc.). (2)
</TABLE>
2
<PAGE> 5
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE PRINCIPAL OCCUPATION (1) SINCE EXPIRES
---- --- ------------------------ -------- -------
<S> <C> <C> <C> <C>
George H. Conrades.......... 61 Chairman and Chief Executive Officer of Akamai 1999 2001
Technologies, Inc., a provider of global
internet services (Akamai Technologies, Inc.,
Infinity Broadcasting Corporation, Viacom
Corporation).
Robert L. Gerbig............ 55 Retired Chairman and Chief Executive Officer 1975 2001
of Gerbig, Snell/Weisheimer & Associates, Inc.,
an advertising agency.
Richard C. Notebaert........ 53 President and Chief Executive Officer of 1999 2001
Tellabs, Inc., a telecommunication systems
company (Tellabs, Inc., Sears, Roebuck & Co.,
Aon Corporation).
Melburn G. Whitmire ........ 60 Retired Vice Chairman of the Company. 1994 2001
Regina E. Herzlinger........ 56 Professor, Harvard University Graduate School 1995 2002
of Business Administration (C.R. Bard, Inc.,
Deere & Company, Schering-Plough Corporation).
John C. Kane................ 60 Vice Chairman, President and Chief Operating 1993 2002
Officer of the Company (Connetics Corporation,
Greif Bros. Corporation). (2)
J. Michael Losh............. 54 Retired Chief Financial Officer of General 1996 2002
Motors Corporation, an automobile
manufacturing company (The Quaker Oats
Company).
John B. McCoy............... 57 Chairman of the Board of Corillian 1987 2002
Corporation, a provider of internet-related
financial services (Corillian Corporation,
Federal Home Loan Mortgage Corporation, SBC
Communications, Inc.).
Michael D. O'Halleran....... 49 President and Chief Operating Officer of Aon 1999 2002
Corporation, an insurance brokerage,
consulting and underwriting company (Aon
Corporation, Optimark Technologies, Inc.).
</TABLE>
(1) Each of the Directors except Messrs. Conrades, Notebaert and McCoy either
has had the positions shown or has had other executive positions with the same
employer for more than five years. Mr. Conrades was Chairman and Chief Executive
Officer of BBN Corporation from January 1994 through May 1997. From May 1997
through July 1998, he was Executive Vice President of GTE Corporation. He has
been a partner in Polaris Venture Partners since August 1998 and has held his
current position as Chairman and Chief Executive Officer of Akamai Technologies,
Inc. since April 1999. Mr. Notebaert was Chairman and Chief Executive Officer of
Ameritech Corporation from April 1994 through his retirement during the last
fiscal year. Mr. Notebaert's appointment as President and Chief Executive
Officer of Tellabs, Inc. was announced in August 2000. Mr. McCoy served as Chief
3
<PAGE> 6
Executive Officer of Bank One Corporation, a bank holding company, from 1984
until his retirement during the last fiscal year. Mr. McCoy has held his current
position since June 2000. Messrs. Gerbig and Losh retired since the beginning of
the last fiscal year from the positions listed above.
(2) Messrs. Kane and Walter are officers and directors of various subsidiaries
of the Company.
Four regular meetings and one special meeting of the Company's Board of
Directors were held during the fiscal year ended June 30, 2000. Each Director
attended 75% or more of the meetings of the Board and Board committees on which
he or she served.
Messrs. Finn, Losh, McCoy and Walter are the current members of the
Board's Executive Committee, which is empowered to exercise all powers and
perform all duties of the Board of Directors when the Board is not in session
other than the authority to fill vacancies among the Directors or in any
committee of the Board. The Executive Committee met one time during the last
fiscal year, and, as permitted by Ohio law, acted two times by written action
without a meeting.
Messrs. Finn, Bing, Conrades, Gerbig, O'Halleran and Mrs. Herzlinger
are the current members of the Board's Audit Committee, which is empowered to
exercise all powers and authority of the Board of Directors with respect to the
Company's annual audit, accounting policies, financial reporting, and internal
controls. The Audit Committee met five times during the last fiscal year.
Messrs. Losh, Cathcart, McCoy, Notebaert and Whitmire are the current
members of the Board's Human Resources and Compensation Committee (the
"Compensation Committee"), which is empowered to exercise all powers and
authority of the Board of Directors with respect to compensation of the
employees of the Company, sales to employees of stock in the Company, and grants
of stock-based incentives to employees, including options to purchase stock in
the Company. The Compensation Committee met four times during the last fiscal
year and, as permitted by Ohio law, acted several times by written action
without a meeting. Messrs. Losh, Cathcart, McCoy and Notebaert are current
members of the Board's Human Resources and Compensation Subcommittee (the
"Compensation Subcommittee") which was formed to act on matters relating to and
affected by Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 162(m) ("Section 162(m)") of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code").
Messrs. McCoy, Finn, Havens and Losh are the current members of the
Board's Nominating Committee, which is empowered to exercise all powers and
authority of the Board of Directors with respect to selection of nominees to
serve on the Board and its various committees. The Nominating Committee will
consider nominees recommended by shareholders upon submission in writing to the
Secretary of the Company of the names of such nominees, together with their
qualifications for service as a Director of the Company. The Nominating
Committee met four times during the last fiscal year.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A property which includes parts of the Company's former Columbus food
distribution center is leased by the Company from a limited partnership in which
the general partner is Mr. Walter and the limited partners include Mr. Walter.
The Company has subleased this property to a third party at rentals
substantially in excess of the rentals it is required to pay to the limited
partnership. The Company has options to renew the lease for two additional terms
through 2024. The rent payable by the Company currently is $92,000 per annum.
4
<PAGE> 7
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
All executive officers and Directors of the Company, except for Messrs.
Whitmire and Havens, timely filed all reports required under Section 16(a)
of the Exchange Act during the fiscal year ended June 30, 2000. Mr. Whitmire was
late in reporting one exempt option grant which was awarded pursuant to an
automatic formula plan for outside directors. Mr. Havens was late in reporting
one exempt gift transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Shares as of September 8, 2000, by:
(a) the Company's Directors; (b) each other person who is known by the Company
to own beneficially more than 5% of the outstanding Common Shares; (c) the
Company's Chief Executive Officer and the other executive officers named in the
Summary Compensation Table; and (d) the Company's executive officers and
Directors as a group. Except as otherwise described in the notes below, the
following beneficial owners have sole voting power and sole investment power
with respect to all Common Shares set forth opposite their names:
<TABLE>
<CAPTION>
Number of
Common Shares
Name of Beneficial Owner Beneficially Owned Percent of Class
------------------------ ------------------ ----------------
<S> <C> <C> <C>
FMR Corp. (1) 35,922,692 13.0%
Capital Research and Management Company (2) 24,043,589 8.7%
Robert D. Walter (3) (4) 4,236,988 1.5%
Melburn G. Whitmire (5) (6) 1,557,520 *
Joseph F. Damico (4) 794,074 *
John C. Kane (4) 523,521 *
James F. Millar (4) 226,520 *
George L. Fotiades (4) 178,568 *
Robert L. Gerbig (6) (7) 98,582 *
John B. McCoy (6) (8) 80,205 *
Silas S. Cathcart (6) 36,729 *
John F. Havens (6) (9) 33,947 *
John F. Finn (6) (10) 28,400 *
Richard C. Notebaert (6) 15,317 *
J. Michael Losh (6) (11) 10,734 *
Regina E. Herzlinger (6) 9,933 *
Michael D. O'Halleran (6) 6,885 *
Dave Bing (6) 4,529 *
George H. Conrades (6) 3,011 *
All Executive Officers and Directors as a
Group (12) (23 Persons) 8,106,987 2.9%
</TABLE>
* Indicates beneficial ownership of less than 1% of the outstanding
Common Shares.
(1) Based on information obtained from a Schedule 13F filed by FMR Corp.
with the Securities and Exchange Commission on or about August 23,
2000. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109. FMR Corp. has sole voting power with respect to
976,405 Common Shares and sole dispositive power with respect to all
35,922,692 Common Shares.
5
<PAGE> 8
(2) Based on information obtained from a Schedule 13F filed by Capital
Research and Management Company with the Securities and Exchange
Commission on or about August 15, 2000. The address of Capital
Research and Management Company is 333 South Hope Street, Los Angeles,
CA 90071. Capital Research and Management Company has sole voting
power with respect to none of the Common Shares and sole dispositive
power with respect to all 24,043,589 Common Shares.
(3) Includes 1,965,634 Common Shares held in Mr. Walter's grantor retained
annuity trusts.
(4) Common Shares and the percent of class listed as being beneficially
owned by the Company's named executive officers include outstanding
options to purchase Common Shares which are exercisable within 60 days
of September 8, 2000, as follows: Mr. Walter - 452,384 shares; Mr.
Kane - 434,824 shares; Mr. Damico - 664,048 shares; Mr. Millar -
139,996 shares; Mr. Fotiades - 141,251 shares.
(5) Includes 11,604 Common Shares held by Mr. Whitmire and his wife as
custodian for the benefit of their minor daughter.
(6) Common Shares and the percent of class listed as being beneficially
owned by the listed Company Directors (except for Messrs. Kane and
Walter) include outstanding options to purchase Common Shares which
are exercisable under the Company's Directors' Stock Option Plan,
Equity Incentive Plan, Outside Directors Equity Incentive Plan, or
Allegiance Director Option Agreements as follows: Mr. Bing - 4,300
shares; Mr. Cathcart - 1,885 shares; Mr. Conrades - 3,011 shares; Mr.
Finn - 13,540 shares; Mr. Gerbig - 16,285 shares; Mr. Havens - 16,285
shares; Mrs. Herzlinger - 9,933 shares; Mr. Losh - 7,147 shares; Mr.
McCoy - 16,285 shares; Mr. Notebaert - 3,011 shares; Mr. O'Halleran -
1,885 shares; Mr. Whitmire - 31,976 shares.
(7) Includes 82,297 Common Shares held in Mr. Gerbig's grantor retained
annuity trust.
(8) Includes 4,291 Common Shares held in trust for the benefit of Mr.
McCoy's son.
(9) Includes 17,356 Common Shares held in trust for the benefit of Mr.
Havens' spouse and children.
(10) Includes 13,835 Common Shares held jointly by Mr. Finn and his wife
and 688 Common Shares held in his wife's individual retirement
account.
(11) Includes 1,000 Common Shares held in trust for the benefit of Mr.
Losh's daughter.
(12) Common Shares and percent of class listed as being beneficially owned
by all executive officers and Directors as a group include outstanding
options to purchase Common Shares which are exercisable within 60 days
of September 8, 2000.
EXECUTIVE COMPENSATION
HUMAN RESOURCES AND COMPENSATION COMMITTEE REPORT
The following Human Resources and Compensation Committee Report and the
performance graph included elsewhere in this Proxy Statement do not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933, as amended, or
the Exchange Act, except to the extent the Company specifically incorporates
this Report or the performance graph by reference in such filing.
The Company's executive compensation program is administered by the
Human Resources and Compensation Committee (the "Compensation Committee") of the
Company's Board of Directors, which has responsibility for reviewing all aspects
of the compensation program for the Company's executive officers. The
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<PAGE> 9
Compensation Committee is comprised of Messrs. Losh, Cathcart, McCoy, Notebaert
and Whitmire. The Human Resources and Compensation Subcommittee (the
"Compensation Subcommittee"), which during the fiscal year ended June 30, 2000
("FY00") was comprised of Messrs. Losh, Cathcart and Notebaert, acts upon
matters relating to or affected by Section 16 of the Exchange Act or Section
162(m) of the Internal Revenue Code. The Compensation Committee's primary
objective with respect to executive compensation is to establish programs which
attract and retain key executives and align their compensation with the
Company's overall business strategies, values and performance. To this end, the
Compensation Committee has established, and the Board of Directors has endorsed,
an executive compensation philosophy which includes the following
considerations:
o A "pay-for-performance" orientation that differentiates
compensation results based upon corporate, business unit and
individual performance;
o An emphasis on stock incentives as a significant component of
total compensation in order to more closely align the interests of
Company executives with the long-term interests of shareholders;
o An objective of having an emphasis on total compensation vs. cash
compensation, rewarding Company executives with total compensation
(including cash and stock incentive programs) at or above
competitive levels, if performance is superior;
o Recognition that as an executive's level of responsibility
increases, a greater portion of the total compensation opportunity
should be based upon stock and other performance incentives; and
o An appropriate mix of short-term and long-term compensation which
facilitates retention of talented executives and encourages
Company stock ownership and capital accumulation.
The primary components of the Company's executive compensation program
are: (a) base salaries, (b) annual cash incentive opportunities, and (c)
long-term incentive opportunities in the form of stock options and restricted
shares. This three-part approach enables the Company to meet the requirements of
the highly competitive environment in which the Company operates while ensuring
that executive officers are compensated in a way that advances both the short-
and long-term interests of shareholders. Each primary component of executive pay
is discussed below.
The executive officers' and CEO's base salary, annual bonus target and
award, and long-term incentives are reviewed at least annually to ensure market
competitiveness and to assure satisfaction of the Company's objective of
providing total executive pay which achieves the appropriate leverage of
variable pay for performance and at-risk equity holdings. The Compensation
Committee has been advised by independent outside executive compensation
consultants in its review of the executive officers' and Mr. Walter's
compensation. In making their recommendations, the independent advisors
considered the appropriate peer group of companies for the Company. The
companies considered by the advisors include some of, but are not the same as,
those in the Value Line Health Care Index utilized in the Shareholder
Performance Graph set forth on page ___, and which represent a broader spectrum
of wholesale, retail and manufacturing companies that the Compensation Committee
believes to be a more representative measure of the size, scope and complexity
of the market for competitive executive talent.
In reviewing compensation of the Company's executive officers for FY00
(including that of Mr. Walter), the Compensation Committee considered multiple
factors, including the Company's size and complexity, overall quality of
earnings performance, balance sheet and cash flow performance, significantly
increased and expansive foreign operations, and total shareholder return. The
Compensation Committee also considered each executive officer's contribution
toward positioning of the Company for future expansion and success. In addition,
in establishing Mr. Walter's compensation for FY00, the Compensation Committee
considered the growth and expansion of the Company's business from previous
years, continued increase in market capitalization, successful integration of
previously acquired businesses, strategic positioning and continued business
development activities, more diversified lines of business and a substantially
increased and more geographically diverse work force. It is
7
<PAGE> 10
the observation of the Compensation Committee that FY00 marked yet another
record year financially for the Company.
Base Salaries. Base salaries for Company executives are generally
subject to annual review and adjustment on the basis of individual and Company
performance, level of responsibility, and competitive, inflationary and internal
equity considerations. In order to effectively recruit and retain key managers,
the Company has adopted a base salary philosophy which takes into account
competitive market compensation levels. In considering Mr. Walter's FY00 base
salary, the Compensation Committee considered the same factors as those
considered for other executive officers.
Annual Cash Incentives. Company executives are eligible to receive
annual cash incentive awards pursuant to the Company's Management Incentive Plan
("MIP"). Targeted MIP incentive amounts, which are designed to provide
competitive incentive pay, are established each year, with such amounts varying
as a percentage of base salary depending upon each executive's level of
responsibility and function. Performance objectives intended to focus attention
on achieving key goals are established for the Company and for each significant
business unit within the Company at the beginning of each fiscal year. These
objectives include a specific target for Company earnings growth, which target
was met for FY00. In addition, individual performance objectives are established
for each executive, which include both specific performance goals and other,
more qualitative and developmental, criteria. For managers with primary staff or
corporate responsibilities, 60% of the MIP amount is weighted to achievement of
the Company's corporate performance objectives and 40% to achievement of
individual performance objectives. For managers with primary operating unit
responsibilities, 50% of the MIP amount is weighted to performance of the
relevant business unit, 30% to achievement of individual performance objectives,
and 20% to achievement of the Company's performance objectives. Incentive awards
for FY00 for the Company's executive officers other than the covered employees
as discussed below were approved by the Compensation Committee based upon these
corporate, business unit and individual performance criteria. For FY00, the
Company also utilized a President's Over-Performance Plan ("POP") for eligible
employees, including executives. The POP, which is designed to reward
exceptional business unit and Company performance, provides for a maximum
payment of an additional 50% of an employee's MIP target amount, provided 100%
of the Company performance objectives have been achieved. The POP percentage
paid for the fiscal year ended June 30, 2000 varied for each business unit of
the Company from 0% to 40% depending upon the applicable business unit
performance.
Certain executive officers' bonuses are not paid in accordance with the
MIP. Instead, their bonus is paid under the Cardinal Health, Inc.
Performance-Based Incentive Compensation Plan (the "Performance-Based Plan").
The Budget Reconciliation Act of 1993 (the "Act") amended the Internal Revenue
Code to add Section 162(m), which prohibits a deduction to any publicly held
corporation for non-performance-based compensation paid to a "covered employee"
in excess of $1 million per year (the "Dollar Limitation"). A covered employee
is an employee who, on the last day of the Company's taxable year, is the chief
executive officer of the Company or an employee who appears in the Summary
Compensation Table by reason of being one of the four most highly compensated
executive officers for the taxable year (other than the chief executive
officer). In anticipation that the deductibility of compensation paid to Mr.
Walter and other executive officers could be affected by the Act, in August
1996, the Company's Board of Directors adopted the Performance-Based Plan, the
material terms of the performance goals of which were approved by the Company's
shareholders in October 1996, and amendments to which were approved by the
Company's shareholders in November 1998. Compensation paid in accordance with
the Performance-Based Plan generally will not be applied toward the Dollar
Limitation. Messrs. Walter, Kane, Damico, Millar and Fotiades were the covered
employees for the Company's past fiscal year. Under the terms of the
Performance-Based Plan, and in accordance with Section 162(m), a maximum bonus
potential level is set for each covered employee if the performance goals
established by the Compensation Subcommittee are fully satisfied. The
performance goals established by the Compensation Subcommittee under the
Performance-Based Plan for the covered employees for FY00 were fully satisfied.
As permitted by the Performance-Based Plan, the Compensation Subcommittee then
considered other factors, including without limitation the results of the
business unit managed by each such executive, in determining the amount of bonus
paid to each covered employee for FY00, within the maximum award limits.
8
<PAGE> 11
Long-Term Stock Incentives. The Company has granted equity-based
awards to its executives under the Company's Stock Incentive Plan (the "Stock
Incentive Plan"), which was initially approved by the Company's shareholders in
1987, and the Company's Amended and Restated Equity Incentive Plan (the "Equity
Incentive Plan"), which replaced the Stock Incentive Plan as to ongoing grants,
and which was approved by the Company's shareholders in November 1995, and
amendments to which were approved by the Company's shareholders in November
1998. The Stock Incentive Plan was, and Equity Incentive Plan is, designed to
align a significant portion of the executive compensation package with the
long-term interests of the Company's shareholders by providing an incentive that
focuses attention on managing the Company from the perspective of an owner with
an equity stake in the business. The Stock Incentive Plan provided, and the
Equity Incentive Plan provides, for the grant of several types of equity-based
awards, including stock options and restricted shares.
Although not required to do so, the Company has consistently made
annual grants of stock options to its management personnel, including its
executive officers. This annual grant program is designed to provide Company
managers, over a number of years, with multiple stock options, each granted with
an exercise price equal to the market price for Common Shares on the date of the
grant. Individual option grants are determined by the Compensation Committee
based on a manager's current performance, potential for future responsibility,
and salary multiples designed to increase the portion of the total compensation
opportunity represented by stock incentives as a manager's level of
responsibility increases. Approximately 2,600 individuals below the executive
officer level were granted stock options under the Company's Equity Incentive
Plan and Broadly-based Equity Incentive Plan during FY00. This program is an
increasingly important element of the Company's efforts to identify, develop and
motivate the potential leaders who will sustain the Company's superior
performance in the future. It also reinforces an entrepreneurial environment by
providing real incentives for these employees to sustain and enhance the
Company's long-term performance. Because a primary purpose of granting stock
options is to encourage positive future performance, when granting options the
Compensation Committee does not consider the number of options granted to an
individual in previous years. The Company's standard stock option agreement
contains provisions providing for forfeiture of the option or option value
received in the event the option holder engages in certain behavior in
competition with or contrary to the interests of the Company. The Compensation
Committee places a relatively heavy emphasis on stock options, consistent with
its philosophy that stock incentives more closely align the interests of Company
managers with the long-term interests of shareholders.
The number of option shares granted to members of management,
individually and in the aggregate, for the Company's past fiscal year was larger
than that granted in previous years. The increased number of option shares
granted was affected in part by the increase in the number of option plan
participants and the relative stock price at the time of grant compared to prior
years. In addition, in authorizing the larger grant, the Compensation Committee
took into account several factors, including without limitation the Company's
extraordinary performance in a highly-competitive industry, the significant
growth of the Company in the last several years, and implementation of the
Compensation Committee's objective to more closely align the Company's stock
incentive awards with those of competitive market practice, the level of which
has consistently increased over the past few years.
Grants of restricted shares are generally limited to the Company's
executive officers and other senior management personnel to reward exceptional
performance with a long-term benefit in lieu of cash, to facilitate stock
ownership, and to deter recruitment of key Company managers by competitors and
others. Unlike the Company's stock option program, restricted share grants are
not made on an annual or other regularly established basis. Recipients of
restricted share grants are subject to restrictions on the disposition of the
stock during a period determined by the Compensation Subcommittee at the time of
grant. Restricted stock awards are forfeited by their terms if the recipient
terminates employment with the Company prior to the expiration of the
restriction period. Restricted stock awards are, in most instances, also
forfeited by their terms if the recipient engages in certain behavior in
competition with or contrary to the interests of the Company. During the fiscal
year ended June 30,
9
<PAGE> 12
2000, the Compensation Subcommittee authorized the grant of restricted shares to
certain executive officers and other senior management personnel in connection
with the execution by such executives and management personnel of employment and
similar agreements. (See "Employment Agreements and Other Arrangements" below).
Those restricted share awards contain restrictions and forfeiture provisions as
described above.
Consistent with the Company's philosophy of linking total compensation
to stock performance for all of its executive officers, a significant portion of
Mr. Walter's overall compensation package is comprised of stock incentives. In
November 1999, the Compensation Subcommittee granted Mr. Walter options to
purchase 950,000 Common Shares with an exercise price of $46.75 per share (the
market price on the date of grant) as part of the annual option grant made to
Company executives. In making this grant, the Compensation Subcommittee
considered several of the same factors as those considered for the other
executive officers, including implementation of the Compensation Subcommittee's
objective to more closely align the Company's stock incentive awards with those
of the market. In addition, the Compensation Subcommittee took into account the
Company's consistent, multi-year financial performance, its strong strategic
positioning, and overall market competitiveness of Mr. Walter's total
compensation package. It was the objective of the Compensation Subcommittee that
this option grant to Mr. Walter be a special grant which is larger than the
normal annual option grant made to Mr. Walter in previous years in order to
provide an incentive for Mr. Walter to continue to impart the Company with
aggressive leadership and to guide the Company toward its future goals. In
considering any annual grant to Mr. Walter for future fiscal years, the
Compensation Subcommittee will take into account the fact that Mr. Walter
received a special annual grant in FY00. However, the Compensation Subcommittee
has reserved the right to grant Mr. Walter additional options in the future,
particularly if market conditions or other circumstances warrant. Mr. Walter's
options granted during FY00 vest one-third on each of the first, second and
third anniversary of the grant date and have an option term of ten years. All of
the options granted to Mr. Walter during the fiscal year also contain provisions
for forfeiture of the option or option value received in the event Mr. Walter
engages in certain behavior in competition with or contrary to the interests of
the Company.
IMPACT OF 1993 TAX ACT CHANGES
As discussed above, Section 162(m) of the Internal Revenue Code
prohibits a deduction to any publicly held corporation for non-performance-based
compensation paid to a covered employee in excess of the Dollar Limitation.
Although it is the Company's policy to minimize the effect of the Act on the
Company's compensation expense, as a result of the Act the Company will have
approximately $790,000 in non-deductible compensation for FY00. However, the
impact was mitigated by exclusions of certain performance-based compensation
under the Stock Incentive Plan, Equity Incentive Plan and the Performance-Based
Plan, and salary deferral elections made by Mr. Walter and certain of the other
covered employees. The Compensation Subcommittee reserves the authority to award
non-deductible compensation in such circumstances as they deem appropriate.
Further, because of ambiguities and uncertainties as to the application and
interpretation of Section 162(m) and the regulations issued thereunder, no
assurance can be given, notwithstanding the Company's efforts, that compensation
intended by the Company to satisfy the requirements for deductibility under
Section 162(m) does in fact do so.
CONCLUSION
As described above, the Company's executive compensation program
provides a significant link between total compensation and the Company's
performance and long-term shareholder value consistent with the compensation
philosophies set forth above. This program is believed to be a significant
factor in the Company's growth and profitability and the resulting long-term
gains achieved by the Company's shareholders.
J. Michael Losh, Chairman
Silas S. Cathcart
John B. McCoy
Richard C. Notebaert
Melburn G. Whitmire
10
<PAGE> 13
EXECUTIVE COMPENSATION
The following information is set forth with respect to the Company's
Chief Executive Officer and each of the Company's four other most highly
compensated executive officers.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS
------------------------------------------------------------------------------------------------------------------------------
OTHER RESTRICTED SECURITIES ALL
ANNUAL STOCK UNDERLYING OTHER
NAME AND FY - SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION ENDED ($) ($) ($)(1) ($)(2)(3) (#)(3) ($)(4)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Walter 2000 $949,231 $1,836,517 $64,835(5) -0- 950,000 $206,924(6)
Chairman & Chief -------------------------------------------------------------------------------------------------
Executive Officer 1999 824,808 1,794,375 -0- -0- 215,000 201,944
-------------------------------------------------------------------------------------------------
1998 724,231 800,000 -0- -0- 94,268 196,552
------------------------------------------------------------------------------------------------------------------------------
John C. Kane 2000 $600,385 $1,062,088 -0- -0- 50,000 $31,289
Vice Chairman, -------------------------------------------------------------------------------------------------
President & 1999 575,347 967,845 -0- -0- 220,000 31,509
Chief -------------------------------------------------------------------------------------------------
Operating Officer 1998 488,462 489,945 -0- -0- 57,021 29,717
------------------------------------------------------------------------------------------------------------------------------
Joseph F. Damico
Executive Vice President & 2000 $446,465 $ 658,650 -0- -0- 76,418 $89,796(8)
Group President- -------------------------------------------------------------------------------------------------
Allegiance Corporation (7) 1999 $171,353 $ 308,140 -0- $1,500,017 67,000
------------------------------------------------------------------------------------------------------------------------------
James F. Millar
Executive Vice President & 2000 $479,019 $ 565,331 -0- $ 971,250 75,294 $31,289
Group President- -------------------------------------------------------------------------------------------------
Pharmaceutical 1999 368,403 462,788 -0- -0- 39,131 31,509
Distribution & Provider -------------------------------------------------------------------------------------------------
Services 1998 310,501 221,810 -0- 527,100 22,500 29,717
------------------------------------------------------------------------------------------------------------------------------
George L. Fotiades
Executive Vice President & 2000 $446,167 $ 529,095 -0- $ 878,750 45,271 $94,289(10)
Group President - R.P. -------------------------------------------------------------------------------------------------
Scherer Corporation (9) 1999 366,593 187,275 -0- 999,898 55,614 83,833
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) -0- indicates that the aggregate amount of perquisites and other personal
benefits, securities or property in the aggregate did not exceed the
lesser of $50,000 or 10% of the total of Salary and Bonus, and the
executive had no other compensation reportable under this category.
(2) Aggregate restricted share holdings and values at June 30, 2000 (based
upon the closing price of the Common Shares on the New York Stock Exchange
on such date), for the named executive officers are as follows: (i) Mr.
Walter - 94,009 shares, $6,956,666; (ii) Mr. Kane - 4,680 shares,
$346,320; (iii) Mr. Damico - 21,127 shares, $1,563,398; (iv) Mr. Millar -
28,725 shares, $2,125,650; and (v) Mr. Fotiades - 33,617 shares,
$2,487,658. Dividends are paid on restricted shares at the same rate as
all Common Shares.
(3) All numbers have been adjusted to reflect the 3-for-2 split of the
Company's Common Shares in October 1998.
(4) Amounts shown represent Company contributions to the executive's account
under the Company's Profit Sharing and Retirement Savings Plan (or
applicable subsidiary 401(k) plan) and the Company's Incentive
11
<PAGE> 14
Deferred Compensation Plan for fiscal 2000 as follows: Messrs. Walter,
Kane, and Millar - $31,289; Mr. Damico - $39,796; and Mr. Fotiades -
$10,456.
(5) Includes $51,435 relating to personal use of a Company airplane.
(6) Includes $175,635 for premiums paid by the Company on a split-dollar life
insurance arrangement among the Company, Mr. Walter, and a trust for Mr.
Walter's family. The Company will recover all such premiums paid by it,
plus interest at the rate of 3% per annum, upon the earlier to occur of
January 12, 2003, or the death of the survivor of Mr. Walter and his
spouse.
(7) Mr. Damico joined the Company in February 1999 following the acquisition
by the Company of Allegiance Corporation (the "Allegiance Acquisition").
Compensation included in the Summary Compensation Table for Mr. Damico
excludes all compensation paid prior to the Allegiance Acquisition.
(8) Includes $50,000 in connection with CIC Agreement (as described and
defined below under "Employment Agreements and Other Arrangements").
(9) Mr. Fotiades joined the Company in August 1998 following the acquisition
by the Company of R.P. Scherer Corporation (the "R.P. Scherer
Acquisition"). Compensation included in the Summary Compensation Table for
Mr. Fotiades excludes all compensation paid prior to the R.P. Scherer
Acquisition.
(10) Includes $83,833 paid to Mr. Fotiades as an incentive fee pursuant to
certain provisions contained in the Original Fotiades Agreement (as
described and defined below under "Employment Agreements and Other
Arrangements").
<TABLE>
<CAPTION>
II. OPTION/SAR GRANTS IN LAST FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
-----------------------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(4)
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR(2) ($/SH)(3) DATE 0% ($) 5% ($) 10% ($)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert D. Walter 950,000 14.78% $46.75 11/15/09 $0.00 $27,930,783 $70,782,087
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
John C. Kane 50,000 .78% $50.00 02/09/10 $0.00 $1,572,237 $3,984,356
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Joseph F. Damico 76,418 1.19% $46.75 11/15/09 $0.00 $2,246,752 $5,693,711
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
James F. Millar 75,294 1.17% $46.75 11/15/09 $0.00 $2,213,706 $5,609,965
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
George L. Fotiades 45,271 .70% $46.75 11/15/09 $0.00 $1,331,005 $3,373,027
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All options granted during the fiscal year to the named executives are
nonqualified stock options and are exercisable on and after the third
anniversary from the date of grant, except for those granted to Mr. Walter
which are exercisable one-third on each of the first, second and third
anniversary of the grant date.
12
<PAGE> 15
(2) Based on 6,424,767 options granted to all employees during the fiscal year
ended June 30, 2000 under the Company's Equity Incentive Plan and
Broadly-based Equity Incentive Plan.
(3) Market price on date of grant.
(4) These amounts are based on hypothetical appreciation rates of 0%, 5% and
10% and are not intended to forecast the actual future appreciation of the
Company's stock price. No gain to optionees is possible without an actual
increase in the price of the Company's Common Shares, which increase
benefits all of the Company's shareholders.
III. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT FY-END OPTIONS
(#) AT FY-END ($)(2)
------------------------------------------------
SHARES VALUE
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) (1) UNEXERCISABLE UNEXERCISABLE
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert D. Walter 36,563 $1,979,910 422,384/1,259,268 $21,882,364/$29,353,097
------------------------------------------------------------------------------------------------------------------
John C. Kane -0- -0- 472,324/217,021 $23,660,511/$2,538,365
------------------------------------------------------------------------------------------------------------------
Joseph F. Damico -0- -0- 664,048/143,418 $34,072,677/$2,283,391
------------------------------------------------------------------------------------------------------------------
James F. Millar 9,563 $ 505,500 139,996/136,925 $7,096,096/$2,655,980
------------------------------------------------------------------------------------------------------------------
George L. Fotiades -0- -0- 141,251/149,715 $5,251,107/$2,534,715
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value calculated as the difference between the fair market value of the
Common Shares on the date of exercise and the option exercise price before
payment of any taxes.
(2) Value calculated as the difference between the fair market value of the
Common Shares on June 30, 2000 and the option exercise price.
13
<PAGE> 16
SHAREHOLDER PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total return
of Common Shares with the cumulative total return of the Standard & Poor's
Composite - 500 Stock Index and the Value Line Health Care Sector Index, an
independently prepared index which includes more than 100 companies in the
health care industry (the "Value Line Health Care Index"). The graph assumes, in
each case, an initial investment of $100 as of June 30, 1995 based on the market
prices at the end of each fiscal year through and including June 30, 2000, with
the Value Line Health Care Index investment weighted on the basis of market
capitalization at the beginning of each such fiscal year, and assuming
reinvestment of dividends (and taking into account all stock splits during such
periods).
[GRAPH WILL BE INSERTED HERE]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Fiscal Year 1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cardinal Health, Inc. 100.00 152.95 182.41 299.12 307.34 355.37
--------------------------------------------------------------------------------------------------
S&P 500 100.00 126.12 169.95 220.83 271.36 287.55
--------------------------------------------------------------------------------------------------
Value Line Health Care Index 100.00 137.02 204.76 279.55 312.75 365.38
--------------------------------------------------------------------------------------------------
Source: Value Line, Inc.
</TABLE>
EMPLOYMENT AGREEMENTS AND OTHER ARRANGEMENTS
In February 2000, the Company announced Mr. Kane's intention to retire
during the fiscal year ending June 30, 2001. In connection with his retirement
and to assist in the transition following his retirement, the Company executed
an agreement with Mr. Kane (the "Kane Agreement"). The Kane Agreement provides
for Mr. Kane to remain as President and Chief Operating Officer of the Company
for an interim period while the Company seeks his successor (the "Search
Period"). Following the Search Period, Mr. Kane will remain available during a
one year "Transition Period" and for up to two years thereafter for consulting
(the "Consulting Period"). During the Search Period, Mr. Kane will receive his
normal base salary and bonus. During the Transition Period, Mr. Kane will be
compensated in the amount of $750,000 and during the Consulting Period, he will
be compensated $50,000 annually. Upon the effective date of the Kane Agreement,
Mr. Kane was granted an option to purchase 50,000 Common Shares of the Company
as described in the "Option/SAR Grants in Last Fiscal Year" table above. The
Kane Agreement contains non-compete and non-solicitation restrictions through
the later of December 31, 2001 or the end of the Consulting Period. If the
Company terminates Mr. Kane's employment prior to the end of the Transition
Period and Mr. Kane elects to retire at that time, he will no longer be subject
to the non-compete and non-solicitation restrictions. The Kane Agreement also
requires Mr. Kane to keep the Company's proprietary information and trade
secrets confidential.
During the fiscal year ended June 30, 2000, the Company entered into a
Second Amendment to Change in Control Severance Agreement with Mr. Damico (the
"CIC Agreement"). The CIC Agreement provides for an incentive award and a stay
bonus if Mr. Damico remains employed by the Company through February 9, 2001.
The CIC Agreement also provides for a signing bonus and Gross-up Payment (as
defined in the CIC Agreement) payable in the event that any payments made to Mr.
Damico under the CIC Agreement or in connection with his termination of
employment with the Company become subject to the excise tax imposed by Section
4999 of the Internal Revenue Code. Under the CIC Agreement, in consideration for
Mr. Damico agreeing to certain non-compete obligations during the term of his
employment and generally for twelve months thereafter and certain
non-solicitation obligations during the term of his employment and generally for
twenty-four months thereafter, Mr. Damico will receive a Noncompetition Payment
(as defined in the CIC Agreement) under the CIC Agreement. The CIC Agreement
also requires Mr. Damico to keep the Company's proprietary information and trade
secrets confidential.
During the fiscal year ended June 30, 2000, the Company entered into an
agreement with Mr. Millar (the "Millar Agreement"), which replaced and
superceded the employment agreement previously in place between the Company and
Mr. Millar. The Millar Agreement provides for an employment term of three years
commencing on February 9, 2000. In addition to base salary and an annual cash
incentive payable under the standard terms of the
14
<PAGE> 17
bonus plan for which Mr. Millar is eligible, the Millar Agreement provides for
an additional incentive award, payable one-half in cash and one-half in
restricted shares (as indicated in the Summary Compensation Table contained in
this Proxy Statement) if Mr. Millar remains employed by the Company through
February 9, 2002. The Millar Agreement also provides for a severance payment to
Mr. Millar in the event the Company terminates Mr. Millar's employment without
Cause (as defined in the Millar Agreement) prior to the end of his full time
employment period. Under the Millar Agreement, Mr. Millar has agreed to comply
with certain non-compete and non-solicitation covenants during the term of his
employment and generally for twelve months thereafter. In addition, Mr. Millar
is obligated to keep the Company's proprietary information and trade secrets
confidential.
During the fiscal year ended June 30, 2000, the Company entered into an
agreement with Mr. Fotiades (the"Fotiades Agreement"), which replaced and
superceded the employment agreement previously in place between the Company and
Mr. Fotiades (such previous agreement, the "Original Fotiades Agreement"). The
Fotiades Agreement provides for an employment term of thirty-three months
commencing on February 9, 2000. In addition to base salary and an annual cash
incentive payable under the standard terms of the bonus plan for which Mr.
Fotiades is eligible, the Fotiades Agreement provides for an additional
incentive award, payable one-half in cash and one-half in restricted shares (as
indicated in the Summary Compensation Table contained in this Proxy Statement)
if Mr. Fotiades remains employed by the Company through February 9, 2002. The
Fotiades Agreement also provides for a severance payment to Mr. Fotiades in the
event the Company terminates Mr. Fotiades' employment without Cause or Mr.
Fotiades terminates his employment for Good Reason (each as defined in the
Fotiades Agreement) prior to the end of his full time employment period. The
Original Fotiades Agreement provided and the new Fotiades Agreement provides for
a fee of $166,667 to be paid to Mr. Fotiades on August 7, 2000 and August 7,
2001. Under the Fotiades Agreement, Mr. Fotiades has agreed to comply with
certain non-compete and non-solicitation covenants during the term of his
employment and generally for twelve months thereafter. In addition, Mr. Fotiades
is obligated to keep the Company's proprietary information and trade secrets
confidential.
The Company's Stock Incentive Plan, Equity Incentive Plan and Broadly-
based Equity Incentive Plan each provides for acceleration of the vesting of
stock options and restricted share awards based upon the occurrence of a change
of control of the Company. A change of control is defined generally, with
certain exclusions, as acquisition by an individual or group of 25% or more of
the Common Shares, an involuntary change in the composition of at least a
majority of the members of the Board of Directors, or approval by the Company's
shareholders of a merger, reorganization, consolidation, liquidation, or sale of
substantially all of the assets of the Company.
COMPENSATION OF DIRECTORS
During the fiscal year ended June 30, 2000, the Company's non-employee
Directors ("Outside Directors") were paid $10,000 per fiscal quarter (the
"Director Service Fee"). Effective as of the last quarter of the Company's
fiscal year, an Outside Director serving as chairperson of a Board committee
receives $1,000 per quarter for such service (the "Committee Chairperson Fee").
Other than the Chairperson, Outside Directors receive no additional compensation
for service on Board committees. Outside Directors may elect to defer payment of
their Director Service Fee and Committee Chairperson Fee into the Company's
Directors Deferred Compensation Plan, one of the investment alternatives for
which is a Company Common Shares Fund. The Company also reimburses Outside
Directors for out-of-pocket travel expenses incurred in connection with
attendance at Board and committee meetings. Employee Directors do not receive
additional compensation in their capacity as a Director.
In May 2000, the Company conducted a market study of Outside Director
compensation and performed an assessment of its strategy for compensation of
Outside Directors. As a result of the study and assessment, the Board of
Directors modified its compensation structure to Outside Directors in order to
be more market competitive and to increase the percentage of compensation paid
to Outside Directors in equity when compared to cash compensation. To effect
such modification, the Board authorized an increase in the annual grant of
options to Outside Directors such that the total annual option grant to Outside
Directors equals options having a total
15
<PAGE> 18
exercise price of $200,000. At that time, the Board of Directors also approved
an increase in the grant upon first appointment or election to the Board such
that the total initial option grant to Outside Directors equals options having a
total exercise price of $250,000. The actual value of the options will be the
difference between the market value of the underlying Common Shares on the
exercise date and the exercise price. In determining the value of the Outside
Director options and, thus, the total compensation to Outside Directors, the
Board of Directors made certain assumptions about the future increase in the
market value of the Company's Common Shares over the term of the options. The
options are granted pursuant to the Company's Equity Incentive Plan and the
newly adopted Outside Directors Equity Incentive Plan. The exercise price of
these options is the fair market value of Common Shares on the date of grant.
All grants to Outside Directors generally vest immediately, are exercisable for
ten years from the date of grant, and are subject to adjustment for subsequent
stock dividends, splits, and other changes in the Company's capital structure.
Options granted to Outside Directors are treated as nonqualified options under
the Internal Revenue Code. On November 3, 1999, Messrs. Finn, Gerbig, Havens,
Losh, and McCoy and Mrs. Herzlinger each were granted an option to purchase
2,225 Common Shares, and on December 1, 1999, Messrs. Conrades and Notebaert
each were granted an option to purchase 3,011 Common Shares, in accordance with
the provisions of the Equity Incentive Plan. On May 11, 2000, Mr. Bing was
granted an option to purchase 2,580 Common Shares, in accordance with the
provisions of the Equity Incentive Plan and 1,720 Common Shares in accordance
with the provisions of the Outside Directors Equity Incentive Plan.
PROPOSAL 1 - ELECTION OF NOMINEES FOR DIRECTORS OF THE COMPANY AT THE ANNUAL
MEETING
The Company's Board of Directors has nominated each of Dave Bing, John
F. Finn, John F. Havens, and Robert D. Walter to serve as a Director of the
Company for a term of three years and until his successor is duly elected and
qualified. Each of Messrs. Bing, Finn, Havens and Walter currently serves as a
Director of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE
FOR THESE NOMINEES TO SERVE AS MORE FULLY DESCRIBED UNDER "ELECTION OF
DIRECTORS" IN THIS PROXY STATEMENT.
PROPOSAL 2 - AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED COMMON SHARES
The Company's Board of Directors has unanimously approved an amendment
to Section 1 of Article Fourth of the Company's Articles of Incorporation to
increase the authorized number of Common Shares from five hundred million to
seven hundred and fifty million and recommends that the Company's shareholders
vote FOR the amendment. The full text of Section 1 of Article Fourth reflecting
this amendment is attached to this Proxy Statement as Exhibit A.
The additional Common Shares for which authorization is sought would
have the same rights and privileges as the Common Shares presently outstanding.
Holders of Common Shares have no preemptive rights to subscribe to or for any
additional shares of the Company.
As of September 8, 2000, ______________ Common Shares were outstanding,
___________ were issued and held in treasury, and _________ Common Shares were
reserved for issuance under stock incentive and deferred compensation plans. As
of such date, excluding Common Shares already reserved as described above, a
balance of __________________ authorized Common Shares would have been available
for issuance without shareholder action. Although the Company has no present
plan, agreement or commitment for the issuance of additional Common Shares other
than those described above or pursuant to existing employee benefit plans, the
Company's Board of Directors believes that the number of Common Shares available
for issuance could be insufficient to meet the future needs of the Company.
The Company's Board of Directors believes that it is desirable to have
additional authorized but unissued Common Shares available for possible future
share dividends or splits, employee benefit programs, financing and
16
<PAGE> 19
acquisition transactions, and other general corporate purposes. For example, the
Company issued approximately 6,970,000 Common Shares pursuant to a 25% stock
split in June 1994, 33,411,000 Common Shares pursuant to a three-for-two stock
split in December 1996, and 66,895,000 Common Shares pursuant to a three-for-two
stock split in October 1998; approximately 1,867,000 Common Shares in a
registered public offering in September 1994; and approximately 160,384,950
Common Shares and options to purchase Common Shares in connection with
acquisition transactions completed since February 1994. Although there can be no
assurance that similar issuances or transactions will occur in the future, the
Board wishes to have Common Shares available for such purposes if conditions
warrant. Like the presently authorized but unissued Common Shares, the
additional Common Shares would be available for issuance without further action
by the Company's shareholders, unless such action is required by applicable law
or the rules of the New York Stock Exchange on which the Common Shares are
listed or any other stock exchange on which the Company's securities may be
listed in the future. The authorization of additional Common Shares will enable
the Company as the need may arise, to take timely advantage of market conditions
and the availability of favorable opportunities without the delay and expense
associated with the holding of a special meeting of its shareholders.
Although a proposal to increase the authorized capital stock of a
company may be construed as having an anti-takeover effect, neither the
management of the Company nor its Board of Directors views this proposal in that
perspective. The proposal has not been prompted by an effort by anyone to gain
control of the Company, and the Company is not aware of any such attempt.
However, the authorized and unissued Common Shares could be issued for the
purpose of discouraging an attempt by another person or entity, through the
acquisition of a substantial number of Common Shares, to acquire control of the
Company with a view to effecting a merger, sale of the Company's assets, or
similar transaction, since the issuance of Common Shares could be used to dilute
the share ownership or voting rights of such a person or entity. Further, any of
such authorized but unissued Common Shares could be privately placed with
purchasers who might support incumbent management, making a change in control of
the Company more difficult.
Under Ohio law and the Company's Articles of Incorporation, the
affirmative vote of the holders of a majority of the outstanding Common Shares
is required for the approval of the proposal. Broker non-votes and abstentions
will have the same effect as votes against the proposal.
THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS VOTE
FOR THIS PROPOSAL.
PROPOSAL 3 - RE-APPROVAL OF THE MATERIAL TERMS OF THE PERFORMANCE GOALS UNDER
THE CARDINAL HEALTH, INC. PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN
INTRODUCTION
At the Annual Meeting, the Company's shareholders will be requested to
consider and act upon a proposal to re-approve the material terms of the
performance goals under the Cardinal Health, Inc. Performance-Based Incentive
Compensation Plan (the "Performance-Based Plan").
On August 14, 1996, the Board of Directors adopted the
Performance-Based Plan, subject to approval by the Company's shareholders of the
material terms of the performance goals thereunder. The Company's shareholders
approved the material terms of the performance goals thereunder on October 29,
1996. The purpose of the Performance-Based Plan is to give the Company a
competitive advantage in attracting, retaining and motivating senior officers
and key employees and to provide the Company with the ability to provide
incentive compensation that is linked to the profitability of the Company's
businesses and increases in shareholder value, which incentive compensation is
not subject to the deduction limitation rules described below.
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DESCRIPTION
Set forth below is a summary of certain important features of the
Performance-Based Plan and a description of the material terms of the
performance goals thereunder that shareholders are being asked to re-approve.
Administration. The Performance-Based Plan is administered by the
Compensation Subcommittee of the Board. Among other things, the Compensation
Subcommittee has the authority to select participants in the Performance-Based
Plan from among the Company's executive officers and to determine the
performance goals, target amounts and other terms and conditions of awards under
the Performance-Based Plan (subject to the terms of the Performance-Based Plan).
The Compensation Subcommittee also has the authority to establish and amend
rules and regulations relating to the Performance-Based Plan and to make all
other determinations necessary and advisable for the administration of the
Performance-Based Plan. All decisions made by the Compensation Subcommittee
pursuant to the Performance-Based Plan are made in the Compensation
Subcommittee's sole discretion and are final and binding.
Eligibility. Executive officers of the Company designated by the
Compensation Subcommittee are eligible to be granted awards under the
Performance-Based Plan.
Terms of Awards. Awards under the Performance-Based Plan consist of
cash amounts payable upon the achievement, during a specified performance
period, of specified objective performance goals. At the beginning of a
performance period for a given award, the Compensation Subcommittee will
establish the performance goal(s) and the target amount of the award, which will
be earned if the performance goal(s) are achieved in full, together with any
lesser amount that will be earned if the performance goal(s) are only partially
achieved. After the end of the performance period, the Compensation Subcommittee
will certify the extent to which the performance goals are achieved and
determine the amount of the award that is payable; provided, that the
Subcommittee will have the discretion to determine that the actual amount paid
with respect to an award will be less than (but not greater than) the amount
earned.
Performance Goals; Maximum Award. The performance goals for awards are
based upon the achievement of targeted measures of return on equity, earnings
per share, or earnings from operations for the Company and/or one or more
operating groups of the Company. The maximum award that may be paid to any
participant for any performance period is $3 million times the number of
twelve-month periods contained within the performance period. For example, if
the performance period for an award is two years, the maximum award would be $6
million, and if the performance period is six months, the maximum award would be
$1,500,000.
Termination of Employment. A participant whose employment terminates
because of death or disability during the performance period for an award will
receive a pro rata portion of the award, based upon the extent to which the
performance goals had been achieved before such termination, unless the
Compensation Subcommittee determines otherwise. A participant whose employment
terminates for any other reason before the end of the performance period for an
award will not be entitled to any payment with respect to the award.
Amendment and Discontinuance. The Performance-Based Plan may be
amended, modified or terminated by the Compensation Committee at any time, but
no such amendment, modification or termination will affect the payment of any
award for a performance period that has already ended or increase the amount of
any award.
REASON FOR SHAREHOLDER APPROVAL
The Performance-Based Plan has been designed to take into account
certain limits on the ability of a public corporation to claim tax deductions
for compensation paid to certain highly compensated executives. Internal Revenue
Code Section 162(m) generally denies a corporate tax deduction for annual
compensation exceeding $1 million paid to the chief executive officer and the
four other most highly compensated officers of a public corporation. (See
"Executive Compensation -- Human Resources and Compensation Committee Report --
Impact of 1993 Tax Act Changes", above.) However, "qualified performance-based
compensation" is exempt from
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this limitation. Qualified performance-based compensation is compensation paid
based solely upon the achievement of objective performance goals, the material
terms of which are approved by the shareholders of the paying corporation. The
rules pertaining to Section 162(m) require shareholder re-approval of the
material terms of the performance goals at least once every five years. Inasmuch
as the Company's shareholders approved the material terms of the performance
goals in October 1996, the shareholders of the Company are thus now being asked
to re-approve the material terms of the performance goals under the
Performance-Based Plan, as described above.
VOTE REQUIRED
Approval of the performance goals under the Cardinal Health, Inc.
Performance-Based Incentive Compensation Plan requires the affirmative approval
of the holders of a majority of the Common Shares present in person, or by
proxy, at the Annual Meeting. Broker non-votes and abstentions will have the
same effect as votes against the proposal.
THE BOARD OF DIRECTORS BELIEVES THAT RE-APPROVAL OF THE PERFORMANCE
GOALS UNDER THE PERFORMANCE-BASED PLAN IS IN THE BEST INTERESTS OF ALL
SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 4 - PROPOSAL FROM SHAREHOLDERS TO PHASE OUT PVC USE IN MANUFACTURE OF
MEDICAL SUPPLIES
The Company has received a proposal from certain shareholders (the
"Shareholder Proposal") which is required to be included in this Proxy
Statement. The Company is advised that the proposal will be presented for action
at the Annual Meeting. The proposed resolution and statements made in support of
it are presented below. The names and addresses of, as well as the number of
Common Shares held by, the shareholders submitting the proposal will be
furnished by the Company to any person requesting such information. THE BOARD OF
DIRECTORS DOES NOT AGREE WITH THE SHAREHOLDER PROPOSAL AND RECOMMENDS THAT
SHAREHOLDERS VOTE AGAINST IT.
The Shareholder Proposal, which contains a number of allegations with
which the Company takes issue, reads as follows:
WHEREAS:
Polyvinyl chloride (PVC) plastic, the primary component in 25 percent of all
medical products, including IV and blood bags, respiratory care products,
dialysis tubing, enteral feeding tubes, surgical gloves and sterile packaging,
creates dioxin during the PVC production process;
PVC also produces dioxin when burned in a medical or solid waste incinerator;
Dioxin is a known human carcinogen and has been linked to a host of other human
health effects, including endocrine (hormone system) disruption, reproductive
abnormalities, altered glucose tolerance, testicular atrophy, neurological
problems, infertility and other effects in both animals and humans;
The EPA has determined that the U.S. population already has dioxin levels in
their bodies at or near the levels which have caused adverse effects in
laboratory animals;
Large quantities of chemicals called "phthalates" are used to manufacture
flexible PVC medical products; as a result, a significant percentage of any
flexible PVC product may be comprised by di-ethylhexyl-phthalate (DEHP), a
plasticizer that is a reproductive and developmental toxicant;
DEHP has been found to leach out of medical devices and into the fluids they are
carrying, thus putting at risk of DEHP exposure vulnerable populations, such as
premature infants, dialysis patients and people with AIDS;
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<PAGE> 22
The leaching of DEHP into patients has been linked to adverse health impacts in
premature infants;
All patients deserve to receive medical treatment using products and technology
which present the least risk to their health;
Many non-PVC medical devices (e.g., IV bags, gloves, plasma collection bags,
containers) are available, and others (e.g., tubing, film for collection bags,
blood bags) are under development.
THEREFORE, BE IT RESOLVED that the shareholders request the Board of Directors
of Cardinal Health, Inc. to adopt a policy of phasing out the manufacture of
PVC-containing or phthalate-containing medical supplies by its Allegiance
subsidiary where safe alternatives are available.
The shareholders submitting the Shareholder Proposal have provided the
following statement which contains a number of allegations with which the
Company does not agree:
Establishing as a priority the manufacture of blood bags and tubing
made from resins that do not contain phthalate plasticizers would provide safer
patient care in the applications which currently expose patients to the greatest
health risks. Mechanisms which could be utilized to implement this policy might
include: maintaining an inventory of products which contain PVC or DEHP,
investigation and tracking of the availability of alternatives, establishing
policies for environmentally preferable manufacturing, and requesting suppliers
and purchasers to aid in the development of alternatives. By adopting these
mechanisms, Cardinal Health, Inc. will demonstrate that there is a market for
such devices and therefore, encourage the development and marketing of
additional alternative products.
As a manufacturer of PVC medical devices in health care, Cardinal
Health, Inc. would, by adopting these policies, demonstrate a continuing
commitment to risk-reduction and safe products.
BOARD OF DIRECTORS STATEMENT IN OPPOSITION TO PROPOSAL FROM SHAREHOLDERS
The Company's Board of Directors opposes the Shareholder Proposal and
recommends that shareholders vote AGAINST the proposal.
As a supplier of medical products and health-care services and a
company whose mission is to improve lives, the Company is committed to the
safety of its products and to environmental stewardship. To assure safe
products, the Company stays abreast of developments regarding materials used in
its products and relies on scientific data generated by government agencies and
other credible sources to determine the safety of these materials. PVC has been
used safely in a variety of medical products for more than 25 years and during
that time it has been widely studied. Numerous scientific studies by
organizations such as the World Health Organization, the U.S. Environmental
Protection Agency, and the U.S. Office of Science and Technology of the Center
for Devices and Radiological Health demonstrate that PVC- and DEHP-containing
medical products are safe. The Company is guided by and follows applicable FDA
regulations concerning the medical products which it manufacturers. The Company
believes that the FDA is the proper agency to determine the safety of such
products and is committed to the integrity of that process. The Company uses PVC
for medical products because it is compatible with the medications used with it
and its flexibility, clarity and sterilizability make it easy to use and cost
effective in a health care setting.
FOR THESE REASONS, THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT THE
COMPANY'S SHAREHOLDERS VOTE AGAINST THE SHAREHOLDER PROPOSAL.
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VOTE REQUIRED
Approval of the Shareholder Proposal requires the affirmative approval
of the holders of a majority of the Common Shares present in person, or by
proxy, at the Annual Meeting. Broker non-votes and abstentions will have the
same effect as votes against the proposal.
FUTURE SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal for the Company's
2001 Annual Meeting of Shareholders for inclusion in the proxy statement and
form of proxy relating to that meeting is advised that the proposal must be
received by the Company at its principal executive offices not later than May
25, 2001. The Company will not be required to include in its proxy statement or
form of proxy a shareholder proposal which is received after that date or which
otherwise fails to meet the requirements for shareholder proposals established
by regulations of the Securities and Exchange Commission.
SELECTION OF INDEPENDENT AUDITORS
The Company provided the following disclosure in its proxy statement
delivered to shareholders in connection with its annual meeting of shareholders
held on November 3, 1999. The Company is required to include this language again
in this Proxy Statement:
The Company and R.P. Scherer completed a merger on August 7, 1998. The
Company and Allegiance Corporation ("Allegiance") completed a merger on February
3, 1999. The Company has historically engaged Deloitte & Touche LLP ("D&T") as
its certifying accountant while R.P. Scherer has historically engaged Arthur
Andersen LLP ("AA") and Allegiance has historically engaged
PricewaterhouseCoopers LLP ("PWC") as their certifying accountants. For the
Company's fiscal year ended June 30, 1999, these certifying accountant
relationships were left intact, with D&T serving as the principal certifying
accountant, with reference in its audit opinion to work performed on R.P.
Scherer by AA and Allegiance by PWC. This was done to provide management with
sufficient time to conduct a diligent process to select one firm as the
certifying accountant for the merged entity. Selection of AA as the certifying
accountant was recommended to and approved by the Company's Audit Committee on
August 30, 1999.
The reports of D&T on the financial statements of the Company and PWC
on the financial statements of Allegiance for the past two fiscal years
contained no adverse opinion or disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles. In connection
with their audits for the past two fiscal years and through August 30, 1999,
there have been no disagreements with D&T or PWC on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements if not resolved to the satisfaction of D&T or PWC
would have caused them to make reference thereto in their reports on the
financial statements for such years. In addition, there were no reportable
events (as defined in SEC Regulation S-K, Item 304(a)(1)(v)) during the two most
recent fiscal years and through August 30, 1999.
The Company requested that D&T and PWC each furnish it with a letter
addressed to the SEC stating whether or not they agree with the above
statements. A copy of D&T's letter, dated September 2, 1999, is filed as Exhibit
16.01 to the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1999. A copy of PWC's letter, dated September 1, 1999, is filed as Exhibit
16.02 to that Form 10-K.
Representatives of AA, which served as the Company's certifying
accountant for FY00 and which the Board has appointed as the certifying
accountant for the fiscal year ending June 30, 2001, are expected to be present
at the Annual Meeting. At the Annual Meeting representatives of AA will have the
opportunity to make a
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<PAGE> 24
statement about the Company's financial condition, if they desire to do so, and
to respond to appropriate questions from shareholders.
OTHER MATTERS
This solicitation of proxies is made by and on behalf of the Board of
Directors. The cost of the solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited by Directors,
officers and employees of the Company in person or by telephone, telegraph, or
other means of communication. These persons will receive no additional
compensation for solicitation of proxies but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation. The Company has
retained MacKenzie Partners, Inc. at an estimated cost of $8,500, plus
reimbursement of expenses, to assist in its solicitation of proxies from
brokers, nominees, institutions and individuals. Arrangements will also be made
by the Company with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries, and the Company will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
If the enclosed proxy is executed and returned, or a proxy is voted by
telephone or internet, the Common Shares represented thereby will be voted in
accordance with any specifications made by the shareholder. In the absence of
any such specification, such proxies will be voted FOR adoption of the amendment
to the Company's Articles of Incorporation to increase the number of authorized
Common Shares, FOR re-approval of the material terms of the performance goals
under the Company's Performance-Based Plan, and AGAINST approval of the
shareholder proposal to phase out PVC use in manufacture of medical supplies.
With respect to the election of Directors, proxies returned without
specifications made by the shareholder will be voted to elect four Directors as
set forth under "Election of Directors" above. Although management does not
presently anticipate cumulating votes pursuant to proxies it obtains as a result
of this solicitation, it reserves the right to cumulate such votes and vote for
less than all of the Director nominees named herein.
The presence of any shareholder at the Annual Meeting will not operate
to revoke his or her proxy. A proxy may be revoked at any time insofar as it has
not been exercised by giving written notice to the Company or in open meeting or
by executing and forwarding a later-dated proxy to the Company or voting a later
proxy by telephone or internet.
If any other matters shall properly come before the Annual Meeting, the
persons named in the proxy, or their substitutes, will vote thereon in
accordance with their judgment. The Board of Directors does not know of any
other matters which will be presented for action at the Annual Meeting.
By Order of the Board of Directors.
September ___, 2000 STEVEN ALAN BENNETT, Secretary
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EXHIBIT A
AMENDED SECTION 1 TO ARTICLE FOURTH
Resolved, that Section 1 of Article FOURTH of the Amended and Restated
Articles of Incorporation, as amended, of Cardinal Health, Inc. be, and the same
hereby is, deleted in its entirety and there is substituted therefor the
following:
FOURTH: Section 1. Authorized Shares. The maximum aggregate number of
shares which the Corporation is authorized to have outstanding is 755,500,000,
consisting of 750,000,000 common shares, without par value ("Class A Common
Shares"), 5,000,000 Class B common shares, without par value ("Class B Common
Shares") (the Class A Common Shares and the Class B Common Shares are sometimes
referred to herein collectively as the "Common Shares"), and 500,000 nonvoting
preferred shares, without par value.
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PRELIMINARY FILING
PROXY - CARDINAL HEALTH, INC.
7000 CARDINAL PLACE
DUBLIN, OHIO 43017
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Michael Losh, John B. McCoy and Anthony J.
Rucci, and each of them, the attorneys and proxies of the undersigned with full
power of substitution to vote as indicated herein, all the common shares,
without par value, of Cardinal Health, Inc. held of record by the undersigned at
the close of business on September 8, 2000, at the annual meeting of
shareholders to be held on November 1, 2000, or any postponements or
adjournments thereof, with all the powers the undersigned would possess if then
and there personally present.
1. [ ] FOR all nominees listed (except as marked to the contrary) or [ ]
WITHHOLD AUTHORITY (to vote for all nominees listed): THE BOARD RECOMMENDS
A VOTE FOR THE NOMINEES LISTED BELOW.
DAVE BING, JOHN F. FINN, JOHN F. HAVENS AND ROBERT D. WALTER
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
--------------------------------------------------------------------------------
2. [ ] FOR or [ ] AGAINST or [ ] ABSTAIN -- Proposal to amend the Company's
Articles of Incorporation to Increase the Number of Authorized Common
Shares. THE BOARD RECOMMENDS A VOTE FOR THIS PROPOSAL.
3. [ ] FOR or [ ] AGAINST or [ ] ABSTAIN -- Proposal to re-approve the
material terms of the Performance Goals under the Cardinal Health, Inc.
Performance-Based Incentive Compensation Plan. THE BOARD RECOMMENDS A VOTE
FOR THIS PROPOSAL.
4. [ ] FOR or [ ] AGAINST or [ ] ABSTAIN - Proposal from Shareholders to
Phase Out PVC Use in Manufacture of Medical Supplies. THE BOARD RECOMMENDS
A VOTE AGAINST THIS PROPOSAL.
5. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE SHAREHOLDER.
IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED TO ELECT THE NOMINEES
DESCRIBED IN ITEM 1 ABOVE, FOR PROPOSALS 2 AND 3, AGAINST PROPOSAL 4, AND WITH
DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
[PERFORATION]
[THE TEXT SET FORTH BELOW IS NOT PART OF THE PROXY]
CARDINAL HEALTH, INC.
Dear Shareholder:
We encourage you to take advantage of two modern and convenient ways by which
you can vote your shares. You may vote your shares electronically by touch-tone
telephone or via the Internet, which eliminates the need to return your proxy
card.
VOTE BY TELEPHONE: To vote your shares by telephone, use a touch-tone telephone
and call the following toll-free number: 1-877-PRX-VOTE, 24 hours a day, 7 days
a week. Insert the Control Number printed in the box above, just below the
perforation. Follow the simple recorded instructions. You will incur no costs
for such call as this is a toll-free number.
VOTE BY INTERNET: To vote via the Internet, go to web site
www.eproxyvote.com/cah. Type in the Control Number which is printed in the box
on this proxy card, just below the perforation, then follow the simple
instructions. Please be aware that if you vote over the Internet, you may incur
costs such as telecommunication and Internet access charges for which you will
be responsible.
The Internet and telephone voting facilities will be available until midnight on
October 31, 2000, the day before Cardinal's Annual Meeting.
PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR THE
INTERNET, AS THE PROXY CARD WILL REVOKE ANY PREVIOUSLY PROVIDED VOTE
<PAGE> 27
By returning this proxy card you are conferring upon management the authority to
vote in their discretion upon such other business as may properly come before
the meeting or any postponement or adjournment thereof.
Receipt of Notice of Annual Meeting of Shareholders and the related Proxy
Statement is hereby acknowledged.
Dated , 2000
---------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
Signature(s) of Shareholder(s)
Please sign as your name appears
hereon. If shares are held
jointly, all holders should sign.
When signing as attorney,
executor, administrator, trustee
or guardian, please give your full
title. If a corporation, please
sign in full corporate name by
president or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person, indicating
where proper, official position or
representative capacity.
[PERFORATION]
[THE TEXT SET FORTH BELOW IS NOT PART OF THE PROXY]
[CARDINAL HEALTH LOGO]
ALL SHAREHOLDERS ARE URGED TO VOTE THEIR PROXY AS EARLY AS POSSIBLE.
PARTICIPANTS HOLDING SHARES THROUGH ANY OF THE COMPANY'S
EMPLOYEE BENEFIT PLANS ARE URGED TO VOTE THEIR SHARES
NO LATER THAN FRIDAY, OCTOBER 27, 2000, IN ORDER TO
ENSURE COMPLETE VOTING BY THE APPLICABLE PLAN ADMINISTRATOR.
PLEASE SEE REVERSE SIDE FOR INFORMATION ON VOTING
YOUR PROXY BY TELEPHONE OR INTERNET.
2
