<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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>
AMERISOURCE HEALTH CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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
PRELIMINARY COPY
[AMERISOURCE LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 3, 1999
------------------------
TO THE STOCKHOLDERS OF AMERISOURCE HEALTH CORPORATION:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of the Stockholders of
AMERISOURCE HEALTH CORPORATION will be held at The Desmond Great Valley Hotel
and Conference Center, One Liberty Boulevard, Malvern, Pennsylvania 19355 on
Wednesday, March 3, 1999, at 8:30 a.m. local time, for the purpose of:
(1) electing eight directors;
(2) approving an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Class
A Common Stock, par value $0.01 per share, to 100,000,000 from
50,000,000;
(3) approving the AmeriSource Health Corporation 1999 Stock Option
Plan;
(4) approving the AmeriSource Health Corporation 1999 Non-Employee
Directors Stock Option Plan; and
(5) transacting such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on January 27, 1999
as the record date for determining the stockholders of the Company entitled to
notice of and to vote at the Annual Meeting and any adjournments thereof; only
holders of Class A Common Stock of the Company of record on that date are
entitled to notice of and to vote at the Annual Meeting and any adjournments.
It is important that your shares be represented at the meeting regardless
of the number of shares that you own. Please complete and sign the enclosed
proxy card, which is being solicited by the Board of Directors of the Company,
and return it in the enclosed postage pre-paid envelope as soon as you can,
whether or not you expect to attend the Annual Meeting in person.
A proxy statement for your additional information is attached to this
notice.
You are cordially invited to attend the Annual Meeting.
Respectfully,
/s/William D. Sprague
WILLIAM D. SPRAGUE
Vice President, General Counsel and
Secretary
February , 1999
<PAGE> 3
AMERISOURCE HEALTH CORPORATION
300 CHESTER FIELD PARKWAY
MALVERN, PA 19355
------------------------
PROXY STATEMENT
------------------------
GENERAL INFORMATION
This proxy statement is furnished by the Board of Directors of AmeriSource
Health Corporation (the "Company") in connection with its solicitation of
proxies for use at the Annual Meeting of Stockholders to be held March 3, 1999
and at any adjournments thereof. The Company's annual report to stockholders,
including financial statements, accompanies this notice and proxy statement, but
is not incorporated as part of the proxy statement and is not to be regarded as
part of the proxy solicitation material. The proxy and this proxy statement are
being mailed to stockholders on or about February , 1999.
Proxies are solicited by the Board of Directors of the Company in order to
provide every stockholder an opportunity to vote on all matters scheduled to
come before the meeting, whether or not he or she attends the meeting in person.
When the enclosed proxy card is returned properly signed, the shares represented
thereby will be voted by the proxy holders named on the proxy card in accordance
with the stockholder's directions. You are urged to specify your choices by
marking the appropriate boxes on the enclosed proxy card. If the proxy is signed
and returned without specifying choices, the shares will be voted as recommended
by the Board of Directors.
Solicitation of proxies is made on behalf of the Board of Directors of the
Company, and the cost of preparing, assembling and mailing the notice of Annual
Meeting, proxy statement, and form of proxy will be borne by the Company. In
addition to the use of the mail, proxies may be solicited by directors, officers
and regular employees of the Company, without additional compensation, in person
or by telephone or other electronic means. The Company will reimburse brokerage
houses and other nominees for their expenses in forwarding proxy material to
beneficial owners of the Company's stock.
REVOCABILITY OF PROXY
Execution of the enclosed proxy will not affect your right to attend the
Annual Meeting and vote in person. If you do attend, you may vote by ballot at
the meeting, thereby effectively canceling any proxies previously given. In
addition, a stockholder giving a proxy may revoke it at any time before it is
voted at the meeting by filing with the Secretary of the Company an instrument
revoking it, or by filing with the Company a duly executed proxy bearing a later
date.
VOTING AT THE ANNUAL MEETING
Only the holders of record of shares of Class A Common Stock, par value
$0.01 per share (the "Common Stock"), of the Company at the close of business on
January 27, 1999 are entitled to receive notice of, and to vote at, the Annual
Meeting. Each holder of Common Stock entitled to vote will have the right to one
vote for each share held on all matters to come before the meeting. On January
27, 1999, there were shares of Common Stock issued and outstanding.
There were also shares of the Class B Common Stock, par value $0.01
per share (the "Class B Common Stock"), and shares of the Class C Common
Stock, par value $0.01 per share (the "Class C Common Stock"), of the Company
issued and outstanding. Holders of the Class B Common Stock may elect at any
time to convert any and all of such shares into Common Stock, on a
share-for-share basis, to the extent the holder thereof is not prohibited from
owning additional voting securities by virtue of regulatory restrictions. A
share of Class C Common Stock will automatically be
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<PAGE> 4
converted into a share of Common Stock (a) immediately prior to its sale in a
future public offering or (b) at such time as such share of Class C Common Stock
has been sold publicly.
The holders of a majority of the shares of Common Stock entitled to vote
must be present in person or by proxy at the Annual Meeting to constitute a
quorum for the purpose of transacting business at the meeting. Except for the
election of directors, the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy at the meeting and entitled
to vote on a proposal is required to ratify and approve the proposal.
Abstentions are counted in tabulations of the votes cast by stockholders on the
proposals and will have the effect of a negative vote. Broker non-votes will not
be counted for purposes of determining whether any proposal has been approved.
Directors are elected by a plurality of the votes present or represented by
proxy at the meeting and entitled to vote on the election of directors. Because
directors are elected by a plurality of votes, abstentions and broker non-votes
will not have an impact on their election.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of January 6, 1999, certain information
regarding the beneficial ownership of Common Stock of the Company, including
shares of Common Stock as to which a right to acquire ownership within 60 days
exists, of each director, each nominee for director, each executive officer
named in the Summary Compensation Table, all the directors and executive
officers of the Company as a group, and each person known to the Company to have
been the beneficial owner of more than 5% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF SHARES PERCENT
TITLE OF BENEFICIALLY OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNER OWNED(1) CLASS
------------------------ ---------------- ---------------- -------
<S> <C> <C> <C>
R. David Yost(2) President and Chief Executive Officer
and Director........................... 277,750 1.0%
Kurt J. Hilzinger(2) Senior Vice President, Chief Operating
Officer and Chief Financial Officer.... 114,850 *
David M. Flowers(2) Vice President, AmeriSource Health
Corporation and President, American
Health Packaging....................... 50,900 *
Bruce C. Bruckmann(3) Director............................... 55,920 *
Michael A. Delaney(4) Director............................... 0 --
Richard C. Gozon(3) Director............................... 25,000 *
Lawrence C. Karlson(3) Chairman & Director.................... 25,000 *
George H. Strong(3) Director............................... 15,500 *
James A. Urry(4) Director............................... 0 --
Barton J. Winokur(3) Director............................... 34,750 *
All directors and executive officers as a group
(10 persons)(2)(3)(4)....................................................... 599,670 2.5%
399 Venture Partners, Inc. ("VPI")(5)(6)...................................... 6,201,073 25.7%
1209 Orange Street Wilmington, DE
19801
FMR Corp...................................................................... 2,674,000 11.10%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ---------------
* Less than 1.0%
Footnotes appear on following page
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<PAGE> 5
(1) Based on information furnished to the Company by the respective
stockholders. Except as indicated below, the Company is informed that the
beneficial owners have sole voting and investment power over the shares
shown opposite their names.
(2) Common Shares and the percent of class listed as being beneficially owned by
the Company's executive officers include outstanding options to purchase
Common Stock which are exercisable within 60 days of January 6, 1999, as
follows: Mr. Yost -- 87,500 shares; Mr. Hilzinger -- 56,500 shares; and Mr.
Flowers -- 22,500 shares.
(3) Common Shares and the percent of class listed as being beneficially owned by
the Company's Non-employee Directors include outstanding options to purchase
Common Stock which are exercisable within 60 days of January 6, 1999, as
follows: Mr. Bruckmann -- 20,000 shares; Mr. Gozon -- 20,000 shares; Mr.
Karlson -- 20,000 shares; Mr. Strong -- 10,000 shares; and Mr.
Winokur -- 15,000 shares.
(4) Messrs. Delaney and Urry disclaim beneficial ownership relating to the
shares of Common Stock held by VPI.
(5) Includes 2,746,560 shares of Class B Common Stock, which is convertible into
Common Stock, owned by VPI.
(6) VPI disclaims beneficial ownership as to shares of Common Stock held by
investors currently or previously affiliated with VPI. VPI is a
wholly-owned, indirect subsidiary of Citigroup Inc.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors consists of eight directors each serving
annual terms. It is proposed that eight directors be elected to hold office
until the next annual meeting of stockholders and until their successors have
been elected and qualified. Unless otherwise specified by the stockholders, it
is intended that the shares represented by proxies will be voted for the eight
nominees for director listed below. All of the nominees are presently serving as
directors of the Company. Each nominee for director has consented to his
nomination and, so far as the Board of Directors and management are aware, will
serve as a director if elected. However, if any of the nominees should become
unavailable prior to the election, the shares represented by proxies may be
voted for the election of such other persons as the Board of Directors may
recommend, unless the Board of Directors chooses to reduce the number of
directors to be elected. There is no family relationship between any of the
directors or nominees. There is no arrangement or understanding between any
director or nominee for director and any other person(s) pursuant to which he
was or is to be selected as a director or nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEES SET FORTH IN THIS PROPOSAL. PROXIES WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON THEIR PROXY CARDS. THE EIGHT
NOMINEES RECEIVING THE HIGHEST NUMBER OF AFFIRMATIVE VOTES OF THE SHARES OF
COMMON STOCK PRESENT OR REPRESENTED AND ENTITLED TO BE VOTED SHALL BE ELECTED AS
DIRECTORS.
BRUCE C. BRUCKMANN Age 45 Director since 1992
Managing Director, Bruckmann, Rosser, Sherrill & Co., Inc.
Mr. Bruckmann previously served as a director of the Company from 1989
to December 1991, and as a director of AmeriSource Corporation from 1988 to
December 1991, prior to his reelection as a director of the Company in
1992. Mr. Bruckmann is a Managing Director of Bruckmann, Rosser,
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Sherrill & Co., Inc. Until January 1995, Mr. Bruckmann was a Managing
Director of Citicorp Venture Capital Ltd. and of Court Square Capital
Limited. Mr. Bruckmann serves as a director of Chromcraft Revington, Inc.,
Cort Business Services Corporation, Jitney-Jungle Stores of America, Inc.,
Mohawk Industries, Inc., Town Sports International, Inc., Anvil Knitwear,
Inc., MEDIQ Incorporated and Penhall International Corp. Mr. Bruckmann is a
member of the Compensation Committee of the Company's Board of Directors.
MICHAEL A. DELANEY Age 44 Director since 1995
Managing Director, Citicorp Venture Capital Ltd.
Mr. Delaney has been a Managing Director of Citicorp Venture Capital
Ltd. since 1989. Mr. Delaney is also a director of GVC Holdings, JAC
Holdings, Delco Remy International, Inc., Enterprise Media Corporation, SC
Processing, Inc., Triumph Group, Inc., Cort Business Services Corporation,
Palomar Technologies Corporation, MSX International, Inc., International
Knife & Saw, Inc., CLARK Material Handling Company, Aetna Industries, Inc.,
Fabri-Steel Products Incorporated, Great Lakes Dredge & Dock Corporation
and Allied Digital Technologies Corp. Mr. Delaney is Chairman of the
Nominating Committee and a member of the Compensation Committee of the
Company's Board of Directors.
RICHARD C. GOZON Age 60 Director since 1994
Executive Vice President, Weyerhaeuser Company
Mr. Gozon has been Executive Vice President of Weyerhaeuser Company
since June 1994. Mr. Gozon formerly was President and Chief Operating
Officer of Alco Standard Corporation from 1988 to 1993. He is also a
director of UGI Corporation, Triumph Group, Inc. and Amerigas Partners,
L.P. Mr. Gozon is Chairman of the Compensation Committee, a member of the
Audit Committee and a member of the Nominating Committee of the Company's
Board of Directors.
LAWRENCE C. KARLSON Age 56 Director since 1994
Non-executive Chairman of the Board of Directors of AmeriSource Health
Corporation and AmeriSource Corporation; Private Investor
In addition to serving as the Non-executive Chairman of the Board
since May 1997, Mr. Karlson is a private investor and serves as a director
of CDI Corp., Spectra-Physics Lasers, Inc. and Vlasic Foods International,
Inc. Mr. Karlson is a member of the Capital Appropriations Committee of the
Company's Board of Directors.
GEORGE H. STRONG Age 72 Director since 1994
Private Investor
Mr. Strong is a private investor and serves as a director of Health
South Rehabilitation Corp., Integrated Health Services, Inc. and Balanced
Care Corporation. Mr. Strong is Chairman of the Audit Committee of the
Company's Board of Directors.
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<PAGE> 7
JAMES A. URRY Age 45 Director since 1995
Vice President, Citicorp Venture Capital Ltd.
Mr. Urry has been with Citibank, N.A. since 1981, serving as a Vice
President since 1986. He has been a Vice President of Citicorp Venture
Capital Ltd. since 1989. He is also a director of York International
Corporation, International Knife & Saw, Inc., Hancor Holdings, CLARK
Material Handling Company, Cort Business Services Corporation, Airxcel,
Inc., Palomar Technologies Corporation and Brunner Mond Limited. Mr. Urry
is a member of the Compensation Committee of the Company's Board of
Directors.
BARTON J. WINOKUR Age 58 Director since 1990
Chairman, Dechert Price & Rhoads
Mr. Winokur is Chairman of the law firm of Dechert Price & Rhoads and
serves as a director of CDI Corp. and Davco Restaurants, Inc. Mr. Winokur
is Chairman of the Capital Appropriations Committee and a member of the
Audit Committee of the Company's Board of Directors.
R. DAVID YOST Age 51 Director since 1997
President and Chief Executive Officer, AmeriSource Health Corporation and
AmeriSource Corporation
Mr. Yost has been President and Chief Executive Officer and a director
of the Company since May 1997. Mr. Yost previously served as Executive Vice
President -- Operations of the Company since 1995. Prior to that, Mr. Yost
served as Group President -- Central Region of the Company since 1989. Mr.
Yost is a member of the Capital Appropriations Committee and the Nominating
Committee of the Company's Board of Directors.
BOARD OF DIRECTORS
The Board of Directors of the Company held nine meetings during fiscal year
1998. All of the directors attended 75% or more of the meetings of the Board of
Directors and the Committees of the Board of Directors on which they served.
COMMITTEES OF THE BOARD OF DIRECTORS
The standing committees of the Board of Directors are the Compensation,
Audit, Capital Appropriations and Nominating Committees.
The Compensation Committee reviews and recommends actions to the Board of
Directors on such matters as salary and other compensation of officers and the
administration of certain benefit plans. The Compensation Committee also has the
authority to grant and to administer stock options under the Company's stock
option plans. The Compensation Committee held three meetings during fiscal year
1998. The Chairman of the Compensation Committee is Mr. Gozon and its other
members are Messrs. Delaney, Urry and Bruckmann.
The Audit Committee meets with management, the Company's independent
auditors and its internal audit department to consider the adequacy of the
Company's internal controls and other financial reporting matters. The Audit
Committee recommends to the Board of Directors the engagement of the Company's
independent auditors, discusses with the independent auditors their audit
procedures, including the proposed scope of their audit, the audit results and
the accompanying management letters and, in connection with determining their
independence, reviews the services performed by the independent auditors. The
Audit
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Committee held four meetings during fiscal year 1998. The Chairman of the Audit
Committee is Mr. Strong and its other members are Messrs. Gozon and Winokur.
The Capital Appropriations Committee authorizes and approves investments by
the Company, other than investments in the ordinary course of business. The
Capital Appropriations Committee held four meetings during fiscal year 1998. The
Chairman of the Capital Appropriations Committee is Mr. Winokur and its other
members are Messrs. Yost and Karlson.
The Nominating Committee reviews and evaluates potential nominees for
election to the Board of Directors and makes recommendations to the Board of
Directors concerning such nominees. The Nominating Committee considers potential
nominees for election at annual meetings of stockholders, as well as nominees
for election by the Board of Directors to fill vacancies that may arise. The
Nominating Committee intends to conduct its evaluation of potential candidates
independently and confidentially; therefore, it does not intend to adopt
stockholder recommendations of candidates. The Chairman of the Nominating
Committee is Mr. Delaney and its other members are Messrs. Gozon and Yost.
PROPOSAL 2
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Company's Board of Directors has authorized an amendment to the first
paragraph of Article 4 of the Company's Certificate of Incorporation to increase
the authorized number of shares of Common Stock to 100,000,000 from 50,000,000.
The full text of the resolution of the Board of Directors reflecting this
amendment is attached to this proxy statement as Appendix A.
As of January 6, 1999, 21,366,488 shares of Common Stock were outstanding
and approximately 5,624,646 shares of Common Stock were reserved for issuance
under stock incentive plans, outstanding stock option awards and upon conversion
of shares of Class B Common Stock and Class C Common Stock. As of the same date,
2,750,783 shares of Class B Common Stock and 127,801 shares of Class C Common
Stock were outstanding. The additional shares of Common Stock for which
authorization is sought would have the same rights and privileges as the shares
of Common Stock presently outstanding. Holders of shares of Common Stock have no
preemptive rights to subscribe to or for any additional shares of stock of the
Company.
The Company's Board of Directors believes that it is desirable to have
sufficient additional authorized but unissued shares of Common Stock available
for possible future share dividends or splits, employee benefit programs,
financing and acquisition transactions, and other general corporate purposes.
The additional shares of Common Stock would be available for issuance without
further action by the Company's stockholders, unless such action is required by
applicable laws or the rules of the New York Stock Exchange, on which the shares
of Common Stock are currently listed, or any other stock exchange on which the
Company's securities may be listed in the future.
Although any proposal to increase the authorized capital stock of a company
may be construed as having an anti-takeover effect, neither management of the
Company nor its Board of Directors views this proposal in that perspective.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock of the Company present in person or by proxy at the meeting and
entitled to vote on a proposal is required to ratify and approve this proposal.
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL. PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE ON
THEIR PROXY CARDS.
PROPOSAL 3
APPROVAL OF THE AMERISOURCE HEALTH CORPORATION 1999 STOCK OPTION PLAN
GENERAL
On December 8, 1998, the Board of Directors adopted, subject to stockholder
approval, the AmeriSource Health Corporation 1999 Stock Option Plan (the "1999
Option Plan"). The 1999 Option Plan provides for the granting of non-qualified
stock options to acquire up to 1,600,000 shares of Common Stock to employees of
the Company.
The Company believes that the 1999 Option Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's stockholders, and will align the economic interests of
the participants with those of the stockholders. We have summarized the 1999
Option Plan below and have attached a full copy of the Plan as Appendix B.
SUMMARY OF THE 1999 OPTION PLAN
ADMINISTRATION. The 1999 Option Plan will be administered by a committee
appointed by the Board (the "Committee"), all of whom will be "outside
directors" as defined under section 162(m) of the Code and related Treasury
regulations, and "non-employee directors," as defined under Rule 16b-3 under the
Exchange Act. The Committee has the sole authority to, among other things, grant
options to any employee of the Company, including executive officers, and
subject to the limits in the 1999 Option Plan, has the discretion to determine
the number of shares to be granted. The Company has approximately 3,000
employees who would be eligible for grants under the 1999 Option Plan.
GRANT OF OPTION. The maximum aggregate number of shares of Common Stock
that may be subject to options granted under the 1999 Option Plan to any
individual during any calendar year is 100,000 shares. The Committee may adjust
this number and the number of shares issuable under the 1999 Option Plan for
stock dividends, stock splits, combinations of shares, or other changes in
outstanding Common Stock. The shares may be authorized but unissued shares of
Common Stock or reacquired shares of Common Stock, including shares purchased by
the Company on the open market for purposes of the 1999 Option Plan.
EXERCISE PRICE. The exercise price for options will be determined by the
Committee and will not be less than the fair market value of a share of Common
Stock on the date of grant or on the date the 1999 Option Plan is approved by
the stockholders, whichever last occurs. The fair market value per share will be
the last reported sales price for the Common Stock on the relevant date on the
New York Stock Exchange. The terms and conditions of an option grant will be
specified in the option agreement. Grants may be transferred to the extent set
forth in the option agreement. The Committee may permit optionees to make
limited transfers for estate planning purposes.
SECTION 162(M). Under section 162(m) of the Code, the Company may be
precluded from claiming a federal income tax deduction for total remuneration in
excess of $1,000,000 paid to the chief executive officer or to any of the other
four most highly compensated officers in any one year. Total remuneration
includes amounts received upon the exercise of stock options granted under the
1999 Option Plan. An exception exists, however, for "qualified performance-based
compensation." The 1999 Option Plan is intended to allow grants
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<PAGE> 10
to meet the requirements of "qualified performance-based compensation." Stock
options should generally meet the requirements of "qualified performance-based
compensation," if the exercise price is at least equal to the fair market value
of the common stock on the date of grant.
CHANGE OF CONTROL OF THE COMPANY. In the event of a Change of Control (as
defined in the 1999 Option Plan), the Company will provide each grantee notice
of the Change of Control and each outstanding option will become fully
exercisable provided that the grantee is employed by the Company at the time of
the Change of Control and either (i) the grantee is employed by the Company on
the first anniversary of the Change of Control, (ii) the grantee's employment is
terminated by the Company, other than for Cause (as defined in the 1999 Option
Plan), during the one year period following the Change of Control, (iii) the
grantee voluntarily terminates employment with the Company during the one year
period following the Change of Control because of a Constructive Termination (as
defined in the 1999 Option Plan), or (iv) the grantee's employment with the
Company terminates because of death or disability during the one year period
following the Change of Control. Upon a certain type of Change of Control
described in the 1999 Option Plan, unless the Committee determines otherwise,
all outstanding options will be assumed by, or replaced with comparable options
by, the surviving corporation. In the event of a Change of Control, the
Committee also has the authority to pay grantees an amount equal to the "spread"
of their outstanding options (i.e., the difference between the fair market value
of the shares subject to each grantee's outstanding options over the exercise
price) in cash or stock or terminate outstanding options that are not exercised
by a specified date.
AMENDMENT AND TERMINATION OF THE 1999 OPTION PLAN. The Board of Directors
may amend or terminate the 1999 Option Plan at any time, but may not do so
without stockholder approval if such approval is required by section 162(m) of
the Code. Unless terminated or extended earlier, the 1999 Option Plan will
terminate on the day immediately preceding the tenth anniversary of its
effective date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following description of
certain income tax consequences of the 1999 Option Plan is based upon current
statutes, regulations and interpretations and does not include state or local
income tax consequences. This description is not intended to address specific
tax consequences applicable to an employee of the Company who receives a stock
option under the 1999 Option Plan.
None of the options to be granted under the 1999 Option Plan is intended to
qualify as an "incentive stock option" as that term is defined in section 422 of
the Code. Neither the option holder nor the Company will incur any federal
income tax consequences as a result of the grant of an option. Upon the exercise
of a 1999 Option, the difference between the exercise price and the fair market
value of the shares on the date of exercise will be taxable as ordinary income
to the option holder. At the time of a subsequent sale of any shares of Common
Stock obtained upon the exercise of an option, any gain or loss will be a
capital gain or loss to the option holder.
The Company will be entitled to a deduction for federal income tax purposes
at the same time and in the same amount that the holder of an option recognizes
ordinary income, to the extent that such income is considered reasonable
compensation under the Code. The Company's income tax deduction may be limited
by the $1,000,000 limit of section 162(m) of the Code if the grant does not
qualify as "qualified performance-based compensation" under section 162(m) of
the Code (see "Section 162(m)" above).
TAX WITHHOLDING. The Company may require that the grantee receiving shares
upon the exercise of options pay to the Company the amount of any federal, state
or local taxes required by law to be withheld with respect to such exercise, or
the Company may deduct the amount of any such taxes from other wages payable by
the Company. With the Committee's consent, a grantee may elect to satisfy the
Company's income tax withholding obligation by withholding shares received from
the exercise of an option.
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<PAGE> 11
PLAN BENEFITS. Because options will be granted from time to time by the
Committee to those persons whom the Committee determines in its discretion
should receive grants, the benefits and amounts that may be received in the
future by persons eligible to participate in the 1999 Option Plan are not
presently determinable. As of January 25, 1999, the last reported sales price of
the Company's common stock as reported on the New York Stock Exchange was $80.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or by proxy at the meeting and entitled to
vote on a proposal is required to ratify and approve this Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THIS PROPOSAL. PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE ON THEIR PROXY CARDS.
PROPOSAL 4
APPROVAL OF THE AMERISOURCE HEALTH CORPORATION 1999 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
GENERAL
On December 8, 1998, the Board of Directors adopted, subject to stockholder
approval, the AmeriSource Health Corporation 1999 Non-Employee Directors Stock
Option Plan (the "1999 Directors Plan"). The 1999 Directors Plan provides for
the granting of non-qualified stock options to acquire up to 175,000 shares of
common stock of the Company to non-employee directors of the Company (as defined
below). The Committee (as defined below) may adjust this number for stock
dividends, stock splits, combinations of shares or other changes in the
outstanding Common Stock.
The Company believes that the 1999 Directors Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's stockholders, and will align the economic interests of
the participants with those of the stockholders. We have summarized the 1999
Directors Plan below and have attached a full copy of the Plan as Appendix C.
SUMMARY OF THE 1999 DIRECTORS PLAN
ADMINISTRATION. The 1999 Directors Plan will be administered by a
committee appointed by the Board of Directors (the "Committee"), all of whom
will be "non-employee directors" as defined under Rule 16b-3 under the Exchange
Act. The Committee will have full power and authority to administer and
interpret the 1999 Directors Plan.
ELIGIBILITY. All members of the Board of Directors who are not employees
of the Company or a subsidiary ("Non-Employee Directors") will be eligible to
participate in the 1999 Directors Plan. As of January 25, 1999, seven
Non-Employee Directors were eligible to participate in the 1999 Directors Plan.
GRANT OF OPTION. Commencing with the 1999 annual meeting of the Company's
stockholders, each Non-Employee Director who is in office on the day immediately
after the annual election of directors will receive a grant of non-qualified
options to purchase 6,000 shares of Common Stock. The number of shares
underlying the options is subject to adjustment as set forth in the 1999
Directors Plan.
EXERCISE PRICE. The exercise price for the options will be equal to the
fair market value of a share of Common Stock on the date of grant, or on the
date the 1999 Directors Plan is approved by stockholders,
9
<PAGE> 12
whichever is later. The fair market value per share will be the last reported
sales price of the Common Stock on the New York Stock Exchange on the relevant
date. The terms and conditions of an option will be specified in the option
agreement. Stock options may be transferred to the extent set forth in the
option agreement. The Committee may permit optionees to make limited transfers
for estate planning purposes.
CHANGE OF CONTROL OF THE COMPANY. In the event of a Change of Control (as
defined in the 1999 Directors Plan), the Company will provide each grantee with
notice of the Change of Control and each outstanding option will become fully
exercisable provided that the grantee is a member of the Board of Directors at
the time of the Change of Control. Upon a certain type of Change of Control, as
specified in the 1999 Directors Plan, unless the Committee determines otherwise,
all outstanding options that are not exercised shall be assumed by, or replaced
with comparable options by, the surviving corporation. In the event of a Change
of Control, the Committee also has the authority to pay grantees an amount equal
to the "spread" of the outstanding options (i.e., the difference between the
fair market value of the shares subject to each grantee's outstanding options
over the exercise price) in cash or stock or terminate any outstanding options
that are not exercised by a specified date.
AMENDMENT AND TERMINATION OF THE 1999 DIRECTORS PLAN. The Board of
Directors may amend or terminate the 1999 Directors Plan at any time. Unless
terminated or extended earlier, the 1999 Directors Plan will terminate on the
day immediately preceding the tenth anniversary of its effective date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following description of
certain income tax consequences of the 1999 Directors Plan is based on current
statutes, regulations and interpretations and does not include state or local
income tax consequences. This description is not intended to address specific
tax consequences applicable to a director of the Company who receives a stock
option under the 1999 Directors Plan.
None of the options to be granted under the 1999 Directors Plan is intended
to qualify as an "incentive stock option" as that term is defined in Section 422
of the Code. Neither the option holder nor the Company will incur any federal
income tax consequences as a result of the grant of an option under the 1999
Directors Plan. Upon the exercise of an option, the difference between the
exercise price and the fair market value of the shares on the date of exercise
will be taxable as ordinary income to the option holder.
At the time of a subsequent sale of any shares of Common Stock obtained
upon the exercise of an option under the 1999 Directors Plan, any gain or loss
will be a capital gain or loss to the option holder.
The Company will be entitled to a deduction for federal income tax purposes
at the same time and in the same amount that the holder of any option recognizes
ordinary income, to the extent that such income is considered reasonable
compensation under the Code.
10
<PAGE> 13
The table below summarizes the number of options that will be granted to
Non-Employee Directors in 1999 under the proposed 1999 Directors Plan, assuming
stockholder approval of the Plan and stockholder approval of Proposal 1.
<TABLE>
<CAPTION>
DOLLAR VALUE
RECIPIENT ($)(1) OPTION SHARES
--------- ------------ -------------
<S> <C> <C>
Bruce C. Bruckmann......................................... 198,960 6,000
Michael A. Delaney......................................... 198,960 6,000
Richard C. Gozon........................................... 198,960 6,000
Lawrence C. Karlson........................................ 198,960 6,000
George H. Strong........................................... 198,960 6,000
James A. Urry.............................................. 198,960 6,000
Barton J. Winokur.......................................... 198,960 6,000
Non-Employee Directors as a Group.......................... 1,392,720 42,000
</TABLE>
- ---------------
(1) Present values were calculated using the Black-Scholes American option
valuation method. The actual value, if any, that a director may receive is
dependent on the excess of the stock price over the exercise price. Use of
this model should not be viewed as a forecast of the future performance of
the Company's stock price. The estimated grant date present value of each
stock option is $33.16 based on the following defined option terms and
assumptions: (a) a grant price of $80.000; (b) an exercise price of $80.000;
(c) an expected life of 5 years; (d) a risk-free interest rate of 4.59%,
which represents the yield on Treasury Bonds with maturity dates
corresponding to that of the options; (e) a dividend yield of 0%,
representing the stock's current yield; and (f) a stock price volatility
rate of .392, which reflects how much the stock price varied on a weekly
basis since the initial public offering of the Company's Common Stock on
April 4, 1995.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or by proxy at the meeting and entitled to
vote on a proposal is required to ratify and approve this Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THIS PROPOSAL. PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY
OTHERWISE ON THEIR PROXY CARDS.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Executive Compensation Program. The role of the Compensation Committee is
to recommend, establish, oversee and direct the Company's executive compensation
policies and programs and to recommend to the Board of Directors compensation
for executive officers. In carrying out this role, we believe it is important to
align executive compensation with Company values and objectives, business
strategies, management initiatives, business financial performance and enhanced
stockholder value.
Our Compensation Committee is comprised of independent outside directors,
none of whom is or was an officer or employee of the Company or its
subsidiaries. Periodically we solicit and receive recommendations and advice
from independent third-party compensation consultants.
Our executive compensation program is designed to attract and retain key
executives with outstanding abilities and to motivate them to perform to the
full extent of their abilities. We believe that executives should have a greater
portion of their compensation at risk than other employees, and that executive
compensation
11
<PAGE> 14
should be tied directly to the performance of the business and be aligned with
benefits realized by the Company's stockholders.
Compensation for Company executives consists of both cash and equity-based
opportunities. The annual cash compensation consists of (i) base salary and (ii)
an annual incentive opportunity. Equity-based opportunities are provided on a
long-term basis through the Company's stock option plans.
The Compensation Committee's compensation consultants have advised that the
salaries, when coupled with annual incentive awards paid to the Company's chief
executive officer and other executive officers, are consistent with industry
competitive practices. In making this determination, the consultants analyzed
the compensation payable at the pharmaceutical wholesale distribution companies
included in the Peer Group Index described in the discussion of Stockholder
Return Performance below, and also relied upon survey data covering a broader
range of wholesale and distribution companies. The Compensation Committee has
reviewed the base salaries of executive officers and has made adjustments that
in its judgment are appropriate. The Compensation Committee reviews executive
officer salaries annually and makes adjustments based on past performance,
changed job duties, scope and responsibilities, competitive pay data and
expected future contributions of each executive officer.
The Compensation Committee also oversees the Company's annual incentive
payments to executive officers. Each year we establish challenging objectives
based on business prospects for that year. For Messrs. Yost, Hilzinger and
Flowers, and for the other senior members of management, annual incentive
opportunities are based on achieving both current financial performance
objectives and individual strategic and operating objectives related to
longer-term earnings, with greater weight given to the current financial
performance objectives. Following the end of each fiscal year, after completion
of the audit of the Company's financial statements, the Compensation Committee
reviews business results and the individual performance of each executive
officer and each senior member of management, and determines and recommends to
the Board of Directors annual incentive payments. In fiscal year 1998, the
Company exceeded its financial performance goals. Strategic and operating
objectives were met by Messrs. Yost, Hilzinger and Flowers as well.
Consequently, Messrs. Yost, Hilzinger and Flowers earned their incentive
payments attributable to their respective financial objectives and to their
strategic and operating objectives.
The Company's long-term, equity-based 1995 Option Plan was approved by the
Company's Board of Directors in February 1995 and approved by the stockholders
in March 1995, prior to the Company's public offering of its Common Stock. The
Compensation Committee oversees the 1995 Option Plan for executives. The 1995
Option Plan consists of non-qualified stock option grants, generally to be made
only at one time each year. The Compensation Committee believes that grants made
under the 1995 Option Plan will focus executives on increasing stockholder
value. No options were granted pursuant to the 1995 Option Plan to the executive
officers in fiscal year 1998.
The Company's long-term, equity-based 1996 Option Plan was approved by the
Company's Board of Directors in November 1996, and approved by the stockholders
in February 1997. The Compensation Committee oversees the 1996 Option Plan for
executives. The 1996 Option Plan consists of non-qualified stock option grants,
generally to be made only at one time each year. The Compensation Committee
believes that grants made under the 1996 Option Plan will focus executives on
increasing stockholder value. Options to purchase a total of 105,000 shares of
Common Stock were granted pursuant to the 1996 Option Plan to the executive
officers in fiscal year 1998, as follows: 45,000 to Mr. Yost; 30,000 to Mr.
Hilzinger; and 30,000 to Mr. Flowers. See "Management Stock Options." These
awards are within the same range that the Compensation Committee's compensation
consultant advised was reasonable for executive officers.
The Company's long-term, equity-based 1999 Option Plan (Proposal 3 herein)
was approved by the Company's Board of Directors in December 1998, subject to
stockholder approval. The Compensation Committee will oversee the 1999 Option
Plan for executives. The 1999 Option Plan will consist of non-
12
<PAGE> 15
qualified stock option grants, generally to be made only at one time each year.
The Compensation Committee believes that grants made under the 1999 Option Plan
will focus executives on increasing stockholder value.
Chief Executive Officer Compensation. Each year the Compensation Committee
and the chief executive officer agree to multi-year objectives. The committee
reviews the chief executive officer's performance against those objectives at
year-end. This review includes a detailed analysis of the short- and long-term
financial results as well as progress toward the Company's strategic objectives.
In addition, the committee considers individual factors such as Mr. Yost's
leadership ability, ability to execute the business strategy and the Company's
relationship with customers and the investment community. Mr. Yost's salary was
based on data received on the salaries of chief executive officers at companies
included in the Peer Group Index as well as upon survey data obtained from
wholesale and distribution companies generally.
Mr. Yost's annual incentive opportunity is 100% of his base salary, subject
to certain adjustments based on his individual performance, as determined by the
committee, and the performance of the Company. Of this amount, 50% is based on
the Company's achievement of earnings per share ("EPS") goals and 50% is based
on goals relating to return on committed capital. For fiscal year 1998, the
Company exceeded the EPS goals by six percentage points and met the goals for
return on committed capital. Based on the foregoing factors, Mr. Yost's annual
incentive payment was 107% of his base salary.
Deductibility of Compensation. Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), imposes a $1 million limit on the
deductibility of compensation paid to certain executive officers of public
companies, unless the compensation meets certain requirements for
"performance-based" compensation. The Compensation Committee believes that all
of the compensation awarded to the Company's executive officers will be fully
deductible in accordance with these rules.
COMPENSATION COMMITTEE
Richard C. Gozon, Chairman
Bruce C. Bruckmann
Michael A. Delaney
James A. Urry
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company receive no additional
compensation for services as a director. Each outside director of the Company is
paid an annual fee of $15,000 for services as a director of the Company, plus an
additional fee of $1,000 for attendance in person at each meeting of the Board
of Directors in excess of four annually, and $500 per telephonic meeting of the
Board of Directors. Mr. Karlson is paid an annual fee of $50,000 for his
services as Chairman. There are no fees paid for attendance at committee
meetings.
Outside directors of the Company, other than Messrs. Delaney and Urry, may
also be entitled to receive stock options for Common Stock pursuant to the
AmeriSource Health Corporation Non-Employee Directors Stock Option Plan (the
"1996 Directors Plan"). The 1996 Directors Plan provides for non-discretionary,
automatic grants on an annual basis of an option to purchase shares of Common
Stock to certain non-employee directors. Such options are fully exercisable on
the grant dates. The option exercise price is equal to 100% of the fair market
value of the Common Stock on the date of grant of the option. An aggregate of
50,000 shares of Common Stock were reserved for issuance under the 1996
Directors Plan. All of the options under the 1996 Directors Plan have been
granted. Options granted to directors under the 1996 Directors Plan are
13
<PAGE> 16
treated as nonstatutory stock options under the Code. The 1996 Directors Plan is
administered by a committee of disinterested directors.
The 1996 Directors Plan permits, with the consent of the committee and if
permitted by the restrictions in the Company's financing agreements, the
exercise of options by delivery of shares of Common Stock owned by the option
holder, by withholding of such shares of Common Stock upon exercise of the
option in lieu of or in addition to cash or by financing made available by the
Company. The 1996 Directors Plan permits the committee to adjust the number and
kind of shares subject to options in the event of a reorganization, merger,
consolidation, recapitalization, reclassification, stock split, stock dividend
or combination of shares. The Board of Directors may amend the 1996 Directors
Plan at any time, provided, however, that stockholder approval is required for
any amendment to the 1996 Directors Plan that increases the number of shares for
which options may be granted or changes in any material respect the limitations
or provisions of the options subject to the 1996 Plan. However, no action by the
Board of Directors or stockholders may alter or impair any option previously
granted to an option holder without such option holder's consent.
During fiscal year 1998, the Company made grants of stock options under the
1996 Directors Plan as follows: Messrs. Bruckmann, Gozon, Karlson, Strong and
Winokur were each granted options to purchase 5,000 shares of Common Stock at
$57.4375 per share and all such options were outstanding and exercisable at
September 30, 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer or
employee of the Company or any of its subsidiaries. To the Company's knowledge,
there were no other relationships involving members of the Compensation
Committee requiring disclosure in this section of this proxy statement.
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE
---- --- -----
<S> <C> <C>
R. David Yost............................. 51 President and Chief Executive Officer
Kurt J. Hilzinger......................... 38 Senior Vice President, Chief Operating
Officer and Chief Financial Officer
David M. Flowers.......................... 51 Vice President, AmeriSource Health
Corporation and President, American Health
Packaging
</TABLE>
Mr. Yost is described above as a nominee for director.
Mr. Hilzinger was appointed Senior Vice President, Chief Operating Officer
and Chief Financial Officer in January 1999. Prior to that time, he served as
Senior Vice President, Chief Financial Officer since 1997, Vice President, Chief
Financial Officer and Treasurer from 1995 to 1997 and Vice President, Finance
and Treasurer from 1993 to 1995.
Mr. Flowers was appointed Vice President of AmeriSource Health Corporation
and President of American Health Packaging, a division of AmeriSource Health
Services Corporation, in January 1999. Prior to that time he had been Executive
Vice President, Sales & Marketing since December 1995. He held the position of
Group President -- Eastern Region from 1989 through December 1995.
There are no arrangements or understandings between any of the executive
officers and any other person pursuant to which he was elected an officer. There
are no family relationships between any director, executive officer, or nominee
for director.
14
<PAGE> 17
SUMMARY COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth, for the fiscal years ended September 30,
1998, 1997 and 1996, certain information regarding the cash compensation paid by
the Company, as well as certain other compensation paid or accrued for those
years, to each of the executive officers of the Company in all capacities in
which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ -------------------------------------
AWARDS PAYOUTS
OTHER ------------------------ ----------
ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND PRINCIPAL COMPENSA- STOCK UNDERLYING LTIP COMPENSA-
POSITION YEAR SALARY($) BONUS($)(1) TION($) AWARD(S)($) OPTIONS(#) PAYOUTS($) TION($)
------------------ ---- --------- ----------- --------- ----------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. David Yost............... 1998 397,100 424,000 -- -- 45,000 -- 86,742(2)
President and Chief 1997 359,600 315,000 -- -- 25,000 -- 40,806(2)
Executive Officer 1996 238,350 235,000 -- -- 20,000 -- 34,544(2)
Kurt J. Hilzinger........... 1998 227,117 265,000 -- -- 30,000 -- 34,827(3)
Sr. Vice President, Chief 1997 200,000 197,175 -- -- 20,000 -- 10,416(3)
Operating Officer and 1996 160,167 150,000 -- -- 12,000 -- 5,842(3)
Chief Financial Officer
David M. Flowers............ 1998 287,000 302,000 -- -- 30,000 -- 41,811(4)
Vice President,
AmeriSource 1997 264,600 253,200 -- -- 20,000 -- 42,050(4)
Health Corporation and 1996 224,600 200,000 -- -- 20,000 -- 36,635(4)
President, American Health
Packaging
</TABLE>
- ---------------
(1) The amounts shown consist of cash bonuses earned in the fiscal year
identified but paid in the subsequent fiscal year.
(2) "All Other Compensation" for Mr. Yost in fiscal year 1998, 1997 and 1996,
respectively (unless otherwise indicated), includes the following: (i)
$3,780, $3,209 and $2,421 in club dues; (ii) $3,300, $3,000 and $1,900 in
tax return preparation fees; (iii) $10,000, $9,000 and $5,400 in
contributions under the Company's Employee Investment Plan; (iv) for 1997
and 1996, respectively, $1,497 and $144 for spousal travel expenses; (v) for
1998 and 1997, respectively, $2,800 and $1,500 for personal use of a
Company-owned condominium; (vi) for 1998, $44,262 in relocation expense;
(vii) $22,600 per year in premiums for a split dollar life insurance policy;
and (viii) for 1996, $2,079 in miscellaneous items.
(3) "All Other Compensation" for Mr. Hilzinger in 1998, 1997 and 1996,
respectively (unless otherwise indicated), includes the following: (i)
$10,000, $9,000 and $5,172 in contributions under the Company's Employee
Investment Plan; (ii) for 1998, $175 in club dues; (iii) $1,087, $137 and
$670 for spousal travel expenses; (iv) for 1998, $22,600 in premiums paid
for a split dollar insurance policy; and (v) for 1998 and 1997,
respectively, $965 and $279 for miscellaneous items.
(4) "All Other Compensation" for Mr. Flowers in fiscal year 1998, 1997 and 1996,
respectively (unless otherwise indicated), includes the following: (i)
$5,285, $5,833 and $7,885 in club dues; (ii) for 1998 and 1997,
respectively, $3,926 and $4,200 in tax preparation fees; (iii) $10,000,
$9,000 and $5,400 in contributions under the Company's Employee Investment
Plan; (iv) for 1997, $417 for spousal travel expenses; (v) $22,600 per year
in premiums paid for a split dollar life insurance policy; and (vi) for
1996, $750 in miscellaneous items.
STOCK OPTIONS
OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth certain information with respect to options
granted to and exercised by the executive officers of the Company during fiscal
year 1998. The information set forth in these tables relates to
15
<PAGE> 18
options granted to and exercised by the executive officers of the Company to
purchase shares of Common Stock under the 1996 Option Plan.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/
UNDERLYING SARS EXERCISE
OPTIONS/ GRANTED TO OR BASE GRANT DATE
SARS EMPLOYEES IN PRICE PRESENT
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) EXPIRATION DATE VALUE($)(2)
---- ------------- ------------ -------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
R. David Yost................. 45,000 10.0% 57.0625 December 15, 2007 1,093,950
Kurt J. Hilzinger............. 30,000 6.7 57.0625 December 15, 2007 729,300
David M. Flowers.............. 30,000 6.7 57.0625 December 15, 2007 729,300
</TABLE>
- ---------------
(1) The options granted under the 1996 Option Plan become exercisable at a rate
of 25% each year, beginning December 15, 1998.
(2) Present values were calculated using the Black-Scholes American option
valuation method. The actual value, if any, that an executive officer may
receive is dependent on the excess of the stock price over the exercise
price. Use of this model should not be viewed as a forecast of the future
performance of the Company's stock price. The estimated grant date present
value of each stock option is $24.31 based on the following defined option
terms and assumptions: (a) a grant price of $57.0625; (b) an exercise price
of $57.0625; (c) an expected life of 5 years; (d) a risk-free interest rate
of 5.30%, which represents the yield on Treasury Bonds with maturity dates
corresponding to that of the options; (e) a dividend yield of 0%,
representing the stock's current yield; and (f) a stock price volatility
rate of .392, which reflects how much the stock price varied on a weekly
basis since the initial public offering of the Company's Common Stock on
April 4, 1995.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information regarding the number of
exercised options and the value of unexercised in-the-money options held by the
executive officers of the Company as of September 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED VALUE ------------- -------------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (*) ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- ------------- -------------------
<S> <C> <C> <C> <C>
R. David Yost..................... 0 0 65,000/90,000 3,538,438/4,899,375
Kurt J. Hilzinger................. 0 0 41,000/61,000 2,231,937/3,320,687
David M. Flowers.................. 0 0 63,750/71,250 3,470,390/3,878,671
</TABLE>
- ---------------
(1) Value calculated as the difference between the fair market value of the
Common Stock on September 30, 1998 and the option exercise price.
PENSION PLANS
AMERISOURCE CORPORATION PARTICIPATING COMPANIES PENSION PLAN. AmeriSource
Corporation ("AmeriSource") has a qualified defined benefit pension plan
providing for continuation of pension benefit coverage for salaried sales and
office employees of the Company who meet the plan's eligibility requirements.
Under AmeriSource's pension plan, the executive officers compensated by
AmeriSource are entitled to annual pension benefits at age 65 equal to the
number of years of credited service multiplied by 1% of average annual
16
<PAGE> 19
compensation earned during the consecutive three years within the last ten years
of participation in the pension plan which yield the highest average.
All pension plan costs are paid by AmeriSource and the pension plan and
benefits are funded on an actuarial basis. Compensation earned by executive
officers for purposes of the plan includes salaries and bonuses set forth in the
cash compensation table under "Summary Compensation Table" above, except that
compensation recognized under the plan may not exceed certain limits, as
required by the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the Code. For 1998, the compensation limit was $160,000.
The years of credited service as of October 1, 1998 for each of the
executive officers of the Company were as follows: R. David Yost -- 24.08 years;
Kurt J. Hilzinger -- 7.58 years; and David M. Flowers -- 22.75 years.
As required by ERISA and the Code, the pension plan limits the maximum
annual benefits payable at Social Security retirement age as a single life
annuity to the lesser of $90,000, with cost-of-living adjustments, or 100% of a
plan participant's average total taxable earnings during his highest three
consecutive calendar years of participation, subject to certain exceptions for
benefits which accrued prior to September 30, 1988. For 1998, the annual benefit
limit was $130,000.
SUPPLEMENTAL RETIREMENT PLAN. AmeriSource also has a Supplemental
Retirement Plan (the "Supplemental Plan"). Coverage under the Supplemental Plan
is limited to participants in AmeriSource's pension plan whose benefits under
the pension plan are limited due to (a) restrictions imposed by the Code on the
amount of benefits to be paid from a tax-qualified plan, (b) restrictions
imposed by the Code on the amount of an employee's compensation that may be
taken into account in calculating benefits to be paid from a tax-qualified plan,
or (c) any reductions in the amount of compensation taken into account under the
pension plan due to an employee's participation in certain deferred compensation
plans sponsored by AmeriSource or one of its subsidiaries. The Supplemental Plan
provides for a supplement to the annual pension benefit paid under AmeriSource's
pension plan to participants who attain early or normal retirement under such
pension plan or who suffer a total and permanent disability while employed by
AmeriSource or one of its subsidiaries and to the pre-retirement death benefits
payable under the pension plan on behalf of such participants who die with a
vested interest in AmeriSource's pension plan. The amount of the supplement will
be the difference, if any, between the pension or pre-retirement death benefit
paid under AmeriSource's pension plan and that which would otherwise have been
payable but for the restrictions imposed by the Code and any reduction in the
participant's compensation for purposes of AmeriSource's pension plan due to his
participation in certain deferred compensation plans of AmeriSource or one of
its subsidiaries.
The following table shows estimated annual retirement benefits that would
be payable to participants under AmeriSource's pension plan and, if applicable,
the Supplemental Plan, upon normal retirement at age 65 under various
assumptions as to final average annual compensation and years of credited
service and on the assumption that benefits will be paid in the form of a single
life annuity. The benefit amounts listed are not subject to any deduction for
Social Security benefits.
17
<PAGE> 20
ESTIMATED ANNUAL RETIREMENT BENEFITS ($)
<TABLE>
<CAPTION>
FINAL AVERAGE
COMPENSATION 10 20 30 35
------------- -- -- -- --
<S> <C> <C> <C> <C>
100,000.................................... 10,000 20,000 30,000 35,000
150,000.................................... 15,000 30,000 45,000 52,500
200,000.................................... 20,000 40,000 60,000 70,000
250,000.................................... 25,000 50,000 75,000 87,500
300,000.................................... 30,000 60,000 90,000 105,000
500,000.................................... 50,000 100,000 150,000 175,000
600,000.................................... 60,000 120,000 180,000 210,000
700,000.................................... 70,000 140,000 210,000 245,000
800,000.................................... 80,000 160,000 240,000 280,000
900,000.................................... 90,000 180,000 270,000 315,000
1,000,000................................... 100,000 200,000 300,000 350,000
</TABLE>
AGREEMENTS WITH EMPLOYEES
Effective August 1, 1997, the Company entered into employment contracts
(the "Employment Contracts") with Messrs. Yost, Hilzinger, and Flowers. The
Employment Contracts provide for three-year terms of employment, with an
automatic one-year extension on each anniversary date, annual base salaries
substantially commensurate with present levels, and incentive compensation,
bonuses and benefits in accordance with the Company's prevailing practices from
time to time.
Each Employment Contract includes a customary termination for cause
provision, whereupon the Company's obligations under the respective Employment
Contract would cease. By a majority vote of the Board of Directors, the Company
would also be able to terminate the employment of the employee without cause,
whereupon the Company would remain obligated to pay the greater of (i) one year
of such employee's then-current salary and (ii) the base salary of the employee
for the balance of the term of the Employment Contract. The Employment Contracts
also provide for acceleration of all or a portion of the employee's Company
stock options then outstanding upon a termination without cause that occurs
after September 5, 1999 and prior to other circumstances. Each Employment
Contract prohibits direct and indirect competition with the Company for a period
of one year after termination of employment. The Employment Contracts also
contain customary prohibitions against the disclosure of confidential
information and the solicitation of the Company's employees and customers.
The Employment Contracts provide for certain payments and other benefits as
the result of the termination of the Employment Contracts upon a change of
control of the Company. The Employment Contracts were filed with the Securities
and Exchange Commission ("SEC") as exhibits to the Company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1997. The foregoing
description is qualified in its entirety by reference to such exhibits.
STOCKHOLDER RETURN PERFORMANCE
The following graph compares the percentage change in cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Index and an index of peer companies
selected by the Company (the "Peer Group Index") from the market close on April
4, 1995 to September 30, 1998. April 4, 1995 was the first trading date on which
the Company's Common Stock was registered under Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Cumulative total return
to stockholders is measured by dividing (x) the sum of (i) total dividends for
the period (assuming dividend reinvestment) and (ii) per-share price change for
the period by (y) the share price at the beginning of the period. The graph is
based on an investment of $100 at the market close on April 4, 1995 in the
Common Stock and in each index.
18
<PAGE> 21
COMPARISON OF 42-MONTH CUMULATIVE TOTAL RETURN*
AMONG AMERISOURCE HEALTH CORPORATION, THE S&P 500 INDEX
AND THE PEER GROUP INDEX
[AMERISOURCE TOTAL RETURN PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
AMERISOURCE
HEALTH
CORPORATION PEER GROUP S&P 500
<S> <C> <C> <C>
4/4/95 100.00 100.00 100.00
SEP-95 128.57 108.91 116.99
SEP-96 211.90 139.59 140.78
SEP-97 278.27 221.84 197.73
SEP-98 259.23 338.27 215.61
</TABLE>
*$100 INVESTED ON 4/04/95 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS, FISCAL YEAR ENDING SEPTEMBER 30.
The Peer Group Index (which is weighted on the basis of market
capitalization) consists of the Company and the following companies engaged
primarily in the wholesale drug distribution business: Bergen Brunswig
Corporation, Bindley Western Industries, Inc., Cardinal Health, Inc., McKesson
Corporation and Owens & Minor, Inc.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
During fiscal year 1998, Dechert Price & Rhoads performed, and currently
does perform, legal services for the Company. Barton J. Winokur, Chairman of
Dechert Price & Rhoads and a director of the Company, beneficially owns 34,750
shares of the Common Stock of the Company.
INDEPENDENT PUBLIC AUDITORS
Since 1988, the Company has retained Ernst & Young LLP as its independent
public auditors and it has retained Ernst & Young LLP for the current year
ending September 30, 1999. Representatives of Ernst & Young LLP are expected to
be present at the Annual Meeting, and such representatives will have an
opportunity at the Annual Meeting to make a statement, if they desire to do so,
and will be available to respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities ("10% Stockholders") to file reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company with the SEC and the New York Stock Exchange. Executive officers,
directors and 10% Stockholders are
19
<PAGE> 22
required by SEC regulation to furnish the Company with copies of all forms they
file under Section 16(a). Based solely on its review of the copies of such forms
received by it and written representations from certain reporting persons that
no other reports were required from those persons, the Company believes that
during the period October 1, 1997 through September 30, 1998, its executive
officers, directors and 10% Stockholders complied with all applicable Section
16(a) filing requirements.
2000 STOCKHOLDER PROPOSALS
In the event that a stockholder desires to have a proposal included in the
proxy statement and form of proxy for the Annual Meeting of Stockholders to be
held in 2000, the proposal must be received by the Company in writing on or
before September 30, 1999, by certified mail, return receipt requested, and must
comply in all respects with applicable rules and regulations of the SEC, the
laws of the State of Delaware and the By-Laws of the Company relating to such
inclusion. With respect to a stockholder proposal that is not included in the
2000 proxy statement and form of proxy but which properly comes before the 2000
meeting, if the Company does not receive notice of such proposal, by certified
mail, return receipt requested, on or before December 20, 1999, then the proxy
solicited by the Board of Directors of the Company for the 2000 meeting may
confer discretionary authority with respect to such proposal. Stockholder
proposals may be mailed to the Secretary, AmeriSource Health Corporation, 300
Chester Field Parkway, Malvern, PA 19355.
ANNUAL REPORT ON FORM 10-K
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR ITS FISCAL YEAR
ENDED SEPTEMBER 30, 1998 MAY BE OBTAINED BY ANY STOCKHOLDER, WITHOUT CHARGE,
UPON WRITTEN REQUEST DIRECTED TO: INVESTOR RELATIONS DEPARTMENT, AMERISOURCE
HEALTH CORPORATION, 300 CHESTER FIELD PARKWAY, MALVERN, PA 19355.
OTHER BUSINESS
The Company is not aware of any other business to be presented at the 1999
Annual Meeting of Stockholders. However, if any other matter should properly
come before the Annual Meeting, the enclosed proxy confers discretionary
authority with respect thereto.
By order of the Board of Directors,
/s/ William D. Sprague
WILLIAM D. SPRAGUE
Vice President, General Counsel and
Secretary
Dated: February , 1999
Malvern, Pennsylvania
20
<PAGE> 23
APPENDIX A
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
RESOLVED, that the first paragraph of Article 4 of the Restated Certificate
of Incorporation of AmeriSource Health Corporation be, and the same hereby is,
amended to read as follows:
4. Authorized Capital. The aggregate number of shares of stock which
the Corporation shall have authority to issue is 117,000,000 shares,
divided into three (3) classes consisting of 100,000,000 shares of Class A
Common Stock, par value $0.01 per share ("Class A Common Stock");
15,000,000 shares of Class B Common Stock, par value $0.01 per share
("Class B Common Stock"); and 2,000,000 shares of Class C Common Stock, par
value $0.01 per share ("Class C Common Stock"). Class A Common Stock, Class
B Common Stock and Class C Common Stock are collectively referred to herein
as "Common Stock."
A-1
<PAGE> 24
APPENDIX B
AMERISOURCE HEALTH CORPORATION
1999 STOCK OPTION PLAN
The purpose of the AmeriSource Health Corporation 1999 Stock Option Plan
(the "Plan") is to provide designated employees of AmeriSource Health
Corporation (the "Company") and its subsidiaries with the opportunity to receive
grants of nonqualified stock options. The Company believes that the Plan will
encourage the participants to contribute materially to the growth of the
Company, thereby benefitting the Company's shareholders, and will align the
economic interests of the participants with those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee (the "Committee"), which shall consist of two or more persons
appointed by the Board of Directors of the Company (the "Board"), all of whom
shall be "outside directors", as defined under section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") and related Treasury regulations,
and "non-employee directors", as defined under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act").
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv)
condition grants on the individual"s execution of a non-compete, non-disclosure
or other agreement deemed appropriate by the Committee, and (v) deal with any
other matters arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
2. Options
Awards under the Plan shall consist of grants of nonqualified stock options
that are not intended to qualify as "incentive stock options" within the meaning
of section 422 of the Code ("Options" or "Nonqualified Stock Options"), as
described in Section 5. All Options shall be subject to the terms and conditions
set forth herein and to such other terms and conditions consistent with this
Plan as the Committee deems appropriate and as are specified in writing by the
Committee to the individual in a grant instrument (the "Option Instrument") or
an amendment to the Option Instrument. The Committee shall approve the form and
provisions of each Option Instrument. Options need not be uniform as among the
grantees.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to the adjustment specified below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 1,600,000 shares, and the maximum
aggregate number of shares of Company Stock that shall be subject to Options
granted under the Plan to any individual during any calendar year shall be
100,000 shares. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including
B-1
<PAGE> 25
shares purchased by the Company on the open market for purposes of the Plan. If
and to the extent Options granted under the Plan terminate, expire, or are
canceled, forfeited, exchanged or surrendered without having been exercised, the
shares subject to such Options shall again be available for purposes of the
Plan.
(b) Adjustments. If there is any change in the number or kind of shares of
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Options, the maximum number of shares of Company Stock for
which any individual participating in the Plan may receive Options in any year,
the number of shares covered by outstanding Options, the kind of shares issued
under the Plan, and the price per share of Options may be appropriately adjusted
by the Committee to reflect any increase or decrease in the number of, or change
in the kind or value of, issued shares of Company Stock to preclude, to the
extent practicable, the enlargement or dilution of rights and benefits under
such Options; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive.
4. Eligibility for Participation
(a) Eligible Persons. All employees of the Company and its subsidiaries
("Employees"), including Employees who are officers or members of the Board,
shall be eligible to participate in the Plan.
(b) Selection of Grantees. The Committee shall select the Employees to
receive Options and shall determine the number of shares of Company Stock
subject to a particular Option in such manner as the Committee determines.
Employees who receive Options under this Plan shall hereinafter be referred to
as "Grantees".
5. Grant of Options
(a) Number of Shares. The Committee shall determine the number of shares
of Company Stock that will be subject to each grant of Options to Employees.
(b) Exercise Price.
(i) The purchase price (the "Exercise Price") of Company Stock subject
to an Option shall be determined by the Committee and shall not be less
than the Fair Market Value (as defined below) of a share of Company Stock
on the date the Option is granted or on the date the Plan is approved by
the Stockholders, whichever last occurs.
(ii) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or
the Nasdaq National Market, the last reported sale price thereof on the
relevant date or (if there were no trades on that date) the latest
preceding date on which a sale was reported, or (y) if the Company Stock is
not principally traded on such exchange or market, the mean between the
last reported "bid" and "asked" prices of Company Stock on the relevant
date, as reported on Nasdaq or, if not so reported, as reported by the
National Daily Quotation Bureau, Inc. or as reported in a customary
financial reporting service, as applicable and as the Committee determines.
If the Company Stock is not publicly traded or, if publicly traded, is not
subject to reported transactions or "bid" or "asked" quotations as set
forth above, the Fair Market Value per share shall be as determined by the
Committee.
B-2
<PAGE> 26
(c) Option Term. The Committee shall determine the term of each Option,
which shall not exceed ten years from the date of grant.
(d) Exercisability of Options. Options shall become exercisable in 25%
increments on each of the first four anniversary dates that follow the grant,
provided the Grantee is employed by the Company as of the applicable date,
except as may otherwise be specified in the Option Instrument or an amendment to
the Option Instrument that is approved by the Committee. The Committee may
accelerate the exercisability of any or all outstanding Options at any time for
any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by the Company as an Employee. In the event that a
Grantee ceases his or her employment with the Company for any reason other
than a "disability" (as defined below), death, or "termination for cause"
(as defined below), any Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within 90 days after the date on
which the Grantee ceases his or her employment with the Company (or within
such other period of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option term. Any of the
Grantee's Options that are not exercisable as of the date on which the
Grantee ceases to be employed by the Company shall terminate as of such
date, unless the Committee determines otherwise. In addition,
notwithstanding any other provisions of this Section 5, if the Committee
determines that the Grantee has engaged in conduct that constitutes "cause"
at any time while the Grantee is employed by the Company or after the
Grantee"s termination of employment, any Option held by the Grantee shall
immediately terminate and the Grantee shall automatically forfeit all
shares underlying any exercised portion of an Option for which the Company
has not yet delivered the share certificates, upon refund by the Company of
the Exercise Price paid by the Grantee for such shares.
(ii) In the event the Grantee ceases his or her employment with the
Company on account of a "termination for cause" by the Company, any Option
held by the Grantee shall terminate as of the date the Grantee ceases to be
employed by the Company. In addition, notwithstanding any other provisions
of this Section 5, if the Committee determines that the Grantee has engaged
in conduct that constitutes "cause" at any time while the Grantee is
employed by the Company or after the Grantee's termination of employment,
any Option held by the Grantee shall immediately terminate and the Grantee
shall automatically forfeit all shares underlying any exercised portion of
an Option for which the Company has not yet delivered the share
certificates, upon refund by the Company of the Exercise Price paid by the
Grantee for such shares.
(iii) In the event the Grantee's employment terminates because the
Grantee is "disabled", any Option which is otherwise exercisable by the
Grantee shall terminate unless exercised within one year after the date on
which the Grantee ceases to be employed by the Company (or within such
other period of time as may be specified by the Committee), but in any
event no later than the date of expiration of the Option term. Any of the
Grantee's Options which are not exercisable as of the date on which the
Grantee ceases to be employed by the Company shall terminate as of such
date, unless the Committee determines otherwise.
(iv) If the Grantee dies while employed by the Company or within 90
days after the date on which the Grantee ceases to be employed on account
of a termination specified in Section 5(e)(i) above (or within such other
period of time as may be specified by the Committee), any Option that is
otherwise exercisable by the Grantee shall terminate unless exercised
within one year after the date on which the Grantee ceases his or her
employment with the Company (or within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the Option term.
B-3
<PAGE> 27
Any of the Grantee's Options that are not exercisable as of the date on
which the Grantee ceases to be employed by the Company shall terminate as
of such date, unless the Committee determines otherwise.
(v) For purposes of this Section 5(e) and Section 9(a):
(A) The term "Company" shall mean the Company and its parent and
subsidiary corporations.
(B) "Disability" shall mean a Grantee's becoming disabled within
the meaning of section 22(e)(3) of the Code.
(vi) For purposes of this Section 5(e), "termination for cause" shall
mean, except to the extent specified otherwise by the Committee, a finding
by the Committee that the Grantee has breached his or her employment or
service contract with the Company, or has been engaged in disloyalty to the
Company, including, without limitation, fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the course of his or her
employment or service, or has disclosed trade secrets or confidential
information of the Company to persons not entitled to receive such
information.
(f) Exercise of Options. A Grantee may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price in cash. Subject to Committee
consent, a Grantee may pay the Exercise Price for an Option through a broker in
accordance with procedures established by the Committee consistent with
Regulation T of the Federal Reserve Board. The Grantee shall pay the Exercise
Price and the amount of any withholding tax due (pursuant to Section 6) at the
time of exercise. Shares of Company Stock shall not be issued upon exercise of
an Option until the Exercise Price is fully paid and any required tax
withholding is made.
6. Withholding of Taxes
(a) Required Withholding. All Options under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company may require the Grantee or other person receiving such
shares to pay to the Company the amount of any such taxes that the Company is
required to withhold with respect to such Options, or the Company may deduct
from other compensation payable by the Company the amount of any withholding
taxes due with respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option by having shares withheld up to an amount that does not
exceed the Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Committee and shall be subject to the prior approval of the
Committee.
7. Transferability of Options
(a) Nontransferability of Options. Except as provided below, only the
Grantee or his or her authorized representative may exercise rights under an
Option. A Grantee may not transfer those rights except by will or by the laws of
descent and distribution or, if permitted under Rule 16b-3 of the Exchange Act
and if permitted by the Committee, pursuant to a domestic relations order (as
defined under the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the regulations thereunder). When a Grantee dies, the
personal representative or other person entitled to succeed to the rights of the
Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee must
furnish proof satisfactory to the Company of his or her right to receive the
Option under the Grantee's will or under the applicable laws of descent and
distribution.
(b) Permitted Transfer of Options. Notwithstanding the foregoing, the
Committee may provide, in an Option Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members or other persons or entities
according to such terms as the Committee may determine; provided that the
Grantee
B-4
<PAGE> 28
receives no consideration for the transfer of an Option and the transferred
Option shall continue to be subject to the same terms and conditions as were
applicable to the Option immediately before the transfer.
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) (other than 399 Venture Partners, Inc. or its affiliates)
is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 35% of the voting power of the then outstanding
securities of the Company, and such person owns more aggregate voting power
of the Company's then outstanding securities entitled to vote generally in
the election of directors than any other person;
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for
(i) the merger or consolidation of the Company with another corporation
where the shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to 50% or more of all
votes to which all shareholders of the surviving corporation would be
entitled in the election of directors (without consideration of the rights
of any class of stock to elect directors by a separate class vote), (ii)
the sale or other disposition of all or substantially all of the assets of
the Company, or (iii) a liquidation or dissolution of the Company; or
(c) After the date this Plan is approved by the shareholders of the
Company, directors are elected such that a majority of the members of the
Board shall have been members of the Board for less than two years, unless
the election or nomination for election of each new director who was not a
director at the beginning of such two-year period was approved by a vote of
at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
9. Consequences of a Change of Control
(a) Notice and Acceleration.
(i) Upon a Change of Control, the Company shall provide each Grantee
who holds outstanding Options written notice of the Change of Control.
(ii) Upon a Change of Control, each outstanding Option shall become
fully exercisable, provided that (i) the Grantee is employed by the Company
at the time of the Change of Control and (ii) either (A) the Grantee is
employed by the Company on the first anniversary of the Change of Control,
(B) the Grantee's employment is terminated by the Company, other than for
"cause" (as defined below), during the one year period following the Change
of Control, (C) the Grantee voluntarily terminates employment with the
Company during the one year period following the Change of Control as a
result of a "constructive termination" (as defined below), or (D) the
Grantee's employment with the Company terminates on account of death or
disability (as defined in Section 5(e)) during the one year period
following the Change of Control. Any portion of an Option that would not be
exercisable after a Change of Control but for the provisions of the
preceding sentence may be exercised after the conditions of the preceding
sentence have been met.
(iii) For purposes of this Section, "cause" means willful misconduct
or dishonesty, or conviction of or failure to contest prosecution for a
felony, or excessive absenteeism unrelated to illness.
(iv) For purposes of this Section, "constructive termination" will
occur if the Company (a) requires the Grantee to assume duties inconsistent
with, or the Company makes a significant diminution or reduction in the
nature or scope of the Grantee's authority or duties from, the authorities
or duties
B-5
<PAGE> 29
assigned to or held by the Grantee during the 30 days immediately prior to
the Change of Control, (b) materially reduces the Grantee's base salary,
incentive compensation opportunities or fringe benefits, or (c) relocates
the Grantee's site of employment to a location more than 50 miles away from
the Grantee's site of employment 30 days immediately before the Change of
Control.
(v) Notwithstanding the foregoing, a Grantee shall be eligible to
exercise Options both before and after a Change of Control to the full
extent otherwise permitted under the Plan.
(b) Assumption of Options. Upon a Change of Control described in Section
8(b)(i) where the Company is not the surviving corporation (or survives only as
a subsidiary of another corporation), unless the Committee determines otherwise,
all outstanding Options that are not exercised shall be assumed by, or replaced
with comparable options by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (d) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options in exchange for a payment by the
Company, in cash or Company Stock as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the shares of Company
Stock subject to the Grantee's outstanding Options exceeds the Exercise Price of
the Options, or (ii) after giving Grantees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Committee deems appropriate. Such surrender or termination shall take place
as of the date of the Change of Control or such other date as the Committee may
specify.
(d) Limitations. Notwithstanding anything in the Plan to the contrary, in
the event of a Change of Control, the Committee shall not have the right to take
any actions described in the Plan (including without limitation actions
described in Subsection (c) above) that would make the Change of Control
ineligible for pooling of interests accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
10. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without shareholder
approval if such approval is required by Section 162(m) of the Code.
(b) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or unless extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after an Option is granted shall not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 17(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Option. Whether or not the Plan has terminated, an outstanding Option may be
terminated or amended under Section 17(b) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
B-6
<PAGE> 30
11. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of shares with respect to Options under this Plan.
12. Rights of Participants
Nothing in this Plan shall entitle any Employee or other person to any
claim or right to be granted an Option under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any individual any
rights to be retained by or in the employ of the Company or any other employment
rights.
13. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Option. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
14. Requirements for Issuance of Shares
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Committee shall deem necessary or advisable
as a result of any applicable law, regulation or official interpretation
thereof, and certificates representing such shares may be legended to reflect
any such restrictions. Certificates representing shares of Company Stock issued
under the Plan will be subject to such stop-transfer orders and other
restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
15. Headings
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
16. Effective Date of the Plan
Subject to the approval of the Company's shareholders, this Plan shall be
effective on December 8, 1998.
17. Miscellaneous
(a) Options in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to grant Options under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Options
granted to employees thereof who become Employees of the Company, or for other
proper corporate purposes, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may grant an Option to an employee of another
corporation who becomes an Employee by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or any of its subsidiaries in substitution for a stock
option grant made by such corporation ("Substituted Stock Incentives"). The
terms and conditions of the substitute grant may vary from the terms and
conditions required by the Plan and from those of the Substituted Stock
Incentives. The Committee shall prescribe the provisions of the substitute
grants.
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(b) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Option if it is contrary to law or modify an Option to bring it
into compliance with any valid and mandatory government regulation. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a shareholder with respect to any shares of Company Stock covered by
an Option until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company.
(d) Governing Law. The validity, construction, interpretation and effect
of the Plan and Option Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of the State of Delaware,
without giving effect to the conflicts of laws provision thereof.
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APPENDIX C
AMERISOURCE HEALTH CORPORATION
1999 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The purpose of the AmeriSource Health Corporation 1999 Non-Employee
Directors Stock Option Plan (the "Plan") is to provide members of the Board of
Directors (the "Board") of AmeriSource Health Corporation (the "Company") who
are not employees of the Company or its subsidiaries with grants of nonqualified
stock options. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's shareholders, and will align the economic interests of
the participants with those of the shareholders.
1. Administration
(a) Committee. The Plan shall be administered and interpreted by a
committee (the "Committee"), which shall consist of two or more persons
appointed by the Board, all of whom shall be "non-employee directors", as
defined under Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act").
(b) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
2. Options
Awards under the Plan shall consist of grants of nonqualified stock options
that are not intended to qualify as "incentive stock options" within the meaning
of section 422 of the Code ("Options" or "Nonqualified Stock Options"), as
described in Section 5. All Options shall be subject to the terms and conditions
set forth herein and to such other terms and conditions consistent with this
Plan as the Committee deems appropriate and as are specified in writing by the
Committee to the individual in a grant instrument (the "Option Instrument") or
an amendment to the Option Instrument. The Committee shall approve the form and
provisions of each Option Instrument.
3. Shares Subject to the Plan
(a) Shares Authorized. Subject to the adjustment specified below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 175,000 shares. The shares may be
authorized but unissued shares of Company Stock or reacquired shares of Company
Stock, including shares purchased by the Company on the open market for purposes
of the Plan. If and to the extent Options granted under the Plan terminate,
expire, or are canceled, forfeited, exchanged or surrendered without having been
exercised, the shares subject to such Options shall again be available for
purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares of
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a
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spinoff or the Company's payment of an extraordinary dividend or distribution,
the maximum number of shares of Company Stock available for Options, the number
of shares covered by outstanding Options, the kind of shares issued under the
Plan, and the price per share of Options may be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in the
kind or value of, issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Options; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive.
4. Eligibility for Participation
All members of the Board who are not employees of the Company or a
subsidiary ("Non-Employee Directors") shall be eligible to participate in the
Plan.
5. Grant of Options
(a) Annual Grants. Commencing with the 1999 annual meeting of the
Company's shareholders each Non-Employee Director who is in office on the day
immediately after the annual election of directors shall receive a grant of a
Nonqualified Stock Option to purchase 6,000 shares of Company Stock.
(b) Exercise Price. The purchase price per share of Company Stock subject
to an Option (the "Exercise Price") shall be equal to the Fair Market Value of a
share of Company Stock on the date of grant or on the date the Plan is approved
by the Stockholders, whichever last occurs. If the Company Stock is publicly
traded, then the Fair Market Value per share shall be determined as follows: (x)
if the principal trading market for the Company Stock is a national securities
exchange or the Nasdaq National Market, the last reported sale price thereof on
the relevant date or (if there were no trades on that date) the latest preceding
date upon which a sale was reported, or (y) if the Company Stock is not
principally traded on such exchange or market, the mean between the last
reported "bid" and "asked" prices of Company Stock on the relevant date, as
reported on Nasdaq or, if not so reported, as reported by the National Daily
Quotation Bureau, Inc. or as reported in a customary financial reporting
service, as applicable and as the Committee determines. If the Company Stock is
not publicly traded or, if publicly traded, is not subject to reported
transactions or "bid" or "asked" quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option Term and Exercisability. The term of each Option shall be ten
years.
(d) Exercisability of Options. Options shall become vested and exercisable
on the earlier of the first anniversary of the date of grant, or the date of the
next following regularly scheduled annual meeting of the Company's shareholders,
provided the Grantee is a member of the Board on such date.
(e) Termination of Board Membership or Death.
(i) Except as provided below, an Option may only be exercised while
the Grantee is a member of the Board. If a Grantee ceases to be a member of
the Board for any reason other than death or "cause" (as defined below),
the Grantee's Options that are vested on such date shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
a member of the Board, or, if earlier, the date of expiration of the Option
term.
(ii) If the Grantee ceases to be a member of the Board for "cause",
any Option held by the Grantee shall terminate as of the date the Grantee
ceases to a member of the Board.
(iii) "Cause" shall mean a finding by the Committee that the Grantee
has breached his or her service contract with the Company, or has been
engaged in disloyalty to the Company, including, without limitation, fraud,
embezzlement, theft, commission of a felony or proven dishonesty in the
course of his or her service, or has disclosed trade secrets or
confidential information of the Company to persons not
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entitled to receive such information. In the event a Grantee ceases to be a
member of the Board for cause, in addition to the immediate termination of
all Options, the Grantee shall automatically forfeit all shares underlying
any exercised portion of an Option for which the Company has not yet
delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares.
(iv) If the Grantee dies while a member of the Board, any of the
Grantee's Options that are not exercisable as of the date on which the
Grantee ceases to be Board member on account of death shall become vested
and exercisable. Any Option that is otherwise exercisable by the Grantee,
including Options that have vested on account of death, shall terminate
unless exercised within one year of the date of the Grantee's death, but in
any event no later than the date of expiration of the Option term.
(f) Exercise of Options. A Grantee may exercise an Option, in whole or in
part, by delivering a notice of exercise to the Company with payment of the
Exercise Price in cash. Subject to Committee consent, a Grantee may pay the
Exercise Price for an Option through a broker in accordance with procedures
established by the Committee consistent with Regulation T of the Federal Reserve
Board. The Grantee shall pay the Exercise Price and the amount of any
withholding tax due (pursuant to Section 6) at the time of exercise. Shares of
Company Stock shall not be issued upon exercise of an Option until the Exercise
Price is fully paid and any required tax withholding is made.
6. Withholding of Taxes
(a) Required Withholding. All Options under the Plan shall be subject to
any applicable federal (including FICA), state and local tax withholding
requirements. The Company may require the Grantee or other person receiving such
shares to pay to the Company the amount of any such taxes that the Company is
required to withhold with respect to such Options, or the Company may deduct
from other compensation payable by the Company the amount of any withholding
taxes due with respect to such Options.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to an Option by having shares withheld up to an amount that does not
exceed the Grantee's maximum marginal tax rate for federal (including FICA),
state and local tax liabilities. The election must be in a form and manner
prescribed by the Committee and shall be subject to the prior approval of the
Committee.
7. Transferability of Options
(a) Nontransferability of Options. Except as provided below, only the
Grantee or his or her authorized representative may exercise rights under an
Option. A Grantee may not transfer those rights except by will or by the laws of
descent and distribution or, if permitted under Rule 16b-3 of the Exchange Act
and if permitted by the Committee, pursuant to a domestic relations order (as
defined under the Code or Title I of the Employee Retirement Income Act of 1974,
as amended, or the regulations thereunder). When a Grantee dies, the personal
representative or other person entitled to succeed to the rights of the Grantee
("Successor Grantee") may exercise such rights. A Successor Grantee must furnish
proof satisfactory to the Company of his or her right to receive the Option
under the Grantee's will or under the applicable laws of descent and
distribution.
(b) Permitted Transfer of Options. Notwithstanding the foregoing, the
Committee may provide, in an Option Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members or other persons or entities
according to such terms as the Committee may determine; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
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8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) (other than 399 Venture Partners, Inc. or its affiliates)
is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 35% of the voting power of the then outstanding
securities of the Company, and such person owns more aggregate voting power
of the Company's then outstanding securities entitled to vote generally in
the election of directors than any other person;
(b) The shareholders of the Company approve (or, if shareholder
approval is not required, the Board approves) an agreement providing for
(i) the merger or consolidation of the Company with another corporation
where the shareholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such shareholders to 50% or more of all
votes to which all shareholders of the surviving corporation would be
entitled in the election of directors (without consideration of the rights
of any class of stock to elect directors by a separate class vote), (ii)
the sale or other disposition of all or substantially all of the assets of
the Company, or (iii) a liquidation or dissolution of the Company; or
(c) After the date this Plan is approved by the shareholders of the
Company, directors are elected such that a majority of the members of the
Board shall have been members of the Board for less than two years, unless
the election or nomination for election of each new director who was not a
director at the beginning of such two-year period was approved by a vote of
at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
9. Consequences of a Change of Control
(a) Notice and Acceleration. Upon a Change of Control, the Company shall
provide each Grantee who holds outstanding Options written notice of the Change
of Control. Each outstanding Option shall become fully exercisable, provided
that the Grantee is a member of the Board at the time of the Change of Control.
(b) Assumption of Options. Upon a Change of Control described in Section
8(b)(i) where the Company is not the surviving corporation (or survives only as
a subsidiary of another corporation), unless the Committee determines otherwise,
all outstanding Options that are not exercised shall be assumed by, or replaced
with comparable options by, the surviving corporation.
(c) Other Alternatives. Notwithstanding the foregoing, subject to
subsection (c) below, in the event of a Change of Control, the Committee may
take one or both of the following actions: the Committee may (i) require that
Grantees surrender their outstanding Options in exchange for a payment by the
Company, in cash or Company Stock as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the shares of Company
Stock subject to the Grantee's outstanding Options exceeds the Exercise Price of
the Options, or (ii) after giving Grantees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Committee deems appropriate. Such surrender or termination shall take place
as of the date of the Change of Control or such other date as the Committee may
specify.
(d) Limitations. Notwithstanding anything in the Plan to the contrary, in
the event of a Change of Control, the Committee shall not have the right to take
any actions described in the Plan (including without limitation actions
described in Subsection (b) above) that would make the Change of Control
ineligible for pooling of interest accounting treatment or that would make the
Change of Control ineligible for desired tax treatment if, in the absence of
such right, the Change of Control would qualify for such treatment and the
Company intends to use such treatment with respect to the Change of Control.
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10. Amendment and Termination of the Plan
(a) Amendment. The Board may amend or terminate the Plan at any time.
(b) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or unless extended by the Board with the
approval of the shareholders.
(c) Termination and Amendment of Outstanding Options. A termination or
amendment of the Plan that occurs after an Option is granted shall not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 16(a). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Option. Whether or not the Plan has terminated, an outstanding Option may be
terminated or amended under Section 16(a) or may be amended by agreement of the
Company and the Grantee consistent with the Plan.
(d) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
11. Funding of the Plan
This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of shares with respect to any Options under this Plan.
12. No Fractional Shares
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Option. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
13. Requirements for Issuance of Shares
No Company Stock shall be issued or transferred in connection with any
Option hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Option granted to any Grantee hereunder on such Grantee's undertaking in
writing to comply with such restrictions on his or her subsequent disposition of
such shares of Company Stock as the Committee shall deem necessary or advisable
as a result of any applicable law, regulation or official interpretation
thereof, and certificates representing such shares may be legended to reflect
any such restrictions. Certificates representing shares of Company Stock issued
under the Plan will be subject to such stop-transfer orders and other
restrictions as may be required by applicable laws, regulations and
interpretations, including any requirement that a legend be placed thereon.
14. Headings
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
15. Effective Date of the Plan.
Subject to the approval of the Company's shareholders, this Plan shall be
effective on December 8, 1998.
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16. Miscellaneous
(a) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Options shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to Section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee
may revoke any Option if it is contrary to law or modify an Option to bring it
into compliance with any valid and mandatory government regulation. The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(b) Ownership of Stock. A Grantee or Successor Grantee shall have no
rights as a shareholder with respect to any shares of Company Stock covered by
an Option until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company.
(c) Governing Law. The validity, construction, interpretation and effect
of the Plan and Option Instruments issued under the Plan shall exclusively be
governed by and determined in accordance with the law of State of Delaware,
without giving effect to the conflicts of laws provisions thereof.
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