| | Vernard W. Henley, 72, retired March 15, 2001 as a member of the firm's
Investment Policy Committee. Mr. Acuff serves
as National Chair for the Association of Gov-
erning Boards of Colleges and Universities
and is a member of the Board of Directors of
Sweet Briar College. He also serves as a
board member of the Virginia Foundation for
Independent Colleges, the Jamestown-Yorktown
Foundation, Inc., the Episcopal Church Foun-
dation and the Endowment Association of the
College of William and Mary. Mr. Acuff has
been a director since January 2001.
[PHOTO OF A. MARSHALL ACUFF, JR.]
Henry A. Berling, 58, is Executive Vice Pres-
ident, Partnership Development of Owens &
Minor and has served in this position since
1995. From 1996 to 1998, he also served as
the Company's Chief Sales Officer. Mr.
Berling has been a director since 1998.
[PHOTO OF HENRY A. BERLING]
James B. Farinholt, Jr., 66, is Special
Assistant to the President for Economic
Development of Virginia Commonwealth Univer-
sity, advising on campus expansion and com-
mercialization of scientific discoveries. He
is a member of the Board of Directors of
PharmaNetics Inc. and the VCU Intellectual
Properties Foundation. Mr. Farinholt has been
a director since 1974.
[PHOTO OF JAMES B. FARINHOLT, JR.]
5
[PHOTO OF ANNE MARIE WHITTEMORE]
Anne Marie Whittemore, 55, is a partner in
the law firm of McGuireWoods LLP. Mrs. Whit-
temore also serves on the Boards of Directors
of T. Rowe Price Group, Inc. and Albemarle
Corporation. Mrs. Whittemore has been a
director since 1991.
DIRECTORS CONTINUING IN OFFICE
Terms expiring in 2003:
[PHOTO OF JOSIAH BUNTING, III]
Josiah Bunting, III, 60, is Superintendent of
the Virginia Military Institute, Lexington,
Virginia. From 1987 to 1995, he served as
Headmaster of The Lawrenceville School. Gen-
eral Bunting has been a director since 1995.
[PHOTO OF JOHN T. CROTTY]
John T. Crotty, 63, is Managing Partner of
CroBern Management Partnership, a healthcare
investment firm, and President of CroBern,
Inc., a healthcare consulting and advisory
firm. Prior to co-founding these businesses,
Mr. Crotty held several senior management
positions during 19 years with American Hos-
pital Supply Corporation, including corporate
vice president of planning and business
development and president of the services
operating group. He also serves on the Boards
of Directors of three private companies in
the healthcare industry. Mr. Crotty has been
a director since 1999.
[PHOTO OF JAMES E. ROGERS]
James E. Rogers, 55, is President of SCI
Investors Inc, a private equity investment
firm. Mr. Rogers also serves on the Boards of
Directors of Wellman, Inc., Caraustar Indus-
tries, Inc., Chesapeake Corporation and Cad-
mus Communications. Mr. Rogers has been a
director since 1991.
[PHOTO OF JAMES E. UKROP]
James E. Ukrop, 63, is Chairman of Ukrop's
Super Markets, Inc., a retail grocery chain,
and Chairman of First Market Bank. Mr. Ukrop
also serves on the Board of Directors of Legg
Mason, Inc. Mr. Ukrop has been a director
since 1987.
6
Terms expiring in 2002:
[PHOTO OF VERNARD W. HENLEY]
Vernard W. Henley, 71, is Chairman of the Board and Chief Executive Officer of Consoli-
dated Bank and Trust Company, Richmond, Vir-
ginia. Mr. Henley has been a director since
1993.
[PHOTO OF G. GILMER MINOR]
G. Gilmer Minor, III, 60, is Chairman and
Chief Executive Officer of Owens & Minor. Mr.
Minor also serves on the Board of Directors
of SunTrust Banks, Inc. Mr. Minor has been a
director since 1980.
[PHOTO OF PETER S. REDDING]
Peter S. Redding, 62, is retired President
and Chief Executive Officer of Standard Reg-
ister Company. He serves on the Board of
Directors of Projects Unlimited in Dayton,
Ohio. Mr. Redding has been a director since
1999.
RETIRING DIRECTOR
Effective at the Annual Meeting, Mr. Massey will retire as a director
because he has reached our mandatory retirement age. The Company gratefully
acknowledges Mr. Massey's 13 years of service to Owens & Minor.
[PHOTO OF E. MORGAN MASSEY]
E. Morgan Massey, 74, is Chairman of Asian-
American Coal, Inc. and Chairman Emeritus of
A.T. Massey Coal Company, Inc., both coal
companies. Mr. Massey is Chairman of Evan
Energy Company, a private company with coal,
oil, gas and pipeline investments. He is a
member of the Board of Directors of VCU Engi-
neering School Foundation and is also Vice
Chairman of the Marine Advisory Council of
the Virginia Institute for Marine Science.
Mr. Massey has been a director since 1988.
7
PROPOSAL 2: APPROVAL OF AMENDMENT TO INCREASE AUTHORIZED SHARES UNDER AND
EXTEND TERM OF 1998 STOCK OPTION AND INCENTIVE PLAN
General
The Board of Directors proposes that the shareholders approve an amendment
(the "Amendment") to the Owens & Minor, Inc. 1998 Stock Option and Incentive
Plan (the "Plan") to (i) increase the number of shares of Common Stock that
may be issued under the Plan from 1,380,000 to 2,780,000 and (ii) extend the
term of the Plan by two years to April 28, 2005. The Plan was originally
adopted by the Board of Directors on February 23, 1998 and approved by the
shareholders on April 28, 1998. A total of 1,380,000 shares were reserved for
issuance under the Plan.
As of March 1, 2001, 9,075 shares of Common Stock were available for issu-
ance under the Plan (exclusive of the increase in shares subject to share-
holder approval at this meeting). Options to purchase 1,327,500 shares were
outstanding and 43,425 shares of Common Stock had been issued under the Plan
pursuant to options at an average exercise price per share of $13.00. No stock
awards have been granted under the Plan.
The Plan authorizes the Board of Directors or its committee to grant stock
options, stock appreciation rights, stock awards, incentive awards and perfor-
mance shares. The provisions of these stock options, stock appreciation
rights, stock awards, incentive awards and performance shares are outlined
below. The Plan is structured to allow the Board or its committee broad dis-
cretion in creating employee equity incentives in order to assist the Company
in attracting, retaining and motivating the best available talent for the suc-
cessful conduct of our business. The Board of Directors believes that the
remaining shares under the Plan are insufficient to accomplish these purposes.
In addition, the extension of the duration of the Plan is intended by the
Board to allow the Company to continue to make awards under the Plan until
2005. Therefore, the Board of Directors is proposing to (i) increase the num-
ber of shares of Common Stock that may be issued under the Plan from 1,380,000
to 2,780,000 and (ii) extend the term of the Plan by two years to April 28,
2005.
The following paragraphs summarize the principal features of the Plan. This
summary is subject, in all respects, to the terms of the Plan.
Summary of the Plan
Purposes. The Board believes that the Plan benefits the Company by assisting
it in recruiting and retaining key employees by enabling them to participate
in the future success of the Company and its related entities and associating
their interests with those of the Company and its shareholders.
Administration. The Compensation & Benefits Committee (the "Compensation
Committee") administers the Plan. The Compensation Committee may delegate its
authority to administer the Plan to one or more officers of the Company. The
Compensation Committee, however, may not delegate its authority with respect
to individuals who are subject to Section 16 of the Securities Exchange Act of
1934. As used in this summary, the term "Administrator" means the Compensation
Committee and any delegate, as appropriate.
Eligibility. Each employee of the Company or a related entity or a person
who provides services to the Company or a related entity is eligible to par-
ticipate in the Plan. The Administrator selects the individuals who will par-
ticipate in the Plan ("Participants"). The Administrator may, from time to
time, grant stock options, stock appreciation rights ("SARs"), stock awards,
incentive awards, or performance shares to Participants.
Options. Options granted under the Plan may be incentive stock options
("ISOs") or nonqualified stock options. A stock option entitles the Partici-
pant to purchase shares of Common Stock from the Company at the option price.
The option price is fixed by the Administrator at the time the option is
granted, but the price cannot be less than the fair market value of the Common
Stock on the date of grant. The Administrator cannot adjust or amend the exer-
cise price of a previously granted option whether through amendment, cancella-
tion, replacement grant or any other means (except for adjustments to reflect
changes in the Company's capitalization). The option price may be paid in
cash, with shares of Common Stock, or with a combination of cash and Common
Stock. No individual may be awarded, in any calendar year, options covering
more than 75,000 shares of Common Stock.
SARs. SARs entitle the Participant to receive, with respect to each share of
Common Stock encompassed by the exercise of the SAR, an amount determined by
the Administrator and set forth in an agreement. In the
8
absence of such a determination, the SAR holder will receive the lesser of (i)
the excess of the fair market value of a share of Common Stock on the date of
exercise over the initial value of the SAR or (ii) the initial value. The ini-
tial value of an SAR granted independently of an option is the fair market
value of a share of Common Stock on the date of grant. The initial value of a
Corresponding SAR (defined below) is the option price per share of the related
option. The Administrator cannot adjust or amend the initial value of a previ-
ously granted SAR whether through amendment, cancellation, replacement grant
or any other means (except for adjustments to reflect changes in the Company's
capitalization). The amount payable upon the exercise of an SAR may be paid in
cash, Common Stock, or a combination of the two. No individual may be granted,
in any calendar year, SARs with respect to more than 75,000 shares of Common
Stock. SARs may be granted in relation to option grants ("Corresponding SARs")
or independently of option grants. The difference between these two types of
SARs is that to exercise a Corresponding SAR, the Participant must surrender,
unexercised, that portion of the stock option to which the Corresponding SAR
relates and vice versa.
Stock Awards. Participants also may be awarded shares of Common Stock pursu-
ant to a stock award. The Administrator, in its discretion, may prescribe that
a Participant's rights in a stock award shall be nontransferable or forfeita-
ble or both unless certain conditions are satisfied. These conditions may
include, for example, a requirement that the Participant continue employment
with the Company or a related entity for a specified period or that the Compa-
ny, a related entity, or an operating unit achieve certain Performance Objec-
tives (described below). If a Participant's rights in a stock award are
restricted, the period during which the restriction applies cannot be less
than one year. No individual may be granted, in any calendar year, stock
awards covering more than 25,000 shares of Common Stock.
Performance Shares. The Plan also provides for the award of performance
shares. A performance share award entitles the Participant to receive a pay-
ment equal to the fair market value of a specified number of shares of Common
Stock if certain requirements are met. The Administrator will prescribe the
requirements that must be satisfied before a performance share award is
earned. The performance share requirements may include, for example, a
requirement that the Participant continue employment with the Company or a
related entity for a specified period or that the Company, a related entity,
or an operating unit achieve certain Performance Objectives (described below).
The period in which any performance criteria must be satisfied cannot be less
than one year. To the extent that performance shares are earned, the obliga-
tion may be settled in cash, by the grant of a stock award or by a combination
of the two. No individual may be granted, in any calendar year, performance
shares covering more than 25,000 shares of Common Stock.
Incentive Awards. The Plan also allows the Administrator to grant incentive
awards. An incentive award entitles the Participant to receive a cash payment
from the Company or one of its related entities. The Administrator will pre-
scribe the requirements that must be satisfied before an incentive award is
earned. The incentive award requirements may include, for example, a require-
ment that the Participant continue employment with the Company or a related
entity for a specified period or that the Company, a related entity, or an
operating unit achieve certain Performance Objectives (described below). The
period in which any performance criteria must be satisfied cannot be less than
one year. No individual may be granted, in any calendar year, incentive awards
exceeding the lesser of 75% of the Participant's base salary or $500,000.
Performance Objectives. The Administrator may condition grants and awards
under the Plan on the achievement of objectives based on the Company's, a
related entity's, or an operating unit's (i) gross, operating or net earnings
before or after taxes, (ii) return on equity, (iii) return on capital, (iv)
return on sales, (v) return on assets or net assets, (vi) earnings per share,
(vii) cash flow per share, (viii) book value per share, (ix) earnings growth,
(x) sales growth, (xi) volume growth, (xii) cash flow (as defined by the Com-
pensation Committee), (xiii) fair market value of the Common Stock, (xiv)
total shareholder return, (xv) market share, (xvi) productivity, (xvii) level
of expenses, (xviii) quality, (xix) safety, (xx) customer satisfaction, (xxi)
total economic value added, or (xxii) peer group comparisons of any of the
aforementioned objectives.
Share Authorization. The proposed Amendment would increase from 1,380,000 to
2,780,000 the maximum number of shares of Common Stock that may be issued
under the Plan. No more than 460,000 of the shares that may be issued under
the Plan may be issued as stock awards and in settlement of performance share
awards. The aggregate share limitation, the individual award limitations and
the terms of outstanding awards shall be adjusted, as the Compensation Commit-
tee deems to be equitably required in the event of a stock dividend, stock
split, combination, reclassification, recapitalization, or other similar
events.
9
Expiration, Termination and Amendment. Currently, no option, SAR, stock
award or incentive award may be granted and no performance shares may be
awarded under the Plan after April 28, 2003. The proposed amendment would
extend this expiration date by two years to April 28, 2005. The Board may ter-
minate the Plan sooner without further action by shareholders. The Board also
may amend the Plan except that no amendment that increases the number of
shares of Common Stock that may be issued under the Plan or that changes the
class of individuals who may be selected to participate in the Plan will
become effective until it is approved by shareholders.
Change in Control. The Plan provides that outstanding options and SARs will
become exercisable and outstanding stock awards will become transferable and
nonforfeitable, in the event that, following a change in control (as defined
in the Plan), (i) the Participant's employment is terminated without cause or
following his or her refusal to move to another location, or (ii) there is a
material reduction in the Participant's compensation or duties. In addition,
each Performance Share will be earned in full and converted into a stock award
which will become transferable and nonforfeitable as provided in the preceding
sentence. The terms of the agreement between the Company and the Participant
specifying the terms and conditions of options and SARs granted or awards made
under the Plan may provide for earlier exercisability of options and SARs and
earlier nonforfeitability of stock awards upon a change in control.
Plan Benefits. The grant of stock options, SARs, stock awards, incentive
awards, or performance shares under the Plan to employees, including the Named
Executive Officers named in the Summary Compensation Table, is subject to the
discretion of the Administrator. Neither the number of individuals who will in
the future be selected to participate in the Plan nor the type or size of
awards that will in the future be approved by the Administrator can be deter-
mined. On March 1, 2001, the fair market value of the Common Stock was $15.00
per share, which was the closing sales price reported on the New York Stock
Exchange. Set forth in the table below are the awards made under the Plan to
the Named Executive Officers, executive officers as a group and non-executive
officers as a group during 2000.
PLAN BENEFITS
1998 Stock Option and Incentive Plan
Average Weighted Exercise
Name and Position (1) Securities Underlying Options (2) Price/Share
- --------------------------------------------------------------------------------------
Chief Executive Officer of Consolidated Bank and Trust Company, Richmond, Virginia. Mr. Henley has been a director since 1993. | | G. Gilmer Minor, III, 50,000 $8.31 61, is Chairman and Chief Executive Officer - --------------------------------------------------------------------------------------
Craig R. Smith 50,000 $8.31of Owens & Minor. Mr. Minor also serves on the Board of Directors of SunTrust Banks, Inc. Mr. Minor has been a director since 1980. | | | Peter S. Redding, 63, retired December 31, 2000 as President and Chief OperatingExecutive Officer - --------------------------------------------------------------------------------------
of Standard Register Company. He serves on the Board of Directors of Projects Unlimited in Dayton, Ohio. Mr. Redding has been a director since 1999. |
DIRECTORS CONTINUING IN OFFICE Terms expiring in 2004: | | A. Marshall Acuff, Jr., 62, retired September 12, 2001 as Senior Vice President and Managing Director of Salomon Smith Barney, Inc. where he was responsible for equity strategy as a member of the firm’s Investment Policy Committee. Mr. Acuff is a Chartered Financial Analyst. He serves as National Chair for the Association of Governing Boards of Colleges and Universities and is a member of the Board of Directors of Sweet Briar College. He also serves as a board member of the Virginia Foundation for Independent Colleges, the Jamestown-Yorktown Foundation, Inc., the Episcopal Church Foundation and the Endowment Association of the College of William and Mary. Mr. Acuff has been a director since 2001. | | | Henry A. Berling, 18,000 $8.31 59, is Executive Vice President, Partnership Development - --------------------------------------------------------------------------------------
Drew St. J. Carneal 12,000 $8.31
Senior Viceof Owens & Minor and has served in this position since 1995. From 1996 to 1998, he also served as the Company’s Chief Sales Officer. Mr. Berling has been a director since 1998. | | | James B. Farinholt, Jr., 67, is Special Assistant to the President for Economic Development of Virginia Commonwealth University, advising on campus expansion and commercialization of scientific discoveries. He is a member of the Board of Directors of PharmaNetics Inc. and the VCU Intellectual Properties Foundation. Mr. Farinholt has been a director since 1974. | | | Anne Marie Whittemore, 55, is a partner in the law firm of McGuireWoods LLP. Mrs. Whittemore also serves on the Boards of Directors of T. Rowe Price Group, Inc. and Albemarle Corporation. Mrs. Whittemore has been a director since 1991. |
Terms expiring in 2003: | | Josiah Bunting, III, 62, is Superintendent of the Virginia Military Institute, Lexington, Virginia. From 1987 to 1995, he served as Headmaster of The Lawrenceville School. General CounselBunting has been a director since 1995. | | | John T. Crotty, 64, is Managing Partner of CroBern Management Partnership, a healthcare investment firm, and Secretary
- --------------------------------------------------------------------------------------
President of CroBern, Inc., a healthcare consulting and advisory firm. Prior to co-founding these businesses, Mr. Crotty held several senior management positions during 19 years with American Hospital Supply Corporation, including corporate vice president of planning and business development and president of the services operating group. He also serves on the Boards of Directors of four private companies in the healthcare industry. Mr. Crotty has been a director since 1999. | | | James L. Grigg 10,000 $8.31
Senior ViceE. Rogers, 56, is President Supply Chain Management
- --------------------------------------------------------------------------------------
Executive Group 230,000 $8.78
- --------------------------------------------------------------------------------------
Non-Executive Employee 239,000 $8.31
Group
of SCI Investors Inc, a private equity investment firm. Mr. Rogers also serves on the Boards of Directors of Wellman, Inc., Caraustar Industries, Inc., Chesapeake Corporation and Cadmus Communications. Mr. Rogers has been a director since 1991. | | | James E. Ukrop, 64, is Chairman of Ukrop’s Super Markets, Inc., a retail grocery chain, and Chairman of First Market Bank. Mr. Ukrop also serves on the Board of Directors of Legg Mason, Inc. Mr. Ukrop has been a director since 1987. |
(1) Non-employee Directors are not eligible to participate in the Plan.
(2) No stock awards were granted under the Plan during 2000.
10
Federal Income Tax Consequences
The Company has been advised by counsel regarding the federal income tax
consequences of the Plan. No income is recognized by a Participant at the time
an option is granted. If the option is an ISO, no income will be recognized
upon the Participant's exercise of the option. Income is recognized by a Par-
ticipant when he or she disposes of shares acquired under an ISO. The exercise
of a nonqualified stock option generally is a taxable event that requires the
Participant to recognize, as ordinary income, the difference between the
shares' fair market value and the option price.
No income is recognized upon the grant of an SAR. The exercise of an SAR
generally is a taxable event. The Participant generally must recognize ordi-
nary income equal to any cash that is paid and the fair market value of any
Common Stock that is received in settlement of an SAR.
The Participant will recognize ordinary income on account of a stock award
on the first day that the shares are either transferable or not subject to a
substantial risk of forfeiture. The amount of ordinary income recognized by
the Participant is equal to the fair market value of the Common Stock received
on that date.
The Participant will recognize ordinary income on account of the settlement
of a performance share award. The Participant will recognize ordinary income
equal to any cash that is paid and the fair market value of Common Stock (on
the date that the shares are first transferable or not subject to a substan-
tial risk of forfeiture) that is received in settlement of the award.
The Participant will recognize ordinary income equal to the amount of any
cash paid under an incentive award.
The employer (either the Company or a related entity) will be entitled to
claim a federal income tax deduction on account of the exercise of a nonquali-
fied option or SAR, the vesting of a stock award, the settlement of a perfor-
mance share award, and the settlement of an incentive award. The amount of the
deduction is equal to the ordinary income recognized by the Participant. The
employer will not be entitled to a federal income tax deduction on account of
the grant or the exercise of an ISO. The employer may claim a federal income
tax deduction on account of certain dispositions of Common Stock acquired upon
the exercise of an ISO.
Approval of the Amendment requires the affirmative vote of a majority of the
shares of Common Stock cast. Abstentions and broker shares that are not voted
on this proposal will not be included in determining the number of votes cast
on it. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE PROPOSED AMENDMENT TO THE PLAN.
11
PROPOSAL 3:2: APPROVAL OF INDEPENDENT AUDITORS The Board of Directors, upon the recommendation of its Audit Committee, has appointed KPMG LLP to serve as the Company'sCompany’s independent auditors for 2001,2002, subject to ratification by the shareholders. Unless otherwise directed, a proxy will be voted for the ratification of the appointment of KPMG LLP as independent auditors of the Company. For the year ended December 31, 2001, KPMG LLP billed the Company the fees set forth below in connection with professional services rendered by that firm to the Company: Audit Fees. Audit fees for the Company’s 2001 financial statements were $193,000. All Other Fees. Aggregate fees were $94,800 for audit related services consisting of employee benefit plan audits, services performed in connection with the Company’s debt offering and accounting consultations. Fees were $39,145 for non-audit related tax services. Financial Information Systems Design and Implementation Fees. KPMG LLP did not provide professional services relating to financial information systems design and implementation during 2001. Representatives of KPMG LLP will be present at the Annual Meeting to answer questions and to make a statement, if they desire to do so. The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Owens & Minor'sMinor’s independent auditors for 2001.
2002. REPORT OF THE AUDIT COMMITTEE The Audit Committee is composed of seven "independent"six “independent” directors as defined in the New York Stock Exchange listing standards. The Audit Committee operates under a written charter adopted by the Board of Directors, a copy of which is
attached to this Proxy Statement as Appendix A.Directors. The Audit Committee recommends to the Board of Directors, subject to shareholder ratification, the selection of the Company'sCompany’s independent auditors. Management is responsible for the Company'sCompany’s internal controls and the financial reporting process. The indepen-
dentindependent auditors are responsible for performing an independent audit of the Company'sCompany’s consolidated financial statements in accordance with generally accepted auditing standards and for issuing a report thereon. The Audit Com-
mittee'sCommittee’s responsibility is to monitor and oversee these processes. In this context, the Audit Committee has met and held discussions with management and KPMG LLP, the Company'sCompany’s independent auditors. Management represented to the Audit Committee that the Company's consoli-
datedCompany’s consolidated financial statements were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements with management and KPMG LLP, including the scope of the auditors'auditors’ responsibilities, significant accounting adjustments and any disagreements with management. The Audit Committee has discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). The Audit Committee has also received the written disclosures and the letter from KPMG LLP relating to the independence of that firm as required by Inde-
pendenceIndependence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and, has discussed with KPMG LLP that firm'sfirm’s independence from the Company.
Company and considered the compatibility of nonaudit services with the auditors’ independence. Based upon the Audit Committee'sits discussions with management and KPMG LLP and the Audit Committee'sits review of the representation of management and the report of KPMG LLP to the Audit Committee, the Audit Committee has no reason to believe that the audited consolidated financial statements in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 20002001 contain an untrue statement of material fact or omit to state a material fact necessary to make the statements made not misleading (in light of the circumstances under which they were made). Accordingly, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 20002001 filed with the Securities and Exchange Commission.
During the year ended December 31, 2000, KPMG LLP billed the Company the
fees set forth below in connection with services rendered by that firm to the
Company:
Audit Fees. For the year ended December 31, 2000, the aggregate fees billed
the Company by KPMG LLP for professional services rendered for the audit of
the Company's consolidated financial statements and review of quarterly finan-
cial statements were $186,000.
Financial Information Systems Design and Implementation Fees. For the year
ended December 31, 2000, KPMG LLP did not provide professional services relat-
ing to financial information systems design and implementation.
All Other Fees. For the year ended December 31, 2000, KPMG LLP billed the
Company aggregate fees of (i) $18,850 for the audit of two employee benefit
plans, (ii) $11,185 for review of the Company's 1999 Federal
12
tax return, (iii) $8,200 for consultation and research related to the
Company's receivables securitization facility and (iv) $42,605 for preparation
of four executive officer tax returns.
The Audit Committee believes that the provision of the services referenced
above under the caption "All Other Fees" is compatible with maintaining KPMG
LLP's independence.
THE AUDIT COMMITTEE
A. Marshall Acuff, Jr.
Josiah Bunting, III
John T. Crotty
James B. Farinholt, Jr. (Chairman)
Vernard W. Henley
Peter S. Redding
James E. Ukrop
| James B. Farinholt, Jr. (Chairman) |
STOCK OWNERSHIP INFORMATION Compliance With Section 16(a) Reporting Section 16(a) of the Securities Exchange Act of 1934 requires the Company'sCompany’s directors and executive officers to file reports with the SEC of holdings and transactions in the Company'sCompany’s Common Stock. Based on the Company'sCompany’s records and information provided by the directors and officers, the Company believes that the filing requirements were satisfied in 2000.
2001. Stock Ownership Guidelines Under the Company'sCompany’s Management Equity Ownership Program (MEOP) adopted in 1997, officers are expected, over a five-year period, to achieve the following levels of ownership of Common Stock:
Stock. Officer
| | Value of Common Stock Owned
------- ---------------------------
| | Chief Executive Officer | | 4.0 x Base Salary | | President | | 3.0 x Base Salary (effective 1/1/01)
| | Executive Vice Presidents | | 2.0 x Base Salary | | Senior Vice Presidents | | 1.5 x Base Salary | Vice Presidents, Group and Regional Vice Presidents | | 1.0 x Base Salary |
In addition, the Board of Directors adopted a policy in 1997 that each director achieve, over a five-year period, a level of ownership in Common Stock equal to at least five times the annual retainer fee (including both cash and stock retainer).
13
Stock Ownership By Management and the Board of Directors This table shows as of March 1, 20012002 the number of shares of Common Stock beneficially owned by each director and nominee, the Company'sCompany’s five most highly compensated officers and all current executive officers and directors of the Company as a group.
Sole Voting Aggregate
Name of and Investment Percentage
Beneficial Owner Power (1) Other(2) Owned
- -----------------------------------------------------------------------------
G. Gilmer Minor, III 849,032 18,796 2.58%
- -----------------------------------------------------------------------------
A. Marshall Acuff, Jr. 2,241 0 *
- -----------------------------------------------------------------------------
Henry A. Berling 459,729 8,457 1.40%
- -----------------------------------------------------------------------------
Josiah Bunting, III 13,732 0 *
- -----------------------------------------------------------------------------
John T. Crotty 12,190 38 *
- -----------------------------------------------------------------------------
James B. Farinholt, Jr. 23,932 0 *
- -----------------------------------------------------------------------------
Vernard W. Henley 22,082 0 *
- -----------------------------------------------------------------------------
E. Morgan Massey 435,493 23,000 1.38%
- -----------------------------------------------------------------------------
Peter S. Redding 10,802 79 *
- -----------------------------------------------------------------------------
James E. Rogers 26,926 0 *
- -----------------------------------------------------------------------------
James E. Ukrop 75,926 0 *
- -----------------------------------------------------------------------------
Anne Marie Whittemore 32,847 225 *
- -----------------------------------------------------------------------------
Craig R. Smith 230,082 1,619 *
- -----------------------------------------------------------------------------
Drew St.J. Carneal 133,216 5,726 *
- -----------------------------------------------------------------------------
James L. Grigg 58,143 565 *
- -----------------------------------------------------------------------------
All Executive Officers and Directors as a
group (25 persons) 2,804,385 71,984 8.37%
*Represents
|
|
|
|
|
|
| Name of Beneficial Owner | | Sole Voting and Investment Power (1) | | Other(2) | | Aggregate Percentage Owned | |
|
|
|
|
|
|
| | G. Gilmer Minor, III | | 769,915 | | 23,796 | | 2.32 | % |
|
|
|
|
|
|
| | A. Marshall Acuff, Jr. | | 5,899 | | 0 | | * | |
|
|
|
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| | Henry A. Berling | | 476,814 | | 8,457 | | 1.42 | % |
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| | Josiah Bunting, III | | 13,590 | | 0 | | * | |
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| | John T. Crotty | | 16,848 | | 74 | | * | |
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| | James B. Farinholt, Jr. | | 23,326 | | 0 | | * | |
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| | Vernard W. Henley | | 23,208 | | 0 | | * | |
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| | Peter S. Redding | | 15,207 | | 121 | | * | |
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| | James E. Rogers | | 30,584 | | 0 | | * | |
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| | James E. Ukrop | | 76,647 | | 0 | | * | |
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| | Anne Marie Whittemore | | 37,389 | | 225 | | * | |
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| | Craig R. Smith | | 290,567 | | 1,428 | | * | |
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| | Jeffrey Kaczka | | 13,627 | | 15 | | * | |
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| | David R. Guzmán | | 14,921 | | 221 | | * | |
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| | All Executive Officers and Directors as a group (22 persons) | | 2,354,567 | | 50,644 | | 6.86 | % |
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*Represents less than 1% of the total number of shares outstanding. (1) Includes 1,067,9841,035,114 shares which certain officers and directors of the Company have the right to acquire through the exercise of stock options within 60 days following March 1, 2001.2002. Stock options exercisable within 60 days of March 1, 20012002 for each of the Named Executive Officers are as follows: Mr. Minor 293,500,218,200, Mr. Smith 183,750,236,950, Mr. Berling 127,200,147,300, Mr. Carneal
92,400,Kaczka 10,000, Mr. Grigg 35,300.
Guzmán 10,800 (2) Includes: (a) shares held by certain relatives or in estates; (b) shares held in various fiduciary capacities; (c) shares held by the 401(k) plan; and (d) shares for which the shareholder has shared power to dispose or to direct disposition. These shares may be deemed to be beneficially owned under the rules and regulations of the SEC, but the inclusion of such shares in the table does not constitute an admission of beneficial ownership.
14
Stock Ownership by Certain Shareholders The following organizations are deemed by SEC rules to beneficially own more than 5% of Owens & Minor Common Stock: | | Wellington Management Company, LLP (75 State Street, Boston, MA 02109) in its capacity as an investment adviser owned 4,331,500 shares, or 12.74%, as of February 14, 2002. Of these 4,331,500 shares, 2,362,100 shares, or 6.95%, were owned by Vanguard Specialized Funds—Vanguard Health Care Fund (100 Vanguard Blvd., Malvern, PA 19355) as of February 6, 2002. |
| Westport | | Asset Management, Inc. (253 Riverside Avenue, Westport, CT 06880) in its capacity as an investment adviser owned 2,722,916 shares, or 8.00%, as of February 15, 2002. |
| DKR | | Management Company Inc. (1281 East Main Street, Stamford, CT 06902) in its capacity as an investment adviser owned 772,282 shares of Owens & Minor term convertible securities (which are convertible into 1,872,166 shares of Common Stock or 5.22%) as of December 31, 2001. Basso Securities Ltd. (1281 East Main Street, Stamford, CT 06902) shared ownership of these securities in its capacity as portfolio manager. |
SUMMARY COMPENSATION TABLE This table shows for each of the past three years the compensation paid by the Company to its five most highly compensated officers ("(“Named Executive Officers"Officers”). | | | | Annual Compensation | | Long-Term Compensation (1)
-----------------------------------------------------------------------------
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| | | | | | | | | | | Awards
---------------------
Other Restricted Securities
Annual Stock Underlying All Other
Compensation Awards Options Compensation
| | | | | | | | | | | |
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| | | Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Other Annual Compensation ($)(2) | | Restricted Stock Awards ($)(3) (#) | | Securities Underlying Options(#)(4) | | All Other Compensation ($)(5)
- ---------------------------------------------------------------------------------------------------------
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| G. Gilmer Minor, III 2000 $600,183 $245,766 -- $399,879 50,000 $39,476
Chairman & Chief 1999 518,071 0 -- 215,004 55,000 34,523
Executive Officer 1998 503,462 118,125 -- 239,532 | | 2001 2000 1999 | | $ | 666,151 600,183 518,071 | | $ | 333,009 245,766 0 | | — — — | | $ | 219,252 399,879 215,004 | | 58,000 50,000 36,724
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
55,000 | | $ | 37,640 39,476 34,523 |
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| Craig R. Smith 2000 415,394 170,033 -- 157,082 50,000 21,841
President & Chief 1999 321,392 0 -- 19,827 50,000 18,735
Operating Officer 1998 266,676 65,314 -- 60,202 25,000 18,807
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
| | 2001 2000 1999 | | | 482,695 415,394 321,392 | | | 195,887 170,033 0 | | — — — | | | 137,709 157,082 19,827 | | 58,000 50,000 50,000 | | | 21,854 21,841 18,735 |
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| Henry A. Berling 2000 323,325 105,264 -- 121,799 18,000 22,585
Executive Vice 1999 283,346 0 -- 63,362 25,000 19,876
President,
Partnership 1998 266,676 61,145 -- 70,873 Development | | 2001 2000 1999 | | | 353,340 323,325 283,346 | | | 117,662 105,264 0 | | — — — | | | 65,455 121,799 63,362 | | 18,000 18,000 25,000 21,199
Development
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Drew St.J. Carneal 2000 210,304 62,281 -- 69,572 12,000 5,720
| | | 22,018 22,585 19,876 |
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| Jeffrey Kaczka
Senior Vice President 1999 195,133 0 -- 35,245 18,000 5,006
General Counsel & 1998 182,630 47,549 -- 40,417 15,000 5,006
Secretary
- ---------------------------------------------------------------------------------------------------------
James L. Grigg Chief Financial Officer (6) | | 2001 2000 201,824 65,058 -- 68,704 10,000 24,191
1999 | | | 234,231 0 0 | | | 135,700 0 0 | | — — — | | | 21,424 0 0 | | 25,000 0 0 | | | 2,189 0 0 |
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| David R. Guzmán
Senior Vice President &
Chief Information Officer (7) | | 2001 2000 1999 185,242 | | | 342,201 7,882 0 -- 21,579 10,000 36,554
Supply Chain Management 1998 168,480 43,721 -- 19,308 6,500 35,919
- ---------------------------------------------------------------------------------------------------------
| | | 162,101 0 0 | | — — — | | | 32,860 37,050 0 | | 12,000 15,000 0 | | | 6,237 0 0 |
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(1) The Company has no Long-Term Incentive Plans as defined by applicable SEC rules. (2) None of the Named Executive Officers received Other Annual Compensation in excess of the lesser of $50,000 or 10% of combined salary and bonus for fiscal years 2001, 2000 1999 or 1998.
1999. (3) Of the total Restricted Stock awards for 2000,2001, the following amounts were awarded to the Named Executive Officer for achieving his stock ownership requirement under the Management Equity Ownership Program (MEOP):
Mr. Minor $296,887
Mr. Smith $ 73,024
Mr. Berling $ 78,863
Mr. Carneal $37,382
Mr. Grigg $35,820
| Mr. Minor | | $ | 136,000 | | Mr. Kaczka | | $0 (no ownership requirement until 2002) | | Mr. Smith | | $ | 88,738 | | Mr. Guzmán | | $4,835 | | Mr. Berling | | $ | 36,040 | | | | |
Aggregate restricted stock holdings and values at December 31, 20002001 for the Named Executive Officers are as follows: Mr. Minor 76,497 | | 85,269 shares, $1,357,822
$1,577,477 | | Mr. Kaczka | | 2,400 shares, $44,400 | Mr. Smith 18,425 | | 24,210 shares, $ 327,044
447,885 | | Mr. Guzmán | | 2,662 shares, $49,247 | Mr. Berling 22,725 | | 24,695 shares, $ 403,369
456,858 | | | | |
Mr. Carneal 13,233 shares, $234,886
Mr. Grigg 8,669 shares, $153,875
Dividends are paid on restricted stock at the same rate as all shareholders of record. (4) No SARs were granted in 2001, 2000 1999 or 1998.
15
1999.(5) Includes for each officer Company contributions or benefits attributable in 20002001 to the following:
401(k) Plan Stock Purchase Plan Company-Owned Life Insurance
----------- ------------------- ----------------------------
Mr. Minor $5,250 $720 $33,506
Mr. Smith 5,250 720 15,871
Mr. Berling 5,250 0 17,335
Mr. Carneal 5,000 720 0
Mr. Grigg 4,500 720 18,971
| | | 401(k) Plan
| | Stock Purchase Plan
| | Split Dollar/Company Provided Life Insurance
| | Mr. Minor | | $ | 5,250 | | $ | 720 | | $ | 31,670 | | Mr. Smith | | | 5,250 | | | 720 | | | 15,884 | | Mr. Berling | | | 5,250 | | | 0 | | | 16,768 | | Mr. Kaczka | | | 464 | | | 240 | | | 1,485 | | Mr. Guzmán | | | 3,155 | | | 540 | | | 2,542 |
In addition to the amount disclosed in the table, on December 28, 2000, a performance award granted to Mr. Minor in 1999 in lieu of a salary increase met the earnout requirement that the Com-
monCommon Stock close on the New York Stock Exchange at a price equal to or greater than $18.00 per share. The earnout amount of 10,000 shares of Common Stock (valued at $180,000 based on the closing stock price of $18.00 per share) was paid in January 2001 to Mr. Minor in cash at the election of the Compensation & Benefits Committee.
2000 (6) Mr. Kaczka joined the Company as Senior Vice President & Chief Financial Officer on April 17, 2001. Mr. Kaczka’s bonus includes a $50,000 signing bonus paid in 2001. (7) Mr. Guzmán joined the Company as Senior Vice President & Chief Information Officer on December 11, 2000. Mr. Guzmán’s bonus includes a $50,000 signing bonus paid in 2001. This table shows options granted during 20002001 to the Named Executive Offi-
cers.Officers. The Company granted no SARs during 2000.
Individual Grants(1) Value(2)
----------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration Grant Date
Name Granted Fiscal Year ($/Share) Date Present Value ($)
- -------------------------------------------------------------------------------------------
G. Gilmer Minor, III 50,000 10.66% $8.3125 2/01/10 $126,000
- -------------------------------------------------------------------------------------------
Craig R. Smith 50,000 10.66% 8.3125 2/01/10 126,000
- -------------------------------------------------------------------------------------------
Henry A. Berling 18,000 3.84% 8.3125 2/01/10 45,360
- -------------------------------------------------------------------------------------------
Drew St.J. Carneal 12,000 2.56% 8.3125 2/01/10 30,240
- -------------------------------------------------------------------------------------------
James L. Grigg 10,000 2.13% 8.3125 2/01/10 25,200
2001.| | | Individual Grants(1) | | Value(2) | | |
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| Name | | Number of Securities Underlying Options Granted | | % of Total Options Granted to Employees in Fiscal Year | | | Exercise or Base Price ($/Share) | | Expiration Date | | Grant Date Present Value ($) |
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| | G. Gilmer Minor, III | | 58,000 | | 12.81 | % | | $ | 15.7600 | | 1/30/08 | | $ | 305,080 |
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| | Craig R. Smith | | 58,000 | | 12.81 | % | | | 15.7600 | | 1/30/08 | | | 305,080 |
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| | Henry A. Berling | | 18,000 | | 3.98 | % | | | 15.7600 | | 1/30/08 | | | 94,680 |
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| | Jeffrey Kaczka | | 25,000 | | 5.52 | % | | | 16.5900 | | 4/17/08 | | | 139,500 |
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| | David R. Guzmán | | 12,000 | | 2.65 | % | | | 15.7600 | | 1/30/08 | | | 63,120 |
(1) The vesting schedule is as follows: 40%, 30% and 30% on first, second and third anniversary of grant date. (2) Based upon Black Scholes option valuation model. Assumptions include a risk-free interest rate of 5.1%4.4%, annual dividend yield of 3.0%1.6%-1.7%, an average period outstanding of fivefour years and expected volatility of approximately 36.7%41.4%.
2000 2001 OPTION EXERCISES AND YEAR-END OPTION VALUES This table shows for the Named Executive Officers any options exercised dur-
ing 2000during 2001 and unexercised options held on December 31, 2000.2001. There were no SARs exercised during 20002001 or outstanding on December 31, 2000.2001. Value of unexer-
cisedunexercised options is calculated using the difference between the option exercise price and $17.75$18.50 (year-end stock price) multiplied by the number of shares underlying the option.
Number of Securities Value of
Shares Underlying Unexercised Unexercised In-the-Money
Acquired Options at Year End Options at Year End
Upon Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------
G. Gilmer Minor, III 0 $ 0 242,000 98,000 $861,095 $621,563
- ---------------------------------------------------------------------------------------------
Craig R. Smith 0 0 141,250 87,500 560,145 635,156
- ---------------------------------------------------------------------------------------------
Henry A. Berling 0 0 105,000 40,500 273,113 241,500
- ---------------------------------------------------------------------------------------------
Drew St.J. Carneal 0 0 77,700 27,300 273,259 161,749
- ---------------------------------------------------------------------------------------------
James L. Grigg 0 0 26,350 17,950 137,916 118,303
16
Name | | Shares Acquired Upon Exercise | | Value Realized | | Number of Securities Underlying Unexercised Options at Year End | | Value of
Unexercised In-the-Money Options at Year End | | | | | | |
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| | | | | Exercisable | | Unexercisable | | Exercisable | | Unexercisable | | | | | | |
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| | G. Gilmer Minor, III | | 70,000 | | $ | 462,500 | | 223,500 | | 104,500 | | $ | 894,208 | | $ | 532,683 |
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| | Craig R. Smith | | 0 | | | 0 | | 183,750 | | 103,000 | | | 994,989 | | | 552,670 |
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| | Henry A. Berling | | 0 | | | 0 | | 147,300 | | 16,200 | | | 705,953 | | | 84,604 |
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| | Jeffrey Kaczka | | 0 | | | 0 | | 0 | | 25,000 | | | 0 | | | 47,750 |
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| | David R. Guzmán | | 0 | | | 0 | | 6,000 | | 21,000 | | | 18,375 | | | 60,443 |
Pension Plan. The Company provides retirement benefits under a defined bene-
fitbenefit pension plan to substantially all employees who had earned benefits as of December 31, 1996. Benefits under the pension plan are based upon both length of service and compensation and are determined under a formula based on an individual'sindividual’s earnings and years of credited service. Funding is determined on an actuarial basis. Effective December 31, 1996, participants in the pension plan ceased to accrue additional benefits; provided, however, that partici-
pantsparticipants who had completed at least five years of service as of January 1, 1997 and whose age plus years of service equaled at least 65 continue to earn an accrued benefit until the earlier of (i) December 31, 2001 or (ii) retirement, death or termination of employment (with the exception of certain highly com-
pensatedcompensated employees if the pension plan does not meet certain coverage require-
mentsrequirements of the Internal Revenue Code). The following table shows estimated annual benefits payable under the pen-
sionpension plan at normal retirement age of 65 years based on the specified remuner-
ationremuneration and years of service:
Average Straight Life Annuity Benefits Based
on Years of Credited Service
Average ------------------------------------------------------------------
Compensation(1) 15 yrs. 20 yrs. 25 yrs. 30 yrs. 35 yrs.
- ------------------------------------------------------------------------------------------
200,000 32,055 41,674 51,293 60,912 70,531
- ------------------------------------------------------------------------------------------
250,000 36,265 48,364 60,462 72,561 84,660
- ------------------------------------------------------------------------------------------
300,000 39,736 54,315 68,893 83,472 98,050
- ------------------------------------------------------------------------------------------
350,000 43,208 60,266 77,325 94,383 111,441
- ------------------------------------------------------------------------------------------
400,000 46,680 66,218 85,756 105,294 124,832
- ------------------------------------------------------------------------------------------
450,000 50,151 72,169 94,187 116,205 135,000
- ------------------------------------------------------------------------------------------
500,000 53,623 78,121 102,618 127,116 135,000
- ------------------------------------------------------------------------------------------
550,000 57,095 84,072 111,049 135,000 135,000
- ------------------------------------------------------------------------------------------
600,000 60,566 90,023 119,480 135,000 135,000
- ------------------------------------------------------------------------------------------
650,000 64,038 95,975 127,911 135,000 135,000
- ------------------------------------------------------------------------------------------
700,000 67,510 101,926 135,000 135,000 135,000
- ------------------------------------------------------------------------------------------
750,000 70,981 107,878 135,000 135,000 135,000
- ------------------------------------------------------------------------------------------
800,000 74,453 113,829 135,000 135,000 135,000
Average
Compensation(1) | | Average Straight Life Annuity Benefits Based
On Years of Credited Service | | |
|
| | | 15 yrs. | | 20 yrs. | | 25 yrs. | | 30 yrs. | | 35 yrs. |
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| | 200,000 | | 32,055 | | 41,674 | | 51,293 | | 60,912 | | 70,531 |
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| | 300,000 | | 39,736 | | 54,315 | | 68,893 | | 83,472 | | 98,050 |
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| | 400,000 | | 46,680 | | 66,218 | | 85,756 | | 105,294 | | 124,832 |
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| | 500,000 | | 53,623 | | 78,121 | | 102,618 | | 127,116 | | 140,000 |
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| | 600,000 | | 60,566 | | 90,023 | | 119,480 | | 140,000 | | 140,000 |
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| | 700,000 | | 67,510 | | 101,926 | | 136,343 | | 140,000 | | 140,000 |
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| | 800,000 | | 74,453 | | 113,829 | | 140,000 | | 140,000 | | 140,000 |
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| | 900,000 | | 81,396 | | 125,732 | | 140,000 | | 140,000 | | 140,000 |
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| | 1,000,000 | | 88,340 | | 137,635 | | 140,000 | | 140,000 | | 140,000 |
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| | 1,100,000 | | 95,283 | | 140,000 | | 140,000 | | 140,000 | | 140,000 |
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| | 1,200,000 | | 102,226 | | 140,000 | | 140,000 | | 140,000 | | 140,000 |
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| | 1,300,000 | | 109,169 | | 140,000 | | 140,000 | | 140,000 | | 140,000 |
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| | 1,400,000 | | 116,113 | | 140,000 | | 140,000 | | 140,000 | | 140,000 |
(1) Average compensation represents compensation based upon a benefit for-
mulaformula applied to an employee'semployee’s career average earnings, which approximates the amount of salary set forth in the Summary Compensation Table. The maximum amount of covered compensation is $170,000, or some other amount as may be determined by the Secretary of Treasury pursuant to Section 401(a)(17) of the Internal Revenue Code. Benefits are computed on a straight-life annuity basis, and are not subject to offset for Social Security benefits or other amounts. The years of service credited for the Named Executive Officers under the pension plan are presently as follows: Mr. Minor, 3536 years; Mr. Smith, 711 years; Mr. Berling, 3233 years; Mr. Carneal, 10 years;Kaczka, not eligible; and Mr. Grigg, 0 years.
Guzmán, not eligible. Supplemental Executive Retirement Plan. The Company provides supplemental retirement benefits to certain employees selected by the Compensation Commit-
tee& Benefits Committee under the Supplemental Executive Retirement Plan ("SERP"(“SERP”). The SERP enti-
tlesentitles participants to receive a specified percentage (in the case of the Named Executive Officers, 65%) of the participant'sparticipant’s average base monthly salary (plus bonus for certain participants, including the Named Executive Officers) during the five years preceding his or her retirement reduced by the benefit payable under the pension plan, Social Security and any defined benefit pen-
sionpension plan of a prior employer. The estimated annual benefits payable under the SERP upon retirement at normal retirement age for the Named Executive Officers are: Mr. Minor $343,419,$491,809, Mr. Smith $316,053,$376,485, Mr. Berling $172,976,$225,164, Mr. Carneal
$132,279,Kaczka (participation effective 1/1/03), Mr. Grigg $150,374.
17
Guzmán (participation effective 1/1/02).REPORT OF THE COMPENSATION & BENEFITS COMMITTEE The Compensation & Benefits Committee (the “Compensation Committee”) is comprised of six outside directors who are not current or past employees of the Company. The Compensation Committee'sCommittee’s primary functions are to:
. oversee the design and competitiveness of the Company's total compensa-
tion program,
. evaluate the performance of the Company's senior executives and approve
related compensation actions, and
. administer the Company's compensation plans for officers.
| Ÿ | | oversee the design and competitiveness of the Company’s total compensation program, |
| Ÿ | | evaluate the performance of the Company’s senior executives and approve related compensation actions, and |
| Ÿ | | administer the Company’s compensation plans for officers. |
The Compensation Committee met threefour times during 2000.
2001. Executive Compensation Philosophy The Compensation Committee'sCommittee’s philosophy is to:
. establish and maintain programs and practices that promote achievement of
the Company's strategic objectives,
. provide rewards that reflect the Company's performance, and
. align executives' financial interests with those of shareholders.
| • | | establish and maintain programs and practices that promote achievement of the Company’s strategic objectives, |
| • | | provide rewards that reflect the Company’s performance, and |
| • | | align executives’ financial interests with those of shareholders. |
To accomplish this, compensation for executives is based on measures of the Company'sCompany’s financial performance and strategic results that should translate to increased shareholder value. The Compensation Committee also strives to maintain market competitive com-
pensationcompensation levels. To meet this objective, the Compensation Committee evaluates executive compensation levels through comparisons to the peer companies included in the performance graph of this proxy statement, and other companies of similar size and operating characteristics. Base salaries are targeted at competitive market median for like experienced executives. Annual incentive compensation opportunities, when combined with base salaries, are intended to fully reach competitive median total cash compensation levels as warranted by the Company'sCompany’s and the individual officer'sofficer’s performance. Longer-term incentive compensation opportunities, such as stock options and restricted stock, link executive compensation with achievement of strategic objectives and share-
holdershareholder value growth. This combination is intended to focus management on the annual and longer-term success of the Company. The Compensation Committee recognizes that sometimes it is necessary to sac-
rificesacrifice short-term financial performance to obtain longer-term business suc-
cess.success. The Compensation Committee regularly monitors the balance between annual and longer-term rewards and acts as needed to encourage meaningful levels of share ownership among executives. The Management Equity Ownership Program (MEOP) adopted in 1997 for the Company'sCompany’s officers further aligns the interests of executives and shareholders. Committee Process and Compensation Administration In deciding base salary levels, incentive payments and granting of stock options and restricted stock, the Compensation Committee looks to the Chief Executive Officer for recommendations on senior executives. The Compensation Committee meets privately, without the presence of management (including the Chief Executive Officer), to determine compensation actions for the Chief Executive Officer. To maintain the desired level of competitiveness and tech-
nicallytechnically sound compensation and benefit programs, the Compensation Committee obtains input from the Company'sCompany’s Human Resources Department and periodically from outside advisors. Base Salary
In 2000, based on a study of competitive market Consistent with the Compensation Committee’s compensation levels,philosophy, in 2001 base salary increases for the Named Executive Officers' base salariesOfficers were adjusted to maintain competitive
pay levels consistent withdetermined based on individual performance and the Compensation Committee's compensation philoso-
phy.competitiveness of their current salary. The Chief Executive Officer received an increase in base salary to $640,000.
$680,000. Annual Incentive Each year the Compensation Committee meets to review key aspects of the upcoming year'syear’s business plan and establish Annual Incentive Plan goals for each corporate officer, including the Chief Executive Officer. Goals under this plan are weighted to reflect their importance and contribution to Company performance and therefore shareholder experience.
18
The 20002001 Annual Incentive Plan goals for named executives included a minimum net income goal and Company results measured by revenue growth, profitability and profitability,
as well as pre-established personal performance objectives. These goals were
weighted three-fourths on revenue growth and profitability performance and
one-fourth on personal performance objectives for the Named Executive Offi-
cers.earnings per share. The Compensation Committee receives periodic updates during the year on business performance in relation to incentive plan goals, particularly with
respect to senior executives.
goals. At the close of each year, the Compensation Committee meets to discuss per-
formanceperformance compared to Annual Incentive Plan goals and longer-term strategic business goals. These longer-term business goals center around the Company'sCompany’s strategic objectives to remain customer oriented in everything it does and to actively evolve its business consistent with the service needs of customers and the Company'sCompany’s markets. For 20002001 the Company showed a 109 percent increase in sales to $3.8 billion from $3.5 billion from $3.19 billion in 1999.2000. Excluding the effects of after-tax restructuring credits taken in 2001 and 2000, as well as two unusual charges and 1999,an extraordinary item recorded in the third quarter of 2001, net income increased to $37.5 million in 2001, compared to $32.7 million in 2000,
compared to $27.4 million in 1999.2000. Net income per diluted common share, excluding the effects of the restructuring credits, the unusual charges and the extraordinary item, was $0.93,$1.03, compared to $0.80$0.93 in 1999.
2000. The target cash award payable under the Company'sCompany’s Annual Incentive Plan to the Chief Executive Officer for meeting targeted Company financial and per-
sonal performance goals was 44%60% of his base salary. Based on these performance measures, the Chief Executive Officer earned an annual incentive award of $245,766. In 1999, in lieu of a base salary increase, the Chief Executive
Officer was provided a performance-based award equal to 10,000 shares contin-
gent on the stock price closing at or above $18.00 per share before April
2001. On December 28, the Company's stock price reached the $18.00-per-share
objective resulting in an award of $180,000 paid in January 2001.$333,009. The named executive officers also received bonuses for 20002001 performance. Under the Company'sCompany’s Annual Incentive Plan, executives are also eligible to receive a bonus of Common Stock equivalent to an additional 25% of the cash incentive payment. The shares are restricted and vest provided the officer remains an employee of the Company for the following three years. The restricted stock bonus for Named Executive Officers is dependent on perfor-
manceperformance against the same goals as for the Annual Incentive Plan. A stock award was made to the Chief Executive Officer in the amount of 3,8994,333 shares. Long-Term Incentive Plan Each year the Compensation Committee considers granting awards under the Company'sCompany’s stock option plan. The plan provides for the use of non-qualified stock options, incentive stock options, restricted and performance-based awards, and stock appreciation rights. The Compensation Committee'sCommittee’s decision to grant stock options is discretionary and largely determined by financial performance and strategic accomplishments, although there are no specific per-
formanceperformance targets for this purpose. Option grant decisions may also be based upon outstanding individual performance, job promotions and greater responsi-
bilityresponsibility within the Company. Stock options are a key component of a competitive total compensation pro-
gram.program. The Compensation Committee believes stock option grants have histori-
callyhistorically been effective in focusing executives on enhancing long-term profitabil-
ityprofitability and shareholder value. The Compensation Committee granted 50,00058,000 stock options to the Chief Executive Officer in 20002001 to encourage future growth in shareholder returns. Grants were also provided to the other Named Executive Officers. The Compensation Committee does not specifically consider the number of options currently held by an officer in determining current option grant levels. Management Equity Ownership Program As stated earlier, in 1997 the Compensation Committee approved the Manage-
mentManagement Equity Ownership Program (MEOP) for members of the management team, including each of the Named Executive Officers. This program is intended to strengthen the alignment of management and shareholder interests by creating meaningful levels of stock ownership by management. An ownership target has been determined for each level of the management team. These targets range from four times salary for the Chief Executive Officer to one times salary for Vice Presidents. Eligible holdings in meeting these targets include direct holdings, indirect holdings, shares held through Company plans such as the 401(k) Plan and Stock Purchase Plan and restricted stock holdings. To encour-
ageencourage ownership and help senior management meet their equity investment targets, participants may elect to receive a portion of their annual cash incentive award in restricted stock.
19
Participants are given a five-year period to reach the full target ownership amount with interim ownership targets to meet each year. As of December 31, 2000,2001, the value of the stock owned by participants, in aggregate, well exceeded the aggregate full target ownership amount. The Named Executive Offi-
cersOfficers as a group have beneficial ownership levels (excluding stock options held) of 3%2.8% of common shares outstanding. This is above the peer group median ownership level of 1.7%1.4% of common shares outstanding. If a participant meets his or her target level of ownership, a 10% annual equity ownership dividend (which has been(the dividend is reduced to 5% beginning in 2001 for those participants who have reached theirthe years subsequent to a participant reaching his or her full target ownership amount) is paid on all Common Stock owned up to the participant'sparticipant’s full target level. The dividend is paid in the form of restricted stock and will vest five years after grant if the desired ownership level is maintained. If a participant'sparticipant’s ownership falls below the desired level, a portion of his or her annual bonus and/or salary increase, if earned, will be paid in the form of restricted stock and dividend shares will be forfeited until the target ownership level is met. During 2000,2001, the Chief Executive Officer was granted an annual divi-
denddividend of 16,7267,372 restricted shares. Corporate Tax Considerations Congress passed a law effective in 1994, covered in Section 162(m) of the Internal Revenue Code that disallows corporate tax deductions for executive compensation in excess of $1 million for "proxy table"“proxy table” executives. This law does allow for certain exemptions to the deduction cap, including pay plans that depend on formulas rather than discretion and therefore are "performance-
based."
“performance-based.” All current executive compensation is fully deductible. The Compensation Committee intends that the Company'sCompany’s pay plans and actions be performance-
basedperformance-based and therefore fully eligible for compensation expense deductions.
THE COMPENSATION & BENEFITS COMMITTEE
John T. Crotty
Vernard W. Henley
Peter S. Redding
James E. Rogers (Chairman)
James E. Ukrop
Anne Marie Whittemore
20
| TH | E COMPENSATION & BENEFITS COMMITTEE |
| Jam | es E. Rogers (Chairman) |
COMPARISON OF FIVE-YEAR AND TEN-YEAR CUMULATIVE TOTAL RETURN The following performance graphs comparegraph compares the performance of the Company'sCompany’s Common Stock to the S&P 500 Index and a Peer Group (which includes the Company and the companies listed below) for the last five and ten years. To provide a
more balanced view of the Company's historical stock performance, we are pro-
viding performance graphs for both a five-year and ten-year horizon.
10-YEAR 5-YEAR TOTAL SHAREHOLDER RETURN This graph assumes that the value of the investment in the Common Stock and each index was $100 on December 31, 19901996 and that all dividends were reinvest-
ed.
[GRAPH]
Dec-90 Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96
Owens & Minor, Inc. 100 205 227 358 336 305 249
S&P 500 COM 100 130 140 154 156 215 265
Industry Peer Index(1) 100 111 128 160 144 202 246
Dec-97 Dec-98 Dec-99 Dec-00
Owens & Minor, Inc. 357 394 229 463
S&P 500 COM 353 454 549 499
Industry Peer Index(1) 361 528 257 506
21
5-YEAR TOTAL SHAREHOLDER RETURN
This graph assumes that the value of the investment in the Common Stock and
each index was $100 on December 31, 1995 and that all dividends were reinvest-
ed.
[GRAPH]
Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00
Owens & Minor, Inc. 100 82 117 129 75 152
S&P 500 COM 100 123 164 211 255 232
Industry Peer Index(1) 100 122 179 262 128 252
[* Graphsreinvested.[*Graph prepared by William M. Mercer, Incorporated] (1) The Industry Peer Group selected for purposes of the performance graphs consists of companies engaged in the business of healthcare product distribu-
tiondistribution and includes Owens & Minor, Inc., AmeriSource HealthAmerisource Bergen Corporation, Bergen
Brunswig Corporation, Bindley Western Industries, Inc., Cardinal Health, Inc., Henry Schein Inc., McKesson HBOC, Inc., Moore Medical Corp. and PSS World Medi-
cal,Medical, Inc. Two peer companies, Bergen Brunswig Corporation (acquired by AmeriSource Health Corporation in 2001) and Bindley Western Industries, Inc. (acquired by Cardinal Health, Inc. in 2001) are no longer separately included in the Industry Peer Group. The Company has entered into Severance Agreements with certain officers in order to encourage key management personnel to remain with the Company and to avoid distractions regarding potential or actual changes in control of the Com-
pany.
Company. The Severance Agreements provide for the payment of a severance benefit if the officer'sofficer’s employment with the Company is terminated for any reasonreasons (other than as a consequence of death, disability or normal retirement) within two years after a change in control. For the Named Executive Officers, the sever-
anceseverance benefit is equal to 2.99 times the officer'sofficer’s annual base salary plus bonus. Each Severance Agreement continues in effect through December 31, 2001,2002, and unless notice is given to the contrary, the term is automatically extended for an additional year at the end of each year. March 13, 2001
By Order of the Board of Directors
DREW ST.2002 BY ORDEROF THE BOARDOF DIRECTORS DREW ST. J. CARNEAL
CARNEAL Senior Vice President, General Counsel & Secretary
22
APPENDIX A
OWENS & MINOR, INC.
CHARTER
of the
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE
The Audit Committee is to assist the Board of Directors in fulfilling its
oversight responsibilities. The Committee's primary duties and responsibili-
ties are to:
. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance;
. Monitor the independence and performance of the Company's independent
auditors and internal auditing department; and
. Provide an avenue of communication among the independent auditors, man-
agement, the internal auditing department, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation appropri-
ate to fulfilling its responsibilities and it has direct access to the inde-
pendent auditors as well as to anyone in the organization. The Audit Committee
has the authority to retain at the Company's expense special legal, accounting
or other consultants or experts it deems necessary in the performance of its
duties. The internal audit department shall be responsible to senior manage-
ment, but also shall have a direct reporting responsibility to the Board of
Directors through the Committee.
II. COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the New York Stock
Exchange. The Audit Committee shall be comprised of not less than three direc-
tors as determined by the Board, each of whom shall be independent non-execu-
tive directors, free from any relationship that would interfere with the exer-
cise of his or her independent judgment. All members of the Committee shall
have a basic understanding of finance and accounting and be able to read and
understand fundamental financial statements, and at least one member of the
Committee shall have accounting or related financial management expertise in
banking, finance, investment, or the distribution industry.
Audit Committee members shall be appointed annually by the Board on recom-
mendation of the Governance & Nominating Committee. If an audit committee
Chair is not designated, the members of the Committee may designate a chair by
majority vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. The Audit Committee Chair shall prepare and/or approve
an agenda in advance of each meeting. The Committee should meet privately in
executive session at least once annually with members of management, the
director of the internal auditing department, the independent auditors and as
a committee, to discuss any matters that the Committee or each of these groups
believes should be discussed. The Committee may ask members of management or
others to attend meetings and provide pertinent information as necessary. In
addition, the Committee or at least its Chair should communicate with manage-
ment and the independent auditors quarterly to review the Company's financial
statements and significant findings based upon the auditors' limited review
procedures.
III. DUTIES AND RESPONSIBILITIES
The Audit Committee shall:
Review Procedures
1. In consultation with management, the independent auditors and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control and
report such exposures. Review
23
significant findings prepared by the independent auditors and the
internal auditing department together with management's responses,
including the status of previous recommendations.
2. Review with financial management and the independent auditors the
Company's quarterly financial statements prior to filing or distribu-
tion. Discuss any significant changes to the Company's accounting prin-
ciples and any items required to be communicated by the independent
auditors in accordance with Statement of Auditing Standards (SAS) No.
61.
3. Review the Company's annual audited financial statements prior to fil-
ing or distribution. Review should include discussion with management
and independent auditors of significant issues regarding accounting
principles, practices and judgments.
4. Review and reassess the adequacy of this Charter at least once annual-
ly. Submit the Charter to the Board of Directors for approval and have
the document published at least every three years in accordance with
Securities and Exchange Commission regulations as such regulations may,
from time to time, be amended.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit Com-
mittee and the Board of Directors. The Audit Committee shall review the
independence and performance of the auditors and annually recommend to
the Board of Directors the appointment of the independent auditors or
approve any discharge of auditors when circumstances warrant.
6. Review and recommend to the Board of Directors, for its approval, the
fees and other significant compensation to be paid to the independent
auditors. In addition, the Committee will review significant management
consulting engagements to be performed by the independent auditors firm
and be advised of any other significant study undertaken at the request
of management that is beyond the scope of the audit engagement letter.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors' audit plan and engagement letter. Dis-
cuss scope, staffing, locations, reliance upon management and internal
audit and general audit approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss the items required to be
communicated to audit committees in accordance with SAS No. 61:
a. The auditors' responsibilities under Generally Accepted Auditing
Standards (GAAS)
b. Significant accounting policies
c. Management judgments and accounting estimates
d. Significant audit adjustments
e. Other information in documents containing audited financial state-
ments
f. Disagreements with management--including accounting principles,
scope of audit, disclosures
g. Consultation with other accountants by management
h. Major issues discussed with management prior to retention, and
i. Difficulties encountered in performing the audit.
The communication may be in writing or oral and may take place before
or after the financial statements are issued.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting including:
a. Discussions with management and the independent auditors of the
degree of conservatism of the accounting principles and underlying
estimates used in the preparation of the Company's financial state-
ments; and
24
b. Inquiry as to the independent auditors' views about whether manage-
ment's choices of accounting principles are conservative, moderate,
or aggressive from the perspective of income, asset and liability
recognition, and whether those principles are common practices or
are minority practices.
Internal Audit Department and Legal Compliance
11. Review the budget, plan, and changes in plan, activities, organiza-
tional structure and qualifications of the internal audit department,
as needed.
12. Review and approve the appointment and replacement of the senior inter-
nal audit executive.
13. Review the performance of the senior internal audit executive.
14. Review significant reports prepared by the internal audit department
together with management's response and follow-up to these reports.
15. Review with the Company's counsel any legal matters that could have a
significant impact on the organization's financial statements, the
Company's compliance with applicable laws and regulations, inquiries
received from regulators or governmental agencies and all reports of
fraud or regulatory non-compliance.
Other Audit Committee Responsibilities
16. Annually prepare a report to shareholders as required by the Securities
and Exchange Commission. The report should be included in the Company's
annual proxy statement stating whether they have:
a. reviewed and discussed the audited financial statements with man-
agement;
b. discussed with the independent auditors the matters required to be
discussed by SAS 61; and
c. received certain disclosures from the auditors regarding their
independence as required by the Independent Standards Board 1 and
then include a statement whether, based on such review and discus-
sion, anything has come to the attention of the members of the
Audit Committee that caused them to believe that the audited finan-
cial statements included in the Company's Annual Report on Form 10-
K for the year then ended contain an untrue statement of material
fact or omit to state a material fact, necessary to make the state-
ments made, in light of the circumstances under which they were
made, not misleading.
17. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
18. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
19. Establish, review and up-date on an annual basis the Company's Stan-
dards of Conduct Policy including its system of enforcement.
20. Periodically perform self-assessment of Audit Committee performance.
21. Review financial and accounting personnel succession planning within
the Company.
22. Annually review policies and procedures as well as audit results asso-
ciated with directors' and officers' expense accounts and perquisites.
Annually review a summary of directors' and officers' related party
transactions and potential conflicts of interest.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete
and accurate and are in accordance with generally accepted accounting princi-
ples. This is the responsibility of management and the independent auditors.
Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditors
or to assure compliance with laws and regulations and the Company's Standards
of Conduct.
25
Directions to Owens & Minor, Inc. Annual Meeting of Shareholders Thursday, April 26, 2001 --25, 2002 — 10:00 a.m.
Virginia Historical Society
428 North Boulevard
at The Jefferson Hotel 101 West Franklin Street Richmond, Virginia
[GRAPHIC MAP]
The Boulevard is Exit 78 on both I-64 and I-95.
(804) 788-8000 (888) 943-8800 From Washington, D.C., followNorth | • | | TakeExit 76B (Belvidere Street Exit) |
| • | | At first light, turn left onto Leigh Street |
| • | | At next light, turn right onto Belvidere Street |
| • | | At fifth light, turn left onto Franklin Street |
| • | | The Jefferson is four blocks on the right |
From South to the exit.
| • | | TakeExit 74A to 195 (Downtown Expressway) |
| • | | Go approximately one mile |
| • | | Take Belvidere Street Exit |
| • | | Turn right onto Belvidere Street |
| • | | At third light, turn right onto Franklin Street |
| • | | The Jefferson is four blocks on the right |
From Petersburg, follow I-95 North to the exit.
East | • | | TakeExit 190 (Fifth Street/Coliseum Exit) |
| • | | Turn right onto Grace Street (one block beyond Broad Street) |
| • | | Go eight blocks, turn left onto Jefferson Street |
| • | | Turn left onto Franklin Street |
From Charlottesville, follow I-64 East to the exit.
From Norfolk and the Airport, follow I-64 West to the exit.
Take the Boulevard south just past Kensington Avenue, turn right into the
Virginia Historical Society. Parking is available behind the building and at
the adjacent Virginia Museum parking lot.
| • | | Take I-64 East to merge with I-95 |
| • | | TakeExit 76B (Belvidere Street Exit) |
| • | | Turn left onto Leigh Street |
| • | | At first light, turn right onto Belvidere Street |
| • | | At fifth light, turn left onto Franklin Street |
| • | | The Jefferson is four blocks on the right |
FOR ADDITIONAL DIRECTIONS OR A MAP, PLEASE CONTACT OWENS & MINOR AT (800) 488-8850. PARKING INFORMATION The Jefferson’s parking lot is located at the north corner of Main and Adams Streets. Parking passes for this lot will be available at the meeting.
OWENS & MINOR, INC.
P R O X Y
PROXY Solicited by the Board of Directors for the Annual Meeting of Shareholders The undersigned hereby appoints Josiah Bunting, III, John T. Crotty,A. Marshall Acuff, Jr., Henry A. Berling, James E. Rogers,B. Farinholt, Jr., and James E. UkropAnne Marie Whittemore (and if the undersigned is a proxy, the substitute proxy) and each of them with power of substitution, the proxies of the undersigned to vote all shares held of record on March 1, 20012002 by the undersigned as directed on the reverse side and in their discretion on all other matters which may properly come before the Annual Meeting of Shareholders of Owens & Minor, Inc., to be held on April 26, 200125, 2002 at 10:00 A.M. at the Virginia
Historical Society, 428 North Boulevard,The Jefferson Hotel, 101 West Franklin Street, Richmond, Virginia, and any adjournments or postponements thereof. The undersigned directs said proxies to vote as specified upon the items shown herein which are referred to in the Notice of Annual Meeting and as set forth in the Proxy Statement. This Proxy, when properly executed, will be voted in the manner directed by the undersigned shareholder(s). If no direction is made, this Proxy will be voted FOR Proposals 1 2 and 3.
(Continued2. (Continued and to be dated and signed on the reverse side.)
OWENS & MINOR, INC.
P.O. BOX 11421
NEW YORK, N.Y. 10203-0421
If Mailing Your Proxy, Please Detach Here
You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope
| NE | W YORK, N.Y. 10203-0421 |
ê DETACH PROXY CARD HERE IF YOU ARE NOT VOTING BY TELEPHONE OR INTERNET ê
(Please sign, date and return this proxy in the enclosed postage prepaid envelope.) | | Votes must be indicated (x) in Black or Blue ink. | | | | 2. Ratification of appointment of KPMG LLP as independent auditors. | | FOR | | AGAINST | | ABSTAIN | | The Board of Directors recommends a vote FOR Proposals 1 2 and 2. | | 3. In their discretion, the proxies are authorized to vote upon such other matters as may properly come before the meeting. | | 1. Election of Directors | | | | | | | | | | | | FOR all nominees [ ] | | WITHHOLD AUTHORITY to [ ] vote for all nominees | | FOR ALL EXCEPT nominee(s) [ ]
vote for all nominees marked in space below | | | | | | | | | | For a term of three years: A. Marshall Acuff, Jr., Henry A. Berling, James B. Farinholt, Jr., Anne Marie Whittemore.
(INSTRUCTIONS:Vernard W. Henley; G. Gilmer Minor, III; Peter S. Redding | | | | | | | | | | (INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark the "FOR“FOR ALL EXCEPT"EXCEPT” box and write the nominee's(s'nominee’s(s’) name(s) in the space provided below. Your shares will be voted for the remaining nominee(s).)
- -----------------------------------------------------------------------------------------------------------------------------------
2. Approval of proposed amendment to 1998 Stock Option 3. Ratification of appointment of KPMG LLP as independent auditors.
and Incentive Plan to increase authorized shares from
1,380,000 to 2,780,000 and extend term of Plan to FOR [ ] AGAINST [ ] ABSTAIN [ ]
April 28, 2005.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the proxies are authorized to vote upon such other matters as may Change of Address and [ ]
properly come before the meeting. or Comments Mark Here
| | To change your address, please mark this box. | | | | | | | | | SCAN LINE | | | | | | | | | | | | | | Please sign exactly as your name appears herein. Attorneys-in-fact, executors, administrators, trustees and guardians should give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Shareholders who are present at the meeting may withdraw their proxy and vote in person if they so desire.
Dated: _______________________________________, 2001
Signature
Signature
Votes must be indicated
(x) in Black or Blue ink. [X]
(Please | | | | | | Date | | Share Owner sign date and return this proxy in the enclosed postage prepaid envelope.)
here | | Co-Owner sign here | | |
OWENS & MINOR, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
(amended as of February 23, 2001)
A-1
OWENS & MINOR, INC.
Table of Contents
-----------------
Page
----
ARTICLE I DEFINITIONS A-4
1.01. Administrator A-4
1.02. Agreement A-4
1.03. Board A-4
1.04. Change in Control A-4
1.05. Code A-4
1.06. Committee A-4
1.07. Common Stock A-4
1.08. Company A-4
1.09. Control Change Date A-4
1.10. Corresponding SAR A-5
1.11. Exchange Act A-5
1.12. Fair Market Value A-5
1.13. Incentive Award A-5
1.14. Initial Value A-5
1.15. Option A-5
1.16. Participant A-5
1.17. Performance Shares A-5
1.18. Plan A-5
1.19. Related Entity A-5
1.20. SAR A-5
1.21. Stock Award A-5
1.22. Ten Percent Shareholder A-5
ARTICLE II PURPOSES A-6
ARTICLE III ADMINISTRATION A-7
ARTICLE IV ELIGIBILITY A-7
4.01. General A-7
4.02. Grants A-7
ARTICLE V STOCK SUBJECT TO PLAN A-7
5.01. Shares Issued. A-7
5.02. Aggregate Limit A-7
5.03. Individual Limitations A-8
5.04. Reallocation of Shares A-8
ARTICLE VI OPTIONS AND SARS A-9
6.01. Awards A-9
6.02. Option Price A-9
6.03. Maximum Option or SAR Period A-9
6.04. Nontransferability A-9
6.05. Transferable Options and SARs A-9
6.06. Exercise A-9
6.07. Payment A-9
6.08. Determination of Payment of Cash
and/or Common Stock Upon Exercise
of SAR A-10
6.09. Shareholder Rights A-10
6.10. Change in Control A-10
ARTICLE VII STOCK AWARDS A-11
7.01. Awards A-11
7.02. Vesting A-11
7.03. Performance Objectives A-11
7.04. Change in Control A-11
7.05. Shareholder Rights A-11
ARTICLE VIII PERFORMANCE SHARE AWARDS A-11
8.01. Award A-11
A-2
8.02. Earning the Award A-11
8.03. Payment A-12
8.04. Change in Control A-12
8.05. Shareholder Rights A-12
ARTICLE IX INCENTIVE AWARDS A-12
9.01. Awards A-12
9.02. Terms and Conditions A-12
ARTICLE X ADJUSTMENT UPON CHANGE IN COMMON STOCK A-13
ARTICLE XI COMPLIANCE WITH LAW AND APPROVAL OF
REGULATORY BODIES A-13
ARTICLE XII GENERAL PROVISIONS A-14
12.01. Effect on Employment or Service A-14
12.02. Unfunded Plan A-14
12.03. Disposition of Stock A-14
12.04. Rules of Construction A-14
12.05. Employee Status A-15
12.06. Withholding Taxes A-15
12.07. Certain Reduction of Parachute Payments A-15
ARTICLE XIII AMENDMENT A-15
ARTICLE XIV DURATION OF PLAN A-15
ARTICLE XV EFFECTIVE DATE OF PLAN A-15
A-3
OWENS & MINOR, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
ARTICLE I
DEFINITIONS
-----------
1.01. ADMINISTRATOR
Administrator means the Committee and any delegate of the Committee that
is appointed in accordance with Article III.
1.02. AGREEMENT
Agreement means a written agreement (including any amendment or supplement
thereto) between the Company and a Participant specifying the terms and
conditions of an award of Performance Shares or a Stock Award, Incentive Award,
Option or SAR granted to such Participant.
1.03. BOARD
Board means the Board of Directors of the Company.
1.04. CHANGE IN CONTROL
Change in Control means:
(a) Any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any Company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities provided, however, that Company
securities acquired directly from the Company shall be disregarded for this
purpose;
(b) During any period of two consecutive years (not including any period
prior to the execution of this agreement), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c) or (d) of this Section) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of a majority of the directors then still in office who
either (x) were directors at the beginning of such period or (y) were so elected
or nominated with such approval, cease for any reason to constitute at least a
majority of the Board;
(c) The stockholders of the Company approve a merger or consolidation of
the Company with any other Company, other than (x) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation or (y) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person"(as
hereinabove defined) acquires more than 20% of the combined voting power of the
Company's then outstanding securities; or
(d) The stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
1.05. CODE
Code means the Internal Revenue Code of 1986, and any amendments thereto.
1.06. COMMITTEE
Committee means the Compensation and Benefits Committee of the Board.
1.07. COMMON STOCK
Common Stock means the common stock of the Company.
1.08. COMPANY
Company means Owens & Minor, Inc.
1.09. CONTROL CHANGE DATE
Control Change Date means the date on which a Change in Control occurs.
If a Change in Control occurs on account of a series of transactions, the
Control Change Date is the date of the last of such transactions.
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1.10. CORRESPONDING SAR
Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.
1.11. EXCHANGE ACT
Exchange Act means the Securities Exchange Act of 1934, as amended.
1.12. FAIR MARKET VALUE
Fair Market Value means, on any given date, the closing price of a share
of Common Stock as reported on the New York Stock Exchange composite tape on
such date, or if the Common Stock was not traded on the New York Stock Exchange
on such day, then on the next preceding day that the Common Stock was traded on
such exchange, all as reported by such source as the Administrator may select.
1.13. INCENTIVE AWARD
Incentive Award means an award which, subject to such terms and
conditions as may be prescribed by the Administrator, entitles the Participant
to receive a cash payment from the Company or a Related Entity.
1.14. INITIAL VALUE
Initial Value means, with respect to a Corresponding SAR, the Option
price per share of the related Option and, with respect to an SAR granted
independently of an Option, the Fair Market Value of one share of Common Stock
on the date of grant.
1.15. OPTION
Option means a stock option that entitles the holder to purchase from the
Company a stated number of shares of Common Stock at the price set forth in an
Agreement.
1.16. PARTICIPANT
Participant means an employee of the Company or a Related Entity,
including an employee who is a member of the Board, or an individual who
provides services to the Company or a Related Entity who satisfies the
requirements of Article IV and is selected by the Administrator to receive
an award of Performance Shares or a Stock Award, an Option, an SAR, or an
Incentive Award or a combination thereof.
1.17. PERFORMANCE SHARES
Performance Shares means an award which, in accordance with and subject to
an Agreement, will entitle the Participant, or his or her estate or beneficiary
in the event of the Participant's death, to receive cash or a Stock Award or a
combination thereof.
1.18. PLAN
Plan means the Owens & Minor, Inc. 1998 Stock Option and Incentive Plan.
1.19. RELATED ENTITY
Related Entity means any "subsidiary" or "parent" corporation (within the
meaning of Section 424 of the Code) of the Company.
1.20. SAR
SAR means a stock appreciation right that in accordance with the terms of
an Agreement entitles the holder to receive, with respect to each share of
Common Stock encompassed by the exercise of such SAR, the amount determined by
the Administrator and specified in an Agreement. In the absence of such a
determination, the holder shall be entitled to receive, with respect to each
share of Common Stock encompassed by the exercise of such SAR, the lesser of (a)
the excess of the Fair Market Value at the time of exercise over the Initial
Value, or (b) the Initial Value. References to "SARs" include both
Corresponding SARs and SARs granted independently of Options, unless the context
requires otherwise.
1.21. STOCK AWARD
Stock Award means Common Stock awarded to a Participant under Article VII
or in accordance with an award of Performance Shares.
1.22. TEN PERCENT SHAREHOLDER
Ten Percent Shareholder means any individual owning more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of a Related Entity. An individual shall be considered to own any voting
stock owned (directly or indirectly) by or for his or her brothers, sisters,
spouse, ancestors or lineal descendants and shall be considered to own
proportionately any voting stock owned (directly or indirectly) by or for a
corporation, partnership, estate or trust of which such individual is a
shareholder, partner or beneficiary.
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ARTICLE II
PURPOSES
--------
The Plan is intended to assist the Company and Related Entities in
recruiting and retaining key employees by enabling such employees to participate
in the future success of the Company and the Related Entities and to associate
their interests with those of the Company and its shareholders. The Plan is
intended to permit the award of Performance Shares, the grant of Stock Awards,
SARs, the grant of both Options qualifying under Section 422 of the Code
("incentive stock options") and Options not so qualifying, and the grant of
Incentive Awards. No Option that is intended to be an incentive stock option
shall be invalid for failure to qualify as an incentive stock option. The
proceeds received by the Company from the sale of Common Stock pursuant to this
Plan shall be used for general corporate purposes.
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ARTICLE III
ADMINISTRATION
--------------
The Plan shall be administered by the Administrator. The Administrator
shall have authority to award Performance Shares and to grant Stock Awards,
Incentive Awards, Options and SARs upon such terms (not inconsistent with the
provisions of this Plan) as the Administrator may consider appropriate. Such
terms may include conditions (in addition to those contained in this Plan) on
the exercisability of all or any part of an Option or SAR or on the
transferability or forfeitability of a Stock Award, Incentive Award, or
Performance Shares, including by way of example and not limitation, conditions
on which Participants may defer receipt of benefits under the Plan, requirements
that the Participant complete a specified period of employment with the Company
or a Related Entity or that the Company achieve a specified level of financial
performance. Notwithstanding any such conditions, the Committee may, in its
discretion, accelerate the time at which any Option or SAR may be exercised, or
the time at which a Stock Award may become transferable or nonforfeitable or the
time at which an Incentive Award or an award of Performance Shares may be
settled. In addition, the Administrator shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific
power to the Administrator shall not be construed as limiting any power or
authority of the Administrator. Any decision made, or action taken, by the
Administrator or in connection with the administration of this Plan shall be
final and conclusive. Neither the Administrator nor any member of the Committee
shall be liable for any act done in good faith with respect to this Plan or any
Agreement, Option, SAR, Stock Award, Incentive Award or award of Performance
Shares. All expenses of administering this Plan shall be borne by the Company.
The Committee, in its discretion, may delegate to one or more officers of
the Company all or part of the Committee's authority and duties with respect to
grants and awards to individuals who are not subject to the reporting and other
provisions of Section 16 of the Exchange Act. The Committee may revoke or amend
the terms of a delegation at any time but such action shall not invalidate any
prior actions of the Committee's delegate or delegates that were consistent with
the terms of the Plan.
ARTICLE IV
ELIGIBILITY
-----------
4.01. GENERAL.
Any employee of the Company or a Related Entity (including a corporation
that becomes a Related Entity after the adoption of this Plan) or a person who
provides services to the Company or a Related Entity (including a corporation
that becomes a Related Company after the adoption of this Plan) is eligible to
participate in this Plan if the Administrator, in its sole discretion,
determines that such person has contributed significantly or can be expected to
contribute significantly to the profits or growth of the Company or a Related
Entity. Directors of the Company who are employees of the Company or a Related
Entity may be selected to participate in this Plan.
4.02. GRANTS.
The Administrator will designate individuals to whom an award of
Performance Shares are to be granted and to whom Stock Awards, Incentive Awards,
Options and SARs are to be granted and will specify the number of shares of
Common Stock subject to each award or grant. An SAR may be granted with or
without a related Option. Each award of Performance Shares and all Stock
Awards, Options, SARs, and Incentive Awards granted under this Plan shall be
evidenced by Agreements which shall be subject to the applicable provisions of
this Plan and to such other provisions as the Administrator may adopt. No
Participant may be granted incentive stock options or related SARs (under all
incentive stock option plans of the Company and any Related Entity) which are
first exercisable in any calendar year for stock having an aggregate Fair Market
Value (determined as of the date an Option is granted) that exceed the
limitation prescribed by Code section 422(d). The preceding annual limitation
shall not apply with respect to Options that are not incentive stock options.
ARTICLE V
STOCK SUBJECT TO PLAN
---------------------
5.01. SHARES ISSUED.
Upon the award of shares of Common Stock pursuant to a Stock Award, the
Company may issue shares of Common Stock from its authorized but unissued Common
Stock. Upon the exercise of any Option or SAR, the Company may deliver to the
Participant (or the Participant's broker if the Participant so directs), shares
of Common Stock from its authorized but unissued Common Stock.
5.02. AGGREGATE LIMIT.
The maximum aggregate number of shares of Common Stock that may be issued
under this Plan is 2,780,000 shares. Moreover, the maximum aggregate number of
shares of Common Stock that may be issued as Stock Awards is 460,000 shares.
The maximum aggregate number of shares of Common Stock that may be issued under
this Plan and the maximum number of shares that may be issued as Stock Awards
shall be subject to adjustment as provided in Article X.
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5.03. INDIVIDUAL LIMITATIONS.
Subject to the limitations set forth in the preceding sections, no
individual may, in any calendar year, be granted or awarded (i) Options,
covering more than 75,000 shares of Common Stock; (ii) SARs with respect to
75,000 shares of Common Stock; (iii) Stock Awards covering 25,000 shares of
Common Stock; (iv) Performance Shares covering more than 25,000 shares of Common
Stock; or (v) Incentive Awards exceeding the lesser of 75% of the Participant's
base salary (prior to any salary reduction or deferral election) or $500,000.
In applying the limitations of the preceding sentence, an Option and
Corresponding SAR shall be treated as a single award. The limitations set forth
in this Section 5.03 shall be subject to adjustment as provided in Article X.
5.04. REALLOCATION OF SHARES.
If an Option is terminated, in whole or in part, for any reason other than
its exercise or the exercise of a Corresponding SAR, the number of shares of
Common Stock allocated to the Option or portion thereof may be reallocated to
other Options, SARs, Stock Awards and awards of Performance Shares to be granted
under this Plan. If an SAR is terminated, in whole or in part, for any reason
other than its exercise or the exercise of a related Option, the number of
shares of Common Stock allocated to the SAR or portion thereof may be
reallocated to other Options, SARs, Stock Awards and awards of Performance
Shares to be granted under this Plan. If an award of Performance Shares is
forfeited, in whole or in part, without the issuance of a Stock Award, the
number of shares of Common Stock allocated to the Performance Share Award or
portion thereof may be reallocated to other Options, SARs, Stock Awards and
awards of Performance Shares to be granted under this Plan. If a Stock Award is
forfeited, in whole or in part, the number of shares of Common Stock allocated
to the Stock Award may be reallocated to other Options, SARs, Stock Awards and
awards of Performance Shares to be granted under this Plan.
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ARTICLE VI
OPTIONS AND SARS
----------------
6.01. AWARDS.
In accordance with Article IV, and subject to the limitations set forth in
Plan section 5.03, the Administrator will designate each individual to whom an
Option, SAR or both is to be made and will specify the number of shares of
Common Stock covered by such awards.
6.02. OPTION PRICE.
The price per share for Common Stock purchased on the exercise of an
Option shall be determined by the Administrator on the date of grant; provided,
however, that the price per share for Common Stock purchased on the exercise of
any Option shall not be less than the Fair Market Value on the date the Option
is granted. Notwithstanding the preceding sentence, the price per share for
Common Stock purchased on the exercise of any Option that is an incentive stock
option granted to an individual who is a Ten Percent Shareholder on the date
such option is granted, shall not be less than one hundred ten percent (110%) of
the Fair Market Value on the date the Option is granted. Except as provided in
Article X, the Administrator may not adjust or amend the option price or Initial
Value of a previously granted Option or SAR whether through amendment,
cancellation, replacement grant or any other means.
6.03. MAXIMUM OPTION OR SAR PERIOD.
The maximum period in which an Option or SAR may be exercised shall be
determined by the Administrator on the date of grant, except that no Option that
is an incentive stock option or its Corresponding SAR shall be exercisable after
the expiration of ten years from the date such Option or Corresponding SAR was
granted. In the case of an incentive stock option or a Corresponding SAR
granted to a Participant who is a Ten Percent Shareholder on the date of grant,
such Option or its Corresponding SAR shall not be exercisable after the
expiration of five years from the date of grant. The terms of any Option or SAR
may provide that it is exercisable for a period less than such maximum period.
6.04. NONTRANSFERABILITY.
Any Option or SAR granted under this Plan shall be nontransferable except
by will or by the laws of descent and distribution. In the event of any such
transfer, the Option and any Corresponding SAR that relates to such Option must
be transferred to the same person or person(s). During the lifetime of the
Participant to whom the Option or SAR is granted, the Option or SAR may be
exercised only by the Participant. No right or interest of a Participant in any
Option or SAR shall be liable for, or subject to, any lien, obligation, or
liability of such Participant.
6.05. TRANSFERABLE OPTIONS AND SARS.
Section 6.04 to the contrary notwithstanding, if the Agreement provides,
an Option that is not an incentive stock option or an SAR, other than a
Corresponding SAR that is related to an incentive stock option, may be
transferred by a Participant to the Participant's children, grandchildren,
spouse, one or more trusts for the benefit of such family members or a
partnership in which such family members are the only partners, on such terms
and conditions as may be permitted under Securities Exchange Commission Rule
16b-3 as in effect from time to time. The holder of an Option or SAR
transferred pursuant to this section shall be bound by the same terms and
conditions that governed the Option or SAR during the period that it was held by
the Participant; provided, however, that such transferee may not transfer the
Option or SAR except by will or the laws of descent and distribution. In the
event of any transfer of an Option or SAR (by the Participant or his
transferee), such Option and any Corresponding SAR must be transferred to the
same person or persons or entity or entities.
6.06. EXERCISE.
Subject to the provisions of this Plan, an Option or SAR may be exercised
in whole at any time or in part from time to time at such times and in
compliance with such requirements as the Administrator shall determine;
provided, however, that a Corresponding SAR that is related to an incentive
stock option may be exercised only to the extent that the related Option is
exercisable and when the Fair Market Value exceeds the Option price of the
related Option. An Option or SAR granted under this Plan may be exercised with
respect to any number of whole shares less than the full number for which the
Option or SAR could be exercised. A partial exercise of an Option or SAR shall
not affect the right to exercise the Option or SAR from time to time in
accordance with this Plan and the applicable Agreement with respect to the
remaining shares subject to the Option or related to the SAR. The exercise of
either an Option or Corresponding SAR shall result in the termination of the
other to the extent of the number of shares with respect to which the Option or
Corresponding SAR is exercised.
6.07. PAYMENT.
Unless otherwise provided by the Agreement, payment of the Option price
shall be made in cash or a cash equivalent acceptable to the Administrator.
Subject to rules established by the Committee, payment of all or part of the
Option price may be made with shares of Common Stock to the Company. If Common
Stock is used to pay all or part of the Option price, the sum of the cash and
cash equivalent and the Fair Market Value of the surrendered shares (on the day
preceding the exercise date) must not be less than the Option price of the
shares for which the Option is being exercised.
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6.08. DETERMINATION OF PAYMENT OF CASH AND/OR COMMON STOCK UPON EXERCISE OF SAR.
At the Administrator's discretion, the amount payable as a result of the
exercise of an SAR may be settled in cash, Common Stock, or a combination of
cash and Common Stock. A fractional share shall not be deliverable upon the
exercise of an SAR but a cash payment will be made in lieu thereof.
6.09. SHAREHOLDER RIGHTS.
No Participant shall have any rights as a stockholder with respect to
shares subject to his or her Option or SAR until the date of exercise of such
Option or SAR.
6.10. CHANGE IN CONTROL.
Section 6.06 to the contrary notwithstanding, after a Control Change Date
each Option and SAR shall be fully exercisable thereafter in accordance with the
terms of the applicable Agreement. If not sooner exercisable under the terms of
the applicable Agreement, a Participant's Option or SAR shall be fully
exercisable (i) as of his or her termination of employment if his or her
employment terminates after a Control Change Date and he or she is terminated
without cause or following his or her refusal to move to another location or
(ii) as of the date that there is a material reduction in the Participant's
compensation or duties if such reduction occurs after a Control Change Date.
For purposes of the preceding sentence the term "cause" means a willful neglect
of responsibilities to the Company or a Related Entity.
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ARTICLE VII
STOCK AWARDS
------------
7.01. AWARDS.
In accordance with the provisions of Article IV, and subject to the
limitations set forth in Plan section 5.03, the Administrator will designate
each individual to whom a Stock Award is to be made and will specify the number
of shares of Common Stock covered by such awards. The limitation of Section
5.03 on the issuance of Stock Awards shall not limit the issuance of Stock
Awards in settlement of Performance Share awards.
7.02. VESTING.
The Administrator, on the date of the award, may prescribe that a
Participant's rights in the Stock Award shall be forfeitable or otherwise
restricted for a period of time or subject to such conditions as may be set
forth in the Agreement. By way of example and not of limitation, the
restrictions may postpone transferability, vesting or both of the shares until
the attainment of performance objectives prescribed by Committee or may provide
that the shares will be forfeited if the Participant separates from the service
of the Company and its Related Entities before the expiration of a stated term.
If a Stock Award is not nonforfeitable and transferable upon its grant, the
period of restriction shall be at least three years, provided that the minimum
period of restriction shall be at least one year in the case of a Stock Award
that will become transferable and nonforfeitable on account of the satisfaction
of performance objectives prescribed by the Administrator.
7.03. PERFORMANCE OBJECTIVES.
In accordance with Section 7.02, the Committee may prescribe that Stock
Awards will become vested or transferable or both based on objectives stated
with respect to one or more of the Company's, a Related Entity's or an operating
unit's (i) gross, operating or net earnings before or after taxes, (ii) return
on equity, (iii) return on capital, (iv) return on sales, (v) return on assets
or net assets, (vi) earnings per share, (vii) cash flow per share, (viii) book
value per share, (ix) earnings growth, (x) sales growth, (xi) volume growth,
(xii) cash flow (as defined by the Committee), (xiii) Fair Market Value, (xiv)
total shareholder return, (xv) market share, (xvi) productivity, (xvii) level of
expenses, (xviii) quality, (ix) safety, (x) customer satisfaction, (xi) total
economic value added, or (xii) peer group comparisons of any of the
aforementioned objectives. If the Committee, on the date of the award,
prescribes that a Stock Award shall become nonforfeitable and transferable only
upon the attainment of performance objectives stated with respect to one or more
of the foregoing criteria, the shares subject to such Stock Award shall become
nonforfeitable and transferable only to the extent the Committee certifies that
such objectives have been achieved.
7.04. CHANGE IN CONTROL.
Sections 7.02 and 7.03 to the contrary notwithstanding, after a Control
Change Date each Stock Award will become transferable and nonforfeitable
thereafter in accordance with the terms of the applicable Agreement. If not
sooner transferable and nonforfeitable under the terms of the applicable
Agreement, a Participant's interest in a Stock Award shall be transferable and
nonforfeitable (i) as of his or her termination of employment if his or her
employment terminates after a Control Change Date and he or she is terminated
without cause or following his or her refusal to move to another location or
(ii) as of the date that there is a material reduction in the Participant's
compensation or duties if such reduction occurs after a Control Change Date.
For purposes of the preceding sentence the term "cause" means a willful neglect
of responsibilities to the Company or a Related Entity.
7.05. SHAREHOLDER RIGHTS.
Prior to their forfeiture (in accordance with the terms of the Agreement
and while the shares of Common Stock granted pursuant to the Stock Award may be
forfeited), a Participant will have all rights of a shareholder with respect to
a Stock Award, including the right to receive dividends and vote the shares;
provided, however, that (i) a Participant may not sell, transfer, pledge,
exchange, hypothecate, or otherwise dispose of shares of Common Stock granted
pursuant to a Stock Award, (ii) the Company shall retain custody of the
certificates evidencing shares of Common Stock granted pursuant to a Stock
Award, and (iii) the Participant will deliver to the Company a stock power,
endorsed in blank, with respect to each Stock Award. The limitations set forth
in the preceding sentence shall not apply after the shares of Common Stock
granted under the Stock Award are no longer forfeitable.
ARTICLE VIII
PERFORMANCE SHARE AWARDS
------------------------
8.01. AWARD.
In accordance with the provisions of Article IV and subject to the
limitations set forth in paragraph 5.03, the Administrator will designate
individuals to whom an award of Performance Shares is to be granted and will
specify the number of shares of Common Stock covered by the award.
8.02. EARNING THE AWARD
The Administrator, on the date of the grant of an award, may prescribe
that the Performance Shares, or portion thereof, will be earned, and the Parti-
cipant will be entitled to receive Common Stock pursuant to a Stock Award, a
cash payment or a combination thereof, only upon the satisfaction of certain
requirements. By way of example and not of limitation, the restrictions may
provide that Performance Shares shall be earned only upon the Participant's
completion of a specified period of employment with the Company or Related
Entity or upon the attainment of stated performance objectives or goals. The
period for determining whether such requirements are satisfied shall be at least
three years; provided that the period shall be at least one year in the case of
Performance Shares earned upon the attainment of stated performance objectives
or goals. Such performance objectives or goals may be based on one or more of
the Company's, a Related Entity's or an operating unit's (i) gross, operating or
net earnings before or after taxes, (ii) return on equity, (iii) return on
capital, (iv) return on sales, (v) return on assets or net assets, (vi) earnings
per share, (vii) cash flow per share, (viii) book value per share, (ix) earnings
growth, (x) sales growth, (xi) volume growth, (xii) cash flow (as defined by the
Committee), (xiii) Fair Market Value, (xiv) share price or total shareholder
return, (xv) market share, (xvi) productivity, (xvii) level of expenses, (xviii)
quality, (ix) safety, (x) customer satisfaction, (xi) total economic value added
or (xii) peer group comparisons of any of the aforementioned objectives. If the
Committee, on the date of the award, prescribes that Performance Shares shall be
earned only upon the attainment of performance objectives stated with respect to
one or more of the foregoing criteria, such Performance Shares shall be earned
only to the extent the Committee certifies that such objectives have been
achieved.
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8.03. PAYMENT.
In the discretion of the Administration, the amount payable when an award
of Performance Shares is earned may be settled in cash, by the grant of a Stock
Award or a combination of cash and a Stock Award. A fractional share shall not
be deliverable when an award of Performance Shares is earned, but a cash payment
will be made in lieu thereof.
8.04. CHANGE IN CONTROL.
Section 8.02 to the contrary notwithstanding, after a Control Change Date
each Performance Share shall be earned in its entirety and converted into a
Stock Award in accordance with the terms of the applicable Agreement. If not
sooner earned in accordance with the terms of the applicable Agreement, a
Participant's interest in each Performance Share shall be earned and converted
into a Stock Award (i) as of his or her termination of employment if his or her
employment terminates after a Control Change Date and he or she is terminated
without cause or following his or her refusal to move to another location or
(ii) as of the date that there is a material reduction in the Participant's
compensation or duties if such reduction occurs after a Control Change Date.
For purposes of the preceding sentence the term "cause" means a willful neglect
of responsibilities to the Company or a Related Entity. Each such Stock Award
issued under this Section 8.04 will be transferable and nonforfeitable
8.05. SHAREHOLDER RIGHTS.
No Participant shall, as a result of receiving an award of Performance
Shares, have any rights as a shareholder until and to the extent that the award
of Performance Shares is earned and a Stock Award is made. If the Agreement so
provides, a Participant may receive a cash payment equal to the dividends that
are payable with respect to the number of shares of Common Stock covered by the
award between the date the Performance Shares are awarded and the date a Stock
Award is made. A Participant may not sell, transfer, pledge, exchange,
hypothecate, or otherwise dispose of a Performance Share award or the right to
receive Common Stock thereunder other than by will or the laws of descent and
distribution. After an award of Performance Shares is earned and a Stock Award
is made, a Participant will have all the rights of a shareholder as described in
Plan section 7.05.
ARTICLE IX
INCENTIVE AWARDS
----------------
9.01. AWARDS.
The Administrator shall designate Participants to whom Incentive Awards are
made for annual incentive payments. All Incentive Awards shall be finally
determined exclusively by the Administrator under the procedures established by
the Administrator, subject to the limitations set forth in Section 5.03.
9.02. TERMS AND CONDITIONS.
The Administrator, at the time an Incentive Award is made, shall specify
the terms and conditions which govern the award. Such terms and conditions may
include, by way of example and not of limitation, requirements that the
Participant complete a specified period of employment with the Company or a
Related Entity or that the Company, a Related Entity, or the Participant attain
stated objectives or goals as a prerequisite to payment under an Incentive
Award. The period for determining whether such requirements are satisfied shall
be at least one year. The performance objectives or goals may be based on one
or more of the Company's, a Related Entity's or an operating unit's (i) gross,
operating or net earnings before or after taxes, (ii) return on equity, (iii)
return on capital, (iv) return on sales, (v) return on assets or net assets,
(vi) earnings per share, (vii) cash flow per share, (viii) book value per share,
(ix) earnings growth, (x) sales growth, (xi) volume growth, (xii) cash flow (as
defined by the Committee), (xiii) Fair Market Value, (xiv) total shareholder
return, (xv) market share, (xvi) productivity, (xvii) level of expenses, (xviii)
quality, (ix) safety, (x) customer satisfaction, (xi) total economic value added
or (xii) peer group comparisons of any of the aforementioned objectives. If the
Committee, on the date of the award, prescribes that the Incentive Award shall
be earned only upon the attainment of performance objectives stated with respect
to one or more of the foregoing criteria, such Incentive Award shall be earned
only to the extent that the Committee certifies that such objectives have been
achieved. The Administrator, at the time an Incentive Award is made, shall also
specify when amounts shall be payable under the Incentive Award and whether
amounts shall be payable in the event of the Participant's death, disability, or
retirement.
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ARTICLE X
ADJUSTMENT UPON CHANGE IN COMMON STOCK
--------------------------------------
The maximum number of shares as to which Options, SARs, Stock Awards and
awards of Performance Shares may be granted under this Plan, the individual
limitations set forth in Section 5.03, and the terms of outstanding awards of
Performance Shares, Stock Awards, Options, SARs, and Incentive Awards shall be
adjusted as the Committee shall determine to be equitably required in the event
that (a) the Company (i) effects one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares or (ii) engages in a transaction to
which Section 424 of the Code applies or (b) there occurs any other event which,
in the judgment of the Committee is equitably required. Any determination made
under this Article X by the Committee shall be final and conclusive.
The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the maximum
number of shares as to which Options, SARs, Stock Awards, and awards of
Performance Shares may be granted, the terms of outstanding awards of
Performance Shares, Stock Awards, Options, SARs, or Incentive Awards, or the
individual limitations set forth in Section 5.03.
The Committee may make Stock Awards and may grant awards of Performance
Shares, Options, and SARs in substitution for performance shares, phantom
shares, stock awards, stock options, stock appreciation rights, or similar
awards held by an individual who becomes an employee of the Company or a Related
Entity in connection with a transaction described in the first paragraph of this
Article X. Notwithstanding any provision of the Plan (other than the
limitations of Article V), the terms of such substituted awards of Performance
Shares, Stock Awards, Option or SAR grants shall be as the Committee, in its
discretion, determines is appropriate.
ARTICLE XI
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
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No Option or SAR shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the
rules of all domestic stock exchanges on which the Company's shares may be
listed. The Company shall have the right to rely on an opinion of its counsel
as to such compliance. Any share certificate issued to evidence Common Stock
when a Stock Award is granted or for which an Option or SAR is exercised may
bear such legends and statements as the Administrator may deem advisable to
assure compliance with federal and state laws and regulations. No Option or SAR
shall be exercisable, no Stock Award shall be granted, no Common Stock shall be
issued, no certificate for shares shall be delivered, and no payment shall be
made under this Plan until the Company has obtained such consent or approval as
the Administrator may deem advisable from regulatory bodies having jurisdiction
over such matters.
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ARTICLE XII
GENERAL PROVISIONS
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12.01. EFFECT ON EMPLOYMENT OR SERVICE.
Neither the adoption of this Plan, its operation, nor any documents
describing or referring to this Plan (or any part thereof) shall confer upon any
individual any right to continue in the employ or service of the Company or a
Related Entity or in any way affect any right and power of the Company or a
Related Entity to terminate the employment or service of any individual at any
time with or without assigning a reason therefor.
12.02. UNFUNDED PLAN.
The Plan, insofar as it provides for grants, shall be unfunded, and the
Company shall not be required to segregate any assets that may at any time be
represented by grants under this Plan. Any liability of the Company to any
person with respect to any grant under this Plan shall be based solely upon any
contractual obligations that may be created pursuant to this Plan. No such
obligation of the Company shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of the Company.
12.03. DISPOSITION OF STOCK.
A Participant shall notify the Administrator of any sale or other
disposition of Common Stock acquired pursuant to an Option that was an incentive
stock option if such sale or disposition occurs (i) within two years of the
grant of an Option or (ii) within one year of the issuance of the Common Stock
to the Participant. Such notice shall be in writing and directed to the
Secretary of the Company.
12.04. RULES OF CONSTRUCTION.
Headings are given to the articles and sections of this Plan solely as a
convenience to facilitate reference. The reference to any statute, regulation,
or other provision of law shall be construed to refer to any amendment to or
successor of such provision of law.
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12.05. EMPLOYEE STATUS.
In the event that the terms of any award of Performance Shares, or Stock
Award or Incentive Award or the grant of any Option or SAR provide that shares
may be issued or become transferable and nonforfeitable thereunder only after
completion of a specified period of employment, the Administrator may decide in
each case to what extent leaves of absence for governmental or military service,
illness, temporary disability, or other reasons shall not be deemed
interruptions of continuous employment.
12.06. WITHHOLDING TAXES.
Each Participant shall be responsible for satisfying any income and
employment tax withholding obligations attributable to participation in the
Plan. Unless otherwise provided by the Agreement, any such withholding tax
obligations may be satisfied in cash (including from any cash payable in
settlement of an award of Performance Shares, an SAR or Incentive Award) or a
cash equivalent acceptable to the Committee. Any withholding tax obligations
may also be satisfied by surrendering shares of Common Stock to the Company, by
withholding or reducing the number of shares of Common Stock otherwise issuable
to the Participant upon the exercise of an Option or SAR, the settlement of an
award of Performance Shares or the grant or vesting of a Stock Award, or by any
other method as may be approved by the Committee. If shares of Common Stock are
used to pay all or part of such withholding tax obligation, the Fair Market
Value of the shares surrendered, withheld or reduced shall be determined as of
the day preceding the date the Option or SAR is exercised, the Stock Award vests
or the Performance Shares are earned, as applicable.
12.07. CERTAIN REDUCTION OF PARACHUTE PAYMENTS
Any benefit, payment, accelerated vesting or other right under this Plan
may constitute a "parachute payment" (as defined in Code section 280G(b)(2)(A),
but without regard to Code section 280G(b)(2)(A)(ii)), with respect to a
Participant and the Participant may incur a liability under Code section 4999.
In that event, the Company shall reduce any such parachute payments, if, and
only to the extent that a reduction will allow the Participant to receive a
greater "net after-tax amount" than such Participant would receive absent a
reduction. For purposes of this Plan section, "net after tax amount" means the
amount of any parachute payments, as applicable, net of taxes imposed under Code
sections 1, 3101(b) and 4999 and any State or local income taxes applicable to
the Participant as in effect on the date of the first payment under this Plan
Agreement. The determination of the net after tax amount shall be calculated by
applying the foregoing taxes on income of the same character as the parachute
payments or capped parachute payments, as applicable at the top marginal rates,
in effect for the year in which the determination is made. "Capped parachute
payments" means the largest amount of parachute payments that may be paid
without liability under Code section 4999.
ARTICLE XIII
AMENDMENT
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The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if (i) the amendment increases the aggregate number of shares of Common
Stock that may be issued under the Plan or (ii) the amendment changes the class
of individuals eligible to become Participants. No amendment shall, without a
Participant's consent, adversely affect any rights of such Participant under any
outstanding award of Performance Shares, or under any Stock Award, Option or SAR
outstanding at the time such amendment is made.
ARTICLE XIV
DURATION OF PLAN
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No Performance Shares may be awarded and no Stock Award, Option, SAR or
Incentive Award may be granted under this Plan after April 28, 2005.
Performance Shares awarded, and Stock Awards, Options, SARs and Incentive Awards
granted before that date shall remain valid in accordance with their terms.
ARTICLE XV
EFFECTIVE DATE OF PLAN
----------------------
Performance Shares may be awarded and Options, SARs and Incentive Awards
may be granted under this Plan upon its adoption by the Board, provided that no
award of Performance Shares, Option or SAR will be effective unless this Plan is
approved by a majority of the votes entitled to be cast by the Company's
shareholders, voting either in person or by proxy, at a duly held shareholders'
meeting within twelve months of such adoption. Stock Awards may be granted
under this Plan upon its approval by shareholders in accordance with the
preceding sentence.
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