SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
OWENS & MINOR, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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1) Amount Previously Paid:
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4) Date Filed:
[OWENS & MINOR INC. LOGO]
Notice of
1998
Annual Meeting
and
Proxy StatementNOTICE OF
1999
ANNUAL MEETING
AND
PROXY STATEMENT
WHETHER OR NOT YOU PRESENTLY PLAN TO ATTEND THE MEETING
IN PERSON, THE BOARD OF DIRECTORS URGES YOU TO SIGN AND
RETURN THE PROXY IN THE ENCLOSED ENVELOPE.
OwensOWENS & Minor, Inc.MINOR, INC.
4800 Cox Road
Glen Allen, VirginiaCOX ROAD
GLEN ALLEN, VIRGINIA 23060-6292
[OWENS & MINOR INC. LOGO]
4800 Cox Road, Post Office Box 27626
Glen Allen, Virginia 23060-6292
(804) 747-9794 FAX (804) 270-7281
March 13, 199811, 1999
Dear Shareholders:
Please plan on attending theIt is my pleasure to invite you to our Annual Meeting of Shareholders of Owens &
Minor, Inc. You will be the guests of honor.on
Wednesday, April 28, 1999 at 10:00 a.m. The meeting will be held on
Tuesday, April 28, 1998 at 10:00 a.m. at the
Virginia Historical Society, 428 North Boulevard, Richmond, Virginia.
Morning refreshments will be served.
Parking is available behind the building and at the adjacent Virginia Museum
parking lot; directionsDirections are on the back of the Proxy Statement. Morning refreshments will be
served.
The primary business of the meeting will be as follows: to elect four
directors;three directors and
to ratify the appointment of KPMG Peat Marwick LLP as our independent auditors;auditors. In addition to approve the proposed 1998 Stock Option and Incentive Plan; and to
approve the proposed 1998 Directors' Compensation Plan. During theconsidering
these matters, we will review major developments since our last shareholders
meeting I
will also share with you my perspective on the state of the Company as well as our performance during 1997 and the first quarter of 1998. You will meet
members of the Board of Directors as well as management. You will also be
encouraged to ask questions on matters of importance to you and all
shareholders. I sincerely hope you can come.opportunities in 1999.
Please complete, sign date and return the enclosed proxy card as soon as
possible in the postage-paid envelope provided. Your vote is important. All of
us at Owens & Minor appreciate your continued interest in and support of the
Company.support.
Warm regards,
/s/ G. GILMER MINOR,Gilmer Minor III
------------------------------------------------------
G. GILMER MINOR, III
Chairman, President and
Chief Executive Officer
Proxy Statement
Table of Contents Page
- --------------------------------------------------------------------------- --------
Notice of Meeting ......................................................... 1
Voting Procedures ......................................................... 2
Meetings and Committees of the Board of Directors ......................... 3
Director Compensation ..................................................... 3
Proposal 1 -- Election of Directors ....................................... 4
Nominees for Election to the Board of Directors .......................... 5
Members of the Board of Directors Continuing in Office ................... 6
Series B Preferred Stock Director ........................................ 8
Proposal 2 -- Approval of Independent Auditors ............................ 8
Proposal 3 -- Approval of Proposed Owens & Minor, Inc.
1998 Stock Option and Incentive Plan ..................................... 9
Proposal 4 -- Approval of Proposed Owens & Minor, Inc.
1998 Directors' Compensation Plan ........................................ 12
Stock Ownership Information ...............................................PROXY STATEMENT
TABLE OF CONTENTS PAGE
- - ------------------------------------------------------------ -----
Notice of Meeting .......................................... 1
Questions and Answers ...................................... 2
Board Meetings and Committees .............................. 3
Director Compensation ...................................... 4
PROPOSAL 1 -- ELECTION OF DIRECTORS ........................ 5
Nominees for Election ..................................... 5
Directors Continuing in Office ............................ 6
Retiring Director ......................................... 7
PROPOSAL 2 -- APPROVAL OF INDEPENDENT AUDITORS ............. 8
Stock Ownership Information ................................ 8
Compliance with Section 16(a) Reporting ................... 8
Stock Ownership Guidelines ................................ 8
Stock Ownership by Management ............................. 9
Executive Compensation ..................................... 10
Summary Compensation Table ................................ 10
1998 Option Grants ........................................ 11
1998 Option Exercises and Year-End Option Values .......... 11
Retirement Plans .......................................... 11
Report of the Compensation & Benefits Committee ........... 12
Comparison of Five-Year Cumulative Total Return ........... 15
Severance Agreements ...................................... 15
Compliance with Section 16(a) Reporting .................................. 15
Stock Ownership Guidelines ............................................... 15
Stock Ownership by Principal Shareholders and Management ................. 16
Executive Compensation .................................................... 18
Summary Compensation Table ............................................... 18
1997 Option Grants ....................................................... 19
1997 Option Exercises and Year-End Option Values ......................... 19
Retirement Plans ......................................................... 19
Report of the Compensation & Benefits Committee .......................... 20
Comparison of Five-Year Cumulative Total Return .......................... 23
Executive Severance Agreements ........................................... 24
Other Information ......................................................... 24
Shareholder Proposals .................................................... 24
Expenses of Solicitation ................................................. 24
Miscellaneous ............................................................ 24
Annex A: Proposed Owens & Minor, Inc. 1998 Stock Option and Incentive Plan A-1
Annex B: Proposed Owens & Minor, Inc. 1998 Directors' Compensation Plan ... B-1
YOUR VOTE IS IMPORTANT
Whether or not you presently plan to attend the meeting in person, the Board of
Directors urges you to sign and return the proxy in the enclosed envelope.WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND RETURN
THE PROXY CARD IN THE ENCLOSED ENVELOPE.
[OWENS & MINOR INC. LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held Tuesday, AprilTO BE HELD WEDNESDAY, APRIL 28, 19981999
TO THE SHAREHOLDERS OF OWENS & MINOR , INC.:
You are hereby notified that theMINOR:
The Annual Meeting of Shareholders of Owens & Minor Inc., a Virginia corporation, will be held on
Wednesday, April 28, 1999 at 10:00 a.m. at the Virginia Historical Society, 428
North Boulevard, Richmond, Virginia, on Tuesday, April 28, 1998 at
10:00 a.m.Virginia.
The purposes of the meeting are:
1. To elect fourthree directors to serve until the Annual Meeting of
Shareholders in 2001 (Proposal 1);2002;
2. To ratify the appointment of KPMG Peat Marwick LLP as independent auditors (Proposal 2);auditors; and
3. To approve the proposed Owens & Minor, Inc. 1998 Stock Option and
Incentive Plan (Proposal 3);
4. To approve the proposed Owens & Minor, Inc. 1998 Directors' Compensation
Plan (Proposal 4); and
5. To transact suchany other business as may properly be brought before the meeting.
The BoardAnnual Meeting.
Shareholders as of Directors has fixed the close of business on March 3, 1998 as
the record date for the determination of shareholders2, 1999 will be entitled to receive
notice of and to vote at the meeting and any adjournment or postponement
thereof.Annual
Meeting.
Your attention is directed to the attached Proxy Statement. This Proxy
Statement, proxy card and Owens & Minor's 1998 Annual Report are being
distributed on or about March 11, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
DREW ST. J. CARNEAL
Secretary
Richmond, Virginia
March 13, 1998
1
[OWENS & MINOR INC. LOGO]
Street Address Mailing AddressSTREET ADDRESS MAILING ADDRESS
4800 Cox Road P.O. Box 27626
Glen Allen, Virginia 23060-6292 Richmond, Virginia 23261-7626
PROXY STATEMENT
Annual MeetingANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28, 1999
QUESTIONS AND ANSWERS
Q: WHAT AM I VOTING ON?
A: Proposal 1: The election of the following three directors, each for a three-year term:
Vernard W. Henley, G. Gilmer Minor, III and Peter S. Redding.
Proposal 2: Ratification of KPMG LLP as Owens & Minor's independent auditors.
Q: WHO IS ENTITLED TO VOTE?
A: Shareholders as of the close of business on March 2, 1999 (the Record Date) are entitled to vote. Each
share of common stock is entitled to one vote.
Q: HOW DO I VOTE?
A: Vote by completing, signing and returning the enclosed proxy card. You may revoke a proxy prior to the
meeting by (1) submitting a subsequently dated proxy, (2) giving notice in writing to the Secretary of
the Company or (3) voting in person at the meeting.
Q: WHAT HAPPENS IF I DON'T MAKE SELECTIONS ON MY PROXY CARD?
A: If you sign your proxy card, but do not make any selections, you give authority to the individuals
designated on the proxy card to vote on the two proposals and any other matter that may arise at the
meeting. All proxies will be voted in favor of the election of directors and in favor of the ratification of
independent auditors unless otherwise indicated on the proxy card.
Q: WHAT DOES IT MEAN IF I GET MORE THAN ONE PROXY CARD?
A: Your shares are probably registered differently or are in more than one account. Sign and return all
proxy cards to ensure that all your shares are voted. Please have all of your accounts registered in the
same name and address. You may do this by contacting our transfer agent, Bank of New York, at
1-800-524-4458.
Q: WHAT CONSTITUTES A QUORUM?
A: As of March 2, 1999, 32,685,349 shares of Owens & Minor common stock were issued and outstanding.
A majority of the outstanding shares, present or represented by proxy, constitutes a quorum. A quorum is
required to conduct the Annual Meeting. If you vote by proxy card, you will be considered part of the
quorum. Abstentions and shares held by brokers that are voted on any matter are included in the
quorum.
2
Q: WHICH SHAREHOLDERS OWN AT LEAST 5% OF OWENS & MINOR?
A: Westport Asset Management, Inc. (253 Riverside Avenue, Westport, CT 06880) owned 2,976,450 shares,
or 9.11%, as of February 16, 1999.
Wellington Management Company, LLP (75 State Street, Boston, MA 02109) owned 2,896,300 shares,
or 8.86%, as of December 31, 1998.
Valenzuela Capital Partners LLC (1270 Avenue of the Americas, Suite 508, New York, NY 10020)
owned 2,211,350 shares, or 6.77%, as of February 1, 1999.
Q: WHAT PERCENTAGE OF OWENS & MINOR STOCK IS OWNED BY ITS DIRECTORS AND OFFICERS?
A: As of March 2, 1999, approximately 5.5%.
Q: WHEN ARE THE YEAR 2000 SHAREHOLDER PROPOSALS DUE?
A: Shareholder proposals must be submitted in writing by December 11, 1999 to Drew St.J. Carneal,
Senior Vice President, General Counsel, Owens & Minor, 4800 Cox Road, Glen Allen, VA 23060.
Shareholder recommendations for director-nominees must be accompanied by a consent of the nominee
to serve if elected and set forth the following:
(i) the name and address of the nominating shareholder and each proposed nominee;
(ii) the number of shares of common stock owned by the nominating shareholder and each nominee;
and
(iii) such other information about each nominee as is required by rules of the Securities and Exchange
Commission to be disclosed in a proxy statement.
Q: WHAT ARE THE COSTS OF SOLICITING PROXIES?
A: Owens & Minor will pay all costs of this proxy solicitation. Corporate Investor Communications has
been retained to aid in the distribution and solicitation of proxies for approximately $4,000 plus
expenses. The Company will reimburse stockbrokers and other custodians, nominees and fiduciaries for
their expenses in forwarding proxy and solicitation materials.
BOARD MEETINGS AND COMMITTEES
The Board of Shareholders
to beDirectors held on April 28, 1998
March 13, 1998
This Proxy Statement is furnished in connection withnine meetings during 1998. All directors
attended at least 75% of the solicitationtotal meetings of
proxies by the Board of Directors and any
committees on which they serve.
The Board of OwensDirectors has the following committees:
EXECUTIVE COMMITTEE: Exercises limited powers of the Board when the Board
is not in session.
AUDIT COMMITTEE: Oversees the Company's financial reporting and internal
control structure and serves as a direct line of communication among the
Company's independent auditors, Internal Audit Department and the Board.
Recommends the Company's independent auditors. All members are non-employee
directors.
COMPENSATION & Minor, Inc.BENEFITS COMMITTEE: Administers executive compensation
programs, policies and practices. Advises the Board on salaries and
compensation of the executive officers and makes other studies and
recommendations concerning compensation and compensation policies. All members
are non-employee directors.
GOVERNANCE & NOMINATING COMMITTEE: Considers and recommends nominees for
election as directors and officers. Reviews and evaluates the procedures,
practices and policies of the Board and its members. All members are
non-employee directors.
STRATEGIC PLANNING COMMITTEE: Reviews and makes recommendations for the
strategic direction of the Company.
3
BOARD COMMITTEE MEMBERSHIP
COMPENSATION & GOVERNANCE & STRATEGIC
DIRECTOR BOARD AUDIT BENEFITS EXECUTIVE NOMINATING PLANNING
G. Gilmer Minor, III X X* X
Henry A. Berling X X X
Josiah Bunting, III X X X
R. E. Cabell, Jr., Esq. X X* X
James B. Farinholt, Jr. X X X X*
Vernard W. Henley X X X X
E. Morgan Massey X X X X
James E. Rogers X X* X X
James E. Ukrop X X X
Anne Marie Whittemore X X X X*
No. of meetings in 1998 9 4 4 4 3 1
*Chairperson
DIRECTOR COMPENSATION
EMPLOYEE DIRECTORS receive no additional compensation other than their
normal salary for serving on the Board or its committees.
NON-EMPLOYEE DIRECTORS receive the following annual cash and stock
compensation:
DIRECTOR COMPENSATION TABLE
TYPE OF COMPENSATION CASH STOCK
Annual Retainer $ 10,000* $ 10,000*
Additional Retainer for Committee Chair $ 3,000*
Board or Committee Attendance Fee (per meeting) $ 1,000*
Board or Committee Telephone Conference (per meeting) $ 500*
Stock Options Option for 3000 shares
*Effective April 28, 1999, director compensation will be increased to the
following amounts: Annual Retainer (cash), $12,500; Annual Retainer (stock),
$12,500; Additional Retainer for Committee Chair, $3,500; Board or Committee
Attendance Fee (per meeting), $1,200; Board or Committee Telephone Conference
(per meeting), $600.
Directors may defer the receipt of all or part of their directors fees.
Amounts deferred are "invested" in bookkeeping accounts that measure earnings
and losses based on the performance of a Virginia
corporation (the "Company"),particular investment. Directors may
elect to defer their fees into the following two subaccounts: (i) an account
based upon the price of the common stock and (ii) an account based upon the
current interest rate of the Company's fixed income fund in its 401(k) plan.
Subject to certain restrictions, a director may take cash distributions from a
deferred fee account either prior to or following the termination of his or her
service as a director. Directors are also permitted to receive payment of their
director fees in common stock.
4
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors is divided into three classes for usepurposes of
election. One class is elected at each Annual Meeting to serve for a three-year
term. Three directors will be elected at the Annual Meeting of Shareholders of
the Company to be heldserve for a
three-year term expiring at the Virginia Historical Society, 428 North Boulevard,
Richmond, Virginia, on April 28, 1998 at 10:00 a.m., and at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting.
This Proxy Statement and form of proxy is first being mailed to
shareholders of the Company on or about March 13, 1998.
VOTING PROCEDURES
- -----------------
Only shareholders of record at the close of business on March 3, 1998 will
be entitled to vote at the meeting or any adjournment or postponement thereof.
As of such record date, the Company had outstanding and entitled to vote
32,392,391 shares of Common Stock, $2.00 par value per share (the "Common
Stock"), each of which is entitled to one vote, and 1,150,000 shares of Series
B Cumulative Preferred Stock, $100 par value per share (the "Series B Preferred
Stock"), each of which is entitled to 6.06 votes. The holder of the Series B
Preferred Stock has agreed to vote its shares of Series B Preferred Stock with
respect to each matter to be voted upon at theCompany's Annual Meeting in the same
proportion asyear 2002. Each
nominee has agreed to serve if elected. If any nominee is not able to serve,
the votes castBoard may designate a substitute or reduce the number of directors serving
on such matter by holders of the Common Stock
(excluding certain holders of 5% or more of the Common Stock).
All proxies received pursuant to this solicitationBoard.
Unless otherwise directed, a proxy will be voted "for"for the election of directors as set forth below and in favor of Proposals 2, 3 and 4
unless contrary instructions are given. Any person who has returned a proxy to
the Company has the power to revoke it at any time before its exercisenominees shown
below. Each nominee must be elected by
submitting a subsequently dated proxy, by giving notice in writing to the
Secretary of the Company prior to the commencement of the meeting or by voting
in person at the meeting.
The election of each nominee for director (Proposal 1) requires the
affirmative vote of a plurality of the votes castshares voted in the election of directors
by the holders of the Common Stock and Series B Preferred Stock, voting
together as a single class.this
election. Votes that are withheld and broker shares that are not voted in the
election of directors will not be included in determining the number of votes
cast.
The approval of each of the 1998 Stock Option and
Incentive Plan (Proposal 3) and the 1998 Directors' Compensation Plan (Proposal
4) requires the affirmative vote of a majority of shares of Common Stock and
Series B Preferred Stock castInformation on each of the plans, voting together as a single
class; provided that the total vote cast on each of the plans represents over
50% of all securities entitled to vote on the plans. Abstentionsnominee and broker
shares that are not voted on Proposals 3 and 4 will not be included in
determining the number of votes cast on Proposals 3 and 4.
2
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
- -------------------------------------------------
The Board of Directors held five meetings during 1997. All directors
attended at least 75% of the total meetings of the Board of Directors and any
Committees on which they serve. The Board has Executive, Audit, Compensation &
Benefits, Governance & Nominating and Strategic Planning Committees.
None of the members of the Audit Committee are employees of the Company or
its subsidiaries. The function of the Audit Committee is to oversee the
Company's financial reporting and internal control structure and to serve as a
direct line of communication among the Company's independent auditors, the
Company's Internal Audit Department and the Board of Directors. The Audit
Committee met four times during the past year.
None of the members of the Compensation & Benefits Committee (the
"Compensation Committee") are employees of the Company or its subsidiaries. The
function of the Compensation Committee is to recommend to the Board of
Directors the salaries and compensation of the executive officers of the
Company, and to make such other studies and recommendations concerning
compensation and compensation policies as may be brought to their attention for
consideration. The Compensation Committee administers the Savings & Protection
Plan (the "401(k) Plan"), the Employee Stock Purchase Plan (the "Stock Purchase
Plan"), the 1993 Stock Option Plan, the Supplemental Executive Retirement Plan
and the Annual Incentive Plan for employees who are subject to Section 16 of
the Securities Exchange Act of 1934 (the "Exchange Act"). The Compensation
Committee met four times during the past year.
The functions of the Governance & Nominating Committee (the "Governance
Committee") are to make recommendations to the Board of Directors concerning
the selection of candidates as nominees as Directors, and to advise on
directorship practices and corporate governance matters. The Governance
Committee will consider candidates recommended by shareholders entitled to vote
for the election of directors. Notice of nominations made by shareholders with
respect to the 1999 annual meeting must be received in writing by the Secretary
of the Company no later than November 13, 1998 and must set forth (i) the name,continuing director, including age and
address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee and (iii) the number and class of
capital shares of the Company beneficially owned by each such nominee, if any.
The Governance Committee met four times during the past year.
DIRECTOR COMPENSATION
- ---------------------
Cash Compensation. In 1997, each non-employee director was paid an annual
retainer of $10,000 ($13,000 for committee chairpersons) plus $1,000 for each
Board meeting attended, $1,000 for each meeting of the Board's committees
attended and $500 for telephone conference meetings.
Directors' Compensation Plan. The 1993 Directors' Compensation Plan (the
"1993 Directors' Plan") provides for automatic, annual grants of options to
purchase Common Stock. During 1997, each eligible director was granted options
to purchase 2,532 shares of Common Stock at a per share exercise price of
$13.00. In addition, pursuant to an amendment to the 1993 Directors' Plan
approved in December 1996, each eligible director received during 1997 an award
of Common Stock with a fair market value of $5,000. The 1993 Directors' Plan
allows eligible directors to defer the receipt of all or part of their director
fees. Amounts deferred are "invested" in bookkeeping accounts that measure
earnings and losses based on the performance of a particular investment. There
are two subaccounts into which directors may elect to defer their fees in
integral multiples of 10%: (i) an account based upon the price of the Company's
Common Stock, and (ii) an account based upon the current interest rate of the
Company's fixed income fund in its 401(k) Plan, currently 5.15%. Subject to
certain restrictions, a director will be permitted to take cash distributions
in whole or in part from a deferred fee account either prior to or following
the termination of his or her service as a director. The 1993 Directors' Plan
also allows eligible directors to receive payment of all or part of their
director fees in Common Stock rather than cash.
3
PROPOSAL 1. ELECTION OF DIRECTORS
In January 1998, the Board of Directors adopted an amendment to the
Company's bylaws increasing the number of directors from 9 to 10. The Board
appointed Henry A. Berling, Executive Vice President, Partnership Development
of the Company to fill the newly created position to serve until this Annual
Meeting at which he is nominated for election. The Board will remain divided
into three classes, with one class being elected every year for a term of three
years. Four nominees are expected to be elected at this Annual Meeting to serve
for a term of three years. All nominees are to serve until their successors are
elected and have qualified. The remaining six directors will continue to serve
as set forth below. Each of the nominees is currently a director of the Company
and has agreed to serve if elected. Unless otherwise directed, a proxy will be
voted for the four nominees shown below. If some unexpected occurrence should,
in the judgment of the Board of Directors, make necessary the substitution of
some other person for any of the nominees, the shares represented by proxies
will be voted for such other person as the Board of Directors may select, or
the Board of Directors may amend the Bylaws to reduce the number of directors
to the total of the remaining nominees and any such substitute nominee or
nominees in which case the shares represented by proxies shall be voted for the
remaining nominees and any such substitute nominee or nominees. No proxy can be
voted for more than four persons.
The names and ages of the nominees and continuing directors, their
principal occupation or employment during the past five years, and other
relevant data regarding them as of March 3, 1998, based on information received
from the respective nominees and continuing directors, areis set forth below.
Each of the nominees and the directors has served continuously since the year
he or she joined the Board of Directors.
4
NOMINEES FOR ELECTION TO
THE BOARD OF DIRECTORS ForRECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE
AS DIRECTOR.
NOMINEES FOR ELECTION
FOR THREE-YEAR TERM EXPIRING IN 2002:
[PHOTO] VERNARD W. HENLEY, 69, is Chairman of the Three-Year Term Expiring AprilBoard and Chief
Executive Officer of Consolidated Bank and Trust Company,
Richmond, Virginia. Mr. Henley has been a director since 1993.
[PHOTO] G. GILMER MINOR, III, 58, is Chairman, President and Chief
Executive Officer of Owens & Minor. Mr. Minor also serves on
the Boards of Directors of SunTrust Banks, Inc. and Richfood
Holdings, Inc. Mr. Minor has been a director since 1980.
[PHOTO] PETER S. REDDING, 60, is President and Chief Executive Officer
of Standard Register. From January to December 1994, Mr.
Redding was Executive Vice President and Chief Operating
Officer of Standard Register. Mr. Redding also serves on The
Boards of Directors of KeyBank (Dayton, OH), The Victoria
Theatre Association, The Human Race Theatre, The Children's
Medical Center Foundation, the Ohio Foundation of
Independent Colleges and Projects Unlimited. Mr. Redding
would join the Board as a new director of Owens & Minor.
5
DIRECTORS CONTINUING IN OFFICE
TERMS EXPIRING IN 2001:
[PICTURE][PHOTO] E. Morgan Massey, 71,MORGAN MASSEY, 72, is Chairman of Inter-American Coal,
N.V. and Chairman Emeritus of A.T. Massey Coal Company,
Inc., both coal companies. Mr. Massey has been
a director since 1988 and is a member of the
Compensation & Benefits, Governance & Nominating and
Strategic Planning Committees. Mr. Massey also serves as Chairman
of the Massey Cancer Center Advisory Board, Richmond,
Virginia, and asis a member of the Board of the
UniversityDirectors of VirginiaVCU
Engineering School Foundation. He is also Vice Chairman of
the Marine Advisory Council of the Virginia Institute for
Marine Science. [PICTURE] JamesMr. Massey has been a director since 1988.
[PHOTO] JAMES B. Farinholt, Jr.FARINHOLT, JR., 63,64, is Executive Director of the
Virginia Biotechnology Research Park and Special Assistant to the
President of Virginia Commonwealth University for BusinessEconomic
Development, advising on campus expansion and commercializationcommercial-
ization of scientific discoveries. From 1978 to 1995, Mr.
Farinholt served as President of Galleher & Company, Inc., an
investment company, which he sold. Mr. Farinholt has been a
director since 1974 and is
Chairman of the Strategic Planning Committee and a
member of the Audit and Executive Committees.
[PICTURE] Anne Marie Whittemore, 52,1974.
[PHOTO] ANNE MARIE WHITTEMORE, 53, is a partner in the law firm of
McGuire, Woods, Battle & Boothe, L.L.P. Mrs. Whittemore
has been a director since 1991 and is Chairperson of the
Governance & Nominating Committee and a member of
the Executive and Compensation & Benefits Committees.
Mrs. Whittemore also serves on the Boards of Directors of
USF&G Corporation, Fort James
Corporation, T. Rowe Price Associates, Inc. and Albemarle
Corporation. [PICTURE] HenryMrs. Whittemore has been a director since 1991.
[PHOTO] HENRY A. Berling, 55,BERLING, 56, is Executive Vice President, Partnership
Development of the CompanyOwens & Minor and has served in this
position since 1995. From 1996 to 1998, Mr. Berling also
served as the Company's Chief Sales Officer. Mr. Berling
served as Executive Vice President, Sales and Customer
Development from 1994 to 1995 and as Senior
Vice President, Sales and Marketing from 1992 to 1994.1995. Mr. Berling has been a
director since January 1998 and is a
member of the Executive and Strategic Planning
Committees.
51998.
6
MEMBERS OF THE BOARD OF DIRECTORS CONTINUINGTERMS EXPIRING IN OFFICE
Terms expiring April 2000:
[PICTURE] Josiah Bunting,[PHOTO] JOSIAH BUNTING, III, 57,58, is Superintendent of the Virginia
Military Institute, Lexington, Virginia. From 1987 to 1995, he
served as Headmaster of The Lawrenceville School. General
Bunting has been a director since 1995 and1995.
[PHOTO] JAMES E. UKROP, 61, is a
member of the Audit and Strategic Planning
Committees.
[PICTURE] James E. Ukrop, 60, is Vice Chairman and Chief
Executive Officer of Ukrop's Super Markets,
Inc., a retail grocery chain. Mr. Ukrop has been a director since 1987chain, and is a memberChairman of the Compensation & Benefits and
Strategic Planning Committees.First Market
Bank. Mr. Ukrop also serves on the Boards of Directors of
Richfood Holdings, Inc.
andInc.and Legg Mason, Inc. [PICTURE] JamesMr. Ukrop has
been a director since 1987.
[PHOTO] JAMES E. Rogers, 52,ROGERS, 53, is President of SCI Investors Inc, a
private equity investment firm. Mr. Rogers has been a
director since 1991 and is Chairman of the
Compensation & Benefits Committee and a member of
the Executive and Strategic Planning Committees. Mr. Rogers also serves on the
Boards of Directors of Wellman, Inc. and Caraustar Industries,
Inc. 6
Terms Expiring April 1999:
[PICTURE] Vernard W. Henley, 68, is Chairman of the Board and
Chief Executive Officer of Consolidated Bank and Trust
Company, Richmond, Virginia. Mr. HenleyRogers has been a director since 1993 and is a member of1991.
RETIRING DIRECTOR
Effective at the Audit,
Governance & Nominating, and Compensation &
Benefits Committees.
[PICTURE] G. Gilmer Minor, III, 57, is Chairman, President and
Chief Executive Officer of the Company.Annual Meeting, Mr. Minor has
beenCabell will retire as a director since 1980because he
has reached our mandatory retirement age. The Company gratefully acknowledges
Mr. Cabell's 37 years of service and is Chairman of the
Executive Committee and a member of the Strategic
Planning Committee. Mr. Minor also serves on the
Boards of Directors of Crestar Financial Corporation and
Richfood Holdings, Inc.
[PICTURE]dedication to Owens & Minor.
[PHOTO] R.E. Cabell, Jr.CABELL, JR., Esq.ESQ., 74,75, is retired (Of Counsel) from the
law firm of Williams, Mullen, Christian & Dobbins.
Mr. Cabell has been a director since 1962 and is
Chairman of the Audit Committee and a member of the
Executive Committee. Mr. Cabell
also serves on the Board of Directors of The C.F. Sauer Company
and is a Trustee of Hampden-Sydney College. Mr. Cabell has
been a director since 1962.
7
SERIES B PREFERRED STOCK DIRECTOR
Pursuant to the Company's Articles of Incorporation, the holders of the
Series B Preferred Stock are entitled to elect one member of the Board of
Directors of the Company for so long as any share of Series B Preferred Stock
remains outstanding. Such director (the "Series B Director") is in addition to
the number of Directors of the Company elected by the holders of the Common
Stock and Series B Preferred Stock, voting together as a single class. On April
29, 1997, the holder of the Series B Preferred Stock elected C.G. Grefenstette
as the Series B Director, to serve until his successor is elected in 1998. It
is anticipated that the holder of the Series B Preferred Stock will re-elect
Mr. Grefenstette in 1998.
[PICTURE] C.G. Grefenstette, 70, is Chairman of the Board of The
Hillman Company, a firm engaged in diversified
investments and operations. From 1994 to 1997,
Mr. Grefenstette served as Chairman of the Board and
Chief Executive Officer, and from 1989 to 1993, he
served as President and Chief Executive Officer of The
Hillman Company. Mr. Grefenstette also serves on the
Boards of Directors of The Hillman Company, The
Hillman Foundation, Inc., The Polk Foundation, Inc.,
Duquesne University and PNC Bank Corp.
Mr. Grefenstette has been a director of the Company
since 1994 and is a member of the Audit, Governance &
Nominating and Strategic Planning Committees.
PROPOSAL 2.2: APPROVAL OF INDEPENDENT AUDITORS
- --------------------------------------------
Action will be taken at the meeting to ratify the appointment by theThe Board of Directors, upon the recommendation of its Audit Committee,
has appointed KPMG Peat Marwick LLP to serve as the Company's independent auditors offor 1999,
subject to ratification by the Company. The Audit Committee and the Board of Directors recommend that the
shareholders ratify their appointment.shareholders. Unless otherwise directed, the persons
named in the enclosed form ofa proxy
intend to vote such proxywill be voted for the ratification of the appointment by the Board of Directors of KPMG Peat Marwick LLP as
independent auditors of the Company.
Representatives of KPMG Peat Marwick LLP are expected towill be present at the Annual Meeting of Shareholders. They will have the opportunityto
answer questions and to make a statement, if they desire to do so, and will be available to respond to
appropriate questions from shareholders.
8
PROPOSAL 3. APPROVAL OF PROPOSED OWENS & MINOR, INC. 1998 STOCK OPTION
AND INCENTIVE PLAN
The Board of Directors proposes that the shareholders approve the Owens &
Minor, Inc. 1998 Stock Option and Incentive Plan (the "1998 Option/Incentive
Plan"), adopted by the Board on February 23, 1998, subject to the approval of
the Company's shareholders.
In 1993, the Board of Directors adopted, and the shareholders approved,
the Owens & Minor, Inc. 1993 Stock Option Plan (the "1993 Option Plan"). The
1993 Option Plan expired in February 1998 and the Board wishes to replace it
with the 1998 Option/Incentive Plan.
The following paragraphs summarize the principal features of the 1998
Option/Incentive Plan. This summary is subject, in all respects, to the terms
of the 1998 Option/Incentive Plan. A copy of the full text of the 1998
Option/Incentive Plan is included as Annex A to this Proxy Statement.
Summary of the 1998 Option/Incentive Plan
Purposes. The Board believes that the 1998 Option/Incentive Plan will
benefit 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 related entities.
Administration. The Compensation Committee will administer the 1998
Option/Incentive Plan. The Compensation Committee may delegate its authority to
administer the Option/Incentive 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 Exchange Act
("Section 16"). 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
participate in the 1998 Option/Incentive Plan. The Administrator will select
the individuals who will participate in the 1998 Option/Incentive 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 1998 Option/Incentive Plan may be
incentive stock options ("ISOs") or nonqualified stock options. A stock option
entitles the Participant to purchase shares of Common Stock from the Company at
the option price. The option price will be 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 exercise price of a previously granted option whether through
amendment, cancellation, 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. On March 3, 1998, the
market value of the Common Stock was $17.375 per share.
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 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 initial 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 previously 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
9
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
pursuant to a stock award. The Administrator, in its discretion, may prescribe
that a Participant's rights in a stock award shall be nontransferable or
forfeitable 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 Company, a related entity, or an operating unit achieve certain Performance
Objectives (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 1998 Option/Incentive Plan also provides for the
award of performance shares. A performance share award entitles the Participant
to receive a payment 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 obligation 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 1998 Option/Incentive 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 prescribe the requirements that must be
satisfied before an incentive award is earned. The incentive award 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. 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, a related
entity, 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 Compensation
Committee), (xiii) fair market value of the Common Stock, (xiv) total
shareholder return, (xv) market share, (xvi) productivity, (xvii) level of
expenses, (xviii) quality, (ixx) safety, (xx) customer satisfaction, (xxi)
total economic value added, or (xxii) peer group comparisons of any of the
aforementioned objectives.
Share Authorization. A maximum of 1,380,000 shares of Common Stock may be
issued under the 1998 Option/Incentive Plan which, together with the proposed
number of shares to be authorized under the 1998 Directors' Plan (defined
below), is less than 5% of the Company's outstanding shares of Common Stock. No
more than 460,000 of the shares that may be issued under the 1998
Option/Incentive 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 Committee deems to be equitably required in the event of a stock
dividend, stock split, combination, reclassification, recapitalization, or
other similar events.
Expiration, Termination and Amendment. No option, SAR, stock award or
incentive award may be granted and no performance shares may be awarded under
the 1998 Option/Incentive Plan more than five years after the date it is
approved by the Company's shareholders. The Board may sooner terminate the 1998
Option/Incentive Plan without further action by shareholders. The Board also
may amend the
10
1998 Option/Incentive Plan except that no amendment that increases the number
of shares of Common Stock that may be issued under the 1998 Option/Incentive
Plan or that changes the class of individuals who may be selected to
participate in the 1998 Option/Incentive Plan will become effective until it is
approved by shareholders.
New Plan Benefits. Neither the number of individuals who will be selected
to participate in the 1998 Option/Incentive Plan nor the type or size of awards
that will be approved by the Administrator can be determined. The Company is
also unable to determine the number of individuals who would have participated
in the 1998 Option/Incentive Plan or the type or size of awards that would have
been made under the 1998 Option/Incentive Plan had it been in effect in 1997.
Change in Control. The 1998 Option/Incentive 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 1998 Option/Incentive 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 1998 Option/Incentive Plan may provide for earlier exercisability of
Options and SARs and earlier nonforfeitability of stock awards upon a change in
control.
Federal Income Tax Consequences
The Company has been advised by counsel regarding the federal income tax
consequences of the 1998 Option/Incentive 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 Participant 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 ordinary
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 substantial 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
nonqualified option or SAR, the vesting of a stock award, the settlement of a
performance 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.so.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
OWENS & MINOR, INC. 1998 STOCK OPTION AND INCENTIVE PLAN.
11
PROPOSAL 4. APPROVAL OF PROPOSED OWENS & MINOR, INC. 1998 DIRECTORS'
COMPENSATION PLAN
The Board of Directors proposes that the shareholders approve the Owens &
Minor, Inc. 1998 Directors' Compensation Plan (the "1998 Directors' Plan"),
adopted by the Board on February 23, 1998, subject to the approval of the
Company's shareholders.
In 1993, the Board of Directors adopted, and the shareholders approved,
the 1993 Directors' Plan. The term of the 1993 Directors' Plan expires in April
1998 prior to the Annual Meeting, and the Board wishes to replace it with the
1998 Directors' Plan.
The following paragraphs summarize the principal features of the 1998
Directors' Plan. This summary is subject, in all respects, to the terms of the
1998 Directors' Plan. A copy of the full text of the 1998 Directors' Plan is
included as Annex B to this Proxy Statement.
Summary of the 1998 Directors' Plan
General. The Board believes that the 1998 Directors' Plan will benefit the
Company by assisting in the recruitment and retention of highly qualified
non-employee Directors and associating the interests of non-employee Directors
with those of the Company and its shareholders.
The 1998 Directors' Plan consists of four programs. The Stock Option
Program provides for automatic annual grants of options to purchase Common
Stock. The Deferred Fee Program allows eligible Directors to defer the receipt
of all or part of their retainer fees, meeting fees or both. The Stock Purchase
Program allows eligible Directors to receive payment of all or part of their
retainer fees, meeting fees, or both in the form of Common Stock rather than in
cash. The Stock Award Program provides for grants of Common Stock to eligible
Directors. Participation in the Deferred Fee Program and the Stock Purchase
Program is voluntary.
Administration. The Governance Committee will administer the 1998
Directors' Plan. The Governance Committee has the authority to make any
determinations necessary or advisable for the administration of the 1998
Directors' Plan.
Eligibility. No Director who is an employee or officer of the Company or
one of its related entities will be eligible to participate in the 1998
Directors' Plan. The Company's Board of Directors currently consists of nine
Directors who will participate in the 1998 Directors' Plan ("Participating
Directors").
Stock Option Program. Options granted under the Stock Option Program are
nonstatutory stock options. A stock option entitles a Participating Director to
purchase shares of Common Stock at the option price.
Each year during the term of the Stock Option Program, each Participating
Director will be granted an option to purchase 3,000 shares of Common Stock.
Options will be granted on the date of the first meeting of the Board of
Directors following the annual shareholders' meeting. The option price will
equal the fair market value, as reported on the New York Stock Exchange, of the
Common Stock on the date of grant. The Governance Committee cannot adjust or
amend the exercise price of a previously granted option whether through
amendment, cancellation, 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, Common Stock or a combination of the two. On March
3, 1998, the market value of the Common Stock was $17.375 per share.
Options granted under the Stock Option Program will be exercisable in
whole or in part as of the date of grant. The maximum period in which an option
may be exercised will be ten years from the date of grant. However, if a
Participating Director ceases to be a Director, the option may be exercised for
one year following the date that he or she ceased to be a Director or until the
end of the option period, whichever is shorter. In the event of a Participating
Director's death, the option may be exercised by the Participating Director's
estate or by the person or entity who succeeds to the Participating Director's
rights by will or the laws of descent and distribution for one year following
the date the Participating Director ceased to be a Director or until the end of
the option period, whichever is shorter.
12
All options granted under the Stock Option Program will be evidenced by
written agreements between the Participating Director and the Company.
The maximum aggregate number of shares of Common Stock that may be issued
upon the exercise of options or as Stock Awards (described hereafter) under the
1998 Directors' Plan is 220,000 shares which, together with the proposed number
of shares to be authorized under the 1998 Option/Incentive Plan, is less than
5% of the Company's outstanding shares of Common Stock. This limitation, and
the number of shares subject to outstanding options, will be adjusted, as the
Governance Committee deems appropriate, in the event of a stock dividend, stock
split, combination, reclassification, recapitalization or other similar event.
The Company has been advised by counsel concerning the federal income tax
consequences of the Stock Option Program. No income is recognized by a
Participating Director at the time an option is granted under the Stock Option
Program. The exercise of an option generally is a taxable event that requires
the holder to recognize, as ordinary income, the difference between the option
price and the shares' fair market value on the date of exercise.
The Company will be entitled to claim a federal income tax deduction on
account of the exercise of an option. The amount of the deduction is equal to
the ordinary income recognized by the holder.
Deferred Fee Program. The Deferred Fee Program allows a Participating
Director to defer the receipt of all or part of his or her retainer fee,
meeting fees or both. A Participating Director's deferral election relating to
a retainer fee will be effective with respect to the portion of the retainer
fee payable for calendar quarters following the election. A Participating
Director's deferral election relating to a meeting fee will be effective with
respect to the meeting fees payable in calendar months following the election.
The Deferred Fee Program provides that each Participating Director may
direct how his or her deferred fees will be "invested." The "investments" under
the Deferred Fee Program will be bookkeeping accounts that measure earnings and
losses based on the performance of a particular investment measure. The
Deferred Fee Program will offer "investment choices" for determining such gains
and losses on deferred amounts. The Deferred Fee Program provides that one of
the investment choices will be a Common Stock Account. The Governance Committee
will designate other investment choices, if any, that will be available under
the Deferred Fee Program.
In addition to the investment elections, a Participating Director will be
permitted, subject to certain restrictions, (i) to increase or decrease the
amount of his or her future fee deferrals, (ii) to change the allocation of
deferrals among the "investment funds;" and (iii) to cease to defer fees.
Subject to certain restrictions, including those under Section 16 of the
Exchange Act, a Participating Director will be permitted to take cash
distributions in whole or in part from the Deferred Fee Program either prior to
or following the termination of his or her service as a Director. In addition,
distributions from the Common Stock Account may be made in Common Stock and
cash in lieu of a fractional share. A Participating Director may change the
date and form of distribution with respect to fees that are payable following
the new election.
Stock Purchase Program. The Stock Purchase Program allows a Participating
Director to receive payment of all or part of his or her retainer fee, meeting
fees, or both (other than fees that are deferred under the Deferred Fee
Program), in the form of Common Stock. The Stock Purchase Program does not
increase the fees otherwise payable to non-employee Directors.
Common Stock will be issued to each Director who participates in the Stock
Purchase Program on the dates that his or her retainer fee and meeting fees are
otherwise payable. The number of shares issued will be determined by dividing
the portion of fees subject to the Participating Director's election by the
fair market value of the Common Stock on the day preceding the date of payment.
The value of a fractional share, and the remainder of the Director fees, will
be paid in cash.
Elections to purchase Common Stock under the Stock Purchase Program will
be effective with respect to fees payable on and after the election date. A
Participating Director will be permitted to (i) increase or decrease the fees
that will be applied to purchase Common Stock and (ii) cease purchases of
Common Stock.
13
Stock Award Program. Under the Stock Award Program, each Participating
Director will be awarded, on the date of the first meeting of the Board
immediately following the annual meeting of the Company's shareholders, a
number of whole shares of Common Stock having an aggregate fair market value
equal to, or most nearly equal to, $10,000.
Duration, Amendment and Termination. No options may be granted under the
Stock Option Program and no awards may be made under the Stock Award Program
after the fifth anniversary of the date the 1998 Directors' Plan is approved by
the Company's shareholders. The Deferred Fee Program will terminate when all of
the deferred fees and any earnings thereon have been distributed to
Participants. No elections may be made under the Stock Purchase Program with
respect to fees payable on or after the fifth anniversary of the date the 1998
Directors' Plan is approved by the Company's shareholders. The Board may sooner
terminate the 1998 Directors' Plan without shareholder approval.
The Board also may amend the 1998 Directors' Plan. However, no amendment
will be effective without shareholder approval if (i) the amendment increases
the aggregate number of shares of Common Stock that may be issued in connection
with the Stock Option Program and Stock Award Program or (ii) the amendment
changes the class of individuals eligible to become Participating Directors.
Benefits Table. The following table illustrates the benefits that would
have been provided under the Stock Option and Stock Award Programs of the 1998
Directors' Plan if the plan had been in effect during 1997.
New Plan Benefits
Directors' Compensation Plan
Name and Position Dollar Value ($) Number of Units
- ---------------------------------------------- ------------------ ----------------
CEO $ 0 0
Executive A $ 0 0
Executive B $ 0 0
Executive C $ 0 0
Executive D $ 0 0
Executive Group $ 0 0
Non-Executive Director Group $441,000(1) 33,921(2)
Non-Executive Officer Employee Group $ 0 0
(1) This amount represents the fair market value of the Common Stock for
which options would have been granted and which would have been subject to
stock awards made to Directors who would have been eligible to participate in
the 1998 Directors' Plan. Each eligible Director would have received an option
for 3,000 shares of Common Stock (with a fair market value of $39,000 on April
29, 1997) with a corresponding option exercise price of $39,000. In addition,
each Director would have received a stock award for 769 shares of Common Stock
with a fair market value of $10,000 on April 29, 1997.
(2) The number of units was determined by multiplying the sum of 3000
optioned shares and 769 shares by the number of Directors who would have been
eligible to participate in the 1998 Directors' Plan on April 29, 1997.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVALRATIFICATION OF THEKPMG LLP
AS OWENS & MINOR, INC. 1998 DIRECTORS' COMPENSATION PLAN.
14
MINOR'S INDEPENDENT AUDITORS FOR 1999.
STOCK OWNERSHIP INFORMATION
- ---------------------------
Compliance WithCOMPLIANCE WITH SECTION 16(A) REPORTING
Section 16(a) Reporting
Theof the Securities Exchange Act of 1934 requires the
Company's directors itsand executive officers and any persons holding
more than 10% of outstanding shares of Common Stock are required to file reports with the Securities
and Exchange Commission ("SEC") concerning their
initial ownership(SEC) of Common Stockholdings and any subsequent changestransactions in that ownership.
Thethe Company's
common stock. Based on the Company's records and information provided by the
directors and officers, the Company believes that the filing requirements were
satisfied in 1997,1998, except that Josiah Bunting, III, a Director, Ann Greer Rector,an option grant to Gloria Farrow, Senior Vice
President and Chief Financial Officer, and James L. Grigg, Senior Vice
President, Supply Chain Management, eachManaging Director, Human Resources, was reported one transaction late. In
making this disclosure,late due to a
Company reporting error.
STOCK OWNERSHIP GUIDELINES
Under the Company has relied solely on written
representations of its directors, executive officers and beneficial owners of
more than 10% of the Common Stock and copies of the reports that they have
filed with the SEC.
Stock Ownership Guidelines
The Board of Directors adopted aCompany's Management Equity Ownership Program adopted in 1997,
pursuant to which officers of the Company are expected, over a five-year period, to achieve the following levels
of ownership of Common Stock:
common stock:
Officer Value of Common Stock Owned
- - ---------------------------------------------- ----------------------------
Chief Executive Officer 4.0 x Base Salary
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 Stockcommon stock
equal to at least five times the annual retainer fee (including both cash retainer, the value
of commonand
stock granted as part of the annual retainer and any additional
retainer received for serving as chairperson of a board committee)retainer).
158
Stock Ownership By Principal Shareholders and Management
The followingSTOCK OWNERSHIP BY MANAGEMENT
This table sets forthshows as of March 3, 19982, 1999 the number of shares of Common Stock and Series B Preferred Stockcommon stock
beneficially owned by each director and nominee, the named executiveCompany's five most highly
compensated officers in the Summary Compensation Table,and all current executive officers and directors of the
Company as a group, and all
persons (including any "group" as that term is used in Section 13(d)(3) of the
Exchange Act) who, to the knowledge of the Company, are the beneficial owners
of more than 5% of the outstanding Common Stock or Series B Preferred Stock.group.
Sole Voting Aggregate
Title Name of and Investment Percentage
of Class Beneficial Owner Power(1) Other(2) Owned
- ------------- ------------------------------------------ ---------------- --------------- -----------SOLE VOTING AGGREGATE
NAME OF AND INVESTMENT PERCENTAGE
BENEFICIAL OWNER POWER(1) OTHER(2) OWNED
Common G. Gilmer Minor, III 640,192 76,371715,817 13,976 2.2%
Henry A. Berling 383,358406,317 8,457 1.2%1.3%
Josiah Bunting, III 5,5499,135 0 *
R. E. Cabell, Jr. 86,66789,103 8,655 *
James B. Farinholt, Jr. 17,11320,699 0 *
C.G. Grefenstette 9,981 6,969,000 (3) 17.7%
Vernard W. Henley 10,51314,849 750 *
E. Morgan Massey 207,110210,696 23,000 *
Peter S. Redding 0 0 *
James E. Rogers 19,10723,693 0 *
James E. Ukrop 50,01355,014 0 *
Anne Marie Whittemore 17,82721,413 225 *
Craig R. Smith 112,744139,202 45 *
Ann Greer Rector 25,535 1,78648,630 2,342 *
Drew St.J. Carneal 77,709 2,01393,283 2,191 *
All Executive Officers and Directors as a group (28(26 persons) 2,002,919 7,105,768 22.8%
Wilmington Securities, Inc. (3)
824 Market Street, Suite 900
Wilmington, DE 19801 6,969,000 0 17.7%
Wellington Management Company, LLP (4)
75 State Street
Boston, MA 02109 0 2,049,400 6.3%
Westport Asset Management, Inc. (5)
253 Riverside Avenue
Westport, CT 06880 21,900 2,427,075 7.6%
Valenzuela Capital Management, Inc. (6)
1270 Avenue of the Americas, Suite 508
New York, NY 10020 2,532,300 0 7.8%
Series B
Preferred
Stock(7)(8) Wilmington Securities, Inc. (3)
824 Market Street, Suite 900
Wilmington, DE 19801 1,150,000 0 100.0%2,167,072 58,157 5.5%
*Represents less than 1% of the total number of shares outstanding.
(1) Includes 663,617808,262 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 3, 1998.2, 1999. Stock options exercisable within 60 days of
March 3, 19982, 1999 for each of the named executive officers in the Summary
Compensation TableNamed Executive Officers are as follows: Mr.
Minor 141,500;190,000, Mr. Smith 85,750;107,750, Mr. Berling 80,500;80,000, Mrs. Rector 22,500; and41,100, Mr.
Carneal 46,500.
16
61,500.
(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;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.
(3) Wilmington Securities, Inc. ("Wilmington") owns 1,150,000 shares of
Series B Preferred Stock which are convertible into approximately 6,969,000
shares of Common Stock. Wilmington acquired the 1,150,000 shares of Series B
Preferred Stock in January 1996 from the former shareholders of Stuart Medical,
Inc. Wilmington is a private investment company and an indirect wholly-owned
subsidiary of The Hillman Company, a firm engaged in diversified investments
and operations which is controlled by the Henry L. Hillman Trust U/A/T dated
November 18, 1985 (the "Trust"). The trustees of the Trust are Henry L.
Hillman, Elsie Hilliard Hillman and C.G. Grefenstette (the "Trustees"). The
Trustees share voting and investment power with respect to the shares held of
record by Wilmington and may be deemed to be the beneficial owners of such
shares.
(4) The number of shares owned is as of January 14, 1998, as reported in
the Schedule 13G filed by Wellington Management Company, LLP and received by
the Company on or about February 16, 1998.
(5) The number of shares owned is as of February 19, 1998, as reported in
the Schedule 13G filed by Westport Asset Management, Inc. and received by the
Company on or about February 23, 1998.
(6) The number of shares owned is as of February 4, 1998, as reported on
the Schedule 13G filed by Valenzuela Capital Management, Inc. and received by
the Company on or about February 5, 1998.
(7) The 1,150,000 shares of outstanding Series B Preferred Stock are
convertible into approximately 6,969,000 shares of Common Stock and are owned
by Wilmington. Wilmington has agreed that so long as it owns any shares of
Series B Preferred Stock or owns at least 5% of the outstanding shares of
Common Stock, it will vote such shares, with respect to each matter to be voted
upon by the holder(s) of such shares, in the same proportion as the votes cast
on such matter by all other holders of Common Stock (excluding certain holders
of 5% or more of the Common Stock). Such voting agreement does not apply to
certain matters including specified amendments to the Company's articles of
incorporation or bylaws, the election of the Series B Director and certain
matters specified by Virginia law.
(8) None of the directors, or named executive officers in the Summary
Compensation Table, other than Mr. Grefenstette, owns any Series B Preferred
Stock.
179
EXECUTIVE COMPENSATION
- ----------------------
SUMMARY COMPENSATION TABLE
The followingThis table shows for each of the fiscalpast three years ended December 31, 1997,
1996 and 1995, the cash compensation paid by
the Company as well as certain
other compensation paid or accrued, to the Company's Chief Executive Officer
and its four otherfive most highly compensated executive officers (the "Named(Named Executive
Officers")Officers).
Annual Compensation Long-Term CompensationANNUAL COMPENSATION LONG-TERM COMPENSATION (1)
--------------------------------------- --------------------------------------
Awards
------------------------
Other Restricted Securities All
Annual Stock Underlying Other
Name and Compensation Awards Options Compensation
Principal Position Year SalaryAWARDS
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BonusBONUS ($) ($)(2) ($)(3) (#)(4) ($)(5)
- --------------------------- ------ ------------ ----------- -------------- ----------- ------------ -------------
G. Gilmer Minor, III 1997 $476,926 $110,0001998 $503,462 $118,125 -- $227,500$239,532 50,000 $35,921$36,724
Chairman, President & 1997 476,926 110,000 -- 227,500 50,000 35,921
Chief Executive Officer 1996 409,619 0 -- 0 45,000 33,217
& Chief Executive 1995 375,000 0 -- 0 0 35,611
Officer
Craig R. Smith 1998 266,676 65,314 -- 60,202 25,000 18,807
Executive Vice President 1997 262,062 64,974 -- 47,380 20,000 17,978
Executive Vice PresidentChief Operating Officer 1996 231,620 0 -- 0 20,000 15,563
Chief Operating Officer 1995 203,091 0 -- 0 30,000 15,366
Henry A. Berling 1998 266,676 61,145 -- 70,873 25,000 21,199
Executive Vice President 1997 256,369 60,996 -- 68,289 25,000 20,706
Executive Vice PresidentPartnership Development 1996 223,789 0 -- 0 15,000 15,133
Partnership 1995 206,938 0 -- 0 0 16,700
Development
Ann Greer Rector (6)1998 226,246 52,820 -- 24,266 15,000 10,240
Senior Vice President 1997 201,539 52,875 -- 17,043 15,000 9,602
Senior Vice PresidentChief Financial Officer 1996 159,866 0 -- 0 15,000 2,777
Chief Financial Officer 1995 57,692 39,696 -- 0 12,000 0
Drew St.J. Carneal 1998 182,630 47,549 -- 40,417 15,000 5,006
Senior Vice President 1997 178,800 41,860 -- 37,765 15,000 4,791
Senior Vice PresidentGeneral Counsel & Secretary 1996 167,633 0 -- 0 15,000 2,894
General Counsel & 1995 164,175 0 -- 0 0 3,370
Secretary
(1) The Company has no Long-Term Incentive Plans as defined by Item
402(a)(7)(iii) of Regulation S-K.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 1998, 1997 1996 or 1995.1996.
(3) Of the total Restricted Stock awards for 1997,1998, the following amounts
were awarded to the Named Executive Officer for achieving his or her stock
ownership requirement under the Management Equity Ownership Program:
(i) Mr. Minor $200,000; (ii)$210,000 Mrs. Rector $11,061
Mr. Smith $31,136; (iii)$ 43,873 Mr. Carneal $28,529
Mr. Berling $53,040; (iv) Mrs.
Rector, $3,824; and (v) Mr. Carneal, $27,300.$ 55,586
Aggregate restricted stock holdings and values at December 31, 19971998 for
the Named Executive Officers are as follows: (i) Mr. Minor: 16,678 shares, $241,831; (ii) Mr. Smith: 3,354
shares, $48,633; (iii) Mr. Berling: 4,913 shares, $71,239; (iv) Mrs. Rector:
261 shares, $3,785; and (v) Mr. Carneal: 2,894 shares, $41,963.follows. Dividends are paid on restricted
stock at the same rate as all shareholders of record.
Mr. Minor 29,891 shares, $470,783 Mrs. Rector 3,329 shares, $52,432
Mr. Smith 6,593 shares, $103,840 Mr. Carneal 4,784 shares, $75,348
Mr. Berling 8,759 shares, $137,954
(4) No SARs were granted in 1998, 1997 1996 or 1995.1996.
(5) Includes in 1997 for (i) Mr. Minor: $4,750 companyeach officer Company contributions to defined contribution plan, $720 company contributions to Stock Purchase Plan
and $30,451 benefit attributable to company-owned life insurance policy; (ii)
Mr. Smith: $4,750 company contributions to defined contribution plan, $225
company contributions to Stock Purchase Plan and $13,003 benefit attributable
to company-owned life insurance policy; (iii) Mr. Berling: $4,750 company
contributions to defined contribution plan and $15,956 benefit attributable to
company-owned life insurance policy; (iv) Mrs. Rector: $4,071 company
contributions to defined contribution plan, $555 company contributions to Stock
Purchase Plan and $4,976 benefit attributable to company-owned life insurance
policy; and (v) Mr. Carneal: $4,071 company contributions to defined
contribution plan and $720 company contributions to Stock Purchase Plan.
18the following:
401(k) Plan Stock Purchase Plan Company-Owned Life Insurance
------------- --------------------- -----------------------------
Mr. Minor $5,000 $720 $31,004
Mr. Smith 5,000 225 13,582
Mr. Berling 5,000 0 16,199
Mrs. Rector 4,286 720 5,234
Mr. Carneal 4,286 720 0
10
(6) Mrs. Rector was hired by the Company on August 8, 1995 as Vice
President, Controller of the Company and was promoted to Senior Vice President,
Chief Financial Officer in September 1996.
19971998 OPTION GRANTS
The followingThis table contains information concerning the grant ofshows options madegranted during 1997 under the 1993 Option Plan1998 to the Named Executive
Officers. The Company granted no SARs during 1997.1998.
Grant
Date
Individual Grants(1) Value(2)
- --------------------------------------------------------------------------------------- ------------------
Number of
SecuritiesINDIVIDUAL GRANTS(1) VALUE(2)
NUMBER OF
SECURITIES % of Total
Underlying Options Granted Exercise or
Options to Employees Base Price Expiration Grant Date
Name Granted in Fiscal YearOF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION GRANT DATE
NAME GRANTED IN FISCAL YEAR ($/Share) Date Present ValueSHARES) DATE PRESENT VALUE ($)
- ---------------------- ------------ ----------------- ------------ ------------ ------------------
G. Gilmer Minor, III 50,000 10.12%9.91% $ 12.6875 4/15/07 $191,50013.5625 2/02/08 $204,500
Craig R. Smith 20,000 4.05% 12.6875 4/15/07 76,60025,000 4.96% 13.5625 2/02/08 102,250
Henry A. Berling 25,000 5.06% 12.6875 4/15/07 95,7504.96% 13.5625 2/02/08 102,250
Ann Greer Rector 15,000 3.03% 12.6875 4/15/07 57,4502.97% 13.5625 2/02/08 61,350
Drew St.J. Carneal 15,000 3.03% 12.6875 4/15/07 57,4502.97% 13.5625 2/02/08 61,350
(1) Options are exercisable beginningThe vesting schedule is as follows: 40% on the first anniversary of grant
date, with 40% being exercisable at that time and an additional2/2/99; 30% on 2/2/00; and
30% becoming exercisable on the second and third anniversary of grant date,
respectively.2/2/01.
(2) Based upon Black Scholes option valuation model. Assumptions include a
risklessrisk-free interest rate of return of 5.62%4.7%, annual dividend yield of 1.42%1.47%, an average
period outstanding of 4.1 years and expected volatility of approximately
24.58%35.11%.
19971998 OPTION EXERCISES AND YEAR-END OPTION VALUES
The followingThis table sets forth information with respect toshows for the Named Executive Officers concerning the exercise ofany options exercised
during 19971998 and unexercised options held by them on December 31, 1997.1998. There were no
SARs exercised during 19971998 or outstanding on December 31, 1997.1998. Value of
unexercised options is calculated using the difference between the option
exercise price and $15.75 (year-end stock price) multiplied by the number of
shares underlying the option.
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options at
Shares Options at FY End FY End
Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
- ---------------------- --------------- ---------- ------------------- --------------------SHARES NUMBER OF SECURITIES VALUE OF
ACQUIRED UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
UPON VALUE OPTIONS AT YEAR END OPTIONS AT YEAR END
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
G. Gilmer Minor, III 67,500 $338,929 108,000 / 77,0000 $ 12,375/$109,1880 141,500 93,500 $152,251 $227,406
Craig R. Smith 28,875 148,553 73,250 / 41,000 87,316/ 52,93810,500 73,941 85,750 43,000 128,489 103,063
Henry A. Berling 11,250 70,082 66,000 / 34,000 137,258/ 51,50022,500 211,883 58,000 44,500 63,456 109,344
Ann Greer Rector 0 0 14,400 / 27,600 31,950/ 58,80028,500 28,500 97,519 78,544
Drew St.J. Carneal 11,250 60,394 58,500 / 24,000 137,258/ 33,37522,500 150,008 46,500 28,500 48,709 69,094
RETIREMENT PLANS
Pension Plan.PENSION PLAN. The Company provides retirement benefits under a defined
benefit pension plan (the "Pension Plan") to substantially all employees who had earned benefits as
of December 31, 1996. Benefits under the Pension Planpension plan are based upon both
length of service and compensation and are determined under a formula based on
an individual's earnings and years of credited service. Funding is determined
on an actuarial basis. Effective December 31, 1996, participants in the Pension Planpension
plan ceased to accrue additional benefits; provided, however, that participants
who have completed at least five years of service as of January 1, 1997 and
whose age plus years of service equalequaled at least 65 continue to earn an accrued
benefit until the earlier of (i) December 31, 2001 or (ii) until retirement,
death or termination of 19
employment (with the exception of certain highly
compensated employees if the Pension Planpension plan does not meet certain coverage
requirements of the Internal Revenue Code ("IRC"))Code).
11
The following table shows estimated annual benefits payable under the
pension plan at normal retirement age of 65 years to persons withbased on the specified
remuneration and years of service under the Pension Plan:service:
Average Average Straight Life Annuity Benefits Based
Compensation(1) on Years of Credited Service
- ----------------- ------------------------------------------------------------AVERAGE STRAIGHT LIFE ANNUITY BENEFITS BASED
ON YEARS OF CREDITED SERVICE
AVERAGE
COMPENSATION(1) 15 yrs.YRS. 20 yrs.YRS. 25 yrs.YRS. 30 yrs.YRS. 35 yrs.
--------- --------- ---------- ---------- ----------YRS.
$ 150,000 $25,343 $32,482 $39,621 $46,761 $53,900
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 94,187 116,205 125,000130,000
500,000 53,623 78,121 102,618 125,000 125,000127,116 130,000
550,000 57,095 84,072 111,049 130,000 130,000
600,000 60,566 90,023 119,480 130,000 130,000
650,000 64,038 95,975 127,911 130,000 130,000
700,000 67,510 101,926 130,000 130,000 130,000
750,000 70,981 107,878 130,000 130,000 130,000
(1) Average compensation represents compensation based upon a benefit
formula applied to an employee's career average earnings, which approximates
the amount of salary set forth in the Summary Compensation Table. The maximum
amount of covered compensation is $160,000, or some other amount as may be
determined by the Secretary of Treasury pursuant to IRC 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 Planpension plan are
presently as follows: Mr. Minor, 3435 years; Mr. Smith, 7 years; Mr. Berling, 3132
years; Mrs. Rector, 0 years; and Mr. Carneal, 910 years.
Supplemental Executive Retirement Plan.SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company provides supplemental
retirement benefits to certain employees selected by the Compensation &
Benefits Committee under the Supplemental Executive Retirement Plan (the "SERP")(SERP). The
SERP entitles participants to receive a specified percentage of the
participant's average base monthly salary during the five years preceding his
or her retirement (in the case of the Named Executive Officers, 65%) reduced by
the benefit payable under the Pension Planpension plan and Social Security. The estimated
annual benefits payable under the SERP upon retirement at normal retirement age
for the Named Executive Officers are: Mr. Minor $190,684;$237,666, Mr. Smith $139,110;$144,524,
Mr. Berling $95,786;$111,673, Mrs. Rector $100,476; and$128,970, Mr. Carneal $82,074. These
benefits have been calculated assuming a frozen Pension Plan benefit at
December 31, 1996, as discussed above.$86,747.
REPORT OF THE COMPENSATION & BENEFITS COMMITTEE
The Compensation & Benefits Committee (Compensation Committee) is
comprised of five outside directors who are not current or past employees of
the Company. The primary functions of the Compensation Committee are to oversee
the design and competitiveness of the Company's total compensation program, to
evaluate the performance of the Company's senior executives and approve related
compensation actions, and to administer the Company's SERP, 401(k) Plan, Stock Purchase Plan, 1993 Option
Plan and Annual Incentive Plancompensation plans for
employees who are subject to Section 16 of the Securities Exchange Act of 1934,
in accordance with the terms of each respective plan. The Compensation
Committee met four times during calendar year 1997.
Executive Compensation Philosophy
With respect to executive compensation, the1998.
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee'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. Compensation for
executives is therefore based upon measures of the Company's financial
performance and strategic results that are intended to lead to the creation of
shareholder value. The Compensation Committee also strives to maintain market
competitive compensation levels and therefore regularly evaluates executive
compensation levels through comparisons against the peer
12
companies reflected in the Performance Graph of this proxy statement, and other
companies of similar
20
size and operating characteristics. Base salary levels
generally are targeted at competitive market averages for like experienced
executives. Annual incentive compensation opportunities, when combined with
base salaries, are intended to fully reach competitive average total cash
compensation levels as warranted by the Company's and the individual officer's
performance. Longer-term incentive compensation opportunities, such as stock
options, link executive compensation with achievement of strategic objectives
and shareholder value growth. This combination is intended to focus management
on the annual and longer-term success of the Company.
The Compensation Committee recognizes it may sometimes be necessary to
sacrifice short-term financial performance to obtain longer-term business
success. This belief leads the Compensation Committee to regularly monitor the
balance between annual and longer-term rewards, and act as needed to encourage
meaningful levels of share ownership among executives. During
1997, the Compensation Committee approved theThe Management Equity
Ownership Program ("MEOP") for the Company's officers works to further align the
alignmentinterests of executiveexecutives and shareholder interests. The MEOP is described later in this
report.shareholders.
Executive base salaries were adjusted in 1997 due1998 to a need for moremaintain competitive pay
levels and to be consistent with the Compensation Committee's compensation philosophy.
The base salary for the CEOChief Executive Officer increased 18%5% over the 19961997
level. Base salaries for the other Named Executive Officers increased an
average of 11%4.7% over 19961997 levels.
Committee Process and Annual Incentive PlanCOMMITTEE PROCESS AND ANNUAL INCENTIVE PLAN
Early each year the Compensation Committee meets to review key aspects of
the upcoming year's business plan and to establish Annual Incentive Plan goals
for each corporate officer, including the Chief Executive Officer, executive
and senior vice presidents and vice presidents. Goals under this plan are
weighted to reflect their importance and contribution to desired Company and
shareholder outcomes. The 19971998 Annual Incentive Plan goals for named executives
were based on results in two areas: the Company's earnings per share (EPS)
achievement and pre-established personal performance objectives. These goals
were weighted 80%two-thirds based on EPS and 20%one-third on personal performance for
the Chief Executive Officer and each of the other Named Executive Officers. The
Compensation Committee receives periodic updates during the year on business
performance in relation to incentive plan goals, particularly with respect to
senior executives. Discussions of management contribution and performance are
the norm, not the exception, in Compensation Committee meetings.
At the close of each year, the Compensation Committee meets to discuss
financial and other performance compared to Annual Incentive Plan goals and
longer-term strategic business goals. These longer-term business goals center
around the Company'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's markets. In deciding the level of
annual salary increases, incentive payments and granting of stock options, the
Compensation Committee looks to the Chief Executive Officer for recommendations
on senior executives and then meets privately, without the presence of
management, including the Chief Executive Officer in relation to his own
compensation, to determine compensation actions. The Compensation Committee's
decision-making process is benefited by input from the Company's Human
Resources Department, and periodically from outside advisors, to maintain the
desired level of competitiveness and technically sound compensation and benefit
programs.
The Company's operating performance forloss in 1998 of Columbia/HCA as a customer was moderated by the
aggressive actions of management to add new business with favorable terms.
These efforts kept Company sales in 1998 level with 1997 showed improvement over 1996.
Company performance in 1997 saw sales increase 3.2% toat $3.1 billion, and
net income increaseexcluding the non-recurring restructuring charge due to the
Columbia/HCA loss was $26.8 million versus $24.3 million from a 1996 net income of $13.0 million.in 1997. Net income
per common share was $0.60 versus $0.25 per share$.75 compared to $.60 in 1996.1997.
The maximum cash award payable under the Company's Annual Incentive Plan
to the Chief Executive Officer for full attainment of earnings per shareEPS and personal
performance goals would be 50% of his base salary. An annual incentive cash
award in the amount of $110,000,$118,125, or 22%22.5% of base salary, was paid to the CEOChief
Executive Officer for 19971998 performance.
Under the Company's Annual Incentive Plan, executives are also eligible to
receive a bonus of Common Stockcommon stock equivalent to an additional 25% of the cash
incentive payment. The shares are restricted and vest provided the officer
maintains a continuous employment relationship with the Company for the
following three years. The restricted stock bonus for Named Executive Officers
is dependent on performance against the same goals as for the Annual Incentive
Plan. The Chief Executive Officer and other 21
Named Executive Officers each
received a
13
restricted stock bonus equal to 25% of the cash annual incentive award paid for
19971998 performance. The value of restricted stock provided to the Chief Executive
Officer was $27,500.
Long-Term Incentive Plan$29,532.
LONG-TERM INCENTIVE PLAN
Each year the Compensation Committee considers the desirability of
granting senior executives awards under the Company's stock option plan. The
plan provides for the use of non-qualified stock options, incentive stock
options and stock appreciation rights. The Compensation Committee's decision to
grant stock options is discretionary and largely determined by key financial
performance measures and strategic accomplishments, though no specific
performance targets are applied for this purpose. Option grant decisions may
also be based upon outstanding individual performance, job promotions and
greater responsibility within the Company. Stock option levels are a component
of competitive total compensation and include such considerations as salary
grade levels, responsibility levels and expectations of future impact on
overall Company performance. The Compensation Committee believes stock option
grants have historically been effective in helping to focus executives on
enhancing long-term profitability and shareholder value. The Compensation
Committee granted 50,000 stock options to the Chief Executive Officer in 1997
as a result of performance improvements over 1996, progress toward
profitability enhancement initiatives and1998
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 ProgramMANAGEMENT EQUITY OWNERSHIP PROGRAM
As stated earlier, in 1997 the Compensation Committee approved the
MEOPManagement Equity Ownership Program for members of the management team,
including each of the Named Executive Officers. The MEOPThis 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 CEOChief Executive Officer to one times salary for
Regional 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.
Participants are given a five year period to progress to the full target
ownership amount with interim ownership requirements to meet each year. During
the initial investment phase, a portion4% of theany 1998 salary increase if any,
will bewas delivered in
the form of restricted stock. Participants have the option to receive a portion
of their annual cash incentive award in restricted stock to help meet their
equity investment requirements. In addition, a 10% annual equity ownership
dividend is paid on all Common Stockcommon stock owned up to the participant'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 achieved and maintained. If
a participant's ownership falls below the desired ownership 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
required ownership level is met. Corporate Tax ConsiderationsDuring 1998, 4% of the Chief Executive
Officer's salary increase was paid in the form of restricted stock and an
annual dividend of 13,254 restricted shares was granted.
CORPORATE TAX CONSIDERATIONS
Congress passed a law effective in 1994, covered in IRC Section 162(m), of the
Internal Revenue Code, that disallows corporate tax deductions for executive
compensation in excess of $1 million for "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."
All current executive compensation is fully deductible. The Compensation
Committee intends for the Company's pay plans and actions to be
performance-based and therefore fully eligible for compensation expense
deductions.
The foregoing report has been furnished by Mrs. Whittemore and Messrs.
Henley, Massey, Rogers (Chairman), and Ukrop.
2214
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The following performance graph compares the performance of the Common
StockCompany's
common stock to the S&P 500 Index and a Peer Group which(which includes the Company
and the companies listed below,below) for the Company's last five fiscal years. The graph assumes that
the value of the investment in the Common Stockcommon stock and each index was $100 on
December 31, 19921993 and that all dividends were reinvested.
5-Year Total Shareholder Return5-YEAR TOTAL SHAREHOLDER RETURN
[GRAPH]
Dec-92 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97
Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98
Owens & Minor, Inc. 100 158 148 13494 85 70 100 110 157
S&P 500 100 110 112 153 189 252101 139 171 229 294
Industry Peer Index 100 122 125 170 226 320102 137 181 244 310
The Peer Group selected for purposes of the above graph consists of
companies engaged in the business of distribution, and includes Owens & Minor,
Inc., Arrow Electronics Inc., Bergen Brunswig Corp., Bindley Western
Industries, Cardinal Health, Inc., Hughes Supply Inc., Moore Medical Corp.,
Nash Finch Company, Richfood Holdings, Inc., United Stationers Inc., and VWR
Scientific Products Corp.
and Rykoff-Sexton Inc. (which was acquired by JP
Foodservice Inc. on December 23, 1997).
23
EXECUTIVE SEVERANCE AGREEMENTS
In 1989, the Board authorized theThe Company to enterhas entered into Severance Agreements (the "Severance Agreements") with certain officers of the Company 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
Company.
The Severance Agreements include senior vice presidents and higher ranking
corporate officers, including the Named Executive Officers, who have been
employed by the Company for a period of at least one year and also vice
presidents who have been employed by the Company for at least ten years and are
approved for participation by the Compensation Committee.
The Severance Agreements provide for the payment of a severance benefit if
such participant'sthe officer's employment with the Company is terminated for any reason other(other
than as a consequence of death, disability or normal retirement,retirement) within two
years after a Changechange in Control ofcontrol. For the Company (as defined inNamed Executive Officers, the Severance
Agreements). The
severance benefit is equal to 2.99 times the average of the
participant's totalofficer's annual compensation from the Company, including all
bonuses, which was included in gross income for income tax purposes for the
five calendar years preceding the Change in Control of the Company, provided,
however, no payments will be made to participants which would be treated as an
"excess parachute payment" under Section 280G of the IRC.base salary plus
bonus.
Each Severance Agreement continues in effect through December 31, 1998,1999,
and unless notice is given to the contrary, the term is automatically extended
for an additional year at the end of each year.
OTHER INFORMATION
- -----------------
Shareholder Proposals
Shareholders wishing to present proposals for action at the Company's
Annual Meeting of Shareholders inMarch 11, 1999 must submit the proposals to the Company
for inclusion in the Company's 1999 Proxy Statement not later than November 13,
1998 in writing at the address shown in the heading of this Proxy Statement.
Expenses of Solicitation
The Company pays all costs of solicitation related to this proxy
statement. The Company will reimburse brokers and other persons holding stock
in their name as nominees for their expenses in obtaining authorization to
execute proxies from their principals. Corporate Investor Communications, Inc.
has been retained to aid in the solicitation of proxies by telephone or
telegraph or by personal calls at an anticipated cost to the Company of $5,000
plus expenses.
Miscellaneous
The Company does not know of any other matter to be presented for action
by the shareholders at the meeting. If any other matter properly comes before
the meeting, it is intended that the persons named in the accompanying form of
proxy will vote thereon in their discretion.
March 13, 1998
BY ORDER OF THE BOARD OF DIRECTORS
DREW ST. J. CARNEAL
Secretary
2415
Directions to
Owens & Minor, Inc. Annual Meeting of Shareholders
Tuesday,Wednesday, April 28, 19981999 -- 10:00 a.m.
Virginia Historical Society
428 North Boulevard
Richmond, Virginia
The Boulevard is Exit 78 on both I-64 and I-95:
From Washington DC, follow I-95 South to the exit.
From Petersburg, follow I-95 North.
From Charlottesville, follow I-64 East.
From Norfolk and the Airport, follow I-64 West.
Take the Boulevard south just past Kensington Avenue, turn right into the
Virginia Historical Society. Parking is available behind the building and atin
the adjacent Virginia Museum parking lot.
Annex A
OWENS & MINOR, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
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-5
1.06. Committee....................................................A-5
1.07. Common Stock.................................................A-5
1.08. Company......................................................A-5
1.09. Control Change Date..........................................A-5
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-6
1.18. Plan.........................................................A-6
1.19. Related Entity...............................................A-6
1.20. SAR..........................................................A-6
1.21. Stock Award..................................................A-6
1.22. Ten Percent Shareholder......................................A-6
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-8
5.01. Shares Issued................................................A-8
5.02. Aggregate Limit..............................................A-8
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-10
6.07. Payment.....................................................A-10
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
A-2
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-12
8.01. Award.......................................................A-12
8.02. Earning the Award...........................................A-12
8.03. Payment.....................................................A-12
8.04. Change in Control...........................................A-12
8.05. Shareholder Rights..........................................A-13
ARTICLE IX INCENTIVE AWARDS................................................A-13
9.01. Awards......................................................A-13
9.02. Terms and Conditions........................................A-13
ARTICLEP R O X ADJUSTMENT UPON CHANGE IN COMMON STOCK...........................A-14
ARTICLE XI COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES...........A-14
ARTICLE XII GENERAL PROVISIONS.............................................A-14
12.01. Effect on Employment or Service............................A-14
12.02. Unfunded Plan..............................................A-15
12.03. Disposition of Stock.......................................A-15
12.04. Rules of Construction......................................A-15
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-16
ARTICLE XIV DURATION OF PLAN...............................................A-16
ARTICLE XV EFFECTIVE DATE OF PLAN..........................................A-16
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;
(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
A-4
(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.
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.
A-5
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.
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.
A-6
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.
A-7
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 1,380,000 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.
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.
A-8
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.
A-9
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.
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
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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
Participant 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.
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
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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
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.
ARTICLE XII
GENERAL PROVISIONS
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
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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.
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
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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
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
No Performance Shares may be awarded and no Stock Award, Option, SAR or
Incentive Award may be granted under this Plan more than five years after the
earlier of the date that the Plan is adopted by the Board or the date that the
Plan is approved by shareholders as provided in Article XV. 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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Annex B
OWENS & MINOR, INC.
1998 DIRECTORS' COMPENSATION PLAN
B-1
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS..........................................B-4
1.01. Account.........................................B-4
1.02. Agreement.......................................B-4
1.03. Allocation Date.................................B-4
1.04. Beneficiary.....................................B-4
1.05. Board...........................................B-4
1.06. Code............................................B-4
1.07. Committee.......................................B-4
1.08. Common Stock....................................B-5
1.09. Common Stock Account............................B-5
1.10. Company.........................................B-5
1.11. Compensation....................................B-5
1.12. Deferred Amount.................................B-5
1.13. Deferred Fee Program............................B-5
1.14. Disability......................................B-5
1.15. Distribution Date...............................B-5
1.16. Election Date...................................B-5
1.17. Election Form...................................B-5
1.18. Extraordinary Distribution Request Date.........B-5
1.19. Extraordinary Distribution Request Form.........B-5
1.20. Fair Market Value...............................B-5
1.21. Meeting Fees....................................B-5
1.22. Option..........................................B-5
1.23. Participant.....................................B-6
1.24. Plan............................................B-6
1.25. Retainer Fee....................................B-6
1.26. Stock Award.....................................B-6
1.27. Stock Award Program.............................B-6
1.28. Stock Option Program............................B-6
1.29. Stock Purchase Program..........................B-6
1.30. Stock Purchase Election.........................B-6
1.31. Stock Purchase Election Form....................B-6
ARTICLE II ADMINISTRATION......................................B-6
ARTICLE III STOCK OPTION PROGRAM...............................B-6
3.01. Option Grants...................................B-6
3.02. Option Price....................................B-7
3.03. Maximum Option Period...........................B-7
3.04. Exercise........................................B-7
3.05. Payment of Option Price.........................B-7
3.06. Stock Subject to Options........................B-7
3.07. Transferable Options............................B-7
ARTICLE IV DEFERRED FEE PROGRAM................................B-7
4.01. Deferral Elections..............................B-7
4.02. Deferral Election Modifications.................B-8
4.03. Cessation of Deferrals..........................B-8
4.04. Beneficiary Election Modification...............B-8
4.05. Investments.....................................B-8
4.06. Investment Directions...........................B-8
4.07. New Investment Directions.......................B-9
4.08. Investment Transfers............................B-9
4.09. Distribution Elections..........................B-9
4.10. Modified Distribution Elections.................B-9
4.11. Extraordinary Distributions.....................B-9
B-2
ARTICLE V STOCK PURCHASE PROGRAM..............................B-10
5.01. Common Stock Purchase..........................B-10
5.02. Stock Purchase Election Modification...........B-10
5.03. Issuance of Common Stock.......................B-10
ARTICLE VI STOCK AWARD PROGRAM................................B-10
6.01. Awards.........................................B-10
6.02. Vesting........................................B-11
6.03. Transferability................................B-11
ARTICLE VII SHAREHOLDER RIGHTS................................B-11
ARTICLE VIII ADJUSTMENT UPON CHANGE IN COMMON STOCK...........B-11
ARTICLE IX COMPLIANCE WITH LAW, ETC...........................B-11
ARTICLE X GENERAL PROVISIONS..................................B-11
10.01. Unfunded Plan.................................B-11
10.02. Rules of Construction.........................B-12
10.03. Nontransferability............................B-12
ARTICLE XI AMENDMENT AND TERMINATION..........................B-12
ARTICLE XII DURATION OF PLAN..................................B-12
ARTICLE XIII EFFECTIVE DATE OF PLAN...........................B-12
B-3
INTRODUCTION
The Owens & Minor, Inc. 1998 Directors' Compensation Plan (the Plan)
was adopted by the Board of Directors on February 23, 1998, subject to the
approval of the Plan by the Company's shareholders. The Plan is an amendment and
restatement of the Directors' Compensation Plan that was adopted by the Board of
Directors on February 25, 1993, and approved by the Company's shareholders on
April 27, 1993. Four programs comprise the Plan: the Stock Option Program, the
Deferred Fee Program, the Stock Purchase Program; and the Stock Award Program.
The Stock Option Program provides for the automatic grant of Options
to purchase Common Stock. Options are granted on an annual basis and are
subject to the terms and conditions prescribed by the Plan. Participation in
the Stock Option Program is automatic.
The Deferred Fee Program allows Participants to defer the receipt of
all or part of their Retainer Fee, Meeting Fees or both in accordance with
Revenue Ruling 71-419, 1971-2 C.B. 220. Participation in the Deferred Fee
Program is voluntary.
The Stock Purchase Program allows Participants to receive all or part
of their Retainer Fee, Meeting Fees or both (to the extent such amounts are not
deferred under the Deferred Fee Program), in the form of Common Stock.
Participation in the Stock Purchase Program is voluntary.
The Stock Award Program provides for grants of common stock of the
Company to Participants. Stock is awarded on the first meeting of the Board
following the annual meeting of the Company's Shareholders.
Participation in the Stock Award Program is automatic.
The Plan is intended to assist the Company in promoting a greater
identity of interest between Participants and the Company and its shareholders.
The Plan is also intended to assist the Company in attracting and retaining
non-employee Directors by affording them an opportunity to share in the future
success of the Company.
ARTICLE I
DEFINITIONS
1.01. Account
Account means an unfunded deferred compensation account established by
the Company pursuant to the Deferred Fee Program, consisting of one or more
Subaccounts established in accordance with Section 4.05.
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 Option granted to such Participant.
1.03. Allocation Date
Allocation Date means any date on which an amount representing all or a
part of a Participant's Compensation is to be credited to his or her Account
pursuant to an effective deferral election. The Allocation Date for the Retainer
Fee shall be the first day of each calendar quarter and for Meeting Fees shall
be the first day of the month following the date the meeting is held.
1.04. Beneficiary
Beneficiary means any person or entity designated as such in a current
Election Form. If there is no valid designation or if no designated Beneficiary
survives the Participant, the Beneficiary is the Participant's estate.
1.05. Board
Board means the Board of Directors of the Company.
1.06. Code
Code means the Internal Revenue Code of 1986, and any amendments
thereto.
1.07. Committee
Committee means the Governance and Nominating Committee of the Board.
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1.08. Common Stock
Common Stock means the Common Stock of the Company.
1.09. Common Stock Account
Common Stock Account means the Subaccount whose value shall be based on
the value of units representing shares of Common Stock and dividend equivalents.
1.10. Company
Company means Owens & Minor, Inc.
1.11. Compensation
Compensation means the sum of the Retainer Fee and the Meeting Fees
payable by the Company to each Participant, including any additional amount paid
to a chairman of a committee for additional services.
1.12. Deferred Amount
Deferred Amount means the amount (determined as a percentage of the
Retainer Fee and the Meeting Fees) subject to a current deferral election.
1.13. Deferred Fee Program
Deferred Fee Program means the provisions of the Plan that permit
Participants to defer all or part of their Compensation.
1.14. Disability
Disability means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
1.15. Distribution Date
Distribution Date means the date designated by a Participant or Retired
Participant in accordance with Sections 4.10 and 4.11 for the commencement of
payment of amounts credited to his or her Account.
1.16. Election Date
Election Date means the date an Election Form is received by the
Secretary of the Company.
1.17. Election Form
Election Form means a valid Deferred Fee Program initial Election Form
or modified Election Form (in the forms approved by the Committee) properly
completed and signed.
1.18. Extraordinary Distribution Request Date
Extraordinary Distribution Request Date means the date an Extraordinary
Distribution Request Form is received by the Secretary of the Company.
1.19. Extraordinary Distribution Request Form
Extraordinary Distribution Request Form means the Deferred Fee Program
Extraordinary Distribution Request Form (in the form approved by the Committee)
properly completed and executed by a Participant or Beneficiary who wishes to
request an extraordinary distribution of amounts credited to his or her Account
in accordance with Section 4.12.
1.20. 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 in the Wall Street Journal.
1.21. Meeting Fees
Meeting Fees means the portion of a Participant's Compensation that is
based upon his or her attendance at Board meetings and meetings of committees of
the Board.
1.22. 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.
B-5
1.23. Participant
Participant means a member of the Board who is not then an employee or
officer of the Company. For purposes of the Deferred Fee Program only, a
Participant shall also include a person who ceases to be a member of the Board
as long as an Account is being maintained for his or her benefit.
1.24. Plan
Plan means the Owens & Minor, Inc. 1998 Director's Compensation Plan.
1.25. Retainer Fee
Retainer Fee means the portion of a Participant's Compensation that is
fixed and paid without regard to his or her attendance at meetings.
1.26. Stock Award
Stock Award means an award of Common Stock in accordance with Article
VI of this Plan.
1.27. Stock Award Program
Stock Award Program means the provisions of the Plan relating to Stock
Awards.
1.28. Stock Option Program
Stock Option Program means the provisions of the Plan relating to
Options.
1.29. Stock Purchase Program
Stock Purchase Program means the provisions of the Plan that permit
Participants to purchase Common Stock with all or part of their Compensation.
1.30. Stock Purchase Election
Stock Purchase Election means a Participant's election to receive all
or part of his or her Compensation in the form of Common Stock in accordance
with the Stock Purchase Program.
1.31. Stock Purchase Election Form
Stock Purchase Election Form means a valid initial Stock Purchase
Program election form or a modified Stock Purchase Program election form (in the
forms approved by the Committee) properly completed and signed.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall
grant Options in accordance with the Plan and upon such terms (not inconsistent
with the provisions of this Plan) as the Committee may consider appropriate. In
addition, the Committee shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements and to approve the
other forms that are appropriate for use in conjunction with the Plan; 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 Committee shall not be construed as limiting any power or authority of
the Committee. Any decision made, or action taken, by the Committee or in
connection with the administration of this Plan shall be final and conclusive.
No member of the Committee shall be liable for any act done in good faith with
respect to this Plan. All expenses of administering this Plan shall be paid by
the Company.
ARTICLE III
STOCK OPTION PROGRAM
3.01. Option Grants
During the term of the Plan and subject to the limitation set forth in
Section 3.07, each Participant will be granted an Option for 3,000 shares of
Common Stock at the first meeting of the Board following each annual meeting of
the Company's shareholders during the term of this Plan. All Options granted
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under this Plan will be evidenced by Agreements which shall be subject to the
applicable provisions of the Plan.
3.02. Option Price
The price per share for Common Stock purchased on the exercise of an
Option shall be the Fair Market Value of the Common Stock on the date the Option
is granted. Except as provided in Article VIII, the Committee may not adjust or
amend the option price of a previously granted Option whether through amendment,
cancellation, replacement grant or any other means.
3.03. Maximum Option Period
The maximum period in which an Option may be exercised shall be ten
years from the date of grant; provided, however, that if the Participant ceases
to be a member of the Board, the Option may be exercised for one year following
the date he or she ceases to be a member of the Board, or until the expiration
of the Option period, whichever is shorter. In the event of the Participant's
death prior to the termination of his or her rights under the Option, the Option
may be exercised by the Participant's estate or by such person or persons who
succeed to Participant's rights by will or the laws of descent and distribution
for one year following the date that the Participant ceased to be a member of
the Board or until the expiration of the Option period, whichever is shorter.
3.04. Exercise
Subject to the provisions of Section 3.03 and Article VIII, an Option
may be exercised in whole at any time or in part from time to time on and after
the date of grant. An Option may be exercised with respect to any number of
whole shares less than the full number for which the Option could be exercised.
A partial exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with this Plan and the applicable
Agreement with respect to the remaining shares subject to the Option. 3.05.
Payment of Option Price
Payment of the Option price shall be made in cash or a cash equivalent
acceptable to the Committee or by surrendering shares of Common Stock to the
Company. The total amount of cash or cash equivalent paid and the Fair Market
Value (determined as of the day preceding the date of exercise) of any Common
Stock surrendered shall not be less than the aggregate option price for the
number of shares for which the option is being exercised.
3.06. Stock Subject to Options
Upon the exercise of any Option, the Company may deliver to the
Participant (or the Participant's broker if the Participant so directs), shares
from its authorized but unissued Common Stock. The number of shares of Common
Stock that may be issued pursuant to the exercise of Options or as Stock Awards
under this Plan shall not in the aggregate exceed 220,000 shares. The maximum
aggregate number of shares of Common Stock that may be issued under this Plan
shall be subject to adjustment as provided in Article VIII. If an Option is
terminated, in whole or in part, for any reason other than its exercise, the
number of shares of Common Stock allocated to the Option or portion thereof may
be reallocated to other Options and Stock Awards to be granted under this Plan.
3.07. Transferable Options
Section 10.03 to the contrary notwithstanding, an 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 transferred
pursuant to this section shall be bound by the same terms and conditions that
governed the Option during the period that it was held by the Participant;
provided, however, that such transferee may not transfer the Option except by
will or the laws of descent and distribution.
ARTICLE IV
DEFERRED FEE PROGRAM
4.01. Deferral Elections
(a) A Participant may make a Deferral Election with respect to all
or a part of his or her Compensation to be earned and payable thereafter by
completing and executing an Election Form and submitting it to the Secretary of
the Company. A deferral election relating to a Retainer Fee shall be in integral
multiples of twenty-five percent (25%) of the Retainer Fee. A deferral election
relating to Meeting Fees shall be in integral multiples of twenty-five percent
(25%) of each Meeting Fee.
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(b) In accordance with the terms of the Plan, the Participant
shall indicate on the Election Form: (i) the percentage of the Retainer Fee and
the percentage of the Meeting Fee that he or she wishes to defer; (ii) the
Distribution Date; (iii) whether distributions are to be in a lump sum, in
installments or a combination thereof; (iv) the Participant's Beneficiary or
Beneficiaries; and (v) the subaccounts to which the Deferred Amount is to be
allocated.
(c) A deferral election shall become effective with respect to a
Participant's Retainer Fee accruing on and after the first day of the calendar
quarter following the Election Date. A deferral election shall become effective
with respect to a Participant's Meeting Fees accruing on and after the first day
of the calendar month following the Election Date. A deferral election shall
remain in effect with respect to all future Compensation until a new deferral
election made by the Participant in accordance with Section 4.02 or Section 4.03
becomes effective.
4.02. Deferral Election Modifications
A Participant may modify his or her deferral election with respect to
Compensation to be earned and payable thereafter by completing and executing a
new Election Form and submitting it to the Secretary of the Company. An election
to increase the amount of future Compensation to be deferred shall become
effective with respect to a Participant's Retainer Fee accruing on and after the
first day of the calendar quarter following the Election Date. An election to
increase the amount of future Compensation deferred shall become effective with
respect to a Participant's Meeting Fees accruing on and after the first day of
the calendar month following the Election Date. Subject to Section 4.03, an
election to decrease the amount of future Compensation to be deferred shall
become effective with respect to Compensation accruing on and after the later of
(i) January 1 of the year following the Election Date or (ii) the first day of
the second calendar quarter following the Election Date. Any amount credited to
a Participant's Account prior to such effective date will continue to be subject
to the provisions of the Participant's last valid Election Form.
4.03. Cessation of Deferrals
A Participant may cease to defer future Compensation by completing and
executing a new Election Form, and submitting it to the Secretary of the
Company. An election by a Participant to cease deferrals in the Deferred Fee
Program shall become effective with respect to Compensation accruing on or after
the later of (i) January 1 of the year following the Election Date or (ii) the
first day of the second calendar quarter following the Election Date. Any
amounts credited to a Participant's Account prior to such effective date will
continue to be subject to the provisions of the Participant's last valid
Election Form.
4.04. Beneficiary Election Modification
A Participant shall be permitted at any time to modify his or her
Beneficiary designation, effective as of the Election Date, by completing and
executing a new Election Form and submitting it to the Secretary of the Company.
4.05. Investments
(a) The Company shall establish an Account (for bookkeeping
purposes only), for each Participant and for each Beneficiary to whom
installment distributions are being made. On each Allocation Date, the Company
shall allocate to each Participant's Account an amount equal to his Deferred
Amount.
(b) The Company shall establish within each Account one or more
Subaccounts, which shall be credited with earnings and charged with losses, if
any. One Subaccount shall be the Common Stock Account. The other Subaccounts, if
any, shall be designated by the Committee from time to time.
(c) Subject to the provisions of Sections 4.06 and 4.07, on each
Allocation Date, each Participant's Subaccount shall be credited with an amount
equal to the Deferred Amount designated by the Participant for allocation to
such Subaccounts. Each Subaccount shall be credited with earnings and charged
with losses as if the amounts allocated thereto actually had been invested in
the investment designated as that subaccount.
4.06. Investment Directions
In connection with his or her initial deferral election, each
Participant shall make an investment direction on his or her Election Form with
respect to the portion of such Participant's Deferred Amount that is to be
allocated to each Subaccount of the Participant's Account. Any apportionment of
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Deferred Amounts (and of increases or decreases in Deferred Amounts) among the
Subaccounts shall be in integral multiples of ten percent (10%). An investment
direction shall become effective with respect to a Subaccount on the first day
of the calendar month following the Election Date. All investment directions
shall remain in effect with respect to all future Deferred Amounts until a new
investment direction made by the Participant in accordance with Section 4.07
becomes effective.
4.07. New Investment Directions
A Participant may make a new investment direction with respect to his
or her Deferred Amount only by completing and executing a new Election Form and
submitting it to the Secretary of the Company. A new investment direction shall
become effective with respect to a Subaccount on the first day of the calendar
month following the Election Date.
4.08. Investment Transfers
A Participant or a Beneficiary (after the death of the Participant) may
transfer to one or more different Subaccounts all or a part (in integral
multiples of ten percent (10%)) of the amounts credited to a Subaccount by
completing and executing a transfer form and submitting it to the Secretary of
the Company. Any transfer of amounts among the Subaccounts shall become
effective on the first day of the calendar month following the transfer Election
Date.
4.09. Distribution Elections
(a) Each Participant shall designate on his or her Election Form
one of the following dates as a Distribution Date with respect to amounts
credited to his or her Account thereafter: (i) the first day of the calendar
month following the date of the Participant's death; (ii) the first day of the
calendar month following the date of the Participant's Disability; (iii) the
first day of the calendar month following the date of termination of the
Participant's service as a member of the Board; (iv) the first day of a calendar
month specified by the Participant which is at least six months after the
Election Date; or (v) the earliest to occur of (i), (ii), (iii) or (iv). A
Distribution Date election shall become effective on the Election Date.
(b) A Participant may request on his or her Election Form that
distributions from his or her Account be made in (i) a lump sum, (ii) no more
than one-hundred eighty (180) monthly, sixty (60) quarterly or fifteen (15)
annual installments or (iii) a combination of (i) and (ii). Each installment
shall be determined by dividing the Account balance by the number of remaining
installments. If a Participant receives a distribution from a Subaccount on an
installment basis, amounts remaining in such Subaccount before payment shall
continue to accrue earnings and incur losses in accordance with the terms of
Section 4.05. Except as stated in Section 4.09(c), all distributions shall be
made to the Participant.
(c) If the Distribution Date is the first day of the month
following the Participant's death or a fixed date which in fact occurs after the
Participant's death or if at the time of death the Participant was receiving
distributions in installments, the balance remaining in the Participant's
Account shall be payable to his or her Beneficiaries as set forth on the
Participant's current Election Form or Forms. Upon the death of a Beneficiary
who is receiving distributions in installments, the balance remaining in the
Account of the Beneficiary shall be payable to his or her estate in a lump sum.
(d) All distributions shall be paid in cash and, except as
provided in Section 4.12, shall be deemed to have been made from each Subaccount
pro rata. Notwithstanding the preceding sentence, if the Plan is approved by the
Company's shareholders as provided in Article XIII, a Participant or Beneficiary
may elect to receive a distribution from the Common Stock Account in whole
shares of Common Stock and cash in lieu of a fractional share.
4.10. Modified Distribution Elections
A Participant may modify his or her election as to the Distribution
Date and form of distribution with respect to Compensation to be earned and
payable thereafter by completing and executing a new Election Form and
submitting it to the Secretary of the Company. Any new Distribution Date or form
of distribution election shall become effective on the Election Date.
4.11. Extraordinary Distributions
(a) Notwithstanding the foregoing, a Participant or Beneficiary
(after the death of the Participant) may request an extraordinary distribution
of all or part of the amount credited to his or her Account on account of
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hardship. A distribution shall be deemed to be "on account of hardship" if such
distribution is necessary to alleviate or satisfy an immediate and heavy
financial need of the Participant or Beneficiary (after the death of the
Participant).
(b) A request for an extraordinary distribution shall be made by
completing and executing an Extraordinary Distribution Request Form and
submitting it to the Secretary of the Company. All extraordinary distributions
shall be subject to approval by the Committee. The Extraordinary Distribution
Request Form shall indicate: (i) the amount to be distributed from the Account;
(ii) the Subaccount(s) from which the distribution is to be made; and (iii) the
"hardship" requiring the distribution. The amount of any extraordinary
distribution shall not exceed the lesser of the amount determined by the
Committee to be required to meet the immediate financial need of the applicant
or the amount credited to the Participant's Account.
(c) An extraordinary distribution shall be made with respect to
amounts credited to any of the Subaccounts, if the recipient is not then subject
to Section 16 of the Exchange Act, on the first day of the calendar month next
following approval of the extraordinary distribution request by the Committee.
An extraordinary distribution requested by a Participant who is then subject to
Section 16 of the Exchange Act shall commence with respect to amounts credited
to the Common Stock Account on the first day of the calendar month that is at
least six months following the Participant's most recent "opposite way"
discretionary transaction (as such term is defined in Securities and Exchange
Commission Rule 16b-3).
ARTICLE V
STOCK PURCHASE PROGRAM
5.01. Common Stock Purchase
(a)......A Participant may make a Stock Purchase Election with respect
to all or part of his or her Compensation to be earned and payable thereafter
(other than Compensation that is deferred under Article IV), by completing and
executing a Stock Purchase Election Form and submitting it to the Secretary of
the Company.
(b)......A Stock Purchase Election relating to the Retainer Fee shall
be in integral multiples of twenty-five percent (25%) of the Retainer Fee. A
Stock Purchase Election relating to Meeting Fees shall be in integral multiples
of twenty-five percent (25%) of each Meeting Fee. The Participant shall indicate
on the Stock Purchase Election Form whether the Common Stock issued under this
Article V shall be registered in the name of the Participant or in the joint
names of the Participant and his or her spouse. A Stock Purchase Election Form
shall remain in effect with respect to all future Compensation until a new Stock
Purchase Election made by the participant in accordance with Section 5.02
becomes effective.
5.02. Stock Purchase Election Modification
A Participant may modify his or her Stock Purchase Election to increase
or decrease the amount of Compensation that will be applied to the purchase of
Common Stock under this Article V or to cease purchases of Common Stock under
this Article V. The new Stock Purchase Election shall be effective with respect
to Compensation payable on and after the first day of the month specified by the
Participant.
5.03. Issuance of Common Stock
Common Stock purchased under this Article V shall be issued as of the
date that the Retainer Fee or Meeting Fee or both, as applicable, would have
been payable but for the Participant's Stock Purchase Election. The number of
shares issuable shall be determined by dividing the amount of Retainer Fee or
Meeting Fee otherwise payable on that date by the Fair Market Value of the
Common Stock on the day preceding the date described in the preceding sentence.
A fractional share of Common Stock shall not be issued but instead the
Participant shall receive a cash payment of the Compensation that cannot be
applied to purchase a whole share.
ARTICLE VI
STOCK AWARD PROGRAM
6.01. Awards
Beginning in 1998 and during the term of this Plan, on the date of each
meeting of the Board immediately following the annual meeting of the Company's
shareholders, each Participant shall be awarded a number of whole shares of
Common Stock having an aggregate Fair Market Value equal to, or most nearly
equal to, $10,000.
B-10
6.02. Vesting
All of the shares of Common Stock issued under this Article VI shall be
immediately and fully vested.
6.03. Transferability
All of the shares of Common Stock issued under this Article VI shall be
immediately transferable, subject only to restrictions imposed by federal and
state securities and other laws.
ARTICLE VII
SHAREHOLDER RIGHTS
No Participant shall have any rights as a shareholder with respect to
shares subject to his or her Option until the date that he or she exercises such
Option. No Participant shall have any rights as a shareholder with respect to
his or her participation in the Deferred Fee Program unless and until the
Participant receives a distribution of Common Stock from his or her Common Stock
Account. No Participant shall have any rights as a shareholder with respect to
his or her participation in the Stock Purchase Program until the date for the
issuance of shares as provided in Section 5.03. No Participant shall have any
rights as a Shareholder with respect to his or her participation in the Stock
Award Program until the date a Stock Award is made as provided in Section 6.01.
ARTICLE VIII
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options may be granted under
this Plan shall be proportionately adjusted, and the terms of outstanding
Options and the records of the Company Stock Account 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 necessitates such action. Any determination made under
this Article VIII 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,
outstanding awards of Options or the records of the Company Stock Account.
ARTICLE IX
COMPLIANCE WITH LAW, ETC.
No Option 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, 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 purchased under Article V, awarded under Article VI, or for which
an Option is exercised may bear such legends and statements as the Committee may
deem advisable to assure compliance with federal and state laws and regulations.
No option shall be exercisable, 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 Committee may
deem advisable from regulatory bodies having jurisdiction over such matters.
ARTICLE X
GENERAL PROVISIONS
10.01. Unfunded Plan
The Plan shall be unfunded, and the Company shall not be required to
segregate any assets that may at any time be represented by grants under, or
participation in, this Plan. Any liability of the Company to any person with
respect to any grant under, or participation in, this Plan shall be based solely
upon any contractual obligations that may be created pursuant to this Plan. No
B-11
such obligation of the Company shall be deemed to be secured by any pledge of,
or other encumbrance on, any property of the Company.
10.02. Rules of Construction
Headings are given to the articles and sections of this Plan solely as
a convenience to facilitate reference. The use of the singular includes the
plural and the reference to one gender includes the other. 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.
10.03. Nontransferability
Except as provided in Section 3.07, a Participant may not transfer or
assign any rights that he or she has under this Plan other than by will or the
laws of descent and distribution. Except as provided in Section 3.07, during the
lifetime of the Participant, his or her Option may be exercised only by the
Participant. No right or interest of any Participant or Beneficiary under the
Plan shall be liable for, or subject to, any lien, obligation or liability of
such Participant or Beneficiary.
ARTICLE XI
AMENDMENT AND TERMINATION
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 Option, the Deferred Fee Program or the Stock Purchase Program as in
effect at the time such amendment is made.
ARTICLE XII
DURATION OF PLAN
No Option may be granted under this Plan more than five years after the
date that the Plan is approved by shareholders as provided in Article XIII.
Options granted before that date shall remain valid in accordance with their
terms. The Deferred Fee Program shall remain in effect until all Participants'
Accounts have been distributed in full, unless sooner terminated by the Board.
No Stock Purchase Election shall be made with respect to Compensation payable
more than five years after the date the Plan is approved by shareholders as
provided in Article XIII; provided, however, that the Board may sooner terminate
the Stock Purchase Program. No awards may be made under the Stock Award Program
more than five years after the Plan is approved by shareholders as provide in
Article XIII; provided, however, that the Board may sooner terminate the Stock
Award Program.
ARTICLE XIII
EFFECTIVE DATE OF PLAN
The Deferred Fee Program will be effective upon its adoption by the
Board of Directors. The Stock Option Program, the Stock Purchase Program and the
Stock Award Program will be effective on the date that this Plan is approved by
a majority of the votes cast by the Company's shareholders, voting either in
person or by proxy, at a duly held shareholders' meeting at which a quorum
representing a majority of all outstanding voting stock is present, either in
person or by proxy.
B-12
OWENS & MINOR, INC.
PROXYY
Solicited by the Board of Directors for the Annual Meeting of Shareholders
The undersigned hereby appoints Messrs. Josiah Bunting, III,Henry A. Berling, James B. Farinholt, E.
UkropMorgan Massey and James E. RogersAnne 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 3, 19982, 1999 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 28, 19981999 at 10:00 A.M. at the Virginia
Historical Society, 428 North Boulevard, Richmond, Virginia, and any
adjournments or postponements thereof.
The undersigned directs said proxies to vote as specified upon the itemsItems
shown herein which are referred to in the Notice of Annual Meeting and as set
forth in the Proxy Statement.
This proxy,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, 3 and 4.2.
(Continued and to be dated and signed on the reverse side.)
OWENS & MINOR, INC.
P.O. BOX 11421
NEW YORK, N.Y. 10203-0421
The Board of Directors recommends a vote FOR Proposals 1, 2, 3 and 4.
[ ]
The Board of Directors recommends a vote FOR Proposals 1 and 2.
1. Election of Directors FOR all nominees [ ][X] WITHHOLD AUTHORITY to [ ][X] FOR ALL EXCEPT [ ][X]
vote for all nominees nominee(s) marked
in space below
For a term of three years: Vernard W. Henley, G. Gilmer Minor, III and Peter S. Redding.
(INSTRUCTIONS: To withhold authority to vote for all nomineesany individual nominee(s) marked, mark the "FOR ALL EXCEPT" box and write the
nominee's(s') name(s) in the space belowprovided below. Your shares will be voted for the remaining nominee(s).)
- - -----------------------------------------------------------------------------------------------------------------------
2. Ratification of appointment of KPMG LLP as independent auditors. 3. In their discretion, the proxies are authorized to vote
upon such other matters as may properly come before the
meeting.
FOR [X] AGAINST [X] ABSTAIN [X]
Change of Address and [X]
or Comments Mark Here
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:_______________________________________, 1999
___________________________________________________
Signature
___________________________________________________
Signature
Votes must be indicated
(Please sign, date and return this proxy in the enclosed postage prepaid envelope.) (x) in Black or Blue ink. []
For a term of three years: E. Morgan Massey, James B. Farinholt, Jr.,
Anne Marie Whittemore and Henry A. Berling.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
the "FOR ALL EXCEPT" box and write the nominee's(s) name(s) in the space
provided below. Your shares will be voted for the remaining nominee(s).)
- -------------------------------------------------------------------------------
2. Ratification of appointment of KPMG Peat Marwick LLP as independent
auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Approval of Owens & Minor, Inc. 1998 Stock Option and Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Approval of Owens & Minor, Inc. 1998 Directors' Compensation Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting.
Change of Address and or Comments Mark Here [ ]
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: _________________________________ , 1998
_______________________________________________
Signature
_______________________________________________
Signature
Votes must be indicated (x) in Black or Blue ink. [ ]
(Please sign, date and return this proxy in the enclosed postage prepaid
envelope.)