Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] 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
OMNICARE, INC.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
[Logo]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 2001
The Annual Meeting of Stockholders of Omnicare, Inc. (the 'Company') will be
held at The Metropolitan Club, 50 E. RiverCenter Boulevard, Covington, Kentucky,
on Monday, May 21, 2001 at 10:00 a.m. The purpose of the Annual Meeting is to
consider and act upon:
(1) the election of directors;
(2) the re-approval of the Company's Annual Incentive Plan for Senior
Executive Officers;
(3) the ratification of the selection of PricewaterhouseCoopers LLP as
independent accountants of the Company; and
(4) any other business as may properly be brought before the meeting.
Stockholders of record at the close of business on March 23, 2001 are
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
Whether or not you plan to attend the meeting, please sign and date the
enclosed proxy and mail it in the enclosed envelope at your earliest
convenience. No postage is required if it is mailed in the United States.
By Order of the Board of Directors
CHERYL D. HODGES
Secretary
Covington, Kentucky
April 10, 2001
YOUR VOTE IS IMPORTANT! TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING, PLEASE TAKE A MOMENT TO SIGN, DATE AND PROMPTLY MAIL YOUR PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
OMNICARE, INC.
100 E. RIVERCENTER BOULEVARD
COVINGTON, KENTUCKY 41011
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished to stockholders in connection with the
solicitation by the Board of Directors of Omnicare, Inc. (the 'Company') of
proxies to be used at the Annual Meeting of Stockholders of the Company to be
held on May 21, 2001, and any adjournment thereof ('Annual Meeting').
Stockholders of record as of the close of business on March 23, 2001 are
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof. As of such date, the Company had outstanding 93,358,948 shares of its
Common Stock, par value $1 per share ('Common Stock'), having one vote per
share.
To constitute a quorum at the Annual Meeting, the presence, in person or by
proxy, of the holders of a majority of the outstanding shares of Common Stock is
necessary. Shares represented by proxies received by the Company will be counted
as present at the Annual Meeting for the purpose of determining the existence of
a quorum, regardless of how or whether such shares are voted on a specific
proposal. Abstentions will be treated as votes cast on a particular proposal as
well as shares present at the Annual Meeting. Where nominee stockholders are not
permitted to vote on a specific issue because they did not receive specified
instructions on the specific issue from the beneficial owners of the shares
('Broker Nonvotes'), such Broker Nonvotes will be treated as not present at the
meeting for purposes of calculating the results of the vote on the specific
issue. Accordingly, abstentions and Broker Nonvotes have the effect of a
negative vote on any proposal where the vote required to pass the proposal is a
percentage of the outstanding shares, but only abstentions have the effect of a
negative vote when the vote required to pass a proposal is a percentage of the
shares present at the Annual Meeting. Shares represented by properly executed
proxies received in the accompanying form will be voted in accordance with the
instructions contained therein. In the absence of contrary instructions, such
shares will be voted (1) to elect as directors the 12 persons named below;
(2) to re-approve the Company's Annual Incentive Plan for Senior Executive
Officers; and (3) to ratify the selection of PricewaterhouseCoopers LLP as
independent accountants of the Company for 2001. A proxy may be revoked at any
time prior to its exercise by the execution of a proxy signed at a later date or
by the giving of written notice of revocation to the Secretary of the Company. A
revocation during the Annual Meeting will not affect any vote previously taken.
This Proxy Statement and the accompanying proxy were first mailed to
stockholders on or about April 10, 2001.
ELECTION OF DIRECTORS
The number of directors to be elected at the Annual Meeting has been fixed
by the Board of Directors at 12. Directors are to be elected to serve until the
following annual meeting of stockholders and until their respective successors
are duly elected and qualified. Set forth below are the names of the persons to
be nominated by the Board of Directors, together with a description of each
person's principal occupation during at least the past five years and other
pertinent information. Each of the nominees for election as a director, except
for Timothy E. Bien, is currently a director of the Company.
The Company has a program under which certain nominations for membership on
the Board of Directors are on occasion rotated among senior operating executives
of the Company and its subsidiaries. The persons considered to be in the
rotating group are Messrs. Timothy E. Bien, Leo P. Finn, David W. Froesel, Jr.,
Gary W. Kadlec, Thomas W. Ludeke and Jeffrey M. Stamps. Mr. Froesel is currently
a director. Messrs. Froesel and Bien are being nominated from that group this
year. It is anticipated that additional executives of the Company will be
included in such rotating group in future years.
No person may be nominated for election as a director unless written notice
of intention to nominate such person (which notice shall contain the prospective
nominee's name, address and occupation) has been given to the Chairman, the
President or the Secretary of the Company by a
stockholder entitled to notice of, and to attend, a meeting of stockholders at
which directors are to be elected, not later than 15 business days before such
meeting.
Unless authority is withheld for individual nominees or all nominees, it is
intended that the shares represented by each proxy will be voted for the
nominees listed below. The Company anticipates that all nominees listed in this
Proxy Statement will be candidates when the election is held. However, if for
any reason any nominee is not a candidate at that time, proxies will be voted
for a substitute nominee designated by the Board of Directors and for the
remaining nominees (except where a proxy withholds authority with respect to the
election of directors).
NOMINEES
EDWARD L. HUTTON .......... Mr. Hutton is Chairman of the Company and has held this
Director since 1981 position since May 1981. Additionally, he is Chairman and
Age: 81 Chief Executive Officer and a director of Chemed
Corporation, Cincinnati, Ohio (a diversified public
corporation with interests in plumbing and drain cleaning
services, janitorial supplies and health care services)
(hereinafter 'Chemed') and has held these positions since
November 1993 and April 1970, respectively. Previously, he
was President and Chief Executive Officer of Chemed,
positions he had held from April 1970 to November 1993.
Mr. Hutton is the father of Thomas C. Hutton, who is a
director of the Company.
JOEL F. GEMUNDER .......... Mr. Gemunder is President of the Company and has held this
Director since 1981 position since May 1981. Mr. Gemunder was an Executive
Age: 61 Vice President of Chemed and Group Executive of its Health
Care Group from May 1981 through July 1981 and a Vice
President of Chemed from 1977 until May 1981. Mr. Gemunder
is a director of Chemed and Ultratech Stepper, Inc. (a
manufacturer of photolithography equipment for the
computer industry).
TIMOTHY E. BIEN ........... Mr. Bien is Senior Vice President -- Professional Services
Nominee and Purchasing of the Company, a position he has held since
Age: 50 May 1996. From May 1992 until May 1996, he served as Vice
President of Professional Services and Purchasing of the
Company. Prior to that, he was Vice President and a former
owner of Home Care Pharmacy, a wholly-owned subsidiary
that the Company acquired in December 1988. Mr. Bien has
also served as a director for two prior terms: 1998-1999
and 1999-2000.
CHARLES H. ERHART, JR. .... Mr. Erhart retired as President of W.R. Grace & Co.,
Director since 1981 Columbia, Maryland (international specialty chemicals,
Age: 75 construction and packaging) (hereinafter 'Grace') in
August 1990. He had held this position since July 1989.
From November 1986 to July 1989, he was Chairman of the
Executive Committee of Grace. From May 1981 to November
1986, he served as Vice Chairman and Chief Administrative
Officer of Grace. Mr. Erhart is a director of Chemed.
DAVID W. FROESEL, JR. ..... Mr. Froesel is Senior Vice President and Chief Financial
Director since 2000 Officer of the Company and has held this position since
Age: 49 March 1996. From May 1993 to February 1996, Mr. Froesel
was Vice President of Finance and Administration at
Mallinckrodt Veterinary, Inc., a subsidiary of
Mallinckrodt, Inc. From July 1989 to April 1993 he was
worldwide Corporate Controller of Mallinckrodt Medical,
Inc., a subsidiary of Mallinckrodt, Inc.
CHERYL D. HODGES .......... Ms. Hodges is Senior Vice President and Secretary of the
Director since 1992 Company and has held these positions since February 1994.
Age: 49 From August 1986 to February 1994, she was Vice President
and Secretary of the Company. From August 1982 to August
1986, she served as Vice President -- Corporate and
Investor Relations. Ms. Hodges has also served as a
director of the Company for four prior terms: 1984-85;
1986-87; 1988-89; and 1990-91.
2
PATRICK E. KEEFE .......... Mr. Keefe is Executive Vice President -- Operations of the
Director since 1993 Company and has held this position since February 1997.
Age: 55 Previously, he was Senior Vice President -- Operations
since February 1994. From April 1993 to February 1994, he
was Vice President -- Operations of the Company. From
April 1992 to April 1993, he served as Vice
President -- Pharmacy Management Programs of Diagnostek,
Inc., Albuquerque, New Mexico (mail-service pharmacy and
health care services) (hereinafter 'Diagnostek'). From
September 1990 to April 1992, Mr. Keefe served as
President of HPI Health Care Services, Inc. (hereinafter
'HPI'), a subsidiary of Diagnostek that was acquired from
the Company in August 1989. From August 1984 to September
1990, he served as Executive Vice President of HPI.
SANDRA E. LANEY ........... Ms. Laney is Senior Vice President and Chief Administrative
Director since 1987 Officer of Chemed and has held these positions since
Age: 57 November 1993 and May 1991, respectively. From May 1984 to
November 1993, she was a Vice President of Chemed. Ms.
Laney is a director of Chemed.
ANDREA R. LINDELL, ........ Dr. Lindell is Dean and Professor in the College of Nursing
DNSC, RN at the University of Cincinnati, a position she has held
Director since 1992 since December 1990. Dr. Lindell is also Associate Senior
Age: 57 Vice President for Interdisciplinary Education Programs
for the Medical Center at the University of Cincinnati,
since July 1998. She also serves as Interim Dean of the
College of Allied Health Sciences at the University of
Cincinnati. From August 1981 to August 1990, Dr. Lindell
served as Dean and a Professor in the School of Nursing at
Oakland University, Rochester, Michigan.
SHELDON MARGEN, M.D. ...... Dr. Margen is a Professor Emeritus in the School of Public
Director since 1983 Health, University of California, Berkeley, a position he
Age: 81 has held since May 1989. He had served as a Professor of
Public Health at the University of California, Berkeley,
since 1979.
KEVIN J. MCNAMARA ......... Mr. McNamara is President of Chemed and has held this
Director since 1986 position since August 1994. From November 1993 to August
Age: 47 1994, Mr. McNamara was Executive Vice President, Secretary
and General Counsel of Chemed. Previously, from May 1992
to November 1993, he held the positions of Vice Chairman,
Secretary and General Counsel of Chemed. From August 1986
to May 1992, he served as Vice President, Secretary and
General Counsel of Chemed. He is a director of Chemed.
JOHN H. TIMONEY ........... Mr. Timoney is a retired executive of Applied Bioscience
Director since 2000 International Inc. (research organization serving the
Age: 67 pharmaceutical and biotechnology industries) ('Applied
Bioscience'), at which he held a number of positions from
1986 through 1996. From December 1995 through September
1996, he was Chief Executive Officer of Clinix
International, Inc., a wholly-owned subsidiary of Applied
Bioscience. From June 1992 to September 1996, Mr. Timoney
was Senior Vice President of Applied Bioscience. From
September 1986 through June 1992, he was Vice President,
Chief Financial Officer, Secretary and Treasurer of
Applied Bioscience. In addition, from September 1986
through June 1995 he was a director of Applied Bioscience.
Mr. Timoney has also held financial and executive
positions with IMS Health Incorporated (market research
firm serving the pharmaceutical and healthcare
industries), Chemed and Grace.
3
COMMITTEES AND MEETINGS OF THE BOARD
The Board of Directors of the Company has a Compensation and Incentive
Committee, an Audit Committee, a Nominating Committee and an Executive
Committee.
The Compensation and Incentive Committee makes recommendations to the Board
of Directors concerning (a) salary and incentive compensation payable to
officers and certain other key employees of the Company, (b) establishment of
incentive compensation plans and programs generally, (c) additional year-end
contributions by the Company under the Company's Employees' Savings and
Investment Plan and (d) adoption and administration of certain employee benefit
plans and programs. In addition, the Compensation and Incentive Committee
administers the Company's stock-based incentive plans under which it makes
determinations concerning the grant of stock options and stock awards to key
employees of the Company. The Compensation and Incentive Committee consists of
Doctors Margen and Lindell and Mr. Erhart. The Compensation and Incentive
Committee met on four occasions during 2000.
The Audit Committee (a) recommends to the Board of Directors a firm of
independent accountants to audit the Company's consolidated financial
statements, (b) reviews and reports to the Board of Directors on the Company's
annual financial statements and the independent accountants' report on such
financial statements, (c) meets with the Company's senior financial officers,
internal auditors and independent accountants to review audit plans and other
matters regarding the Company's accounting, financial reporting and internal
control systems and (d) assists the Board of Directors in monitoring compliance
by the Company with legal and regulatory requirements. The Audit Committee
Charter, adopted by the Board and included as Appendix A to this Proxy
Statement, more specifically sets forth the duties and responsibilities of the
Audit Committee. The Audit Committee consists of Messrs. Erhart and Timoney, Ms.
Laney and Dr. Lindell. The Audit Committee met on four occasions during 2000.
The Nominating Committee (a) recommends to the Board of Directors the
candidates for election to the Board of Directors to fill newly created
directorships and to replace directors who are not standing for election at each
Annual Meeting of Stockholders of the Company, (b) recommends to the Board of
Directors candidates for election by the Board of Directors to fill director
vacancies and (c) considers director candidates submitted by directors, officers
and stockholders. The Nominating Committee consists of Messrs. Erhart and
Timoney and Dr. Margen. The Nominating Committee was established in March 2001.
The Executive Committee is empowered to act for the full Board in intervals
between Board meetings, with the exception of certain matters that by law or the
Company's By-Laws may not be delegated. The committee meets as necessary, and
all actions by the committee are reported at the next Board of Directors
meeting. The Executive Committee consists of Messrs. Erhart, Hutton, Gemunder
and Keefe. The Executive Committee did not meet during 2000.
During 2000, there were five meetings of the Board of Directors and each
director attended at least 75% of the aggregate of (a) the total number of
meetings held by the Board of Directors during the period for which he or she
has been a director and (b) the total number of meetings held by all Committees
of the Board of Directors during the period for which he or she served.
REMUNERATION OF DIRECTORS
In May 2000 the Board of Directors approved an amendment to the fees paid to
members of the Board of Directors who are not regular employees of the Company.
Under such revised fee schedule each non-employee director is paid a $20,000
annual retainer fee (payable at the director's election in cash or restricted
stock). Each non-employee director is also granted an annual restricted stock
award having a value of $20,000. In addition, non-employee directors who are the
Chairman of one or more Committees of the Board (except for the Executive
Committee) received an additional $15,000 retainer fee, and directors who are
members of one or more Committees of the Board, but not the Chairman of any,
received an additional $10,000 retainer fee (in each case payable at the
director's election in cash or restricted stock). During 2000, each member of
the Board of Directors was granted an annual unrestricted stock award covering
400 shares of the Company's Common Stock. Prior to the revisions to the fee
schedule described above, during 2000, each member of the Board of Directors who
was not a
4
regular employee of the Company was paid $1,300 for his or her attendance at
each meeting of the Board, and $750 for each meeting of a Committee of the Board
of which he or she was a member. In consideration of special services to the
Company during 2000, Ms. Laney received additional stock awards covering 3,250
shares and Mr. McNamara received 2,000 shares. Each of these individuals was a
director of the Company but did not serve as a member of the Compensation and
Incentive Committee of either the Company or an affiliated company or as a
regular employee of the Company at the date of grant. Also during 2000, Mr.
Erhart received an additional annual fee of $8,000 and Mr. T. C. Hutton received
an additional annual fee of $5,000. Such fees were paid in lieu of stock options
granted to directors in previous years. These individuals were members of the
Compensation and Incentive Committee of either the Company or an affiliated
company on the dates of such grants and thus were ineligible to participate.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation of
the Company's most highly compensated executive officers (the 'named
executives') for services to the Company and its subsidiaries during 2000, 1999
and 1998.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------------------
AWARDS
------------------------
# OF SHARES
RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OTHER(1) STOCK(2) OPTIONS COMPENSATION
- ----------------------------------- ---- ------ ----- -------- -------- ------- ------------
E.L. Hutton ....................... 2000 $475,000 $441,125 $38,807 $2,244,225 255,000 $2,070,115(3)
Chairman 1999 448,333 541,125 42,208 1,882,660 630,000 2,454,476
1998 419,333 828,625 42,208 2,003,835 130,000 2,230,878
J.F. Gemunder ..................... 2000 900,000 588,800 69,913 2,947,529 328,430 878,179(4)
President 1999 816,667 580,978 63,755 2,310,000 1,400,000 97,218
1998 750,000 868,282 82,910 3,258,750 150,000 2,162,134
P.E. Keefe ........................ 2000 287,500 173,913 13,129 861,129 100,000 178,452(4)
Executive Vice President -- 1999 255,750 173,838 -- 703,000 182,000 36,741
Operations 1998 226,062 265,802 -- 992,438 57,000 654,857
D.W. Froesel, Jr. ................ 2000 285,000 143,042 7,589 720,929 85,000 222,944(4)
Senior Vice President and Chief 1999 251,667 143,002 -- 565,000 153,000 53,144
Financial Officer 1998 235,000 181,231 -- 770,250 43,000 539,444
C.D. Hodges ....................... 2000 226,000 85,222 4,928 657,114 70,674 272,641(4)
Senior Vice President and 1999 208,083 85,200 -- 515,000 148,000 26,638
Secretary 1998 187,500 131,189 -- 725,813 38,000 410,361
- ---------
(1) These amounts represent payments made to the executive officer as required
to offset the tax liability associated with premiums paid by the Company on
behalf of the officer under split dollar life insurance policies.
(2) Under the Company's stock award program, restricted shares of Common Stock
were issued as incentive compensation to the named executives and other key
employees. Restricted shares vest generally in seven annual installments as
determined by the Compensation and Incentive Committee with a greater
proportion vesting in the latter years. If the recipient's employment
terminates due to death, disability, retirement under a retirement plan of
the Company, or change in control of the Company, the restrictions
terminate. Otherwise, in the event of termination of employment, unvested
shares are forfeited. Recipients receive dividends on the awarded shares.
Restricted stock awards were granted in March 2001 for 2000 services as
incentive compensation. The numbers of restricted shares granted in March
2001 to the named executives are as follows: Mr. Hutton -- 110,146 shares;
Mr. Gemunder -- 144,664 shares; Mr. Keefe -- 42,264 shares;
Mr. Froesel -- 35,383 shares; and Ms. Hodges -- 32,251 shares. As of
December 31, 2000, the number and value of the aggregate restricted stock
holdings of the named executives were: Mr. Hutton -- 431,635 shares or
(footnotes continued on next page)
5
(footnotes continued from previous page)
$9,334,107; Mr. Gemunder -- 566,346 shares or $12,247,432;
Mr. Keefe -- 172,758 shares or $3,735,892; Mr. Froesel -- 123,500 shares or
$2,670,688; and Ms. Hodges -- 129,434 shares or $2,799,010.
(3) Mr. Hutton does not participate in the Company's tax-qualified pension
plans. Of this amount, $1,266,139 represents a deferral under a deferred
compensation arrangement, which is designed to provide him retirement
benefits comparable to other executives. Such deferred amounts accrue
interest at market rates and are paid in future years. This column also
includes $803,976 paid during 2000 to Mr. Hutton upon the termination of the
Company's non-qualified supplemental pension plan established in 1999 and
distribution of all accrued benefits thereunder. The amount paid is subject
to the continued satisfaction by Mr. Hutton of the original five-year
installment vesting schedule under the plan.
(4) This amount includes the dollar value of shares of Common Stock allocated to
the named executives' accounts in the Company's Employee Stock Ownership
Plan (the 'ESOP') which are attributable to the Company's contributions to
the ESOP. Participants are entitled to receive the fully vested shares
allocated to their accounts upon death, disability, retirement or
termination of employment. To the extent benefits under the ESOP are
otherwise limited by provisions of the Internal Revenue Code, the Company's
Excess Benefits Plan provides that the Company will provide from its general
funds a benefit to an employee equal to the benefit which would have been
provided but for the limitations of the Internal Revenue Code. The benefits
shown include those provided under the Excess Benefits Plan. For 2000, the
numbers of shares attributable to these plans and the dollar values thereof
included in the table for each named executive are as follows: Mr. Gemunder
3,381 shares or $47,860; Mr. Keefe 641 shares or $9,700; Mr. Froesel 536
shares or $8,335; and Ms. Hodges 261 shares or $4,625. This column also
includes (a) life insurance premiums paid by the Company
(Mr. Gemunder -- $5,100; Mr. Keefe -- $714; Mr. Froesel -- $714; and Ms.
Hodges -- $1,102); (b) the present value to the recipient of future benefits
derived from premium payments made by the Company for the benefit of the
recipient under a split dollar life insurance policy, which provides for the
refund of premiums to the Company upon termination of the policy (unrelated
to term life insurance coverage) (Mr. Gemunder -- $21,243;
Mr. Keefe -- $12,985; Mr. Froesel -- $11,787; and Ms. Hodges -- $8,493); and
(c) as to Mr. Froesel, also includes $47,055 which the Company credited to a
deferred account established for him in lieu of his participation in the
Company's pension plan. This column also includes the amount paid during
2000 to the named executive officer upon the termination of the Company's
supplemental pension plan established in 1999 and distribution of all
accrued benefits thereunder as follows: Mr. Gemunder -- $803,976;
Mr. Keefe -- $155,053; Mr. Froesel -- $155,053; and Ms. Hodges -- $258,421.
The amounts paid are subject to the continued satisfaction by each executive
of the original five-year installment vesting schedule under the plan.
6
STOCK OPTIONS
The following table sets forth information regarding stock options granted
to the named executives during 2000.
OPTION GRANTS IN 2000
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SHARES GRANTED TO OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM($)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------------
NAME GRANTED YEAR ($/SHARE) DATE 5% 10%
---- ------- ---- --------- ---- -- ---
E.L. Hutton................. 255,000(1) 15.2% $16.5625 05/15/10 $2,656,097 $6,731,072
J.F. Gemunder............... 325,000(1) 19.4 16.5625 05/15/10 3,385,222 8,578,817
1,716(2) 0.1 10.5938 08/09/10 12,393 30,502
1,714(2) 0.1 16.5313 11/14/10 18,081 45,575
P.E. Keefe.................. 100,000(1) 6.0 16.5625 05/15/10 1,041,607 2,639,636
D.W. Froesel, Jr............ 85,000(1) 5.1 16.5625 05/15/10 885,366 2,243,691
C.D. Hodges................. 70,000(1) 4.2 16.5625 05/15/10 729,125 1,847,745
346(2) -- 10.5938 08/09/10 2,499 6,150
328(2) -- 16.5313 11/14/10 3,460 8,721
- ---------
(1) All such options were granted on May 15, 2000, provide for the purchase of
shares of Common Stock at a price equal to the fair market value on the date
of grant, become exercisable in four equal annual installments commencing
one year from the date of grant, and expire 10 years after date of grant
unless previously exercised.
(2) All such options were granted on August 8, 2000, in the case of the first
such grant, and on November 14, 2000, in the case of the second such grant,
and were granted in connection with the Company's broad-based employee stock
purchase program. These options provide for the purchase of shares of the
Company's Common Stock at a price equal to the fair market value on the date
of grant, become exercisable in full four years from the date of grant
(provided the optionee has held certain related shares of the Company's
Common Stock purchased under the program for a minimum of two years), and
expire 10 years from the date of grant unless previously exercised.
-------------------
The following table sets forth information regarding stock options exercised
by the named executives during 2000 and the value of unexercised options held by
the named executives as of December 31, 2000.
AGGREGATED OPTION EXERCISES IN 2000 AND
FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
E.L. Hutton.......... 32,500 $ 294,531 285,000 807,500 $ 775,625 $4,522,730
J.F. Gemunder........ 80,000 1,040,000 1,198,000 1,468,430 10,959,528 8,534,295
P.E. Keefe........... 10,000 114,838 209,000 270,000 1,181,163 1,484,740
D.W. Froesel, Jr..... -- -- 93,500 225,500 270,410 1,241,544
C.D. Hodges.......... 17,000 190,995 189,000 204,924 1,348,358 1,136,289
7
PENSION PLAN
The Company has a pension plan in which the named executives, other than
Messrs. E.L. Hutton and Froesel, participate. Retirement benefits under the
pension plan are calculated on the basis of the executive's earnings during the
highest consecutive 60-month period during the executive's last 120 months of
employment ('Final Average Compensation') and years of service. Benefits payable
under the pension plan are reduced for payments under a prior Company pension
plan and are partially reduced for social security benefits. The following table
shows the estimated maximum annual retirement benefits payable at normal
retirement (age 65) under the pension plan at selected compensation levels after
various years of service. Amounts are shown on a 10-year certain and life form,
after the applicable reduction for social security benefits.
PENSION PLAN TABLE
YEARS OF SERVICE(2)
FINAL AVERAGE ------------------------------------------------------------------------------------
COMPENSATION(1) 15 20 25 30 35 40
--------------- -- -- -- -- -- --
$ 200,000............. $ 39,470 $ 52,627 $ 65,784 $ 78,941 $ 93,941 $ 108,941
250,000............. 50,720 67,627 84,534 101,441 120,191 138,941
300,000............. 61,970 82,627 103,284 123,941 146,441 168,941
350,000............. 73,220 97,627 122,034 146,441 172,691 198,941
400,000............. 84,470 112,627 140,784 168,941 198,941 228,941
450,000............. 95,720 127,627 159,534 191,441 225,191 258,941
500,000............. 106,970 142,627 178,284 213,941 251,441 288,941
550,000............. 118,220 157,627 197,034 236,441 277,691 318,941
600,000............. 129,470 172,627 215,784 258,941 303,941 348,941
650,000............. 140,720 187,627 234,534 281,441 330,191 378,941
700,000............. 151,970 202,627 253,284 303,941 356,441 408,941
800,000............. 174,470 232,627 290,784 348,941 408,941 468,941
900,000............. 196,970 262,627 328,284 393,941 461,441 528,941
1,000,000............ 219,470 292,627 365,784 438,941 513,941 588,941
1,100,000............ 241,970 322,627 403,284 483,941 566,441 648,941
1,200,000............ 264,470 352,627 440,784 528,941 618,941 708,941
1,300,000............ 286,970 382,627 478,284 573,941 671,441 768,941
1,400,000............ 309,470 412,627 515,784 618,941 723,941 828,941
1,500,000............ 331,970 442,627 553,284 663,941 776,441 888,941
1,600,000............ 354,470 472,627 590,784 708,941 828,941 948,941
1,700,000............ 376,970 502,627 628,284 753,941 881,441 1,008,941
1,800,000............ 399,470 532,627 665,784 798,941 933,941 1,068,941
1,900,000............ 421,970 562,627 703,284 843,941 986,441 1,128,941
2,000,000............ 444,470 592,627 740,784 888,941 1,038,941 1,188,941
2,100,000............ 466,970 622,627 778,284 933,941 1,091,441 1,248,941
2,200,000............ 489,470 652,627 815,784 978,941 1,143,941 1,308,941
2,300,000............ 511,970 682,627 853,284 1,023,941 1,196,441 1,368,941
2,400,000............ 534,470 712,627 890,784 1,068,941 1,248,941 1,428,941
2,500,000............ 556,970 742,627 928,284 1,113,941 1,301,441 1,488,941
2,600,000............ 579,470 772,627 965,784 1,158,941 1,353,941 1,548,941
- ---------
(1) For purposes of the pension plan, such compensation generally includes base
salary and incentive compensation which for the named executives are set
forth in the 'Salary' and 'Bonus' columns of the Summary Compensation Table
as well as the value of stock awards vesting during the year.
(footnotes continued on next page)
8
(footnotes continued from previous page)
Covered compensation for 2000 for Messrs. Gemunder and Keefe and Ms. Hodges
was $2,127,633, $662,893 and $458,312, respectively.
(2) As of December 31, 2000, Messrs. Gemunder and Keefe and Ms. Hodges had 37,
16 and 21 years of service, respectively.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain of its
executive officers. Mr. Gemunder's employment agreement provides for his
continued employment as President of the Company through August 3, 2006, subject
to earlier termination under certain circumstances, at his base salary as last
set by the Board of Directors as well as participation in incentive compensation
plans, stock incentive plans and other employee benefit plans. The agreement
also provides for his continued nomination as a director of the Company. In the
event of termination without cause or a material reduction in authority or
responsibility, the agreement provides that Mr. Gemunder will receive severance
payments equal to 150% of his then-current base salary, the amount of incentive
compensation most recently paid or approved in respect of the previous year and
the fair market value of all stock awards which have vested during the
12 months prior to termination ('Covered Compensation') for the balance of the
term of the agreement. The provisions of Ms. Hodges' employment agreement are
essentially identical to those of Mr. Gemunder, except that her agreement
provides for her nomination as a director, no less frequently than bi-annually.
Mr. Keefe is employed under an agreement that is also essentially identical to
that of Mr. Gemunder except that director nomination is not stipulated and
severance payments resulting from the conditions described above would equal
100% of Covered Compensation. Mr. Froesel is employed under an agreement with a
term expiring on March 3, 2002, except that the agreement automatically renews
at that time for a three-year period unless advance notice of termination is
given by either party. In the event the Company were to terminate Mr. Froesel's
employment on account of a change of control of the Company, he would be
entitled to be paid his then-current base salary and cash bonus compensation for
the then remaining term of the agreement, plus an additional two-year period,
subject to certain limitations specified in the agreement.
REPORT OF THE COMPENSATION AND INCENTIVE
COMMITTEE ON EXECUTIVE COMPENSATION
The Company believes that executive compensation should be directly and
materially linked to the financial and operating performance of the Company and
increases in stockholder value. The Company's executive compensation program
combines base salary, annual incentive compensation, and long-term incentive
compensation in the form of stock options and restricted stock awards with
various benefit plans, including pension plans, savings plans and medical
benefits generally available to salaried employees of the Company.
The executive compensation program is administered through the Compensation
and Incentive Committee of the Board of Directors. The membership of the
Committee is comprised of outside directors (i.e., non-employees of the
Company). The Committee is responsible for the review, approval and
recommendation to the Board of Directors of matters concerning base salary and
annual cash incentive compensation for key executives of the Company, which
recommendations must be approved by the full Board of Directors. The Committee
also administers the Company's stock incentive plans under which it reviews and
makes grants of stock options and restricted stock awards. The Committee may
use, subject to the provisions of the Company's compensation plans, its
discretion to set executive compensation where, in its judgment, external,
internal or individual circumstances warrant.
BASE SALARY AND ANNUAL INCENTIVE OPPORTUNITY
In determining base salary levels, the Committee considers the executive's
responsibilities, experience, performance and specific issues particular to the
Company. The Committee also considers
9
the compensation practices and performances of other companies that are likely
to compete with the Company for executive talent. In general, base salaries are
set at levels believed by the Committee to be sufficient to attract and retain
qualified executives when considered with the other components of the Company's
compensation program.
Annual incentive compensation provides a direct financial incentive to
executives, in the form of an annual bonus, to achieve their business unit's and
the Company's annual goals. The Committee believes that bonuses as a percent of
an executive's salary should be sufficiently high to provide a major incentive
for achieving annual performance targets.
At the beginning of each fiscal year, financial and operational goals are
established, which generally take into account such measures of performance as
sales and earnings growth, profitability, cash flow and return on investment.
Non-financial measures of performance used by the Committee in determining the
annual cash bonus award include organizational development, product or service
expansion and strategic positioning of the Company's assets. Specific relative
weights are not assigned to each performance factor, since the relative
importance of each factor varies depending upon the executive's specific job
responsibilities. Instead, each individual compensation decision is made on a
case-by-case basis and will ultimately depend upon the judgment of the
Committee. However, when fixing the annual bonus of the executive officers
listed in the Summary Compensation Table (the 'named executives'), the Committee
acts within the parameters provided for in the Annual Incentive Plan for Senior
Executives, approved by stockholders on May 20, 1996 (and which is being
proposed for re-approval this year; see 'Re-approval of Annual Incentive Plan
for Senior Executive Officers' herein). Under that plan, the amount of the
annual cash bonus for 2000 was dependent on the level of the Company's pretax
income, before adjustments for the cumulative effect of accounting changes,
acquisition expenses related to pooling-of-interests transactions and special
charges, reaching certain target levels established at the beginning of the
year.
LONG-TERM INCENTIVE COMPENSATION
The stock option and restricted stock program forms the basis of the
Company's long-term incentive plan for executives. This program seeks to align
executive and long-term stockholder interests by creating a strong and direct
link between executive compensation and stockholder return.
Stock options and restricted stock awards are granted annually and are
generally the primary incentive for long-term performance as they are granted at
or above fair market value and have vesting restrictions which generally lapse
over four to seven-year periods. The Committee considers each grantee's current
stock option and award holdings in making such grants. Both the amounts of
restricted stock awards and the proportion of stock options increase as a
function of higher salary and position of responsibility within the Company.
For the named executives, the restricted share awards for 2000 under the
1992 Long-Term Stock Incentive Plan were dependent upon the growth of the
Company's earnings per share, before the cumulative effect of accounting changes
and acquisition expenses related to pooling-of-interests transactions and
special charges, for fiscal year 2000 meeting certain thresholds established at
the beginning of the year.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) limits to $1,000,000 the amount that may be deducted by a
publicly held company for compensation paid each year to each of its five most
highly paid executive officers. Federal law excludes compensation from the
$1,000,000 limit if it is paid under specified conditions, including that the
compensation is based on performance goals determined by a committee of
'outside' directors and approved by the Company's stockholders. The Annual
Incentive Plan for Senior Executive Officers, approved by stockholders on
May 20, 1996, and amendments to the 1992 Long-Term Stock Incentive Plan,
approved by stockholders on May 19, 1997, brought the plans into compliance with
Section 162(m) relating to performance-based compensation. The Committee's
present intention is to comply in the future with Section 162(m) unless the
Committee believes that such compliance would not be in the best interests of
the Company and its stockholders.
10
COMPENSATION OF THE COMPANY'S PRESIDENT
In determining Mr. Gemunder's overall compensation and each component
thereof, the Committee took into consideration the report of the Hay Group,
independent professional compensation consultants, and the financial measures
cited above. Effective July 1, 2000, Mr. Gemunder's salary was increased to
$950,000 from the $850,000 that had been his base salary since May 1, 1999. This
increase was based on a survey performed by the Hay Group.
The implementation of the Prospective Payment System ('PPS') for Medicare
residents of skilled nursing facilities created an extremely difficult operating
environment in the long-term care industry in 1999, characterized by an erosion
of occupancy in skilled nursing facilities, a lower acuity level of residents in
such facilities and a deterioration in the financial condition of many skilled
nursing facility clients. Financial relief for skilled nursing facilities had
been expected in 2000 from the passage of the Balanced Budget Refinement Act
('BBRA') late in 1999, which provided for increases in reimbursement,
particularly for higher acuity residents. The implementation of certain of the
higher payments under the BBRA was, however, delayed until the second half of
2000, which served to exacerbate an already difficult operating environment. As
a result, the expected stabilization in the marketplace did not begin until
later in 2000. In order to deal with these still difficult operating conditions,
management focused on protecting the financial health of the business, managing
for cash flow and on consolidating its operations and maximizing productivity to
lower overall operating costs. Cash flow from operations reached an historical
high of $133 million, 31% above the $101 million generated in 1999, even though
earnings per share (excluding special items such as restructuring and
acquisition related expenses) of $0.72 for 2000 were 18% lower than the $0.88
earned in 1999. The Company also completed its consolidation and productivity
initiative in December 2000 on time and ahead of expectations in terms of
targeted savings. The total number of operating locations was reduced by 29% and
the total workforce was reduced by 16%. Annualized cost savings were in excess
of $46 million. Moreover, the balance sheet remained strong and the cash flow
generated allowed total debt to be reduced from 44.2% of the Company's
capitalization at December 31, 1999 to 42.3% at December 31, 2000. Given the
operating environment, the Committee viewed these actions as critical and the
results achieved as excellent. The Committee also believed these actions
contributed to the 80% increase in share price during 2000.
In determining incentive compensation for the Company's executives,
including Mr. Gemunder, the Committee reviewed the reports and recommendations
of the Hay Group as well as the Company's performance particularly in view of
the difficult business environment in 2000. In determining Mr. Gemunder's
compensation, the Committee took into consideration the success the Company had
in achieving such level of net income in 2000 and in maintaining the Company's
strong balance sheet despite the difficult market conditions, the Company's
record-breaking generation of cash flow from operations in 2000, the achievement
of its productivity and consolidation initiatives, the performance of the
Company versus its competitors, the Company's performance in 2000 in other areas
which it believes are key measures of the Company's success, the fact that
stock-based awards in particular should provide substantial incentive to Mr.
Gemunder to achieve the long-term goals of the Company, and the advice of its
consultants, the Hay Group, which concluded that Mr. Gemunder's overall
compensation in 2000 is representative of the Company's current marketplace,
financial position and operating environment.
Annual performance not only drives the payout of the Annual Incentive Plan
but it also is used in determining the size of the long-term incentive grant of
restricted stock awards. Acknowledging the difficulty in managing in such
market conditions, given the financial results of the Company, the Committee
recommended an overall increase in incentive compensation versus the prior year.
As it has done since the 1998 awards, the Committee decided to shift the mix of
cash and stock-based incentives to more heavily focus on the future long-term
performance of the Company and the Committee continued that practice with
respect to the 2000 awards. Accordingly, the Committee recommended that the
cash portion of incentive compensation remain essentially even with the
prior year, while recommending an increase in stock-based incentives. This shift
places more pay at risk because the restricted stock vests over seven years with
a greater proportion vesting in the latter years and aligns the interests of the
executives with that of the Company's stockholders.
11
Accordingly, the Committee awarded Mr. Gemunder a cash bonus of $500,000 for
2000, which was even with that for 1999; and, the Committee granted Mr. Gemunder
100,000 shares of restricted stock in recognition of the Company having achieved
the performance objective required for that level of award. In addition, in
light of the Company's success in achieving earnings per share (excluding
special items) of $0.72 despite the difficult operating environment that
occurred in 2000 and in recognition of other significant accomplishments of the
Company during 2000 including the generation of record cash flow and the
achievement of its productivity and consolidation initiatives and in order to
provide incentive to Mr. Gemunder to restore the Company to a record of
consistent growth, the Committee determined that it was in the best interests of
the Company and its stockholders to grant Mr. Gemunder another award of 44,664
shares. These two awards for 2000 total 144,664 shares of restricted stock as
compared with a total of 237,684 shares in 1999, a decrease of 39.1% in the
number of shares but an increase of 27.6% in terms of total dollar values as
compared with the 1999 grant. Both grants vest over a seven-year period with a
greater proportion vesting in the latter years. In addition, in 2000, as
long-term compensation, Mr. Gemunder was granted options to purchase 325,000
shares of Common Stock at option prices equal to the fair market value at the
date of grant.
The Committee believes that it is key to the Company's success that Mr.
Gemunder be primarily motivated and rewarded on the basis of shepherding the
Company through the current operating environment while positioning the Company
for future growth. The Committee believes that the challenges facing senior
executives in difficult times test management to a greater degree than in better
times. Accordingly, the Committee believes that in granting an increasing
percentage of stock-based compensation it has put in place substantial
incentives to restore the Company's track record of consistent earnings growth
in a manner which most directly aligns the interest of management with that of
the Company's stockholders.
Compensation and Incentive Committee:
Sheldon Margen, M.D., Chairman
Andrea R. Lindell, DNSc, RN
Charles H. Erhart, Jr.
COMPENSATION AND INCENTIVE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. E.L. Hutton and Gemunder, executive officers of the Company, are
directors of Chemed. In addition, Mr. Erhart, a member of the Compensation and
Incentive Committee, is a director of Chemed.
CERTAIN TRANSACTIONS
The Company subleases offices from Chemed and is charged for consulting
services pertaining to information systems development, the occasional use of
Chemed's corporate aviation department and other incidental expenses based on
Chemed's cost. The Company reimburses Chemed for all such services at rates that
are essentially equal to those which would have been incurred if the Company had
obtained such services from other parties. During 2000, such reimbursements
totaled $1.4 million.
12
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total return for the last five
years on a $100 investment on December 31, 1995 in each of the Company's Common
Stock, the Standard & Poor's 500 Stock Index and the OCR Peer Group Index.
CUMULATIVE TOTAL STOCKHOLDER RETURN FOR
FIVE-YEAR PERIOD ENDED DECEMBER 31, 2000
[PERFORMANCE GRAPH]
DECEMBER 31,
-------------------------------------------------
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
Omnicare, Inc.................................. 100 143.90 139.21 156.43 54.34 98.59
S&P 500........................................ 100 122.96 163.98 210.85 255.21 231.98
OCR Peer Group................................. 100 108.79 145.80 145.90 54.95 81.31
The OCR Peer Group Index includes the following companies: Alterra
Healthcare Corp., Bergen Brunswig Corp., Beverly Enterprises Inc., Genesis
Health Ventures Inc., Manor Care Inc., NCS Healthcare Inc., Parexel
International Corp., Pharmaceutical Product Development Inc., PSS World Medical
Inc., and Sunrise Assisted Living Inc. The total return calculations reflected
in the foregoing graph were performed by Standard & Poor's Compustat Services,
Inc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 2000, with
respect to the only person known to the Company to beneficially own more than 5%
of the shares of its Common Stock:
NUMBER OF SHARES
NAME AND AND NATURE
ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(a) CLASS(a)
---------------- ------------ --------
T. Rowe Price Associates, Inc. ............................ 10,605,528(b) 11.4%
100 E. Pratt Street
Baltimore, MD 21202
- ---------
(a) Under applicable Securities and Exchange Commission regulations, shares are
treated as 'beneficially owned' if a person has or shares voting or
dispositive power with respect to the shares or has a right to acquire the
shares within 60 days of December 31, 2000. Unless otherwise
(footnotes continued on next page)
13
(footnotes continued from previous page)
indicated, sole voting power and sole dispositive power are exercised by
the named person. In calculating 'Percent of Class' for a person, shares
which may be acquired by the person within such 60-day period are treated
as owned by the person and as outstanding shares.
(b) Investment adviser has sole dispositive power with respect to 10,504,516 of
the listed shares and sole voting power with respect to 2,144,956 of the
shares and neither shared voting nor shared dispositive power with respect
to any of the shares. These securities are owned by various individual and
institutional investors, which T. Rowe Price Associates, Inc. ('Price
Associates') serves as investment adviser with power to direct investments
and/or sole power to vote the securities. For purposes of the reporting
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities.
-------------------
The following table sets forth information as of March 23, 2001 with respect
to the shares of Common Stock beneficially owned by each of the nominees and
directors, each of the named executives, and all directors and executive
officers of the Company as a group:
NUMBER OF SHARES
AND NATURE OF PERCENT OF
INDIVIDUAL OR GROUP OWNERSHIP CLASS(a)(b)
------------------- --------- -----------
E.L. Hutton................................................. 543,990(c)
223,750(d)
21,472(e)
J.F. Gemunder............................................... 1,024,602(c) 2.3%
1,119,250(d)
16,328(f)
T.E. Bien................................................... 138,209(c)
59,000(d)
C.H. Erhart, Jr. ........................................... 24,828(c)
M.L. Fox.................................................... 26,019(c)
89,000(d)
D.W. Froesel, Jr. .......................................... 166,042(c)
76,500(d)
C.D. Hodges................................................. 257,404(c)
178,250(d)
T.C. Hutton................................................. 10,501(c)
21,472(e)
P.E. Keefe.................................................. 230,050(c)
121,000(d)
S.E. Laney.................................................. 61,778(c)
7,800(d)
A.R. Lindell, DNSc.......................................... 3,208(c)
S. Margen, M.D. ............................................ 20,112(c)
K.J. McNamara............................................... 6,411(c)
J.H. Timoney................................................ 5,419(c)
All directors, nominees, and executive officers as a group
(15 persons).............................................. 2,525,011(c) 4.7%
1,883,800(d)
21,472(e)
16,328(f)
- ---------
(a) Under applicable Securities and Exchange Commission regulations, shares are
treated as 'beneficially owned' if a person has or shares voting or
dispositive power with respect to the shares or has a right to acquire the
shares within 60 days of March 23, 2001. Unless otherwise indicated, sole
voting power and sole dispositive power are exercised by the named person.
In calculating
(footnotes continued on next page)
14
(footnotes continued from previous page)
'Percent of Class' for a person, shares which may be acquired by the person
within such 60-day period are treated as owned by the person and as
outstanding shares.
(b) Percent of Class is not shown if less than 1%.
(c) Shares held in individual capacity (including shares held by a member of
his or her household) as to which such person has voting and dispositive
powers (and includes shares allocated, as of December 31, 2000, to the
account of each named person or member of the group under the Company's
Employees' Savings and Investment Plan and its Employee Stock Ownership
Plan).
(d) Shares subject to outstanding options exercisable within 60 days from March
23, 2001.
(e) Messrs. E.L. Hutton and T.C. Hutton are trustees of the E.L. Hutton
Foundation, which holds 21,472 shares of Common Stock over which the
Trustees share both voting and dispositive powers.
(f) Mr. Gemunder is a trustee of the Joel F. Gemunder Foundation, which holds
16,328 shares of Common Stock, over which he holds both voting and
dispositive powers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
persons deemed to be executive officers of the Company, directors of the
Company, and beneficial owners of more than 10% of the Common Stock are required
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of the Company. The Company believes that during 2000 all such persons complied
with these filing requirements. In making these statements, the Company has
relied upon the facts of which it is specifically aware and, in the case of its
directors and officers, upon their written representations.
RE-APPROVAL OF ANNUAL INCENTIVE PLAN FOR SENIOR EXECUTIVE OFFICERS
The Board of Directors of the Company normally seeks to implement
compensation programs in a manner which maximizes the deductibility for federal
income taxes of compensation paid by the Company. Accordingly, in 1996 the Board
adopted, and the stockholders approved on May 20, 1996, the Annual Incentive
Plan for Senior Executive Officers (the 'Plan'). The Plan is designed to qualify
the amounts paid under its terms to the Company's senior executive officers as
'qualified performance-based compensation' under Section 162(m) of the Internal
Revenue Code (the 'Code'). This qualification allows amounts awarded under the
Plan to be deductible by the Company for federal income tax purposes, even if,
when combined with other compensation, the award causes the compensation of any
Named Executive Officer to exceed $1 million. The Code requires that the Plan be
reapproved by the Company's stockholders every five years. A summary of the
principal features of the Plan is set forth below, and the full text of the Plan
is annexed as Appendix B to this Proxy Statement.
Payment of any awards under the Plan relating to services to be performed in
calendar year 2002 and thereafter is contingent on stockholder re-approval of
the Plan. If such approval is not obtained, no such future awards will be paid,
although other incentive awards may be paid at the discretion of the Committee
(as hereinafter defined).
Under Section 162(m) of the Code, the amount which the Company may deduct on
its tax returns for compensation paid to certain 'covered employees' (generally
the chief executive officer and the four highest paid executive officers other
than the chief executive officer) in any taxable year is generally limited to $1
million per individual. However, compensation that qualifies as 'performance-
based compensation' is not subject to the $1 million deduction limit. In order
for compensation to qualify as 'performance-based' for this purpose, it must
meet certain conditions, one of which is that the material terms of the
performance goals under which the compensation is to be paid must be disclosed
to and approved by stockholders, and thereafter approved every five years that
the Plan continues in effect.
The persons who are eligible to be selected to participate in the Plan are
employees of the Company and its subsidiaries who are executive officers of the
Company and whose annual incentive
15
compensation for any taxable year of the Company may not be deductible by the
Company in whole or in part unless the incentive compensation qualifies as
'performance-based' under Section 162(m)(4)(C) of the Code. Based on this
eligibility standard, only seven persons, including the named executives,
participated in the Plan in 2000. Other employees of the Company and its
subsidiaries are eligible to earn lower amounts of annual incentive compensation
under other arrangements that are generally less restrictive than the Plan.
However, a larger or smaller number of persons may be eligible to be selected to
participate in the Plan in the future, depending on the compensation levels and
the character of the compensation payable to the Company's executive officers in
the future. Under the Plan, the Compensation and Incentive Committee of the
Board of Directors, or another committee designated by the Board and consisting
exclusively of 'outside directors' within the meaning of Section 162(m) of the
Code (the 'Committee'), selects participants in the Plan, determines the amount
of their award opportunities, selects the performance criteria and the
performance goals for each year, and administers and interprets the Plan. An
eligible employee may (but need not) be selected to participate in the Plan each
year.
No later than 90 days after the commencement of each year (or by such other
deadline as may apply under Code Section 162(m)(4)(C) or the Treasury
regulations thereunder), the Committee will select the persons who will
participate in the Plan in such year and establish in writing the performance
goals for that year as well as the method for computing the amount of
compensation which each such participant will be paid if such performance goals
are attained in whole or in part. Such method will be stated in terms of an
objective formula or standard that precludes discretion to increase the amount
that will be due upon attainment of the goals. The Committee retains discretion
under the Plan to reduce an award at any time before it is paid.
The maximum amount of compensation that may be paid under the Plan to any
participant for any year is equal to the lesser of two and one-quarter percent
(2 1/4%) of the Company's consolidated income before income taxes, the
cumulative effect of accounting changes, and acquisition expenses (e.g., pooling
of interests), as determined in accordance with generally accepted accounting
principles ('Adjusted Pre-Tax Income'), or $5.0 million. In calculating Adjusted
Pre-Tax Income, each extraordinary item which increases (or has the effect of
increasing) Adjusted Pre-Tax Income will be included. Adjusted Pre-Tax Income
will be increased by the amount of any extraordinary item which decreases (or
has the effect of decreasing) Adjusted Pre-Tax Income.
Under the Plan, the performance goals for any year may be based on any of
the following criteria, either alone or in any combination, and on either a
consolidated or business unit level, and may include or exclude discontinued
operations and acquisition expenses (e.g., pooling of interests), as the
Committee may in each case determine: level of sales, earnings per share, income
before income taxes and the cumulative effect of accounting changes, income
before the cumulative effect of accounting changes, net income, return on
assets, return on equity, return on capital employed, total stockholder return,
market valuation, and completion of acquisitions. The foregoing terms shall have
any reasonable definitions that the Committee may specify, which may include or
exclude any or all of the following items, as the Committee may specify:
extraordinary, unusual or non-recurring items; effects of accounting changes;
effects of currency fluctuations; effects of financing activities (e.g., effect
on earnings per share of issuing convertible debt securities); expenses for
restructuring or productivity initiatives; non-operating items; acquisition
expenses (e.g., pooling of interests); and effects of divestitures. Any of the
foregoing criteria may apply to a participant's award opportunity for any year
in its entirety or to any designated portion of the award opportunity, as the
Committee may specify.
The performance goals that have been established by the Committee for 2001
are based on consolidated income before income taxes, the cumulative effect of
accounting changes, and acquisition expenses (e.g., pooling of interests). The
Committee has determined that, unless it determines otherwise, each
extraordinary item which affects such 2001 consolidated income before income
taxes shall be automatically excluded or included in calculating the award that
has been earned, whichever will produce the higher award. (This provision was
made because the awards may qualify as 'performance-based compensation' under
Section 162(m) of the Code if the Committee retains discretion to reduce an
award but not if the Committee retains discretion to increase an award). Under
16
the Plan, the Committee may use the same criterion or such other criterion as
set forth in the Plan for awards in future years.
Awards may be paid under the Plan for any year only if and to the extent the
awards are earned on account of the attainment of the performance goals
applicable to such year and the participant is continuously employed throughout
such year. The only exceptions to the continued employment requirement are if
employment terminates by reason of death or disability during a year, in which
case a prorated award may be paid after the close of the year, or if a Change of
Control (as defined in the Company's 1995 Premium-Priced Stock Option Plan)
occurs during a year, in which case a prorated award will be paid at the time of
the Change of Control based on the participant's projected award for the year in
which the Change of Control occurs (as determined by the Committee). If a
participant's employment terminates for any reason other than death or
disability during a year, any award for such year will be forfeited. However, a
prorated award may also be paid after the year if employment terminates by
retirement during the year, but only if such a payment will not prevent awards
from qualifying as 'performance-based' compensation in the absence of any
termination of employment.
Unless the Committee provides otherwise, all payments pursuant to the Plan
are to be made in cash when the Committee certifies that the performance goals
for the year have been satisfied. The Board may amend or terminate the Plan
without stockholder approval at any time.
For services in 2000, the following awards were paid to the participants in
the Plan:
E.L. Hutton................................................. $ 400,000
J.F. Gemunder............................................... 500,000
P.E. Keefe.................................................. 160,000
D.W. Froesel, Jr. .......................................... 135,000
C.D. Hodges................................................. 80,000
All executive officer participants as a group............... 1,350,000
Approval of the Plan requires the affirmative vote of the holders of a
majority of the shares of Common Stock represented in person or by proxy and
entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RE-APPROVAL OF THE PLAN.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD
The Audit Committee is comprised of four members of the Company's Board of
Directors. Each member of the Audit Committee is independent as 'independence'
is defined at Sections 303.01(B)(2)(a) and (B)(3) of the New York Stock
Exchange's listing standards. The duties and responsibilities of the Audit
Committee are set forth in the Audit Committee Charter, which the Board of
Directors adopted on May 15, 2000. A copy of the Charter is included as Appendix
A to this Proxy Statement. The Audit Committee, among other things, recommends
to the Board of Directors (i) that the audited financial statements be included
in the Company's Annual Report on Form 10-K and (ii) the selection of the
independent accountants' to audit the books and records of the Company.
The Audit Committee has (i) reviewed and discussed the Company's audited
financial statements for the year ended December 31, 2000 with the Company's
management and with the Company's independent auditors; (ii) discussed with the
Company's independent auditors the matters required to be discussed by SAS 61
(Codification for Statements on Auditing Standards); and (iii) received and
discussed the written disclosures and the letter from the Company's independent
auditors required by Independence Standards Board Statement No. 1 (Independence
discussions with Audit Committees). Based on such review and discussions with
management and the independent auditors, the Committee recommended to the Board
of Directors that the audited financial statements be included in the
17
Company's Annual Report on Form 10-K for the year ended December 31, 2000 for
filing with the U.S. Securities and Exchange Commission.
The Audit Committee:
Charles H. Erhart, Jr.
Sandra E. Laney
Andrea R. Lindell, DNSc, RN
John H. Timoney
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the firm of PricewaterhouseCoopers LLP
as independent accountants for the Company and its consolidated subsidiaries for
the year 2001. The Board engaged PricewaterhouseCoopers LLP to audit Omnicare's
consolidated financial statements and to perform certain other non-audit
services.
Audit Fees. The aggregate fees billed by PricewaterhouseCoopers LLP for
professional services required for the audit of the Company's audited
consolidated financial statements for fiscal 2000 and the reviews of the interim
consolidated financial statements included in the Company's Forms 10-Q for that
year were approximately $0.6 million.
All Other Fees. The aggregate fees billed for additional services rendered
by PricewaterhouseCoopers LLP in fiscal 2000, other than the services described
above, were approximately $1.4 million (none of which was for financial
information systems design or implementation). In engaging
PricewaterhouseCoopers LLP for these additional services, management considered
whether the provision of these services was compatible with maintaining
PricewaterhouseCoopers' independence.
PricewaterhouseCoopers LLP (and its predecessor) has acted as independent
accountants for the Company and its consolidated subsidiaries since 1981.
Although the submission of this matter to the stockholders is not required by
law or the By-Laws of the Company, the selection of PricewaterhouseCoopers LLP
will be submitted for ratification at the Annual Meeting. The affirmative vote
of a majority of the shares represented at the meeting is necessary to ratify
the selection of PricewaterhouseCoopers LLP. If the selection is not ratified at
the meeting, the Board of Directors will reconsider its selection of independent
accountants.
It is expected that a representative of PricewaterhouseCoopers LLP will be
present at the Annual Meeting. Such representative will have the opportunity to
make a statement if he or she desires to do so and will be available to respond
to questions raised at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION.
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be considered for inclusion in the
proxy materials for presentation at the 2002 Annual Meeting of Stockholders must
be in writing and received by the Secretary of the Company not later than
December 11, 2001. If any stockholder who intends to propose any other matter to
be acted on at the 2002 Annual Meeting of Stockholders does not inform the
Company of such matter by February 24, 2002, the persons named as proxies for
the 2002 Annual Meeting of Stockholders will be permitted to exercise
discretionary authority to vote on such matter even if the matter is not
discussed in the proxy statement for that meeting.
OTHER MATTERS
As of February 24, 2001, the Company did not know of any other matter, which
will be presented for consideration at the Annual Meeting. However, if any other
matter should come before the meeting, the persons named in the enclosed proxy
(or their substitutes) will have discretionary authority to vote on the matter.
18
EXPENSES OF SOLICITATION
The expense of soliciting proxies in the accompanying form will be borne by
the Company. The Company will request banks, brokers and other persons holding
shares beneficially owned by others to send proxy materials to the beneficial
owners and to secure their voting instructions, if any. The Company will
reimburse such persons for their expenses in so doing. In addition to
solicitation by mail, officers and regular employees of the Company may, without
extra remuneration, solicit proxies personally, by telephone or by telegram from
some stockholders, if such proxies are not promptly received. The Company also
expects to retain D.F. King & Co., Inc., a proxy-soliciting firm, to assist in
the solicitation of such proxies at a cost that will not exceed $7,500 plus
reasonable expenses.
By Order of the Board of Directors
Cheryl D. Hodges
Secretary
April 10, 2001
19
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APPENDIX A
OMNICARE, INC.
AUDIT COMMITTEE CHARTER
I. STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the compliance
by the Company with legal and regulatory requirements, and (3) the independence
and performance of the Company's internal and external auditors.
II. ORGANIZATION
The members of the Audit Committee shall be appointed by the Board and shall
consist of at least three members of the Board who meet the independence and
experience requirements of the New York Stock Exchange. Accordingly, all of the
members will be directors:
1. Who have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company; and
2. Who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Audit
Committee. In addition, at least one member of the Audit Committee
will have accounting or related financial management expertise.
The Audit Committee shall meet, whether in person or telephonically, at
least two times each year. The Audit Committee shall make regular reports to the
Board.
III. RESPONSIBILTIES
The responsibilities of the Audit Committee include the following:
1. Review and assess the adequacy of this Charter annually and
recommend any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management and
the independent auditor prior to the filing by the Company of its
annual report on Form 10-K, including significant financial
reporting matters related thereto, and recommend to the Board that
the annual financial statements be included in the Form 10-K.
Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended,
relating to the conduct of the annual audit.
3. Review with management and the independent auditor the Company's
quarterly financial statements prior to the filing by the Company of
its reports on Form 10-Q, or where practicable, prior to the first
public release of quarterly earnings. Discuss with the independent
auditor the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended, relating to the conduct of
the quarterly reviews. The Chairperson of the Audit Committee may
represent the entire Audit Committee for purposes of this review.
4. Review with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such
exposures.
5. Review significant issues with respect to the Company's accounting
principles and practices as suggested by the independent auditor,
internal auditors or management.
6. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board.
7. Approve the fees to be paid to the independent auditor.
A-1
8. Receive periodic reports no less frequently than annually from the
independent auditor regarding the auditor's independence, discuss
such reports with the auditor, and if so determined by the Audit
Committee, recommend that the Board take appropriate action to
satisfy itself of the independence of the auditor.
9. Evaluate together with the Board the performance of the independent
auditor and, if so determined by the Audit Committee, recommend that
the Board replace the independent auditor.
10. Meet with the independent auditor prior to the annual audit to
review the planning and scope of the audit.
11. Meet with management and the independent auditor to review the
internal audit department responsibilities and the adequacy of its
resources to carry out its responsibilities.
12. Review the appointment and replacement of the senior internal
auditing officer.
13. Review with the Company's counsel any legal matters that may have a
material impact on the financial statements and any material reports
or inquiries received from regulators or governmental agencies.
14. Meet with management, the senior internal audit officer and the
independent auditor in separate executive sessions to discuss any
matters that the Audit Committee or those persons believe should be
discussed.
15. Review and approve the expense reports of the Company's principal
executive officers.
16. Prepare the report required by the rules of the Securities and
Exchange Commission to be included in the Company's annual proxy
statement.
The foregoing functions shall be the common recurring activities of the
Audit Committee in carrying out its functions. These functions are set forth as
a guide with the understanding that the Audit Committee may diverge from this
guide as appropriate given the circumstances.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent auditor.
Consequently, in carrying out its responsibilities, the Audit Committee is not
providing any expert or special assurance as to the Company's financial
statements or any professional certification as to the independent auditor's
work. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor or
to assure compliance with laws and regulations and the Company's Corporate
Compliance Program.
A-2
APPENDIX B
OMNICARE, INC.
ANNUAL INCENTIVE PLAN FOR SENIOR EXECUTIVE OFFICERS
1. APPLICATION
This document sets forth the annual incentive plan applicable to those
employees of Omnicare, Inc. (the 'Company') and its subsidiaries who are
executive officers of the Company and whose annual incentive compensation for
any taxable year of the Company commencing on or after January 1, 1996 the
Committee (as hereafter defined) anticipates would not be deductible by the
Company in whole or in part but for compliance with Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended ('162(m) Covered Employee'), including
members of the Board of Directors who are such employees. This plan is hereafter
referred to as the 'Plan' or 'Annual Incentive Plan'.
2. ELIGIBILITY
All 162(m) Covered Employees shall be eligible to be selected to participate
in this Annual Incentive Plan. The Committee shall select the 162(m) Covered
Employees who shall participate in this Plan in any year no later than 90 days
after the commencement of the year (or no later than such earlier or later date
as may be the applicable deadline for the compensation payable to such 162(m)
Covered Employee for such year hereunder to qualify as 'performance-based' under
Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the
'Code')).
3. ADMINISTRATION
The Plan shall be administered by the Compensation and Incentive Committee
of the Board of Directors (the 'Board'), or by another committee appointed by
the Board consisting of not less than two (2) Directors who are not employees of
the Company or any subsidiary of the Company (the 'Committee'). The Committee
shall be comprised exclusively of Directors who are not employees and who are
'outside directors' within the meaning of Section 162(m)(4)(C) of the Code. The
Committee shall have authority, subject to the provisions herein, to select
employees to participate herein; establish and administer the performance goals
and the award opportunities applicable to each participant and certify whether
the goals have been attained; construe and interpret the Plan and any agreement
or instrument entered into under the Plan; establish, amend, and waive rules and
regulations for the Plan's administration; and make all other determinations
which may be necessary or advisable for the administration of the Plan. Any
determination by the Committee pursuant to the Plan shall be final, binding and
conclusive on all employees and participants and anyone claiming under or
through any of them.
4. ESTABLISHMENT OF PERFORMANCE GOALS AND AWARD OPPORTUNITIES
No later than 90 days after the commencement of each year commencing on or
after January 1, 1996 (or no later than such earlier or later date as may be the
applicable deadline for compensation payable hereunder for such year to qualify
as 'performance-based' under Section 162(m)(4)(C) of the Code), the Committee
shall establish in writing the method for computing the amount of compensation
which will be payable under the Plan to each participant in the Plan for such
year if the performance goals established by the Committee for such year are
attained in whole or in part and if the participant's employment by the Company
or a subsidiary continues without interruption during that year. Such method
shall be stated in terms of an objective formula or standard that precludes
discretion to increase the amount of the award that would otherwise be due upon
attainment of the goals. No provision of this Plan shall preclude the Committee
from exercising negative discretion with respect to any award hereunder, within
the meaning of Treasury Regulation Section 1.162-27(e)(2)(iii)(A).
No later than 90 days after the commencement of each year commencing on or
after January 1, 1996 (or no later than such earlier or later date as may be the
applicable deadline for compensation
B-1
payable hereunder for such year to qualify as 'performance-based' under
Section 162(m)(4)(C) of the Code), the Committee shall establish in writing the
performance goals for such year, which shall be based on any of the following
performance criteria, either alone or in any combination, on either a
consolidated or business unit or divisional level, and which shall include or
exclude discontinued operations and acquisition expenses (e.g., pooling of
interests), as the Committee may determine: level of sales, earnings per share,
income before income taxes and cumulative effect of accounting changes, income
before cumulative effect of accounting changes, net income, return on assets,
return on equity, return on capital employed, total stockholder return, market
valuation, and completion of acquisitions. The foregoing criteria shall have any
reasonable definitions that the Committee may specify, which may include or
exclude any or all of the following items, as the Committee may specify:
extraordinary, unusual or non-recurring items; effects of accounting changes;
effects of currency fluctuations; effects of financing activities (e.g., effect
on earnings per share of issuing convertible debt securities); expenses for
restructuring or productivity initiatives; non-operating items; acquisition
expenses (e.g., pooling of interests); and effects of divestitures. Any such
performance criterion or combination of such criteria may apply to the
participant's award opportunity in its entirety or to any designated portion or
portions of the award opportunity, as the Committee may specify.
5. MAXIMUM AWARD
The maximum amount of compensation that may be paid under the Plan to any
participant for any year is equal to the lesser of two and one-quarter percent
(2 1/4%) of the Company's consolidated income before income taxes, the
cumulative effect of accounting changes, and acquisition expenses (e.g., pooling
of interests), as determined in accordance with generally accepted accounting
principles ('Adjusted Pre-Tax Income'), or $5.0 million. In calculating Adjusted
Pre-Tax Income, each extraordinary item which increases (or has the effect of
increasing) Adjusted Pre-Tax Income will be included. Adjusted Pre-Tax Income
will be increased by the amount of any extraordinary item which decreases (or
has the effect of decreasing) Adjusted Pre-Tax Income.
6. ATTAINMENT OF PERFORMANCE GOALS REQUIRED
Awards shall be paid under this Plan for any year solely on account of the
attainment of the performance goals established by the Committee with respect to
such year, within the meaning of applicable Treasury regulations. Awards shall
also be contingent on continued employment by the Company or a subsidiary of the
Company during such year. The only exceptions to this rule apply in the event of
termination of employment by reason of death or disability (as determined by the
Committee), or in the event of a Change of Control of the Company (as such term
is defined in the Company's 1995 Premium-Priced Stock Option Plan), during such
year, in which case the following provisions shall apply. In the event of
termination of employment by reason of death or disability during a Plan year,
an award shall be payable under this Plan to the participant or the
participant's estate for such year, which shall be paid at the same time as the
award the participant would have received for such year had no termination of
employment occurred, and which shall be equal to the amount of such award
multiplied by a fraction the numerator of which is the number of full or partial
calendar months elapsed in such year prior to termination of employment and the
denominator of which is the number twelve. In the event of a Change of Control
during a Plan year and prior to termination of employment, an incentive award
shall be paid under the Plan at the time of such Change of Control to each
participant, with the amount of such award being equal to the participant's
projected award under the Plan (as determined by the Committee) for the year in
which the Change of Control occurs, multiplied by a fraction the numerator of
which is the number of full or partial calendar months elapsed in such year
prior to the Change of Control and the denominator of which is the number
twelve. An additional exception shall apply in the event of termination of
employment by reason of retirement during a Plan year, but only if and to the
extent it will not prevent any award payable hereunder (other than an award
payable in the event of death, disability, Change of Control or retirement) from
qualifying as 'performance-based compensation' under Section 162(m)(4)(C) of the
Code. Subject to the preceding sentence, in the event of termination of
employment by reason of retirement during a Plan year an award shall be payable
under this Plan to the participant for such year, which shall be paid at the
same time as the award the
B-2
participant would have received for such year had no termination of employment
occurred, and which shall be equal to the amount of such award multiplied by a
fraction the numerator of which is the number of full or partial calendar months
elapsed in such year prior to termination of employment and the denominator of
which is the number twelve. A participant whose employment terminates prior to
the end of a Plan year for any reason not excepted above shall not be entitled
to any award under the Plan for that year.
7. STOCKHOLDER APPROVAL AND COMMITTEE CERTIFICATION CONTINGENCIES; PAYMENT OF
AWARDS
Payment of any awards under this Plan shall be contingent upon stockholder
approval of the Plan, prior to payment, in accordance with applicable Treasury
regulations under Code Section 162(m). Unless and until such stockholder
approval is obtained, no award shall be paid pursuant to this Plan. Subject to
the provisions of Paragraph 6 above relating to death, disability, Change of
Control and retirement, payment of any award under this Plan shall also be
contingent upon the Compensation Committee's certifying in writing that the
performance goals and any other material terms applicable to such award were in
fact satisfied, in accordance with applicable Treasury regulations under Code
Section 162(m). Unless and until the Committee so certifies, such award shall
not be paid. Unless the Committee provides otherwise, (a) earned awards shall be
paid promptly following such certification, and (b) such payment shall be made
in cash (subject to any payroll tax withholding the Company may determine
applies).
8. AMENDMENT OR TERMINATION
The Board of Directors may amend, modify or terminate this Plan at any time,
provided that no such amendment, modification or termination shall adversely
affect the incentive opportunity of any participant with respect to the portion
of the year elapsed prior to the date of such amendment, modification or
termination, without such participant's written consent.
9. INTERPRETATION AND CONSTRUCTION
Any provision of this Plan to the contrary notwithstanding, (a) awards under
this Plan are intended to qualify as performance-based compensation under Code
Section 162(m)(4)(C), and (b) any provision of the Plan that would prevent an
award under the Plan from so qualifying shall be administered, interpreted and
construed to carry out such intention and any provision that cannot be so
administered, interpreted and construed shall to that extent be disregarded. No
provision of the Plan, nor the selection of any eligible employee to participate
in the Plan, shall constitute an employment agreement or affect the duration of
any participant's employment, which shall remain 'employment at will' unless an
employment agreement between the Company and the participant provides otherwise.
Both the participant and the Company shall remain free to terminate employment
at any time to the same extent as if the Plan had not been adopted.
10. GOVERNING LAW
The terms of this Plan shall be governed by the laws of the State of
Delaware, without reference to the conflicts of laws principles of that State.
B-3
APPENDIX 1
OMNICARE, INC.
100 E. RiverCenter Boulevard
P Covington, Kentucky 41011
R THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS, MAY 21, 2001.
O
The undersigned hereby appoints E. L. Hutton, J. F. Gemunder and C. D.
X Hodges as Proxies, each with the power to appoint a substitute, and hereby
authorizes them to represent and to vote, as designated below, all the
Y shares of common stock of Omnicare, Inc. held of record by the undersigned
as of March 23, 2001 at the Annual Meeting of Stockholders to be held on
May 21, 2001, or at any adjournment thereof.
Election of Directors
Nominees:
Edward L. Hutton David W. Froesel, Jr. Andrea E. Lindell, DNSc
Joel F. Gemunder Cheryl D. Hodges Sheldon Margen, M.D.
Timothy E. Bien Patrick E. Keefe Kevin J. McNamara
Charles H. Erhart, Jr. Sandra E. Laney John H. Timoney
(Continued and to be signed on other side)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[X] Please mark your
votes as in this
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. To re-approve the [ ] [ ] [ ]
Directors. Company's Annual
(see reverse) Incentive Plan for
Senior Executive
For, except vote withheld from the Officers.
following nominee(s):
FOR AGAINST ABSTAIN
3. To ratify the selection of [ ] [ ] [ ]
independent accountants.
4. In their discretion, the Proxies are authorized to vote
upon such other business as may properly come
before the meeting.
IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS (1), (2) AND
(3). When signed on behalf of a corporation, partnership, estate, trust, or
other stockholder, state your title or capacity or otherwise indicate that you
are authorized to sign.
(Please sign exactly as name(s) appear at left)
PLEASE MARK, SIGN, DATE AND RETURN PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
- --------------------------------------------
- --------------------------------------------
SIGNATURE (S) DATE
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE