UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 Under Rule 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:
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[OMNICARE, INC. LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 18, 2004
The Annual Meeting of Stockholders of Omnicare, Inc. (the 'Company') will be
held at The Phoenix Club, 812 Race Street, Cincinnati, Ohio, on Tuesday,
May 18, 2004 at 11:00 a.m. local time. The purpose of the Annual Meeting is to
consider and act upon:
(1) the election of nine Directors;
(2) the approval of the Omnicare, Inc. 2004 Stock and Incentive Plan;
(3) the ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors of the Company for 2004; and
(4) any other business as may properly be brought before the meeting.
Stockholders of record at the close of business on March 31, 2004 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 12, 2004
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.
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TABLE OF CONTENTS
<Table>
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS.......... 1
ELECTION OF DIRECTORS....................................... 1
Nominees................................................ 2
GOVERNANCE OF THE COMPANY AND BOARD MATTERS................. 4
Corporate Governance Guidelines......................... 4
Independent Directors................................... 4
Committees of the Board, Committee Charters and
Meetings............................................... 5
Selection of Nominees for the Board of Directors........ 6
Code of Ethics.......................................... 7
Executive Sessions of Non-management Directors.......... 7
Contacting the Board of Directors....................... 7
Director Compensation................................... 7
EXECUTIVE COMPENSATION...................................... 9
Stock Options........................................... 11
Pension Plan............................................ 12
Supplemental Benefit Plan............................... 13
Employment Agreements................................... 13
REPORT OF THE COMPENSATION AND INCENTIVE COMMITTEE ON
EXECUTIVE COMPENSATION.................................... 14
Base Salary and Annual Incentive Opportunity............ 15
Long-Term Incentive Compensation........................ 15
Policy on Deductibility of Compensation................. 15
Stock Ownership Guidelines.............................. 16
Compensation of the Company's President and Chief
Executive Officer...................................... 16
Compensation and Incentive Committee Interlocks and
Insider Participation.................................. 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 18
COMPARATIVE STOCK PERFORMANCE............................... 19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 20
PROPOSAL TO APPROVE 2004 STOCK AND INCENTIVE PLAN........... 21
Description of the Plan................................. 22
New Plan Benefits....................................... 25
U.S. Federal Income Tax Consequences.................... 25
EQUITY COMPENSATION PLANS................................... 26
REPORT OF THE AUDIT COMMITTEE OF THE BOARD.................. 27
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS......... 28
Audit Committee Pre-Approval Policies and Procedures.... 28
Fees and Services of Independent Auditors............... 28
Vote on Ratification of Appointment..................... 29
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 29
STOCKHOLDER PROPOSALS....................................... 29
Stockholder Proposal Intended for Inclusion in the 2005
Proxy Statement........................................ 29
Stockholder Nomination of a Candidate for Election as a
Director............................................... 29
Advance Notice of Business for 2005 Annual Meeting...... 30
Corporate Secretary Address for Notices and Requests.... 30
OTHER MATTERS............................................... 30
EXPENSES OF SOLICITATION.................................... 30
Appendix A: Audit Committee Charter......................... A-1
Appendix B: 2004 Stock and Incentive Plan................... B-1
</Table>
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OMNICARE, INC.
100 EAST 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' or
'Omnicare') of proxies to be used at the Annual Meeting of Stockholders of the
Company to be held on May 18, 2004, and any postponement or adjournment thereof
(the 'Annual Meeting'). Stockholders of record as of the close of business on
March 31, 2004 are entitled to notice of, and to vote at, the Annual Meeting or
any postponement or adjournment thereof. As of such date, the Company had
outstanding 103,848,057 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. If your shares of Common Stock are
held by a broker, the broker will ask you how you want your shares to be voted
at the Annual Meeting. If you give the broker instructions, your shares must be
voted as you direct. If you do not give instructions, one of two things can
happen, depending upon the type of proposal. For some proposals, such as the
election of Directors and the ratification of auditors, the broker may vote your
shares at its discretion. But for other proposals, including the approval of the
Omnicare, Inc. 2004 Stock and Incentive Plan, the broker may not vote your
shares at all. When that happens, it is called a 'Broker Nonvote.' 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 nine persons named below; (2) to approve the
Omnicare, Inc. 2004 Stock and Incentive Plan; and (3) to ratify the selection of
PricewaterhouseCoopers LLP as independent auditors of the Company for 2004. 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 12, 2004.
ELECTION OF DIRECTORS
The Board of Directors, pursuant to the Second Amended and Restated By-Laws
of the Company (the 'By-Laws'), has fixed the number of Directors at nine.
Directors are elected to serve until the next annual meeting of stockholders and
until their respective successors are duly elected and qualified. Upon the
recommendation of the Nominating and Governance Committee, the Board has
nominated for election as Directors at the Annual Meeting the nine persons named
below. Set forth below is a description of each nominee's principal occupation
during at least the past five years and other pertinent information. Ms. Cheryl
Hodges and Mr. Patrick Keefe, who are currently Directors and employed by the
Company, are not standing for re-election. Each of the nominees for election as
a Director is currently a Director of the Company, except for Ms. Amy Wallman.
The Board has affirmatively determined that Ms. Wallman is an independent
Director under the New York Stock Exchange ('NYSE') listing standards applicable
to the Company as of the Annual Meeting. See 'Governance of the Company and
Board Matters -- Independent Directors.'
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A stockholder may nominate a candidate for election as a Director if the
stockholder provides timely proper written notice of the nomination to the
Secretary of the Company in advance of the meeting, as more fully set forth
below under the caption 'Stockholder Proposals.' The Board of Directors will
also consider candidates recommended by stockholders if the recommendation is
made in accordance with the procedures set forth below under the caption
'Governance of the Company and Board Matters -- Selection of Nominees for the
Board of Directors.'
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). The nine nominees receiving the greatest number of votes
at the Annual Meeting will be elected Directors.
NOMINEES
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EDWARD L. HUTTON .......... Mr. Hutton has been Chairman of the Board of the Company
Director since 1981 since May 2003. In May 2003, the Company amended its
Age: 84 By-Laws to create the non-executive position of Chairman
of the Board. Prior to May 2003, Mr. Hutton served in an
executive position, as Chairman of the Company, from 1981.
He is also Chairman and a Director of Roto-Rooter, Inc.
(which was named Chemed Corporation until May 2003),
Cincinnati, Ohio (a diversified public corporation with
interests in plumbing and drain cleaning; appliance,
heating, ventilation and air conditioning repair; and
hospice services) ('Roto-Rooter') and has held these
positions since November 1993 and April 1970,
respectively. Previously, he was President and Chief
Executive Officer of Roto-Rooter, positions he had held
from April 1970 to November 1993, and was Chairman and
Chief Executive Officer of Roto-Rooter from November 1993
until May 2001.
JOEL F. GEMUNDER .......... Mr. Gemunder is President and Chief Executive Officer of the
Director since 1981 Company and has held these positions since May 1981 and
Age: 64 May 2001, respectively. Mr. Gemunder was an Executive Vice
President of Roto-Rooter and Group Executive of its Health
Care Group from May 1981 through July 1981 and a Vice
President of Roto-Rooter from 1977 until May 1981. Mr.
Gemunder is a Director of Roto-Rooter and Ultratech, Inc.
(a manufacturer of photolithography equipment for the
computer industry).
CHARLES H. ERHART, JR. .... Mr. Erhart retired as President of W.R. Grace & Co.,
Director since 1981 Columbia, Maryland (an international specialty chemicals,
Age: 78 construction and packaging company) ('Grace') in August
1990. He had served as President 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 Roto-Rooter.
DAVID W. FROESEL, JR. ..... Mr. Froesel is Senior Vice President and Chief Financial
Director since 2000 Officer of the Company and has held these positions since
Age: 52 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.
</Table>
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<Table>
SANDRA E. LANEY ........... Ms. Laney is Chairman and Chief Executive Officer of Cadre
Director since 1987 Computer Resources Co., Cincinnati, Ohio (a network
Age: 60 security services company), positions she has held since
September 2001. Previously she served as Executive Vice
President and Chief Administrative Officer of Roto-Rooter
from May 2001 and May 1991, respectively, until March
2003. From November 1993 until May 2001, she held the
position of Senior Vice President of Roto-Rooter. From May
1984 to November 1993, she was a Vice President of
Roto-Rooter. Ms. Laney is a Director of Roto-Rooter.
ANDREA R. LINDELL, ........ Dr. Lindell is Dean and a Professor of the College of
DNSc, RN Nursing at the University of Cincinnati, a position she
Director since 1992 has held since December 1990. Dr. Lindell is also
Age: 60 Associate Senior Vice President of the Medical Center at
the University of Cincinnati, positions she has held since
July 1998 and May 2002, respectively. From September 1994
to June 2002, she also held an additional position 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 of the
School of Nursing at Oakland University, Rochester,
Michigan. In addition, from September 1977 until August
1981, Dr. Lindell also held the position of Chair,
Department of Nursing, of the University of New Hampshire,
Durham, New Hampshire.
SHELDON MARGEN, M.D. ...... Dr. Margen is a Professor Emeritus of the School of Public
Director since 1983 Health, University of California, Berkeley, a position he
Age: 84 has held since May 1989. He had served as a Professor of
Public Health at the University of California, Berkeley,
since 1979.
JOHN H. TIMONEY ........... Mr. Timoney is a retired executive of Applied Bioscience
Director since 2000 International Inc. (a research organization serving the
Age: 70 pharmaceutical and biotechnology industries) ('Applied
Bioscience'), where 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 (a market
research firm serving the pharmaceutical and healthcare
industries), Roto-Rooter and Grace.
AMY WALLMAN ............... Ms. Wallman is a retired audit partner with Ernst & Young
Director Nominee International (a public accounting and professional
Age: 54 services firm), a position she held from 1984 to July
2001. From 1995 to 2001, she also served as Health Care
Industry Leader in Ernst & Young's healthcare practice
based in New York, New York.
</Table>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PERSONS NOMINATED
BY THE BOARD.
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GOVERNANCE OF THE COMPANY AND BOARD MATTERS
CORPORATE GOVERNANCE GUIDELINES
The Board of Directors (the 'Board') has adopted the Omnicare, Inc.
Corporate Governance Guidelines (the 'Guidelines') effective as of the date of
the Annual Meeting. The Guidelines reflect the principles by which the Company
will operate. The Guidelines provide that the Board is elected by the
stockholders to provide oversight and guidance to senior management with a view
to increasing stockholder value over the long term and that the core
responsibility of the Board is to exercise its fiduciary duties to act in the
best interests of Omnicare and its stockholders. The Guidelines cover various
topics, including, but not limited to, Director independence, Board and
committee composition, Board operations, Director compensation and leadership
development. The Nominating and Governance Committee of the Board is responsible
for overseeing and reviewing the Guidelines and reporting and recommending to
the Board any changes to the Guidelines. A copy of the Guidelines is available
at the Company's Web site (www.omnicare.com) and may also be obtained upon
request from the Company's Corporate Secretary.
INDEPENDENT DIRECTORS
The Guidelines provide that a majority of the members of the Board must be
'independent' under the criteria set forth in the New York Stock Exchange
('NYSE') listing standards and require the Board to affirmatively determine on
an annual basis as to each Board member whether he or she is independent. The
criteria for determining independence set forth in the NYSE listing standards
are the same categorical standards the Board and the Nominating and Governance
Committee will use in determining independence.
Pursuant to the NYSE listing standards for determining those Directors that
are independent, no Director qualifies as 'independent' unless the Board of
Directors affirmatively determines that the Director has no material
relationship with the listed company (either directly or as a partner,
shareholder or officer of an organization that has a relationship with the
company). In addition:
(i) A Director who is an employee, or whose immediate family member is
an executive officer, of the company is not independent until three years
after the end of such employment relationship. Employment as an interim
Chairman or CEO shall not disqualify a Director from being considered
independent following that employment.
(ii) A Director who receives, or whose family member receives, more than
$100,000 per year in direct compensation from the listed company, other than
Director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not contingent
in any way on continued service), is not independent until three years after
he or she ceases to receive more than $100,000 per year in such
compensation. Compensation received by a Director for former service as an
interim Chairman or CEO need not be considered in determining independence
under this test. Compensation received by an immediate family member for
service as a non-executive employee of the listed company need not be
considered in determining independence under this test.
(iii) A Director who is affiliated with or employed by, or whose
immediate family member is affiliated with or employed in a professional
capacity by, a present or former internal or external auditor of the company
is not 'independent' until three years after the end of the affiliation or
the employment or auditing relationship.
(iv) A Director who is employed, or whose immediate family member is
employed, as an executive officer of another company where any of the listed
company's present executives serve on that company's compensation committee
is not 'independent' until three years after the end of such service or the
employment relationship.
(v) A Director who is an executive officer or an employee, or whose
immediate family member is an executive officer, of a company that makes
payments to, or receives payments from, the listed company for property or
services in an amount which, in any single fiscal year, exceeds the greater
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of $1 million, or 2% of such other company's consolidated gross revenues, is
not 'independent' until three years after falling below such threshold.
An 'immediate family member' includes a person's spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than domestic employees) who shares such
person's home.
The Board and the Nominating and Governance Committee of the Board undertook
an annual review of Director independence. During the review, the Board and the
Nominating and Governance Committee considered transactions and relationships
between each Director or any member of his or her immediate family and the
Company and its subsidiaries and affiliates, including those reported under the
caption 'Certain Relationships and Related Transactions' below. The Board and
the Nominating and Governance Committee also examined transactions and
relationships between Directors or their affiliates and members of the Company's
senior management or their affiliates. The purpose of this review was to
determine whether any such relationships or transactions were inconsistent with
a determination that the Director is independent.
As a result of this review, the Board and the Nominating and Governance
Committee have affirmatively determined that, under the Guidelines and the NYSE
listing standards, the following Directors, constituting a majority of the
Directors nominated for election at the Annual Meeting, are independent of the
Company and its management: Messrs. Erhart and Timoney, Dr. Lindell, Dr. Margen
and Ms. Wallman. Messrs. Hutton, Gemunder and Froesel are not considered
independent because of their employment by the Company. Ms. Laney is not
considered independent because of her spouse's employment by the Company. See
'Certain Relationships and Related Transactions.'
COMMITTEES OF THE BOARD, COMMITTEE CHARTERS AND MEETINGS
In 2003, the Board of Directors had standing the Audit Committee, the
Compensation and Incentive Committee, the Nominating and Governance Committee
and the Executive Committee. With the exception of the Executive Committee, all
of the committees were comprised in 2003 (and continue to be comprised) solely
of Directors who are independent within the meaning of the Guidelines and the
NYSE listing standards. The Charters for each of the Company's committees, which
are effective as of the Annual Meeting, are available at the Company's Web site
(www.omnicare.com) and copies may also be obtained upon request from the
Company's Corporate Secretary. The Company's Audit Committee Charter is also
attached hereto as Appendix A.
In 2003, the Board of Directors met ten times, the Audit Committee met eight
times, the Compensation and Incentive Committee met five times, the Nominating
and Governance Committee met once and the Executive Committee met five times. In
2003, each Director attended more than 75% of the meetings of the Board of
Directors and the committees on which he or she served.
All members of the Board of Directors are strongly encouraged, but not
required, to attend the Annual Meeting of Stockholders of the Company. Seven of
ten Directors attended the Company's annual meeting in 2003. One additional
Director would have been in attendance at the 2003 Annual Meeting, but was not,
due to flight delays.
Audit Committee. The Audit Committee is comprised of Messrs. Erhart
(Chairman) and Timoney and Dr. Lindell. Mr. Erhart, the Chairman of the Audit
Committee, is qualified and has been designated as audit committee financial
expert within the meaning of the regulations of the Securities and Exchange
Commission (the 'SEC'), as the Board has determined that he has relevant
accounting and related financial management expertise within the meaning of the
listing standards of the NYSE.
Under its new Charter, the Audit Committee has sole and direct authority to
engage, appoint, evaluate, compensate and replace the independent auditors. The
Audit Committee reviews and approves in advance all audit, audit related and
non-audit services performed by the independent auditors (to the extent those
services are permitted by the Securities Exchange Act of 1934, as amended). The
Audit Committee meets with the Company's management regularly to consider the
adequacy of the Company's internal controls and financial reporting process and
the reliability of the Company's financial reports to the public. The Audit
Committee also meets with the independent auditors and with the Company's
financial personnel and internal auditors regarding these matters. Both
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the Company's independent auditors and the internal auditors meet regularly with
the Audit Committee in private and have unrestricted access to the Audit
Committee. The Audit Committee examines the independence and performance of the
Company's independent auditors as well as the performance of the Company's
internal audit function. In addition, among its other responsibilities, the
Audit Committee reviews the Company's critical accounting policies and the
Company's annual and quarterly reports on Forms 10-K and 10-Q, respectively. See
'Report of Audit Committee of the Board' for additional information.
Compensation and Incentive Committee. The Compensation and Incentive
Committee is comprised of Dr. Margen (Chairman), Mr. Erhart and Dr. Lindell.
Under its new Charter, the Compensation and Incentive Committee's principal
responsibilities are to administer the Company's compensation plans under which
stock may be issued to Directors and executive officers, to review and approve
corporate goals and objectives relevant to the compensation of the Chief
Executive Officer, to approve the Chief Executive Officer's compensation, to
review and approve recommendations of the Chief Executive Officer with respect
to the compensation of other executive officers, and to report on executive
compensation in the Company's proxy statement.
Nominating and Governance Committee. The Nominating and Governance Committee
is comprised of Messrs. Erhart (Chairman) and Timoney and Dr. Margen. The
Nominating and Governance Committee was formerly known as the Nominating
Committee.
Under its new Charter, the Nominating and Governance Committee's principal
responsibilities are to identify individuals qualified to become Directors, to
recommend to the Board nominees for election as Directors by stockholders or to
fill vacancies in the Board, to recommend to the Board the appointment of
Directors to Board committees, to develop and recommend to the Board a set of
Corporate Governance Guidelines and to review the Guidelines annually to ensure
that they are appropriate for the Company and comply with applicable laws,
regulations and listing standards, to recommend any desirable changes in the
Guidelines to the Board, to recommend other activities to the Board relating to
corporate governance and to develop and recommend to the Board, and to oversee
the administration of, an annual self-evaluation process for the Board and its
committees.
Executive Committee. The Executive Committee is comprised of Messrs. Hutton
(Chairman), Erhart, Gemunder and Froesel. 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 under the By-Laws may not be
delegated. The Executive Committee meets as necessary, and all actions by the
Executive Committee are reported at the next Board meeting.
SELECTION OF NOMINEES FOR THE BOARD OF DIRECTORS
The Board believes that it should be comprised of Directors with varied,
complementary backgrounds, and that Directors should, at a minimum, have
expertise that may be useful to the Company, such as an understanding of the
healthcare industry and practices, the needs of the elderly, technology,
finance, accounting, marketing or international matters -- all in the context of
an assessment of the needs of the Board at a particular time. Directors should
be willing and able to devote the required amount of time to Company affairs.
When seeking candidates for Director, the Nominating and Governance
Committee may solicit suggestions from incumbent Directors, management and
others. After conducting an initial evaluation of a candidate and depending upon
the needs of the Board, the Committee may interview the candidate if it believes
the candidate might be a valuable addition to the Board. The Committee may also
require the candidate to meet with management. If, based on, among other things,
the needs of the Board and the experience and other qualities of other
prospective candidates, the Committee believes a candidate would be a valuable
addition to the Board, it may recommend to the Board that candidate's
nomination.
Pursuant to its policy regarding the consideration of any Director
candidates recommended by stockholders, the Nominating and Governance Committee
will consider candidates for Director recommended by stockholders applying the
criteria for candidates described above and considering the additional
information referred to in this paragraph. Stockholders wishing to recommend a
candidate
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for Director should write the Company's Corporate Secretary and include the
following: a statement that the writer is a stockholder (accompanied by
appropriate confirmation of such stock ownership) and is proposing a candidate
for consideration by the Committee; the name of and contact information for the
candidate; a statement of the candidate's business and educational experience;
information regarding each of the factors listed in the first paragraph of this
subsection sufficient to enable the Committee to evaluate the candidate; a
statement detailing any relationship between the candidate and any customer,
supplier or competitor of the Company; detailed information about any
relationship or understanding between the proposing stockholder and the
candidate; and a statement that the candidate is willing to be considered and
willing to serve as a Director if nominated and elected.
All nominees for election as Director at the Annual Meeting are incumbent
Directors except for Ms. Wallman. In seeking a new Director, the Company engaged
a third-party executive search firm. Such firm assisted the Company in
identifying a number of suitable candidates to serve on the Board and in the
initial screening of such candidates by, among other things, conducting personal
interviews and background checks. Ms. Wallman was identified by this firm as a
potentially suitable candidate for nomination as a Director. Ms. Wallman met
with a member of the Nominating and Governance Committee and the Chief Executive
Officer of the Company.
CODE OF ETHICS
The Board of Directors has adopted a Code of Business Conduct and Ethics
that applies to Directors, officers and employees of the Company. A copy of the
Code is available at the Company's Web site (www.omnicare.com).
EXECUTIVE SESSIONS OF NON-MANAGEMENT DIRECTORS
Non-management Directors will meet in executive sessions without management.
'Non-management' Directors are all of those Directors who are not Company
employees and may include Directors, if any, who are not 'independent' by virtue
of the existence of a material relationship with the Company. Executive sessions
are led by a 'Presiding Director' who is chosen by the Non-management Directors
at each executive session by a plurality vote of the Directors present. An
executive session will be held in conjunction with the regularly scheduled Board
meetings in February and August and at other times as may be determined by the
Non-management Directors. If any Non-management Director is determined not to be
an independent Director, then, at least annually, an executive session of only
independent Directors will be held.
CONTACTING THE BOARD OF DIRECTORS
The Board has a process by which stockholders can send communications to the
Board. Stockholders can send written communications to one or more members of
the Board, addressed to:
Corporate Secretary
Omnicare, Inc.
100 East RiverCenter Boulevard
Covington, Kentucky 41011
All such communications will be forwarded to the relevant Director(s) except for
communications unrelated to the Company.
DIRECTOR COMPENSATION
Each non-employee Director is paid a $30,000 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 $100,000 that
vests in one installment on the third anniversary of the date of grant. Mr.
McNamara, Director Emeritus of the Company, will receive a $30,000 annual
retainer fee for one year and will receive $100,000 (payable in cash), which
shall be paid in full in May 2006. Mr. Hutton, the Chairman of the Board,
receives a $60,000 annual Board Chairman retainer fee and an annual restricted
stock award of $200,000, which also vests in one installment on the third
anniversary of
7
<Page>
the date of grant. In addition, the Chairmen of the Audit and Compensation and
Incentive Committees are each paid a $30,000 annual retainer fee and members of
the Audit and Compensation and Incentive Committees are each paid a $15,000
annual retainer fee (in each case payable at the Director's election in cash or
restricted stock that vests as described above). The Chairman of the Nominating
and Governance Committee is paid a $20,000 annual retainer fee and members of
the Nominating and Governance Committee are each paid a $10,000 annual retainer
fee (in each case payable at the Director's election in cash or restricted stock
that vests as described above). During 2003, each member of the Board of
Directors was granted an annual unrestricted stock award covering 400 shares of
Common Stock. During 2003, Dr. Margen received a fee of $1,000 per month for
certain consulting services provided to the Company. During 2003, Mr. Erhart
received an additional annual fee of $8,000. Such fee was paid in lieu of stock
options granted to Directors in previous years. Mr. Erhart was a member of the
Compensation and Incentive Committee of either the Company or an affiliated
company on the dates of such grants and thus was ineligible to participate.
8
<Page>
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 2003, 2002
and 2001.
SUMMARY COMPENSATION TABLE
<Table>
<Caption>
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(3) ................ 2003 $ 267,125 $ 41,125 $38,152 $ -- -- $1,598,045(4)
Chairman of the Board 2002 318,500 231,125 38,152 392,612 200,000 1,831,571
2001 389,958 316,125 38,038 1,693,998 210,000 1,154,575
J.F. Gemunder ................. 2003 1,254,167 2,089,749 71,265 14,167,756 279,854 117,536(5)
President and Chief 2002 1,133,333 2,289,407 81,991 5,500,006 555,682 97,167
Executive Officer 2001 950,000 1,289,216 68,828 3,629,998 395,366 80,617
P.E. Keefe .................... 2003 381,583 229,178 11,117 2,681,744 50,000 26,572(5)
Executive Vice President -- 2002 363,500 354,067 13,050 1,314,263 120,000 32,316
Operations 2001 325,000 274,012 12,960 1,001,009 105,000 30,443
D.W. Froesel, Jr. ............. 2003 377,000 278,169 6,406 2,965,121 60,000 114,474(5)
Senior Vice President and 2002 348,500 408,114 7,527 1,177,685 120,000 91,070
Chief Financial Officer 2001 310,000 283,092 7,485 858,002 105,000 69,799
C.D. Hodges ................... 2003 303,750 185,293 4,151 2,423,032 50,990 23,008(5)
Senior Vice President and 2002 282,083 265,265 4,884 1,026,791 101,192 24,172
Secretary 2001 250,000 180,252 4,858 769,131 86,188 20,127
T.E. Bien ..................... 2003 274,083 188,337 6,537 1,892,889 40,708 18,878(5)
Senior Vice President -- 2002 250,167 268,277 7,679 758,409 72,852 20,277
Professional Services and 2001 230,000 168,247 7,628 518,105 65,872 23,888
Purchasing
</Table>
- ---------
(1) These amounts represent payments made to Messrs. Hutton, Gemunder, Keefe,
Froesel and Bien and Ms. Hodges as required to offset the tax liability
associated with premiums paid by the officers under split-dollar life
insurance policies.
(2) Under the Company's stock award program, restricted shares of Common Stock
were issued as incentive compensation for services rendered during 2003 to
the named executives and other key employees. Restricted shares vest based
on the continued service of the executive 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 or retirement under a
retirement plan of the Company, or a change in control of the Company
occurs, the restrictions terminate. The restrictions also terminate upon the
recipient's termination without cause following the attainment of the age of
65 and at least 10 years of service with the Company. Otherwise, in the
event of termination of employment, unvested shares are generally forfeited.
Recipients receive dividends on the awarded shares. Restricted stock awards
were granted in December 2003 and March 2004 for services rendered during
2003 as incentive compensation having a grant date value in the amount shown
on the table. The number of restricted shares granted for 2003 services to
the named executives was as follows: Mr. Gemunder -- 324,813 shares;
Mr. Keefe -- 61,404 shares; Mr. Froesel -- 68,073 shares;
Ms. Hodges -- 55,665 shares; and Mr. Bien -- 43,522 shares. As of
December 31, 2003, the number and value of the aggregate restricted stock
holdings of the named executives were: Mr. Hutton -- 404,426 shares or
$16,334,766; Mr. Gemunder -- 946,131 shares or $38,214,231;
Mr. Keefe -- 250,699 shares or $10,125,733; Mr. Froesel -- 218,078 shares or
$8,808,170; Ms. Hodges -- 195,750 shares or $7,906,343; and
Mr. Bien -- 144,056 shares or $5,818,422.
(footnotes continued on next page)
9
<Page>
(footnotes continued from previous page)
(3) In May 2003, the Company amended its By-Laws to create the position of
Chairman of the Board. Prior to May 2003, Mr. Hutton served as Chairman of
the Company and was considered an executive officer of the Company. Since
May 2003, Mr. Hutton has served as Chairman of the Board and is no longer an
executive officer of the Company.
(4) Mr. Hutton does not participate in the Company's tax-qualified pension
plans. Of this amount, $1,000,000 represents the Company's contribution
under a deferred compensation arrangement, which had been 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 amount also includes $368,045 paid to Mr. Hutton, which payment
reflects the economic value of the benefit that would have vested in 2003
for his account if he had been eligible to participate in the Company's 2002
Supplemental Benefit Plan described below under the caption 'Supplemental
Benefit Plan.' The amount disclosed also includes compensation and fees
which began being paid to Mr. Hutton in May 2003 for his service as Chairman
of the Board consisting of $30,000 of the annual Board Chairman retainer fee
and a restricted stock award of $200,000 (or 7,388 shares) as described in
footnote three. For more information on such compensation and fees, see
'Governance of the Company and Board Matters -- Director Compensation.'
(5) This amount includes the dollar value of shares of Common Stock of the
Company allocated to the named executives' accounts in the Company's
Employee Savings and Investment Plan (the 'S&I Plan') that are attributable
to the Company's contributions to the S&I Plan. 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 S&I Plan are otherwise limited by provisions of the Internal
Revenue Code of 1986, as amended, 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 2003, the number of shares
attributable to these plans and the dollar values thereof included in the
table for each named executive was as follows: Mr. Gemunder -- 3,888 shares
or $117,446; Mr. Keefe -- 771 shares or $24,812; Mr. Froesel -- 793 shares
or $25,159; Ms. Hodges -- 651 shares or $21,296 and Mr. Bien -- 522 shares
or $17,205. This column also includes (a) life insurance premiums paid by
the Company (Mr. Gemunder -- $90; Mr. Keefe -- $1,760;
Mr. Froesel -- $1,738; Ms. Hodges -- $1,712 and Mr. Bien -- $1,673) and
(b) as to Mr. Froesel, also includes $87,577 which the Company credited to a
deferred account established for him in lieu of his participation in the
Company's pension plan.
10
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STOCK OPTIONS
The following table sets forth information regarding stock options granted
to the named executives during 2003.
OPTION GRANTS IN 2003
<Table>
<Caption>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SHARES GRANTED TO OF STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM ($)
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------------
NAME GRANTED YEAR ($/SHARE) DATE 5% 10%
---- ------- ---- --------- ---- -- ---
E.L. Hutton................. -- -- % $-- -- $ -- $ --
J.F. Gemunder............... 275,000(1) 33.7 41.62 12/30/13 7,198,013 18,241,179
1,374(2) 0.2 25.06 2/7/13 21,654 54,876
1,312(2) 0.2 26.17 5/8/13 21,593 54,721
1,032(2) 0.1 33.48 8/7/13 21,729 55,066
1,136(2) 0.1 36.90 11/7/13 26,362 66,807
P.E. Keefe.................. 50,000(1) 6.1 41.62 12/30/13 1,308,730 3,316,578
D.W. Froesel, Jr............ 60,000(1) 7.4 41.62 12/30/13 1,570,476 3,979,894
C.D. Hodges................. 50,000(1) 6.1 41.62 12/30/13 1,308,730 3,316,578
284(2) -- 25.06 2/7/13 4,476 11,343
270(2) -- 26.17 5/8/13 4,444 11,261
214(2) -- 33.48 8/7/13 4,506 11,419
222(2) -- 36.90 11/7/13 5,152 13,056
T.E. Bien................... 40,000(1) 4.9 41.62 12/30/13 1,046,984 2,653,262
200(2) -- 25.06 2/7/13 3,152 7,988
192(2) -- 26.17 5/8/13 3,160 8,008
150(2) -- 33.48 8/7/13 3,158 8,004
166(2) -- 36.90 11/7/13 3,852 9,762
</Table>
- ---------
(1) All such options were granted on December 30, 2003, provide for the purchase
of shares of Common Stock at a price equal to the fair market value on the
date of grant, vest on November 30, 2004, based on the continued service of
the executive, become exercisable in four equal annual installments
commencing one year from the date of grant, subject to certain exceptions in
the event of cessation of employment, and expire 10 years after date of
grant unless previously exercised.
(2) Such options were granted on February 7, May 8, August 7 and November 7,
2003, respectively, and were granted in connection with the Company's
StockPlus Plan, a broad-based stock purchase and stock option program for
employees and Directors. For executive officers and Directors, option grants
pursuant to the StockPlus Plan are issued out of the 1992 Long-Term Stock
Incentive Plan. For all other employees, option grants pursuant to the
StockPlus Plan are issued out of the 1998 Long-Term Employee Incentive Plan.
These options 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
full four years from the date of grant based on the continued service of the
employee (provided the optionee has held certain related shares of Common
Stock purchased under the program for a minimum of two years), and expire
10 years from the date of grant unless previously exercised.
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<Page>
The following table sets forth information regarding stock options exercised
by the named executives during 2003 and the value of unexercised options held by
the named executives as of December 31, 2003.
AGGREGATED OPTION EXERCISES IN 2003 AND
FISCAL YEAR-END OPTION VALUES
<Table>
<Caption>
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.......... 271,153 $5,771,536 546,062 318,750 $ 8,249,737 $ 5,683,303
J.F. Gemunder........ 348,000 7,502,120 2,286,250 983,082 49,653,030 11,804,345
P.E. Keefe........... 237,750 4,246,044 163,250 217,500 1,778,618 2,878,388
D.W. Froesel, Jr. ... 194,000 3,425,801 137,250 223,750 1,569,167 2,789,034
C.D. Hodges.......... 197,888 3,797,491 182,875 189,044 2,688,675 2,365,559
T.E. Bien............ 129,750 1,994,155 56,250 140,696 578,448 1,710,987
</Table>
PENSION PLAN
The Company has a pension plan in which the named executives, other than
Mr. Froesel and Mr. Hutton, participate. Retirement benefits under the pension
plan are calculated on the basis of the executive's compensation 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 that would be 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
<Table>
<Caption>
FINAL AVERAGE
COMPENSATION(1) YEARS OF SERVICE (2)
--------------- --------------------------------------------------------------------------------------
10 15 20 25 30 35 40
-- -- -- -- -- -- --
$600,000................... $ 84,313 $ 128,021 $ 171,435 $ 214,295 $ 257,154 $ 302,154 $ 347,154
800,000................... 114,313 173,021 231,435 289,295 347,154 407,154 467,154
1,000,000................... 144,313 218,021 291,435 364,295 437,154 512,154 587,154
1,500,000................... 219,313 330,521 441,435 551,795 662,154 774,654 887,154
2,000,000................... 294,313 443,021 591,435 739,295 887,154 1,037,154 1,187,154
3,000,000................... 444,313 668,021 891,435 1,114,295 1,337,154 1,562,154 1,787,154
4,000,000................... 594,313 893,021 1,191,435 1,489,295 1,787,154 2,087,154 2,387,154
5,000,000................... 744,313 1,118,021 1,491,435 1,864,295 2,237,154 2,612,154 2,987,154
<Caption>
FINAL AVERAGE
COMPENSATION(1) YEARS OF SERVICE (2)
--------------- -----------------------
45 50
-- --
$600,000................... $ 392,154 $ 437,154
800,000................... 527,154 587,154
1,000,000................... 662,154 737,154
1,500,000................... 999,654 1,112,154
2,000,000................... 1,337,154 1,487,154
3,000,000................... 2,012,154 2,237,154
4,000,000................... 2,687,154 2,987,154
5,000,000................... 3,362,154 3,737,154
</Table>
- ---------
(1) For purposes of the pension plan, such Final Average 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 for 2001 through 2003, as well as the value of stock
awards vesting during each year. As of December 31, 2003, Final Average
Compensation for Messrs. Gemunder, Keefe and Bien and Ms. Hodges was
$3,931,843, $1,128,711, $639,245 and $827,155, respectively.
(2) As of December 31, 2003, Messrs. Gemunder, Keefe and Bien and Ms. Hodges had
40, 23, 11 and 24 years of service, respectively.
12
<Page>
SUPPLEMENTAL BENEFIT PLAN
The Company's 2002 Supplemental Benefit Plan provides for a fixed annual
benefit, payable in the form of a straight life annuity, to each of the named
executives, commencing at the later of the participant's 65th birthday or seven
years of credited service after January 1, 2001. The annual benefit for each
named executive, assuming seven years of credited service, is:
Mr. Gemunder -- $287,298; Mr. Keefe -- $91,415; Mr. Froesel -- $160,113;
Mr. Bien -- $28,072 and Ms. Hodges -- $100,940. The annual benefit would be
reduced by approximately 14.29% for each year of service less than seven. At
December 31, 2003, each named executive had three years of credited service
under the plan.
EMPLOYMENT AGREEMENTS
Mr. Gemunder. The Company entered into an employment agreement with
Mr. Gemunder in August 1988. The agreement, as amended, is currently effective
through August 3, 2009. The agreement has generally been extended annually by
one year. The agreement provides that Mr. Gemunder's compensation may be
increased annually by the Company and that he is entitled to receive annual
incentive compensation and bonuses as determined by the Board, as well as
participate in benefit programs and receive certain fringe benefits.
Mr. Gemunder's continued nomination to the Board during his employment is
provided for in the agreement. The agreement provides that if Mr. Gemunder is
terminated without cause, the Company will pay him monthly severance payments at
an annual rate equal to 150% of the sum of (i) his then-current base salary,
(ii) his annual incentive bonus most recently paid or approved to be paid in
respect of the previous year and (iii) the fair market value of all of his stock
awards that have vested during the 12 months prior to the termination. Such
payments will be made for the remaining term of the agreement. Under the
agreement, Mr. Gemunder may voluntarily terminate his employment within 120 days
after a change of control and such termination will be treated as without cause
(each as defined in the agreement). To the extent that any payment to
Mr. Gemunder would be subject to excise taxes under Section 4999 of the Internal
Revenue Code, he will receive 'gross-up' payments to make him whole with respect
to such taxes.
Other employment agreements. The Company has entered into employment
agreements with each of Messrs. Keefe, Froesel and Bien and Ms. Hodges. The
employment agreement of Ms. Hodges is currently effective through August 3, 2009
and the employment agreement of Mr. Keefe is currently effective through
May 31, 2009. Each of these agreements has generally been extended annually by
one year. Mr. Froesel's employment agreement is currently effective through
March 3, 2005 and Mr. Bien's employment agreement is currently effective through
May 31, 2005, following which Messrs. Froesel and Bien's employment agreements
will be automatically extended for successive three-year terms unless either
party provides prior written notice of non-renewal. The agreements of Mr. Keefe
and Ms. Hodges provide that each executive's current base compensation may be
increased by the Company. Mr. Froesel's agreement provides that his base salary
may be adjusted at the Company's discretion. Messrs. Keefe, Froesel and Bien and
Ms. Hodges are entitled to participate in incentive compensation and bonus
programs generally available to executives of the Company. Each executive is
entitled to participate in benefit programs and receive fringe benefits
generally available to executives of the Company.
The employment agreements of Mr. Keefe and Ms. Hodges provide that if the
executive is terminated without cause (as defined in the agreements), including,
among other things, the Company's continuing material breach of the agreement, a
material reduction in responsibilities, and, following a change of control (as
defined in the agreements), assignment to the executive of duties inconsistent
with his/her position or a relocation of the Company's offices, the Company will
pay the executive monthly severance payments at an annual rate equal to 150%, in
the case of Ms. Hodges, and 100%, in the case of Mr. Keefe, of the sum of
(i) his/her then-current base salary; (ii) his/her annual incentive bonus most
recently paid or approved to be paid in respect of the previous year; and
(iii) the fair market value of all of his/her stock awards that have vested
during the 12 months prior to the termination. These payments will be made for
the remaining terms of the agreements. Mr. Froesel's agreement provides that if
he is terminated without cause (as defined in the agreement), then the Company
will pay Mr. Froesel his then-current base salary for two years and any
restricted stock, stock options and rabbi trust contributions will immediately
vest. If the Company terminates Mr. Froesel upon a change of control
13
<Page>
(as defined in the agreement), Mr. Froesel will be entitled to receive his base
salary and cash bonus for the remaining term of the agreement plus two years,
and any restricted stock, stock options and rabbi trust contributions will
immediately vest. Mr. Bien's agreement provides that if he is terminated without
cause (as defined in the agreement), then the Company will pay Mr. Bien his then
current base salary for the remainder of the term of the agreement or for 18
months, whichever is greater, and bonus based on the most recent full year bonus
paid. The employment agreements of Messrs. Froesel, Keefe and Bien and
Ms. Hodges provide that the executives may voluntarily terminate employment
within 120 days after a change of control and that such termination will be
treated as without cause, resulting in the payments described above.
Each employment agreement also provides that to the extent any payment to
the executive would be subject to excise taxes under Section 4999 of the
Internal Revenue Code, the executive will receive 'gross-up' payments to make
them whole with respect to such taxes.
Upon a change of control, the Company is required to continue to make
premium payments under split-dollar life insurance arrangements with Messrs.
Gemunder, Keefe, Froesel and Bien and Ms. Hodges until the end of the term of
his/her employment agreement, and is required to make a contribution to a rabbi
trust in an amount equal to the present value of the company's premium payment
obligations until the executive reaches age 65 (or, in the case of
Mr. Gemunder, age 69 and, in the case of Mr. Hutton, until March 1, 2005). In
addition, Mr. Gemunder may, during his employment or following any termination
due to disability or without cause, elect to (i) convert an existing key-man
life insurance policy covering him into an insurance arrangement substantially
equivalent to a split-dollar life insurance arrangement for his benefit and
(ii) purchase from the Company certain other existing key-man life insurance
policies covering him at a purchase price equal to the then-current cash value
of such policies. These rights are conditioned upon the Compensation and
Incentive Committee's prior approval. Pursuant to the terms of the Company's
equity incentive plans, all stock options, restricted stock and other equity
awards will become fully vested upon a change of control. Pursuant to the
Company's Excess Benefit Plan and 2002 Supplemental Benefit Plan, all benefits
become fully vested upon a change of control.
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
includes base salary, annual incentive compensation, and long-term incentive
compensation (in the form of stock options and restricted stock awards) and
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 by the Compensation and
Incentive Committee of the Board of Directors. The Committee is comprised solely
of independent Directors. In 2003, the Committee was responsible for the review,
approval and recommendation to the Board of Directors of matters concerning base
salary, annual cash incentive compensation and benefits for key executives of
the Company. Recommendations made by the Committee required the approval of the
full Board. The Committee also administered the Company's stock incentive plan
under which it reviewed and made grants of stock options and restricted stock
awards. Pursuant to the new Charter of the Compensation and Incentive Committee,
which is effective as of the date of the Annual Meeting, the Committee is
responsible for the approval of the Chief Executive Officer's annual base salary
level, annual incentive compensation, long-term incentive compensation,
including equity incentives and special or supplemental benefits and any action
so taken by the Committee is not subject to the full Board's approval. With
respect to executive officers other than the Chief Executive Officer, the
Committee is responsible for reviewing the recommendations of the Chief
Executive Officer with respect to their annual base salary level, annual
incentive compensation, long-term incentive compensation, including equity
incentives and special or supplemental benefits and any action so taken by the
Committee is not subject to the full Board's approval. The Committee has full
and final authority in connection with the administration of all plans of the
Company under which Common Stock or other
14
<Page>
equity securities of the Company may be issued to Directors or executive
officers, except as they apply to members of the Committee, in which case the
full Board is responsible for making the necessary determinations.
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 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 other components of the Company's compensation program. In
making these determinations, the Committee also considers the data supplied by,
and the advice of, outside consultants.
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 percentage
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 determining 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 re-approved on May 21,
2001. Under that plan, the amount of the annual cash bonus for 2003 was
dependent on the Company's pre-tax income for 2003, before adjustments for the
cumulative effect of accounting changes 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. Stock options are
granted at or above fair market value and generally become exercisable over four
years; and restricted stock awards have vesting restrictions based on continued
employment that generally lapse over seven-year periods, with the greater
portion vesting in the latter years. 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 2003 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 special charges, for fiscal year 2003 meeting certain thresholds established
at the beginning of the year.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code 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. Section 162(m) excludes
compensation from the $1,000,000 limit if it is paid under specified conditions,
including that the compensation qualifies as 'performance-based compensation'
under Section 162(m). The Annual Incentive Plan for Senior Executive Officers,
approved by stockholders on May 20, 1996 (and re-approved on May 21, 2001), and
amendments to the 1992 Long-
15
<Page>
Term Stock Incentive Plan, approved by stockholders on May 18, 1997 (and
re-approved on May 20, 2002), brought the plans into compliance with Section
162(m) relating to performance-based compensation. The Company's proposed 2004
Stock and Incentive Plan would also comply under Section 162(m) to permit the
award of performance-based compensation, assuming approval by stockholders. The
Committee's present intention is to comply in the future with Section 162(m)
except to the extent the Committee believes that such compliance would not be in
the best interests of the Company and its stockholders.
STOCK OWNERSHIP GUIDELINES
Historically, the Company has encouraged the ownership of stock of the
Company in a number of ways. For example, a broad group of employees, including
all members of senior management, are paid a significant portion of their annual
incentive compensation in the form of restricted stock. In addition, periodic
stock option grants are made to key employees, including senior management.
Non-employee Directors of the Company are paid a substantial portion of their
Director compensation in the form of restricted stock with the option to receive
all such fees in Omnicare stock, and all Directors receive annual unrestricted
stock awards. All employees of the Company are provided the opportunity to own
Company stock through various benefit programs, such as the Company's S&I Plan
and the Omnicare StockPlus Plan, a broad-based stock purchase and stock
option program for employees and Directors. For executive officers and
Directors, option grants pursuant to the StockPlus Plan are issued out of the
1992 Long-Term Stock Incentive Plan. For all other employees, option grants
pursuant to the StockPlus Plan are issued out of the 1998 Long-Term Employee
Incentive Plan.
In order to further encourage executive stock ownership, the Company adopted
stock ownership guidelines in February 2002 to encourage each executive to
achieve and maintain an appropriate ownership stake in the Company. The
ownership levels are based on a multiple of base salary, ranging from a goal of
five times base salary for the President and Chief Executive Officer and from
one to three and one-half times for other officers. Messrs. Gemunder, Keefe,
Froesel and Bien and Ms. Hodges have met the established guidelines. Until an
executive has reached his or her target ownership, he or she will be required to
hold 50%, in the case of officers other than vice presidents, and 20%, in the
case of vice presidents, of the after-tax number of shares acquired by the
executive upon the exercise of stock options or the vesting of restricted stock
awards.
COMPENSATION OF THE COMPANY'S PRESIDENT AND CHIEF EXECUTIVE OFFICER
In determining Mr. Gemunder's overall compensation and each component
thereof, the Compensation and Incentive Committee took into consideration the
advice of Compensation Strategies, Inc., independent professional compensation
consultants, and the financial measures cited above. Mr. Gemunder's salary was
increased to $1,400,000 on August 1, 2003 from the $1,150,000 that had been his
base salary since February 1, 2002. This increase was based on the Committee's
evaluation of the above-mentioned factors as well as its assessment of
Mr. Gemunder's performance, which assessment placed him in the upper range of
industry peers. These factors were taken into account in setting Mr. Gemunder's
new base salary level versus a survey of market compensation by Compensation
Strategies, Inc.
In determining incentive compensation for the Company's executives,
including Mr. Gemunder, the Committee reviewed the reports and recommendations
of Compensation Strategies, Inc. as well as the Company's performance,
particularly in view of the significant accomplishments of 2003. During the
year, two strategically important acquisitions, NCS Healthcare, the Company's
largest institutional pharmacy acquisition in its history, and SunScript
Pharmacy Corporation were consummated. Both acquisitions were completed at
attractive valuations and, together, increased the size of the Company by more
than 30%. Moreover, by year-end 2003, the successful integration of these
acquisitions was largely complete, allowing the Company to realize the
anticipated cost synergies and benefits of these transactions. As a result, the
Company achieved a 33% increase in sales to a record $3.5 billion, a 54%
increase in net income to $194.4 million and a 45% increase in diluted earnings
per share to $1.93. It should be noted that results for 2003 included a special
charge of $7.9 million after taxes related to the redemption of the Company's 5%
convertible subordinated debentures and results for the year 2002 included
restructuring charges of $14.4 million after taxes related to the second phase
of the Company's
16
<Page>
productivity and consolidation initiative, completed in September 2002.
Excluding these special items, adjusted net income increased 44% to $202.2
million and adjusted earnings per share rose 36% to $2.01. Operating cash flow
of $169.5 million included fourth quarter pre-buys of $86.1 million. Excluding
such pre-buy activity, operating cash flow also reached an all-time high of
$255.5 million.
In addition, a major refinancing was successfully completed raising $1.5
billion in new capital and borrowing capacity. The financing, while serving in
part to fund the Company's acquisition activity on a long-term basis, enhanced
the Company's capital structure, extended its debt maturities, expanded the
equity basis in a non-dilutive manner and maintained the Company's positive
credit ratings. In addition to the significant strategic and operational
achievements and record financial results in 2003, the Company's stock price
increased nearly 70%, outperforming all major market indices and creating
substantial value for stockholders in 2003.
In determining Mr. Gemunder's incentive compensation, the Committee
considered the Company's strong performance on an absolute basis and in relation
to its competitors, as well as the advice of its consultants on the benefits of
shifting incentive compensation for the Company's executives more toward
equity-based compensation, particularly restricted stock awards, to provide
significant incentives for the achievement of the long-term goals of the
Company.
Annual performance not only drives the payout of the Annual Incentive Plan
but it also is used, in part, in determining the size of the long-term incentive
grants of stock options and restricted stock awards. Given the Company's strong
results in 2003, the Committee acknowledged that the performance objectives it
had set pursuant to section 162(m) of the Code had been achieved under both the
Annual Incentive Plan as well as the 1992 Long-Term Stock Incentive Plan.
Recognizing the success the Company achieved under Mr. Gemunder's leadership
in 2003, the Committee recommended a significant increase in his overall
incentive compensation, as well as a substantial shift toward longer term
equity-based incentive compensation. The Committee also determined, after
considering the advice of its advisors, to significantly reduce the Company's
utilization of stock options and to use restricted stock with a seven-year
staggered vesting schedule as the main driver of the Company's 2003 incentive
compensation program. Accordingly, the Committee, with the advice of
Compensation Strategies Inc., developed a strategic shift in the overall mix of
cash, stock options and restricted stock and awarded Mr. Gemunder, along with
the other senior executives of the Company, a substantial increase in restricted
stock with a staggered seven-year vesting schedule. The Committee recommended a
cash bonus for Mr. Gemunder of $2.1 million for 2003 services as compared with
the cash bonus of $2.3 million paid in respect of 2002 services. Stock options
granted to Mr. Gemunder in 2003 totaled 279,854 shares, versus the 555,682
shares granted to him in 2002 (all at fair market value on date of grant.) Using
the Black-Scholes method of stock option valuation, the Committee noted that
this decrease in the number of options in 2003 had, on the date of grant, a
value foregone to Mr. Gemunder of $6.1 million. After taking this into account,
as well as the factors mentioned above, the Committee concluded that seven-year
restricted stock awards in the aggregate amount of 324,813 shares, or $14.2
million, for 2003 services, as compared with a seven-year restricted stock award
in the aggregate amount of 217,822 shares, or $5.5 million, granted to
him in respect of 2002 services, was merited. Such restricted stock awards vest
over a staggered, seven-year period with the greater proportion of the awards
vesting in the latter years. Taking into account all three elements of
Mr. Gemunder's incentive compensation, the Committee determined that the total
incentive compensation granted to him in respect of 2003 services, on a net
basis, was appropriate given that the year 2003 had been one of the strongest in
the Company's history and that the compensation mix was specifically designed to
keep Mr. Gemunder's long-term incentive compensation aligned with the interests
of the Company's stockholders. Compensation Strategies, Inc. concluded that
Mr. Gemunder's overall compensation for 2003 services was representative of the
marketplace in view of the Company's strong financial and operational
performance.
The Committee believes that it is key to the Company's success that it
motivate and reward Mr. Gemunder for increasing top and bottom line results and
for developing and implementing a business and financial strategy that will
promote growth and enhance stockholder value. The Committee believes
Mr. Gemunder's 2003 compensation program meets these objectives.
17
<Page>
The Compensation and Incentive Committee:
Sheldon Margen, M.D., Chairman
Charles H. Erhart, Jr.
Andrea R. Lindell, DNSc, RN
COMPENSATION AND INCENTIVE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hutton, the current Chairman of the Board and former Chairman of the
Company, and Mr. Gemunder, the President, Chief Executive Officer and a Director
of the Company, are Directors of Roto-Rooter. In addition, Mr. Erhart, a member
of the Compensation and Incentive Committee, is a Director of Roto-Rooter and
serves on Roto-Rooter's Audit Committee, Executive Committee, Nominating and
Governance Committee and Compensation and Incentive Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Joel F. Gemunder is the President, Chief Executive Officer and a Director of
the Company. Mr. Gemunder's son, David A. Gemunder, is a shareholder in the law
firm of Fowler White Boggs Banker. In 2003, the Company paid $562,825 to Fowler
White Boggs Banker for legal services the firm performed for the Company.
Sandra E. Laney is a Director of the Company. Ms. Laney's spouse, D. Michael
Laney, is Vice President -- Management Information Systems of the Company. For
services rendered in 2003 and pursuant to his employment agreement with the
Company, the Company paid Mr. Laney $197,083 as salary and $20,418 in bonus and,
under the Company's stock award program, awarded him 9,841 shares of restricted
Common Stock with a dollar value of $435,140, which shares vest over seven years
with the greater portion vesting in the latter years. Mr. Laney receives
dividends on the awarded restricted shares. In addition, in 2003, the Company
granted Mr. Laney options to purchase 10,640 shares of Common Stock of the
Company at an average exercise price of $40.75 per share under the Company's
1998 Long-Term Employee Incentive Plan. The options are for a term of 10 years
and become exercisable ratably over four years, in the case of 9,860 of such
options, and become exercisable in full after four years, in the case of 780 of
such options. Mr. Laney is also a participant in the Company's S&I Plan and, as
such, was credited with a Company contribution of 159 shares of the Company's
Common Stock with a dollar value of $5,620 for 2003. Mr. Laney participates in
the Company's split-dollar insurance program. For 2003, the present value of
future benefits derived from premium payments made by the Company for the
benefit of Mr. Laney under the split-dollar program, which provides for refund
of premiums to the Company upon termination of the policy, was $3,904. The
Company paid life insurance premiums of $745 for Mr. Laney in 2003. Mr. Laney
also participates in the Company's 2002 Supplemental Benefit Plan described at
'Executive Compensation -- Supplemental Benefit Plan.' His annual benefit under
the plan, assuming seven years of credited service, is $12,545.
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<Page>
COMPARATIVE STOCK PERFORMANCE
The following graph compares the cumulative total return for the last five
years on a $100 investment (assuming dividend reinvestment) on December 31, 1998
in each of the Common Stock of the Company, the Standard & Poor's 500 Stock
Index and the OCR Peer Group Index.
[OMNICARE GRAPH]
<Table>
<Caption>
DECEMBER 31,
----------------------------------------------------
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Omnicare, Inc.............................. $100 $ 34.74 $ 63.03 $72.81 $70.01 $119.01
S&P 500 100................................ 100 121.05 110.02 96.95 75.52 97.19
OCR Peer Group............................. 100 46.39 81.37 99.79 80.28 105.49
</Table>
The OCR Peer Group Index includes the following companies: AmerisourceBergen
Corporation, Beverly Enterprises Inc., Genesis Health Ventures Inc. (until
December 1, 2003 and Neighborcare, Inc. thereafter), Manor Care, Inc., Parexel
International Corp., Pharmaceutical Product Development Inc., PSS World Medical
Inc., and Sunrise Senior Living Inc. The total return calculations reflected in
the foregoing graph were performed by Zacks Investment Research, Inc.
19
<Page>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of December 31, 2003, based on
public filings with the SEC, with respect to the only person known to the
Company to beneficially own more than 5% of the shares of its Common Stock:
<Table>
<Caption>
NUMBER OF SHARES
NAME AND AND NATURE
ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP(a) CLASS(a)
---------------- ------------ --------
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202....................................... 12,241,360(b) 11.9%
</Table>
- ---------
(a) Under applicable SEC 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, 2003. Unless otherwise 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) According to its public filings with the SEC, T. Rowe Price Associates,
Inc. ('Price Associates') is an investment adviser that has sole
dispositive power with respect to 12,241,360 shares and sole voting power
with respect to 2,275,090 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 for which 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, as amended, 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 31, 2004, 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:
<Table>
<Caption>
NUMBER OF SHARES
AND NATURE OF PERCENT OF
INDIVIDUAL OR GROUP OWNERSHIP CLASS(a)(b)
------------------- --------- -----------
E.L. Hutton................................................. 390,850(c)
509,812(d)
3,408(e)
J.F. Gemunder............................................... 1,665,026(c) 3.9%
2,505,000(d)
11,228(f)
T.E. Bien................................................... 193,512(c)
85,500(d)
C.H. Erhart, Jr............................................. 34,658(c)
D.W. Froesel, Jr............................................ 303,387(c)
188,500(d)
C.D. Hodges................................................. 364,010(c)
225,375(d)
P.E. Keefe.................................................. 361,115(c)
218,250(d)
S.E. Laney.................................................. 98,014(c)
105,116(d)
A.R. Lindell, DNSc, RN...................................... 9,506(c)
S. Margen, M.D.............................................. 28,891(c)
J.H. Timoney................................................ 16,365(c)
</Table>
(table continued on next page)
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<Page>
(table continued from previous page)
<Table>
<Caption>
NUMBER OF SHARES
AND NATURE OF PERCENT OF
INDIVIDUAL OR GROUP OWNERSHIP CLASS(a)(b)
------------------- --------- -----------
A. Wallman.................................................. --
All Directors, nominees, and executive officers as a group 3,465,064(c) 6.8%
(12 persons).............................................. 3,837,553(d)
3,408(e)
11,228(f)
</Table>
- ---------
(a) Under applicable SEC regulations, shares are treated as 'beneficially
owned' if a person has or shares voting or dispositive power with respect
to those shares or has a right to acquire the shares within 60 days of
March 31, 2004. Unless otherwise 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 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 (or together with a member of his or her
household) as to which such person has voting and dispositive power (and
includes shares allocated as of December 31, 2003 to the account of each
named person or member of the group under the Company's Employees' Savings
and Investment Plan and its StockPlus Plan).
(d) Shares subject to outstanding options exercisable within 60 days from
March 31, 2004.
(e) Mr. Hutton is a trustee of the E.L. Hutton Foundation, which holds 3,408
shares of Common Stock over which he holds both voting and dispositive
power.
(f) Mr. Gemunder is a trustee of the Joel F. Gemunder Foundation, which holds
11,228 shares of Common Stock over which he holds both voting and
dispositive power.
PROPOSAL TO APPROVE 2004 STOCK AND INCENTIVE PLAN
The Board of Directors has adopted the Company's 2004 Stock and Incentive
Plan (the 'Plan'), subject to stockholder approval, to provide for the award of
equity-based and other incentive compensation to employees, officers, directors,
consultants and advisors of the Company. The Plan provides for the award of
stock options, stock appreciation rights, restricted stock, stock units, stock
awards and performance awards. The Plan will allow the Company to make awards
that qualify as 'performance-based compensation' under Section 162(m) of the
Internal Revenue Code (the 'Code').
If the Plan is approved by the Company's stockholders, it will replace the
Company's 1992 Long-Term Stock Incentive Plan (the '1992 Plan'). In accordance
with revised rules of the New York Stock Exchange for equity compensation plans,
the 1992 Plan will expire for purposes of granting new awards after the date of
the Annual Meeting. The 1992 Plan, as previously approved by stockholders, has a
formula for re-determining each year the maximum number of shares of Common
Stock that may be subject to awards that may be issued. For more information,
see footnote (c) to the table provided under the caption 'Equity Compensation
Plans.' Under the revised New York Stock Exchange rules, this formula will no
longer be operative. The shares of Common Stock that remain authorized for
issuance under the 1992 Plan as of the Annual Meeting date will be included in
the shares authorized for issuance under the Plan, subject to stockholder
approval. In addition, the Board of Directors has determined that, if
stockholder approval of the Plan is obtained, it will cease issuing awards under
the Company's 1995 Premium-Priced Stock Option Plan (the '1995 Plan'), the
Company's 1998 Long-Term Employee Incentive Plan (the '1998 Plan') and the
Company's Director Stock Plan for Members of the Compensation and Incentive
Committee (the 'Director Plan'), and that the shares of Common Stock that remain
authorized for issuance under these plans as of the Annual Meeting date will be
included in the shares authorized for issuance under the Plan, subject to
stockholder approval. If stockholder approval of the Plan is not obtained, the
Company may continue to grant awards from the shares
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<Page>
currently authorized for issuance under the 1995 Plan, the 1998 Plan and the
Director Plan. However, the officers of the Company are not eligible to
participate in either the 1998 Plan or the Director Plan and the 1995 Plan has
12,450 shares remaining that may be granted only as stock options.
The following is a summary of the material terms of the Plan. This summary
is qualified by reference to the full text of the Plan, which is attached hereto
as Appendix B.
DESCRIPTION OF THE PLAN
Purpose. The purpose of the Plan is to advance the interests of the Company
and its stockholders by attracting, retaining and motivating key personnel of
the Company upon whose judgment, initiative and effort the Company is largely
dependent for the successful conduct of its business, and to encourage and
enable such persons to acquire a proprietary interest in the Company by
ownership of its stock.
Reservation of Shares. Subject to stockholder approval at the Annual
Meeting, a total of 10,000,000 shares of Common Stock may be issued and sold
under the Plan. Of this amount, 5,066,643 unissued shares have previously been
authorized for issuance under the 1992 Plan, the 1995 Plan, the 1998 Plan and
the Director Plan, and upon effectiveness of the Plan, such unissued shares
will be issuable under the Plan instead of the 1992 Plan, the 1995 Plan, the
1998 Plan or the Director Plan, as the case may be. Shares of Common Stock
issued and sold under the Plan may be either authorized but unissued shares or
shares held in the Company's treasury. To the extent that any award payable in
shares of Common Stock is forfeited, cancelled, returned to the Company for
failure to satisfy vesting requirements or upon the occurrence of other
forfeiture events, or otherwise terminates without payment being made
thereunder, the shares of Common Stock covered thereby will no longer be charged
against the foregoing maximum share limitations and may again be made subject to
awards under the Plan. In addition, any shares of Common Stock exchanged by a
participant or withheld from a participant as full or partial payment to the
Company of the exercise price or the tax withholding upon exercise or payment of
an award will be returned to the number of shares of Common Stock available for
issuance under the Plan. Any awards settled in cash will not be counted against
the share limitations under the Plan. In the event of recapitalizations,
reclassifications or other specified events affecting the Company or the shares
of Common Stock, appropriate and equitable adjustments may be made to the number
and kind of shares of Common Stock available for grant, as well as to other
maximum limitations under the Plan, and the number and kind of shares of Common
Stock or other rights and prices under outstanding awards.
Administration. The Plan is administered by the Compensation and Incentive
Committee (the 'Committee') of the Board of Directors. The Committee shall, to
the extent deemed necessary or advisable by the Board, be constituted so each
committee member will satisfy the requirements for (i) an 'independent director'
under rules adopted by the New York Stock Exchange, (ii) a 'non-employee
director' for purposes of Rule 16b-3 under the Securities Exchange Act of 1934
and (iii) an 'outside director' under Section 162(m) of the Code. Subject to the
limitations set forth in the Plan, the Committee has the authority to determine
the persons to whom awards are granted, the types of awards to be granted, the
time at which awards will be granted, the number of shares of Common Stock,
units or other rights subject to each award, the exercise, base or purchase
price of an award, the time or times at which the award will become vested,
exercisable or payable, the performance criteria, performance goals and other
conditions of an award, and the duration of the award. Subject to the terms of
the Plan, the Committee shall have the authority to amend the terms of an award
in any manner that is permitted by the Plan for the grant of an award, provided
that no such action shall adversely effect the rights of a participant with
respect to an outstanding award without the participant's consent. In
administering the Plan, the Committee will act in accordance with its authority
under the Charter of the Compensation and Incentive Committee, as in effect from
time to time.
Eligibility. Awards under the Plan may be granted to any current or
prospective employee, officer, director, consultant or advisor of the Company or
any of its subsidiaries. Recipients of awards will be selected from time to time
by the Committee in its sole discretion.
Stock Options. Stock options granted under the Plan may be issued as either
incentive stock options (within the meaning of Section 422 of the Code), or as
non-qualified options. The exercise price
22
<Page>
of an option will be determined by the Committee, provided that the exercise
price per share will not be less than the fair market value of a share of Common
Stock on the date of the grant of the option. The Committee will determine the
vesting and/or exercisability requirements and the term of exercise of each
option, including the effect of termination of employment or service of a
participant. The maximum term of a stock option will be ten years from the date
of grant. To exercise an option, the participant must pay the exercise price,
subject to specified conditions, (i) in cash, (ii) in shares of Common Stock
that have been held for at least six months, (iii) through an open-market
broker-assisted transaction, (iv) by combination of any of the above methods, or
(v) by such other method approved by the Committee, and must pay any required
tax withholding amounts. For purposes of section 422 of the Code, the maximum
value of shares of Common Stock (determined at the time of grant) that may be
subject to incentive stock options that become exercisable by an employee in any
one year is limited to $100,000. For purposes of Section 162(m) of the Code, the
maximum number of shares of Common Stock that may be covered under options
granted under the Plan to any participant in any calendar year is 2,000,000
shares of Common Stock. The Plan prohibits 'repricing' or the cancellation,
substitution or amendment of an option for the purpose of reducing the exercise
price of a previously granted option, except for equitable adjustments for
changes in the Company's corporate structure, as described above. In addition,
the Plan does not permit the granting of automatic 'reload' stock options.
Stock Appreciation Rights. A stock appreciation right may be granted either
in tandem with an option or without a related option. A stock appreciation right
entitles the participant, upon exercise, to receive a payment based on the
excess of the fair market value of a share of Common Stock on the date of
exercise over the base price of the right, multiplied by the number of shares of
Common Stock as to which the right is being exercised. The base price may not be
less than the fair market value of a share of Common Stock on the date of grant.
The Committee will determine the vesting requirements and the term of exercise
of each stock appreciation right, including the effect of termination of
employment or service of a participant. The maximum term of a stock appreciation
right will be ten years from the date of grant. For purposes of Section 162(m)
of the Code, the maximum number of shares of Common Stock that may be subject to
stock appreciation rights granted under the Plan to any participant during any
calendar year is 2,000,000 shares of Common Stock. Stock appreciation rights may
be payable in cash or in shares of Common Stock or in a combination of both. The
Plan prohibits 'repricing' and 'reload' of stock appreciation rights, as
described above for stock options.
Restricted Stock Awards. A restricted stock award represents shares of
Common Stock that are issued subject to restrictions on transfer and vesting
requirements as determined by the Committee. Vesting requirements may be based
on the continued employment of the participant for specified time periods and on
the attainment of specified business performance goals established by the
Committee. Subject to the transfer restrictions and vesting requirements of the
award, the participant will have the rights of a stockholder of the Company,
including all voting and dividend rights, during the restriction period, unless
the Committee determines otherwise at the time of the grant. For purposes of
Section 162(m) of the Code, the maximum number of shares of Common Stock that
may be subject to restricted stock awards granted under the Plan to any
participant during any calendar year is 1,000,000 shares of Common Stock.
Stock Units. An award of stock units provides the participant the right to
receive a payment based on the value of a share of Common Stock. Stock units may
be subject to vesting requirements, restrictions and conditions to payment as
the Committee determines are appropriate. Such vesting requirements may be based
on the continued employment of the participant for a specified time period or on
the attainment of specified business performance goals established by the
Committee. A stock unit award may also be granted on a fully vested basis, with
a deferred payment date. Stock unit awards are payable in cash or in shares of
Common Stock or in a combination of both. Stock units may also be granted
together with related dividend equivalent rights. For purposes of Section 162(m)
of the Code, the maximum number of shares of Common Stock that may be subject to
stock units granted under the Plan to any participant during any calendar year
is 1,000,000 shares of Common Stock.
Stock Awards. A stock award represents shares of Common Stock that are
issued free of restrictions on transfer and other incidents of ownership and
free of forfeiture conditions. A stock award may be granted for past services,
in lieu of bonus or other cash compensation, directors' fees or
23
<Page>
for any other valid purpose as determined by the Committee. For purposes of
Section 162(m) of the Code, the maximum number of shares of Common Stock that
may be subject to stock awards granted under the Plan to any participant during
any calendar year is 1,000,000 shares of Common Stock.
Performance Awards. The Committee may grant performance awards under the
Plan, which shall represent the right to receive a payment in cash if
performance goals established by the Committee for a performance period are
satisfied. The Committee may grant performance awards that are intended to
qualify as performance-based compensation under Section 162(m) of the Code, as
well as performance awards that are not intended to so qualify. At the time a
performance award is granted, the Committee will determine, in its sole
discretion, the applicable performance period and performance goals to be
achieved during the performance period, as well as such other conditions as the
Committee deems appropriate. The Committee may also determine a target payment
amount or a range of payment amounts for each award. For purposes of Section
162(m) of the Code, the maximum amount of compensation that may be payable to a
participant during any one calendar year with respect to performance awards will
be $10 million. In the case of performance awards that are intended to qualify
as performance-based compensation under Section 162(m) of the Code, the
Committee will designate performance criteria from among the criteria set forth
below.
Section 162(m) Awards. Awards of options and stock appreciation rights
granted under the Plan are intended by their terms to qualify for the
performance-based compensation exception under Section 162(m) of the Code. In
addition, the Committee may grant awards of restricted stock, stock units or
stock awards that are intended to qualify for the performance-based compensation
exception under Section 162(m) of the Code. Under Section 162(m), the terms of
the award must state, in terms of an objective formula or standard, the method
of computing the amount of compensation payable under the award, and must
preclude discretion to increase the amount of compensation payable under the
terms of the award (but may give the Committee discretion to decrease the amount
of compensation payable). For each such award, the performance criteria upon
which the payment or vesting may be based shall be limited to one or more of the
following performance measures, which may be applied with respect to the
Company, any Subsidiary or any business unit: cash flow; cash flow from
operations; free cash flow; total earnings; earnings per share, diluted or
basic; earnings per share from continuing operations, diluted or basic;
income before income taxes; earnings before interest and taxes; earnings before
interest, taxes, depreciation, and amortization; earnings from continuing
operations; net asset turnover; inventory turnover; receivable turnover;
capital expenditures; net earnings; operating earnings; gross or operating
margin; debt; working capital; return on equity; return on net assets; return
on total assets; return on capital; return on investment; return on sales; net
or gross sales; market share; economic value added; expense reduction levels;
stock price; and total shareholder return. The foregoing performance criteria
shall have any reasonable definitions that the Committee may specify, which
may include or exclude any items specified by the Committee, including but not
limited to any or all of the following items: discontinued operations,
extraordinary, unusual, non-recurring or special items, effects of accounting
changes, effects of currency or interest rate fluctuations, effects of financing
activities, changes in tax rates, expenses for restructuring or productivity
initiatives, litigation losses, non-operating items, effects of acquisitions
or divestitures and changes of law or regulation affecting the Company's
business. The foregoing performance measures may be determined on an absolute
basis or relative to internal goals or relative to levels attained in prior
years, or related to other companies or indices, or as ratios expressing
relationships between two or more performance measures.
Change In Control. The Committee may, in an award agreement, provide for the
effect of a 'change in control' (as defined in the Plan) on an award. These
provisions may include the acceleration of vesting of an award, the elimination
or modification of performance or other conditions, the extension of the time
for exercise or realizing gain from an award, the acceleration of payment, cash
settlement of an award or other adjustments that the Committee considers
appropriate. Unless otherwise provided by the Committee and set forth in the
applicable award agreement, upon a change in control, (i) each outstanding
option and stock appreciation right, to the extent that it has not otherwise
become vested and exercisable, will automatically become fully and immediately
vested and exercisable, without regard to any otherwise applicable vesting
requirement, (ii) each restricted stock award will become fully and immediately
vested and all forfeiture and transfer restrictions thereon will
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lapse, and (iii) each outstanding stock unit award, stock award and performance
award will become immediately and fully vested and payable.
Term; Amendment and Termination. The term of the Plan is ten years from the
date of the Annual Meeting. The Board may terminate or amend the Plan at any
time, subject to stockholder approval under certain circumstances provided in
the Plan. However, no termination or amendment of the Plan will adversely affect
the rights of a participant under any previously granted award.
NEW PLAN BENEFITS
During fiscal 2003, stock options were granted under the 1992 Plan to the
Company's named executives, as set forth in the table captioned 'Option
Grants In 2003' above in 'Executive Compensation -- Stock Options', and
restricted stock was granted under the 1992 Plan to the Company's named
executives, as set forth in the table captioned 'Summary Compensation
Table' above. Total stock options granted during the year to all executive
officers as a group to purchase 481,552 shares of Common Stock were at an
average weighted exercise price of $41.46 per share, and 553,477 shares of
restricted stock were granted to all executive officers as a group. Stock
options were granted to all other employees of the Company as a group to
purchase 330,974 shares of Common Stock at an average weighted exercise price of
$37.46 per share, and 155,683 shares of restricted stock were granted to all
other employees of the Company as a group.
In March 2004, the Company made contingent grants of restricted stock that
would be issued under the Plan, if it is approved by stockholders. The
contingent grants were made to each of the Company's executive officers.
Consistent with the Company's past practice, the participants would receive
awards of restricted stock in 2005 if the Company achieves specified business
performance goals for 2004. The contingent grants are intended to comply with
the requirements of Section 162(m) of the Code, and were granted at a maximum
level of 750,000 shares per participant, subject to certain stock price
adjustments within the limits under the Plan and further subject to the
discretion of the Committee to reduce, for any reason, the number of shares
granted. Such grants will be made by the Committee dependent upon the growth of
the Company's earnings per share.
The terms and number of options, restricted stock or other awards to be
granted in the future under the Plan are to be determined in the discretion of
the Committee. Since no such determinations have yet been made, the benefits or
amounts that will be received by or allocated to the Company's executive
officers or other eligible employees cannot be determined at this time.
As of April 6, 2004, the closing price on the New York Stock Exchange of the
Company's Common Stock was $43.85 per share.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summarizes the United States federal income tax consequences
of awards under the Plan to participants who are subject to United States tax.
The tax consequences of the Plan to the Company and participants in other
jurisdictions are not summarized below.
Stock Options. An optionee will not generally recognize taxable income upon
the grant of a nonqualified stock option to purchase shares of Common Stock.
Upon exercise of the option, the optionee will generally recognize ordinary
income for federal income tax purposes equal to the excess of the fair market
value of the shares of Common Stock over the exercise price. The tax basis of
the shares of Common Stock in the hands of the optionee will equal the exercise
price paid for the shares of Common Stock plus the amount of ordinary
compensation income the optionee recognizes upon exercise of the option, and the
holding period for the shares of Common Stock for capital gains purposes will
commence on the day the option is exercised. An optionee who sells any of the
shares of Common Stock will recognize capital gain or loss measured by the
difference between the tax basis of the shares of Common Stock and the amount
realized on the sale. The Company will be entitled to a federal income tax
deduction equal to the amount of ordinary compensation income recognized by the
optionee. The deduction will be allowed at the same time the optionee recognizes
the income.
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An optionee will not generally recognize income upon the grant of an
incentive stock option to purchase shares of Common Stock and will not generally
recognize income upon exercise of the option, provided the optionee is an
employee of the Company or a subsidiary at all times from the date of grant
until three months prior to exercise. If an optionee who has exercised an
incentive stock option sells the shares of Common Stock acquired upon exercise
more than two years after the grant date and more than one year after exercise,
capital gain or loss will be recognized equal to the difference between the
sales price and the exercise price. An optionee who sells the shares of Common
Stock before the expiration of this holding period, will generally recognize
ordinary income upon the sale, and the Company will be entitled to a
corresponding federal income tax deduction at the same time the participant
recognizes ordinary income.
Other Awards. The current United States federal income tax consequences of
other awards authorized under the Plan are generally in accordance with the
following: (i) stock appreciation rights are generally subject to ordinary
income tax at the time of exercise; (ii) restricted stock is generally subject
to ordinary income tax at the time the restrictions lapse, unless the recipient
elects to accelerate recognition as of the date of grant; (iii) stock units and
performance awards are generally subject to ordinary income tax at the time of
payment; and (iv) unrestricted stock awards are generally subject to ordinary
income tax at the time of grant. In each of the foregoing cases, the Company
will generally be entitled to a corresponding federal income tax deduction at
the same time the participant recognizes ordinary income.
Section 162(m). Compensation of persons who are 'covered employees' of the
Company is subject to the tax deduction limits of Section 162(m) of the Code.
Awards that qualify as 'performance-based compensation' are exempt from Section
162(m), thus allowing the Company the full federal tax deduction otherwise
permitted for such compensation. If approved by the Company's stockholders, the
Plan will enable the Committee to grant awards that will be exempt from the
deduction limits of Section 162(m).
The affirmative vote of the holders of a majority of the shares represented
in person or by proxy and entitled to vote on the item will be required for
approval of the 2004 Stock and Incentive Plan. A properly executed proxy marked
'ABSTAIN' with respect to any such matter will not be voted, although it will be
counted for purposes of determining the number of votes present and entitled to
vote. Accordingly, an abstention will have the effect of a negative vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 2004 STOCK AND
INCENTIVE PLAN.
EQUITY COMPENSATION PLANS
The following table sets forth certain information regarding our equity
compensation plans as of December 31, 2003 and March 31, 2004 (in thousands,
except exercise price data):
<Table>
<Caption>
NUMBER OF SECURITIES
NUMBER OF SECURITIES TO WEIGHTED AVERAGE REMAINING AVAILABLE FOR
BE ISSUED UPON EXERCISE EXERCISE PRICE OF FUTURE ISSUANCE UNDER
OF OUTSTANDING OPTIONS OUTSTANDING OPTIONS AND EQUITY COMPENSATION
AND WARRANTS WARRANTS PLANS(c)
------------------------ ------------------------ ------------------------
PLAN CATEGORY AS OF AS OF AS OF
------------- ------------------------ ------------------------ ------------------------
DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31, DECEMBER 31, MARCH 31,
2003 2004 2003 2004 2003 2004
------------ --------- ------------ --------- ------------ ---------
Equity compensation plans
approved by stockholders
(a)..................... 5,924 5,671 $23.87 $23.98 748 2,256
Equity compensation plans
not approved by
stockholders (b)........ 2,354 2,191 $25.23 $25.59 2,912 2,811
----- ----- ----- -----
8,278 7,862 $24.25 $24.43 3,660 5,067
----- ----- ----- -----
----- ----- ----- -----
</Table>
(footnotes on next page)
26
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(footnotes from previous page)
(a) Includes the 1992 Long-Term Stock Incentive Plan and the 1995
Premium-Priced Stock Option Plan.
(b) Includes the 1998 Long-Term Employee Incentive Plan and Director Stock
Plan. Additionally, at December 31, 2003, the outstanding amount includes
118 stock options transferred from or issued in connection with companies
previously acquired by the Company at a weighted average exercise price of
$36.67, 220 compensation-related warrants issued in 1997 at an exercise
price of $29.275 per share and 10 compensation-related warrants issued in
2003 at an exercise price of $33.08 per share. At March 31, 2004, the
outstanding amount includes 110 stock options transferred from or issued in
connection with companies previously acquired by the Company at a weighted
average exercise price of $36.99, 180 compensation-related warrants issued
in 1997 at an exercise price of $29.275 per share and 10
compensation-related warrants issued in 2003 at an exercise price of $33.08
per share.
(c) Excludes securities listed in the first column of the table. Under the 1992
Long-Term Stock Incentive Plan, securities available for issuance are
determined under a formula. The number of shares available for issuance
under such plan as of any given date (a 'Determination Date') may not
exceed that number of shares equal to (i) 5% of the Company's issued and
outstanding Common Stock as of the preceding December 31 reduced by (ii)
the total number of stock incentives granted under the 1992 Plan at any
time during the then current calendar year and during the immediately
preceding two calendar years (the 'Granting Period') increased by (iii) the
total number of shares covered by previously granted stock incentives
forfeited during the Granting Period. As of the date of the Annual Meeting,
the remaining authorized but unissued shares under the 1992 Plan, the 1995
Plan, the 1998 Plan and the Director Plan will be included in the 2004
Stock and Incentive Plan, subject to stockholder approval at the Annual
Meeting. For more details, see 'Proposal to Approve 2004 Stock and
Incentive Plan.'
REPORT OF THE AUDIT COMMITTEE OF THE BOARD
The Audit Committee is comprised of three members of the Company's Board of
Directors. The Board has affirmatively determined that each member of the Audit
Committee is an independent Director and qualified to serve as a member of the
Audit Committee under the Guidelines, including the applicable NYSE and SEC
standards. The Audit Committee operates under a written Charter adopted by the
Board. The Board has revised the Charter, and a copy of the new Charter, which
will become effective as of the date of the Annual Meeting, is attached hereto
as Appendix A.
The Audit Committee assists the Board in monitoring: (i) the integrity of
the Company's financial statements; (ii) the independent auditors'
qualifications, independence and performance; (iii) the performance of the
Company's internal audit function; and (iv) the Company's compliance with legal
and regulatory requirements.
The Audit Committee has met and held discussions with management and the
Company's internal auditors and independent auditors, each of whom has
unrestricted access to the Audit Committee. Management represented to the Audit
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has met and discussed the consolidated financial statements with
management and the independent auditors. The Audit Committee discussed with the
Company's independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication With Audit Committees).
The Audit Committee also has discussed with the independent auditors the
auditors' independence from the Company and its management, including the
matters in the written disclosures required by Independence Standards Board
Statement No. 1 (Independence Discussions with Audit Committees). The Audit
Committee has also considered whether the independent auditors' provision of
non-audit services to the Company is compatible with the auditors' independence.
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Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2003 for filing with the SEC.
The Report of the Audit Committee of the Board does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the extent the
Company specifically incorporates this Report by reference therein.
The Audit Committee:
Charles H. Erhart, Jr., Chairman
Andrea R. Lindell, DNSc, RN
John H. Timoney
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed the firm of
PricewaterhouseCoopers LLP ('PricewaterhouseCoopers') as the independent public
accounting firm to audit the Company's consolidated financial statements for
2004, subject to stockholders ratifying the appointment at the Annual Meeting.
PricewaterhouseCoopers (and its predecessor) has acted as independent auditors
for the Company and its consolidated subsidiaries since 1981.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted policies and procedures that require the
pre-approval of all audit, audit-related, tax and other services rendered by the
Company's independent auditors. Under the policy, an auditor services schedule
is prepared at the beginning of each year that describes each type of service to
be provided by the independent auditors and the projected fees for each such
service. The Audit Committee reviews and approves in advance, as appropriate,
each service listed on the auditor services schedule and the projected fees for
each such service. On a periodic basis, the independent auditors report to the
Audit Committee the actual spending for specified services compared with the
approved amounts. Projected fee amounts listed on the auditor services schedule
may be updated, as appropriate in the Audit Committee's discretion, at each
regularly scheduled meeting of the Audit Committee. The Audit Committee may also
pre-approve particular services on a case-by-case basis. The policy allows the
Audit Committee to delegate pre-approval authority to one or more members of the
Audit Committee. Any decisions made by the designated pre-approval member are
reported, for informational purposes only, to the full Audit Committee at its
next meeting.
FEES AND SERVICES OF INDEPENDENT AUDITORS
The following table summarizes fees for professional services provided to
the Company by PricewaterhouseCoopers for the years ended December 31, 2003 and
2002 (in thousands):
<Table>
<Caption>
FEES 2003 2002
---- ---- ----
Audit.................................................... $1,599 $ 872
Audit-Related............................................ 4,687 2,137
Tax...................................................... -- 42
All Other................................................ 212 --
------ ------
Total................................................ $6,498 $3,051
------ ------
------ ------
</Table>
Audit fees for the years ended December 31, 2003 and 2002, respectively,
were for professional services rendered for the audits of the consolidated
financial statements of the Company as well as statutory audits, issuance of
consents, income tax provision procedures and assistance with review of
documents filed with the SEC.
Audit-related fees for the years ended December 31, 2003 and 2002,
respectively, were for assurance and related services primarily attributable to
acquisition-related financial due diligence and
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<Page>
agreed-upon procedures (including those for deferred payments and the Company's
restructuring programs), as well as employee benefit plan audits and
consultations concerning financial accounting and reporting standards.
Tax fees for the year ended December 31, 2002 were for services related to
review of certain of the Company's benefit plans.
All other fees for the year ended December 31, 2003 were permissible
services performed by PricewaterhouseCoopers that do not meet the above category
descriptions.
VOTE ON RATIFICATION OF APPOINTMENT
Although ratification of the appointment of PricewaterhouseCoopers as
independent auditors for 2004 by stockholders is not required by law or the
By-Laws of the Company, the appointment of PricewaterhouseCoopers 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
appointment of PricewaterhouseCoopers. If the appointment is not ratified at the
meeting, the Audit Committee will reconsider its appointment of independent
auditors. In connection with its appointment of PricewaterhouseCoopers as
independent auditors, the Audit Committee considered whether the provision of
non-audit services is compatible with maintaining the independence of
PricewaterhouseCoopers.
It is expected that a representative of PricewaterhouseCoopers 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 OF THE APPOINTMENT
OF PRICEWATERHOUSECOOPERS AS THE INDEPENDENT PUBLIC ACCOUNTING FIRM TO AUDIT THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR 2004.
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 SEC 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 2003 all such persons complied with these filing
requirements, except that one report relating to one transaction by Mr. Bien
involving a Company employee benefit plan was not timely filed, and five reports
relating to ten transactions under Company employee benefit plans by D. Michael
Laney, the spouse of Ms. Laney, were inadvertently filed late.
STOCKHOLDER PROPOSALS
STOCKHOLDER PROPOSAL INTENDED FOR INCLUSION IN THE 2005 PROXY STATEMENT
Any stockholder proposal intended to be considered for inclusion in the
Company's proxy materials for presentation at the 2005 Annual Meeting of
Stockholders must be in writing and received by the Corporate Secretary of the
Company not later than December 13, 2004. If any stockholder who intends to
propose any other matter to be acted on at the 2005 Annual Meeting of
Stockholders does not inform the Company of such matter by February 16, 2005,
the persons named as proxies for the 2005 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.
STOCKHOLDER NOMINATION OF A CANDIDATE FOR ELECTION AS A DIRECTOR
The Company's By-Laws, a copy of which is available upon request to the
Corporate Secretary of the Company, provide that nominations for Director may
only be made by the Board of Directors or a stockholder entitled to vote who
sends a stockholder notice of the nomination to the Corporate Secretary that is
received by the Corporate Secretary not less than 90 days nor more than
120 days prior to the anniversary date of the prior year's annual meeting of
stockholders. For a nominee of a stockholder to be eligible for election at the
2005 Annual Meeting, the stockholder's notice of nomination must be received by
the Corporate Secretary between January 18, 2005 and February 17,
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<Page>
2005. This advance notice period is intended to allow the Board to have an
opportunity to consider persons expected to be nominated at the Annual Meeting.
A stockholder's notice of nomination is required to set forth the following:
(i) as to each person whom the stockholder proposes to nominate for election or
re-election as a Director: (A) the name, age, business address and residence
address of such person; (B) the principal occupation or employment of such
person; (C) the class and number of shares of capital stock of the Company that
are beneficially owned by such person; (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) and between the beneficial owner and
such nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; and (E) any other information relating to such person that is
required to be disclosed in solicitations of proxies for elections of Directors,
or is otherwise required, in each case pursuant to Section 14 of the Exchange
Act (including, without limitation, such person's written consent to being named
in the proxy statement as a nominee and to serving as a Director if elected);
and (ii) as to such stockholder giving notice, the information required to be
provided pursuant to Section 1.02(e) of the Company's By-Laws.
ADVANCE NOTICE OF BUSINESS FOR 2005 ANNUAL MEETING
The Company's By-Laws provide that no business may be brought before an
annual meeting unless it is specified in the notice of the meeting or is
otherwise brought before the meeting by or at the direction of the Board or by a
stockholder entitled to vote who has delivered written notice to the Company's
Corporate Secretary (containing certain information specified in the By-Laws
about the stockholder and the proposed business) not less than 90 days nor more
than 120 days prior to the anniversary date of the prior year's annual meeting
of stockholders. For business proposed by a stockholder to be eligible to be
brought before the 2005 Annual Meeting, the stockholder's notice of proposed
business must be received by the Corporate Secretary between January 18, 2005
and February 17, 2005.
CORPORATE SECRETARY ADDRESS FOR NOTICES AND REQUESTS
All notices to, or requests from, the Corporate Secretary should be sent to
Omnicare, Inc., 1600 RiverCenter II, 100 E. RiverCenter Boulevard, Covington,
Kentucky, 41011.
OTHER MATTERS
As of the date of this Proxy Statement, 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.
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, by facsimile or by
other electronic means 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 $8,000 plus reasonable expenses.
By Order of the Board of Directors
CHERYL D. HODGES
Secretary
April 12, 2004
30
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APPENDIX A
OMNICARE, INC. (THE 'COMPANY')
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. STATEMENT OF PURPOSES
There shall be a committee of the Board of Directors (the 'Board') to be
known as the Audit Committee (the 'Committee'). The Board appoints the Committee
for the following purposes:
1. The Committee shall assist the Board in fulfilling its statutory and
fiduciary responsibilities with respect to internal controls, accounting
policies, and auditing and financial reporting practices. The Committee shall
assist the Board in monitoring:
a. The integrity of the Company's financial statements;
b. The independent auditors' qualifications, independence and
performance;
c. The performance of the Company's internal audit function; and
d. The Company's compliance with legal and regulatory requirements.
2. The Committee shall prepare the Committee report that the United States
Securities and Exchange Commission (the 'SEC') rules require to be included in
the Company's annual proxy statement.
The Committee shall assure that, with respect to the above listed items,
there are free and open means of communication between the Board and the
independent auditors, the persons responsible for the Company's internal audit
function and the financial management of the Company. The Committee will report
its activities to the Board on a regular basis and make such recommendations as
the Committee deems necessary and appropriate.
II. MEMBERSHIP
The Committee shall be comprised of at least three directors who shall be
appointed annually by the Board after considering the recommendation of the
Nominating and Governance Committee. The members of the Committee shall meet the
independence and experience requirements of the New York Stock Exchange and the
SEC. The Board shall designate one member of the Committee as its Chairman.
Members of the Committee shall serve until their resignation, retirement,
removal by the Board or until their successors are appointed.
Each member of the Audit Committee shall be financially literate, or become
financially literate within a reasonable period of time after appointment to the
Committee. At least one member of the Committee shall be an 'audit committee
financial expert' (as defined by the SEC) as determined by the Board and the
Board shall disclose such determination in the Company's annual report on Form
10-K.
The simultaneous service on the audit committee of more than two other
public companies requires a Board determination that such simultaneous service
would not impair the ability of such member to effectively serve on the
Committee and such determination must be disclosed in the Company's annual proxy
statement.
Other than in their capacities as members of the Committee, the Board, or
any other Board committee, members of the Committee may not receive directly or
indirectly any consulting, advisory, or other compensatory fee from the Company
or any subsidiary of the Company; compensatory fees do not include the receipt
of fixed amounts of compensation under a retirement plan (including deferred
compensation) for prior service with the Company (provided that such
compensation is not contingent in any way on continued service).
A-1
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III. MEETINGS
The Committee shall meet at least quarterly and hold such other meetings
from time to time as may be called by the Chairman of the Committee, the
Chairman of the Board or the Chief Executive Officer of the Company (the 'CEO').
A majority of the members of the Committee shall constitute a quorum of the
Committee. A majority of the members in attendance shall decide any matter
properly brought before any meeting of the Committee.
The Committee shall periodically meet separately with management, the
internal auditor and the Company's independent auditor.
The Committee shall keep minutes of its proceedings. The minutes of a
meeting shall be subsequently approved by the Committee, shall be signed by the
person whom the Chairman of the Committee designated to act as secretary of the
meeting, and shall be filed as permanent records with the Secretary of the
Company.
The Chairman of the Committee shall at each meeting of the Board following a
meeting of the Committee report to the full Board on the matters considered at
the last meeting of the Committee.
IV. SPECIFIC DUTIES AND RESPONSIBILITIES
1. Engagement of Independent Auditors. The Committee shall be responsible
directly for the appointment (subject, if applicable, to stockholder
ratification), retention, termination, compensation and terms of engagement, and
oversight of the work of the independent auditors (including the resolution of
disagreements between management and the independent auditors regarding
financial reporting). The Committee shall have a clear understanding with
management and the independent auditor that the independent auditor is
ultimately accountable and must report directly to the Committee. The Committee
shall have the ultimate authority and responsibility to evaluate and, when
appropriate, to replace the independent auditor.
2. Pre-Approvals. The Committee shall pre-approve all auditing services and
permitted non-audit services (including the fees and terms thereof) to be
performed for the Company or any of its subsidiaries by its independent auditor.
The Committee may establish pre-approval policies and procedures, as permitted
by applicable law and the rules and regulations of the SEC, for the engagement
of independent auditors to render services to the Company, including, without
limitation, policies that would allow the delegation of pre-approval authority
to one or more members of the Committee, provided that the pre-approval decision
is presented to the Committee at its next regularly scheduled meeting.
3. Qualifications of Independent Auditors. At least annually, the Committee
shall obtain and review a report by the Company's independent auditor which
describes the independent auditor's internal quality-control procedures; any
material issues raised by the most recent internal quality-control review, or
peer review, of the firm, or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm, and any steps taken to deal
with any such issues; and all relationships between the independent auditor and
the Company.
4. Assessment of Independent Auditors. The Committee shall evaluate the
qualifications, performance and independence of the independent auditor,
including considering whether the independent auditor's quality controls are
adequate and the provision of non-audit services is compatible with maintaining
the independent auditor's independence, and taking into account the opinions of
management and the internal auditors. The Committee shall receive from the
independent auditors written disclosures with respect to their independence and
discuss with them any factors that might detract from their independence. As
part of such evaluation, the Committee shall review and evaluate the lead
partner and senior members of the independent auditor, assure the regular
rotation of the audit partners as required by law as well as consider whether
the independent audit firm itself should be rotated, so as to assure continuing
auditor independence. The Committee will require the independent auditors to
certify annually that they are in compliance with all applicable legal and
regulatory requirements including those addressing rotation of lead and
concurring partners, provision
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of prohibited services, document retention, and the submission of timely
reports. The Committee shall present its conclusions to the Board.
5. Annual Financial Statements. The Committee, to the extent that it deems
necessary and appropriate, shall review with representatives of the independent
auditor:
a. The scope of, and the plan for the staffing of, the annual audit of
the Company's financial statements;
b. The results of the most recent annual audit, any audit problems or
difficulties and management's response, and the Committee will discuss any
management or internal control letter issued or proposed to be issued by the
independent auditors or schedule of unadjusted differences, if any;
c. Any recommendations with respect to internal controls and other
financial matters, including any perceived weaknesses in the Company's
internal controls, policies, procedures, business risk and compliance
matters and any special audit steps adopted in light of material control
deficiencies;
d. Any significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements,
including any material changes in the Company's selection and application of
accounting principles, the development, selection and disclosure of critical
accounting policies, and analyses of the effect of alternative assumptions,
estimates or GAAP methods on the Company's financial statements;
e. The effect of regulatory and accounting initiatives as well as
off-balance sheet structures on the Company's financial statements; and
f. Major financial risk exposures and the steps that management has
taken to monitor and control such exposures, including the Company's risk
assessment and risk management policies.
6. Annual and Quarterly Financial Statements and Disclosures. The Committee
shall:
a. Review and discuss with management and the independent auditors the
annual audited financial statements, including disclosures made in
'Management's Discussion and Analysis of Financial Condition and Results of
Operations', and recommend to the Board whether the audited financial
statements should be included in the Company's Form 10-K.
b. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to the filing of its Form
10-Q and disclosures made in 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' including the results of the
independent auditors' reviews of the quarterly financial statements.
c. Discuss generally the Company's earnings press releases, including
the use of 'pro forma' or 'adjusted' non-GAAP information, as well as
financial information and earnings guidance provided to analysts and rating
agencies. The Committee need not discuss in advance each earnings release or
each instance in which the Company may provide earnings guidance.
7. Oversight of the Company's Internal Audit Function. The Committee shall:
a. Review the structure of the Company's internal audit function; and,
if applicable, review the appointment and replacement of the senior internal
auditing executive; and
b. Discuss with the independent auditor the internal audit function of
the Company, the responsibilities of the persons carrying out the function,
budget and staffing and any recommended changes in the planned scope of the
internal audit.
8. Review Procedures. In consultation with the management and the
independent auditors, the Committee shall consider the integrity of the
Company's financial reporting processes and controls, discuss significant
financial risk exposures and review significant findings prepared by the
independent auditors together with management's responses.
9. Oversight of the Company's Senior Financial Officers. The Committee
shall:
a. Develop a Code of Ethics for the CEO and Senior Financial Officers;
and
b. Monitor compliance with the Code of Ethics for the CEO and Senior
Financial Officers and cause any waiver of the Code to be disclosed in a
current report on Form 8-K filed with the SEC or posted on the Company's Web
site, as required.
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10. CEO/CFO Certifications. The Committee shall:
a. Review with the CEO and the Chief Financial Officer of the Company
(the 'CFO') each quarter the certifications that each of them will make in
connection with the filing of the Company's next quarterly report on Form
10-Q or annual report on Form 10-K; and
b. Review the procedures that were followed by the CEO, CFO and other
financial staff of the Company, including internal auditors, to provide
reasonable assurances that the statements in the CEO and CFO certifications
are true and accurate and review the steps taken by counsel for the Company
to document the completion and effectiveness of the CEO/CFO certification
verification and testing processes implemented by the Company.
11. Compliance Oversight Responsibilities. The Committee shall:
a. Review any material issues that arise relating to compliance by the
Company and its subsidiaries and all directors, officers and employees with
the Company's Corporate Compliance Manual, which includes policies on
business ethics, public responsibility, conflicts of interests and related
party transactions;
b. Review with management any correspondence with regulators or
governmental agencies and any employee complaints or published reports that
raise material issues regarding the Company's financial statements or
accounting policies; and
c. Discuss with (or obtain a report from) the Company's management any
legal matters that may have a material impact on the financial statements or
the Company's compliance policies.
12. Procedure for Complaints. The Committee shall establish and implement
procedures for the receipt, retention, and treatment of complaints received by
the Company regarding accounting, internal accounting controls or auditing
matters, and the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
13. Delegation. With regard to all matters described in this Charter as
being within the authority of the Committee, the Committee may not delegate its
authority except as expressly provided in Section IV(2) of this Charter
regarding the authority to pre-approve audit and non-audit services.
14. Retention of Advisors. The Committee shall have the authority, to the
extent it deems necessary and appropriate, to retain special legal, accounting
or other consultants to advise the Committee. The Company shall provide for
appropriate funding, as determined by the Committee, for payment of compensation
to the independent auditors for the purpose of rendering or issuing an audit
report or performing other audit, review or attest services for the Company and
to any advisors employed by the Committee and for ordinary expenses of the
Committee.
V. ANNUAL PERFORMANCE EVALUATION
The Committee shall perform a review and evaluation, at least annually, of
the performance of the Committee and its members, including a review of the
compliance of the Committee with this Charter. In addition, the Committee shall
review and reassess, at least annually, the adequacy of this Charter and
recommend to the Board any improvements to this Charter that the Committee
considers necessary and appropriate.
VI. EMPLOYMENT OF PERSONS FORMERLY EMPLOYED BY INDEPENDENT AUDITORS
No person shall be employed by the Company or a subsidiary of the Company
without the prior approval of the Committee if such person was formerly employed
by the Company's independent auditors and had rendered services to the Company
or a subsidiary of the Company while employed by such independent auditor within
the three years prior to such person's proposed employment date with the Company
or a subsidiary of the Company.
VII. LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the 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. These are the
responsibilities of management and the independent auditors.
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APPENDIX B
OMNICARE, INC.
2004 STOCK AND INCENTIVE PLAN
1. PURPOSE
The purpose of this Omnicare, Inc. 2004 Stock and Incentive Plan is to
advance the interests of the Company and its stockholders by attracting,
retaining and motivating key personnel upon whose judgment, initiative and
effort the successful conduct of the Company's operations is largely dependent.
The Plan is also intended to further align the interests of key personnel with
those of the stockholders by promoting the ownership of shares of Common Stock
by these individuals.
2. DEFINITIONS
Wherever the following capitalized terms are used in this Plan, they shall
have the meanings specified below:
(a) 'Award' means an award of an Option, Stock Appreciation Right,
Restricted Stock Award, Stock Unit Award, Performance Award or Stock Award
granted under the Plan.
(b) 'Award Agreement' means an agreement entered into between the Company
and a Participant setting forth the terms and conditions of an Award granted to
a Participant.
(c) 'Board' means the Board of Directors of the Company.
(d) 'Change in Control' shall have the meaning set forth in Section 13.2
hereof.
(e) 'Code' means the Internal Revenue Code of 1986, as amended.
(f) 'Common Stock' means the Company's Common Stock, par value $1.00 per
share.
(g) 'Committee' means the Compensation and Incentive Committee of the Board.
(h) 'Company' means Omnicare, Inc., a Delaware corporation.
(i) 'Date of Grant' means the date on which an Award under the Plan is made
by the Committee, or such later date as the Committee may specify to be the
effective date of the Award.
(j) 'Disability' means a permanent and total disability (within the meaning
of Section 22(e)(3) of the Code).
(k) 'Eligible Person' means any person who is an employee, officer,
director, consultant or advisor of the Company or any Subsidiary, as determined
by the Committee, or any person who is determined by the Committee to be a
prospective employee, officer, director, consultant or advisor of the Company or
any Subsidiary.
(l) 'Exchange Act' means the Securities Exchange Act of 1934, as amended.
(m) 'Fair Market Value' of a share of Common Stock as of a given date shall
be the closing price of a share of Common Stock on the New York Stock Exchange
on the first trading date preceding the date as of which Fair Market Value is to
be determined or, in the absence of any reported sales of Common Stock on such
date, on the first preceding date on which any such sale shall have been
reported. If Common Stock is not listed on the New York Stock Exchange on the
date as of which Fair Market Value is to be determined, the Committee shall
determine in good faith the Fair Market Value in whatever manner it considers
appropriate.
(n) 'Incentive Stock Option' means an Option to purchase shares of Common
Stock granted under Section 6 hereof that is intended to meet the requirements
of Section 422 of the Code and the regulations promulgated thereunder.
(o) 'Nonqualified Stock Option' means an Option to purchase shares of Common
Stock granted under Section 6 hereof that is not an Incentive Stock Option.
(p) 'Option' means an Incentive Stock Option or a Nonqualified Stock Option
granted under the Plan.
(q) 'Participant' means any Eligible Person who holds an outstanding Award
under the Plan.
(r) 'Performance Awards' means an Award under Section 11 hereof entitling a
Participant to a payment in cash at the end of a performance period, if the
performance and other conditions established by the Committee are satisfied.
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(s) 'Plan' means the Omnicare, Inc. 2004 Stock and Incentive Plan as set
forth herein, as amended from time to time.
(t) 'Restricted Stock Award' means an Award under Section 8 hereof entitling
a Participant to shares of Common Stock that are nontransferable and subject to
forfeiture until specific conditions established by the Committee are satisfied.
(u) 'Section 162(m) Award' means any Award that is intended to qualify for
the performance-based compensation exemption under Section 162(m) of the Code
and the regulations promulgated thereunder.
(v) 'Stock Award' means an Award under Section 10 hereof entitling a
Participant to shares of Common Stock that are free of transfer restrictions and
forfeiture conditions.
(w) 'Stock Appreciation Right' means an Award under Section 7 hereof
entitling a Participant to receive a payment, representing the difference
between the base price per share of the right and the Fair Market Value of a
share of Common Stock on the date of exercise.
(x) 'Stock Unit Award' means an Award under Section 9 hereof entitling a
Participant to a payment of a unit value based on the Fair Market Value of a
share of Common Stock.
(y) 'Subsidiary' means an entity (whether or not a corporation) that is
wholly or majority owned or controlled, directly or indirectly, by the Company,
or any other affiliate of the Company that is so designated, from time to time,
by the Committee; provided, however, that with respect to Incentive Stock
Options, the term 'Subsidiary' shall include only an entity that qualifies under
Section 424(f) of the Code as a 'subsidiary corporation' with respect to the
Company.
3. ADMINISTRATION
SECTION 3.1 Committee Members. The Plan shall be administered by a Committee
comprised of no fewer than two members of the Board. Solely to the extent deemed
necessary or advisable by the Board, each Committee member shall satisfy the
requirements for (i) an 'independent director' under rules adopted by the New
York Stock Exchange, (ii) a 'nonemployee director' for purposes of such
Rule 16b-3 under the Exchange Act and (iii) an 'outside director' under
Section 162(m) of the Code. The Committee shall have such powers and authority
as may be necessary or appropriate for the Committee to carry out its functions
as described in the Plan. No member of the Committee shall be liable for any
action or determination made in good faith by the Committee with respect to the
Plan or any Award thereunder.
SECTION 3.2 Committee Authority. Subject to the express limitations of the
Plan, the Committee shall have authority in its discretion to determine the
Eligible Persons to whom, and the time or times at which, Awards may be granted,
the number of shares, units or other rights subject to each Award, the exercise,
base or purchase price of an Award (if any), the time or times at which an Award
will become vested, exercisable or payable, the performance criteria,
performance goals and other conditions of an Award, the duration of the Award,
and all other terms of the Award. Subject to the terms of the Plan, the
Committee shall have the authority to amend the terms of an Award in any manner
that is permitted by the Plan for the grant of an Award, provided that no such
action shall adversely affect the rights of a Participant with respect to an
outstanding Award without the Participant's consent. The Committee shall also
have discretionary authority to interpret the Plan, to make all factual
determinations under the Plan, and to make all other determinations necessary or
advisable for Plan administration. The Committee may prescribe, amend, and
rescind rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Committee shall be final, conclusive, and
binding upon all parties. In administering the Plan, the Committee shall act in
accordance with its authority under the Charter of the Compensation and
Incentive Committee, as in effect from time to time.
SECTION 3.3 Grants to Committee Members. Any Awards under the Plan made to
members of the Committee shall be approved by the Board. With respect to awards
to such directors, all rights, powers and authorities vested in the Committee
under the Plan shall instead be exercised by the Board, and all provisions of
the Plan relating to the Committee shall be interpreted in a manner consistent
with the foregoing by treating any such reference as a reference to the Board
for such purpose.
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4. SHARES SUBJECT TO THE PLAN
SECTION 4.1 Share Limitations. Subject to adjustment pursuant to Section 4.2
hereof, the maximum aggregate number of shares of Common Stock which may be
issued and sold hereunder shall be 10,000,000 shares. Shares of Common Stock
issued and sold under the Plan may be either authorized but unissued shares or
shares held in the Company's treasury. To the extent that any Award payable in
shares of Common Stock is forfeited, cancelled, returned to the Company for
failure to satisfy vesting requirements or upon the occurrence of other
forfeiture events, or otherwise terminates without payment being made
thereunder, the shares of Common Stock covered thereby will no longer be charged
against the foregoing maximum share limitations and may again be made subject to
Awards under the Plan pursuant to such limitations. In addition, any shares of
Common Stock exchanged by a Participant or withheld from a Participant as full
or partial payment to the Company of the exercise price or tax withholding upon
exercise or payment of an Award shall be added to the number of shares of Common
Stock available for issuance under the Plan from time to time. Any Awards
settled in cash shall not be counted against the share limitations set forth in
this Section 4.1.
SECTION 4.2 Adjustments. If there shall occur any recapitalization,
reclassification, stock dividend, stock split, reverse stock split, or other
distribution with respect to the shares of Common Stock, or any merger,
reorganization, consolidation or other change in corporate structure affecting
the Common Stock, the Committee may, in the manner and to the extent that it
deems appropriate and equitable to the Participants and consistent with the
terms of this Plan, cause an adjustment to be made in (i) the maximum number and
kind of shares provided in Section 4.1 hereof, (ii) the maximum number and kind
of shares or units set forth in Sections 6.1, 7.1, 8.1, 9.1 and 11.1 hereof,
(iii) the number and kind of shares of Common Stock, units, or other rights
subject to then outstanding Awards, (iv) the price for each share or unit or
other right subject to then outstanding Awards, (v) the performance measures or
goals relating to an Award and (v) any other terms of an Award that are affected
by the event. Notwithstanding the foregoing, in the case of Incentive Stock
Options, any such adjustments shall be made in a manner consistent with the
requirements of Section 424(a) of the Code.
5. ELIGIBILITY AND AWARDS
All Eligible Persons are eligible to be designated by the Committee to
receive an Award under the Plan. The Committee has the authority, in its sole
discretion, to determine and designate from time to time those Eligible Persons
who are to be granted Awards, the types of Awards to be granted and the number
of shares or units subject to the Awards that are granted under the Plan. To the
extent deemed necessary by the Committee, an Award will be evidenced by an Award
Agreement as described in Section 14.1 hereof.
6. STOCK OPTIONS
SECTION 6.1 Grant of Option. An Option may be granted to any Eligible Person
selected by the Committee. Subject to the provisions of Section 6.6 hereof and
Section 422 of the Code, each Option shall be designated, in the discretion of
the Committee, as an Incentive Stock Option or a Nonqualified Stock Option. The
maximum number of shares of Common Stock that may be subject to Options granted
to any Participant during any calendar year shall be limited to 2,000,000 shares
(subject to adjustment as provided in Section 4.2 hereof).
SECTION 6.2 Exercise Price. The exercise price under any Option shall be
determined by the Committee; provided, however, that the exercise price per
share under an Option shall not be less than 100 percent of the Fair Market
Value per share of the Common Stock on the Date of Grant.
SECTION 6.3 Vesting; Term of Option. The Committee, in its sole discretion,
shall prescribe the time or times at which, or the conditions upon which, an
Option or portion thereof shall become vested and/or exercisable, and may
accelerate the exercisability of any Option at any time. The period during which
a vested Option may be exercised shall be ten years from the Date of Grant,
unless a shorter exercise period is specified by the Committee in an Award
Agreement. An Option may be earlier terminated as specified by the Committee and
set forth in an Award Agreement upon or following the termination of a
Participant's employment or other service with the Company or any Subsidiary,
including by reason of voluntary resignation, death, Disability, termination for
cause or any other reason.
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SECTION 6.4 Option Exercise; Tax Withholding. Subject to such terms and
conditions as shall be specified in an Award, an Option may be exercised in
whole or in part at any time during the term thereof by notice in the form
required by the Company, together with payment of the aggregate exercise price
therefor. Payment of the exercise price shall be made in the manner set forth in
the Award Agreement, unless otherwise provided by the Committee: (i) in cash or
by cash equivalent acceptable to the Committee, (ii) payment in shares of Common
Stock that have been held by the Participant for at least six months (or such
other period as the Committee may deem appropriate for purposes of applicable
accounting rules), valued at the Fair Market Value of such shares on the date of
exercise, (iii) by a delivery of a notice in the form acceptable to the
Committee that the Participant has placed a market sell order (or similar
instruction) with a broker with respect to shares of Common Stock then issuable
upon exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the exercise price (conditioned upon the payment of such net
proceeds), (iv) by a combination of the methods described above, or (v) by such
other method as may be approved by the Committee and set forth in the Award
Agreement. In addition to and at the time of payment of the exercise price, the
Participant shall pay to the Company the full amount of any and all applicable
income tax and employment tax amounts required to be withheld in connection with
such exercise, payable under such of the methods described above for the payment
of the exercise price of the Options as may be approved by the Committee and set
forth in the Award Agreement.
SECTION 6.5 Limited Transferability of Nonqualified Options. All Options
shall be nontransferable except (i) upon the Participant's death, by the
Participant's will or the laws of descent and distribution or (ii) in the case
of Nonqualified Stock Options only, on a case-by-case basis as may be approved
by the Committee in its discretion, in accordance with the terms provided below.
An award for a Nonqualified Stock Option may provide that the Participant shall
be permitted to, during his or her lifetime and subject to the prior approval of
the Committee at the time of proposed transfer, transfer all or part of the
Option to the Participant's family member (as defined in the Award Agreement in
a manner consistent with the requirements for the Form S-8 registration
statement under the Securities Act of 1933.) The transfer of a Nonqualified
Stock Option may be subject to such other terms and conditions as the Committee
may in its discretion impose from time to time. Subsequent transfers of an
Option shall be prohibited other than by will or the laws of descent and
distribution upon the death of the transferee.
SECTION 6.6 Additional Rules for Incentive Stock Options.
(i) Eligibility. An Incentive Stock Option may only be granted to an
Eligible Person who is considered an employee of the Company or any Subsidiary
for purposes of Treasury Regulation 'SS'1.421-7(h).
(ii) Annual Limits. No Incentive Stock Option shall be granted to a
Participant as a result of which the aggregate Fair Market Value (determined as
of the Date of Grant) of the stock with respect to which Incentive Stock Options
are exercisable for the first time in any calendar year under the Plan and any
other stock option plans of the Company, any Subsidiary, or any parent
corporation, would exceed $100,000, determined in accordance with
Section 422(d) of the Code. This limitation shall be applied by taking Options
into account in the order in which granted.
(iii) Termination of Employment. An Award of an Incentive Stock Option may
provide that such Option may be exercised not later than 3 months following
termination of employment of the Participant with the Company and all
Subsidiaries, or not later than one year following death or Disability, as and
to the extent determined by the Committee to comply with the requirements of
Section 422 of the Code.
(iv) Other Terms and Conditions; Nontransferability. Any Incentive Stock
Option granted hereunder shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as are deemed necessary or desirable
by the Committee, which terms, together with the terms of this Plan, shall be
intended and interpreted to cause such Incentive Stock Option to qualify as an
'incentive stock option' under Section 422 of the Code. An Award Agreement for
an Incentive Stock Option may provide that such Option shall be treated as a
Nonqualified Stock Option to the extent that certain requirements applicable to
'incentive stock options' under the Code shall not be satisfied. An Incentive
Stock Option shall by its terms be nontransferable other than by will or by the
laws of descent and distribution, and shall be exercisable during the lifetime
of a Participant only by such Participant.
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(v) Disqualifying Dispositions. If shares of Common Stock acquired by
exercise of an Incentive Stock Option are disposed of within two years following
the Date of Grant or one year following the issuance of such shares to the
Participant upon exercise, the Participant shall, promptly following such
disposition, notify the Company in writing of the date and terms of such
disposition and provide such other information regarding the disposition as the
Company may reasonably require.
SECTION 6.7 Repricing and Reloads Prohibited. Neither the Committee nor the
Board shall cause the cancellation, substitution or amendment of an Option that
would have the effect of reducing the exercise price of an Option previously
granted under the Plan, except in accordance with an adjustment permitted under
Section 4.2 hereof. No Option granted under the Plan may provide for the
automatic grant of another Option upon the exercise of the underlying Option
without further action by the Committee.
7. STOCK APPRECIATION RIGHTS
SECTION 7.1 Grant of Stock Appreciation Rights. A Stock Appreciation Right
may be granted to any Eligible Person selected by the Committee. A Stock
Appreciation Right granted to an Eligible Person is an Award in the form of a
right to receive, upon surrender of the right but without other payment, an
amount based on appreciation in the Fair Market Value of shares of Common Stock
over a base price established for the Award, exercisable at such time or times
and upon conditions as may be approved by the Committee, provided that the
Committee may accelerate the exercisability of an Stock Appreciation Right at
any time. The maximum number of shares of Common Stock that may be subject to
Stock Appreciation Rights granted to any Participant during any calendar year
shall be limited to 2,000,000 shares (subject to adjustment as provided in
Section 4.2 hereof).
SECTION 7.2 Freestanding Stock Appreciation Rights. A Stock Appreciation
Right may be granted without any related Option, and in such case, will be
exercisable as determined by the Committee, but in no event after 10 years from
the Date of Grant. The base price of a Stock Appreciation Right granted without
any related Option shall be determined by the Committee in its sole discretion;
provided, however, that the base price per share of any such freestanding Stock
Appreciation Right shall not be less than 100 percent of the Fair Market Value
of the shares of Common Stock on the Date of Grant.
SECTION 7.3 Tandem Stock Appreciation Rights. A Stock Appreciation Right may
be granted in connection with an Option, either at the time of grant or at any
time thereafter during the term of the Option. A Stock Appreciation Right
granted in connection with an Option will entitle the holder, upon exercise, to
surrender such Option or any portion thereof to the extent unexercised, with
respect to the number of shares as to which such Stock Appreciation Right is
exercised, and to receive payment of an amount computed as described in
Section 7.4 hereof. Such Option will, to the extent and when surrendered, cease
to be exercisable. A Stock Appreciation Right granted in connection with an
Option hereunder will have a base price per share equal to the per share
exercise price of the Option, will be exercisable at such time or times, and
only to the extent, that a related Option is exercisable, and will expire no
later than the related Option expires.
SECTION 7.4 Payment of Stock Appreciation Rights. A Stock Appreciation Right
will entitle the holder, upon exercise of the Stock Appreciation Right, to
receive payment of an amount determined by multiplying: (i) the excess of the
Fair Market Value of a share of Common Stock on the date of exercise of the
Stock Appreciation Right over the base price of such Stock Appreciation Right,
by (ii) the number of shares as to which such Stock Appreciation Right is
exercised. Payment of the amount determined under the foregoing may be made, as
approved by the Committee and set forth in the Award Agreement, in cash, in
shares of Common Stock valued at their Fair Market Value on the date of
exercise, or in a combination of cash and shares of Common Stock, subject to
applicable tax withholding requirements.
SECTION 7.5 Repricing and Reload of Stock Appreciation Rights Prohibited.
Neither the Committee nor the Board shall cause the cancellation, substitution
or amendment of a Stock Appreciation Right that would have the effect of
reducing the base price of a Stock Appreciation Right previously granted under
the Plan, except in accordance with an adjustment permitted under Section 4.2
hereof. No Stock Appreciation Right granted under the Plan may provide for the
automatic grant of another Stock Appreciation Right upon the exercise of the
Stock Appreciation Right without further action by the Committee.
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8. RESTRICTED STOCK AWARDS
SECTION 8.1 Grant of Restricted Stock Awards. A Restricted Stock Award may
be granted to any Eligible Person selected by the Committee. A Restricted Stock
Award granted to an Eligible Person represents shares of Common Stock that are
issued subject to such vesting and transfer restrictions as the Committee shall
determine and set forth in an Award Agreement. The Committee may, in connection
with any Restricted Stock Award, require the payment of a specified purchase
price. The Committee may grant Restricted Stock Awards that are Section 162(m)
Awards, as well as Restricted Stock Awards that are not Section 162(m) Awards.
The maximum number of shares of Common Stock that may be subject to Restricted
Stock Awards granted to a Participant during any one calendar year shall be
limited to 1,000,000 shares (subject to adjustment as provided in Section 4.2
hereof).
SECTION 8.2 Vesting Requirements. The restrictions imposed on shares granted
under a Restricted Stock Award shall lapse in accordance with the vesting
requirements specified by the Committee in the Award Agreement, provided that
the Committee may accelerate the vesting of a Restricted Stock Award at any
time. Such vesting requirements may be based on the continued employment of the
Participant with the Company or its Subsidiaries for a specified time period or
periods. Such vesting requirements may also be based on the attainment of
specified performance goals or measures established by the Committee in its sole
discretion. In the case of any Restricted Stock Award that is a Section 162(m)
Award, any such performance-based vesting requirements shall be based upon the
performance criteria identified in Section 12.2 hereof, and the terms of the
Award shall otherwise comply with the requirements described in Section 12.3
hereof. If the vesting requirements of a Restricted Stock Award shall not be
satisfied, the Award shall be forfeited and returned to the Company, with any
purchase price paid by the Participant to be refunded, unless otherwise provided
by the Committee.
SECTION 8.3 Restrictions. Shares granted under any Restricted Stock Award
may not be transferred, assigned or subject to any encumbrance, pledge, or
charge until all applicable restrictions are removed or have expired, unless
otherwise allowed by the Committee. Failure to satisfy any applicable
restrictions shall result in the subject shares of the Restricted Stock Award
being forfeited and returned to the Company, with any purchase price paid by the
Participant to be refunded, unless otherwise provided by the Committee. The
Committee may require in an Award Agreement that certificates representing the
shares granted under a Restricted Stock Award bear a legend making appropriate
reference to the restrictions imposed, and that certificates representing the
shares granted or sold under a Restricted Stock Award will remain in the
physical custody of an escrow holder until all restrictions are removed or have
expired.
SECTION 8.4 Rights as Stockholder. Subject to the foregoing provisions of
this Section 8 and the applicable Award Agreement, the Participant will have all
rights of a stockholder with respect to the shares granted to him under a
Restricted Stock Award, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto, unless the
Committee determines otherwise at the time the Restricted Stock Award is
granted.
SECTION 8.5 Section 83(b) Election. If a Participant makes an election
pursuant to Section 83(b) of the Code with respect to a Restricted Stock Award,
the Participant shall be required to file, within 30 days following the Date of
Grant, a copy of such election with the Company and with the Internal Revenue
Service, in accordance with the regulations under Section 83 of the Code. The
Committee may provide in an Award Agreement that the Restricted Stock Award is
conditioned upon the Participant's refraining from making an election with
respect to the Award under Section 83(b) of the Code.
9. STOCK UNIT AWARDS
SECTION 9.1 Grant of Stock Unit Awards. A Stock Unit Award may be granted to
any Eligible Person selected by the Committee. A Stock Unit Award is an Award to
an Eligible Person of a number of hypothetical share units with respect to
shares of Common Stock that are granted subject to such vesting and transfer
restrictions and conditions of payment as the Committee shall determine and set
forth in an Award Agreement. The value of each unit under a Stock Unit Award is
equal to the Fair Market Value of the Common Stock on any applicable date of
determination. The Committee may grant Stock Unit Awards that are
Section 162(m) Awards, as well as Stock Unit Awards that are not Section 162(m)
Awards. The maximum number of units that may be subject to Stock Unit Awards
granted to a Participant during any one calendar year shall be separately
limited to 1,000,000 units
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(subject to adjustment as provided in Section 4.2 hereof). A Stock Unit Award
shall be subject to such restrictions and conditions as the Committee shall
determine. A Stock Unit Award may be granted, at the discretion of the
Committee, together with a dividend equivalent right with respect to the same
number of shares of Common Stock.
SECTION 9.2 Vesting of Stock Unit Awards. On the Date of Grant, the
Committee shall determine, in its sole discretion, any vesting requirements with
respect to a Stock Unit Award, which shall be set forth in the Award Agreement,
provided that the Committee may accelerate the vesting of a Stock Unit Award at
any time. Vesting requirements may be based on the continued employment of the
Participant with the Company or its Subsidiaries for a specified time period or
periods. Vesting requirements may also be based on the attainment of specified
performance goals or measures established by the Committee in its sole
discretion. In the case of any Stock Unit Award that is a Section 162(m) Award,
any such performance-based vesting requirements shall be based upon the
performance criteria identified in Section 12.2 hereof, and the terms of the
Award shall otherwise comply with the requirements described in Section 12.3
hereof. A Stock Unit Award may also be granted on a fully vested basis, with a
deferred payment date.
SECTION 9.3 Payment of Stock Unit Awards. A Stock Unit Award shall become
payable to a Participant at the time or times determined by the Committee and
set forth in the Award Agreement, which may be upon or following the vesting of
the Award. The payment with respect to each share unit under a Stock Unit Award
shall be determined by reference to the Fair Market Value of one share of Common
Stock on each applicable payment date. Payment may be made, at the discretion of
the Committee, in cash or in shares of Common Stock, or in a combination
thereof, subject to applicable tax withholding requirements. In accordance with
Section 14.4 hereof, the Committee may permit a Participant to defer the receipt
of payment under a Stock Unit Award until such date or event as may be elected
by the Participant in accordance with rules established by the Committee.
SECTION 9.4 No Rights as Stockholder. The Participant shall not have any
rights as a stockholder with respect to the shares subject to a Stock Unit Award
until such time as shares of Common Stock are delivered to the Participant
pursuant to the terms of the Award.
10. STOCK AWARDS
SECTION 10.1 Grant of Stock Awards. A Stock Award may be granted to any
Eligible Person selected by the Committee. A Stock Award may be granted for past
services, in lieu of bonus or other cash compensation, directors' fees or for
any other valid purpose as determined by the Committee. A Stock Award granted to
an Eligible Person represents shares of Common Stock that are issued free of
restrictions on transfer and other incidents of ownership and free of forfeiture
conditions, except as otherwise provided in the Plan and the Award Agreement.
The Committee may, in connection with any Stock Award, require the payment of a
specified purchase price. The Committee may grant Stock Awards that are
Section 162(m) Awards, as well as Stock Awards that are not Section 162(m)
Awards. The maximum number of shares of Common Stock that may be subject to a
Stock Awards granted to a Participant during any one calendar year shall be
limited to 1,000,000 shares (subject to adjustment as provided in Section 4.2
hereof).
SECTION 10.2 Rights as Stockholder. Subject to the foregoing provisions of
this Section 10 and the applicable Award Agreement, the Participant will have
all rights of a stockholder with respect to the shares granted to him under a
Stock Award, including the right to vote the shares and receive all dividends
and other distributions paid or made with respect thereto.
11. PERFORMANCE AWARDS
SECTION 11.1 Grant of Performance Awards. The Committee may grant
Performance Awards under the Plan, which shall represent the right to receive a
payment in cash if performance goals established by the Committee for a
performance period are satisfied. The Committee may grant Performance Awards
that are Section 162(m) Awards, as well as Performance Awards that are not
Section 162(m) Awards. At the time a Performance Award is granted, the Committee
shall determine, in its sole discretion, the applicable performance period and
performance goals to be achieved during the performance period, as well as such
other conditions as the Committee deems appropriate. The Committee may also
determine a target payment amount or a range of payment amounts for each Award.
The performance goals applicable to a Performance Award grant may be subject to
adjustments
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as the Committee shall deem appropriate to reflect significant unforeseen
events, such as changes in law, accounting practices or unusual or nonrecurring
items or occurrences. The Committee's authority to make such adjustments shall
be subject to such limitations as the Committee deems appropriate in the case of
a Performance Award that is a Section 162(m) Award. In the case of any
Performance Award that is a Section 162(m) Award, performance-goals shall be
based upon the performance criteria identified in Section 12.2 hereof, and the
terms of the Award shall otherwise comply with the requirements described in
Section 12.3 hereof. The maximum amount of compensation that may be paid to a
Participant during any one calendar year under Performance Awards shall be
$10,000,000.
SECTION 11.2 Payment of Performance Awards. At the end of the performance
period, the Committee shall determine the extent to which performance goals have
been attained, or a degree of achievement between minimum and maximum levels, in
order to establish the level of payment to be made, if any. Payments of
Performance Awards shall generally be made as soon as practicable following the
end of the performance period, subject to any tax withholding requirements.
12. SECTION 162(m) AWARDS
SECTION 12.1 Awards. Awards of Options and Stock Appreciation Rights granted
under the Plan are intended by their terms to qualify as Section 162(m) Awards.
Restricted Stock Awards, Stock Unit Awards, Stock Awards and Performance Awards
granted under the Plan may qualify as Section 162(m) Awards if the Awards are
granted or become payable or vested based upon pre-established performance goals
in accordance with this Section 12.
SECTION 12.2 Performance Criteria. In the case of a Restricted Stock Award,
Stock Unit Award, Stock Award or Performance Award that is intended to be a
Section 162(m) Award, the performance criteria upon which the grant, payment or
vesting may be based shall be limited to one or more of the following
performance measures, which may be applied with respect to the Company, any
Subsidiary or any business unit: cash flow; cash flow from operations; free cash
flow; total earnings; earnings per share, diluted or basic; earnings per share
from continuing operations, diluted or basic; income before income taxes;
earnings before interest and taxes; earnings before interest, taxes,
depreciation, and amortization; earnings from continuing operations; net asset
turnover; inventory turnover; receivable turnover; capital expenditures; net
earnings; operating earnings; gross or operating margin; debt; working capital;
return on equity; return on net assets; return on total assets; return on
capital; return on investment; return on sales; net or gross sales; market
share; economic value added; expense reduction levels; stock price; and total
shareholder return. The foregoing performance criteria shall have any reasonable
definitions that the Committee may specify, which may include or exclude any
items specified by the Committee, including but not limited to any or all of the
following items: discontinued operations, extraordinary, unusual, non-recurring
or special items, effects of accounting changes, effects of currency or interest
rate fluctuations, effects of financing activities (e.g., effect on earnings per
share of issuing convertible debt securities), changes in tax rates, expenses
for restructuring or productivity initiatives, litigation losses, non-operating
items, effects of acquisitions or divestitures and changes of law or regulation
affecting the Company's business. The foregoing performance measures may be
determined on an absolute basis or relative to internal goals or relative to
levels attained in prior years, or related to other companies or indices, or as
ratios expressing relationships between two or more performance measures. In the
case of Awards that are not Section 162(m) Awards, the Committee may designate
performance criteria from among the foregoing or such other performance criteria
as it shall determine in its sole discretion.
SECTION 12.3 Section 162(m) Requirements. In the case of a Restricted Stock
Award, Stock Unit Award, Stock Award or Performance Award that is intended to be
a Section 162(m) Award, the Committee shall make such determinations with
respect to an Award as required by Section 162(m) of the Code within 90 days
after the beginning of the performance period (or such other time period as is
required under Section 162(m) of the Code). As and to the extent required by
Section 162(m) of the Code, the terms of an Award that is a Section 162(m) Award
must state, in terms of an objective formula or standard, the method of
computing the amount of compensation payable under the Award, and must preclude
discretion to increase the amount of compensation payable under the terms of the
Award (but may give the Committee discretion to decrease the amount of
compensation payable).
13. CHANGE IN CONTROL
SECTION 13.1 Effect of Change in Control. The Committee may, in an Award
Agreement, provide for the effect of a 'Change in Control' (as defined below) on
an Award. Such provisions may include
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any one or more of the following: (i) the acceleration or extension of time
periods for purposes of exercising, vesting in, or realizing gain from any
Award, (ii) the elimination or modification of performance or other conditions
related to the payment or other rights under an Award, (iii) provision for the
cash settlement of an Award for an equivalent cash value, as determined by the
Committee, or (iv) such other modification or adjustment to an Award as the
Committee deems appropriate to maintain and protect the rights and interests of
Participants upon or following a Change in Control. Unless otherwise provided by
the Committee and set forth in the Award Agreement, upon a Change in Control,
(i) each outstanding Option and Stock Appreciation Right, to the extent that it
shall not otherwise have become vested and exercisable, shall automatically
become fully and immediately vested and exercisable, without regard to any
otherwise applicable vesting requirement, (ii) each Restricted Stock Award shall
become fully immediately vested and all forfeiture and transfer restrictions
shall lapse, and (iii) each outstanding Stock Unit Award, Stock Award and
Performance Award shall become immediately and fully vested and payable.
SECTION 13.2 Definition of Change in Control. For purposes of this
Agreement, a 'Change in Control' shall be deemed to have occurred upon
any of the following:
(i) any Person becomes a beneficial owner, directly or indirectly, of
securities of the Company representing 20% or more of the combined voting
power of the Company's then outstanding securities;
(ii) the merger or consolidation of the Company with or into another
entity (or other similar reorganization), whether or not the Company is the
surviving corporation, in which the stockholders of the Company immediately
prior to the effective date of such transaction own less than 50% of the
voting power in the surviving entity;
(iii) the sale or other disposition of all or substantially all of the
assets of the Company, or a complete liquidation or dissolution of the
Company; or
(iv) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board cease for any reason to
constitute at least a majority of such Board, unless the nomination for the
election by the Company's stockholders of each new director was approved by
a vote of at least one-half of the persons who were directors at the
beginning of the two-year period.
For purposes of this Section 13.2, 'Person' shall mean any individual, firm,
company, partnership, other entity or group, but excluding the Company, its
affiliates, any employee benefit plan maintained by the Company, or an
underwriter temporarily holding securities pursuant to an offering of such
securities. For purposes of this Section 13.2, a Person shall be deemed the
'beneficial owner' of any securities (i) which such Person or any of its
Affiliates or Associates beneficially owns, directly or indirectly; or
(ii) which such Person or any of its Affiliates or Associates, has directly or
indirectly, (1) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (2) the right to vote pursuant to
any agreement, arrangement or understanding; or (iii) which are beneficially
owned, directly or indirectly, by any other Person with which such Person or any
of its Affiliates or Associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing or any securities.
For purposes of this Section 13.2, 'Affiliate' or 'Associate' shall have the
respective meaning ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Exchange Act.
14. GENERAL PROVISIONS
SECTION 14.1 Form of Agreement. To the extent deemed necessary by the
Committee, an Award under this Plan shall be evidenced by an Award Agreement in
a form approved by the Committee setting forth the number of shares of Common
Stock or units subject to the Award, the exercise price, base price, or purchase
price of the Award, the time or times at which an Award will become vested,
exercisable or payable and the term of the Award. The Award Agreement shall also
set forth the effect on an Award of termination of employment under certain
circumstances. The Award Agreement may also set forth other terms and conditions
applicable to the Award as determined by the Committee consistent with the
limitations of this Plan. Award Agreements evidencing Incentive Stock Options
shall
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contain such terms and conditions as may be necessary to meet the applicable
provisions of Section 422 of the Code.
SECTION 14.2 Forfeiture Events. The Committee may specify in an Award
Agreement at the time of the Award that the Participant's rights, payments and
benefits with respect to an Award shall be subject to reduction, cancellation,
forfeiture or recoupment upon the occurrence of certain specified events, in
addition to any otherwise applicable vesting or performance conditions of an
Award. Such events shall include, but shall not be limited to, termination of
employment for cause, violation of material Company policies, breach of
noncompetition, confidentiality or other restrictive covenants that may apply to
the Participant, or other conduct by the Participant that is detrimental to the
business or reputation of the Company.
SECTION 14.3 No Assignment or Transfer; Beneficiaries. Except as provided in
Section 6.5 hereof, Awards under the Plan shall not be assignable or
transferable, except by will or by the laws of descent and distribution, and
during the lifetime of a Participant, an Award shall be exercised only by such
Participant or by his guardian or legal representative. Notwithstanding the
foregoing, the Committee may provide in the terms of an Award Agreement that the
Participant shall have the right to designate a beneficiary or beneficiaries who
shall be entitled to any rights, payments or other benefits specified under an
Award following the Participant's death.
SECTION 14.4 Deferrals of Payment. The Committee may permit a Participant to
defer the receipt of payment of cash or delivery of shares of Common Stock that
would otherwise be due to the Participant by virtue of the exercise of a right
or the satisfaction of vesting or other conditions with respect to an Award. If
any such deferral is to be permitted by the Committee, the Committee shall
establish the rules and procedures relating to such deferral, including, without
limitation, the period of time in advance of payment when an election to defer
may be made, the time period of the deferral and the events that would result in
payment of the deferred amount, the interest or other earnings attributable to
the deferral and the method of funding, if any, attributable to the deferred
amount.
SECTION 14.5 Rights as Stockholder. A Participant shall have no rights as a
holder of shares of Common Stock with respect to any unissued securities covered
by an Award until the date the Participant becomes the holder of record of such
securities. Except as provided in Section 4.2 hereof, no adjustment or other
provision shall be made for dividends or other stockholder rights, except to the
extent that the Award Agreement provides for dividend payments or dividend
equivalent rights.
SECTION 14.6 Employment or Service. Nothing in the Plan, in the grant of any
Award or in any Award Agreement shall confer upon any Eligible Person the right
to continue in the capacity in which he is employed by, or otherwise serves, the
Company or any Subsidiary.
SECTION 14.7 Securities Laws. No shares of Common Stock will be issued or
transferred pursuant to an Award unless and until all then applicable
requirements imposed by Federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any
exchanges upon which the shares of Common Stock may be listed, have been fully
met. As a condition precedent to the issuance of shares pursuant to the grant or
exercise of an Award, the Company may require the Participant to take any
reasonable action to meet such requirements. The Committee may impose such
conditions on any shares of Common Stock issuable under the Plan as it may deem
advisable, including, without limitation, restrictions under the Securities Act
of 1933, as amended, under the requirements of any exchange upon which such
shares of the same class are then listed, and under any blue sky or other
securities laws applicable to such shares.
SECTION 14.8 Tax Withholding. The Participant shall be responsible for
payment of any taxes or similar charges required by law to be withheld from an
Award or an amount paid in satisfaction of an Award, which shall be paid by the
Participant on or prior to the payment or other event that results in taxable
income in respect of an Award. The Award Agreement shall specify the manner in
which the withholding obligation shall be satisfied with respect to the
particular type of Award.
SECTION 14.9 Unfunded Plan. The adoption of this Plan and any setting aside
of cash amounts or shares of Common Stock by the Company with which to discharge
its obligations hereunder shall not be deemed to create a trust or other funded
arrangement. The benefits provided under this Plan shall be a general, unsecured
obligation of the Company payable solely from the general assets of the Company,
and neither a Participant nor the Participant's permitted transferees or estate
shall have any interest in any assets of the Company by virtue of this Plan,
except as a general unsecured creditor of the Company. Notwithstanding the
foregoing, the Company shall have the right to implement or set aside
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funds in a grantor trust, subject to the claims of the Company's creditors, to
discharge its obligations under the Plan.
SECTION 14.10 Other Compensation and Benefit Plans. The adoption of the Plan
shall not affect any other share incentive or other compensation plans in effect
for the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of share incentive or other compensation for
employees of the Company or any Subsidiary. The amount of any compensation
deemed to be received by a Participant pursuant to an Award shall not constitute
compensation with respect to which any other employee benefits of such
Participant are determined, including, without limitation, benefits under any
bonus, pension, profit sharing, life insurance or salary continuation plan,
except as otherwise specifically provided by the terms of any such plan.
SECTION 14.11 Plan Binding on Transferees. The Plan shall be binding upon
the Company, its transferees and assigns, and the Participant, his executor,
administrator and permitted transferees and beneficiaries.
SECTION 14.12 Construction and Interpretation. Whenever used herein, nouns
in the singular shall include the plural, and the masculine pronoun shall
include the feminine gender. Headings of Sections hereof are inserted for
convenience and reference and constitute no part of the Plan.
SECTION 14.13 Severability. If any provision of the Plan or any Award
Agreement shall be determined to be illegal or unenforceable by any court of law
in any jurisdiction, the remaining provisions hereof and thereof shall be
severable and enforceable in accordance with their terms, and all provisions
shall remain enforceable in any other jurisdiction.
SECTION 14.14 Foreign Jurisdictions. The Committee may adopt, amend and
terminate such arrangements and grant such Awards, not inconsistent with the
intent of the Plan, as it may deem necessary or desirable to comply with any
tax, securities, regulatory or other laws of other jurisdictions with respect to
Awards that may be subject to such laws. The terms and conditions of such Awards
may vary from the terms and conditions that would otherwise be required by the
Plan solely to the extent the Committee deems necessary for such purpose.
SECTION 14.15 Governing Law. The Plan and all rights hereunder shall be
subject to and interpreted in accordance with the laws of the State of Delaware,
without reference to the principles of conflicts of laws, and to applicable
Federal securities laws.
15. EFFECTIVE DATE, AMENDMENT AND TERMINATION
SECTION 15.1 Effective Date. The Plan shall become effective following its
adoption by the Board upon the approval of the Plan by the Company's
stockholders on the date of the 2004 Annual Meeting of Stockholders. The term of
the Plan shall be 10 years from the date of such approval, subject to
Section 15.3 hereof.
SECTION 15.2 Amendment. The Board may at any time and from time to time and
in any respect, amend or modify the Plan; provided, however, that the Board may
seek the approval of any amendment or modification by the Company's stockholders
to the extent it deems necessary or advisable in its sole discretion for
purposes of compliance with Section 162(m) or Section 422 of the Code, the
listing requirements of the New York Stock Exchange or other exchange or
securities market or for any other purpose. No amendment or modification of the
Plan shall adversely affect any Award theretofore granted without the consent of
the Participant or the permitted transferee of the Award.
SECTION 15.3 Termination. The Plan shall terminate on the date immediately
preceding the tenth anniversary of the date it becomes effective in accordance
with Section 15.1 hereof. The Board may, in its sole discretion and at any
earlier date, terminate the Plan. Notwithstanding the foregoing, no termination
of the Plan shall adversely affect any Award theretofore granted without the
consent of the Participant or the permitted transferee of the Award.
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APPENDIX 1
PROXY
OMNICARE, INC.
100 E. RiverCenter Boulevard
Covington, Kentucky 41011
This Proxy is Solicited by the Board of Directors for
the Annual Meeting of Stockholders, May 18, 2004
The undersigned hereby appoints J. F. Gemunder, D.W. Froesel, Jr. and C. D.
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 shares of
common stock of Omnicare, Inc. held of record by the undersigned as of March 31,
2004 at the Annual Meeting of Stockholders to be held on May 18, 2004, or at any
postponement or adjournment thereof.
Election of Directors
Nominees:
Edward L. Hutton David W. Froesel, Jr. Sheldon Margen, M.D.
Joel F. Gemunder Sandra E. Laney John H. Timoney
Charles H. Erhart, Jr. Andrea R. Lindell, DNSc, RN Amy Wallman
(Continued and to be signed on other side)
[X] Please mark
vote as in
this example
FOR AGAINST ABSTAIN
2. To approve the 2004 [ ] [ ] [ ]
Stock and Incentive
1. Election of Directors. Plan.
(Please see reverse)
FOR AGAINST ABSTAIN
3. To ratify the [ ] [ ] [ ]
selection of
independent
accountants.
FOR WITHHELD
FOR WITHHELD 4. In their discretion, the Proxies are
ALL [ ] [ ] FROM ALL authorized to vote upon such other
NOMINEES NOMINEES business as may properly come before
the meeting.
[ ]
----------------------------------------
For all nominees except as written above
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 as name(s) appear at left)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Please sign this proxy exactly as name(s) appear hereon. When
shares are held by joint tenants, both should sign. When signing
as attorney, administrator, trustee or guardian, please give
full title as such.
Signature: Date Signature: Date:
---------------------- ------------- ---------------------------- -------------
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as................................ 'SS'