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EXHIBIT 10.01
CARDINAL HEALTH, INC.
INCENTIVE DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED EFFECTIVE
July 1, 1997
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CARDINAL HEALTH, INC.
INCENTIVE DEFERRED COMPENSATION PLAN
(THE "PLAN")
I
PURPOSE
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Cardinal Health, Inc. and its affiliates (collectively, the "Company")
is willing to provide supplemental retirement benefits out of its general assets
to certain key employees as an incentive for those individuals to continue their
relationship with the Company and to provide the benefits such individuals could
otherwise earn under the Cardinal Health, Inc. Profit Sharing and Retirement
Savings Plan (the "Qualified Plan") if certain federal law restrictions did not
apply. Only a select group of the Company's management or highly compensated
employees will be eligible to participate in this program. The Company's goal is
to retain and reward its key employees by helping them to accumulate benefits
for a comfortable retirement.
II
ELIGIBILITY
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Selection of the Company employees eligible to participate in the Plan
is within the sole discretion of the Chairman of Cardinal Health, Inc. Only high
income or key management employees are eligible for selection by the Chairman.
If you fall into one of these groups and are chosen by the Chairman to
participate in the Plan, you will sign an Incentive Deferred Compensation
Agreement which details the requirements you must satisfy to be eligible to
receive this supplemental retirement benefit from the Company. The Chairman will
review and determine his selections each year. Thus, selection in one year does
not automatically confer a right to participate in succeeding years.
III
INCENTIVE DEFERRED COMPENSATION ACCUMULATIONS
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The benefits provided to participants under their Incentive Deferred
Compensation Agreements are paid from the Company's general assets. The program
is, therefore, considered to be an "unfunded" arrangement as amounts are not set
aside or held by the Company in a trust, escrow, or similar account or fiduciary
relationship on your behalf. Each participant's rights to benefits under the
Plan are equivalent to the rights of any unsecured general creditor of the
Company. However, the Company may open accounts with one or more investment
companies selected by the Chairman, in his discretion, including from among
those used as investment options under the Qualified Plan, and may invest funds
subject to this Plan in these mutual funds.
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Each participant may be permitted to direct how the portion of the Company's
funds allocable to him or her is invested from among the available options, if
such investment accounts are established. The Company currently expects any such
options to be similar to those available under the Qualified Plan, but is not
obligated to make these or any other particular investment options available.
All investments shall at all times continue to be a part of the Company's
general assets for all purposes.
To measure the amount of the Company's obligations to a participant in
this program, the Company will maintain a bookkeeping record or account of each
participant's "Accumulations". There are three basic components of each
participant's Accumulations:
First, the Company may credit to your Accumulations
each calendar year during which you are selected to
participate in the Plan an amount equal to 3% of your
compensation from the Company in excess of the compensation
limit applicable to the Qualified Plan under the Internal
Revenue Code (currently $160,000 per year) but not more than
$100,000 above such compensation limit (currently a maximum
of $260,000 per year). For this purpose, your compensation
includes salary, commission and bonus payments made for the
year, but does not include other cash or noncash
compensation, expense reimbursements or other benefits
provided by the Company, other than your own salary deferrals
into this Plan or the Qualified Plan. In addition, the
Company may make an additional profit sharing contribution to
the Plan for a year, in the Company's discretion, to be
credited to your Accumulations. One of the purposes of these
contributions is to make up the portion of automatic and
special profit sharing contributions to the Qualified Plan
that you are losing due to the capping of pay eligible for
consideration under the Qualified Plan under Internal Revenue
Code rules. All contributions under this provision to your
Accumulations, as adjusted for earnings or losses (described
below), are referred to as your "PROFIT SHARING VALUE."
Second, to encourage each participant to invest in
his or her own future, you may also elect to defer your
compensation from the Company. There are two types of
deferral elections that you may make under the Plan. You may
elect (within 30 days of when you first become eligible to
participate in the Plan for your initial year of
participation or, for subsequent years, not later than the
December 31 prior to each such year) to defer payment of a
portion of your compensation to be earned during the balance
of the current or next calendar year, as applicable, as a
credit to your Accumulations. Under special circumstances,
the Chairman may also determine, in his discretion, that you
may be periodically eligible to make a special election after
the beginning of the year to defer any compensation for the
remainder of the year which is not yet payable to you. Both
types of voluntary deferrals, adjusted for earnings or losses
as described below, are known as the "DEFERRAL VALUE." The
minimum amount you may defer under either type of election is
1% of your compensation. The Company may, in its
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discretion, establish and change from time to time a maximum
limitation on your deferral contributions. Also, who is
eligible to participate in the deferral portion of the Plan
is determined on a year to year basis by the Company. If you
were a participant one year but are not eligible in a
succeeding year, you will still be a participant, but will be
treated as "inactive."
Third, the Company will also match your deferral at
the same rate it is generally matching 401(k) deferrals under
the Qualified Plan for the period in question. Generally,
however, a matching contribution shall only apply to
deferrals with respect to your compensation up to $100,000
above the compensation limit applicable to the Qualified Plan
under the Internal Revenue Code (currently, a maximum of
$260,000 per year). Any "caps" on the match under the
Qualified Plan will also apply to this Plan, with the match
under this Plan being offset by the match to the Qualified
Plan to the extent duplicative. For example, if the Qualified
Plan match for the year is 75 cents on the dollar, up to the
first 3% of salary deferrals, and you are eligible to defer
5% of the first $160,000 of pay to the Qualified Plan (under
the special discrimination-testing rules of that plan), then
only the first 3% of deferrals from the portion of your
salary above $160,000 but less than $260,000 will be matched
under this Plan. In addition to this formula match, the
Company may make additional matching contributions for a
year, in its sole discretion. All amounts credited to your
Accumulations on a matching basis, adjusted for earnings or
losses as described below, are referred to as your "MATCHING
VALUE."
EARNINGS (OR LOSSES): At least once each calendar year while you have a
credit balance in your Accumulations, the Company will credit your Accumulations
with earnings (or losses), if any, for the period since the last such crediting
and determine the value of your Accumulations at that time. The earnings (or
losses) may either be credited on the basis of the earnings (or losses)
allocable to your directed portion of the Company investments, if any, or on the
basis of a hypothetical earnings rate, as determined by the Company in its sole
discretion. The Company also reserves the right to adjust the earnings (or
losses) credited to your Accumulations and to determine the value of your
Accumulations as of any date by adjusting such earnings (or losses) or such fair
market value for the Company's tax and other costs of providing this Plan.
These earnings will compensate for the postponement of the receipt of
the Accumulations and give you the benefit of tax-deferred growth of the
accumulating amounts. Under current federal income tax rules, the amounts
credited to your Accumulations, including earnings, will not be taxable income
to you in the year they are credited to your account. You, or your beneficiaries
in the event of your death, will generally be taxable on these amounts and the
credited earnings only if and when benefits are actually paid to you. Thus, this
program provides the opportunity to defer income and the payment of income
taxes.
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IV
BENEFITS
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A. Vesting
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If you participate in the deferral portion of the Plan, your
Deferral Value will always be 100% "vested". This means you will always
be entitled to receive benefits from this portion of your
Accumulations.
The portion of your Accumulations derived from the Profit
Sharing Value and the Matching Value will not be fully vested until you
complete 5 years of service for the Company. A "year of service" for
this purpose means a period of 12 consecutive calendar months during
which you were employed by the Company and worked at least 1,000 hours.
Years of service are calculated from the date you were first hired as
an employee by the Company, and anniversaries of that date. The
schedule for vesting is as follows:
Vested
Years of Service Percentage
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Less than 2 None
2 but less than 3 25%
3 but less than 4 50%
4 but less than 5 75%
5 or more 100%
In addition, you also become 100% vested in your Accumulations
upon your death or if you become permanently disabled prior to
retirement or other termination of service with the Company, or upon a
"Change in Control," regardless of your years of service. "Change in
Control" means: (i) the purchase or other acquisition by any person,
entity or group of persons (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable
successor provisions), directly or indirectly, which results in
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Act) of such person, entity or group of persons equalling 30
percent or more of either the outstanding common shares of Cardinal
Health, Inc. ("Cardinal") or the combined voting power of the
then-outstanding securities of Cardinal entitled to vote in the
election of directors of Cardinal, or (ii) the approval by the
shareholders of Cardinal of a reorganization, merger, or consolidation,
with respect to which in each case persons who were shareholders of
Cardinal immediately prior to such reorganization, merger or
consolidation do not (solely because of their common shares of Cardinal
owned immediately prior to such reorganization, merger, or
consolidation) immediately thereafter, own more than 50 percent of the
combined voting power entitled to vote in the election of directors of
the then-outstanding securities of the reorganized, merged or
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consolidated company, or (iii) a liquidation or dissolution of
Cardinal, or (iv) the sale of all or substantially all of Cardinal's
assets.
B. Forfeiture of Benefits
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If your employment with the Company terminates for any reason
other than death, disability, or a Change in Control prior to the time
you have completed 5 years of service, you will forfeit some or all
(based on the above schedule) rights to receive benefits under the
Plan, except that you will still be entitled to receive benefits based
on your Deferral Value.
C. Payment of Benefits.
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1. Retirement Benefits. You will be eligible to receive
retirement benefits under the plan upon your retirement after attaining
age 65 with five years of service. Retirement benefits will generally
be paid as a monthly benefit payable for 60 months. The amount of your
benefit will equal the amount necessary to amortize your total
Accumulations over the 60 month period. The amount payable each month
will either be based on an approximately equal amortization of
principal plus actual earnings (or less actual losses) or an
amortization based on an assumed interest rate declared by the Company
from time to time during the period of distribution. You must give the
Company at least 30 days advance written notice of your intention to
retire and receive retirement benefits. Actual benefit payments will
begin on the first day of the second month following your satisfaction
of all requirements for payment.
2. Disability Benefits. If you become totally disabled before
satisfying the requirements for retirement benefits, you will be
eligible to receive payment of the amounts credited to your
Accumulations as a monthly benefit commencing after six months of total
disability and payable for 60 months. The amount of the benefit will be
determined in the same manner as retirement benefits. For this purpose,
"total disability" means a physical or mental condition which totally
and presumably permanently prevents you from engaging in any
substantially gainful activity. It is up to the Company to determine
whether you qualify as being totally disabled and the Company may
require you to submit to periodic medical examinations to confirm that
you are, and continue to be, totally disabled. If your disability ends,
your disability benefit payments will stop. However, you could continue
to qualify for benefits under another provision of the Plan.
3. Death Benefits. In the event of your death while receiving
benefit payments under the Plan, the Company will pay the beneficiary
or beneficiaries designated by you any remaining payments due under the
terms of your Incentive Deferred Compensation Agreement, using the same
method of distribution in effect to you at the date of your death. In
the event of death prior to beginning to receive benefits under the
Incentive Deferred Compensation Agreement, the Company will pay any
vested benefits to your beneficiary or beneficiaries, beginning as soon
as practicable after your
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death. In this case, benefits will generally be paid as a monthly
benefit payable for 60 months computed in the same manner as retirement
benefits. The Company will provide you with the form for designating
your beneficiary or beneficiaries. If you fail to make a beneficiary
designation, or if your designated beneficiary predeceases you or
cannot be located, any death benefits will be paid to your estate.
4. Other Termination of Service. If your service with the
Company terminates for any reason other than retirement, death, or
total disability, then the vested portion of your Accumulations will be
paid to you as a monthly benefit payable for 60 months computed in the
same manner as retirement benefits, beginning as soon as
administratively practicable after your employment terminates.
5. Payment Alternatives. At the Company's election, or upon
your request, benefits may be paid in a lump sum or over a shorter or
longer period of time than the 60 months generally called for, as
described above. However, no request by you or your beneficiaries for a
different payment method will be binding on the Company, and any
accelerated or deferred payment of benefits shall be made only in the
sole discretion of the Company. In addition, the Company may alter the
payment method in effect from time to time in its discretion, for
example, in order to avoid the loss of a deduction under Code Section
162(m). If the payment method is altered, the amount you or your
beneficiaries will receive will be computed under one of the
alternative methods for determining payment amounts provided for under
the normal form of distribution for your Accumulations, determined by
the Company in its discretion.
6. Change in Control. If a Change in Control occurs, and your
employment with the Company (or its successor) terminates within two
years after the Change in Control occurred, then you shall be entitled
to receive your Accumulations in a single lump sum within 30 days of
your termination of employment, notwithstanding any other provision of
this Plan or your Incentive Deferred Compensation Agreement. Also,
following a Change in Control, the Company's discretion to alter the
payment methodology (described in Section 5, above) is limited to
accelerating your benefits; the Company cannot, after a Change in
Control, defer the commencement of payments or extend the period of
distribution beyond the normal periods described in the preceding
sections (1-4).
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V
MISCELLANEOUS PROVISIONS
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A. No Right to Company Assets.
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As explained previously, this Incentive Deferred Compensation
Plan is an unfunded arrangement and the agreement you will enter into
with the Company does not create a trust or any kind of a fiduciary
relationship between the Company and you, your designated beneficiaries
or any other person. To the extent you, your designated beneficiaries,
or any other person acquires a right to receive payments from the
Company under the Incentive Deferred Compensation Agreement, that right
is no greater than the right of any unsecured general creditor of the
Company.
B. Modification or Revocation.
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Your Incentive Deferred Compensation Agreement will continue
in effect until revoked, terminated, or all benefits are paid, even
during any period of time when you are an "inactive" participant
because you are not designated by the Company as eligible to accumulate
additional benefits. However, the Incentive Deferred Compensation
Agreement and this Plan may be amended or revoked at any time, in whole
or in part, by the Company in its sole discretion. Unless you agree
otherwise, you will still be entitled to the vested benefit, if any,
that you have earned through the date of any amendment or revocation.
Such benefits will be payable at the times and in the amounts provided
for in the Incentive Deferred Compensation Agreement, or the Company
may elect to accelerate distribution and pay all amounts due
immediately.
C. Rights Preserved.
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Nothing in the Incentive Deferred Compensation Agreement or
this Plan gives any employee the right to continued employment by the
Company. The relationship between you and the Company shall continue to
be "at will" and may be terminated at any time by the Company or you,
with or without cause, except as may be specifically set forth in any
separate written employment agreement between you and the Company.
D. Controlling Documents.
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This is merely a summary of the key provisions of the
Incentive Deferred Compensation Agreement currently in use by the
Company. In the event of any conflict between the provisions of this
Plan and the Incentive Deferred Compensation Agreement, the agreement
shall in all cases control.
The Company has executed this amended and restated Plan in Dublin, Ohio
on the date set forth below.
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Cardinal Health, Inc.
By: /s/ George H. Bennett, Jr.
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Its: Executive Vice President
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Date: October 27, 1997
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