1
EXHIBIT 4(b)
CARDINAL HEALTH, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
EFFECTIVE JANUARY 1, 2000
8
2
CARDINAL HEALTH, INC.
DIRECTORS DEFERRED COMPENSATION PLAN
(THE "PLAN")
I
PURPOSE
-------
Cardinal Health, Inc. and its affiliates (collectively, the "Company")
is willing to provide nonemployee members of its Board of Directors (the
"Board") with the opportunity to defer the payment of their Board fees for
retirement savings purposes. The Company's goal is to retain and reward its
Board members by helping them to accumulate benefits for a comfortable
retirement.
II
ELIGIBILITY
-----------
All members of the Board are eligible to participate in the Plan. If
you elect to participate in the Plan, you will sign a Directors Deferred
Compensation Agreement which details the requirements you must satisfy to be
eligible to receive this supplemental retirement benefit from the Company.
III
DEFERRED COMPENSATION ACCUMULATIONS
A. UNFUNDED NATURE OF PLAN
The Plan is considered to be an "unfunded" arrangement as amounts
generally will not be 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, and
may invest funds subject to this Plan in those investment companies. The Company
also may establish a deferred compensation trust (rabbi or otherwise) in
connection with the Plan. 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 alternatives, if such investment accounts are established. The
Company currently expects any such alternatives to be similar to those available
under its tax-qualified retirement plan for employees, but is not obligated to
make these or any other particular investment options available. If a
participant is permitted to direct how the portion of the Company's funds
allocable to him or her is invested among the available alternatives, the
participant may be permitted to change such direction from time to time;
provided, however, that in no event shall a participant be permitted to change
any investment in a Cardinal Stock Account to any other investment alternative,
except as to future director's fees to be earned as provided below under the
heading "Election to Defer into Common Shares". All investments shall at all
times continue to be a part of the Company's general assets.
B. ACCUMULATIONS
To measure the amount of the Company's obligations to a participant in
this Plan, the Company will maintain a bookkeeping record or account of each
participant's "Accumulations".
You may elect (within 30 days of when you first become eligible to
participate in the Plan for your initial calendar year of participation or, for
subsequent calendar years, not later than the December 31 prior to each such
year) to defer payment of a portion or all of your director's fees to be earned
during the balance of the current or next calendar year, as applicable, as a
credit to your Accumulations. Once made, any such election (including without
limitation the percentage of director's fees to be deferred) shall be
irrevocable for all director's fees earned
9
3
during the calendar year for which the election is made. If you desire, your
election can continue in effect from year to year until you change it, but any
change will be effective only as of the January 1 of the calendar year following
the calendar year in which you change your election. The minimum amount you may
defer is 20% and the maximum is 100% of all fees expected to be paid to you as a
director of the Company.
C. ELECTION TO DEFER INTO COMMON SHARES
Subject to the provisions of this Article III, whenever you make a
deferral election pursuant to the preceding paragraph, you may also elect to
have all or a portion of the deferred fees to be deemed invested in common
shares, without par value ("Common Shares"), of the Company (such deferred fees,
the "Share Election Fees"). On the date when your Share Election Fees would
otherwise be payable to you (if you had not elected to defer such payment) (the
"Payment Date"), the Company will credit to a separate account (your "Cardinal
Stock Account") a number of hypothetical Common Shares (and fractions thereof)
having a Value equal to the Share Election Fees. For purposes of this Plan, the
"Value" of a Common Share on a particular day shall mean the closing price of a
Common Share on the New York Stock Exchange on that day (or, if there is no
trading of the Common Shares on that day, on the most recent previous date on
which trading occurred). Any election made pursuant to this paragraph shall be
irrevocable for all director's fees earned during the calendar year for which
the election is made. Any election made pursuant to this paragraph shall remain
in effect for fees payable in subsequent calendar years unless you deliver a
written notice to the Secretary of the Company setting forth a different
deferral election, which shall be applied to future calendar years until further
written notice is received by the Secretary of the Company pursuant to this
section. Notwithstanding the foregoing, if any deferral election into Common
Shares would make a transaction between the Company and any other entity
ineligible for pooling-of-interests accounting under APB No. 16 that but for the
nature of such deferral would otherwise be eligible for such accounting
treatment, such deferral election shall be treated as a deferral election into
the other available funds pro-rata.
If any recapitalization, reorganization, reclassification,
consolidation, merger of Cardinal Health, Inc. ("Cardinal") or the Company or
any sale of all or substantially all of Cardinal's or the Company's assets to
another person or entity or other transaction which is effected in such a way
that holders of Common Shares are entitled to receive (either directly or upon
subsequent liquidation) stock, securities, or assets with respect to or in
exchange for Common Shares (each an "Organic Change") shall occur, then your
Cardinal Stock Account (if any) shall be adjusted so as to contain such shares
of stock, securities or assets (including cash) as would have been issued or
payable with respect to or in exchange for the number of Common Shares credited
thereto immediately before such Organic Change, if such Common Shares had been
outstanding. If the assets held in your Cardinal Stock Account immediately after
such adjustment are not equity securities, then you shall be permitted to
re-direct the investment thereof into the other investment choices then
available under this Plan.
D. 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) shall be
credited on the basis of the earnings (or losses) allocable to your directed
investments. 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.
In the case of your Cardinal Stock Account (if any), the earnings (or
losses) credited to such account shall consist solely of dividend equivalent
credits pursuant to this paragraph. Whenever a dividend or other distribution is
made with respect to the Common Shares, then your Cardinal Stock Account shall
be credited, on the payment date for such dividend or other distribution (the
"Dividend Payment Date"), with a number of additional Common Shares having a
Value, as of the Dividend Payment Date, based upon the number of Common Shares
deemed to be held in your Cardinal Stock Account as of the record date for such
dividend or other distribution (the "Dividend Record Date"), if such Common
Shares were outstanding. If such dividend or other distribution is in the form
of cash, the number of Common Shares so credited shall be a number of Common
Shares (and fractions thereof) having a Value, as of the Dividend Payment Date,
equal to the amount of cash that would have been distributed with
10
4
respect to the Common Shares deemed to be held in your Cardinal Stock Account as
of the Dividend Record Date, if such Common Shares were outstanding. If such
dividend or other distribution is in the form of Common Shares, the number of
Common Shares so credited shall equal the number of such Common Shares (and
fractions thereof) that would have been distributed with respect to the Common
Shares deemed to be held in your Cardinal Stock Account as of the Dividend
Record Date, if such Common Shares were outstanding. If such dividend or other
distribution is in the form of property other than cash or Common Shares, the
number of Common Shares so credited shall be a number of Common Shares (and
fractions thereof) having a Value, as of the Dividend Payment Date, equal to the
value of the property that would have been distributed with respect to the
Common Shares deemed to be held in your Cardinal Stock Account as of the
Dividend Record Date, if such Common Shares were outstanding. The value of such
property shall be its fair market value as of the Dividend Payment Date,
determined by the Board based upon market trading if available and otherwise
based upon such factors as the Board deems appropriate.
Under the federal income tax rules in effect as of the adoption of this
Plan, 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 taxed on these
amounts and the credited earnings only if and when benefits are actually paid to
you or your beneficiaries.
IV
BENEFITS
A. VESTING
All contributions to the Plan will always be 100%
"vested". This means you will always be entitled to receive benefits from your
Accumulations.
B. PAYMENT OF BENEFITS
1. TERMINATION OF BOARD MEMBERSHIP OTHER THAN BY DEATH. You will be
eligible to receive benefits under the Plan upon your termination of
Board membership by reason other than death. Benefits under this
Plan generally will be paid as an annual benefit payable for 5
years. The amount of your benefit will equal the amount necessary to
amortize your total Accumulations over the 5-year period. The amount
payable each year 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.
2. 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 Directors Deferred Compensation Agreement, using the
same method of distribution to you in effect at the date of your
death. In the event of death prior to beginning to receive benefits
under the Directors Deferred Compensation Agreement, the Company
will pay benefits to your beneficiary or beneficiaries, beginning as
soon as practicable after your death. In this case, benefits will
generally be paid as an annual benefit payable for 5 years computed
in the same manner as retirement benefits. The Company will provide
you with a Designation of Beneficiary form. 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.
3. 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 5 years generally provided hereunder,
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. 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 for your
Accumulations, determined by the Company in its discretion. Payments
of
11
5
amounts credited to your Cardinal Stock Account, if any, shall be in
the form of Common Shares plus cash in lieu of any fractional
shares.
4. CHANGE IN CONTROL. If a Change in Control occurs, and your
membership on the Board terminates within the 2-year period
immediately following a Change in Control, then you shall be
entitled to receive your Accumulations in a single lump sum within
30 days of your termination of office, notwithstanding any other
provision of this Plan or your Directors Deferred Compensation
Agreement. Also, following a Change in Control, the Company's
discretion to alter the payment methodology (described in Subsection
3, 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 Subsections 1 or 2.
"Change in Control" under this Plan and the Directors Deferred
Compensation Agreement shall mean (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 equaling 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
consolidated company, or (iii) a liquidation or dissolution of
Cardinal, or (iv) the sale of all or substantially all of Cardinal's
assets.
V
MISCELLANEOUS PROVISIONS
------------------------
A. NO RIGHT TO COMPANY ASSETS
As explained previously, this Plan is an unfunded arrangement and the
agreement you will enter into with the Company does not create a trust of any
kind or 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 this Plan or your Directors Deferred Compensation Agreement, that
right is no greater than the right of any unsecured general creditor of the
Company.
B. GENERAL RESTRICTIONS
Notwithstanding any other provision of this Plan or any Directors
Deferred Compensation Agreement, the Company shall not be required to issue or
deliver any certificate or certificates for Common Shares under this Plan prior
to fulfillment of all of the following conditions:
(i) Listing or approval for listing upon official notice of issuance
of such shares on the New York Stock Exchange, Inc., or such
other securities exchange as may at the time be a market for the
Common Shares;
(ii) Any registration or other qualification of such shares under any
state or federal law or regulation, or the maintaining in effect
of any such registration or other qualification which the
Chairman shall, in his absolute discretion upon the advice of
counsel, deem necessary or advisable; and
12
6
(iii) Obtaining any other consent, approval, or permit from any state
or federal governmental agency which the Chairman shall, in his
absolute discretion after receiving the advise of counsel,
determine to be necessary or advisable.
Nothing contained in this Plan shall prevent the Company from adopting
other or additional compensation arrangements for the participants.
C. COMMON SHARES AVAILABLE
The maximum aggregate number of Common Shares which may be credited to
Cardinal Stock Accounts pursuant to this Plan is 60,000. Common Shares issuable
under the Plan may be taken from authorized but unissued shares, treasury
shares, shares held in a trust for purposes of the Plan, or purchased on the
open market. No single participant may acquire under the Plan more than 30,000
Common Shares.
In the event of any stock dividend, stock split, share combination,
corporate separation or division (including, but not limited to, split-up,
spin-off, split-off or distribution to Cardinal's shareholders other than a
normal cash dividend), or partial or complete liquidation, or any other
corporate transaction or event having any effect similar to any of the
foregoing, then the aggregate number of Common Shares reserved for issuance
under the Plan shall be appropriately substituted for new shares or adjusted, as
determined by the Compensation and Personnel Subcommittee in its sole
discretion.
D. MODIFICATION OR REVOCATION
Your Directors Deferred Compensation Agreement will continue in effect
until revoked, terminated, or all benefits are paid. However, the Directors
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 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 Directors
Deferred Compensation Agreement, or the Company may elect to accelerate
distribution and immediately pay all amounts due.
E. RIGHTS PRESERVED
Nothing in the Directors Deferred Compensation Agreement or this Plan
gives any director the right to continue to hold such office. The relationship
between you and the Company shall continue to be determined by the applicable
provisions of the governing documents of the Company and by applicable law.
F. CONTROLLING DOCUMENTS
This is merely a summary of the key provisions of the Directors
Deferred Compensation Agreement currently in use by the Company. In the event of
any conflict between the provisions of this Plan and the Directors Deferred
Compensation Agreement, the Directors Deferred Compensation Agreement shall in
all cases control.
13