8-K/ALeadership ChangesExhibits & Filings

CARDINAL HEALTH INC 8-K/A Report, Executive Changes (Aug 10, 2009)

Filed August 10, 2009For Securities:CAH

Summary

This 8-K/A filing from Cardinal Health, Inc. (CAH) primarily details significant executive leadership changes and compensation adjustments in anticipation of the company's planned spin-off of CareFusion Corporation, expected by the end of August 2009. Notably, CEO R. Kerry Clark and Vice Chairman David L. Schlotterbeck are stepping down, with George S. Barrett appointed as the new Chairman and CEO, effective upon the spin-off. The filing outlines Mr. Barrett's comprehensive employment agreement, including his base salary, bonus targets, and substantial equity awards (restricted stock units and stock options) designed to incentivize performance post-spin-off. Further, the report discloses the fiscal year 2009 annual incentive payouts to named executives, noting that while performance targets for EBIT and ROTC were not met, discretion was exercised due to factors like the impact of deferrals on specific segments and overall expense management, as well as the significant efforts related to the spin-off. The filing also announces the termination of the long-term incentive cash program due to the spin-off, with partial payouts being made for certain performance cycles based on the committee's discretion. New directors, Bruce L. Downey and Glenn A. Britt, have also been appointed to the board and its committees.

Key Highlights

  • 1Effective August 4, 2009, R. Kerry Clark (Chairman & CEO) and David L. Schlotterbeck (Vice Chairman) resigned, to be effective upon the planned CareFusion spin-off.
  • 2George S. Barrett was appointed as the new Chairman and CEO, effective upon the CareFusion spin-off, and also elected to the Board.
  • 3George S. Barrett's employment agreement includes a base salary of at least $1,200,000, a target annual bonus of at least 130% of base salary, and significant initial equity awards valued at $4 million ($1.75M RSUs, $2.25M options).
  • 4Future long-term incentive awards for Mr. Barrett starting fiscal 2010 are targeted at no less than 600% of his base salary.
  • 5Fiscal 2009 annual incentive payouts were made to named executives, with Mr. Clark receiving $696,000, Mr. Henderson $280,000, and Mr. Barrett $390,000, despite missing EBIT and ROTC performance goals, due to committee discretion.
  • 6David L. Schlotterbeck received $0 for his fiscal 2009 annual incentive.
  • 7The long-term incentive cash program is terminated effective upon the spin-off; partial payouts are being made for specific cycles based on committee discretion, with Mr. Schlotterbeck receiving $111,750, and Mr. Clark, Mr. Henderson, and Mr. Barrett expecting payments of $380,625, $105,000, and $121,874 respectively.
  • 8Bruce L. Downey and Glenn A. Britt were appointed to the Board of Directors, with Mr. Downey joining the Audit Committee.

Frequently Asked Questions

This filing is an amendment to a previous 8-K and supplements information regarding executive changes and compensation in preparation for Cardinal Health's spin-off of CareFusion Corporation. It details the resignations of key executives, the appointment of a new CEO, and associated compensation packages, as well as incentive payouts.

R. Kerry Clark, the current Chairman and CEO, and David L. Schlotterbeck, Vice Chairman, are resigning effective immediately following the CareFusion spin-off. George S. Barrett, currently Vice Chairman, will become the new Chairman and CEO upon the spin-off. Additionally, Bruce L. Downey and Glenn A. Britt have been appointed to the Board of Directors.

George S. Barrett will receive a base salary of at least $1,200,000, a target annual bonus of at least 130% of his base salary, and significant initial equity awards including RSUs and stock options. His long-term incentive awards starting in fiscal 2010 are targeted at no less than 600% of his base salary. The employment agreement also includes provisions for relocation reimbursement, aircraft usage, and severance benefits.

The company did not meet the minimum performance goals (EBIT and ROTC) for fiscal 2009. However, the Compensation Committee exercised discretion to fund the Management Incentive Plan based on other criteria (ROE) and specific segment performance, as well as efforts related to the spin-off. David L. Schlotterbeck received $0, while others received payouts based on the committee's discretion. The long-term incentive cash program was terminated, with partial, discretionary payouts made for certain cycles due to the spin-off.