<PAGE> 1
================================================================================
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-11(c) or 14a-12
</TABLE>
NCS HEALTHCARE, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KEVIN B. SHAW, PRESIDENT AND CHIEF EXECUTIVE OFFICER
(NAME OF PERSON FILING PROXY STATEMENT)
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:
Not Applicable
(2) Aggregate number of securities to which transaction applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11*
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
(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:
- ------------------
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
================================================================================
<PAGE> 2
NCS HEALTHCARE [LOGO]
October 2, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of NCS HealthCare, Inc. to be held Thursday, October 30, 1997 at 9:30 a.m.
(local time) at the Renaissance Cleveland Hotel, 24 Public Square, Cleveland,
Ohio.
You will consider and vote upon the election of the Company's Board of
Directors. In addition, there will be a discussion of the Company's activities
and a progress report on our first quarter, which ended on September 30.
Whether or not you plan to attend the Annual Meeting in person, it is
important that your shares are represented. Therefore, please complete, sign,
date and promptly return the enclosed proxy card in the accompanying envelope.
You are, of course, welcome to attend the Annual Meeting and vote in person even
if you have previously returned your proxy card.
On behalf of the Board of Directors and the management of NCS HealthCare,
Inc., we would like to thank you for your continued support and confidence.
Sincerely,
/s/ Jon H. Outcalt
Jon H. Outcalt /s/ Kevin B. Shaw
Chairman
Kevin B. Shaw
President and Chief Executive
Officer
<PAGE> 3
NCS HEALTHCARE, INC.
3201 Enterprise Parkway
Cleveland, Ohio 44122
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD THURSDAY, OCTOBER 30, 1997
The 1997 Annual Meeting of Stockholders of NCS HealthCare, Inc. ("NCS" or
the "Company"), a Delaware corporation, will be held Thursday, October 30, 1997
at 9:30 a.m., Cleveland, Ohio local time, at the Renaissance Cleveland Hotel, 24
Public Square, Cleveland, Ohio. Doors to the meeting will be open at 9:00 a.m.
The meeting will be conducted:
1. To consider and to vote upon the election of the class of Directors
whose terms will expire at the Annual Meeting of Stockholders to be
held in 2000; and
2. To consider and act upon such other matters as may properly come
before the meeting or any and all postponements or adjournments
thereof.
Only stockholders of record at the close of business on September 25, 1997
will be entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
Kevin B. Shaw
President and Chief Executive Officer
October 2, 1997
EACH STOCKHOLDER IS REQUESTED TO EXECUTE AND PROMPTLY RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED PREPAID ENVELOPE.
<PAGE> 4
NCS HEALTHCARE, INC.
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held Thursday, October 30, 1997
Mailed on or about October 2, 1997
INTRODUCTION
This Proxy Statement (the "Proxy Statement") is being furnished to
stockholders of NCS Healthcare, Inc., a Delaware corporation ("NCS" or the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board" or the "Board of Directors") from holders
of record of the Company's outstanding shares of Class A Common Stock, $.0l par
value (the "Class A Stock"), and Class B Common Stock, $.0l par value (the
"Class B Stock") (the Class A Stock and Class B Stock hereinafter collectively
referred to as the "Common Stock") as of the close of business on September 25,
1997 (the "Annual Meeting Record Date") for use at the 1997 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") and at any adjournments or
postponements thereof. The Annual Meeting will be held on Thursday, October 30,
1997, at 9:30 a.m. local time at the Renaissance Cleveland Hotel, 24 Public
Square, Cleveland, Ohio. This Proxy Statement and the accompanying proxy card
are being mailed to stockholders on or about October 2, 1997. The headquarters
and principal executive offices of the Company are located at 3201 Enterprise
Parkway, Cleveland, Ohio 44122.
Proxies will be solicited by mail, telephone or other means of
communication. Solicitation also may be made by Directors, officers and other
employees of the Company not specifically employed for this purpose. The Company
will reimburse brokerage firms, custodians, nominees and fiduciaries in
accordance with the rules of the National Association of Securities Dealers,
Inc. for reasonable expenses incurred by them in forwarding materials to the
beneficial owners of shares. The entire cost of solicitation will be borne by
the Company.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of record of Common Stock as of the close of business on the
Annual Meeting Record Date will be entitled to notice of and to vote at the
Annual Meeting or any adjournments or postponements thereof. Holders of Class A
Stock are entitled to one vote per share on any matter which may properly come
before the Annual Meeting, and holders of Class B Stock are entitled to ten
votes per share on any such matters. Except as otherwise provided by the
Company's Certificate of Incorporation or required by law, holders of Class A
Stock and Class B Stock will at all times vote on all matters (including the
election of Directors) together as one class. The presence, either in person or
by properly executed and delivered proxy, of the holders of a majority of the
voting power of the Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting and to permit action to be taken by stockholders at
such meeting. Under Delaware law,
1
<PAGE> 5
Common Stock represented by proxies that reflect abstentions or "broker
non-votes" (i.e., shares held by a broker or nominee which are represented at
the Annual Meeting, but with respect to which such broker or nominee is not
empowered to vote on a particular proposal) will be counted as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum.
A plurality of the votes present in person or represented by proxy at the
Annual Meeting is required to elect the nominees for Director. "Plurality" means
that the individuals who receive the largest number of votes cast are elected as
Directors up to the maximum number of Directors to be chosen at the meeting.
Consequently, any shares not voted (whether by abstention, broker non-vote or
otherwise) will have no impact on the election of Directors, except to the
extent that the failure to vote for an individual results in another individual
receiving a larger number of votes.
Unless otherwise provided by law or the Company's Certificate of
Incorporation, the affirmative vote of the holders of at least a majority of the
voting power of the Common Stock entitled to vote on such a matter and present
in person or represented by proxy at the Annual Meeting is required to approve
all other matters properly brought before the Annual Meeting. Abstentions as to
all such matters will have the same effect as votes against such matters. Broker
non-votes, however, are not counted as present and entitled to vote for purposes
of determining whether a proposal has been approved and will have no effect on
the outcome of any proposal requiring the affirmative vote of the holder of a
majority of the outstanding shares present and entitled to vote.
As of September 25, 1997, there were 11,709,473 shares of Class A Stock and
7,018,824 shares of Class B Stock outstanding and entitled to vote at the Annual
Meeting. All shares of Common Stock of the Company that are represented at the
Annual Meeting by properly executed and delivered proxies received prior to or
at the Annual Meeting and not revoked will be voted at the Annual Meeting in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted for the nominees recommended by the
Board.
In the event that a quorum is not present at the time the Annual Meeting is
convened or if for any other reason the Company believes that additional time
should be allowed for the solicitation of proxies, the Company may adjourn the
Annual Meeting with or without a vote of the stockholders. If the Company
proposes to adjourn the Annual Meeting by a vote of the stockholders, the
persons named in the enclosed form of proxy will vote all Common Stock for which
they have voting authority in favor of such adjournment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with National City Bank, in its capacity as transfer agent for the Company (the
"Transfer Agent"), at or before the Annual Meeting, a written notice of
revocation bearing a later date than the proxy, (ii) duly executing a subsequent
proxy relating to the same Common Stock and delivering it to the Transfer Agent
at or before the Annual Meeting or (iii) attending the Annual Meeting and voting
in person (although attendance at the Annual Meeting will not, in and of itself,
constitute a revocation of a proxy). Any written notice revoking a proxy should
be sent to National City Bank, Corporate Trust Administration, 629 Euclid
Avenue, Room 635, Cleveland, Ohio 44114, Attention: Mr. J. Dean Presson.
2
<PAGE> 6
STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of September 25, 1997 by (i) each
person known by the Company to be the beneficial owner of more than 5% of any
class of Common Stock, (ii) each Director, (iii) each Named Executive Officer
and (iv) all Directors and executive officers as a group.
<TABLE>
<CAPTION>
CLASS A STOCK CLASS B STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
--------------------------- ---------------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ------------------------------------- ------------- ------- ------------- -------
<S> <C> <C> <C> <C>
Pilgrim Baxter & Associates
1255 Drummers Lane
Suite 300
Wayne, PA 19087.................... 1,253,800(2) 10.7% -- --%
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109................... 1,043,344(3) 8.9 -- --
Van Wagoner Funds, Inc.
One Bush Street
Suite 1150
San Francisco, CA 94104............ 590,300(4) 5.0 -- --
Jon H. Outcalt (5)................... 33,063 * 3,476,086(6) 49.5
Kevin B. Shaw (5).................... 12,330 * 1,141,134(7) 16.3
Phyllis K. Wilson.................... 1,782 * 182,899 2.6
Jeffrey R. Steinhilber............... 1,782 * 87,205(8) 1.2
Marvin R. Richardson................. 53,282 * -- --
William B. Byrum..................... 46,522(9) * -- --
A. Malachi Mixon III................. 35,650 * 92,185 1.3
James B. Naylor...................... -- -- 363,005 5.2
Richard L. Osborne................... 3,565 * 116,767(10) 1.7
Boake A. Sells....................... 14,260 * 92,185 1.3
All Directors and executive officers
as a group (12 persons) (11)....... 205,121 1.8 5,551,466 80.0
</TABLE>
- ---------------
* Less than one percent.
(1) Each share of Class B Stock carries ten votes per share and is convertible
at any time into one share of Class A Stock.
(2) Based solely upon information contained in a Schedule 13G filed with the
Securities and Exchange Commission on March 12, 1997, which was also filed
on behalf of Harold J. Baxter and Gary L. Pilgrim. Pilgrim Baxter &
Associates has sole power to dispose of the 1,253,800 shares of Class A
Stock, and each of Messrs. Baxter and Pilgrim and Pilgrim Baxter &
Associates shares the power to vote those shares.
3
<PAGE> 7
(3) Based solely upon information contained in Amendment No. 1 to the Schedule
13G filed with the Securities and Exchange Commission on January 30, 1997
by Putnam Investments, Inc. ("PI") on behalf of itself and Marsh & McLennan
Companies, Inc. ("MMC"), Putnam Investment Management, Inc. ("PIM") and The
Putnam Advisory Company, Inc. ("PAC"). PI is a wholly-owned subsidiary of
MMC. PIM, the investment adviser to the Putnam family of mutual funds, and
PAC, the investment adviser to Putnam's institutional clients, are
wholly-owned by PI. PIM and PAC have shared dispository power over 880,693
shares and 162,651 shares of Class A Stock, respectively. PAC also has
shared voting power over 130,851 shares of Class A Stock held by
institutional clients. PI and MMC disclaim beneficial ownership over the
shares held by PIM and PAC.
(4) Based solely upon information contained in a Schedule 13G filed with the
Securities and Exchange Commission on February 12, 1997, which was also
filed on behalf of Van Wagoner Capital Management, Inc. ("VWCM"). VWCM is
an investment adviser to Van Wagoner Funds, Inc. ("VWF"). VWCM has sole
dispositive power over 590,300 shares of Class A Stock and VWF has sole
voting power over 525,000 shares of Class A Stock. Both share beneficial
ownership over the same 525,000 shares. VWF and VWCM disclaim the existence
of a "group."
(5) The beneficial owner's address is c/o NCS HealthCare, Inc., 3201 Enterprise
Parkway, Suite 220, Cleveland, Ohio 44122.
(6) Owned of record by the Jon H. Outcalt Trust.
(7) Includes 184,370 shares of Class B Stock held by a limited partnership of
which Mr. Shaw is the sole general partner.
(8) Includes options, exercisable within 60 days of the Annual Meeting Record
Date, to purchase 71,073 shares of Class B Stock.
(9) Includes 100 shares of Class A Stock owned by the trustee for an individual
retirement account for the benefit of Mr. Byrum and 280 shares of Class A
Stock owned by the trustee for an individual retirement account for the
benefit of Mr. Byrum's spouse.
(10) Includes options, exercisable within 60 days of the Annual Meeting Record
Date, to purchase 15,364 shares of Class B Stock.
(11) Includes options, exercisable within 60 days of the Annual Meeting Record
Date, to purchase 2,304 shares of Class A Stock and 86,437 shares of Class
B Stock.
4
<PAGE> 8
ELECTION OF DIRECTORS
The Board of Directors of the Company is comprised of seven Directors. The
Company presently has three classes of Directors. The Board has nominated and
recommends the reelection of Messrs. Shaw and Sells as "Class II Directors" for
a three-year term expiring at the Annual Meeting of Stockholders to be held in
2000. Unless otherwise instructed, the proxy holders will vote the proxies
received by them FOR Messrs. Shaw and Sells.
If elected, Messrs. Shaw and Sells have consented to serve as Directors of
the Company for the three-year term or until their respective successors are
elected and qualified. Further information with respect to both nominees is set
forth below in the section entitled "Nominees for Class II Director." Although
it is not contemplated that any nominee will be unable to serve as a Director,
in such event, the proxies will be voted by the proxyholders for such other
person or persons as may be designated by the present Board of Directors.
NOMINEES FOR CLASS II DIRECTOR
Boake A. Sells
Director since 1993
Member of the Audit and Human
Resources Committees of the
Board of Directors
Age: 60 Boake A. Sells has been a self-employed
private investor since June 1992. He was
Chairman of the Board, President and
Chief Executive Officer of Revco D.S.,
Inc. from September 1987 to June 1992 and
was formerly President and Chief
Operating Officer of Dayton Hudson
Corporation and President and Chief
Operating Officer of Cole National
Corporation. Mr. Sells is a Director of
Harrah's Entertainment, Inc., a leading
casino gaming company.
Kevin B. Shaw
President, Chief Executive
Officer and
Secretary
Director since 1986
Age: 40 Kevin B. Shaw is a founding principal of
NCS and has served as President,
Secretary and a Director of the Company
since 1986 and as Chief Executive Officer
since December 1985. Prior to joining the
Company, he was employed by McKinsey &
Company and Owens Corning Fiberglas.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS A VOTE FOR
EACH OF THE FOREGOING NOMINEES AS DIRECTORS OF THE COMPANY.
DIRECTORS CONTINUING IN OFFICE
James B. Naylor
Director since 1986
Member of the Audit Committee of
the Board of Directors
Term as Class I Director expires
1999
Age: 43 James B. Naylor has managed acquisitions
with McClintock Industries, a company
that invests in industrial product
companies, since July 1997. From July
1993 to July 1997, Mr. Naylor was the
President of Federal Process Corporation,
a manufacturer and distributor of
industrial products. From August 1986 to
October 1995, Mr. Naylor was Executive
Vice President of NCS's predecessor, and
from November 1986 to July 1995, he was
Vice President of Modern Pharmacy
Consultants. He was formerly with Booz,
Allen & Hamilton, Inc. and with Invacare
Corporation, a leading world-wide
manufacturer and distributor of home
health care products.
5
<PAGE> 9
A. Malachi Mixon III
Director since 1994
Member of the Audit and Human
Resources Committees of the
Board of Directors
Term as Class I Director expires
1999
Age: 57 A. Malachi Mixon III has been the Chief
Executive Officer and a Director of
Invacare Corporation since 1979 and,
since 1983, its Chairman of the Board.
Mr. Mixon also served as President of
Invacare Corporation from 1979 to 1996.
Invacare Corporation is a leading world
wide manufacturer and distributor of home
health care products. Mr. Mixon also
serves as a Director of Lamson & Sessions
Co., a supplier of engineered
thermoplastic products, and
Sherwin-Williams Company, a producer and
distributor of coatings and related
products, and is Chairman of the Board of
Trustees of The Cleveland Clinic
Foundation, one of the world's leading
health care institutions.
Phyllis K. Wilson
Executive Vice President
Director since 1993
Term as Class I Director expires
1999
Age: 56 Phyllis K. Wilson is the founder of NCS's
Columbus, Ohio operation and heads the
corporate and support functions of the
Company. From 1989 to June 1995, she was
responsible for corporate development and
oversaw the Company's Ohio and Michigan
operations. She is past President of the
Ohio State Board of Pharmacy and served
as a member of that board from 1977 to
1985. Ms. Wilson is a founding member of
the American Society of Consultant
Pharmacists.
Richard L. Osborne
Director since 1986
Member of the Human Resources
Committee of the Board of
Directors
Term as Class III Director
expires 1998
Age: 59 Richard L. Osborne has served as the
Executive Dean of the Weatherhead School
of Management, Case Western Reserve
University, Cleveland, Ohio, since 1971.
Mr. Osborne serves on the Board of Myers
Industries, Inc., a manufacturer of
plastic and rubber parts for the
automotive and other industries, New
Horizons Worldwide, Inc., a provider of
computer training services, and Ohio
Savings Financial Corporation, a savings
and loan holding company.
Jon H. Outcalt
Chairman of the Board
Director since 1986
Term as Class III Director
expires 1998
Age: 61 Jon H. Outcalt is a founding principal of
NCS. He was a Senior Vice President of
Alliance Capital Management L.P., a
global investment management company,
from 1975 to December 1995. Mr. Outcalt
serves on the Board of Directors of Myers
Industries, Inc., a manufacturer of
plastic and rubber parts for the
automotive and other industries, and Ohio
Savings Financial Corporation, a savings
and loan holding company.
6
<PAGE> 10
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Presently, the Board is comprised of seven members, four of whom are not
officers or employees of the Company. During the fiscal year ended June 30,
1997, the Board met three times and acted by unanimous written consent nine
times.
The Board has two standing committees: (i) Audit and (ii) Human Resources.
The Audit and Human Resources Committees were created on February 5, 1996 in
connection with the Company's initial public offering. The members of each
committee are appointed by the Board of Directors and serve at its discretion. A
majority of each of the committees constitutes a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all of the members, are acts of any of the
respective committees. The Company does not have a standing nominating committee
or a committee performing similar functions.
The members of the Audit Committee are A. Malachi Mixon III, James B.
Naylor and Boake A. Sells, none of whom was an officer or employee of the
Company or any of its subsidiaries. The Audit Committee has general
responsibility for supervision of the financial controls as well as accounting
and audit activities of the Company. The Audit Committee annually reviews the
qualifications of the Company's independent certified public accountants, makes
recommendations to the Board of Directors concerning the selection of the
accountants and reviews the planning, fees and results of such accountants'
audits. The Audit Committee met twice with respect to the fiscal year ended June
30, 1997.
The members of the Human Resources Committee are A. Malachi Mixon III,
Richard L. Osborne and Boake A. Sells, none of whom was an officer or employee
of the Company or any of its subsidiaries. The Human Resources Committee has the
authority to (i) administer the Company's stock option plans, including the
selection of optionees and the timing of option grants, and (ii) review and
monitor key employee compensation and benefits policies and administer the
Company's management compensation plans. The Human Resources Committee met three
times with respect to the fiscal year ended June 30, 1997.
COMPENSATION OF DIRECTORS
The Company endeavors to maintain a mutuality of interest between its
Directors and the stockholders of the Company. Hence, it has required all of its
Directors to purchase Common Stock and has compensated its Directors, who are
not also key employees, solely by granting options to purchase shares of Class B
Stock. No Director fees have been paid, and the Company does not anticipate
paying Director fees in the foreseeable future.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The table below sets forth certain information with respect to compensation
paid or accrued by the Company during the fiscal years ended June 30, 1995, 1996
and 1997, to the Company's Chief Executive Officer and to the four most highly
compensated executive officers of the Company for the fiscal year ended June 30,
1997 (collectively, the "Named Executive Officers").
7
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION(1) SECURITIES
FISCAL ----------------------- UNDERLYING ALL OTHER
YEAR SALARY BONUS OPTIONS COMPENSATION
------ -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Kevin B. Shaw.............................. 1997 $153,970 $ -- 30,000(2) $ 4,660(3)
President and Chief Executive Officer 1996 140,000 32,000 10,000(2) 4,787(3)
1995 129,000 136,000 -- 5,840(3)
Phyllis K. Wilson.......................... 1997 143,390 -- 5,000(2) 50,476(4)
Executive Vice President 1996 138,200 20,000 5,000(2) 49,849(4)
1995 138,200 60,000 -- 50,430(4)
Jeffrey R. Steinhilber..................... 1997 139,423 30,000 15,000(2) 2,986(5)
Senior Vice President and Chief Financial 1996 130,000 28,000 22,540(2) 1,322(5)
Officer
1995 125,000 40,000 118,457(6) --
Marvin R. Richardson(7).................... 1997 115,385 -- 10,000(2) 2,307(8)
Senior Vice President -- Sales and 1996 80,000 -- 1,000(2) --
Marketing
1995 -- -- -- --
William B. Byrum(9)........................ 1997 129,808 72,500 30,000(2) 2,299(8)
Vice President -- Corporate Development 1996 112,500 64,250 1,000(2) 467(8)
1995 -- -- -- --
</TABLE>
- ---------------
(1) No Named Executive Officer received perquisites or other personal benefits
in excess of the lesser of $50,000 or 10% of such individual's salary plus
annual bonus.
(2) Represents options to purchase shares of Class A Stock.
(3) Includes, for fiscal year ended June 30, 1997, fiscal year ended June 30,
1996 and fiscal year ended June 30, 1995, respectively, (i) $3,077 paid by
the Company for the payment of premiums on life insurance policies and
$1,583 contributed by the Company to its 401(k) Plan on behalf of Mr. Shaw;
(ii) $2,938 paid by the Company for the payment of premiums on life
insurance policies and $1,849 contributed by NCS to its 401(k) Plan on
behalf of Mr. Shaw and (iii) $3,992 paid by the Company for the payment of
premiums on life insurance policies and $1,848 contributed by NCS to its
401(k) Plan on behalf of Mr. Shaw. The Company currently matches each
participating employee's contributions to the 401(k) Plan to the extent of
20% of the first 10% of the participant's salary reduction, up to the
maximum allowable under the Internal Revenue Code.
(4) Includes, for fiscal year ended June 30, 1997, fiscal year ended June 30,
1996 and fiscal year ended June 30, 1995, respectively, (i) $48,576 in
premiums used to fund deferred compensation to be paid to Ms. Wilson
pursuant to the terms of a Deferred Compensation Agreement and $1,900
contributed by the Company to its 401(k) Plan on behalf of Ms. Wilson; (ii)
$48,000 in premiums used to fund deferred compensation to be paid to Ms.
Wilson pursuant to the terms of a Deferred Compensation Agreement and $1,849
contributed by the Company to its 401(k) Plan on behalf of Ms. Wilson and
(iii) $48,582 in premiums used to fund deferred compensation to be paid to
Ms. Wilson pursuant to the terms of a Deferred Compensation Agreement and
$1,848 contributed by the Company to its 401(k) Plan on behalf of Ms.
Wilson.
(5) Includes, for fiscal year ended June 30, 1997 and fiscal year ended June 30,
1996, respectively, (i) $1,048 paid by the Company for the payment of
premiums on life insurance policies and $1,938 contributed by
8
<PAGE> 12
NCS to its 401(k) Plan on behalf of Mr. Steinhilber; and (ii) $1,322
contributed by NCS to its 401(k) Plan on behalf of Mr. Steinhilber.
(6) Represents options to purchase shares of Class B Stock.
(7) Mr. Richardson joined the Company on January 1, 1996.
(8) Represents amounts contributed by NCS to its 401(k) Plan on behalf of the
employee.
(9) Mr. Byrum joined the Company on September 1, 1995.
OPTION GRANTS
The following table sets forth certain information relating to grants of
stock options made during the fiscal year ended June 30, 1997 to the Named
Executive Officers. Such grants are reflected in the Summary Compensation Table
above.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------------- ANNUAL
PERCENTAGE OF RATES OF STOCK PRICE
TOTAL APPRECIATION FOR
NUMBER OF OPTIONS OPTION
SECURITIES GRANTED TO EXERCISE OR TERM
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME OPTIONS FISCAL YEAR (PER SHARE) DATE 5% 10%
- ------------------------ ---------- ---------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Kevin B. Shaw........... 30,000 10.0% $ 20.00 2/22/07 $165,768 $ 366,306
Phyllis K. Wilson....... 5,000 1.7 20.00 2/22/07 27,628 61,051
Jeffrey R.
Steinhilber........... 15,000 5.0 20.00 2/22/07 82,884 183,153
Marvin R. Richardson.... 10,000 3.3 20.00 2/22/07 55,256 122,102
William B. Byrum........ 30,000 10.0 20.00 2/22/07 165,768 366,306
</TABLE>
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table provides certain information concerning the value of
securities underlying unexercised stock options held by each of the Named
Executive Officers during the fiscal year ended June 30, 1997. No stock options
were exercised by any of the named Executive Officers during the fiscal year
ended June 30, 1997. This table assumes the conversion into Class A Stock of all
shares of Class B Stock issuable upon the exercise of certain options.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT JUNE 30, 1997 JUNE 30, 1997(1)
ACQUIRED ON VALUE ---------------------------- -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------- ---------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin B. Shaw.......... -- -- -- 40,000 $ -- $ 450,200
Phyllis K. Wilson...... -- -- -- 10,000 -- 121,300
Jeffrey R.
Steinhilber.......... -- -- 71,073 84,922 1,719,256 1,614,726
Marvin R. Richardson... -- -- -- 11,000 -- 117,680
William B. Byrum....... -- -- -- 31,000 -- 325,280
</TABLE>
- ---------------
(1) Represents the total gain which would be realized if all in-the-money
options beneficially held at June 30, 1997 were exercised, determined by
multiplying the number of shares underlying the options by the difference
between the per share option exercise price and $30.38, the closing price
for the Company's Class A Stock as reported by the Nasdaq National Market at
June 30, 1997.
9
<PAGE> 13
EMPLOYMENT AGREEMENT
The Company is party to an employment agreement with William B. Byrum,
dated September 1, 1995, pursuant to which Mr. Byrum is employed by the Company
as Vice President -- Corporate Development. The agreement provides for a term of
five years and an annual salary subject to increase at the discretion of the
Company. The agreement provides for a bonus to be paid to Mr. Byrum. In
addition, the agreement contains certain non-compete, non-disclosure and
non-interference provisions applicable to Mr. Byrum.
The Company, through its wholly-owned subsidiary NCS HealthCare of Indiana,
Inc., is also party to an employment agreement with Marvin R. Richardson, dated
May 31, 1995, pursuant to which Mr. Richardson was employed by the Company as
the President of NCS HealthCare of Indiana, Inc. (f/k/a Quality Health Care of
NCS, Inc.) until March 1997. The agreement provides for a term of four years
from July 1, 1996 and an annual salary in addition to cash bonuses based on
certain performance targets. The agreement also contains certain non-compete,
non-disclosure and non-interference provisions applicable to Mr. Richardson. In
March 1997, Mr. Richardson was promoted to the position of Senior Vice
President -- Sales and Marketing.
CERTAIN TRANSACTIONS
The Company leases its Hilliard, Ohio facility from PR Realty, a
partnership of which Phyllis K. Wilson is Managing Partner. The lease is in the
first year of a ten-year term, with rent payable at an annual rate of $255,750.
The Company believes that this lease is on terms comparable to those which could
be obtained from an unrelated third party.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the Human
Resources Committee (the "Committee") of the Company's Board of Directors. The
Committee is comprised of Messrs. Mixon, Osborne and Sells, none of whom is an
officer or employee of the Company.
The Committee's philosophy regarding the compensation of its executive
officers is (i) to provide a competitive total compensation package that enables
the Company to attract and retain qualified executives; (ii) to provide
executives with incentive bonuses linked to Company and individual performance;
and (iii) to provide executive officers with a significant equity stake in the
Company through stock options or other equity incentives.
Base salaries for all executive officers for fiscal 1997, other than Mr.
Shaw, were established by the Committee based on recommendations by Mr. Shaw.
Generally, base salaries for these executive officers were increased (i) in
order to sufficiently retain and attract qualified executives and (ii) as a
reflection of the Company's continued increase in earnings. Executive officers
were eligible to receive cash bonuses for fiscal 1997 with bonus levels
established based on each executive's function, level of responsibility and/or
the terms of their employment agreements.
The Committee believes that the interests of executives most responsible
for the management and growth of the Company should be closely aligned with the
long-term interests of the Company's stockholders. As a consequence, the
Committee granted stock options to 50 employees of the Company. In determining
the number of options awarded to individual executives, the Committee generally
establishes a level of award based on the position of the individual and his or
her level of responsibility. During the 1997 fiscal year, the
10
<PAGE> 14
Company awarded options to purchase an aggregate of 208,250 shares of Class A
Stock to the Company's executive officers. All of the stock options vest (i)
over time and (ii) only if the trading price of the Company's Class A Stock
reaches certain targeted levels.
The compensation arrangements of Mr. Shaw are determined based on the
Committee's subjective assessment of his performance, measured by the Company's
overall financial performance and the Committee's assessment of his
contributions to achieving strategic objectives during the year. In assessing
Mr. Shaw's contribution, the Committee took into account the fact that the
Company (i) achieved its highest level of revenues and net income during fiscal
1997, (ii) successfully completed a public offering of common stock, (iii)
acquired 20 institutional pharmacies and (iv) introduced a new proprietary
pharmacy information system.
Section 162(m) of the Internal Revenue Code prohibits a deduction to any
publicly held corporation for compensation paid to a "covered employee" in any
year in excess of $1 million. A covered employee is generally one of the Named
Executive Officers. The Committee does not expect the deductibility of any
compensation paid to its Named executive officers in 1997 to be affected by
Section 162(m). However, the Committee may consider alternatives to its existing
compensation programs in the future to assure the deductibility of executive
compensation.
THE HUMAN RESOURCES COMMITTEE
Richard L. Osborne, Chairman
A. Malachi Mixon III
Boake A. Sells
11
<PAGE> 15
PERFORMANCE GRAPH
The following line graph compares the percentage change in the cumulative
total stockholder return on the Company's Class A Stock against the cumulative
total return of the Standard & Poor's 500 Stock Index (the "S&P 500 Index") and
the Standard & Poor's Health Care Sector Index (the "S&P Health Care Sector
Index") for the period which commenced February 14, 1996 and ended June 30,
1997. The graph assumes an investment of $100 on February 14, 1996 in Class A
Stock or on January 31, 1996 for the applicable index, a reinvestment of
dividends (no dividends were declared on the Company's Class A Stock during the
period) and actual market value increases and decreases of the Company's Class A
Stock relative to an initial investment of $100.
The Company believes the information provided has only limited relevance
and is not necessarily indicative of future price performance.
COMPARISON OF 16 MONTH CUMULATIVE TOTAL RETURN
AMONG NCS HEALTHCARE, INC., THE S&P 500 INDEX
AND THE S&P HEALTH CARE SECTOR INDEX
<TABLE>
<CAPTION>
NCS S&P HEALTH
MEASUREMENT PERIOD HEALTHCARE, CARE SECTOR
(FISCAL YEAR COVERED) INC. S&P 500 INDEX INDEX
<S> <C> <C> <C>
2/14/96 100 100 100
6/96 183 106 102
6/97 184 143 151
</TABLE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's Directors and certain of its officers and persons who own
more than 10% of a registered class of the Company's equity securities to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "Commission") and The Nasdaq Stock
Market. Such persons are further required to furnish the Company with copies of
all such forms they file. Based solely on the Company's review of the copies of
such forms it has received, the Company believes that all of the Section 16(a)
filing requirements were satisfied by the Company's Directors and executive
officers for the fiscal year ended June 30, 1996, except that (i) Mr. Shaw's
April 7, 1997 open market purchase of 5,000 shares of Class A Stock was reported
on June 10, 1997, (ii) Mr. Richardson's initial statement of beneficial
ownership for June
12
<PAGE> 16
1997 was reported on September 29, 1997 and (iii) the February 1997 trust
distribution of 1,334 shares of Class A Stock to Mr. Outcalt was reported on
September 29, 1997.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder who meets the requirements of the proxy rules under the
Exchange Act may submit to the Board of Directors proposals to be considered for
submission to the Annual Meeting of Stockholders to be held in 1998. Any such
proposal should be submitted in writing by notice delivered or mailed by
first-class United States mail, postage prepaid, to NCS HealthCare, Inc., 3201
Enterprise Parkway, Cleveland, Ohio 44122 and must be received no later than
June 5, 1998. Any such notice shall set forth: (a) the name and address of the
stockholder and the text of the proposal to be introduced; and (b) the number of
shares of stock held of record, owned beneficially and represented by proxy by
such stockholder as of the date of such notice. If the proponent is not a
stockholder of record, proof of beneficial ownership also should be submitted.
All proposals must be a proper subject for action and comply with the Proxy
Rules of the Commission and such other requirements imposed by the Company as
set forth in its By-laws. The Chairman of the meeting may refuse to acknowledge
the introduction of any stockholder proposal not made in compliance with the
foregoing procedures.
INDEPENDENT AUDITORS
The Board of Directors of the Company has selected the firm of Ernst &
Young LLP, independent auditors, to examine and audit the financial statements
of the Company and its subsidiaries for the fiscal year ending June 30, 1998.
Representatives of Ernst & Young LLP will be present at the Annual Meeting and
will have an opportunity to make a statement should they so desire. The
representatives also will be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
The Board of Directors of the Company is not aware of any matter to come
before the meeting other than those mentioned in the accompanying notice.
However, if other matters shall properly come before the meeting, it is the
intention of the persons named in the accompanying Proxy to vote in accordance
with their best judgment on such matters.
Upon the receipt of a written request from any stockholder entitled to vote
at the Annual Meeting, the Company will mail, at no charge to the stockholder, a
copy of the Company's Annual Report on Form 10-K, including the financial
statements and schedules required to be filed with the Commission pursuant to
Rule 13a-1 under the Exchange Act, for the Company's most recent fiscal year.
Requests from beneficial owners of the Company's voting securities must set
forth a good-faith representation that, as of the Annual Meeting Record Date,
the person making the request was the beneficial owner of securities entitled to
vote at such Annual Meeting. Written requests for the Annual Report on Form 10-K
should be directed to: Kristen H. Schulz, Director of Investor Relations, NCS
HealthCare, Inc., 3201 Enterprise Parkway, Cleveland, Ohio 44122.
You are urged to sign and return your Proxy promptly in order to make
certain your shares will be voted at the Annual Meeting. For your convenience a
return envelope is enclosed requiring no additional postage if mailed in the
United States.
BY ORDER OF THE BOARD OF DIRECTORS
Kevin B. Shaw
President and Chief Executive
Officer
October 2, 1997
13
<PAGE> 17
NCS HEALTHCARE, INC.
PROXY FOR CLASS A COMMON STOCK
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints JON H. OUTCALT, KEVIN B. SHAW and
JEFFREY R. STEINHILBER, and each of them, as Proxy holders and attorneys, with
full power of substitution, to appear and vote all of the shares of Class A
Common Stock of NCS HealthCare, Inc. which the undersigned shall be entitled to
vote at the Annual Meeting of Stockholders of the Company, to be held at the
Renaissance Cleveland Hotel, 24 Public Square, Cleveland, Ohio, on Thursday,
October 30, 1997, at 9:30 a.m. local time, and at any adjournments thereof,
hereby revoking any and all proxies heretofore given, and (ii) authorizes and
directs said Proxy holders to vote all of the shares of Class A Common Stock of
the Company represented by this Proxy as follows, WITH THE UNDERSTANDING THAT IF
NO DIRECTIONS ARE GIVEN BELOW, SAID SHARES WILL BE VOTED "FOR" THE ELECTION OF
THE TWO DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS.
(1) ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR both nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
</TABLE>
KEVIN B. SHAW and BOAKE A. SELLS
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line.)
----------------------------------------------
(To be signed on other side)
PROXY NO. SHARES
(Proxy -- continued from other side)
(2) In their discretion to act on any other matter or matters which may
properly come before the meeting.
Please date, sign and return
promptly in the accompanying
envelope.
Dated:................, 1997
............................
Your signature to this
Proxy form should be exactly
the same as the name
imprinted hereon. Persons
signing as executors,
administrators, trustees or
in similar capacities should
so indicate. For joint
accounts, the name of each
joint owner must be signed.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR BOTH OF THE NOMINEES.
---
<PAGE> 18
NCS HEALTHCARE, INC.
PROXY FOR CLASS B COMMON STOCK
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 30, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (i) appoints JON H. OUTCALT, KEVIN B. SHAW and
JEFFREY R. STEINHILBER, and each of them, as Proxy holders and attorneys, with
full power of substitution, to appear and vote all of the shares of Class B
Common Stock of NCS HealthCare, Inc. which the undersigned shall be entitled to
vote at the Annual Meeting of Stockholders of the Company, to be held at the
Renaissance Cleveland Hotel, 24 Public Square, Cleveland, Ohio, on Thursday,
October 30, 1997, at 9:30 a.m. local time, and at any adjournments thereof,
hereby revoking any and all proxies heretofore given, and (ii) authorizes and
directs said Proxy holders to vote all of the shares of Class B Common Stock of
the Company represented by this Proxy as follows, WITH THE UNDERSTANDING THAT IF
NO DIRECTIONS ARE GIVEN BELOW, SAID SHARES WILL BE VOTED "FOR" THE ELECTION OF
THE TWO DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS.
(1) ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR both nominees listed [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed
</TABLE>
KEVIN B. SHAW and BOAKE A. SELLS
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the following line.)
----------------------------------------
(To be signed on other side)
PROXY NO. SHARES
(Proxy -- continued from other side)
(2) In their discretion to act on any other matter or matters which may
properly come before the meeting.
Please date, sign and return
promptly in the accompanying
envelope.
Dated:................, 1997
............................
Your signature to this
Proxy form should be exactly
the same as the name
imprinted hereon. Persons
signing as executors,
administrators, trustees or
in similar capacities should
so indicate. For joint
accounts, the name of each
joint owner must be signed.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR BOTH OF THE NOMINEES.
---
