PRIORITY HEALTHCARE CORP, 8-K, 1999-01-04

PRIORITY HEALTHCARE CORP
8-K, 1999-01-04
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): DECEMBER 31, 1998

PRIORITY HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)

INDIANA 000-23249 35-1927379
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)

285 WEST CENTRAL PARKWAY, SUITE 1704
ALTAMONTE SPRINGS, FLORIDA 32714

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (407) 869-7001

NOT APPLICABLE
(Former name or former address, if changed since last report)

<PAGE>
ITEM 5. OTHER EVENTS

On October 23, 1998, the Board of Directors of Bindley Western
Industries, Inc. ("BWI") declared a distribution (the "Distribution") to
the holders of BWI common stock, par value $.01 per share (the "BWI Common
Stock") of the 10,214,286 shares of the Class A Common Stock, par value
$.01 per share (the "Priority Class A Common Stock"), of Priority
Healthcare Corporation ("Priority") which were owned by BWI. The shares of
Priority Class A Common Stock (which represented approximately 81.6% of
Priority's outstanding common stock) were distributed on December 31, 1998
(the "Distribution Date") to holders of record of BWI Common Stock on
December 15, 1998 (the "Record Date"). The Distribution was made on the
basis of .448 shares of Priority Class A Common Stock for each share of BWI
Common Stock outstanding on the Record Date. BWI no longer owns any shares
of Priority's outstanding common stock.

On or about December 16, 1998, an Information Statement was mailed to
all holders of BWI Common Stock on the Record Date describing the
Distribution and containing information relating to Priority and BWI. The
Priority Class A Common Stock distributed in the Distribution is not listed
on any securities exchange or any automated dealer quotation system and
there is no trading market for the Priority Class A Common Stock. However,
Priority Class A Common Stock will automatically be converted into shares
of Priority's Class B Common Stock (the "Class B Common Stock") on a share-
for-share basis upon the request of the holder thereof and upon any
transfer or purported transfer to any person other than family members of
the holder of Priority Class A Common Stock, or trusts for the benefit of
or entities controlled by the holder or family members of the holder.
Because of this automatic conversion feature, shares of Priority Class A
Common Stock are freely transferable, except for shares received by persons
who may be deemed to be "affiliates" of Priority under the Securities Act
of 1933, as amended. Priority's Class B Common Stock is traded on the
Nasdaq National Market System under the symbol "PHCC."

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

EXHIBIT NO. DESCRIPTION

10 Distribution Agreement dated as of October 23, 1998, between
Bindley Western Industries, Inc. and Priority Healthcare
Corporation.

20.1 Information Statement dated December 16, 1998 distributed to
Bindley Western Industries, Inc. shareholders.
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

Dated: January 4, 1999

PRIORITY HEALTHCARE CORPORATION

By: /S/ ROBERT L. MYERS
Name: Robert L. Myers
Title: President and Chief Executive Officer
<PAGE>
INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION

10 Distribution Agreement dated as of October 23, 1998, between
Bindley Western Industries, Inc. and Priority Healthcare
Corporation.

20.1 Information Statement dated December 16, 1998 distributed to
Bindley Western Industries, Inc. shareholders.

EXHIBIT 10

DISTRIBUTION AGREEMENT

This DISTRIBUTION AGREEMENT ("Agreement"), dated as of October 23,
1998, is entered into by and between BINDLEY WESTERN INDUSTRIES, INC., an
Indiana corporation ("BWI") and PRIORITY HEALTHCARE CORPORATION, an Indiana
corporation ("PHC").

RECITALS

WHEREAS, PHC is presently a majority-owned subsidiary of BWI; and

WHEREAS, BWI has determined that it is in the best interest of BWI to
distribute to the holders of BWI Common Stock all of the 10,214,286 shares
of PHC Class A Common Stock owned by BWI (the "Distribution"); and

WHEREAS, it is the intention of BWI that, following the Distribution,
BWI shall own no shares of PHC common stock; and

WHEREAS, in connection with the initial public offering of PHC in
1997, BWI and PHC entered into the Tax Sharing Agreement, the
Administrative Services Agreement, the Indemnification and Hold Harmless
Agreement and certain other agreements (collectively, the "Ancillary
Agreements"); and

WHEREAS, the Parties have determined that it is necessary and
desirable to set forth certain understandings and agreements in connection
with the Distribution;

NOW THEREFORE, in consideration of the foregoing premises and the
mutual agreements, provisions and covenants contained in this Agreement,
the Parties hereby agree as follows:

ARTICLE I
DEFINITIONS

As used herein, the following terms have the following meanings:

"Action" means any claim, suit, action, litigation, arbitration,
inquiry, subpoena, discovery request, proceeding, investigation, dispute,
violation or citation (or any threat of any of the foregoing), whenever,
however and wherever initiated, however, whenever and wherever arising, and
however denominated.

"Affiliate" means, with respect to any entity, another entity directly
or indirectly controlling, controlled by or under common control with such
entity.

"BWI Business" means the BWI Group together with the business, assets,
liabilities, operations, occupancies and employee benefit and other plans
of the BWI Group.

"BWI Common Stock" means the Common Stock, $0.01 par value, of BWI.

"BWI Group" means BWI and its Affiliates other than the PHC Group.

"BWI Stock Option Plan" means the 1993 Stock Option and Incentive Plan
of BWI.

"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder.

"Class A Common Stock" means the Class A Common Stock, $0.01 par
value, of PHC.

"Class B Common Stock" means the Class B Common Stock, $0.01 par
value, of PHC, into which the Class A Common Stock is convertible on a
share-for-share basis.

"Commission" means the Securities and Exchange Commission.

"Distribution Agent" means Harris Trust and Savings Bank.

"Distribution Date" means the business day as of which the
Distribution shall be effective, as determined by the board of directors of
BWI.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Executives" means current and former directors, officers and
employees, including any current and former in-house professionals (such as
accountants, lawyers, tax advisors, pension or other plan administrators,
and similar and dissimilar professionals).

"Form 8-A" means the Registration Statement on Form 8-A filed by PHC
with the Commission to effect the registration of the PHC Class A Common
Stock pursuant to the Exchange Act, as such registration statement may be
amended from time to time.

"Information Statement" means the short form information statement to
be sent to each holder of BWI Common Stock in connection with the
Distribution.

"Losses" means any and all losses, liabilities, claims, damages
(including exemplary and punitive damages), judgments, awards, fines,
penalties, obligations, payments, costs and expenses, including, without
limitation, the costs and expenses of any and all Actions, demands,
assessments, judgments, settlements, and compromises relating thereto and
reasonable attorney fees (including in-house counsel costs) and other legal
expenses in connection therewith.

"Parties" means BWI and PHC, and Party means BWI or PHC as the context
requires.

"PHC Business" means the PHC Group together with the business, assets,
liabilities, operations, occupancies and employee benefit and other plans
of the PHC Group.

"PHC Common Stock" means Class A Common Stock and Class B Common
Stock, collectively.

"PHC Group" means PHC and its direct and indirect subsidiaries as of
the Distribution Date.

"PHC Stock Option Plan" means the 1997 Stock Option and Incentive Plan
of PHC.

"Record Date" means the date in 1998 determined by BWI's board of
directors as the record date for determining the holders of BWI Common
Stock entitled to receive PHC Class A Common Stock in connection with the
Distribution.

ARTICLE II
THE DISTRIBUTION

Section 2.1. INFORMATION STATEMENT AND FORM 8-A. BWI and PHC shall
prepare, and BWI shall mail to the holders of BWI Common Stock as of the
Record Date, the Information Statement which shall set forth appropriate
disclosure concerning PHC, the Distribution and any other appropriate
matters. PHC shall also prepare, and PHC shall file with the Commission,
the Form 8-A; provided, however, that nothing contained in this Agreement
shall create an obligation for BWI to complete the Distribution, it being
understood that BWI, in its sole discretion, will decide if and when the
Distribution shall occur.

Section 2.2. COOPERATION. BWI and PHC shall cooperate in preparing,
filing with the Commission and causing to become effective any registration
statements or amendments thereto that are appropriate to reflect the
establishment of or amendments to any BWI or PHC employee benefit and other
plans.

Section 2.3. BLUE SKY LAWS. BWI and PHC shall take all such action
as may be necessary or appropriate under the securities or blue sky laws of
states or other political subdivisions of the United States in connection
with the transactions contemplated by this Agreement.

Section 2.4. RECORD DATE AND DISTRIBUTION DATE. BWI's board of
directors may, in its discretion, establish the Record Date and the
Distribution Date and any appropriate procedures in connection with the
Distribution. In no event shall the Distribution occur unless the
following conditions shall, unless waived by BWI, have been satisfied:

(a) all necessary regulatory approvals to be obtained by BWI or PHC
shall have been received;

(b) the Form 8-A shall have become effective under the Exchange
Act;

(c) BWI's board of directors shall have formally approved the
Distribution and shall not have abandoned, deferred or modified the
Distribution at any time prior to the Record Date;

(d) there shall have been no adverse change in the financial
condition of either BWI or PHC from the date hereof;

(e) there shall have been no adverse change in market conditions
from the date hereof; and

(f) BWI shall have received an opinion that the Distribution
will qualify as a tax-free spinoff under Section 355 of the Code.

Section 2.5. DELIVERY OF CERTIFICATES. On the Distribution Date,
subject to the conditions set forth in this Agreement, BWI shall deliver to
the Distribution Agent a certificate or certificates representing all of
the then outstanding shares of PHC Class A Common Stock held by BWI,
endorsed in blank, and shall instruct the Distribution Agent to distribute
to each holder of record of BWI Common Stock on the Record Date a
certificate or certificates representing such holder of record's allotted
share(s) of PHC Class A Common Stock as determined by BWI's board of
directors. PHC agrees to provide all certificates for shares of PHC Class
A Common Stock that the Distribution Agent shall require in order to effect
the Distribution.

Section 2.6. FRACTIONAL SHARES. No certificates or scrips
representing any fractional shares of PHC Class A Common Stock will be
issued to holders of BWI Common Stock as part of the Distribution. In lieu
of receiving fractional shares, each holder of BWI Common Stock who would
otherwise be entitled to receive a fractional share of PHC Class A Common
Stock pursuant to the Distribution will receive cash for such fractional
share. PHC and BWI agree that BWI shall instruct the Distribution Agent to
determine the number of whole shares and fractional shares of PHC Class A
Common Stock allocable to each holder of record of BWI Common Stock as of
the Record Date, to aggregate all such fractional shares into whole shares
and to sell the whole shares thereby obtained in the open market at then
prevailing prices on behalf of holders who otherwise would be entitled to
receive fractional share interests and to distribute to each such holder
such holder's ratable share of the net proceeds of such sale.

Section 2.7. FEES OF DISTRIBUTION AGENT. The fees and expenses of
the Distribution Agent shall be paid by BWI.

Section 2.8STOCK OPTION PLANS.

(a) With respect to any options held by PHC employees that were
granted under the BWI Stock Option Plan ("BWI Options"), the
Distribution will constitute a termination of employment from BWI
without cause. Each BWI Option held by a PHC employee which is
exercisable on and not exercised prior to the Distribution Date and
with respect to which the holder has not elected prior to the
Distribution Date to surrender in exchange for an option under the
PHC Stock Option Plan ("Priority Option") shall remain outstanding
and shall be exercisable only within a period of three months after
the Distribution Date according to its terms and the terms of the BWI
Stock Option Plan. The number of shares of BWI Common Stock subject
to, and the exercise price of such BWI Option after the Distribution
Date shall be determined in accordance with the requirements of
Section 424 of the Code and the regulations promulgated thereunder.
The exercise price of any such BWI Option shall be rounded to the
nearest $.01; the number of shares subject to any such BWI Option
shall be rounded to the nearest whole share; the aggregate Spread of
such BWI Option immediately after the Distribution Date shall be
equal to the Spread of such BWI Option immediately before the
Distribution Date. "Spread" means, as of the same date, the excess
of the fair market value of the shares subject to the option over the
aggregate option price.

(b) BWI and PHC shall cooperate and take all action necessary so
that as of the Distribution Date, each BWI Option held by a PHC
employee and which is either (i) exercisable on, and not exercised on
or prior to, the Distribution Date, or (ii) not exercisable on or
prior to the Distribution Date, and with respect to which the holder
has elected prior to the Distribution Date to surrender in exchange
for a Priority Option, shall both, without any action on the part of
the holder thereof, be considered to be surrendered to BWI in
exchange for a Priority Option. The number of shares of PHC Class B
Common Stock subject to and the exercise price of such Priority
Option shall be determined in accordance with the requirements of
Section 424 of the Code and the regulations promulgated thereunder.
The exercise price of any such Priority Option shall be rounded to
the nearest $.01; the number of shares subject to any such option
shall be rounded to the nearest whole share; the aggregate Spread of
such Priority Option immediately after the Distribution Date shall be
equal to the Spread of the BWI Option surrendered for it immediately
before the Distribution Date; and such Priority Option shall be
granted under the PHC Stock Option Plan with an outstanding exercise
period and vesting schedule which is the same as the exercise period
and vesting schedule of the BWI Option surrendered for it.

Section 2.9. PROFIT SHARING PLANS.

(a) After the Distribution Date, employees of PHC will no longer be
eligible to participate in the qualified profit sharing plan
maintained by BWI ("BWI Profit Sharing Plan"). On or before the
Distribution Date, PHC shall establish a similar profit sharing plan
("PHC Profit Sharing Plan"), including a 401(k) feature and a PHC
Common Stock Fund, in lieu of a BWI Common Stock Fund. The PHC
Profit Sharing Plan shall also provide for a BWI Common Stock Fund
into which any BWI Common Stock held by PHC employees under the BWI
Profit Sharing Plan shall be transferred, but no further investments
in BWI Common Stock may be made under the PHC Profit Sharing Plan.

(b) BWI shall also amend the BWI Profit Sharing Plan before the
Distribution Date to provide for a PHC Common Stock Fund into which
the PHC Class A Common Stock received as a distribution from BWI on
the BWI Common Stock held by the BWI Profit Sharing Plan shall be
placed. No further investments in PHC Common Stock may be made by
participants in the BWI Profit Sharing Plan.

(c) On or promptly after the Distribution Date, all assets in the
BWI Profit Sharing Plan relating to PHC employees shall be
transferred to the PHC Profit Sharing Plan and BWI and the BWI Profit
Sharing Plan shall have no further obligations or liabilities to such
PHC employees.

Section 2.10. TAX COVENANTS. After the Distribution Date neither BWI
or any member of the BWI Group nor PHC or any member of the PHC Group,
shall take any action, or permit any action to be taken, which could
reasonably be expected to prevent the Distribution from qualifying as a
tax-free distribution under Section 355 of the Code.

ARTICLE III
ASSUMPTION, INDEMNITY AND RELEASE

Section 3.1. INDEMNITIES.

(a) COMPREHENSIVE OBLIGATIONS, CLAIMS AND LIABILITIES. PHC, on its
behalf and on behalf of the PHC Group, does hereby assume and agree
to pay, perform and discharge all obligations, liabilities and Losses
in any way arising out of or relating to the PHC Business (whether
known or unknown, absolute, contingent or otherwise, matured or not
matured, accrued or unaccrued, of whatever nature and whenever
arising and regardless of when discovered, and including contingent
liabilities and obligations as have accrued or will accrue to the BWI
Group relating to the past, present or future PHC Business), or to
acts or events occurring or conditions existing with respect to the
PHC Business, whether before, on or after the Distribution Date,
including without limitation (a) all contracts, agreements,
commitments, undertakings, notes, letters of credit, bonds,
guarantees, warranties, indemnities, accounts payable, purchase
orders, leases, licenses, liens, mortgages, restrictions and
covenants, (b) all employee or employment related obligations and
liabilities, (c) all environmental conditions and responsibilities
(including without limitation hazardous and toxic waste and
material), and (d) all Actions, including those relating to damage or
injury to person, property, business or reputation (all of the
foregoing collectively the "Assumed Liabilities"); PROVIDED, HOWEVER,
that the Assumed Liabilities do not include the obligations of BWI
pursuant, and subject to the provisions of, the Ancillary Agreements.
The PHC Group's obligations with respect to the Assumed Liabilities
shall be unconditional and primary and shall be without regard to,
and shall not be offset or limited by, any reserves that are or may
have been recorded on the books of the BWI Group or the PHC Group.

(b) INDEMNITIES AGAINST ASSUMED LIABILITIES. The PHC Group shall
jointly and severally indemnify, protect, defend and hold harmless
the BWI Group and each of its successors, assigns, officers,
directors, employees and benefit plans, including ERISA plans (each,
an "Indemnified Person" and, where the context so requires, an
"Indemnified BWI Person") from and against any and all Assumed
Liabilities, regardless of any negligence of the Indemnified Person
that might have given rise or contributed thereto, and shall
reimburse to such Indemnified Person all costs reasonably incurred by
such Indemnified Person on account of the Assumed Liabilities.

(c) EMPLOYEE OBLIGATIONS AND INDEMNITIES. Without limiting Section
3.1(a) or (b), the PHC Group jointly and severally agrees to pay all
amounts due to its employees under any employment contract,
arrangement or other employment agreement, payroll practice or
employee benefit plan and to make no changes or amendments to any
employee benefit plan after the date of the Distribution which would
diminish the vested interest of any employee with respect to such
benefit plan. Further, the PHC Group jointly and severally agrees to
indemnify, protect, defend and hold harmless the BWI Group against
all Actions by employees with respect to amounts due to PHC Group
employees under any employment contract, arrangement or other
employee agreement, benefit plan or payroll practice.

(d) BWI INDEMNITIES. BWI, on its behalf and on behalf of the BWI
Group, shall indemnify, protect, defend and hold harmless PHC and the
PHC Group against all Losses in any way arising out of the BWI
Business, whether before, on or after the Distribution Date, other
than the Assumed Liabilities.

Section 3.2. SECURITIES INDEMNITY.

(a) BY PHC. PHC shall indemnify, protect, defend and hold harmless
each Indemnified BWI Person (and shall reimburse such Indemnified BWI
Person for all costs and expenses reasonably incurred) with respect
to any and all Losses of such Indemnified BWI Person arising out of
or due to, directly or indirectly, any claim that the information
provided by the PHC Group and included in the Information Statement
or the Form 8-A, is false and misleading with respect to any material
fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading
or any failure to perform or violation of any provision of this
Agreement by the PHC Group.

(b) BY BWI. BWI shall indemnify, protect, defend and hold harmless
the PHC Group and each of its successors, assigns, officers,
directors, employees and benefit plans, including ERISA plans (each,
an "Indemnified Person" and, where the context so requires, an
"Indemnified PHC Person") (and shall reimburse such Indemnified PHC
Person for all costs and expenses reasonably incurred) with respect
to any and all Losses of such Indemnified PHC Person arising out of
or due to, directly or indirectly, any claim that the information
provided by the BWI Group and included in the Information Statement
or the Form 8-A, is false and misleading with respect to any material
fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading
or any failure to perform or violation of any provision of this
Agreement by the BWI Group; PROVIDED, HOWEVER, that under no
circumstance shall BWI be required to indemnify any Indemnified PHC
Person where the information at issue (or the data from which such
information was derived) was supplied to the BWI Group by the PHC
Group or an Indemnified PHC Person.

Section 3.3. PROCEDURES.

(a) In order for an Indemnified Person to be entitled to the
benefits of Section 3.1(b), Section 3.1(c) or Section 3.2 with
respect to a claim by a third party ("Third Party Claim"), such
Indemnified Person shall notify the indemnitor promptly after receipt
by such Indemnified Person of notice of the Third Party Claim;
PROVIDED, HOWEVER, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent
that the indemnitor shall have been actually prejudiced as a result
of such failure. Thereafter, the Indemnified Person shall deliver to
the indemnitor promptly after the Indemnified Person's receipt
thereof, copies of all notices and documents (including court papers)
received by the Indemnified Person with respect to the Third Party
Claim.

(b) If a Third Party Claim is made against an Indemnified Person,
the indemnitor shall defend and shall have the right to compromise,
at its own expense, the Third Party Claim. The Indemnified Person
will cooperate, at the expense of the indemnitor in connection with
such defense. Such cooperation shall include the retention and, upon
the indemnitor's request, the provision to the indemnitor of records,
compilations and information which are, in the indemnitor's
reasonable opinion, relevant to such Third Party Claim, access to
premises and making employees available on a mutually convenient
basis to be interviewed, to testify and to provide additional
information and explanation of any material provided. The
Indemnified Person shall have the right, at its own expense, to
participate in the defense of a Third Party Claim. In no event shall
an Indemnified Person compromise a Third Party Claim without the
reasonable consent of the indemnitor. The indemnitor shall not,
without the reasonable consent of the Indemnified Person, compromise,
or refuse to compromise, a Third Party Claim which seeks or provides
for equitable relief or otherwise affects the operations or the
contingent liabilities of the Indemnified Person.

Section 3.4. ANCILLARY AGREEMENTS. Nothing in this Agreement shall
be construed to limit in any way the terms of any Ancillary Agreement.

Section 3.5. INTENT. By way of amplification and not limitation, the
intent of the Parties, as between themselves, is that, subject to the
Ancillary Agreements and the releases and waivers contained in Section 3.6
of this Agreement, (a) the PHC Group and the BWI Group shall be considered
as if they had never been Affiliates, (b) all actions, by whomsoever taken
or omitted, relating to the PHC Business on or prior to the Distribution
Date shall be deemed taken or omitted by the PHC Group, and all actions by
whomsoever taken or omitted, relating to the BWI Business on or prior to
the Distribution Date shall be deemed taken or omitted by the BWI Group,
and (c) the PHC Group shall indemnify, protect, defend and hold harmless
the BWI Group from all liabilities relating to the PHC Business accruing
before, on or after the Distribution Date, and the BWI Group shall
indemnify, protect, defend and hold harmless the PHC Group from all
liabilities relating to the BWI Business accruing before, on or after the
Distribution Date.

Section 3.6. RELEASE AND WAIVER.

(a) BY THE BWI GROUP. BWI, on its behalf and on behalf of the BWI
Group, does hereby waive irrevocably in favor of, release, remise,
acquit, forever discharge, and shall forever be barred from asserting
against, the PHC Group and the PHC Executives all, of all and from
all Actions and Losses that the BWI Group may have or claims to have
against the PHC Group or the PHC Executives, for events, acts or
omissions occurring or taken on or prior to the Distribution Date,
including, without limitation, errors, omissions, malpractice, breach
of fiduciary duty, ultra vires acts and other similar or dissimilar
acts or omissions which have been, could be or might be asserted by
the BWI Group against the PHC Group or any PHC Executives for acts or
omissions in the conduct of affairs for, or advice or counsel to, the
BWI Group on or prior to the Distribution Date. Nothing contained in
this Section 3.6(a) shall apply to, or limit the scope of, Section
3.1 or Section 3.2(a) hereof.

(b) BY THE PHC GROUP. PHC, on its behalf and on behalf of the PHC
Group, does hereby waive irrevocably in favor of, release, remise,
acquit, forever discharge, and shall forever be barred from asserting
against, the BWI Group and the BWI Executives all, of all and from
all Actions and Losses that the PHC Group may have or claims to have
against the BWI Group or the BWI Executives, for events, acts or
omissions occurring or taken on or prior to the Distribution Date,
including, without limitation, errors, omissions, malpractice, breach
of fiduciary duty, ultra vires acts and other similar or dissimilar
acts or omissions which have been, could be or might be asserted by
the PHC Group against the BWI Group or any BWI Executives for acts or
omissions in the conduct of affairs for, or advice or counsel to, the
PHC Group on or prior to the Distribution Date. Nothing contained in
this Section 3.6(b) shall apply to, or limit the scope of, Section
3.2(b) hereof.

ARTICLE IV
MISCELLANEOUS

Section 4.1. DIFFERING FACTS. It is understood and agreed by and
between PHC and BWI that the facts and assumptions in respect of which this
Agreement is made may hereafter prove to be other than or different from
the facts and assumptions now known or made by either of them, or believed
by either of them to be true. Each of PHC and BWI expressly accepts and
assumes the risk of the facts and assumptions proving to be different, and
each of them agrees that all the terms and conditions of this Agreement
shall be in all respects effective and not subject to termination or
rescission by any such difference in facts or assumptions.

Section 4.2. DUE INQUIRY. Each of PHC and BWI represents and
warrants to the other that it (a) has made due and diligent inquiry into
the facts and matters which are the subject matter of this Agreement; (b)
fully understands the legal effect of this Agreement; and (c) is duly
authorized and empowered to execute, deliver and perform this Agreement
according to its terms and conditions.

Section 4.3. NON-RECOURSE. BWI makes no (and specifically disclaims
all) representations and warranties whatsoever, including without
limitation that there are any rights or interests associated with the PHC
Business or the Assumed Liabilities. The PHC Group shall have no recourse
whatsoever, and hereby waives all recourse, against the BWI Group and the
BWI Executives in connection with, arising from or relating to the PHC
Business or the Assumed Liabilities.

Section 4.4. GOVERNING LAW; SUBMISSION TO JURISDICTION; INJUNCTION;
ARBITRATION. This Agreement shall be deemed an agreement and contract made
under the laws of the State of Indiana and all matters arising under,
growing out of, or in connection with this Agreement shall, for all
purposes, be governed by, and construed in accordance with, the laws of the
State of Indiana, without giving effect to such State's conflict of laws
rules or principles.

The Parties agree that any action for injunction or specific
performance between them arising out of or in connection with this
Agreement shall be brought only in, and tried by the United States District
Court for the Southern District of Indiana or, absent subject matter
jurisdiction by such Federal Court, in the Circuit Court of Marion County,
Indiana and BWI and PHC each hereby submit to the personal jurisdiction of
such courts for such purpose.

The Parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the courts and
as provided above in this section, such injunctive relief being in addition
to any other remedy to which such Party is entitled at law or in equity.

Notwithstanding any other provision of this Agreement to the contrary,
the Parties agree that any and all disputes with respect to any claim for
indemnification pursuant to the provisions of Article III of this
Agreement, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by a
panel of three arbitrators appointed pursuant to such Rules, and judgment
upon the award rendered by such arbitrators may be entered in any court
having jurisdiction. Such arbitrators shall not have the authority or
power to reform, alter, amend or modify any of the terms or conditions of
this Agreement or to enter an award which reforms, alters, amends or
modifies such terms or conditions. The decision of such arbitrators shall
be in writing, setting forth both findings of fact and of law, and shall be
final and conclusive upon the Parties; and no suit at law or in equity
based on such dispute, controversy or claim shall be instituted by any
Party hereto, other than to enforce the award of such arbitrators. Such
arbitration shall be conducted in Indianapolis, Indiana, or in such other
location as the Parties may agree.

In the event of a dispute, the prevailing Party shall be entitled to
be reimbursed by the nonprevailing Party for such prevailing Party's
reasonable attorney's fees and other expenses.

The Parties agree that as a precondition to the commencement of
arbitration by any Party, the dispute must be submitted to non-binding
mediation with a mediator agreed to by both Parties. If the Parties cannot
agree on a mediator within 14 days from the date of a request for
mediation, the dispute will be mediated by a person selected in accordance
with the rules of the American Arbitration Association.

Section 4.5. THIRD PARTY BENEFICIARIES. Except for each Indemnified
Person and the PHC and BWI Executives, all of which are intended
beneficiaries of the provisions of this Agreement referring to them,
neither this Agreement nor any provision hereof shall inure to the benefit
of any person or entity other than the PHC Group and the BWI Group.

Section 4.6. SEVERABILITY. The provisions of this Agreement shall be
severable if any of the provisions herein (including any provisions within
a single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent
permitted by law. To the extent feasible, any provision held invalid, void
or unenforceable shall be reformed so as to make it valid and enforceable
and to reflect as nearly as possible the intent of the Parties (including
that set forth in Section 3.5 hereof).

Section 4.7. ENTIRETY OF AGREEMENT. This Agreement constitutes the
entire understanding of the Parties with respect to the subject matter
hereof, superseding all negotiations, prior discussions and prior
agreements and understandings relating to such subject matter. This
Agreement does not govern the Ancillary Agreements.

Section 4.8. AMENDMENT AND WAIVER. This Agreement may not be altered
or amended except by an instrument in writing executed by the Party or
Parties to be charged with such amendment. No term or provision of this
Agreement shall be deemed waived and no breach excused, unless such waiver
or consent is in writing and signed by the Party claimed to have waived or
consented. No waiver shall constitute a continuing waiver, and no waiver
of a provision shall be deemed or construed to constitute a waiver of any
other provision whether similar or not.

Section 4.9. ASSIGNMENT/DELEGATION. Neither Party hereto may assign
its rights or delegate any of its duties under this Agreement without the
prior written consent of the other Party. This Agreement shall be binding
upon, and shall inure to the benefit of, the Parties hereto and their
respective successors and permitted assigns.

Section 4.10. NOTICES. All notices and other communications
hereunder shall be in writing and delivered by hand, by facsimile, by
United States Postal Service, postage prepaid, registered or certified mail
(return receipt requested) or by reputable overnight courier service
(charges paid by sender, next business day delivery and delivery
verification requested) and shall be deemed given (a) when delivered by
hand, (b) when transmitted by facsimile (with either (i) receipt confirmed
or (ii) hard copy deposited within one business day of such transmission
with a reputable overnight courier service as above provided), (c) three
business days after mailing if mailed through the United States Postal
Service as above provided, or (d) one business day after depositing with a
reputable overnight courier service as above provided, in each case
addressed to the Parties as follows:

(a) if to BWI:

Bindley Western Industries, Inc.
8909 Purdue Road
Indianapolis, IN 46268
Attention: President
Facsimile: (317) 704-4603

(b) if to PHC:

Priority Healthcare Corporation
285 West Central Parkway
Altamonte Springs, FL 32714
Attention: President
Facsimile: (407) 869-4978

subject to the right of each Party to designate a different address in the
United States and/or addressee by notice similarly given at least 15 days
before the effectiveness of such new designation.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their respective officers, each of whom is duly authorized
as of the date first written above.

BINDLEY WESTERN INDUSTRIES, INC.

By: /S/ WILLIAM E. BINDLEY
William E. Bindley
President and Chief Executive Officer

PRIORITY HEALTHCARE CORPORATION

By: /S/ ROBERT L. MYERS
Robert L. Myers
President and Chief Executive Officer

EXHIBIT 20.1

INFORMATION STATEMENT

CONCERNING THE DISTRIBUTION OF
10,214,286 SHARES OF

PRIORITY HEALTHCARE CORPORATION

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

BINDLEY WESTERN INDUSTRIES, INC.

This Information Statement is being furnished by Bindley Western Industries,
Inc., an Indiana corporation ("BWI"), in connection with the distribution (the
"Distribution") to holders of shares of common stock, par value $.01 per share,
of BWI (the "BWI Common Stock") of .448 shares of the Class A Common Stock,
par value $.01 per share (the "Priority Class A Common Stock"), of Priority
Healthcare Corporation, an Indiana corporation ("Priority"), for each share of
BWI Common Stock owned on December 15, 1998 (the "Record Date"). The
Distribution will result in all of the outstanding shares of Priority Class A
Common Stock being distributed to holders of BWI Common Stock. Priority also
has outstanding 2,301,476 shares of its Class B Common Stock, par value $.01
per share (the "Priority Class B Common Stock" and together with the Priority
Class A Common Stock, the "Priority Common Stock"), of which 2,300,000 shares
were sold to the public by Priority in October of 1997 and the remainder of
which were granted to the non-employee directors of Priority as a portion of
their retainer. The Distribution will result in approximately 81.6% of the
outstanding shares of the Priority Common Stock being distributed to holders of
BWI Common Stock.

Certificates for Priority Class A Common Stock will be mailed on or about
December 31, 1998 to holders of record of BWI Common Stock on the Record Date.
The holders of shares of BWI Common Stock will not be required to pay any cash
or other consideration for the shares of Priority Class A Common Stock received
in the Distribution, nor will they be required to surrender or exchange shares
of BWI Common Stock in order to receive Priority Class A Common Stock. As a
result of the Distribution, Priority will cease to be a subsidiary of BWI.
Following the Distribution, BWI will not own any shares of Priority Common
Stock. See "Relationship and Transactions Between BWI and Priority."

All shares of Priority Class A Common Stock received in the Distribution will
be fully paid and nonassessable and the holders thereof will not be entitled to
preemptive rights. Priority Class A Common Stock will not be listed on any
securities exchange or any automated dealer quotation system and there will be
no trading market for the Priority Class A Common Stock. However, Priority
Class A Common Stock will automatically be converted into shares of Priority
Class B Common Stock on a share-for-share basis upon the request of the holder
thereof and upon any transfer or purported transfer to any person other than:
(i) pursuant to the Distribution; or (ii) family members of the holder of
Priority Class A Common Stock, or trusts for the benefit of or entities
controlled by the holder or family members of the holder. Because of this
automatic conversion feature, shares of Priority Class A Common Stock will be
freely transferable, except for shares received by persons who may be deemed to
be "affiliates" of Priority under the Securities Act of 1933, as amended. See
"Market for Priority Common Stock."

The two classes of Priority Common Stock entitle holders to the same rights
and privileges, except that holders of shares of Priority Class A Common Stock
are entitled to three votes per share on all matters submitted to a vote of
holders of Priority Common Stock, and holders of shares of Priority Class B
Common Stock are entitled to one vote per share on such matters. The two
classes of Priority Common Stock vote together as a single class on all matters
except as otherwise required by applicable law.

BWI has received an opinion of PricewaterhouseCoopers LLP to the effect that
the Distribution generally will not be taxable for U.S. federal income tax
purposes to BWI and its common shareholders. See "The Distribution-Federal
Income Tax Consequences."

____________________________

NO VOTE OF BWI SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE
DISTRIBUTION. THEREFORE, WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE
REQUESTED NOT TO SEND US A PROXY.
____________________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________________

The date of this Information Statement is December 16, 1998.
<PAGE>
THE DISTRIBUTION

GENERAL

On October 23, 1998, the Board of Directors of BWI declared a distribution
to the holders of BWI Common Stock of the 10,214,286 shares of Priority Class A
Common Stock owned by BWI on the basis of .448 shares of Priority Class A
Common Stock for each share of BWI Common Stock outstanding on December 15,
1998, which is the Record Date for the Distribution. The fraction of a share
of Priority Class A Common Stock that will be distributed for each share of BWI
Common Stock is based upon the 10,214,286 shares of Priority Class A Common
Stock owned by BWI divided by the 22,782,545 shares of BWI Common Stock
outstanding on the Record Date.

BWI and Priority have entered into a Distribution Agreement (the
"Distribution Agreement") which contains provisions regarding the mechanics of
the Distribution, conditions to the obligations of BWI and Priority to carry
out the Distribution and the relationship of BWI and Priority following the
Distribution. See "Relationship and Transactions Between BWI and Priority."

HOLDERS OF BWI COMMON STOCK WITH INQUIRIES RELATING TO THE DISTRIBUTION
SHOULD CALL 317-704-4000, EXT. 4305, MONDAY THROUGH FRIDAY, 9:00 A.M. TO 5:00
P.M., INDIANAPOLIS TIME.

MANNER OF EFFECTING THE DISTRIBUTION

BWI will effect the Distribution on December 31, 1998 (the "Distribution
Date") by delivering all of the issued and outstanding shares of Priority Class
A Common Stock to Harris Trust and Savings Bank, Chicago, Illinois, as the
distribution agent (the "Distribution Agent"), for distribution to the holders
of record of BWI Common Stock on the Record Date. All of the shares of
Priority Class A Common Stock will be fully paid and nonassessable and the
holders thereof will not be entitled to preemptive rights. Certificates for
Priority Class A Common Stock will be mailed to BWI shareholders on or about
December 31, 1998.

The holders of shares of BWI Common Stock will not be required to pay any
cash or other consideration for the shares of Priority Class A Common Stock
received in the Distribution, nor will they be required to surrender or
exchange shares of BWI Common Stock in order to receive Priority Class A Common
Stock.

No certificates representing fractional shares of Priority Class A Common
Stock will be issued to BWI shareholders as part of the Distribution. In lieu
of receiving fractional shares of Priority Class A Common Stock, each holder of
BWI Common Stock who would otherwise be entitled to receive a fractional share
will receive cash for such fractional interest. The Distribution Agent will,
as soon as practicable after the Distribution Date, aggregate fractional shares
of Priority Class A Common Stock into whole shares of Priority Class A Common
Stock, and will sell them in the open market and distribute the total net sale
proceeds pro rata to BWI shareholders entitled to fractional interests. See
"-Federal Income Tax Consequences."

FEDERAL INCOME TAX CONSEQUENCES

BWI has received an opinion of PricewaterhouseCoopers LLP (the "Spin-Off
Opinion") that for U.S. federal income tax purposes, the Distribution will
qualify as a tax-free spin-off under Section 355 of the Internal Revenue Code
of 1986, as amended (the "Code"), and will not be taxable under Section 355(e)
of the Code. The Spin-Off Opinion is based on the accuracy of factual
representations made by BWI, Priority and William E. Bindley (the Chairman of
the Board, Chief Executive Officer and President of BWI), and certain other
assumptions, information, data, documentation and other materials that
PricewaterhouseCoopers LLP deemed necessary.

The Spin-Off Opinion represents PricewaterhouseCoopers LLP's best judgment
of how a court would rule. However, the Spin-Off Opinion is not binding upon
either the Internal Revenue Service (the "IRS") or any court. A ruling has not
been, and will not be, sought from the IRS with respect to the U.S. federal
income tax consequences of the Distribution. Although in 1998 BWI did receive
a ruling from the IRS that a distribution of Priority Class A Common Stock
would be a tax-free distribution under Section 355 of the Code, the facts and
circumstances of the distribution which provided the basis for that ruling are
different from those presented by the Distribution. So long as the
Distribution qualifies under Section 355 and is not taxable under Section
355(e), in the opinion of PricewaterhouseCoopers LLP, the principal federal
income tax consequences of the Distribution will be as follows.

No gain or loss will be recognized to BWI upon the distribution of all of
the Priority Class A Common Stock to the common shareholders of BWI. No gain
or loss will be recognized to (and no amount will be included in the income of)
holders of BWI Common Stock upon the receipt of the Priority Class A Common
Stock distributed to them (including any fractional share interests of Priority
Class A Common Stock to which they may be entitled) in the Distribution.
Holders of BWI Common Stock will recognize gain or loss on the receipt of cash
in lieu of fractional shares of Priority Class A Common Stock.

The aggregate basis of the stock of BWI and Priority in the hands of each
BWI common shareholder (including any fractional share interests of Priority
Class A Common Stock to which they may be entitled) after the Distribution
will, in each instance, be the same as the basis of the BWI Common Stock held
by such shareholder immediately before the Distribution, allocated in
proportion to the fair market value of each in accordance with applicable
Treasury Regulations. Such allocation must be calculated separately for each
block of BWI Common Stock (a block representing shares purchased at the same
time and at the same cost).

The holding period of the Priority Class A Common Stock received by each
holder of BWI Common Stock (including any fractional share interests of
Priority Class A Common Stock to which they may be entitled) will include the
holding period of the BWI Common Stock with respect to which the Distribution
will be made, provided the BWI stock is held as a capital asset by such
shareholder on the date of the Distribution.

The foregoing is only a summary of the material federal income tax
consequences of the Distribution under current law and does not take into
account any special circumstances that may apply to particular shareholders.
Each shareholder should consult their own tax advisor as to the particular
consequences of the Distribution to such shareholder, including the application
of state, local and foreign tax laws, and as to possible changes in tax laws
that may affect the tax consequences described above. This summary may not be
applicable to shareholders who received their BWI Common Stock pursuant to the
exercise of options or otherwise as compensation or who are not citizens or
residents of the United States.

As noted above, the Spin-Off Opinion is not binding on the IRS or the
courts. Holders of BWI Common Stock should be aware that the requirements of
Code Section 355 pertaining to business purpose, active trade or business, and
absence of a device for distribution of earnings and profits, as well as the
requirements of Section 355(e) pertaining to a plan or series of related
transactions to acquire 50 percent or more by vote or value of BWI or Priority,
are highly dependent on factual interpretations, are to a significant extent
subjective in nature, and have a relative absence of authority addressing their
application to the particular facts presented by the Distribution.
Accordingly, the IRS and/or a court could reach a conclusion that differs from
the Spin-Off Opinion.

In order for a distribution of stock of a subsidiary to qualify under
Section 355, it must be motivated, in whole or substantial part, by one or more
corporate business purposes. The application of this test is uncertain due to
its subjective nature. It has been represented in the Spin-Off Opinion that
the Distribution will be motivated in whole or substantial part by the
following corporate business purposes: (i) to permit Priority to motivate and
attract key management and other employees, so that they will be incented
adequately to execute certain organizational and operational changes, by
providing compensation packages that permit the issuance of stock options and
other equity incentives tied directly and exclusively to the stock of Priority,
and (ii) to enable BWI and Priority to adopt strategies and pursue objectives
that are more appropriate to their respective businesses and stages of growth,
including resolution of certain customer-competitor issues that have arisen
with respect to BWI's ownership of Priority Class A Common Stock. This
representation is supported by information provided by an independent
compensation consulting company, as well as statements made by current Priority
employees. Based upon the representation and the supporting documentation, it
is the opinion of PricewaterhouseCoopers LLP that the Distribution should
satisfy the business purpose requirement of Section 355. Similar rationales
have been accepted by the IRS in different circumstances as sufficient to meet
the business purpose requirements of Section 355. However, because of the
inherently subjective nature of important elements of the business purpose
requirement, and because the IRS may challenge the representations or
statements upon which PricewaterhouseCoopers LLP relies, there can be no
assurance that the IRS will not successfully assert that the business purpose
requirement is not satisfied.

Section 355 requires that both the distributing corporation and the
controlled corporation must be engaged in the active conduct of a trade or
business that was actively conducted for the five year period preceding the
Distribution. The application of this test is uncertain due to its subjective
nature. In making this determination, if a corporation engaged in the active
conduct of one trade or business during that five-year period and purchased,
created, or otherwise acquired the assets of another trade or business in the
same line of business, then the acquisition of that other business is
ordinarily treated as an expansion of the original business, all of which is
treated as having been actively conducted during that five-year period, unless
that purchase, creation, or other acquisition effects a change of such a
character as to constitute the acquisition of a new or different business.
Based upon representations made to PricewaterhouseCoopers LLP and its review of
certain documents, it is the opinion of PricewaterhouseCoopers LLP that the
businesses directly conducted by BWI and by Priority (the latter being the drug
wholesale business formerly known as the Charise Charles division of BWI, thus
excluding the businesses conducted by IV-1, Inc. and its subsidiaries) will
satisfy the active trade or business requirement of Section 355. However,
because of the inherently subjective nature of important elements of the active
trade or business requirement, and because the IRS may challenge the
representations upon which PricewaterhouseCoopers LLP relies, there can be no
assurance that the IRS will not successfully assert that the active trade or
business requirement is not satisfied.

The distributing company's distribution of stock must not be used
principally as a device for the distribution of earnings and profits of the
distributing company or the company to be distributed. A device can include a
transaction that effects a recovery of basis. Treasury Regulations provide
that this test is applied based on all of the facts and circumstances,
including the presence or absence of factors described in the Regulations as
"device factors" and "nondevice factors" including the relative strength of
such factors. The application of this test is uncertain due to its subjective
nature. Based upon the representations made in the Spin-Off Opinion, it is the
opinion of PricewaterhouseCoopers LLP that the Distribution will not be
considered a transaction used principally as a device for the distribution of
earnings and profits of either BWI or Priority. However, because of the
inherently subjective nature of the device test (including the subjectivity
involved in assigning weight to various factors), and because the IRS may
challenge the representations upon which PricewaterhouseCoopers LLP relies,
there can be no assurance that the IRS will not successfully assert that the
Distribution was used principally as a device for the distribution of earnings
and profits.

If the Distribution fails to qualify under Section 355 of the Code as a
tax-free spin-off, each holder of BWI Common Stock on the Record Date of the
Distribution will be treated as having received a taxable corporate
distribution in an amount equal to the fair market value (on the effective date
of the Distribution) of the Priority Class A Common Stock distributed to such
holder of BWI Common Stock, including fractional shares. In this event, the
Distribution would be treated as a dividend to the extent of a shareholder's
pro rata share of BWI's current and accumulated earnings and profits. In
addition, BWI would be subject to a material corporate-level U.S. federal
income tax.

Code Section 355(e) generally provides that a company that distributes
shares of a subsidiary in a spin-off that is otherwise tax-free will incur U.S.
federal income tax liability if 50 percent or more, by vote or value, of the
capital stock of either the company making the distribution or the distributed
subsidiary is acquired by one or more persons acting pursuant to a plan or a
series of related transactions that includes the spin-off. Stock acquired by
certain related persons is aggregated in determining whether this 50 percent
test is met. There is a presumption that any acquisition of 50 percent or
more, by vote or value, of the capital stock of the distributing company or the
distributed subsidiary occurring two years before or after the spin-off is
pursuant to a plan that includes the spin-off. However, the presumption may be
rebutted by establishing that the spin-off and the acquisition are not part of
a plan or a series of related transactions. Based on the representations of
BWI and Priority, and the assumption that the Distribution is not part of a
plan that is outside the knowledge of BWI and Priority pursuant to which one or
more persons will acquire directly or indirectly 50 percent or more by vote or
value of the capital stock of BWI or of Priority, it is the opinion of
PricewaterhouseCoopers LLP that the Distribution will not be taxable under Code
Section 355(e). However, there can be no assurance that the IRS will not
successfully assert that the Distribution is taxable under Code Section 355(e).
If the Distribution is taxable under Section 355(e), BWI will incur a material
corporate level U.S. federal income tax liability. However, no gain or loss
will be attributable to holders of BWI Common Stock (except with respect to
cash received in lieu of fractional shares).

BWI does not intend to effect the Distribution if, prior to the Distribution
Date, BWI becomes aware of circumstances that would result in the Distribution
being a taxable transaction.

BWI, but not the holders of the BWI Common Stock, will be indemnified by
Priority if the actions or omissions of Priority materially contribute to a
determination that BWI is subject to a tax liability in connection with the
Distribution. See "Relationship and Transactions Between BWI and Priority-Tax
Sharing Agreement". However, there can be no assurance that BWI will be
successful in recovering the full amount of such tax liability under the
indemnification arrangements with Priority.

Additional information will be provided to BWI shareholders after the
Distribution Date concerning the calculation of the new tax basis in their
shares of BWI Common Stock and Priority Class A Common Stock, the tax treatment
of cash received in lieu of fractional shares and certain statements which are
required to be attached to the applicable federal income tax returns of holders
of BWI Common Stock.

MARKET FOR PRIORITY COMMON STOCK

Priority Class A Common Stock will not be listed on any securities exchange
or any automated dealer quotation system and there will be no trading market
for the Priority Class A Common Stock. However, Priority Class A Common Stock
will automatically be converted into shares of Priority Class B Common Stock on
a share-for-share basis upon the request of the holder thereof and upon any
transfer or purported transfer to any person other than: (i) pursuant to the
Distribution; or (ii) family members of the holder of Priority Class A Common
Stock, or trusts for the benefit of or entities controlled by the holder or
family members of the holder. Because of this automatic conversion feature,
shares of Priority Class A Common Stock will be freely transferable, except for
shares received by persons who may be deemed to be "affiliates" of Priority
under the Securities Act of 1933, as amended.

Priority Class B Common Stock is listed on the Nasdaq National Market System
under the symbol "PHCC." Prior to October 24, 1997, there was no public market
for the Priority Class B Common Stock. The following table sets
forth the high and low sales quotations for the Priority Class B Common Stock
as reported by the Nasdaq National Market System for the periods indicated,
commencing October 24, 1997:

<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C> <C> <C>
Fourth Quarter, 1997 (from October 24, $16.500 $14.000
1997)
First Quarter, 1998 18.250 13.500
Second Quarter, 1998 19.875 17.125
Third Quarter, 1998 23.250 17.750
Fourth Quarter, 1998 (through December 10, 38.750 19.750
1998)
</TABLE>

DIVIDENDS

Priority has announced that it does not intend to pay cash dividends on
Priority Common Stock in the foreseeable future, but rather intends to use
future earnings principally to support operations and to finance expansion and
possible acquisitions. The payment of cash dividends in the future will be at
the discretion of Priority's Board of Directors and will depend on a number of
factors, including Priority's financial condition, capital requirements, future
business prospects, and such other factors as Priority's Board of Directors may
deem relevant. In addition, Priority's credit agreement limits the payment of
dividends without the lender's consent. Subject to the terms of any preferred
stock created by Priority's Board of Directors, each outstanding share of
Priority Common Stock will be entitled equally to any dividends as may be
declared from time to time by Priority's Board of Directors.

BWI has paid quarterly cash dividends on BWI Common Stock of two cents per
share since September of 1993. On June 3, 1998, a 4-for-3 stock split of BWI
Common Stock was effected in the form of a stock dividend to all shareholders
of record at the close of business on May 21, 1998. Future dividends will be
paid in accordance with declarations by the Board of Directors of BWI in its
sole discretion. BWI's primary bank line of credit agreement requires BWI to
maintain specified levels of working capital and net worth, which may limit
BWI's ability to pay dividends in the future.

BUSINESS

BWI

BWI was incorporated in 1983 under the laws of the State of Indiana and has
its principal executive office at 8909 Purdue Road, Indianapolis, Indiana
46268. BWI is the country's fifth largest (in terms of annual sales) wholesale
distributor of pharmaceuticals and related health care products. Its product
lines include ethical pharmaceuticals (prescription drugs), dialysis supplies,
health and beauty care products and home health care merchandise. BWI's
wholesale drug customer base includes chain drug companies which operate their
own warehouses, individual drug stores, both chain and independent, hospitals,
clinics, HMOs, state and federal government agencies and other health care
providers.

Following the Distribution, BWI will not hold any shares of Priority Common
Stock. BWI will continue to be a publicly held corporation whose common shares
are traded on the New York Stock Exchange under the symbol "BDY."

PRIORITY

BACKGROUND

Priority was formed by BWI on June 23, 1994 as an Indiana corporation to
focus on the distribution of products and provision of services to the
alternate site segment of the healthcare industry. Priority conducts the
business activities of alternate site healthcare companies acquired by BWI or
Priority in five transactions since February 1993. The principal executive
offices of Priority are located at 285 West Central Parkway, Altamonte Springs,
Florida 32714 and its telephone number at that address is (407) 869-7001. On
October 29, 1997, Priority consummated an initial public offering of its Class
B Common Stock (the "Offering").

ACQUISITION HISTORY

Effective as of February 28, 1993, BWI acquired substantially all of the
assets of Charise Charles, Ltd., Inc. ("Charise Charles"), a specialty
wholesale distributor of oncology and renal care biopharmaceuticals located in
Altamonte Springs, Florida. On October 6, 1993, BWI acquired substantially all
of the assets of PRN Medical, Inc. ("PRN"), a specialty wholesale distributor
of renal care supplies and dialysis equipment located in Orlando, Florida. In
August 1994, PRN was combined with Charise Charles as part of the formation of
Priority. On October 31, 1994, Priority acquired the stock of 3C Medical, Inc.
("3C"), a specialty distributor of acute dialysis products located in Santa
Ana, California. Effective January 1, 1995, Priority acquired all of the
outstanding stock of IV-1, Inc., IV-One Services, Inc. and National Pharmacy
Providers, Inc. (collectively, the "IV One Companies"), three related companies
located in Altamonte Springs, Florida that provided specialty pharmacy and
other related healthcare services. On August 6, 1997, Priority acquired
substantially all of the assets of Grove Way Pharmacy, Inc. ("Grove Way
Pharmacy"), a specialty distributor of vaccines located in Castro Valley,
California.

The operations of Charise Charles, PRN, 3C and Grove Way Pharmacy are now
included in the Priority Healthcare Distribution division ("Priority
Distribution"). The IV One Companies now comprise the Priority Pharmacy
Services division ("Priority Pharmacy").

GENERAL

Priority is a national distributor of specialty pharmaceuticals and related
medical supplies to the alternate site healthcare market and is a provider of
patient-specific, self-injectable biopharmaceuticals and disease treatment
programs to individuals with chronic diseases. Through Priority Distribution,
Priority sells over 3,500 SKUs of specialty pharmaceuticals and medical
supplies to outpatient renal care centers and office-based physicians in the
oncology, infectious disease and vaccine markets. Priority Distribution offers
value-added services to meet the specific needs of these markets by shipping
refrigerated pharmaceuticals overnight in special packaging to maintain
appropriate temperatures, offering automated order entry services and offering
customized distribution for group accounts. From distribution centers in Grove
City, Ohio and Tustin, California, Priority Distribution services over 2,000
customers in all 50 states and Puerto Rico, including approximately 550 office-
based oncologists and 800 renal dialysis clinics.

Through Priority Pharmacy, Priority fills individual patient prescriptions
for self-injectable biopharmaceuticals for over 2,000 patients. These patient-
specific prescriptions are filled in a licensed pharmacy in Altamonte Springs,
Florida, where Priority reconstitutes in syringes the components of the
biopharmaceuticals, according to manufacturer's instructions, and ships these
products directly to the patient overnight in specialized packages. Priority
Pharmacy also provides disease treatment programs for hepatitis, melanoma,
cancer, human growth deficiency and the complications of HIV. Management of
Priority believes that it is the only provider that offers this range of
services on a nationwide basis.

Priority's net sales have increased from $79.6 million in 1993 to $231.0
million in 1997. In the same period, operating income has increased from $2.1
million in 1993 to $11.4 million in 1997. Priority's objective is to continue
to grow rapidly and enhance its market position as a leading specialty
distributor by capitalizing on its business strengths and pursuing the
following strategy: (i) continue to focus on and further penetrate the
alternate site market; (ii) enter new markets by distributing new product
categories and patient-specific biopharmaceuticals; (iii) accelerate growth of
its higher margin, patient-specific pharmacy business by leveraging
relationships with existing distribution customers; (iv) maintain intense cost
control while investing in infrastructure; and (v) pursue acquisitions to
complement existing product offerings or further penetrate markets.

PRODUCTS AND SERVICES

PRIORITY DISTRIBUTION. Priority Distribution provides a broad range of
services and supplies to meet the needs of the alternate site market, including
the outpatient renal care market, office-based oncology market and other
physician office specialty markets such as infectious disease. Priority
Distribution offers value-added services to meet the specialized needs of these
markets by shipping refrigerated pharmaceuticals overnight in special packaging
to maintain appropriate temperatures and offering automated order entry
services and customized group account distribution. Priority Distribution
distributes its products from distribution centers in Grove City, Ohio and
Tustin, California. Priority sells over 3,500 SKUs of pharmaceuticals such as
EPO, Calcijex and INFeD and related medical supplies such as dialyzers, blood
tubing, fistula needles, IV sets, transducers, tape and sponges. During 1997,
approximately 29% of Priority's revenues were attributable to sales of EPO to
the renal care market. EPO for the renal care market is available from only one
manufacturer, Amgen. Priority Distribution services over 2,000 customers
located in all 50 states and Puerto Rico, including approximately 550 office-
based oncologists and 800 renal dialysis clinics.

Priority believes its knowledgeable salesforce provides a competitive
advantage when selling into the alternate site market. Since a majority of
customer orders are placed by telephone, Priority offers its customers a toll-
free telephone number and fax line and is beginning to use direct automated
ordering capability to accept electronically transmitted orders. Orders
typically are received by Priority's telemarketing sales and service personnel
who use PC-based computer systems to enter customer orders, and to access
product information, product availability, pricing, promotions and the
customer's buying or referral history. As part of Priority's commitment to
superior customer service, it offers its customers ease of order placement.
Once an order is received, it is electronically sent to the appropriate
distribution center where it is filled and shipped. Priority estimates that
approximately 98% of all items are shipped without back ordering, and that 99%
of all orders received before 6 p.m. are shipped on the same day that the order
is received.

Priority Distribution has recently entered into an exclusive marketing
agreement whereby it will market and distribute an automated dispensing and
inventory management system to alternate site settings in the oncology and
dialysis markets. The system is a control system that dispenses drugs on a
patient-specific basis, reducing the opportunity for lost billing charges,
while providing automatic inventory replenishment and other conveniences.
Priority is now beginning to market the system after successful testing at one
of its customer's offices. Management of Priority believes that the system
also has the potential to be integrated with billing and clinical systems to
ultimately provide a total technology solution for the alternate site market.

Priority also has developed the capability to provide simple and direct
automated order entry to its customers. This system allows a customer to
transmit orders directly to Priority's computers, which Priority believes
should increase ordering efficiencies and accuracy. Approximately 12 of
Priority's customers are currently using this automated direct order system.

PRIORITY PHARMACY. Priority Pharmacy provides patient-specific, self-
injectable biopharmaceuticals and related disease treatment programs to
individuals with chronic diseases. Through a licensed pharmacy in Altamonte
Springs, Florida, Priority Pharmacy fills patient-specific prescriptions by
reconstituting the biopharmaceuticals into syringes and shipping them via
overnight delivery in special shipping containers to maintain appropriate
temperatures. These services are provided in combination with Priority's
disease treatment programs, through which Priority's pharmacy and nursing staff
provide education, counseling and other services to patients. Management of
Priority is not aware of any other provider that offers the same services as
Priority Pharmacy on a nationwide basis.

Priority Pharmacy currently provides disease treatment programs for various
diseases, including hepatitis and cancer, with biopharmaceuticals that
primarily consist of Interferon and Rebetron, synthetic biopharmaceuticals used
to treat hepatitis B and C, Octreotide, a synthetic hormone used to treat
diarrhea associated with intestinal peptide tumors, and Epoetin Alfa, a
synthetic biopharmaceutical used to treat anemia. Priority Pharmacy also
recently began dispensing Filgrastin, Saragramostin and human growth hormone
and continues to evaluate adding more products.

The disease treatment programs provided by Priority offer a number of
advantages to patients, physicians, third-party payors and drug manufacturers.
The advantages include: (i) increasing patient compliance with the recommended
therapy, thereby avoiding more costly future treatments; (ii) facilitating
patient education required to prepare and administer the products; (iii)
reducing the potential for patient errors in dosing or wastage of product; (iv)
decreasing patient or caregiver anxiety; (v) reducing the overall cost of
delivery; and (vi) collecting better outcomes data.

Priority's telemarketing efforts focus on marketing to physician offices
where new patient referrals occur. Upon referral, patients are contacted via
telephone by Priority's intake nurses who explain the program and provide
education on self-injection techniques, side effects and potential drug
interactions. Following the initial prescription delivery, patients are
contacted by patient care coordinators who assess patient compliance and
progress, inquire regarding any potential side effects, arrange the next
scheduled prescription delivery, verify the shipping address, listen to patient
concerns and direct questions to Priority's clinical staff. Priority's
pharmacists and registered nurses are available for ongoing consultation with
the patient and the dispensing physician regarding the patient's therapy and
progress seven days a week, 24 hours a day.

All parenteral, or injectable, prescriptions are prepared in sterile
conditions under class 100 laminar flow hoods. Licensed pharmacists verify the
prescription with the prescribing physician and recheck the prescription before
shipping. In order to ensure the safe delivery of prescriptions to the patient,
Priority telephones the patient several days before shipping to confirm that
the patient or another person will be at home to receive the package
immediately upon delivery. In addition, Priority requires the overnight
delivery service to obtain a signed receipt before leaving the drugs at a
residence.

Priority Pharmacy maintains a licensed pharmacy accredited with commendation
by the Joint Commission on Accreditation of Healthcare Organizations.
Priority's pharmacy program maintains a planned and systematic Quality
Assessment and Quality Improvement ("QAQI") Program, which provides a means for
monitoring and evaluating the care and services provided to patients. Through
the QAQI Program, Priority strives to promote continuous quality improvement. A
multi-departmental QAQI Committee meets quarterly and is responsible for the
collection and review of quality data, which it presents on a quarterly basis
to Priority's Clinical Advisory Board and on an annual basis to Priority's
Chief Executive Officer.

SELECTED FINANCIAL DATA OF PRIORITY

The following selected financial data of Priority for the ten months ended
December 31, 1993 and for the years ended December 31, 1994, 1995, 1996 and
1997 have been derived from the audited consolidated financial statements of
Priority, which have been audited by PricewaterhouseCoopers LLP, independent
accountants. The selected financial data as of and for the nine-month periods
ended September 30, 1997 and 1998 have been derived from unaudited consolidated
financial statements of Priority. In the opinion of management of Priority,
the unaudited financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the consolidated
financial position and consolidated results of operations of Priority. The
financial data for the two months ended February 28, 1993 were derived from the
unaudited financial statements of Charise Charles, Ltd., Inc. (the "Predecessor
Company"). Effective February 28, 1993, BWI acquired substantially all of the
assets of the Predecessor Company. The following data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Priority's Consolidated Financial Statements and
related notes included in Priority's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 and in Priority's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1998, copies of which can be obtained from
BWI or the Securities and Exchange Commission. See "Additional Information."
<PAGE>
<TABLE>
<CAPTION>
TWO MONTHS TEN MONTHS YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
ENDED ENDED SEPTEMBER 30,
FEBRUARY DECEMBER 31,
28, 1993 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1997 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
STATEMENT OF EARNINGS DATA: (1)
Net sales $11,728 $67,823 $107,449 $123,990 $158,247 $230,982 $169,300 $193,776
Cost of products sold 10,911 63,161 100,254 111,448 141,074 207,755 152,012 171,977
Gross profit 817 4,662 7,195 12,542 17,173 23,227 17,288 21,799
Selling, general and 508 2,498 4,394 7,836 8,443 10,620 8,017 9,887
administrative
expense
Depreciation and 14 333 512 1,161 862 933
amortization 998 1,009
Earnings from 295 1,831 2,289 3,708 7,721 11,446 8,409 10,979
operations
Stock option expense - - - - - 350 - -
Interest (income) 60 (21) 200 511 437 887 832 (640)
expense, net
Earnings before 235 1,852 2,089 3,197 7,284 10,209 7,577 11,619
income taxes
Provision for income 3 741 835 1,311 2,915 4,058 3,031 4,619
taxes
Net earnings 232 1,111 1,254 1,886 4,369 6,151 4,546 7,000
Earnings per share:
Basic $0.11 $0.12 $0.18 $0.43 $0.58 $0.45 $0.56
Diluted $0.11 $0.12 $0.18 $0.43 $0.58 $0.45 $0.56
Weighted average
shares
outstanding:
Basic 10,214,286 10,214,286 10,214,286 10,214,286 10,622,941 10,214,286 12,515,208
Diluted 10,214,286 10,214,286 10,214,286 10,214,286 10,626,589 10,214,286 12,578,943
FEBRUARY DECEMBER 31, SEPTEMBER
28, 30,
1993 1993 1994 1995 1996 1997 1997 1998
BALANCE SHEET DATA:
(1)
Working capital $3,744 $11,599 $12,955 $16,000 $20,792 $57,488 $40,630 $58,525
Receivable from - - - - - 5,290 - 20,365
parent
Total assets 11,897 26,705 36,849 41,584 57,220 93,302 69,963 101,989
Payable to parent - 985 8,345 3,873 9,290 - 15,101 -
Long-term debt - - 113 751 560 272 310 -
Note payable to - - - - - 6,000 6,000 -
parent
Total liabilities 7,822 8,853 16,610 16,553 27,820 33,419 42,017 35,106
Shareholders' equity 4,075 17,852 20,239 25,031 29,400 59,883 27,946 66,883
</TABLE>
__________
(1) During the periods presented, five acquisitions were made by or on behalf
of Priority. See "Business-Priority-Acquisition History." These
acquisitions were accounted for under the purchase method of accounting
and, accordingly, the results of operations of the acquired entities are
included in the Company's financial statements from their respective dates
of acquisition. As a result, period-to-period comparisons of financial
position and results of operations are not necessarily meaningful.

MANAGEMENT OF PRIORITY

The following table sets forth certain information with respect to
the directors and executive officers of Priority.

<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
William E. Bindley 58 Chairman of the Board
Robert L. Myers 53 President, Chief Executive Officer and Director
Guy F. Bryant 39 Executive Vice President-Priority Healthcare Distribution
Steven D. Cosler 43 Executive Vice President-Priority Pharmacy Services
Donald J. Perfetto 52 Executive Vice President, Chief Financial Officer and
Treasurer
Melissa E. McIntyre 38 Vice President-Clinical Services
Barbara J. Luttrell 58 Vice President-Administration
William M. Woodard 40 Vice President-Marketing
Michael D. McCormick 50 Secretary and Director
Thomas J. Salentine 59 Director
Richard W. Roberson 51 Director
Rebecca M. Shanahan 45 Director
</TABLE>

WILLIAM E. BINDLEY is the Chairman of the Board, Chief Executive
Officer and President of BWI, positions he has held since founding BWI
in 1968. He is also a director of BWI and Shoe Carnival, Inc., a shoe
retailer. Mr. Bindley was the Chief Executive Officer of Priority from
July 1994 until May 1997 and the President of Priority from May 1996
until July 1996. He has served as a director of Priority since June
1994.

ROBERT L. MYERS has been the President of Priority since July 1996
and the Chief Executive Officer of Priority since May 1997. From July
1996 to May 1997, he was the Chief Operating Officer of Priority. From
June 1995 through June 1996, Mr. Myers was a consultant to the
healthcare industry. From 1971 to June 1995, he was employed by Eckerd
Corporation, a retail drug store chain, where he served as a corporate
officer from 1981 through 1995 and as senior vice president of pharmacy
from 1990 to 1995. Mr. Myers has served as a director of Priority since
May 1997. Mr. Myers is a registered pharmacist.

GUY F. BRYANT serves as the Executive Vice President-Priority
Healthcare Distribution, a position that he has held since September
1995. Prior to joining Priority, he was employed in sales management
positions by Major Pharmaceuticals, a distributor of generic
pharmaceuticals, since September 1992 and was vice president of sales
from August 1994 to August 1995.

STEVEN D. COSLER became Executive Vice President-Priority Pharmacy
Services in August 1997. Prior to that time and since July 1996, he was
Senior Vice President and General Manager of Priority Healthcare
Services Corporation, a subsidiary of BWI. From January 1992 to June
1996, he was senior vice president of sales and operations for
Coresource, a managed care and third party administrator.

DONALD J. PERFETTO has been the Executive Vice President, Chief
Financial Officer and Treasurer of Priority since June 1997. From 1986
to May 1997, he was employed by Bimeco, Inc., a distributor of medical
products. During such time, Mr. Perfetto held the positions of vice
president of finance and operations and secretary/treasurer of Bimeco,
Inc.

MELISSA E. MCINTYRE, RN, OCN, is the Vice President-Clinical
Services of Priority, a position that she has held since August 1997.
She has also been President and Chief Operating Officer of IV-1, Inc.,
IV-One Services, Inc. and National Pharmacy Providers, Inc. ("NPP"),
subsidiaries of Priority, since February 1995 and was Director of
Clinical Services of IV-1, Inc. from June 1994 to January 1995. Prior to
joining Priority, and since June 1991, she was employed by Intracare, an
outpatient infusion center, as clinical director of nursing.

BARBARA J. LUTTRELL is the Vice President-Administration of
Priority, a position she has held since May 1997. Prior to joining
Priority in January 1997, she was employed by Physician's Alliance, a
physician group, as director of human resources since September 1996.
She attended law school from May 1993 to December 1995 and practiced as
an attorney from May 1996 to September 1996. From December 1995 to May
1996, Ms. Luttrell prepared for the bar examination. From July 1992 to
February 1993, she was a human resources consultant employed by Infusion
Therapy, Inc. Ms. Luttrell has 15 years of experience in human resource
management.

WILLIAM M. WOODARD is the Vice President-Marketing of Priority, a
position that he has held since May 1997. From February 1995 to May
1997, he was Executive Vice President of Sales of IV-1, Inc., IV-One
Services, Inc. and NPP; from July 1994 to February 1995, he was
President of NPP; and from April 1993 to February 1995, he was President
of IV-1, Inc. From March 1990 until April 1993, Mr. Woodard was a sales
representative for Tri State Hospital Supply, a distributor of medical
supplies.

MICHAEL D. MCCORMICK is the Secretary of Priority, a position that
he has held since July 1994. He is also the Executive Vice President,
General Counsel and Secretary of BWI, positions he has held for more
than the past five years, and a director of BWI. Mr. McCormick was the
Executive Vice President and General Counsel of Priority from July 1994
until May 1997 and has served as a director of Priority since June 1994.

THOMAS J. SALENTINE is the Executive Vice President and Chief
Financial Officer of BWI, positions he has held for more than the past
five years. He is also a director of BWI. Mr. Salentine was the
Executive Vice President of Priority from July 1994 until May 1997, the
Chief Financial Officer of Priority from July 1994 until May 1995 and
the Treasurer of Priority from May 1997 to June 1997. He has served as
a director of Priority since July 1994.

RICHARD W. ROBERSON is the president of Sand Dollar Partners,
Inc., an investment and consulting firm, a position which he has held
since November 1996. Prior to that time, Mr. Roberson served as
president and chief executive officer of Visionworks, Inc., a retail
superstore optical chain, from March 1993 to September 1996. From 1978
to March 1993, Mr. Roberson held various positions with Eckerd
Corporation, including chief executive officer of Insta-Care Pharmacy
Services, Inc. and president of Eckerd Vision Group from 1988 to 1993.
Mr. Roberson is also a director of C.H. Heist Corporation, an industrial
cleaning and maintenance company. Mr. Roberson has served as a director
of Priority since October 1997.

REBECCA M. SHANAHAN became vice president, managed care of the
University of Chicago Hospitals and Health Systems in September 1997,
where she is responsible for the development and implementation of
managed care programs and products. From December 1996 until assuming
her present position, she performed legal and consulting services as an
independent contractor for various entities in the health care industry.
From 1991 until December 1996, she held executive office positions with
Methodist Medical Group and Beltway Services, a 600 member physician
practice group affiliated with Methodist Hospital in Indianapolis,
Indiana, with her latest position being senior vice president and chief
operating officer. Ms. Shanahan has served as a director of Priority
since October 1997.

The above information includes business experience during the past
five years for each of Priority's executive officers and directors.
Directors of Priority are divided into three classes with staggered
three-year terms. Executive officers of Priority serve at the
discretion of the Board of Directors of Priority. There is no family
relationship between any of the directors or executive officers of
Priority.

RELATIONSHIP AND TRANSACTIONS BETWEEN BWI AND PRIORITY

There are, and will continue to be following the Distribution, a
number of relationships and transactions between BWI and Priority.
Among other things, Mr. Bindley, the Chairman of the Board, Chief
Executive Officer and President of BWI, is a significant shareholder of
BWI and as a result of the Distribution will become a significant
shareholder of Priority. In addition, three of the six members of
Priority's Board of Directors (Messrs. Bindley, McCormick and Salentine)
are directors and executive officers of BWI.

Set forth below are descriptions of certain services provided by
BWI to Priority and certain agreements between Priority and BWI.

DISTRIBUTION AGREEMENT. The Distribution Agreement contains a
number of provisions relating to the mechanics of the Distribution and
the arrangements between BWI and Priority subsequent to the
Distribution. Pursuant to the Distribution Agreement, the Distribution
will not occur unless a number of conditions have been satisfied (unless
waived by BWI), including but not limited to all necessary regulatory
approvals being received, no adverse change occurring in the financial
condition of either BWI or Priority, no adverse change occurring in
market conditions and the receipt by BWI of an opinion that the
Distribution will qualify as a tax-free spin-off under Section 355 of
the Code.

The Distribution Agreement provides that any options to purchase
BWI Common Stock held by a Priority employee which are exercisable on
and not exercised prior to the Distribution Date and with respect to
which the holder has not elected prior to the Distribution Date to
surrender in exchange for an option to purchase Priority Class B Common
Stock shall be exercisable only within a period of three months after
the Distribution Date. Pursuant to the Distribution Agreement, as of
the Distribution Date, each option to purchase BWI Common Stock held by
a Priority employee and which is either (i) exercisable on and not
exercised on or prior to the Distribution Date or (ii) not exercisable
on or prior to the Distribution Date and with respect to which the
holder has elected prior to the Distribution Date to surrender in
exchange for an option to purchase Priority Class B Common Stock, shall
be considered to be surrendered to BWI in exchange for an option to
purchase Priority Class B Common Stock. The number of shares of
Priority Class B Common Stock subject to and the exercise price of such
option shall be determined in accordance with the requirements of
Section 424 of the Code.

The Distribution Agreement provides that after the Distribution
Date, employees of Priority will no longer be eligible to participate in
the qualified profit sharing plan maintained by BWI (the "BWI Profit
Sharing Plan"). Pursuant to the Distribution Agreement, on or before
the Distribution Date, Priority will establish a similar profit sharing
plan (the "Priority Profit Sharing Plan"), and all assets in the BWI
Profit Sharing Plan relating to Priority employees will be transferred
to the Priority Profit Sharing Plan. The Priority Profit Sharing Plan
will include a fund which invests in Priority Class B Common Stock, and
will also provide for a fund which invests in BWI Common Stock into
which any BWI Common Stock held by Priority employees under the BWI
Profit Sharing Plan shall be transferred, but no future investments in
BWI Common Stock may be made under the Priority Profit Sharing Plan.

The Distribution Agreement provides that, except as otherwise
provided in the Tax Sharing Agreement, the Administrative Services
Agreement and the Indemnification and Hold Harmless Agreement between
BWI and Priority (see descriptions of each below), Priority will pay,
perform and discharge all obligations, liabilities and losses relating
to, and will indemnify and hold harmless BWI from and against, all
contracts, agreements, undertakings, liabilities, claims, suits and
disputes arising out of or relating to Priority, its subsidiaries and
Priority's business, assets, liabilities, operations, occupancies and
employee benefit and other plans. In addition, BWI will indemnify and
hold harmless Priority against all losses, liabilities, claims and
damages in any way arising out of BWI, its subsidiaries (other than
Priority and Priority's subsidiaries) and BWI's business, assets,
liabilities, operations, occupancies and employee benefit and other
plans. The Distribution Agreement also provides that each of BWI and
Priority will waive, release, forever discharge and forever be barred
from asserting against the other and the other's executives all claims,
suits, disputes, violations, losses, liabilities and damages that each
may have against the other for events, acts or omissions occurring or
taken on or prior to the Distribution Date.

ADMINISTRATIVE SERVICES. During 1997 and prior to the Offering,
BWI provided management and consulting services to Priority as its
wholly owned subsidiary, which services included, but were not limited
to, legal, human resources, payroll and tax. In connection with the
Offering, Priority and BWI entered into an Administrative Services
Agreement (the "Services Agreement"), relating to the provision of
similar services by BWI to Priority. The services covered by the
Services Agreement include administrative services for employee benefits
and risk management, legal, tax and treasury services. During 1997,
Priority was charged a total of $65,000 for management and
administrative services rendered by BWI to Priority. This amount was
based on an allocation of the actual services rendered by BWI. This
Services Agreement will continue after the Distribution.

BWI PROFIT SHARING PLAN. Until the Distribution, Priority's
eligible employees participate in the BWI Profit Sharing Plan. After
the Distribution, Priority employees will participate in the new
Priority Profit Sharing Plan. See "-Distribution Agreement."
Priority's contribution to the BWI Profit Sharing Plan for Priority
employees for 1997 was $260,000.

INSURANCE COVERAGE. During 1997 and 1998, Priority was provided
coverage under the BWI insurance plans. The expenses of these plans
were charged to Priority based on a combination of a pro rata allocation
and the push-down of actual expenses incurred, depending on the type of
expenditure. The insurance expense allocated to Priority was $151,000
for 1997. Priority will obtain its own insurance after the
Distribution.

PURCHASE OF INVENTORY. During 1997 and 1998, Priority purchased
inventory from BWI at the price paid by BWI for such inventory. Such
purchases of inventory from BWI aggregated $2.0 million in 1997. It is
expected that Priority will continue to purchase inventory from BWI
after the Distribution at negotiated prices.

DIVIDEND NOTE. On March 31, 1997, Priority paid a dividend to BWI
in the form of a subordinated promissory note with a principal amount of
$6.0 million (the "Dividend Note"). The Dividend Note bears interest at
the rate of 7.25% per annum. Interest on the Dividend Note must be paid
by Priority on a quarterly basis, with the principal amount due on March
31, 1999. The dividend returned a portion of BWI's equity investment in
Priority. During 1997, Priority paid BWI $324,000 in interest on the
Dividend Note. Priority repaid the Dividend Note, including accrued
interest, on September 30, 1998.

BORROWINGS. In prior years, BWI paid for or financed certain
transactions on behalf of Priority, which costs were represented as
borrowings due by Priority to BWI. The largest amount outstanding in
1997 relating to such borrowings was $16.3 million. The interest
expense attributable to the borrowings was $671,000 for 1997. This
interest expense was calculated by applying the BWI average incremental
borrowing rate to the average outstanding borrowings. For 1997, the
average outstanding borrowing was $10.3 million, and the average
incremental borrowing rate applied to the borrowings was 6.4%. On
October 29, 1997, Priority paid in full all amounts due under the
borrowings with proceeds received from the Offering.

Since the Offering, Priority has loaned funds to BWI. The largest
amount outstanding during 1997 relating to this loan was approximately
$6.7 million. The average incremental borrowing rate applied to the
loan was 6.4%. As of December 11, 1998, the amount outstanding under
this loan was approximately $20.4 million.

REVOLVING CREDIT PROMISSORY NOTE. In connection with the
Offering, BWI made available to Priority a $30.0 million line of credit
(the "Line"), evidenced by a Revolving Credit Promissory Note made by
Priority in favor of BWI on September 30, 1997. The maturity date for
the Line is December 31, 1998. Outstanding principal amounts under the
Line bear interest, payable quarterly, at a rate equal to the rate then
paid by BWI under its primary line of credit agreement. Priority never
borrowed under the Line and, effective November 24, 1998, Priority
obtained its own bank line of credit.

TAX SHARING AGREEMENT. Prior to the Distribution, the results of
operations of Priority and its domestic subsidiaries that are at least
80% owned by Priority (the "Priority Group") are included in BWI's
consolidated federal income tax returns and in BWI's consolidated or
combined state tax returns. BWI and Priority have entered into a Tax
Sharing Agreement that provides, among other things, for the allocation
between BWI and Priority of federal, state, local and foreign tax
liabilities for all periods through the Distribution Date. Generally,
Priority is responsible for the portion of any tax deficiencies of BWI
assessed with respect to all periods up to and including the
Distribution Date that give rise to a tax benefit to Priority in a post-
Distribution period. Priority is also entitled to tax refunds received
by BWI that result in a tax detriment to Priority for those post-
Distribution periods. Priority is also responsible for all income taxes
imposed on the Priority Group during the taxable period or portion
thereof beginning on January 1, 1998 and ending on or before the
Distribution Date. Furthermore, the Tax Sharing Agreement provides
that, if the Distribution fails to qualify as a tax-free distribution as
a result of any event occurring prior to the second anniversary of the
Distribution Date that results from the breach of certain covenants made
by Priority in the Tax Sharing Agreement or involves either the stock or
assets (or any combination thereof) of any member of the Priority Group,
then Priority must indemnify and hold BWI harmless, on an after-tax
basis, from any tax liability imposed upon it in connection with the
Distribution. The Tax Sharing Agreement also prohibits Priority from
entering into certain transactions or disposing of substantially all of
its assets prior to the second anniversary of the Distribution Date in
the absence of a prior opinion of independent tax counsel or the receipt
of a private letter ruling from the Internal Revenue Service that such
transaction or disposition will not cause the Distribution to be a
taxable transaction. For 1997, the Priority Group's allocated federal
and state income taxes were $4.1 million.

INDEMNIFICATION AND HOLD HARMLESS AGREEMENT. Priority and BWI
entered into an Indemnification and Hold Harmless Agreement dated as of
September 30, 1997 (the "Indemnification Agreement"), in which each
party agrees to indemnify and hold harmless the other from and against
certain obligations and contingent liabilities. Specifically, the
Indemnification Agreement provides that Priority will indemnify and hold
harmless BWI from obligations related to a guarantee which BWI made in
favor of Priority and from certain indemnity and other obligations which
BWI assumed, or which could be charged against BWI, in connection with
five acquisitions by or on behalf of Priority. The Indemnification
Agreement also provides that BWI will indemnify and hold harmless
Priority from and against contingent liabilities in connection with
certain pending litigation against BWI, to which Priority has been added
as a party. In 1997 and 1998, neither Priority nor BWI made any
payments to the other under the Indemnification Agreement.

Priority has adopted a policy that, following the Offering, all
agreements, including any amendments to those described above, between
Priority and BWI and its affiliates will be subject to the review of
Priority's Audit, Ethics and Compliance Committee and will be on terms
that such Audit Committee believes are no less favorable to Priority
than terms that would be available from unaffiliated parties.

ADDITIONAL INFORMATION

Priority Class B Common Stock is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). BWI and Priority
are each subject to the reporting requirements of the Exchange Act, and
in accordance therewith have filed registration statements, reports and
other information (collectively, the "SEC Reports") with the Securities
and Exchange Commission (the "Commission"). For further information
pertaining to Priority (including financial statements and other
financial information), the Priority Common Stock and related matters,
BWI shareholders are urged to read Priority's SEC Reports, including
particularly the following:

(1) Priority's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997;

(2) Priority's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998;

(3) The description of the Priority Class B Common Stock
contained in Priority's Registration Statement on Form 8-A
filed with the Commission on October 22, 1997, including any
amendment or report filed for the purpose of updating such
description; and

(4) The description of the Priority Class A Common Stock
contained in Priority's Registration Statement on Form 8-A
filed with the Commission on December 14, 1998, including
any amendment or report filed for the purpose of updating
such description.

BWI will promptly provide without charge to each person to whom an
Information Statement is delivered, a copy of the above-referenced
Annual Report on Form 10-K and Quarterly Report on Form 10-Q (not
including exhibits), upon the written or oral request of such person
directed to the Secretary of BWI at its principal offices, 8909 Purdue
Road, Indianapolis, Indiana 46268, (317) 704-4000.

The SEC Reports can be obtained from the Commission at its
principal office in Washington, D.C. upon the payment of the prescribed
fees, or may be examined, without charge, at public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, or at its regional offices located at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World
Trade Center, Suite 1300, New York, New York 10048. The Commission
maintains a World Wide Web site on the Internet at http://www.sec.gov
that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission.