BINDLEY WESTERN INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 1995
The annual meeting of shareholders of Bindley Western Industries,
Inc. will be held at the Conference Center, 10333 North Meridian Street,
Indianapolis, Indiana, on Thursday, May 18, 1995, at 9:00 a.m.,
Indianapolis time, for the following purposes:
(1) To elect ten directors to serve until the next annual meeting
of shareholders and until their successors are elected and have qualified;
(2) To approve or disapprove the appointment of Price Waterhouse as
auditors for the Company for 1995; and
(3) To transact such other business as may come before the meeting.
All shareholders of record at the close of business on April 7, 1995
will be eligible to vote.
It is important that your shares be represented at this meeting.
Whether or not you expect to be present, please fill in, date, sign and
return the enclosed proxy form in the accompanying addressed, postage-
prepaid envelope. If you attend the meeting, you may revoke your proxy and
vote in person.
Michael D. McCormick, Secretary
<PAGE>
BINDLEY WESTERN INDUSTRIES, INC.
4212 West 71st Street
Indianapolis, Indiana 46268
PROXY STATEMENT
Annual Meeting of Shareholders
May 18, 1995
This statement is being furnished to shareholders on or about April
14, 1995 in connection with a solicitation by the Board of Directors of
Bindley Western Industries, Inc. (the Company ) of proxies to be voted at
the annual meeting of shareholders to be held at 9:00 a.m., Indianapolis
time, Thursday, May 18, 1995, at the Conference Center, 10333 North
Meridian Street, Indianapolis, Indiana, for the purposes set forth in the
accompanying Notice.
At the close of business on April 7, 1995 the record date for the
meeting, there were 10,895,893 shares of Common Stock of the Company
outstanding and entitled to vote at the meeting. On all matters, including
the election of directors, each shareholder will have one vote for each
share held.
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked at any time insofar as it has not been exercised.
If a shareholder executes more than one proxy, the proxy having the latest
date will revoke any earlier proxies. A shareholder attending the meeting
will be given the opportunity to revoke his or her proxy and vote in
person.
Unless revoked, a proxy will be voted at the meeting in accordance
with the instructions of the shareholder in the proxy, or, if no
instructions are given, for the election as directors of all nominees
listed under Proposal 1 and for Proposal 2. Election of directors will be
determined by the vote of the holders of a plurality of the shares voting
on such election. Approval of Proposal 2 is subject to the vote of the
holders of a greater number of shares favoring approval than those opposing
it. A proxy may indicate that all or a portion of the shares represented
by such proxy are not being voted with respect to a specific proposal.
This could occur, for example, when a broker is not permitted to vote
shares held in street name on certain proposals in the absence of
instructions from the beneficial owner. Shares that are not voted with
respect to a specific proposal will be considered as not present and
entitled to vote on such proposal, even though such shares will be
considered present for purposes of determining a quorum and voting on other
proposals. Abstentions on a specific proposal will be considered as
present, but not as voting in favor of such proposal. As a result, neither
broker non-votes nor abstentions will affect the determination of whether
Proposals 1 and 2 will be approved.
The Board of Directors knows of no matters, other than those
described in the attached Notice of Annual Meeting, which are to be brought
before the meeting. However, if other matters properly come before the
<PAGE>
meeting, it is the intention of the persons named in the enclosed form of
proxy to vote such proxy in accordance with their judgment on such matters.
The Company intends to retain Corporate Investor Communications
( CIC ) to assist in the solicitation of proxies. CIC may contact various
shareholders by telephone to solicit the return of their proxies. The fee
to be paid to CIC is not expected to exceed $3,500. The cost of this
solicitation of proxies will be borne by the Company.
<PAGE>
ELECTION OF DIRECTORS
Nominees
Ten directors are to be elected at the meeting, each to hold office
for a term of one year and until his successor is elected and has
qualified. It is the intention of the persons named in the accompanying
form of proxy to vote such proxy for the election to the Board of Directors
of the persons identified below. Each of the nominees for director is
presently a director. If any such person is unable or unwilling to accept
nomination or election, it is the intention of the persons named in the
accompanying form of proxy to nominate such other person as director as
they may in their discretion determine, in which event the shares will be
voted for such other person.
Unless otherwise indicated in a footnote to the following table, the
principal occupation of each nominee has been the same for the last five
years, and such nominee possesses sole voting and investment power with
respect to the shares of Common Stock indicated as beneficially owned by
such nominee. William E. Bindley is the father of William F. Bindley II.
<TABLE>
<CAPTION>
Shares
Beneficially Percent
Present Owned on of Class
Principal Director January 31, (if more
Name Age Occupation Since 1995 than 1%)
<S> <C><C> <C> <C> <C>
William E. Bindley (1) 54 Chairman of the Board, Chief 1970 3,087,918 (2)(3) 28.3%Executive Officer and
President of the Company
Robert L. Koch II (4) 56 President, George Koch 1987 13,000 (5) --
Sons, Inc. (manufacturer of
industrial painting systems)
James K. Risk III (6) 53 President, Kirby Risk Supply 1987 11,817 (7) --
Company, Inc. (electrical
supply company)
K. Clay Smith (8) 57 President, Underwood Machinery 1983 7,000 (9) --
Transport, Inc. (transportation
company)
J. Timothy McGinley 54 President, H.M.I., Inc. 1987 10,500 (9) --
(real estate investment company)
Michael D. McCormick 47 Executive Vice President, 1990 197,140 (2)(10) 1.8%
General Counsel and
Secretary of the Company
William F. Bindley II 33 President, Heartland 1990 37,825 (11) --
Films, Inc. (motion picture
production company)
Thomas J. Salentine 55 Executive Vice President, 1990 240,983 (2)(12) 2.2%
Chief Financial Officer and
<PAGE>
Treasurer of the Company
Keith W. Burks 37 Executive Vice President 1993 147,700 (2)(13) 1.3%
of the Company
Seth B. Harris 55 Retired Chairman of the Board 1994 5,000 (14) ---
and President of Harris Wholesale
(wholesale pharmaceutical
distribution company)
</TABLE>
__________
(1) Mr. Bindley also serves on the Board of Directors of Shoe Carnival,
Inc., a shoe retailer.
(2) Does not include shares of the Company's Common Stock subject to
options which are not presently exercisable.
(3) Includes presently exercisable stock options to purchase 42,925 shares
granted by the Company.
(4) Mr. Koch also serves on the Board of Directors of CNB Bancshares, Inc.,
a bank holding company and Southern Indiana Gas and Electric Company, a
public utility.
(5) Includes presently exercisable options to purchase 3,000 shares granted
under the Company's Outside Directors Stock Option Plan. Mr. Koch
shares voting and dispositive power with respect to 7,000 of the
indicated shares with his wife or children.
(6) Mr. Risk also serves on the Board of Directors of Marsh Supermarkets,
Inc., a retail grocery chain.
(7) Mr. Risk shares voting and dispositive power with respect to 681 of
such shares with his wife or children. Includes presently exercisable
options to purchase 4,000 shares granted under the Company's Outside
Directors Stock Option Plan.
(8) Mr. Smith also serves on the Board of Directors of Marsh Supermarkets,
Inc.
(9) Includes presently exercisable options to purchase 4,000 shares granted
under the Company's Outside Directors Stock Option Plan.
(10) Includes presently exercisable stock options to purchase 190,500
shares granted by the Company.
(11) Mr. W.F. Bindley II shares voting and dispositive power with respect
to 14,825 of such shares with his spouse or minor child. Includes
presently exercisable options to purchase 4,000 shares granted under
the Company's Outside Directors Stock Option Plan.
(12) Includes presently exercisable stock options to purchase
230,000 shares granted by the Company.
<PAGE>
(13) Includes presently exercisable stock options to purchase 143,000
shares granted by the Company.
(14) Includes presently exercisable options to purchase 1,000 shares
granted under the Company's Outside Directors Stock Option Plan.
The Board of Directors recommends a vote FOR each of the nominees
listed above.
<PAGE>
Meetings and Committees
During 1994, the Board of Directors of the Company held five meetings.
No director attended fewer than 75% of the total meetings of the Board of
Directors and each committee on which he served. The Board of Directors
does not have a nominating committee. During 1992, the Company had a Stock
Option Committee consisting of Messrs. W.E. Bindley, Koch and Risk. The
Stock Option Committee administered the 1987 Stock Option and Incentive
Plan of the Company and determined all grants thereunder. On October 23,
1992, the Board of Directors created a Compensation Committee consisting of
Messrs. Koch, McGinley, Risk and Smith. The primary function of the
Compensation Committee is to establish compensation policies and
compensation for the Company's executive officers. On March 18, 1993, the
Compensation Committee was redesignated as the Compensation and Stock
Option Committee and it now administers all executive compensation and
stock option plans of the Company. Mr. Harris became a member of such
committee on May 19, 1994. The Compensation and Stock Option Committee met
three times during 1994.
The Board of Directors of the Company has an Audit Committee, the
current members of which are Messrs. W.E. Bindley, Koch and Smith. The
function of the Audit Committee is to meet with the independent accountants
of the Company, to review the audit plan for the Company, to review the
annual audit of the Company with the accountants together with any other
reports or recommendations made by the accountants, to recommend whether
the accountants should be continued as auditors for the Company and, if
others are to be selected, to recommend those to be selected, to meet with
the chief accounting officer for the Company and to review with him and the
accountants for the Company the adequacy of the Company's internal
controls, and to perform such other duties as shall be delegated to the
Audit Committee by the Board of Directors. The Audit Committee met once
during 1994.
Section 16(a) Reporting
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
of Common Stock, to file reports of ownership with the Securities and
Exchange Commission and NASDAQ. Officers, directors and greater than ten-
percent shareholders are required to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during 1994, except
for one Form 4 and a Form 3 filed delinquently by William F. Bindley II and
Mr. Harris, respectively, all filing requirements applicable to its
officers, directors, and greater than ten-percent shareholders were
complied with.
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth certain information regarding
compensation paid during each of the Company's last three years to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers, based on salary and bonus earned
during 1994:
<TABLE>
<CAPTION>
Long Term
Compensati
Annual Compensation on
Other Awards
Name and Annual All Other
Principal Bonus Compensatio Options Compensatio
Position Year Salary (1) n (2) n
<S> <C> <C> <C> <C> <C> <C>
William E. 1994 $553,500 $231,17 $4,800(3) 150,000 $280,467(4)
Bindley 1993 514,400 2 3,925 148,000 289,473
Chairman, Chief 1992 486,000 165,000 0 -- 298,868
Executive 165,000
Officer and
President
Thomas J. Salentine 1994 $192,331 $176,501 $13,550(5) 60,000 $20,226(6)
Executive Vice 1993 146,600 168,000 13,637 60,000 20,690
President and Chief 1992 135,000 165,000 15,075 60,000 21,459
Financial Officer
Michael D. McCormick 1994 $185,750 $175,850 $13,813(5) 60,000 $19,609(7)
Executive Vice 1993 143,100 165,000 14,162 60,000 19,678
President, General 1992 135,000 165,000 15,075 60,000 19,785
Counsel and Secretary
Keith W. Burks 1994 $172,000 $175,136 $13,550(5) 60,000 $19,224(8)
Executive Vice 1993 119,200 150,000 12,500 60,000 19,309
President 1992 105,000 140,000 15,075 60,000 19,187
Michael R. Visnich 1994 $127,022 $50,000 $ 0 20,000 $15,829(9)
President of Priority 1993 100,769 40,000 0 30,000 9,562
Healthcare 1992 -- -- -- -- --
Corporation (10)
</TABLE>
(1) Reflects bonus earned during the specified year, which bonuses at
times have been paid in the following year.
(2) Options to acquire shares of Common Stock. The Company has no SAR
plan and has never granted restricted stock awards.
(3) Represents an auto allowance of $4,800.
<PAGE>
(4) Consists of $12,000 in Company contributions to the Company s profit
sharing plan, $18,000 in Company contributions under Mr. Bindley s
deferred compensation arrangement described on page 7, $27,966 for
the term insurance portion and $221,253 for the non-term insurance
portion of the split-dollar life insurance plan described on page 8,
and $1,248 in group life insurance premiums. The 1993 and 1992
amounts have been restated to include the non-term insurance portion
of the aforementioned split-dollar life insurance plan.
(5) Amounts indicated, in each case, represent an auto allowance of
$4,800 and the balance a gift from William E. Bindley of Common Stock
of the Company.
(6) Consists of $18,867 in Company contributions to the Company s profit
sharing plans and $1,359 in group life insurance premiums.
(7) Consists of $18,867 in Company contributions to the Company s profit
sharing plans and $742 in group life insurance premiums.
(8) Consists of $18,867 in Company contributions to the Company s profit
sharing plan and $457 in group life insurance premiums.
(9) Consists of $12,000 in Company contributions to the Company s profit
sharing plan and $409 in group life insurance premiums.
(10) Mr. Visnich was not employed by the Company during 1992.
The Company does not have any employment agreements with its
executive officers.
<PAGE>
Compensation of Directors
During 1994, the Company paid directors who are not employees of the
Company an annual retainer of $12,000 and a fee of $1,000 for each
committee meeting or special meeting of the Board of Directors attended.
Directors who are full-time employees do not receive any additional
compensation for serving as directors or for attending meetings, but all
directors are reimbursed for out-of-pocket expenses incurred in connection
with attendance at meetings.
On March 29, 1991, the Board of Directors adopted, subject to
shareholder approval, an Outside Directors Stock Option Plan (the
Directors Plan ). The shareholders approved the Directors Plan at the
1991 annual meeting. Pursuant to the Directors Plan, each Eligible
Director is automatically granted an option to purchase 1,000 shares of
common stock on June 1 of each year beginning 1991. The option price per
share is 85% of the fair market value of one share of Common Stock on the
date of grant. The option becomes exercisable six months following the
date of grant and expires ten years following the date of grant. Options
may be exercised by the holder only if he has been in continuous service on
the Board of Directors at all times since the grant of the option. There
are currently six Eligible Directors - Messrs. Koch, Risk, Smith, McGinley,
Harris and W.F. Bindley. The Eligible Directors are not eligible for
grants or awards under any other stock, bonus or benefit plans of the
Company.
Profit Sharing Plan
The Company and its subsidiaries maintain a qualified profit sharing
plan ( Profit Sharing Plan ) for eligible employees of the Company and its
subsidiaries. All employees are generally eligible to participate in the
Profit Sharing Plan as of the first January 1 or July 1 after having
completed at least one year of service (as defined in the Profit Sharing
Plan) and having reached age 21.
The annual contribution of the Company and its subsidiaries to the
Profit Sharing Plan is the lesser of (i) the total Formula Contributions
for the year of those Participants who are employed on the last day of the
year or (ii) 10% of consolidated net income for the year, limited by the
amount deductible for federal income tax purposes. A Participant's Formula
Contribution is 8% of his or her compensation for the year. The employer
contribution for a year is allocated among Participants employed on the
last day of the year in proportion to their relative Formula Contributions
for the year. Subject to limitations imposed by the Internal Revenue Code,
a participant may, in addition to receiving a share of the employer
contribution, have a whole percentage (ranging from 1% to 13%) of his or
her compensation withheld from pay and contributed to the Profit Sharing
Plan. Beginning in 1990, subject to applicable Internal Revenue Code
requirements, employees may make rollover contributions to the Profit
Sharing Plan of qualifying distributions from other employers' qualified
plans.
A participant's interest in amounts withheld from his or her pay and
contributed to the Profit Sharing Plan, in rollover contributions and in
<PAGE>
the earnings on those amounts are fully vested at all times. A
participant's interest in employer contributions made on his or her behalf
and the earnings on those contributions become 20% vested after three years
of service and an additional 20% vests during each of the next four years.
A participating employee's interest in employer contributions made on his
or her behalf and the earnings on those contributions will also become
fully vested when the employee reaches age 65, dies, or becomes totally
disabled.
All contributions to the Profit Sharing Plan are paid in cash to an
Indianapolis bank, as trustee, and are invested by the trustee until
distributed to participants or their beneficiaries. Beginning July 1,
1991, Profit Sharing Plan participants are permitted to direct the trustee
as to the investment of their accounts by choosing among several different
investment funds that are offered under the Profit Sharing Plan, including
one fund consisting of Common Stock of the Company. Participants may elect
to invest in one fund or a combination of the available funds according to
their own investment goals. If a participant does not make an investment
election, his or her Profit Sharing Plan accounts will be invested in a
fund designated by the Company.
Except in certain cases of financial hardship, a participant (or his
or her beneficiary) receives distributions from the Profit Sharing Plan
only at death, retirement, or termination of employment. At that time, the
value of a participant's interest in the Profit Sharing Plan is distributed
to him or her.
Effective January 1, 1994, the Company adopted a new plan document,
the terms and conditions of which are essentially the same as the prior
plan document, except in the following respects: (a) the Company's
contribution is discretionary instead of mandatory; (b) participants'
forfeitures are used to reduce the Company's contribution instead of being
allocated pro rata among the remaining participants; (c) the type and
number of investment alternatives available for participants; and (d) the
entry dates for new participants now include April 1 and October 1.
Generally, the new plan is considered an improvement in terms of
administration, costs and participant access.
Nonqualified Deferred Compensation Arrangements
On December 9, 1994, the Company established the Bindley Western
Industries, Inc. 401(k) Excess Plan ( 401(k) Excess Plan ) and the Bindley
Western Industries, Inc. Profit Sharing Excess Plan ( Profit Sharing Excess
Plan ), both of which are non-qualified deferred compensation plans for a
select group of executive employees. The four executives currently
eligible to participate in the plans are Messrs. Bindley, McCormick,
Salentine, and Burks. The Profit Sharing Excess Plan was established to
compensate the eligible executives for the effect of a new Internal Revenue
Code limitation on the contributions made on their behalf to the Company's
Profit Sharing Plan. The 401(k) Excess Plan is designed to permit the
eligible executives to save for retirement on a pre-tax basis beyond the
extent permitted under the Profit Sharing Plan's 401(k) feature.
<PAGE>
Effective January 1, 1994, the Omnibus Budget Reconciliation Act of
1993 ( OBRA 93") reduced the amount of an employee's compensation that
could be taken into account in determining contributions or benefits under
a qualified pension or profit sharing plan. Under the Profit Sharing
Excess Plan, for each year that an executive is in the plan, the Company
will credit to the executive's account an amount designed to be equal to
the difference between (1) the contribution that the Company may lawfully
make on the executive's behalf to the Profit Sharing Plan for the year, and
(2) the amount that the Company could have contributed to the Profit
Sharing Plan for the executive for that year had OBRA 93 not reduced the
compensation limitation. The Profit Sharing Excess Plan also provides for
an additional annual contribution on behalf of Mr. Bindley. This
additional contribution for Mr. Bindley was formerly provided under a
separate deferred compensation agreement between Mr. Bindley and the
Company. That arrangement has now been terminated, and the amounts
accumulated in Mr. Bindley's account under that arrangement have been
transferred to his account under the Profit Sharing Excess Plan.
The 401(k) Excess Plan permits the eligible executives voluntarily to
defer portions of their pre-tax salary and bonus beyond what they can now
defer under the 401(k) feature of the Profit Sharing Plan. Under the
401(k) Excess Plan, an eligible executive may elect to defer up to 100% of
those portions of his salary and bonus that he is not able to defer under
the Profit Sharing Plan.
Amounts credited to an executive's account under the Profit Sharing
Excess Plan are deemed to bear interest each year at an annual rate equal
to the rate of return of the Standard & Poor 500 Index for the year. With
respect to amounts deferred under the 401(k) Excess Plan, each executive,
at the time he makes his deferral election for the coming year, may
designate the investment option or options (from among those available
under the Profit Sharing Plan) to serve as the measure of the investment
earnings and losses on the executive's deferrals for the year. Under both
plans, a participating executive may choose the form in which his benefits
will be paid to him or his beneficiary upon his retirement or death. The
three options available are a single lump sum payment, quarterly
installment payments for a specified period of up to 15 years, and annual
installment payments over a specified period up to 15 years.
The Company's contributions under the Profit Sharing Excess Plan and
amounts deferred under the 401(k) Excess Plan are deposited in separate
trusts. Each trust is what is commonly referred to as a rabbi trust
arrangement, pursuant to which the assets of the trust are subject to the
claims of the Company's general creditors in the event of the Company's
insolvency. The trust assets are invested by the trustee in accordance
with written investment guidelines submitted to the trustee from time to
time by the Compensation and Stock Option Committee of the Board of
Directors.
Split Dollar Life Insurance
The Company and a family trust created by William E. Bindley
established in December 1992 a split-dollar life insurance arrangement on
the life of Mr. Bindley. The life insurance policy provides coverage in
<PAGE>
the amount of $7 million. The trust pays premiums on the policy as if it
were a one year term life policy. The Company pays the excess premiums.
In addition, the Company pays to Mr. Bindley an annual bonus in an amount
sufficient to cover the premiums paid by the trust and the tax liability on
the bonus.
At the earlier of Mr. Bindley s death or December 16, 2007, the
Company will be reimbursed for all premiums paid by it. In the event of
Mr. Bindley s death, the balance of the proceeds of the policy would be
paid to the trust established by Mr. Bindley and used to purchase Common
Stock of the Company from Mr. Bindley's estate. The first year's premium
on the policy was $404,350, of which $390,910 was paid by the Company on
January 25, 1993. The second year's premium on the policy was $404,350, of
which $389,720 was paid by the Company on December 15, 1993. The third
year s premium on the policy was $404,350, of which $388,530 was paid by
the Company on December 14, 1994.
The Company also purchased a $13 million term life insurance policy
on the life of Mr. Bindley in June 1993. The Company is both the owner and
beneficiary of the policy. The first year's premium on the policy of
$23,060 was paid by the Company on June 4, 1993. The second year s premium
on the policy of $27,610 was paid by the Company on May 31, 1994.
Termination Benefits Agreements
Effective December 31, 1992, the Company entered into a Termination
Benefits Agreement with each of William E. Bindley, Thomas J. Salentine,
Michael D. McCormick, George E. Maloof and Keith W. Burks (the Named
Executive Officers ). The purpose of the agreements is to encourage them
to remain with the Company by assuring them of certain benefits in the
event of a Change in Control of the Company. Effective February 28,
1994, Mr. Maloof retired and is no longer subject to a Termination Benefits
Agreement.
The Termination Benefits Agreements provide for payments to the Named
Executive Officers upon the occurrence of certain events. Each Termination
Benefits agreement has a term of three years and is automatically extended
annually for an additional one-year period unless notice is given by the
Company or the Named Executive Officer. The Termination Benefits
Agreements are designed to protect the Named Executive Officer against
termination of his employment following a Change in Control of the
Company. For purposes of the Termination Benefits Agreement, Change in
Control is broadly defined to include, among other things, the acquisition
by a person or group of persons of twenty-five percent (25%) or more of the
combined voting power of the stock of the Company, the replacement of a
majority of the current Board of Directors, the approval by the
shareholders of the Company of a reorganization, merger or consolidation or
the approval by shareholders of a liquidation or dissolution of the Company
or the sale or disposition of all or substantially all of the assets of the
Company.
Following a Change in Control, the Named Executive Officer is
entitled to the benefits provided by the Termination Benefits Agreement in
the event his employment is terminated for any reason other than his death,
<PAGE>
his disability, his normal retirement or is terminated by the Company for
cause.
In addition, the Named Executive Officer is entitled to the benefits
of the Termination Benefits Agreement if after a Change in Control, the
Named Executive Officer terminates his employment with the Company in
response to certain actions by the Company which include, among other
things, a substantial reduction in the duties or responsibilities of the
Named Executive Officer, a reduction in the level of salary payable to the
Named Executive Officer, the failure by the Company to continue to provide
the Named Executive Officer with benefits substantially similar to those
previously provided to the Named Executive Officer, the required relocation
of the Named Executive Officer, or the breach by the Company of any of the
provisions of the Termination Benefits Agreement.
Upon termination of employment, a Named Executive Officer who is
entitled to the benefits payable under the Termination Benefits Agreement
shall receive within thirty (30) days following the termination all earned
but unpaid salary, bonus and incentive payments through the date of his
termination. In addition, the Named Executive Officer shall be entitled to
a lump-sum payment of an amount equal to 2.9 times the Named Executive
Officer's average annual compensation paid by the Company to the Named
Executive Officer for the past five years.
Stock Options
On June 27, 1983, the Company's Board of Directors and the then sole
shareholder approved two stock option plans, a nonqualified stock option
plan (the Nonqualified Plan ) and an incentive stock option plan (the ISO
Plan ). The Nonqualified Plan and the ISO Plan reserve 200,000 and 300,000
shares, respectively, of Common Stock (subject to adjustment for subsequent
stock splits, stock dividends and certain other changes in the Common
Stock) for issuance pursuant to the exercise of options granted by the
Board of Directors. The Plans are administered by the Board of Directors.
At the 1987 annual meeting of shareholders, the shareholders of the Company
approved the 1987 Stock Option and Incentive Plan (described below) and, as
a result, no further awards will be made under the ISO Plan or the
Nonqualified Plan.
On March 21, 1987, the Board of Directors adopted, subject to
shareholder approval, the 1987 Stock Option and Incentive Plan (the 1987
Plan ). The shareholders approved the 1987 Plan at the 1987 annual meeting
of shareholders and amended it at the 1989, 1990, 1991 and 1994 annual
meetings of shareholders. The 1987 Plan reserves for issuance 2,000,000
shares of Common Stock pursuant to incentive awards granted by the Stock
Option Committee of the Board of Directors (the Option Committee ) which
administers the 1987 Plan. The 1987 Plan provides for the grant to
officers and other key employees of the Company or its subsidiaries of
incentive awards in the form of stock options or restricted stock. Stock
options granted under the 1987 Plan may be either options intended to
qualify for federal income tax purposes as incentive stock options or
options not qualifying for favorable tax treatment ( nonqualified stock
options ).
<PAGE>
On May 20, 1993, the Company's shareholders approved the 1993 Stock
Option and Incentive Plan (the 1993 Plan ) and amended it at the 1994
annual meeting of shareholders. The 1993 Plan reserves for issuance
1,500,000 shares of the Company's Common Stock for sale or award to
officers and key employees (including any such officer or employee who
holds at least 10% of the Company's outstanding Common Stock) as stock
options or restricted stock. As a result of the adoption of the 1993 Plan,
no further awards will be made from the shares of Common Stock that
remained available for grants under the 1987 Plan.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Individual Grants
Number of Shares % of Total
Subject to Options Granted Grant Date
Options to Employees in Exercise Present Value
Name Granted Fiscal Year Price Expiration Date (1)
<C> <C> <C> <C> <C> <C>
William E. 7,500(2) 1.1% $14.575 December 8, $30,825
Bindley 142,500(4) 20.1% $13.250 1999 (3)
December 8, 994,650
2004 (5)
Thomas J. 60,000(6) 8.5% $13.250 December 8, 418,800
Salentine 2004 (5)
Michael D. 60,000(6) 8.5% $13.250 December 8, 418,800
McCormick 2004 (5)
Keith W. Burks 60,000(6) 8.5% $13.250 December 8, 418,800
2004 (5)
Michael R. 20,000(7) 2.5% $13.250 December 8, 139,600
Visnich 2004 (5)
</TABLE>
(1) The Company does not believe that the Black-Scholes model or any
other valuation model is a reliable method of computing the present
value of the Company's employee stock options. The value ultimately
realized, if any, will depend on the amount that the market price of
the stock exceeds the exercise price on the date of exercise.
(2) Incentive stock options granted at 110% of the fair market value of
the stock on the date of grant. The options are exercisable on or
after December 9, 1995 and expire five years after the date of grant.
(3) The grant date present value is based on a Black-Scholes model and
assumes a risk-free rate of return of 7.65%, an option term of five
years, a dividend yield of .60%, a stock volatility of .2342% and no
adjustments for nontransferability or risk of forfeiture.
<PAGE>
(4) Nonqualified stock options granted at 100% of the fair market value
of the stock on the date of grant. The options are exercisable at
the rate of 25% per year, beginning on December 9, 1995.
(5) The grant date present value is based on a Black-Scholes model and
assumes a risk-free rate of return of 7.88%, an option term of ten
years, a dividend yield of .60%, a stock volatility of .2342% and no
adjustments for nontransferability or risk of forfeiture.
(6) Consists of 7,500 shares of incentive stock options and 52,500 shares
of nonqualified stock options, both granted at 100% of fair market
value on the date of grant. The incentive stock options are
exercisable on or after December 9, 1995 and the nonqualified stock
options are exercisable at the rate of 25% per year, beginning
December 9, 1995.
(7) Consists of 7,500 shares of incentive stock options and 12,500 shares
of nonqualified stock options, both granted at 100% of fair market
value on the date of grant. The incentive stock options are
exercisable on or after December 9, 1995 and the nonqualified stock
options are exercisable at the rate of 25% per year, beginning
December 9, 1995.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Value of Unexercised
Number of Unexercised In-The-Money Options
Options at Year-End at Year-End (2)SharesValue
Acquired on Realized Unexercisabl Unexercisabl
Name Exercise (1) Exercisable e Exercisable e
<C> <C> <C> <C> <C> <C> <C>
William E. --- --- 42,925 255,075 $162,615 $747,863
Bindley
Thomas J. --- --- 230,000 99,0001,144,220 291,000
Salentine
Michael D. --- --- 190,500 99,000 775,605 291,000
McCormick
Keith W. Burks 1,000 $3,205 143,000 99,000 485,055 291,000
Michael R. --- --- 13,500 36,500 54,000 111,000
Visnich
</TABLE>
(1) Value is calculated based on the difference between the option
exercise price and the closing market price of the Common Stock on
the date of exercise multiplied by the number of shares to which the
exercise relates.
<PAGE>
(2) The closing price for the Company's Common Stock as reported by the
NASDAQ National Market System on December 31, 1994 was $15.50. Value
is calculated on the basis of the difference between the Common Stock
option exercise price and $15.50 multiplied by the number of In-the-
Money shares of Common Stock underlying the option.
Certain Transactions
The Company leases its Indianapolis facility from a limited
partnership, the general partner of which is W.E. Bindley. The lease has a
remaining term of three years and three months and provides for a minimum
rent payment of $111,000 per year. The Company believes that the terms of
the lease are at least as favorable as could be obtained from an unrelated
third party.
Compensation and Stock Option Committee Interlocks and Insider
Participation
On March 18, 1993, the Board of Directors established the Compensation
and Stock Option Committee (the Committee ) to approve compensation and
stock option grants for the Company's executive officers. The Committee
members are Robert L. Koch, J. Timothy McGinley, James K. Risk, K. Clay
Smith and Seth B. Harris. None of the Committee members are involved in a
relationship requiring disclosure as an interlocking executive
officer/director or under Item 404 of Regulation S-K or as a former officer
or employee of the Company. As used throughout this report, the term
executive officers refers to William E. Bindley, CEO, Chairman, and
President; Keith W. Burks, Executive Vice President; Michael D. McCormick,
Executive Vice President and General Counsel; Thomas J. Salentine,
Executive Vice President and Chief Financial Officer; and Michael R.
Visnich, President of Priority Healthcare Corporation, which became a
wholly owned subsidiary of the Company on June 23, 1994.
Committee Report On Executive Compensation
Prior to October 23, 1992, the Company's Board of Directors oversaw
executive compensation and stock option grants for the Company's executive
officers. The Company's established practice with respect thereto has been
to (a) conduct annual merit reviews in May of each year, to become
effective June 1, (b) grant stock options on the second Friday of each
December, and (c) approve annual bonuses payable, in whole or part, during
December or the following January or March. Because the Committee was not
established until March 18, 1993, however, its role in 1993 was limited to
approving the CEO's June 1 increase in base compensation and the December
1993 stock option grants and annual bonuses for all the executive officers.
The Committee applied the criteria discussed below to the June 1, 1994
annual merit reviews, the 1994 annual bonus amounts for the executive
officers, and the December 9, 1994 stock option grants.
<PAGE>
Executive Compensation Policy
The Company's overall compensation policy is designed to:
1. Be competitive so that the Company can attract, reward, and retain
the quality talent that is essential to its continued success.
2. Motivate key employees through the use of incentive compensation
programs, including annual bonuses and stock option grants.
3. Treat all employees fairly and, at the same time, be cost
effective.
4. Foster teamwork within the Company so that all employees share in
the rewards and risks of the Company.
5. Offer executive officers the opportunity to achieve significant
levels of ownership in the Company's stock so that their interest will be
aligned with those of its shareholders.
6. Assure that all compensation will continue to be tax deductible.
Cash Based Compensation
Base Compensation. In making compensation decisions, the Committee's
subjective review process primarily includes: (a) an analysis of executive
compensation levels within the pharmaceutical and distribution industries
at other publicly-traded companies of comparable size and stature by
reviewing proxy statements and national compensation surveys and reports;
(b) individual efforts and accomplishments within the Company, the
pharmaceutical and distribution industries, and the community;
(c) management experience and development; (d) team building skills
consistent with the Company's best interests; and (e) base compensation
paid to other executive officers within the Company. For the past three
years, annual merit increases have averaged 10%. Certain executive
officers have received greater base compensation increases corresponding to
promotions and/or expanded responsibilities.
The Committee's decision with respect to the 1994 base compensation was
made after the annual merit review of the other executive officers was
conducted by the CEO. At the July 21, 1994 meeting, the Committee
authorized one time adjustments to the base salaries for Messrs. Burks,
McCormick, and Salentine to bring them more in line with comparative
executive compensation levels within the pharmaceutical and distribution
industries. These adjustments, which included annual merit increases of
7.5%, averaged 49% and were made effective retroactively to June 1, 1994.
Mr. Visnich's monthly salary was also increased 10% effective June 1, 1994.
Annual Bonus. A portion of the cash compensation of the executive
officers (and most other salaried employees) consists of annual bonus
payments under the Company's bonus pool. The bonus pool is approved
annually by the Committee and the Board of Directors. For the past three
years, the bonus pool has averaged $1,038,830. Allocation of the bonus
pool to the executive officers (other than the CEO) is based on
<PAGE>
recommendations made by the Committee with input from the CEO. Allocation
of the bonus pool to non-executive officers is generally based on
recommendations made by the heads of the Company's divisions or
departments.
The Committee gives equal consideration to the Company's overall
performance and the executive officer's performance for the specific areas
of the Company under his or her direct control. This 50-50 balance
supports the accomplishments of overall objectives and rewards individual
contributions by the executive officers.
At the December 9, 1994 meeting, the Committee elected to expand its
previously reported measures of the Company's 1994 performance for purposes
of establishing the annual bonuses for the executive officers by including
1994 comparisons to 1993 in the following areas: (a) net sales; (b) net
DSD (Direct Store Delivery) sales; (c) operating cash flow; (d) operating
earnings; (e) net pre-tax earnings; (f) net after-tax earnings; (g)
shareholder equity; (h) primary earnings per share; and (i) December 31
closing stock price. Of these criteria, operating earnings were given the
greatest weight and shareholders equity the least weight. If the 1994
operating earnings were at least 10% greater than those in 1993 and if the
percentage improvement of the other criteria averaged at least 10%, the
Committee agreed to approve 1994 bonuses to Messrs. Bindley, Burks,
McCormick, and Salentine such that the combination of salary and bonus
equalled 5.15% of operating earnings for 1994. On March 10, 1995, the
Committee ratified the above noted bonuses to be paid during that month.
These bonus amounts range from 42% to 102% of base compensation and
averaged 69% for the named executive officers. In 1995, these executive
officers will be eligible to receive an annual bonus of up to 80% of base
compensation, depending on the Company's and individual's performance for
that year.
Because Priority Healthcare Corporation is a new company, Mr. Visnich's
bonus was based on the subjective criteria for evaluating the individual's
performance previously set forth in the discussion with respect to cash
compensation plus Priority Healthcare Corporation's operating earnings and
net sales as compared to pre-established targets. Based on a
recommendation by the CEO, the Committee approved a bonus amounting to 39%
of Mr. Visnich's base compensation to be paid during March 1995.
The Committee deems such financial goals to be a valid measure of
performance within the pharmaceutical and distribution industries and
consistent with the Company's best interests. Discretionary adjustments by
the Committee are possible should unforeseen or uncontrollable events occur
during the course of the year.
The Committee's intent is to make the executive officers total cash
compensation package (base compensation plus annual bonus) competitive with
other publicly-traded companies of comparable size and stature within the
pharmaceutical and distribution industries. Based on its analysis of total
cash compensation for similar executive officers within the pharmaceutical
and distribution industries, the Committee has determined the Company's
cash compensation for its executive officers to be competitive with respect
to the Company's relative position within the industry.
<PAGE>
Equity Based Compensation
The Committee believes that equity compensation, in the form of stock
options, is an important element of performance based compensation of
executive officers. By granting stock options, the Committee will continue
the Company's long-standing practice of increasing management's equity
ownership in order to ensure that their interests remain closely aligned
with those of the Company's shareholders. Stock options and equity
ownership in the Company provide a direct link between executive
compensation and shareholder value. Stock options also create an incentive
for key employees to remain with the Company for the long term because the
options are not immediately exercisable and, if not exercised, are
forfeited if the employee leaves the Company before retirement.
Consistent with the above philosophy, the Committee, based on input
from the CEO, approved the granting of stock options to 190 key employees
on December 9, 1994. For the executive officers (other than the CEO) the
Committee considered: (a) the CEO's input; (b) the Company's long-standing
practices with respect to stock option grants; (c) the objective criteria
for evaluating the Company's performance previously set forth in the
discussion with respect to cash compensation; (d) subjective criteria with
respect to individual performance, including individual efforts and
accomplishments, experience, and team building skills; and (e) the number
of stock option grants to other executive officers within the Company.
Other than the CEO, no executive officer was granted more stock options in
1994 than in 1993. The CEO, who was not eligible to receive stock options
until 1993, was granted 2000 more options in 1994 than in 1993.
Compensation of William E. Bindley, Chairman, Chief Executive Officer, and
President
Mr. Bindley's cash compensation is based on the same factors as the
other executive officers. As reflected in the Summary Compensation Table
on page 5, Mr. Bindley's base compensation is 7.7% greater in 1994 than
1993 and, when adjusted for income attributable to the premiums and taxes
on the split dollar life insurance policy described on page 8, his total
cash compensation was equal to 2.17% of the Company's 1994 operating
earnings. The Committee's decision to increase Mr. Bindley's cash
compensation was based on the subjective and objective criteria previously
set forth in the discussion with respect to cash compensation, including
Mr. Bindley's leadership during a year in which the Company posted record
sales and earnings and completed two acquisitions despite the most
competitive market in the Company's history.
On May 20, 1993, the Company's shareholders approved the 1993 Stock
Option and Incentive Plan. As a result, Mr. Bindley also participated in
the equity based compensation program for the first time in the Company's
history. By employing the subjective and objective criteria previously set
forth in the discussion with respect to cash and equity based compensation,
the Committee granted Mr. Bindley the stock options shown in the Option
Grants In Last Fiscal Year table on page 10.
It is the Committee's view that Mr. Bindley's total compensation
package for 1994 was based on an appropriate balance of (a) individual
<PAGE>
performance, (b) Company performance, and (c) other CEO compensation
packages within the pharmaceutical and distribution industries.
Employment and Severance Agreements
Mr. Maloof was paid his regular cash compensation for the two-month
period preceding his retirement on February 28, 1994. He was not paid a
cash bonus or granted stock options in December 1993 or 1994. Effective
March 1, 1994, Mr. Maloof became a sales and marketing consultant to the
Company for one year. His annual fee approximates one month's salary and
benefits costs prior to his retirement. This agreement has been informally
extended through February 28, 1996.
Compensation and Stock Option Committee
Robert L. Koch
J. Timothy McGinley
James K. Risk
K. Clay Smith
Seth B. Harris
<PAGE>
Performance Graph
The performance graph set forth below compares the cumulative total
shareholder return on the Company's Common Stock with the NASDAQ Market
Index and the NASDAQ Index for Non-Financial Stocks for the years 1989
through 1994.
Comparison of Five-Year Cumulative Total Return Among The Company,
NASDAQ Market Index and NASDAQ Index for Non-Financial Stocks
December 31 . . . 1989 1990 1991 1992 1993 1994
NASDAQ Stock Market 100.00 84.92 136.28 158.58 180.93 176.92
(U.S.)
NASDAQ Non-Financial 100.00 88.03 141.75 154.92 177.61 170.30
Stocks
Bindley Western 100.00 118.14 163.95 121.67 115.19 150.48
[PERFORMANCE GRAPH APPEARS HERE.]
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that may incorporate
future filings (including this proxy statement, in whole or in part), the
preceding Committee Report on Executive Compensation and the stock price
Performance Graph shall not be incorporated by reference in any such
filings.
<PAGE>
APPOINTMENT OF AUDITORS
The appointment of Price Waterhouse as auditors for the Company during
1995 will be submitted to the meeting in order to permit the shareholders
to express their approval or disapproval. In the event of a negative vote,
a selection of other auditors will be made by the Board. A representative
of Price Waterhouse is expected to be present at the meeting, will be given
an opportunity to make a statement if he or she desires and will respond to
appropriate questions. Notwithstanding approval by the shareholders, the
Board of Directors reserves the right to replace the auditors at any time
upon the recommendation of the audit committee of the Board of Directors.
The Board of Directors recommends a vote FOR the appointment of Price
Waterhouse.
PRINCIPAL OWNERS OF COMMON STOCK
The following table sets forth the number of shares of Common Stock of
the Company owned by any person (including any group) known by management
to beneficially own more than 5% of the Common Stock of the Company and by
all directors and executive officers of the Company as a group. Unless
otherwise indicated in a footnote, each individual or group possesses sole
voting and investment power with respect to the shares indicated as
beneficially owned.
Name and Address of Number of Shares Percent
Individual or Beneficially of
Identity of Group Owned (1) Class
William E. Bindley 3,087,918 28.3%
10333 N. Meridian Street, Suite 300
Indianapolis, Indiana 46290
All directors and executive
officers as a group (12 persons) 3,838,883(2) 33.1%
__________
(1) For information regarding the nature of the beneficial ownership of
shares held by certain Directors, see Election of Directors--Nominees
above.
(2) Includes presently exercisable options to acquire 706,425 shares.
SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
The date by which shareholder proposals must be received by the Company
for inclusion in proxy materials relating to the 1996 Annual Meeting of
Common Shareholders is December 15, 1995.
<PAGE>
APPENDIX
PROXY CARD
BINDLEY WESTERN INDUSTRIES, INC.
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby appoint William E. Bindley and Michael D. McCormick, or either of
them, my proxies, with power of substitution, to vote all shares of common
stock of the Company which I am entitled to vote at the annual meeting of
common shareholders of said company, to be held at the Conference Center,
10333 North Meridian Street, Indianapolis, Indiana, on May 18, 1995, at
9:00 a.m., Indianapolis time, and at any adjournment, as follows:
1. ELECTION OF DIRECTORS
\ \ FOR all nominees listed below
(except as marked to the contrary below)
\ \ WITHHOLD AUTHORITY (to vote for all nominees listed below)
William E. Bindley, Keith W. Burks, Robert L. Koch II,
James K. Risk, III, Seth B. Harris, K. Clay Smith,
J. Timothy McGinley, Michael D. McCormick,
William F. Bindley, II, Thomas J. Salentine
(INSTRUCTIONS: To WITHHOLD authority to vote for any individual
nominee, write that nominee's name on the space provided below)
________________________________________________________________
2. PROPOSAL TO APPROVE THE APPOINTMENT OF PRICE WATERHOUSE, as auditors for
the Company for 1995.
\ \ FOR \ \ AGAINST \ \ ABSTAIN
3. In their discretion, on any other matters that may properly come before
the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF ALL NOMINEES LISTED UNDER
PROPOSAL 1 AND FOR PROPOSAL 2.
Please sign exactly as your name appears below. When shares are held by
two or more persons, all of them should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by President or
<PAGE>
other authorized officer. If a partnership, please sign in partnership
name by authorized person.
______________________________ ______________________________
Signature Signature if held jointly
DATE ____________________, 1995
Please mark, sign, date and return the proxy card promptly
using the enclosed envelope.
<PAGE>
