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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT
(Mark One)
[x] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee Requir ed) For the fiscal year ended December 31, 1994
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _____________ to __________________.
Commission File Number 0-11355
BINDLEY WESTERN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 84-0601662
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10333 North Meridian Street, Suite 300, Indianapolis, Indiana 46290
(Address of principal executive office) (zip-code)
Registrant's telephone number, including area code: (317) 298-9900
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock ($.01 par value)
(Title of Class)
6-1/2% Convertible Subordinated Debentures
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days:
Yes: X No:
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
$115,426,080
Aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the last sale price for such stock at March 15, 1995
(assuming solely for the purposes of this calculation that all Directors and
Officers of the Registrant are "affiliates")
10,876,493
Number of shares of common stock outstanding March 15, 1995
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents have been incorporated by reference into
this annual report on Form 10-K:
IDENTITY OF DOCUMENT PARTS ON FORM 10-K INTO WHICH
DOCUMENT IS INCORPORATED
Proxy Statement to be filed
for the 1995 Annual Meeting PART III
of Common Shareholders of Page 1 of 103
Registrant Index to Exhibits at Page 42
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BINDLEY WESTERN INDUSTRIES, INC.
Indianapolis, Indiana
Annual Report to Securities and Exchange Commission
December 31, 1994
Part I
Item 1. BUSINESS.
General
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Bindley Western Industries, Inc., an Indiana corporation together with
its subsidiaries (the "Company"), is one of the largest drug wholesalers in the
United States, specializing in the distribution of ethical pharmaceuticals
(prescription drugs). Its principal customers are chain drug companies which
operate their own warehouses. Other customers include individual drug stores
(both independent and chain), hospitals, clinics, and other health care
providers. The Company believes that its specialization in ethical
pharmaceuticals has enabled it to better serve the chain drug companies that
maintain their own warehouses and typically make the majority of their
pharmaceutical purchases through wholesalers. The Company's largest chain drug
customers and the approximate period of time they have done business with the
Company are: Eckerd Corporation (22 years); Peyton (5 years); Thrifty
Corporation (12 years); Revco D.S., Inc. (17 years); CVS (25 years); and Rite
Aid Corporation (22 years). The Company provides its customers with access to an
inventory of more than 30,000 items that may be ordered electronically,
including by computer-to-computer interface. The Company has adapted its
software programs to assist various customers in recordkeeping and inventory
management. The Company services customers in 50 states, Puerto Rico, Mexico,
and Central and South America from its 14 distribution centers located in
Altamonte Springs, Florida; Austell, Georgia; Brockton, Massachusetts;
Charlotte, North Carolina; Dallas, Texas; Houston, Texas; Indianapolis, Indiana;
Middletown, Pennsylvania; Orange, Connecticut; Orlando, Florida; Portland,
Maine; San Dimas, California; Santa Ana, California; and Shelby, North Carolina.
The Company has historically specialized in the distribution of ethical
pharmaceuticals. The Company also carries a broad range of non-pharmaceutical
products designed to supplement its sales of ethical pharmaceuticals. The
Company's primary business has been to provide pharmaceuticals to chain drug
companies that maintain their own warehouses. Despite the large volume of
pharmaceuticals that chain drug companies purchase, the majority of their
pharmaceutical purchases at the warehouse level are made through wholesalers
because the products may be available only through franchised wholesalers or are
available from wholesalers on better terms than those offered directly by the
manufacturers.
The Company offers its chain drug customers not only competitive prices,
but also several additional services. By using the Company as a primary source
of pharmaceuticals, management believes that a chain drug customer can
centralize purchasing functions, exercise better inventory control, maintain
better security, and reduce handling costs. Inventory control and security are
particularly important to customers because of the relatively high dollar value
of pharmaceuticals in relation to their physical size. In addition, the
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Company has developed systems and procedures which management believes
facilitate customer compliance with the recordkeeping and physical security
requirements of the Controlled Substances Act of 1970 and the Prescription Drug
Marketing Act of 1987. Shipments of controlled substances are billed on separate
invoices and special security procedures are followed to reduce the possibility
of theft.
Customers generally use the services of more than one wholesale
distributor. In addition to chain drug customers, the Company acts as a primary
distributor to hospitals, clinics, and apothecary drug stores that carry only
pharmaceutical products and, since 1987, as a primary distributor to individual
drug stores that carry a broad range of both pharmaceutical and non-
pharmaceutical products. As discussed later, since 1993, the Company also serves
alternate site customers with dialysis, oncology, and infusion products and
services.
Pharmaceutical Distribution
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Wholesale distributors are an important component of the multi-billion
dollar pharmaceutical industry. Wholesale distributors enable pharmaceutical
manufacturers to provide a consistent supply of their products at the retail
level. There are approximately 200 wholesale drug distribution outlets in the
United States, significantly more than the number of distribution outlets
operated by pharmaceutical manufacturers. By utilizing the wholesale
distribution system to make their products available to the thousands of retail
outlets, manufacturers can avoid incurring additional expense and deal directly
with the relatively small number of wholesalers.
Although nearly 80% of pharmaceutical manufacturers distribute through
wholesalers, their distribution practices vary and are subject to change. Some
manufacturers distribute their products solely through franchised wholesalers,
while others also sell directly to retailers. Functional price discounts to
wholesalers are offered by many manufacturers. A limited number of manufacturers
have a one-price system of distribution and sell directly to wholesalers and
retailers at the same price. The Company does not transact a significant amount
of business with direct-selling manufacturers that have adopted a one-price
system. In recent years, certain manufacturers have adopted wholesaler only
policies, while certain other manufacturers have adopted a one-price system for
wholesalers and retailers. Although pharmaceutical manufacturers may adopt one-
price systems in the future, or may be required to pursuant to state
legislation, such developments have not had a material adverse effect on the
Company's business in the past.
Suppliers
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During each of the last five fiscal years more than 90% (based on dollar
volume) of the Company's purchases were ethical pharmaceutical products. The
Company distributes the products of approximately 600 suppliers, including
virtually every major ethical pharmaceutical manufacturer. Of the thousands of
ethical pharmaceutical products carried in inventory, a comparatively small
number account for a disproportionately large share of the total dollar volume
of products sold. The Company's largest suppliers include: Glaxo, Inc.; Eli
Lilly and Company; Pfizer, Inc.; SmithKline Beecham Pharmaceuticals; Bristol-
Myers Squibb; Marion Merrell Dow Inc.; Merck & Co., Inc.; Searle; Sandoz
Pharmaceutical Corporation; and Zeneca Pharmaceutical Group. Management believes
that the Company is one of the largest purchasers of pharmaceutical products
from most of its major suppliers. The Company
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has credit or other payment arrangements that differ among its various
suppliers, with the terms of some arrangements being more stringent than others.
The Company maintains many competing products in inventory and is not dependent
upon any single supplier, although the loss of a major supplier could adversely
affect the business of the Company.
The Company has wholesale distribution or franchise agreements with many of
its suppliers which generally require the Company to maintain an adequate
inventory of the suppliers' products in inventory. These agreements typically
have a term of one year and may be canceled by either party, without cause, on
one month's notice. Management believes that the Company's relationships with
its suppliers are generally excellent.
Customers
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The Company distributes pharmaceutical products to two principal groups of
customers, chain drug warehouses and non-warehouse customers. Chain drug
warehouses purchase in full-case lots for redistribution to individual retail
outlets. Approximately 57% of the Company's 1994 net sales are attributable to
five chain drug warehouse customers. Non-warehouse customers include individual
drug stores, both independent and chain, hospitals, clinics, and other health
care providers that generally purchase in less than full-case lots on a daily
basis as pharmaceutical products are needed. Although sales to non-warehouse
customers involve smaller quantities, they typically generate higher gross
margins than sales to warehouse customers. Sales to non-warehouse customers have
increased from approximately 4.3% of net sales in 1980 to approximately 29% in
1994.
Products ordered by chain drug warehouses are generally delivered by the
Company's trucks at regularly scheduled times or picked up by customers at the
Company's distribution centers. Shipments for chain drug warehouse customers are
individually palletized and packaged in "shrink wrap" for added security.
Shipments to non-warehouse customers are delivered or shipped on a daily basis
directly to the customer by the Company's vehicles or by a for-hire carrier.
Generally, products ordered on a daily basis before 11:00 a.m. are delivered or
shipped the same day.
The Company offers its customers several methods of direct electronic
ordering, including computer-to-computer interface and hand-held remote order
entry devices. The Company has adapted its software to permit direct
communication with the ordering computers of some of its chain drug warehouse
customers, thus avoiding the need to change the customers' existing software.
Management estimates that more than 90% of its 1994 sales to chain drug
warehouse customers were transacted by direct electronic ordering and expects
the percentage to increase in the future. Direct electronic ordering is not
mandatory and orders received by other methods can be processed by the Company.
The following chain drug warehouse customers each accounted for over 10% of
the Company's net sales during the years shown: Eckerd Corporation and Rite Aid
Corporation (1994), and Eckerd Corporation and Peyton (1993, 1992, and 1991).
Net sales to these customers aggregated 33%, 36%, 38%, and 41% of revenues in
1994, 1993, 1992, and 1991, respectively. The Company's largest single customer
for the last 17 years has been Eckerd Corporation. The Company, from time to
time, has entered into written understandings with certain of its major
customers setting forth various terms and conditions of sale.
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However, the Company does not have any long-term contracts with its major
customers and all relationships with such customers are terminable at will by
either party.
The loss of any one of the Company's chain warehouse customers could have a
material adverse effect on the Company's operations. Although the Company
believes that the effect could be minimized through increasing sales to existing
customers, securing additional customers within current distribution areas, and
by expanding into new markets, there can be no assurance thereof.
Divisions and Subsidiaries
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The Company currently has 12 operating divisions and five wholly-owned
subsidiaries. Each operating division is serviced from a distribution center
that has warehouse and delivery facilities. Each center has been constructed or
adapted to the Company's specifications for climate control, alarm systems, and
segregated security areas for controlled substances. The Company utilizes modern
warehousing techniques and equipment designed to accommodate both chain drug
warehouse and non-warehouse customers. A division manager supervises warehouse,
delivery, and local sales functions at each distribution center.
Effective August 1, 1993, the Company entered into a five year lease with
an unrelated landlord for 8,000 square feet of office space located in
Indianapolis, Indiana at a base rental of $9,057 per month. This office
currently houses certain of the Company's executive officers, two division
officers, and three staff.
Further information pertaining to the Company's Bindley Western Drug
Company divisions, all of which serve both warehouse and non-warehouse
customers, is set forth below:
Indianapolis Division. This division is serviced from the distribution
center in Indianapolis, Indiana. The Company leases approximately 32,000 square
feet of office space from a partnership, the partners of which include William
E. Bindley, the Company's Chairman and President, for a monthly base rental of
$9,250. In early 1988, the Company completed construction of a 45,500 square
feet expansion of its Indianapolis warehouse facility and in late 1991 added a
11,700 square feet mezzanine. This expanded facility is used for the warehousing
and distribution of pharmaceuticals and health and beauty aids. The Company owns
approximately three and one-half acres of undeveloped real estate adjacent to
this facility. The Company's centralized accounting, purchasing, and data
processing operations are also located at the Indianapolis facility.
Orlando Division. In September 1992, this division, which began operations
in 1983, occupied a newly built 94,600 square feet distribution center
(including office and mezzanine) situated on 5.22 acres of property in Orlando,
Florida. The Company sold its owned 30,800 square feet facility in 1993.
Houston Division. This division, which began operations in 1975, is
serviced from the distribution center in Houston, Texas. The Company leases
approximately 3,000 square feet of office space and 12,000 square feet of
warehouse space at a base rental of $3,750 per month from an unrelated landlord.
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Atlanta Division. This division, which began operations in 1977, is
serviced from the distribution center in Austell, Georgia, a suburb of Atlanta.
In late 1991, the Company entered into a seven year lease of a new 56,160 square
feet distribution center (including office) at a base rental of $14,015 per
month. Operations commenced at the new location in April 1992. The Company sold
its owned 30,000 square feet facility in 1993.
Dallas Division. This division, which began operations in December 1983, is
serviced from a 44,000 square feet distribution center in Dallas, Texas. The
Company exercised its option to purchase this facility for $950,000 in 1993.
San Dimas Division. This division, which began operations in June, 1987, is
currently served from a distribution center in San Dimas, California, a suburb
of Los Angeles. The Company's former Phoenix division was consolidated into the
San Dimas Division in 1993. The Company sold its Phoenix, Arizona facility
during 1994. The San Dimas facility is 65,400 square feet (including office and
mezzanine) and is leased from an unrelated landlord at a base rental of $19,832
per month under a lease expiring in September 2000.
Middletown Division. This division, which began operations in March 1992, is
served from the distribution center in Middletown, Pennsylvania, a suburb of
Harrisburg. In August 1991, the Company entered into a seven year lease of a new
40,650 square feet distribution center (including office) at a base rental of
$11,760 per month.
Orange Division. This new division resulted from the March 1993
consolidation of the Stamford Superior Drug Company and Special Services Company
(see discussion below) into one facility located in Orange, Connecticut. Both
operations were previously located in separate facilities in Stamford,
Connecticut. The newly built and Company-owned facility includes 10,000 square
feet of office space and 175,000 square feet of warehouse space (including
mezzanine) and is situated on 15 acres of property. From this facility, the
Company services its pharmaceutical, health and beauty care, and home health
care customers in the Northeast.
Brockton Division. This division, which operates by the name of New England
Wholesale Drug Co., was purchased by the Company in December 1986 and has been
serving both warehouse and non-warehouse customers since 1938. In October 1987,
this division moved into a Company-owned facility located in Brockton,
Massachusetts, just south of Boston. This facility includes 5,000 square feet of
office space and 55,000 square feet of warehouse space and is situated on
approximately 6.1 acres of real estate.
J. E. Goold Division. This division was purchased by the Company on March
25, 1992 through a merger with J. E. Goold & Co. ("Goold"), which was founded in
1867. Goold is a full line, full service distributor of pharmaceutical products,
health and beauty aids, and home health care products to customers in Maine, New
Hampshire, Vermont, New York, and Massachusetts. This division is served from a
Company owned 60,000 square feet distribution center in Portland, Maine and
leased depot facilities located in Schodack, New York and Worcester,
Massachusetts. The respective monthly rentals for these two facilities are
$1,833 and $2,134.
Charlotte Division. In January 1988, the Company occupied a newly
constructed distribution center in Charlotte, North Carolina. This facility is
comprised of 2,500 square feet of
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office space and 37,800 square feet of warehouse space. The Charlotte facility
is rented from an unrelated landlord at a base rental of $13,440 per month under
a lease expiring in January 1996.
Kendall Division. This division, which was purchased by the Company
effective July 1, 1994, has been serving non-warehouse customers since 1896.
From its facility in Shelby, North Carolina, this division services customers in
North and South Carolina, Tennessee, Virginia, and Georgia. This Company-owned
30,000 square feet distribution center is currently being expanded by the
addition of 73,500 square feet (including mezzanine) of warehouse space. The
projected completion date for this expansion project is September 1, 1995.
Thereafter, the Company intends to consolidate its Charlotte Division with the
Kendall operation.
Information pertaining to the Company's wholly-owned subsidiary corporations
is set forth below:
Special Services Company. This subsidiary operates at the Orange
distribution center of Bindley Western Drug Company. From the Orange facility,
Special Services specializes in the distribution of health and beauty care
products to customers in the Northeast.
First Choice, Inc. of Maine. On February 9, 1993, Glenlawn, Inc., a former
subsidiary of the Company, changed its name to First Choice, Inc. of Maine. This
subsidiary is currently operated from the Goold facility located in Portland,
Maine. Glenlawn ceased operations at the end of 1991.
BW Transportation Services, Inc. This subsidiary of the Company is a motor
contract carrier operating pursuant to a permit issued by the Interstate
Commerce Commission. Currently, this subsidiary, which is based in Indianapolis,
is performing transportation services on behalf of certain of the Company's
divisions and subsidiaries.
BW Food Distributors, Inc. This subsidiary is based in Metheun,
Massachusetts. On January 6, 1989, the Company entered into an agreement with
David N. Miller to act as a broker of food and related products on behalf of the
Company. This agreement is renewable annually with the consent of the Company
and Mr. Miller and is terminable at any time by either party.
Priority Healthcare Corporation. On June 23, 1994, the Company formed this
subsidiary to develop business opportunities through healthcare reform in both
the provider and supplier markets. The operating units of Priority Healthcare
Corporation are as follows:
Charise Charles Division. This division, which was purchased on February
28, 1993 from Charise Charles Ltd., Inc. ("Charise Charles"), is located
in Altamonte Springs, Florida, and is principally engaged in the
wholesale distribution of oncology and dialysis products. The products
are typically distributed by overnight mail or other overnight delivery
services. This distribution center has 22,800 square feet of office and
warehouse space and is leased from the former owners of Charise Charles.
The lease expires in 1996 and has a base rental of $15,225 per month.
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PRN Medical Division. This division, which was purchased on October 6,
1993, is a wholesale distributor of renal care and dialysis supplies and
equipment to customers in the United States and Central and South
America. PRN Medical operates from the Priority Healthcare Corporation
facility located in Altamonte Springs, Florida.
3C Medical Division. This division, which was purchased on October 31,
1994, is located in Santa Ana, California and is a distributor of
hemodialysis products in the acute dialysis market in Southern California
and Mexico through exclusive distribution agreements with major vendors.
This distribution center has nearly 12,000 square feet of office and
warehouse space and is leased from an unrelated landlord at a base rental
of $5,120 per month under a lease expiring in 1998.
IV-One Companies Subsidiaries. The Company, through Priority Healthcare
Corporation, purchased IV-1, Inc., IV-One Services, Inc., and National
Pharmacy Providers, Inc. effective January 1, 1995. Each company is a
Florida corporation and will be operated as a wholly-owned subsidiary of
Priority Healthcare Corporation. IV-1 and National Pharmacy Providers are
home and ambulatory infusion therapy companies whose primary focus is on
high acuity specialty pharmacy services. In October 1994, IV-1's pharmacy
and nursing services were given full accreditation by the Joint
Commission on Accreditation of Heathcare Organizations ("JCAHO"). IV-One
Services is a wholesale distributor of pharmaceutical drugs, similar to
Priority Healthcare Corporation. The IV-One Companies operate from a
10,200 square feet facility containing office space, pharmacy labs,
infusion suites, and warehouse space. This lease expires in 1998 and has
a base rental of $8,596 per month.
Acquisitions
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Presented below is a brief discussion of recent acquisitions by the
Company. The purchase price has been allocated based on a determination of the
fair value of the assets acquired and liabilities assumed. The goodwill
associated with these acquisitions is being amortized on a straight line basis
over 40 years.
J.E. Goold
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On March 25, 1992, the Company effected a merger with J.E. Goold. The
Company exchanged 91,880 shares of its common stock (market value $1,516,020)
and 1,050 shares of non-voting preferred stock (mandatory redemption value
$1,050,000) for all of the outstanding capital stock of Goold. The non-voting
preferred stock is included in long-term debt in the accompanying balance sheet.
The merger was accounted for as a purchase and, accordingly, the Company's
financial statements are consolidated to include Goold's results of operations
from the date of acquisition.
Charise Charles and PRN Medical
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On February 28, 1993 and October 6, 1993, the Company acquired Charise
Charles Ltd., Inc., a wholesale oncology and dialysis products distributor based
in Altamonte Springs,
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Florida and PRN Medical, Inc., a wholesale distributor of renal and dialysis
supplies and equipment based in Orlando, Florida, respectively.
These acquisitions were accounted for as purchases and, accordingly, the
1993 financial statements include Charise Charles and PRN's results of
operations from the date of acquisition. The consideration exchanged by the
Company for Charise Charles and PRN approximated $9 million.
Kendall Drug Company
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Effective July 1, 1994, the Company acquired the net assets of Kendall Drug
Company, a wholesale pharmaceutical distributor based in Shelby, North Carolina.
The purchase price of approximately $8.1 million approximates the fair value of
the assets purchased.
3C Medical
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On October 31, 1994, the Company, through Priority Healthcare Corporation,
acquired all of the outstanding stock of 3C Medical, Inc., a Santa Ana,
California-based distributor of hemodialysis products. This division of Priority
Healthcare Corporation specializes in the acute dialysis market in Southern
California and Mexico through exclusive distribution agreements with major
vendors. The Company has included 3C Medical's results of operations in its
financial statements from the date of acquisition.
IV-One Companies
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Effective January 1, 1995, the Company, through its Priority Healthcare
Corporation subsidiary, acquired all of the outstanding stock of the IV-One
Companies in a cash transaction. The IV-One Companies are comprised of IV-1,
Inc., IV-One Services, Inc., and National Pharmacy Providers, Inc. These
companies focus on high acuity specialty pharmacy services for patients
requiring home and ambulatory infusion therapy and will be operated as
subsidiaries of Priority Healthcare Corporation from Altamonte Springs, Florida.
The transaction was accounted for as a stock purchase.
Healthcare Reform and Managed Care
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Even though the healthcare reform initiatives of the Clinton Administration
were not enacted during 1994, manufacturers' price increases continued their
downward trend. Recent Bureau of Labor statistics data indicate that the rate of
price increases for prescription drugs at the wholesale level increased 2.6% in
1994 compared to 3.0% in 1993, 6.8% in 1992, 7.9% in 1991, and 8.1% in 1990. The
1993 and 1994 reductions were directly related to congressional pressure and the
prospect of healthcare reform legislation. The overall trend, however, is a
result of competitive market-driven cost containment measures implemented by
both the private and public sectors. Because this decline has limited the
Company's ability to forward purchase inventory in anticipation of price
increases, the Company has responded by focusing its efforts on still lower
administrative and operating expenses, increased direct store delivery sales,
and increased participation in the managed care market.
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In the managed care market, employers negotiate discounts from healthcare
providers by committing to long-term contracts involving thousands of patients.
Healthcare costs are linked more tightly to the provision of managed healthcare
services, especially with hospitals and doctors, than under traditional medical
insurance plans. For example, managed care organizations generally provide full
coverage for prescription drugs to lower healthcare costs by improving access to
medical treatment rather than delaying treatment until more expensive services
are required. The costs associated with the prescription drug benefit are
monitored by the managed care organization primarily through the establishment
of tightly controlled formularies of approved prescription drugs, including
generic substitutes, and by drug utilization review procedures wherein
physicians' prescribing practices and patients' usage are closely scrutinized.
Because more prescription drugs are being dispensed in a managed care
environment, Bindley Western Drug Company focused much of its sales and
marketing efforts during 1994 in this market. These customers, which are
typically long-term care facilities and providers of home healthcare services,
enter into pricing contracts directly with the pharmaceutical manufacturers,
generally through their membership in a group purchasing organization. To be a
participant in this market, the Company is required to service these customers
at the negotiated price and to administer the corresponding contract between the
manufacturer and the customer. Although managed care sales constitute a small
percentage of Bindley Western Drug Company's total sales, this segment of its
business will continue to grow. By comparison, a significant portion of the
sales attributed to Priority Healthcare Corporation's operating subsidiaries and
divisions during 1994 originated in the managed care market.
Internal Systems Development
----------------------------
The Company has developed and continues to improve its specialized internal
operating and management systems. Inventories and accounts receivable are
controlled through the use of Company-developed data processing and management
information systems. These assets are monitored by distribution center
management using on-site data processing equipment. At present, many operational
functions, including accounting, cash management, accounts receivable, and
inventory control are conducted through data processing operations at the
Altamonte Springs, Indianapolis, Brockton, Shelby and Portland facilities. Data
is transmitted to and from on-site data processing equipment at the distribution
centers.
Expansion
---------
The Company continues to seek opportunities to expand its operations
geographically through the development of new distribution centers or the
acquisition of existing wholesale pharmaceutical distributors. In addition, the
Company is continuing to evaluate opportunities to acquire other companies
engaged in health care or distribution related activities.
Employees
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As of December 31, 1994, the Company had 801 full time employees. Of this
amount, 240 employees are associated with the 1992, 1993, and 1994 acquisitions
described
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above. In addition, there are 33 full time employees of the IV-One Companies,
which was purchased effective January 1, 1995. The Company believes its
relationship with its employees is satisfactory.
Competition
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The wholesale pharmaceutical industry is highly competitive. The Company
competes with national and regional full-line distributors, some of which are
larger and have substantially greater financial resources. Additional
competition is provided by short-line distributors, direct selling
manufacturers, mail order houses, rack jobbers, and specialty distributors.
Competition is basically price-oriented, but can also be affected by delivery,
credit terms, depth of product line, and other customer services. In recent
years there has been a trend toward consolidation in the wholesale drug
industry, as evidenced by the purchase of a number of distributors by the
national wholesalers. As of December 31, 1994, there were approximately 55
wholesale drug companies in the United States.
Regulation
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The wholesale pharmaceutical industry is subject to regulation by
federal, state, and local government agencies. Each of the Company's existing
distribution centers is licensed to distribute ethical pharmaceutical products
and certain controlled substances. The Company must comply with regulations,
including certain operating and security standards for each of its distribution
centers, of the Food and Drug Administration, the Drug Enforcement
Administration, state boards of pharmacy and, in certain areas, state boards of
health. The Company believes that it is in compliance with all material statutes
and regulations applicable to its various operations.
Item 2. PROPERTIES.
For a discussion of the properties of the Company, see "Divisions And
Subsidiaries" under Item 1.
Item 3. LEGAL PROCEEDINGS.
The Company is subject to ordinary and routine litigation incidental to
its business, none of which is material to the Company's results of operations
or financial condition. See, also, Note 13 - Legal Proceedings in the Company's
financial statements, which is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of 1994 to a vote of
security holders of the registrant, through the solicitation of proxies or
otherwise.
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EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE OFFICE
Gregory S. Beyerl 37 Vice President and Controller
George E. Maloof 65 Senior Vice President
Michael L. Shinn 40 Treasurer
Gregory S. Beyerl, who is a certified public accountant, joined the
Company's Bindley Western Drug Company Division in 1986 as Assistant Controller
and was promoted to division Controller in 1987, division Vice President in
1990, and corporate Vice President and Controller in 1992. He was previously
with the accounting firm of Price Waterhouse. Mr. Beyerl also holds an MBA
degree.
George E. Maloof joined the Company with its acquisition of New England
Wholesale Drug Company in 1986 and retired from active employment with the
Company on February 28, 1994. Mr. Maloof is a consultant to the Company through
February 1996.
Michael L. Shinn joined the Company as Treasurer in May 1992. Mr. Shinn
is a certified public accountant and was previously the Director of Corporate
Taxation for the Indianapolis office of the accounting firm of Price Waterhouse.
His duties include responsibility for the Company's entire tax function,
including those of its subsidiaries and divisions.
Officers serve at the discretion of the Board. There is no family
relationship between any of the officers of the Company.
(Pursuant to General Instruction G(3) of Form 10-K, the foregoing
information is included as an unnumbered Item in Part I of this Annual Report in
lieu of being included in the Company's Proxy Statement for its 1995 Annual
Meeting of Shareholders.)
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PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The common stock of the Company is traded in the over-the-counter market
under the symbol BIND. The following table shows for the periods indicated the
representative high and low prices for the Company's common stock. Information
relating to the Company's common stock is available through the NASDAQ National
Market System and the table reflects actual closing prices.
<TABLE>
<CAPTION>
<S> <C> <C>
1994 HIGH LOW
First Quarter................. $14.00 $11.88
Second Quarter................ $13.25 $11.13
Third Quarter................. $14.75 $11.25
Fourth Quarter................ $15.63 $11.75
1993 HIGH LOW
First Quarter................. $14.00 $11.50
Second Quarter................ $13.63 $ 9.75
Third Quarter................. $11.88 $10.00
Fourth Quarter................ $12.63 $11.00
</TABLE>
At March 15, 1995 there were outstanding 10,876,493 shares of the
Company's common stock, which were held by approximately 600 holders of record.
The Company has paid cash dividends on its common stock of 1-1/2 cents
per share on twelve different dates for the period beginning September 5, 1990
and ending June 30, 1993. This dividend was increased to 2 cents per share for
cash dividends paid on seven different dates for the period beginning September
7, 1993 and ending March 24, 1995. Prior to September 5, 1990, the Company had
not declared a cash dividend on its common stock. Future dividends will be paid
in accordance with declarations by the Board of Directors in its sole
discretion. The Company's primary line of credit agreement requires the Company
to maintain specified levels of working capital and net worth, which may limit
the Company's ability to pay dividends in the future.
During the third quarter of 1994, the Company established an Automatic
Dividend Reinvestment Plan for its shareholders. This voluntary plan provides
for periodic investment of shareholder dividends in shares of the Company's
common stock plus the opportunity to make voluntary cash payments up to $5,000
per quarter to purchase additional shares without incurring any service charges
or brokerage fees.
13
<PAGE>
Item 6. Selected Financial Data
The selected financial data set forth below should be read in conjunction
with the Company's financial statements and related notes included elsewhere in
this report.
Five Year Financial Review and Selected Financial Data
Bindley Western Industries, Inc.
<TABLE>
<CAPTION>
(in thousands, except share data)
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 4,034,107 $ 3,426,097 $ 2,911,741 $ 2,392,801 $ 2,042,153
Other income 3,317 4,363 3,578 4,164 4,940
Cost of products sold 3,945,172 3,350,119 2,844,880 2,334,669 1,990,431
Selling, general and administrative 50,279 43,322 36,707 27,419 24,972
Other expenses 16,998 20,601 17,761 17,141 16,407
Earnings before income taxes
and cumulative effect of
change in accounting principle 24,975 16,418 15,971 17,736 15,283
Provision for income taxes 10,240 6,854 5,590 6,376 5,551
Net earnings before
cumulative effect of change
in accounting principle 14,735 9,564 10,381 11,360 9,732
Cumulative effect of
change in accounting principle 2,510
Net earnings 14,735 9,564 12,891 11,360 9,732
Earnings per share:
Before cumulative effect of change
in accounting principle
Primary $ 1.34 $ 0.88 $ 1.02 $ 1.61 $ 1.47
Fully diluted 1.20 0.86 1.00 1.33 1.22
Net earnings
Primary 1.34 0.88 1.27 1.61 1.47
Fully diluted 1.20 0.86 1.21 1.33 1.22
Average shares outstanding:
Primary 11,035,912 10,915,751 10,139,662 7,066,916 6,635,424
Fully diluted 14,539,770 14,315,902 11,871,003 10,728,375 10,310,050
Other financial data:
Current assets $ 736,687 $ 665,412 $ 555,429 $ 431,077 $ 285,512
Total assets 803,447 732,204 629,759 495,863 355,126
Current liabilities 547,131 489,904 395,353 341,647 218,837
Long-term debt 69,461 69,733 69,246 53,660 53,740
Total liabilities 623,196 566,486 473,072 409,693 284,219
Shareholders equity 180,251 165,718 156,687 86,170 70,907
Book value per share 16.64 15.38 14.59 12.54 11.05
</TABLE>
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS.
COMPARISON OF 1994 AND 1993.
On June 23, 1994 the Company formed a new wholly owned subsidiary, Priority
Healthcare Corporation (PHC), to develop business opportunities in both the
provider and supplier markets. The new company, based in Altamonte Springs,
Florida, was initially comprised of the Charise Charles Ltd., Inc. (Charise
Charles) and PRN Medical, Inc. (PRN) divisions of the Company.
The Company acquired Kendall Drug Company (Kendall), a wholesale
pharmaceutical distributor, effective July 1, 1994 and on October 31, 1994 the
Companys wholly owned subsidiary, PHC, acquired 3C Medical (3C), a distributor
of hemodialysis products. The Kendall and 3C results of operations are included
in the Companys financial statements from the respective dates of acquisition.
The year ended December 31, 1994 includes sales of $75 million and $497,000 for
Kendall and 3C, respectively.
The Company acquired Charise Charles, a wholesale distributor of oncology
and dialysis products on February 28, 1993, and PRN, a wholesale distributor of
renal care and dialysis supplies and equipment on October 6, 1993. The Charise
Charles and PRN results of operations are included in the Companys financial
statements for the full year in 1994 and from the respective dates of
acquisition in 1993. The year ended December 31, 1994 includes sales of
approximately $107 million for Charise Charles and PRN, as compared to $70
million for the year ended December 31, 1993.
Net sales for 1994 increased by 18% from $3,426 million in 1993 to $4,034
million, principally as a result of volume increases, although overall price
changes in the industry accounted for approximately 4%. The increase reflected
the aforementioned inclusion of Kendall, 3C, Charise Charles, and PRN and
strength in most of the Company's operating units, especially the direct store
delivery segments of Bindley Western Drug Company. Direct store delivery sales
for 1994 were approximately 29% of total net sales and represented an increase
of 30% over 1993.
Gross margin of $89.0 million in 1994 increased by 17% over 1993, primarily
because of the increase in net sales. Gross margin as a percent of net sales had
a slight decrease from 2.22% in 1993 as compared to 2.20% in 1994. The decrease
was caused primarily by competitive selling pressures. The level of
pharmaceutical manufacturer price increases stabilized in 1994, resulting in
approximately the same level of forward purchasing opportunities as 1993. The
national debate about limiting price increases of pharmaceutical drugs due to
increasing costs of healthcare has resulted in a number of pharmaceutical
manufacturers limiting future price increases on certain of their product lines
to the rate of inflation. If price increases were regulated on an industry-wide
basis, the Company's incentive to forward purchase inventory in anticipation of
price increases would likewise be limited because of the reduced potential
profitability of such purchases. In response to this trend, which may continue
in 1995, the Company is continuing to look for ways to lower operating expense,
capitalize on
15
<PAGE>
its direct store delivery and alternate care marketing efforts, and increase its
return on investment with existing customers.
Other income decreased in 1994 as a result of reduced gains on the sale of
marketable securities. This decrease is somewhat offset by an increase in
service fee income on certain customer receivable balances.
Selling, general and administrative expenses increased from $43.3 million
in 1993 to $50.3 million in 1994. The increase in 1994 included approximately
$2.0 million for Kendall and 3C. It also included an incremental increase of
$1.7 million related to Charise and PRN. The remainder of the increase is
primarily related to normal inflationary increases and costs to support the
growing direct store delivery program of Bindley Western Drug Company and the
alternate care business of PHC. The cost increases related to the direct store
delivery and the alternate care programs include, among others, delivery
expenses, warehouse supplies and warehouse labor costs, all of which are
variable with the level of sales volume. Although sales and marketing expenses
are also variable with the level of sales volume, they are relatively
insignificant and represent less than .5% of net sales. Continuing increases in
direct store delivery and alternate care sales will result in continuing
increases in selling, general and administrative expenses.
Depreciation and amortization increased from $5.7 million in 1993 to $5.8
million in 1994. The inclusion of Kendall and 3C accounted for $80,000 of the
increase while $59,000 resulted from the incremental increase at Charise Charles
and PRN. The remainder resulted from depreciation and amortization on new
facilities and equipment offset by the writedown of assets from the 1993
restructuring described below.
Interest expense increased from $8.1 million in 1993 to $11.2 million in
1994. The average short-term borrowings outstanding increased from $105 million
in 1993 to $142 million in 1994 and the average short-term interest rate
increased from 4.9% in 1993 to 5.9% in 1994. Funds received from customers in
respect of working capital carrying cost are treated as a reduction of interest
expense.
The 1993 writedown of accounts receivable consisted of $1.42 million for
Reliable Drug Stores, Inc. Reliable entered bankruptcy on December 9, 1992. The
1993 writeoff represented the Company's remaining exposure from the Reliable
bankruptcy claim.
On February 22, 1995, Pic 'N Save, a 32 store chain based in Jacksonville,
Florida, filed a petition for reorganization under the federal Bankruptcy Code.
As of the date of filing, Pic 'N Save was indebted to the Company in an amount
approximating $3.46 million. During 1994, the Companys sales to Pic 'N Save
approximated $25 million. The Company is continuing to sell to Pic 'N Save on a
cash basis.
Based on the most recent analysis of Pic 'N Save's financial condition,
management believes that any uncollectible amounts would not be material to the
Company's financial position or cash flows.
The restructuring charge of $5.39 million in 1993 was attributable
primarily to consolidation programs for the Company's East Coast operations
which will provide increased efficiency, reduced costs, and enhanced data
processing based programs for all customer
16
<PAGE>
categories. This charge included lease commitments to third parties, writedowns
of various assets to realizable values, and facilities consolidation costs. The
charge was comprised of noncash asset writedowns of approximately $2.7 million,
product consolidation costs of approximately $.3 million, and anticipated
probable cash expenditures of $2.4 million related to payments on lease
commitments, data processing and inventory conversion costs and other employee
costs. The anticipated probable cash expenditures will be funded from operating
revenues. The Company believes that, as of December 31, 1994, the consolidation
of the East Coast operations was on schedule. In 1994, the Company expended $1.2
million of the probable cash expenditures on a basis substantially consistent
with the original plan and believes that the $5.39 million charge taken at
December 31, 1993 will be sufficient to complete the consolidation.
The provision for income taxes represented 41.0% and 41.7% of earnings
before taxes in 1994 and 1993, respectively. The 1993 rate included the effect
of the statutory rate increase on the Company's deferred tax liabilities at the
beginning of 1993. In February 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes." SFAS 109 mandates the liability method for computing deferred
income taxes. The Company adopted SFAS 109 and restated deferred income taxes in
1992. The cumulative effect of the change to the liability method for computing
deferred income taxes resulted in an increase to 1992 net earnings of
$2,510,000.
LIQUIDITY-CAPITAL RESOURCES.
For the year ended December 31, 1994, the Company's operations consumed
$12.2 million in cash. Inventories increased during the period by $47 million.
Offsetting this increase was a $6.9 million increase in accounts payable and a
$6.3 million decrease in accounts receivable. The continuing emphasis on the
direct store delivery and alternate care business has required an increase in
both net working capital and cash.
Capital expenditures, predominantly for upgrades to the Company's data
processing equipment, were $3.6 million during the year. Proceeds from the sale
of marketable securities during the period were $3.8 million.
Net increase in borrowings under the bank credit agreement was $28.5
million during the year. At December 31, 1994 the Company had borrowed $136.5
million under the bank credit agreement and had a remaining availability of
$63.5 million.
The Company believes that its cash on hand, cash equivalents, line of
credit and working capital management efforts are sufficient to meet future
working capital requirements. On February 28, 1995, the Company's short-term
line of credit was increased to $250,000,000.
The Company's principal working capital needs are for inventory and
accounts receivable. The Company sells inventory to its chain drug warehouse and
other customers on various payment terms. This requires significant working
capital to finance inventory purchases and entails accounts receivable exposure
in the event any of its chain warehouse or other major customers encounter
financial difficulties. Although the Company monitors closely the
creditworthiness of its major customers and, when feasible, obtains security
interests in the inventory sold, there can be no assurance that the Company will
not incur some collection loss on chain drug or other major customer accounts
receivable in the future.
17
<PAGE>
COMPARISON OF 1994 AND 1993 FOURTH QUARTERS.
The aforementioned comments regarding Kendall and 3C should be considered
when comparing the fourth quarter of 1994 with the fourth quarter of 1993. Net
sales for the fourth quarter of 1994 increased by 15% from $974 million in 1993
to $1,118 million. Kendall and 3C sales in the fourth quarter of 1994 were
approximately $40 million. The remainder of the increase in 1994 resulted from
volume increases, although overall price changes in the industry accounted for
approximately 4%. Gross margins of $24.6 million in the fourth quarter of 1994
increased by 22% over 1993, primarily because of the increase in net sales.
Gross margin as a percent of net sales increased from 2.07% in the fourth
quarter of 1993 compared to 2.20% in the fourth quarter of 1994. The continued
growth in the Company's direct store delivery and alternate care sales offset
the competitive selling pressures in the market.
The increase in other income from $957,000 in the fourth quarter of 1993 to
$1.3 million in the fourth quarter of 1994 was due principally to the
recognition of gains realized on the sale of marketable securities and an
increase in service fee income on certain customer receivable balances.
Selling, general and administrative expenses increased from $11.5 million
in the fourth quarter of 1993 to $13.7 million in the fourth quarter of 1994.
The increase in 1994 included approximately $1.0 million related to Kendall and
3C, with the remainder of the increase related to normal inflationary increases
and costs to support the growing direct store delivery program of Bindley
Western Drug Company and the alternate care business of PHC. The cost increases
related to the direct store delivery and alternate care programs include, among
others, delivery expenses, warehouse supplies and warehouse labor costs, all of
which are variable with the level of sales volume. Although sales and marketing
expenses are also variable with the level of sales volume, they are relatively
insignificant and represent less than .5% of net sales. Continuing increases in
direct store delivery and alternate care sales will result in continuing
increases in selling, general and administrative expenses.
Depreciation and amortization decreased from $1.6 million in the fourth
quarter of 1993 to $1.4 million in the fourth quarter of 1994. The increase due
to the inclusion of Kendall and 3C and depreciation and amortization on new
facilities and equipment is offset by the writedown of assets from the 1993
restructuring.
Interest expense increased from $2.0 million in the fourth quarter of 1993
to $4.0 million in 1994. The increase resulted from a rise in the average short-
term interest rate and average short-term borrowings outstanding. In the fourth
quarter of 1993, the average short-term interest rate and average short-term
borrowings outstanding were 4.9% and $124.5 million, respectively, as compared
to 6.6% and $200 million in the fourth quarter of 1994. Funds received in 1993
and 1994 from customers in respect of working capital carrying cost are treated
as a reduction of interest expense.
The restructuring charge of $5.39 million in the fourth quarter of 1993 was
attributable primarily to consolidation programs for the Company's East Coast
operations which will provide increased efficiency, reduced costs, and enhanced
data processing based programs for all customer categories. This charge included
lease commitments to third parties, writedowns of various assets to realizable
values, and facilities consolidation costs. The charge was comprised of noncash
asset writedowns of approximately $2.7 million, product consolidation
18
<PAGE>
costs of approximately $.3 million, and anticipated probable cash expenditures
of $2.4 million related to payments on lease commitments, data processing and
inventory conversion costs and other employee costs. The Company believes that,
as of December 31, 1994, the consolidation of the East Coast operations was on
schedule.
The provision for income taxes represented 41.0% and 56.4% of earnings
before taxes in the fourth quarter of 1994 and 1993, respectively. The higher
rate in 1993 was primarily attributable to the proportionally greater effect of
nondeductible items on the lower 1993 fourth quarter earnings caused by the
restructuring charge.
COMPARISON OF 1993 AND 1992.
The year ended December 31, 1993 includes approximately $70 million of
sales for Charise Charles and PRN and $151 million of sales for Goold (acquired
March, 1992). The year ended December 31, 1992 included $113 million of sales
for Goold.
Net sales for 1993 increased by 18% from $2,912 million in 1992 to $3,426
million, principally as a result of volume increases, although overall price
changes in the industry accounted for approximately 4%. The increase reflected
the aforementioned inclusion of Charise Charles, PRN, and Goold and strength in
most of the Company's operating units, especially the direct store delivery
segments of Bindley Western Drug Company. Direct store delivery sales for 1993
were approximately 27% of total net sales and represented an increase of 31%
over 1992.
Gross margin of $76.0 million in 1993 increased by 14% over 1992, primarily
because of the increase in net sales. Gross margin as a percent of net sales
decreased from 2.30% in 1992 compared to 2.22% in 1993. The decrease was caused
both by a reduction in the level of pharmaceutical manufacturer price increases
which resulted in fewer opportunities for forward purchases and by competitive
selling pressures.
The increase in other income in 1993 was due principally to the recognition
of gains realized on the sale of marketable securities. Service fee income on
certain customer receivable balances also increased other income in 1993. Other
income in 1992 includes a $1.9 million gain on the disposition of fixed assets
and a $550,000 charge to recognize the permanent impairment of marketable
securities.
Selling, general and administrative expenses increased from $36.7 million
in 1992 to $43.3 million in 1993. The increase in 1993 included approximately
$2.6 million for Charise Charles and PRN. It also included an incremental
increase of $1.5 million related to Goold. The remainder of the increase was
primarily related to normal inflationary increases and costs to support the
growing direct store delivery program of Bindley Western Drug Company. The cost
increases related to the direct store delivery program include, among others,
delivery expenses, warehouse supplies and warehouse labor costs, all of which
are variable with the level of sales volume. Although sales and marketing
expenses are also variable with the level of sales volume, they are relatively
insignificant and represent less than .2% of net sales. Continuing increases in
direct store delivery sales will result in continuing increases in selling,
general and administrative expenses.
19
<PAGE>
Depreciation and amortization increased from $4.7 million in 1992 to $5.7
million in 1993. The inclusion of Charise Charles and PRN accounted for $44,000
of the increase while $185,000 resulted from the incremental increase at Goold.
The remainder was attributable to the depreciation and amortization on new
facilities and equipment.
Interest expense decreased from $8.4 million in 1992 to $8.1 million in
1993. The average short-term borrowings outstanding increased from $90 million
in 1992 to $105 million in 1993. However, this increase was offset by a decrease
in the average short-term interest rate from 6.0% in 1992 to 4.9% in 1993. The
Company called for redemption on April 2, 1992 all of its outstanding 8-5/8%
Convertible Subordinated Debentures Due 2010. On September 24, 1992 and October
20, 1992 the Company issued $65,000,000 and $2,350,000, respectively, of 6.50%
Convertible Subordinated Debentures. Approximately $1.05 million and $1.15
million of 8-5/8 and 6.5% Debenture interest was recognized in 1992,
respectively, as compared to $4.39 million of 6.5% Debenture interest in 1993.
Funds received from customers in respect of working capital carrying cost are
treated as a reduction of interest expense and increased in 1993.
The 1993 writedown of accounts receivable consisted of $1.42 million for
Reliable Drug Stores, Inc. The 1992 amount includes $1.7 million for Revco D.S.,
Inc. which emerged from bankruptcy in June 1992 and $3.0 million for Reliable.
Revco's emergence from bankruptcy has had little effect on current results of
operations because the Company has maintained the same level of business with
reorganized Revco that it had over the recent few years. Reliable entered
bankruptcy on December 9, 1992. The total writeoff of $4.42 million represents
the Company's remaining exposure from the Reliable bankruptcy claim.
The restructuring charge of $5.39 million in 1993 is attributable primarily
to consolidation programs for the Company's East Coast operations which will
provide increased efficiency, reduced costs, and enhanced MIS based programs for
all customer categories. The charge was comprised of noncash asset writedowns of
approximately $2.7 million, relocation costs of approximately $.3 million, and
anticipated probable cash expenditures of $2.4 million. The anticipated probable
cash expenditures will be funded from operating revenues.
The provision for income taxes represented 41.7% and 35.0% of earnings
before taxes in 1993 and 1992, respectively. The increase was primarily
attributable to the 1992 release of previously provided credits, the 1993
statutory rate increase, and the effect of such rate increase on the Company's
deferred tax liabilities at the beginning of 1993. In February 1992, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes." SFAS 109 mandates the liability
method for computing deferred income taxes. The Company adopted SFAS 109 and
restated deferred income taxes in 1992. The cumulative effect of the change to
the liability method for computing deferred income taxes resulted in an increase
to 1992 net earnings of $2,510,000.
INFLATION.
The Company's financial statements are prepared on the basis of historical
costs and are not intended to reflect changes in the relative purchasing power
of the dollar. Because of its ability to take advantage of forward purchasing
opportunities, the Company believes that its gross profits generally increase as
a result of manufacturers price increases in the products it distributes. Gross
profits may decline if the rate of price increases by manufacturers declines.
20
<PAGE>
Generally, price increases are passed through to customers as they are
received by the Company and therefore reduce the negative effect of inflation.
Other non-inventory cost increases, such as payroll, supplies and services, have
been partially offset during the past three years by increased volume and
productivity.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial data required to be included under this Item is submitted in
a separate section of this report and incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
Not applicable.
21
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item concerning the Directors and
nominees for Director of the Company is incorporated herein by reference to the
Company's definitive Proxy Statement for its 1995 annual meeting of common
shareholders, to be filed with the Commission pursuant to Regulation 14A.
Information concerning the executive officers of the Company who are not also
Director nominees is included under the caption "Executive Officers of the
Company" at the end of Part I of this Annual Report. Such information is
incorporated herein by reference, in accordance with General Instruction G(3) to
Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K.
Item 11. EXECUTIVE COMPENSATION.
The information required by this Item concerning remuneration of the
Company's officers and Directors and information concerning material
transactions involving such officers and Directors is incorporated herein by
reference to the Company's definitive Proxy Statement for its annual meeting of
common shareholders which will be filed pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item concerning the stock ownership of
management and five percent beneficial owners is incorporated herein by
reference to the Company's definitive Proxy Statement for its annual meeting of
common shareholders which will be filed pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item concerning certain relationships
and related transactions is incorporated herein by reference to the Company's
definitive Proxy Statement for its annual meeting of common shareholders which
will be filed pursuant to Regulation 14A within 120 days after the end of the
Company's last fiscal year.
22
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The documents listed below are filed as a part of this report except as
otherwise indicated:
(a) 1. FINANCIAL STATEMENTS. The following described financial
statements, required to be filed by Item 8 and incorporated therein by reference
are set forth on pages 24 though 40.
Report of Independent Accountants 24
Statements of Earnings for each of the three years
in the period ended December 31, 1994 25
Balance Sheets as of December 31, 1994 and 1993 26
Statements of Cash Flows for each of the three years
in the period ended December 31, 1994 27
Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1994 28
Notes to Consolidated Financial Statements 29 to 40
(a) 2. FINANCIAL STATEMENT SCHEDULES. No financial statement schedules
are included as the information required by Rule 5-04 is not applicable, or is
not material.
(a) 3. EXHIBITS. The list of exhibits filed as part of this report is
incorporated herein by reference to the index to Exhibits at Page 42.
(b) 4. No reports on Form 8-K were filed by the Registrant during the
last quarter covered by this report.
23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Bindley Western Industries, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) 1 on page 23 present fairly, in all material
respects, the financial position of Bindley Western Industries, Inc. and its
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes in 1992.
Price Waterhouse LLP
Indianapolis, Indiana
February 27, 1995
24
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the years ended December 31, 1994 1993 1992
(In thousands, except share data)
Revenues:
Net sales $ 4,034,107 $ 3,426,097 $ 2,911,741
Other income 3,317 4,363 3,578
------------- -------------- --------------
4,037,424 3,430,460 2,915,319
Cost and expenses:
Cost of products sold 3,945,172 3,350,119 2,844,880
Selling, general and administrative 50,279 43,322 36,707
Depreciation and amortization 5,813 5,671 4,686
Interest 11,185 8,122 8,375
Write down of accounts receivable 1,420 4,700
Restructuring charge 5,388
------------- -------------- --------------
4,012,449 3,414,042 2,899,348
Earnings before income taxes and
cumulative effect of change in
accounting principle 24,975 16,418 15,971
------------- -------------- --------------
Provision for income taxes:
Current 11,800 8,193 9,899
Deferred (1,560) (1,339) (4,309)
------------- -------------- --------------
10,240 6,854 5,590
Net earnings before cumulative effect
of change in accounting principle 14,735 9,564 10,381
Cumulative effect of change in method
of accounting for income taxes 2,510
------------- -------------- --------------
Net earnings $ 14,735 $ 9,564 $ 12,891
============= ============== ==============
Earnings per share:
Primary:
Net earnings before cumulative
effect of change in accounting
principle $ 1.34 $ 0.88 $ 1.02
Cumulative effect of change in
method of accounting for
income taxes 0.00 0.00 0.25
Net earnings 1.34 0.88 1.27
Fully diluted:
Net earnings before cumulative
effect of change in accounting
principle 1.20 0.86 1.00
Cumulative effect of change in
method of accounting for income
taxes 0.00 0.00 0.21
Net earnings 1.20 0.86 1.21
Average shares outstanding:
Primary 11,035,912 10,915,751 10,139,662
Fully diluted 14,539,770 14,315,902 11,871,003
</TABLE>
(See accompanying notes to consolidated financial statements)
25
<PAGE>
CONSOLIDATED BALANCE SHEET
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, 1994 1993
(In thousands, except share data)
Assets
Current assets:
Cash $ 39,840 $ 33,653
Short-term investments 1,024 4,629
Accounts receivable, less allowance for doubtful
accounts of $2,455 for 1994 and $2,416 for 1993 318,344 313,243
Finished goods inventory 374,557 310,758
Other current assets 2,922 3,129
-------- --------
736,687 665,412
-------- --------
Other assets 1,430 1,604
-------- --------
Fixed assets, at cost 53,983 52,347
Less: accumulated depreciation (16,250) (14,065)
-------- --------
37,733 38,282
-------- --------
Intangibles 27,597 26,906
-------- --------
Total assets $803,447 $732,204
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $136,500 $108,000
Accounts payable 404,813 377,730
Deferred income taxes (3,542) (2,227)
Other current liabilities 9,360 6,401
-------- --------
547,131 489,904
-------- --------
Long-term debt 69,461 69,733
-------- --------
Deferred income taxes 6,604 6,849
-------- --------
Shareholders' equity:
Common stock. $.01 par value-authorized
30,000,000 shares; issued 11,179,994 and
11,120,934 shares, respectively 3,310 3,309
Special shares, $.01 par value-authorized
1,000,000 shares
Additional paid in capital 82,652 81,936
Retained earnings 97,439 83,623
-------- --------
183,401 168,868
-------- --------
Less: 348,291 shares in treasury-at cost (3,150) (3,150)
-------- --------
Total shareholders' equity 180,251 165,718
-------- --------
Commitments and contingencies
-------- --------
Total liabilities and shareholders' equity $803,447 $732,204
======== ========
</TABLE>
(See accompanying notes to consolidated financial statements)
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR YEARS ENDED DECEMBER 31, 1994 1993 1992
(In thousands)
Cash flow from operating activities:
Net income $ 14,735 $ 9,564 $ 12,891
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 5,813 5,671 4,686
Deferred income taxes (1,560) (1,339) (6,819)
Writedown of accounts receivable 1,420 4,700
Loss (gain) on sale of marketable securities (183) (1,450) 559
Loss (gain) on sale of fixed assets (57) 3 (1,935)
Restructuring charge 5,388
Other items (14)
Change in assets and liabilities,
net of acquisitions:
Accounts receivable 6,327 (74,308) (27,900)
Noncurrent account receivable 2,389
Finished goods inventory (46,987) (24,535) (73,413)
Accounts payable 6,876 17,485 75,471
Other current assets and liabilities 2,849 (2,838) 2,581
----------- ----------- -----------
Net cash provided (used) by operating
activities (12,187) (64,939) (6,804)
----------- ----------- -----------
Cash flow from investing activities:
Purchase of fixed assets and other assets (3,575) (5,738) (22,097)
Proceeds from sale of fixed assets 491 1,769 2,326
Proceeds from sale of investment securities 3,793 12,871 22,281
Acquisition of businesses (10,361) (5,980) (274)
----------- ----------- -----------
Net cash provided (used) by investing activities (9,652) 2,922 2,236
----------- ----------- -----------
Cash flow from financing activities:
Proceeds from sale of stock 717 284 1,997
Addition (reduction) of long-term debt (272) 487 (738)
Proceeds from debt issue 65,565
Proceeds under line of credit agreement 1,184,500 984,000 804,000
Payments under line of credit agreement (1,156,000) (921,000) (844,000)
Dividends (919) (817) (674)
----------- ----------- -----------
Net cash provided (used) by financing
activities 28,026 62,954 26,150
----------- ----------- -----------
Net increase (decrease) in cash 6,187 937 21,582
Cash at beginning of year 33,653 32,716 11,134
----------- ----------- -----------
Cash at end of year $ 39,840 $ 33,653 $ 32,716
=========== =========== ===========
</TABLE>
(See accompanying notes to consolidated financial statements)
27
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock Treasury Stock
-----------------------------------------------
Additional
Shares Shares Paid in Valuation Retained Shareholders'
Outstanding Amount Outstanding Amount Capital Allowance Earnings Equity
-----------------------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1991 7,244,701 $3,270 373,300 $(2,879) $24,304 $(1,184) $62,659 $ 86,170
Net earnings 12,891 12,891
Dividends (674) (674)
Shares issued upon exercise
of stock options 182,050 2 3,721 3,723
Shares issued upon conversion
of debt 3,663,083 37 66,871 (979) 52,819 51,877
Shares issued upon acquisition
of business (91,880) 708 808 1,516
Valuation allowance for
marketable equity securities 1,184 1,184
---------- ------ ------- ------- ------- ------- ------- --------
Balances at December 31, 1992 11,089,834 3,309 348,291 (3,150) 81,652 0 74,876 156,687
Net earnings 9,564 9,564
Dividends (817) (817)
Shares issued upon exercise
of stock options 31,100 284 284
---------- ------ ------- ------- ------- ------- ------- --------
Balances at December 31, 1993 11,120,934 3.309 348,291 (3,150) 81,936 0 83,623 165,718
Net earnings 14,735 14,735
Dividends (919) (919)
Shares issued upon exercise of
stock options and employee
awards 44,060 1 521 522
Shares issued upon acquisition
of business 15,000 195 195
---------- ------ ------- ------- ------- ------- ------- --------
Balances at December 31, 1994 11,179,994 $3,310 348,291 $(3,150) $82,625 $ 0 $97,439 $180,251
========== ====== ======= ======= ======= ======= ======= ========
</TABLE>
(See accompanying notes to consolidated financial statements)
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
MARKETABLE SECURITIES. Effective January 1, 1994, the Company adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115) and applied the provisions
on a prospective basis.
At the adoption date, the Company classified its investments on hand as
either held to maturity, available for sale, or trading. Held to maturity
securities are reported at amortized cost while available for sale and trading
securities are reported at fair value. The cost of marketable securities sold is
determined on the specific identification method.
Prior to 1994, marketable equity securities are stated at the lower of cost
or market. Other marketable securities are stated at amortized cost, which does
not exceed market value. The cost of marketable securities sold is determined
on the specific identification method.
INVENTORIES. Inventories are stated on the basis of lower of cost or
market using the first-in, first-out (FIFO) method.
FIXED ASSETS. Depreciation is computed on the straight-line method for
financial reporting purposes. Accelerated methods are primarily used for income
tax purposes. The capitalized lease is being amortized over the lease period of
ten years. Assets, valued at cost, are being depreciated generally over their
estimated useful lives as follows:
Estimated useful life (years)
Building and furnishings 5-35
Leasehold improvements 3-20
Transportation and other equipment 3-20
DEBT ISSUE COSTS. Debt issue costs are amortized on a straight-line basis
over the life of the Debentures.
INTANGIBLES. Intangibles, including goodwill, generated from the acquired
companies are amortized on the straight-line method over periods of 11 to 40
years.
EARNINGS PER SHARE. Primary earnings per share are computed based on the
average number of shares of common stock and equivalents outstanding during the
year. Common stock equivalents included in the computation represent shares
issuable upon assumed exercise of stock options which would have a dilutive
effect. Fully diluted earnings per share are computed based on the average
number of shares of common stock assumed to be outstanding during the year, as
if the Convertible Subordinated Debentures had been converted into common stock
and after giving effect to the elimination of interest expense, net of tax
benefit, applicable to the Debentures.
29
<PAGE>
INCOME TAXES. Effective January 1, 1992, the Company elected early adoption
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109) and applied the provisions on a prospective basis.
The adoption of SFAS 109 changed the Company's method of accounting for
income taxes from the deferred method (APB 11) to an asset and liability method.
The asset and liability method requires the recognition of deferred tax assets
and liabilities for expected future tax consequences of temporary differences
that currently exist between the tax bases and financial reporting bases of the
Company's assets and liabilities.
The 1992 adoption of SFAS 109 resulted in an after-tax increase to net
earnings of $2,510,000. This amount is reflected in 1992 net income as the
effect of a change in accounting principle.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying value of cash, accounts
receivable, short-term borrowings, accounts payable and other current
liabilities approximate their fair market values due to the short-term maturity
of these instruments. The fair market values of marketable securities and long
term debt were determined based on market quoted rates and are disclosed in
Notes 3 and 6, respectively.
NOTE 2 - SHORT-TERM BORROWINGS
The Company's short-term line of credit was $200,000,000 as of December 31,
1994. On February 28, 1995, the short-term line of credit was increased to
$250,000,000. The line was available, as necessary, for general corporate
purposes at rates based upon prevailing money market rates. $136,500,000 was
borrowed under the short-term line of credit at a rate of 6.9% at December 31,
1994. $108,000,000 was borrowed under the short-term line of credit at a rate
of 4.9% at December 31, 1993. $45,000,000 was borrowed under the short-term line
of credit at a rate of 5.7% at December 31, 1992.
No compensating balance is required on the line. Certain conditions
relating to the maintenance of working capital, net worth, and corporate
existence have been imposed by the lenders.
30
<PAGE>
A summary of 1994, 1993, and 1992 borrowings follows:
<TABLE>
<CAPTION>
Maximum short-term Average Average
Year borrowings borrowings interest rate
---------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
1994 $240,000 $142,275 5.9%
1993 $149,500 $104,842 4.9%
1992 $143,000 $ 90,063 6.0%
</TABLE>
NOTE 3 - MARKETABLE SECURITIES AND INVESTMENT INCOME
At December 31, 1994, all securities owned by the Company were categorized
as either available for sale or trading. Securities classified as available for
sale were debt securities with a maturity of five to ten years and a fair market
value of $1,047,000, which approximated amortized cost. During 1994 the proceeds
on sales of securities classified as available for sale were $2,524,000, which
approximated the amortized cost of securities sold.
Marketable securities at December 31, 1993 were comprised of the following
holdings:
<TABLE>
<CAPTION>
1993
---------------
DECEMBER 31, COST MARKET
---------------------------------------
<S> <C> <C>
(in thousands)
CURRENT:
Common stock $ 122 $ 67
Corporate debt 3,369 3,549
Other 1,138 1,138
---------------
$4,629 $4,754
===============
</TABLE>
The components of other income were as follows:
<TABLE>
<CAPTION>
December 31, 1994 1993 1992
-------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
Interest income $3,076 $2,832 $1,788
Dividends 1 54 394
Realized gains
and losses, net 240 1,477 1,396
---------------------------
$3,317 $4,363 $3,578
===========================
</TABLE>
31
<PAGE>
NOTE 4 - FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993
------------------------------------------------
<S> <C> <C>
(in thousands)
Land $ 2,833 $ 2,883
Buildings and furnishings 18,361 18,750
Capitalized lease 1,390 1,380
Leasehold improvements 3,071 3,220
Transportation and
other equipment 28,328 26,114
---------------------
53,983 52,347
Less: Accumulated
depreciation (16,250) (14,065)
---------------------
$ 37,733 $ 38,282
=====================
</TABLE>
NOTE 5 - INCOME TAXES
The provision for income taxes includes state income taxes of $1,850,000,
$1,225,000, and $1,051,000 in 1994, 1993, and 1992, respectively.
The following table indicates the significant elements contributing to the
difference between the U.S. federal statutory tax rate and the effective tax
rate:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 1993 1992
-------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of earnings before taxes:
U.S. federal statutory rate 35.0% 35.0 % 34.0 %
State and local taxes on income, net of
federal income tax benefit 4.8% 4.8 % 4.3 %
Dividend received deduction (0.1)% (0.6)%
Release of previously provided credits (3.9)%
Other 1.2% 2.0 % 1.2 %
---------------------------
Effective rate 41.0% 41.7 % 35.0 %
===========================
</TABLE>
32
<PAGE>
Presented below are the significant elements of the net deferred tax
balance sheet accounts at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
Deferred tax assets: 1994 1993
-------- --------
<S> <C> <C>
Current:
Accounts receivable $ 3,846 $ 2,487
Inventories 888 530
Restructuring costs 473 944
Other, net 731 662
--------------------
Subtotal 5,938 4,623
Long-term:
Acquired net operating loss 596 653
benefits
Customer lists 403 528
Other, net 669 986
--------------------
Subtotal 1,668 2,167
--------------------
Total deferred tax assets $ 7,606 $ 6,790
====================
Deferred tax liabilities:
Current:
Change in tax method for inventories $ 2,396 $ 2,396
--------------------
Subtotal 2,396 2,396
Long-term:
Fixed assets 3,001 1,418
Change in tax method for inventories 4,793 7,189
Other, net 478 409
--------------------
Subtotal 8,272 9,016
--------------------
Total deferred tax liabilities $10,668 $11,412
====================
</TABLE>
During 1992, the Company adopted the FIFO method of valuing inventories for
tax purposes. Prior to 1992, the Company used the LIFO method of valuing
inventories for tax purposes. The transition rules allow for the Company to
implement this change in accounting for tax purposes on a pro-rata basis over
the years 1992 through 1997.
In connection with the acquisition of Goold, the Company acquired federal
net operating loss carryforwards of $2,318,468. Due to certain tax law
limitations, annual utilization of the carryforward is limited to $162,945. The
remaining tax loss carryforward at December 31, 1994 is $1,867,133. The
carryover period expires in 2006.
NOTE 6 - LONG-TERM DEBT
The primary component of long-term debt at December 31, 1994 is $67,350,000
of Convertible Subordinated Debentures. The remaining $2,111,000 is comprised of
non-voting (mandatorily redeemable) preferred stock, mortgage obligations, and
capitalized leases.
33
<PAGE>
On April, 2, 1992, the Company redeemed all of its outstanding 8 5/8%
Convertible Subordinated Debentures Due 2010 at a redemption price of $1,034.50
per $1,000 principal amount of Debentures plus accrued interest. The redemption
reduced the Company's long-term debt by $53,139,000 and increased by 3.6 million
the number of issued shares of the Company's common stock.
On September 24, 1992 and October 20, 1992, the Company concluded a public
offering of $65,000,000 and $2,350,000, respectively, of Convertible
Subordinated Debentures, Due 2002, for approximately $65,565,000, net of
underwriting and other costs. The 6.50% Debentures are convertible at any time
prior to maturity into the Company's common stock at $19.825 per share. The
Company may redeem the Debentures at a decreasing premium after October 1, 1996.
The market value of the 6.50% Debentures, based upon the publicly quoted
rate, was $64,487,625 and $64,319,250 as of December 31, 1994 and December 31,
1993, respectively.
NOTE 7 - PROFIT SHARING PLAN
The Company's qualified profit sharing plan, as amended, covers all
employees who have both completed one year of service with the Company or its
subsidiaries and who have reached the age of 21. An employee's right to his or
her profit sharing account vests 20% per year after three years of service with
the final 20% vesting after the seventh year. Full vesting may occur earlier in
the event that the employee attains the age of 65, retires at age 65 or older,
dies, or is totally disabled.
The Company's annual contribution to the profit sharing plan is the lesser
of 8% of the total compensation paid to the plan participants for the year or
10% of the Company's consolidated net income before taxes. Effective January 1,
1988, employees may elect to make salary redirection contributions to the plan
in accordance with Section 401(k) of the Internal Revenue Code. These
contributions and the earnings on them are fully vested at all times.
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 prorata among the
remaining participants; and (c) the type and number of investment alternatives
available for participants. Generally, the new plan is considered an improvement
in terms of administration, cost, and participant access.
The Company's contributions to the plan for the years ended December 31,
1994, 1993, and 1992 were $933,600, $961,798, and $751,642, respectively.
NOTE 8 - CAPITAL STOCK
The Company's capitalization presently consists of 30,000,000 authorized
shares of Common Stock and 1,000,000 authorized shares of Special Stock. Both
the Common Stock and Special Stock have a $.01 par value per share.
34
<PAGE>
Prior to May 20, 1993, the Company had a 1983 Incentive Stock Option Plan,
a 1983 Nonqualified Option Plan, and a 1987 Stock Option and Incentive Plan. The
number of shares available for issuance pursuant to such plans aggregated
2,500,000 shares. Incentive stock options, granted at a minimum of 100% of fair
market value, and nonqualified stock options, granted at a minimum of 85% of
fair market value, both exercisable for up to 10 years from the date of grant,
were authorized under such plans.
On May 20, 1993, the Company's shareholders approved the 1993 Stock Option
and Incentive Plan authorizing 1,000,000 shares of the Company's common stock
for sale or award to officers and key employees (including any such officer or
employee who hold at least 10% of the Company's common stock) as stock options
or restricted stock. No further awards will be made from the shares of common
stock that remained available for grants under prior stock option plans.
On May 19, 1994, the Company's shareholders approved amendments to the
Company's 1983 Incentive Stock Option Plan, the 1983 Nonqualified Stock Option
Plan, the 1987 Stock Option and Incentive Plan, and the 1993 Stock Option and
Incentive Plan to permit the Company's Compensation and Stock Option Committee
of the Board of Directors ("Committee") to allow participants under these plans,
including the holders of outstanding options, to exercise an option during its
term following cessation of employment by reason of death, disability, or
retirement. Such amendments also permitted the Committee, in its sole
discretion, to change the exercise and termination terms of options granted if
such changes are otherwise consistent with applicable federal and state laws. In
addition, the 1993 plan was amended to (i) increase from 1,000,000 to 1,500,000
the number of shares authorized for issuance pursuant to awards made under the
1993 plan; (ii) limit to 100,000 shares the number of shares that any one
participant may receive under the 1993 plan during any calendar year; and (iii)
provide that the Board of Directors may amend the 1993 plan in any respect
without shareholder approval, unless such approval is required to comply with
Rule 16b-3 under the Securities Exchange Act of 1934 or Section 422 of the
Internal Revenue Code of 1986.
35
<PAGE>
Changes in stock options under all plans are shown below:
<TABLE>
<CAPTION>
NUMBER OF SHARES OPTION PRICE PER SHARE
<S> <C> <C>
Options outstanding
at December 31, 1991 1,082,754 $ 5.42 to $17.00
Forfeited during 1992 (4,200) $11.63 to $17.00
Granted during 1992 510,850 $12.88 to $15.25
Exercised during 1992 (182,050) $ 5.42 to $14.13
--------
Options outstanding
at December 31, 1992 1,407,354 $ 5.42 to $17.00
Forfeited during 1993 (27,050) $12.88 to $17.00
Granted during 1993 667,000 $11.00 to $12.65
Exercised during 1993 (31,100) $ 5.84 to $11.63
---------
Options outstanding
at December 31, 1993 2,016,204 $ 5.42 to $17.00
Forfeited during 1994 (51,200) $ 6.38 to $17.00
Granted during 1994 708,417 $11.50 to $14.58
Exercised during 1994 (43,950) $ 6.38 to $13.38
---------
Options outstanding
at December 31, 1994 2,629,471 $ 5.42 to $17.00
=========
Exercisable
at December 31, 1994 1,921,054
=========
Available for Grant
at December 31, 1994 166,083
=========
</TABLE>
In certain cases, the exercise of stock options results in state and
federal income tax deductions to the Company on the difference between the
market price at the date of exercise and the option price. The tax benefits
obtained from these deductions are included in additional paid in capital.
NOTE 9 - COMMITMENTS
The Company leases warehouse and office space under noncancelable operating
leases expiring at various dates through 2000, with options to renew for various
periods. Minimum commitments under leases aggregate $4,647,323 through 1999.
The Company leases its corporate office from a partnership controlled by
the Company's principal shareholder. The lease, which expires June 30, 1998, has
a minimum annual rental of $111,000. The lease has been capitalized at an
implicit interest rate of 10.5%.
36
<PAGE>
The consolidated rent expense for the years ended December 31, 1994, 1993,
and 1992 was $1,500,082, $1,477,000, and $1,365,000, respectively, of which
approximately $45,000 in 1994 and $38,000 in 1993 and 1992 pertained to leases
with terms of one year or less.
NOTE 10 - MAJOR CUSTOMERS
The Company is one of the largest drug wholesalers in the United States,
specializing in the distribution of ethical pharmaceuticals (prescription
drugs). Its principal customers are chain drug companies that operate their own
warehouses. Other customers include independent drug stores, chain drug stores,
hospitals, clinics, and other health care providers. The Company services
customers in 50 states, Puerto Rico, Mexico, and Central and South America from
its 14 distribution centers located in Altamonte Springs, Florida; Austell,
Georgia; Brockton, Massachusetts; Charlotte, North Carolina; Dallas, Texas;
Houston, Texas; Indianapolis, Indiana; Middletown, Pennsylvania; Orange,
Connecticut; Orlando, Florida; Portland, Maine; San Dimas, California; Santa
Ana, California; and Shelby, North Carolina.
Sales were made to two customers in 1994, 1993, and 1992 in amounts
exceeding 10% of revenues. Revenues from these customers aggregated 33%, 36%,
and 38% of revenues in 1994, 1993, and 1992, respectively.
Revco D.S., Inc., one of the Company's largest warehouse customers, filed
for reorganization under the U.S. Bankruptcy Code in 1988. In 1992, the
Bankruptcy Court confirmed Revco's plan of reorganization, which offered the
Company $5.2 million of cash or 700,088 shares of common stock issued by
reorganized Revco. The Company elected to take the 700,088 shares of Revco
common stock. Issuance of this common stock took place at the time the plan
became effective in June 1992. The Company recognized in the quarter ended June
30, 1992 a $1,700,000 writedown of its Revco receivable to account for the newly
issued Revco common stock at its fair market value. During 1993, the Company
sold all the Revco common stock it received under the plan of reorganization.
In December 1992, Reliable Drug Stores, Inc., a 260 store chain based in
Indianapolis, filed a petition for reorganization under the federal Bankruptcy
Code.
Reliable accounted for about 3% of the Company's sales in 1992. As of the
filing date, Reliable owed the Company approximately $5.0 million. Of this
amount, the Company estimated that approximately $1.1 million was subject to a
reclamation claim under the Uniform Commercial Code and federal Bankruptcy Code
that could result in full recovery of that amount prior to or immediately after
a confirmed plan of reorganization.
Based on management's analysis of Reliable's bankruptcy proceeding, the
Company recorded a write-off of $3.0 million in the fourth quarter of 1992 and
an additional $1.42 million in September 1993. These figures represented the
Company's remaining exposure from the Reliable bankruptcy claim.
On February 22, 1995, Pic 'N Save, a 32 store chain based in Jacksonville,
Florida, filed a petition for reorganization under the federal Bankruptcy Code.
As of the date of filing, Pic 'N Save was indebted to the Company in an amount
approximating $3.46 million. During 1994,
37
<PAGE>
the Company's sales to Pic 'N Save approximated $25 million. The Company is
continuing to sell to Pic 'N Save on a cash basis.
Based on the most recent analysis of Pic 'N Save's financial condition,
management believes that any uncollectible amounts would not be material to the
Company's financial position or cash flows.
NOTE 11 - STATEMENT OF CASH FLOWS
During 1988 the Company renewed the lease for its Indianapolis headquarters
incurring a capital lease obligation of $686,000.
Cash paid for interest expense and income taxes was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994 1993 1992
<S> <C> <C> <C>
(in thousands)
Interest $13,679 $10,074 $6,172
Income taxes $ 8,003 $12,677 $6,928
</TABLE>
Presented below is a brief discussion of recent acquisitions by the
Company. The purchase price has been allocated based on a determination of the
fair value of the assets acquired and liabilities assumed. The goodwill
associated with these acquisitions is being amortized on a straight line basis
over 40 years.
On March 25, 1992, the Company acquired J.E. Goold & Co. (Goold), a
wholesale pharmaceutical distributor based in Portland, Maine. The Company
exchanged 91,880 shares of its common stock (market value $1,516,000) and 1,050
shares of newly issued non-voting preferred stock (mandatory redemption value of
$1,050,000) for all the outstanding capital stock of Goold. This non-voting
preferred stock is included in long-term debt in the December 31, 1993
consolidated balance sheet.
The acquisition was accounted for as a purchase and, accordingly, the
1992 financial statements include Goold's results of operations from the date of
acquisition. The consideration exchanged by the Company plus the excess of
liabilities assumed over the fair market value of the tangible assets resulted
in $9,524,000 of intangible assets.
On February 28, 1993 and October 6, 1993, the Company acquired Charise
Charles Ltd., Inc., a wholesale oncology and dialysis products distributor
based in Altamonte Springs, Florida and PRN Medical, Inc., a wholesale
distributor of renal and dialysis supplies and equipment based in Orlando,
Florida, respectively.
These acquisitions were accounted for as purchases and, accordingly, the
1993 financial statements include the results of operations for Charise Charles
and PRN from the date of acquisition. The consideration exchanged by the Company
for Charise Charles and PRN of approximately $9 million exceeded the fair market
value of the net assets acquired and resulted in approximately $5 million of
intangible assets.
38
<PAGE>
Effective July 1, 1994 and October 31, 1994, the Company purchased Kendall
Drug Co. (Kendall), a wholesale pharmaceutical distributor based in Shelby,
North Carolina and 3C Medical, Inc. (3C), a distributor of hemodialysis products
based in Santa Ana, California, respectively.
These acquisitions were accounted for as purchases and, accordingly, the
1994 financial statements include the results of operations of Kendall and 3C
from the date of acquisition. The Company expended approximately $8.1 million
for the acquisition of Kendall which approximated the fair value of the net
assets acquired. Additional costs of the acquisition resulted in approximately
$350,000 of intangible assets. The Company exchanged 15,000 shares of its common
stock (market value $195,000) and approximately $1.2 million for 3C which
exceeded the fair value of the net assets acquired and resulted in approximately
$1.12 million of intangible assets.
NOTE 12 - RESTATEMENT OF 1990 AND PRIOR FINANCIAL STATEMENTS
In the third quarter of 1991, the Company changed its method of determining
cost for ethical pharmaceutical inventories to the first-in, first-out (FIFO)
method from the last-in, first-out (LIFO) method. The Company filed a Form 8-K
with the Securities and Exchange Commission on February 27, 1992 restating the
1990 and prior financial statements. Accordingly, the restatement of the 1990
and prior financial statements is not repeated in these 1994 financial
statements.
NOTE 13 - LEGAL PROCEEDINGS
The Company is a defendant in a consolidated class action complaint filed
in the United States District Court for the Northern District of Illinois which
names the Company, five other pharmaceutical wholesalers, and 26 pharmaceutical
manufacturers as defendants. Plaintiffs allege that chargeback agreements
between pharmaceutical manufacturers and wholesalers are the result of price-
fixing agreements in violation of the federal antitrust laws. The plaintiffs
seek injunctive relief, unspecified treble damages, costs, interest, and
attorneys fees. On November 15, 1994, plaintiffs motion for class certification
was granted, and the certified class consists of all persons or entities who
purchased from the manufacturer or wholesaler defendants from October 15, 1989
to the present, with the exception of other manufacturers, other wholesalers,
governmental entities, mail order pharmacies, HMOs, hospitals, clinics, and
nursing homes. Discovery in the case is proceeding, and trial of the matter is
currently set for February 5, 1996. On October 21, 1994, the Company entered
into an agreement in these cases with five other wholesalers and 26
pharmaceutical manufacturers. Among other things, the agreement provides that:
(a) if a judgment is entered into against both the manufacturer and wholesaler
defendants, the total exposure for joint and several liability of Bindley
Western is limited to $1,000,000; (b) if a settlement is entered into by,
between, and among the manufacturer and wholesaler defendants, Bindley Western
has no monetary exposure for such settlement amount; (c) the six wholesaler
defendants will be reimbursed by the 26 manufacturer defendants for related
legal fees and expenses up to $9,000,000 total (the Companys initial portion of
this amount is $1,000,000); and (d) the Company is to release certain claims
which it might have had against the manufacturer defendants for the claims
presented by the plaintiffs in these cases. The agreement covers the federal
court litigation as well as cases which have been filed in various state courts.
39
<PAGE>
On March 17, 1995, the Company was served a complaint that was filed in the
United States District Court for the Eastern District of Arkansas by 148
independent pharmacies. The complaint names the manufacturer and wholesaler
defendants in the consolidated action plus a number of regional wholesalers
which sell pharmaceutical drugs in Arkansas. No responsive pleadings have been
filed at this time. If the case goes forward, there is a reasonable likelihood
that it will be consolidated with the other cases already pending in the
Northern District of Illinois.
After discussions with counsel, management of the Company believes that the
allegations of liability set forth in these lawsuits are without merit as to the
wholesaler defendants and that any attendant liability of the Company, although
unlikely, would not have a material adverse effect on the Companys financial
condition.
NOTE 14 - RESTRUCTURING
In 1993, the Company provided for a restructuring charge of $5.39 million
associated with the consolidation of distribution, accounting, and data
processing functions for its East Coast operations. This charge included lease
commitments to third parties, writedowns of various assets to realizable values,
and facilities consolidation costs. The charge was comprised of noncash asset
writedowns of approximately $2.7 million, product consolidation costs of
approximately $.3 million, and anticipated probable cash expenditures of $2.4
million related to payments on lease commitments, data processing and inventory
conversion costs and other employee costs. The anticipated probable cash
expenditures will be funded from operating revenues. The Company believes that,
as of December 31, 1994, the consolidation of the East Coast operations was on
schedule. In 1994, the Company expended $1.2 million of the probable cash
expenditures on a basis substantially consistent with the original plan and
believes that the $5.39 million charge taken at December 31, 1993 will be
sufficient to complete the consolidation.
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
BINDLEY WESTERN INDUSTRIES, INC.
By /s/ William E. Bindley
----------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William E. Bindley Chairman of the Board and March 24, 1995
--------------------------- President (Principal
William E. Bindley Executive Officer); Director
/s/ William F. Bindley, II Director March 24, 1995
---------------------------
William F. Bindley, II
/s/ Keith W. Burks Executive Vice March 24, 1995
--------------------------- President; Director
Keith W. Burks
/s/ Seth B. Harris Director March 24, 1995
---------------------------
Seth B. Harris
/s/ Robert L. Koch, II Director March 24, 1995
---------------------------
Robert L. Koch, II
/s/ Michael D. McCormick Executive Vice President, March 24, 1995
--------------------------- General Counsel and
Michael D. McCormick Secretary; Director
/s/ J. Timothy McGinley Director March 24, 1995
---------------------------
J. Timothy McGinley
/s/ James K. Risk, III Director March 24. 1995
---------------------------
James K. Risk, III
/s/ Thomas J. Salentine Executive Vice President March 24, 1995
--------------------------- and Chief Financial Officer
Thomas J. Salentine (Principal Accounting and
Financial Officer); Director
/s/ K. Clay Smith Director March 24, 1995
---------------------------
K. Clay Smith
</TABLE>
41
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
__________ __________________________________ _______
<S> <C> <C> <C>
3-A /1/ (i) Amended and Restated Articles
of Incorporation of Registrant.....
/2/ (ii)Amendment to Restated Articles
of Incorporation increasing number
of authorized shares...............
/3/ (iii)Amendment to Restated
Articles of Incorporation
establishing terms of Class A
Preferred Stock....................
3-B /4/ (i) Restated By-Laws of
Registrant, as Amended.............
/14/ (ii)Amendment to Restated By-Laws
increasing to 10 the number of
Directors of Registrant............
4-A /5/ Trust Indenture dated as of
September 15, 1992 between
Registrant and Bank One,
Indianapolis, NA...................
4-B /6/ (i)Amended and Restated Credit
Agreement dated as of December 31,
1991 among Registrant and Bank
One, Indianapolis, NA, NCNB Texas
National Bank, The Chicago-Tokyo
Bank, Mellon Bank, N.A.,
Ameritrust National Bank, Central
Indiana, Bank One, Milwaukee, NA,
The Boatmen's National Bank of St.
Louis, and Bank One, Indianapolis,
NA, as agent.......................
/7/ (ii)First Amendment to Amended and
Restated Credit Agreement dated as
of March 25, 1991 among Registrant
and Bank One, Indianapolis, NA,
NCNB Texas National Bank, The
Chicago-Tokyo Bank, Mellon Bank
N.A., Ameritrust National Bank,
Central Indiana, Bank One,
Milwaukee, NA, The Boatmen's
National Bank of St. Louis, and
Bank One, Indianapolis, NA, as
agent..............................
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
__________ ___________________________________ _______
<S> <C> <C> <C>
/8/ (iii)Second Amendment to Amended
and Restated Credit Agreement dated
as of June 30, 1992 among
Registrant and Bank One,
Indianapolis, NA, Nationsbank, The
Chicago-Tokyo Bank, Mellon Bank,
N.A., Ameritrust National Bank,
Central Indiana, Bank One,
Milwaukee, NA, The Boatmen's
National Bank of St. Louis, and
Bank One, Indianapolis, NA, as agent
/9/ (iv)Third Amendment to Amended and
Restated Credit Agreement dated as
of December 31, 1992 among
Registrant and Bank One,
Indianapolis, NA, Nationsbank, The
Chicago-Tokyo Bank, Mellon Bank,
N.A., Society National Bank of
Indiana, Central Indiana, Bank One,
Milwaukee, NA, The Boatmen's
National Bank of St. Louis, and
Bank One, Indianapolis, NA, as agent
(v)Fourth Amendment to Amended and
Restated Credit Agreement dated as
of September 27, 1993 among
Registrant and Bank One,
Indianapolis, NA, Nationsbank, The
Chicago-Tokyo Bank, Mellon Bank,
N.A., Society National Bank of
Indiana, Central Indiana, Bank One,
Milwaukee, NA, The Boatmen's
National Bank of St. Louis, and
Bank One, Indianapolis, NA, as
agent (this exhibit has not been
included with this filing but will
be provided upon written request to
the Registrant's Chief Financial
Officer)............................
(vi)Fifth Amendment to Amended and
Restated Credit Agreement dated as
of December 31, 1993 among
Registrant and Bank One,
Indianapolis NA, Nationsbank, The
Chicago-Tokyo Bank, Mellon Bank,
N.A., Society National Bank of
Indiana, Central Indiana, Bank One,
Milwaukee, NA, The Boatmen's
National Bank of St. Louis, and
Bank One, Indianapolis, NA, as
agent (this exhibit has not been
included with this filing but will
be provided upon written request to
the Registrant's Chief Financial
Officer)............................
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
__________ __________________________________ _______
<S> <C> <C> <C>
(vii)Sixth Amendment to Amended
and Restated Credit Agreement
dated as of February 28, 1994
among Registrant and Bank One,
Indianapolis, NA, Nationsbank of
Texas, N.A., The Chicago-Tokyo
Bank, Mellon Bank, N.A., Society
National Bank of Indiana, Bank
One, Milwaukee, NA, The Boatmen's
National Bank of St. Louis, The
First National Bank of Chicago,
Sun Bank, N.A., and Bank One,
Indianapolis, NA, as agent (this
exhibit has not been included with
this filing but will be provided
upon written request to the
Registrant's Chief Financial
Officer)...........................
(viii) Credit Agreement by and
among Registrant and Bank One,
Indianapolis, NA, Bank One,
Milwaukee, NA, and Bank One,
Indianapolis, NA, as agent (this
Exhibit has not been included with
this filing but will be provided
upon written request to the
Registrant's Chief Financial
Officer)...........................
(ix) Seventh Amendment to Amended
and Restated Credit Agreement
among Registrant and Bank One,
Indianapolis, NA, Nationsbank of
Texas, N.A., The Chicago-Tokyo
Bank, Society National Bank of
Indiana, Bank One, Milwaukee, NA,
The Boatmen's National Bank of St.
Louis, The First National Bank of
Chicago, Sun Bank, N.A., The
Industrial Bank of Japan, Limited,
and Bank One, Indianapolis, NA, as
agent (This exhibit has not been
included in this filing but will
be provided upon written request
to the Registrant's Chief
Financial Officer).................
10-A* /14/ (I)1993 Restatement of the Profit
Sharing Plan and related Trust of
Registrant, as amended to date.....
/10/ (iii)Employee Benefit Trust
Agreement of Registrant dated
November 30, 1990..................
/10/ (iv)Deferred Compensation
Agreement dated December 31, 1990
between Registrant and William E.
Bindley............................
/9/ (v)Split Dollar Insurance
Agreement dated December 11, 1992
between Registrant and William F.
Bindley, II and K. Clay Smith as
trustees of the William E. Bindley
Irrevocable Trust..................
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
__________ __________________________________ _______
<S> <C> <C> <C>
/9/ (vi)The William E. Bindley Trust
Agreement dated December 11, 1992
between William E. Bindley,
grantor, and William F. Bindley,
II and K. Clay Smith, trustees.....
(vii)Amendment to Deferred
Compensation Agreement between
Bindley Western Industries, Inc.
and William E. Bindley............. 48
10-B* /11/ (i)Nonqualified Stock Option Plan
of Registrant......................
/14/ (ii)Amendment to the Nonqualified
Stock Option Plan of Registrant....
10-C* /11/ (i)Incentive Stock Option Plan of
Registrant.........................
/14/ (ii)Amendment to the Incentive
Stock Option Plan of Registrant....
10-D* /12/ (i)1987 Stock Option and Incentive
Plan of Registrant.................
/13/ (ii)Amendment to 1987 Stock Option
and Incentive Plan.................
/13/ (iii)Outside Directors Stock
Option Plan........................
/14/ (iv)Amendment to the 1987 Stock
Option and Incentive Plan of
Registrant.........................
10-E* /9/ (i)1993 Stock Option and Incentive
Plan of Registrant.................
/14/ (ii)Amendment to the 1993 Stock
Option and Incentive Plan of
Registrant.........................
10-F /11/ (i)Addendum to Lease Agreement
dated September 30, 1982 between
Western Properties and Bindley
Western Drug Company, Inc..........
/11/ (ii)Lease Agreement dated June 30,
1978 among Western Properties,
Bindley Western Industries, Inc.
and Bindley Western Drug Company,
Inc................................
10-I /9/ Collective Bargaining Agreement
dated October 21, 1992 between
J.E. Goold & Co. and Truck
Drivers, Warehousemen and Helpers
Union Local No. 340................
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Page No.
Exhibit This
No. Description Filing
________ __________________________________ _______
<C> <C> <S> <C>
10-J* /9/ Form of Termination Benefits
Agreement, dated as of December
31, 1992, between Registrant and
each of William E. Bindley,
Michael D. McCormick, Thomas J.
Salentine, George E. Maloof and
Keith W. Burks.....................
10-U /14/ Assistance Agreement dated August
11, 1993 between the State of
Connecticut and Registrant.........
10-X* /14/ Consulting Agreement, dated
January 20, 1994, between George
E. Maloof and Registrant...........
10-Y /14/ Collective Bargaining Agreement
dated October 21, 1993 between
J.E. Goold & Co. and Truck
Drivers, Warehousemen and Helpers
Union Local No. 340................
10-Z* /14/ (i)401(k) Profit Sharing Plan
(Nonstandardized) Adoption
Agreement of Registrant, effective
January 1,1994.....................
(ii)Amendment to page 4 of the
401(k) Profit Sharing Plan
(Nonstandardized) Adoption
Agreement of Registrant, effective
January 1, 1994.................... 50
10-AA* (i)Form of Profit Sharing Excess
Plan and related Trust between
Registrant and each of William E.
Bindley, Keith W. Burks, Michael
D. McCormick, and Thomas J.
Salentine.......................... 51
(ii)Form of 401(k) Excess Plan and
Related Trust between Registrant
and each of William E. Bindley,
Keith W. Burks, Michael D.
McCormick, and Thomas J. Salentine. 76
22 List of subsidiaries of Registrant. 101
24 Written Consent of Price Waterhouse 102
27 Financial Data Schedule............ 103
</TABLE>
_______________
*The indicated exhibit is a management contract, compensating plan, or
arrangement required to be filed by Item 601 of Regulation S-K.
46
<PAGE>
/1/ The copy of this exhibit filed as the same exhibit
number to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1987 is
incorporated by reference.
/2/ The copy of this exhibit filed as Exhibit 4(a)(ii)
to the Company's Registration Statement on Form
S-3 (Registration No. 33-45965) is incorporated by
reference.
/3/ The copy of this exhibit filed as exhibit number 1
to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992 is incorporated by
reference.
/4/ The copy of this exhibit filed as Exhibit 4-B to
the Company's Registration Statement on Form S-3
(Registration No. 33-45965) is incorporated by
reference.
/5/ The copy of this exhibit filed as Exhibit 4-D to
the Company's Registration Statement on Form S-3
(Registration No. 33-50982) is incorporated by
reference.
/6/ The copy of this exhibit filed as Exhibit 4-C to
the Company's Registration Statement on Form S-3
(Registration No. 33-45965) is incorporated by
reference.
/7/ The copy of this exhibit filed as Exhibit 4-C(ii)
to the Company's Registration Statement on Form
S-3 (Registration No. 33-50982) is incorporated by
reference.
/8/ The copy of this exhibit filed as exhibit number 2
to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992 is incorporated by
reference.
/9/ The copy of this exhibit filed as the same exhibit
number to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992 is
incorporated by reference.
/10/ The copy of this exhibit filed as the same exhibit
number to the Company's Annual Report on Form 10-K
for the year ended December 31, 1990 is
incorporated by reference.
/11/ The copy of this exhibit filed as the same exhibit
number to the Company's Registration Statement on
Form S-1 (Registration No. 2-84862) is
incorporated by reference.
/12/ The copy of this exhibit filed as the same exhibit
number to the Company's Annual Report on Form 10-K
for the year ended December 31, 1986 is
incorporated by reference.
/13/ The copy of this exhibit filed as the same exhibit
number to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991 is
incorporated by reference.
/14/ The copy of this exhibit filed as the same exhibit
number to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 is
incorporated by reference.
47
<PAGE>
EXHIBIT 10A(vii)
AMENDMENT TO
DEFERRED COMPENSATION AGREEMENT
BETWEEN BINDLEY WESTERN INDUSTRIES, INC.
AND WILLIAM E. BINDLEY
----------------------------------------
This Amendment to Deferred Compensation Agreement Between Bindley
Western Industries, Inc. and William E. Bindley is entered into by Bindley
Western Industries, Inc. ("Company"), and William E. Bindley ("Mr. Bindley").
Background
----------
1. In December of 1990, the Company and Mr. Bindley entered into a
Deferred Compensation Agreement (the "Agreement") to provide for the payment to
Mr. Bindley of deferred compensation to be payable by the Company following Mr.
Bindley's termination of employment with the Company.
2. The Agreement provides that it may be amended by mutual agreement
of the Company and Mr. Bindley.
3. Effective December 9, 1994, the Company has established two new
deferred compensation plans in which Mr. Bindley is eligible to participate. In
light of the benefits provided to Mr. Bindley under those plans, the Company and
Mr. Bindley wish to terminate the Agreement and transfer all amounts that have
been accumulated in the rabbi trust created pursuant to the Agreement to a rabbi
trust created under the new plans.
4. The Company and Mr. Bindley also wish to amend the Agreement,
retroactive to its original effective date, to correct a drafting error.
Amendment
---------
The Company and Mr. Bindley hereby agree that the Agreement is amended
as follows:
1. Effective as of the effective date of the Agreement, Subsection
2(a) is amended to read as follows:
48
<PAGE>
(a) For the calendar year beginning January 1, 1989, and for each
succeeding calendar year beginning before Mr. Bindley's Termination of
Employment, the Company shall make a contribution to Mr. Bindley's Trust
Account in an amount equal to the difference between (1) the lesser of
$30,000 and Mr. Bindley's Allocation Percentage multiplied by his
Compensation and (2) the contributions and forfeitures allocated to Mr.
Bindley's account in the Profit Sharing Plan for that year.
2. Effective December 9, 1994, the Agreement shall terminate. As
soon as practicable after the termination, all amounts in the Trust Account
shall be transferred to a rabbi trust created pursuant to the Bindley Western
Industries, Inc. Profit Sharing Excess Plan.
IN WITNESS WHEREOF, the Company has caused this Amendment to Deferred
Compensation Agreement Between Bindley Western Industries, Inc. and William E.
Bindley to be signed by its duly authorized officers, and Mr. Bindley has signed
the same.
BINDLEY WESTERN INDUSTRIES, INC.
Date: ______________________ By ________________________________
Signature
_____________________________
Office
ATTEST:
______________________________
Signature
______________________________
Office
___________________________________
William E. Bindley
49
<PAGE>
EXHIBIT 10Z(ii)
Plan 003
(4) Eligibility for New Plans. (Select if Applicable):
_____ For new Plans, Employees who have not satisfied the age and/or
servive requirements of the Plan, but would otherwise be
eligible to participate in the Plan, shall be eligible to
participate on the Effective Date.
(5) Service for Predecessor Employer. (Plan Sec. 1.1((Q)(4)).
(Select and Complete if Desired):
_____ For eligibility purposes, in addition to the predecessor
service the Plan must credit by reason of Section
1.1(Q)(4), the Plan credits service with the
following predecessor employer(s): _________________________
3-C Medical, Inc. & Kendall Drug Company
---------------------------------------------------------- .
(6) Eligibility Date. (Plan Sec. 1.1(K)) (Select One):
Employees satisfying the eligibility requirements of the Plan are
eligible for participation
(a) semi-annually.
-----
(b) X quarterly.
-----
G. Vesting. (Discretionary Profit Sharing Contributions) (Plan Sec. 2.2).
-------
(1) The percentage of a Participant's Account Employer Contribution
(attributable to discretionary profit sharing contributions) Account
to be vested in him or her upon termination of employment prior to
retirement shall be:
Check and complete the desired vesting schedule.
Completed Years of Vesting Service
1 2 3 4 5 6 7
----- ----- ----- ----- ----- ----- -----
(a) 100%
----- -----
(b) 100%
----- ----- -----
(c) 20% 40% 60% 80% 100%
----- -----
(d) X 20% 40% 60% 80% 100%
----- ----- -----
(e) 10% 20% 30% 40% 60% 80% 100%
-----
(f) 100%
----- ----- ----- ----- -----
-50-
<PAGE>
EXHIBIT 10AA(i)
BINDLEY WESTERN INDUSTRIES, INC.
PROFIT SHARING EXCESS PLAN
--------------------------
I
NATURE AND PURPOSE OF PLAN
--------------------------
1. Type of Plan. The Bindley Western Industries, Inc. Profit-Sharing
Excess Plan ("Plan") is established by the Company as an unfunded, non-qualified
deferred-compensation plan for a select group of the Employer's management and
highly-compensated employees.
2. Purpose of Plan. The purpose of the Plan is to provide a means for the
payment of deferred compensation to a select group of key senior management
employees of the Employer, in recognition of their substantial contributions to
the operation of the Employer, and to provide those individuals with additional
financial security as an inducement to them to remain in employment with the
employer.
II
DEFINITIONS AND RULES OF CONSTRUCTION
-------------------------------------
2. Definitions. As used in the Plan, the following words and phrases,
when capitalized, have the following meanings except when used in a context that
plainly requires a different meaning:
(a) "Account" means, with respect to a Participant, the bookkeeping
account that serves as a record of the contributions and interest credited
to the Participant under the terms of this Plan.
(b) "Allocation Percentage" means, with respect to a Participant for a
Plan Year of the Profit Sharing Plan, the percentage obtained by dividing
the total contributions and forfeitures allocated to the Participant's
account in the Profit Sharing Plan by that portion of his Compensation
taken into account for those allocations under the Profit Sharing Plan.
(c) "Applicable Interest Rate" means, with respect to a Plan Year, the
rate of return of the Standard & Poor's 500 Index for the Plan Year.
(d) "Beneficiary" means, with respect to a Participant, the person or
persons designated pursuant to Section 6.9 to receive benefits under the
Plan in the event of the Participant's death.
(e) "Board of Directors" means the Board of Directors of the Company.
(f) "Change in Control" means an event described in Subsection 6.3(b).
51
<PAGE>
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and interpretive rules and regulations.
(h) "Committee" means the Compensation and Stock Option Committee of
the Board of Directors.
(i) "Company" means Bindley Western Industries, Inc.
(j) "Compensation" means, with respect to a Participant for a Plan
Year, the Participant's compensation as defined for purposes of the Profit
Sharing Plan for the Plan Year, but without regard to the limitation
imposed by Code Paragraph 401(a)(17).
(k) "Designated Participant" means a Participant designated by the
Committee to receive special contributions pursuant to Section 5.2.
(l) "Disability" means, with respect to a Participant, the
Participant's inability by reason of illness or other physical or mental
disability to perform the duties required by his employment for any
consecutive 180 day period. The existence of a Disability shall be
determined by the Committee on the basis of competent medical evidence.
(m) "Effective Date" means December 9, 1994.
(n) "Eligible Employee" means a key management Employee who is
selected by the Committee as an individual who has the opportunity to
impact significantly the annual operating success of the Employer.
(o) "Employee" means any person employed by the Employer on a full-
time salaried basis, including officers of the Company or a Related
Employer.
(p) "Employer" means the Company and any Related Employer.
(q) "Limited Compensation" means, with respect to a Participant for a
Plan Year, that portion of the Participant's Compensation not in excess of
the limitation in effect under the Code Paragraph 401(a)(17) for the Plan
Year.
(r) "Participant" means an Eligible Employee who becomes a Participant
in the Plan pursuant to Section 3.1.
(s) "Plan" means this instrument, as amended from time to time, and
the non-qualified deferred compensation plan so established.
(t) "Plan Year" means a calendar year commencing on or after January
1, 1994.
(u) "Pre-94 Compensation" means, with respect to a Participant for a
Plan Year, that portion of the Participant's Compensation
52
<PAGE>
not in excess of the limitation in effect under Code Paragraph 401(a)(17)
for 1993, increased for each Plan Year in accordance with Code Subsection
415(d).
(v) "Profit Sharing Plan" means the Profit Sharing Plan of Bindley
Western Industries, Inc. and Subsidiaries.
(w) "Rabbi Trust" means a grantor trust established by the Company
pursuant to Subsection 4.3(b) for the deposit of funds to be used for the
exclusive purpose of paying benefits accrued under the Plan, subject to the
claims of the Company's general creditors in the event of the Company's
insolvency.
(x) "Related Employer" means any Employer that, together with the
Company, is under common control or a member of an affiliated service
group, as determined under Code Subsections 414(b), (c), (m), and (o).
(y) "Retirement" means, with respect to a Participant, the
Participant's Termination of Employment, other than a Termination for
Cause, on or after the date the Participant attains age 65.
(z) "Schedule A" means the Schedule A attached to this Plan for the
purpose of determining the benefits payable under Section 6.8 in connection
with a Participant's death.
(aa) "Termination for Cause" means, with respect to a Participant, a
Termination of Employment due to fraud, dishonesty, theft of corporate
assets, or other gross misconduct by the Participant. Notwithstanding the
foregoing, a Participant shall not be deemed to have incurred a Termination
for Cause unless and until there shall have been delivered to him a copy of
a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board of Directors at a meeting
called and held for the purpose (after reasonable notice to the Participant
and an opportunity for the Participant, together with his counsel, to be
heard before the Board of Directors), finding that, in the good faith
opinion of the Board of Directors, the Participant was guilty of conduct
constituting cause and specifying the particulars of the conduct in detail.
(bb) "Termination of Employment" means, with respect to a Participant,
the cessation of the relationship of Employer and Employee between the
Participant and the Employer for any reason other than the Participant's
death or Disability. A Participant shall not be treated as having incurred
a Termination of Employment until the employment relationship between the
Participant and all Related Employers has terminated.
(cc) "Transferred Amounts" means any deferred compensation accumulated
by a Participant under the Deferred Compensation Agreement between Bindley
Western Industries, Inc. and William E. Bindley and transferred to this
Plan, pursuant to Section 5.3.
53
<PAGE>
(dd) "Unforeseeable Emergency" means, with respect to a Participant or
Beneficiary, a severe financial hardship to the Participant or Beneficiary
resulting from a sudden and unexpected illness or accident of the
Participant, Beneficiary, or his or her dependents; loss of the
Participant's or Beneficiary's property due to casualty; or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the Participant's or Beneficiary's control.
3. Rules of Construction. The following rules of construction shall govern
in interpreting the Plan:
(a) The provisions of this Plan shall be construed and governed in all
respects under and by the internal laws of the State of Indiana, to the
extent not preempted by federal law.
(b) Words used in the masculine gender shall be construed to include
the feminine gender, where appropriate, and vice versa.
(c) Words used in the singular shall be construed to include the
plural, where appropriate, and vice versa.
(d) The headings and subheadings in the Plan are inserted for
convenience of reference only and are not to be considered in the
construction of any provision of the Plan.
(e) If any provision of the Plan shall be held to be illegal or
invalid for any reason, that provision shall be deemed to be null and void,
but the invalidation of that provision shall not otherwise impair or affect
the Plan.
III
ELIGIBILITY AND PARTICIPATION
-----------------------------
2. Eligibility. Participation in the Plan is limited to Eligible
Employees.
3. Date OF Participation. An Eligible Employee shall become a Participant
on the date specified by the Committee.
4. Cessation of Participation. Any Participant who ceases to be an
Eligible Employee, but continues to be an Employee, shall cease to be eligible
to receive contributions under Article V but shall continue to have an Account
and to be credited with interest on his Account under Section 4.2 (until that
Account is fully distributed pursuant to Article VI or forfeited pursuant to
Section 4.6), and, except as provided in Section 4.6, the Participant shall be
entitled to receive benefits under Article VI.
54
<PAGE>
IV
--
PARTICIPANTS' ACCOUNTS
----------------------
2. Establishment of Accounts. The Committee shall create and maintain
adequate records to disclose the interest in the Plan of each Participant and
Beneficiary. Records shall be in the form of individual bookkeeping accounts,
which should be credited with contributions and Transferred Amounts pursuant to
Article V and interest pursuant to Section 4.2. Each Participant shall have a
separate Account. The Participant's interest in his Account shall be subject to
forfeiture pursuant to Section 4.6, but shall otherwise be fully vested at all
times.
3. Interest on Accounts. A Participant's Account shall be deemed to bear
interest from the date it is established to the date the entire Account is
distributed pursuant to Article VI or forfeited pursuant to Section 4.6.
Interest shall be credited at the end of each Plan Year at the Applicable
Interest Rate.
4. Accounts Unfunded.
(a) Accounts shall be accounting accruals, in the names of
Participants, on the Employer's books. Accounts shall be unfunded, so
that the Employer's obligation to pay benefits under the Plan is
merely a contractual duty to make payments when due under the Plan.
The Employer's promise to pay benefits under the Plan shall not be
secured in any way, and except as provided in Subsection (b), the
Company shall not set aside or segregate assets for the purpose of
paying amounts credited to Participants' Accounts.
(b) Notwithstanding the positions of Subsection (a), the Company shall
establish a Rabbi Trust. The Employer, from time to time, shall make
such contributions to the Rabbi Trust as the Committee, in its sole
discretion, determines are appropriate to enable the Employer to meet
its contractual obligations to Participants to pay benefits under the
Plan when due. The Rabbi Trust established under this Section shall be
created pursuant to a written trust document that conforms to the
model form of rabbi trust agreement approved by the Internal Revenue
Service in Revenue Procedure 92-64 (as amended from time to time).
5. Valuation of Accounts. The value of a Participant's Account as of any
date shall equal the dollar amount of any contributions and Transferred Amounts
credited to the Account pursuant to Article V, increased or decreased by any
earnings or losses deemed to be credited to the account in accordance with
Section 4.2, and decreased by the amount of any payments made from the Account
to the Participant or his Beneficiary pursuant to Article VI. In the event that
a Participant dies before his Account has been distributed, the value of the
Participant's Account shall be adjusted in accordance with Section 6.8.
55
<PAGE>
6. Annual Report. Within 120 days following the end of each Plan Year, the
Committee shall provide to each Participant a written statement of the amount
standing to his credit in his Account as of the end of that Plan Year.
7. Forfeiture on Termination for Cause. In the event a Participant is
Terminated for Cause before his Account is fully distributed, then his entire
remaining Account shall be forfeited upon his Termination of Employment, and
neither he nor his Beneficiary shall be entitled to any further benefits under
the Plan. Notwithstanding the foregoing, any Transferred Amounts credited to a
Participant's Account shall not be forfeitable pursuant to this Section.
V
-
CONTRIBUTIONS AND TRANSFERRED AMOUNTS
-------------------------------------
2. Basic Contributions. For each Plan Year there shall be credited to the
Account of each Participant who commenced participation before or during the
Plan Year (and who has not become ineligible pursuant to Section 3.3), a
contribution equal to the difference between (a) the Participant's Allocation
Percentage multiplied by his Pre-94 Compensation and, (b) the Participant's
Allocation Percentage multiplied by his Limited Compensation. Contributions with
respect to a Participant shall be credited to the Participant's Account as of
the last day of the Plan Year.
3. Special Contributions for Designated Participant. For each Plan Year,
the Account of any Participant who is a Designated Participant for the Plan Year
shall be credited with a special contribution equal to the difference between
(a) $30,000 and (b) the sum of (1) the contribution credited to the
Participant's Account pursuant to Section 5.1 for the Plan Year plus (2) the
employer contribution (not including elective contributions made pursuant to
Code Subsection 401(k)) allocated to the Designated Participant's account in the
Profit Sharing Plan for the Plan Year.
4. Transferred Amounts. Upon the termination by mutual agreement of the
Deferred Compensation Agreement between Bindley Western Industries, Inc. and
William E. Bindley, amounts credited to Mr. Bindley under that agreement (the
"Transferred Amounts") shall be credited to his Account in this Plan and shall
thereafter be treated as transferred to this Plan and subject to the applicable
terms of this Plan.
VI
--
DISTRIBUTION OF BENEFITS
------------------------
2. General Distribution Rules.
(a) General Provisions. Except as otherwise provided in Sections 6.2
through 6.7, a Participant's Account shall be
56
<PAGE>
distributed to the Participant (or to his Beneficiary in the event of his
death) in the form and at the time elected by the Participant pursuant to
Subsection (b).
(b) Participant's Election. Upon commencing participation in the Plan,
the Participant shall make an election, in writing and pursuant to rules
established by the Committee, selecting the form and time for the payment
of his benefits from among the options described in this Subsection. A
Participant may, at any time, change his election effective as of the first
day of the next Plan Year, but the Participant's new election shall apply
only to amounts credited to his Account after the effective date of the new
election.
(1) Form of Distribution. A Participant may elect to have his Account
distributed in one of the following forms:
(A) A lump sum payment; or
(B) Substantially equal annual or quarterly installments over a
specified number of years not exceeding 15.
(2) Time of Distribution. Distribution of a Participant's benefits
shall commence as soon as administratively feasible after the earlier of
the Participant's death or his Retirement, except that the Participant may
elect to have a specified percentage of his benefits subject to the
election distributed in a lump sum on a specified future date not earlier
than five years from the date of the Participant's election.
(c) If a Participant fails to make an election pursuant to this
Section, then, except as otherwise provided in Sections 6.2 through 6.7,
the Participant's benefits shall be distributed in five substantially equal
annual installments commencing as soon as administratively feasible after
the earlier of the Participant's death or his Retirement.
3. Distribution of Transferred Amounts. Any Transferred Amounts with
respect to a Participant shall be distributed in five substantially equal annual
installments as provided in this Section until all of the Transferred Amounts
have been distributed. The first annual installment shall be paid on the first
day of the month immediately following the earliest of the Participant's death,
Disability, Retirement, or other Termination of Employment. Subsequent annual
installments shall be paid on the anniversary of the initial payment.
4. Distribution Upon Disability. Notwithstanding Section 6.1, in the event
a Participant incurs a Disability, the Participant's Account shall be
distributed to the Participant (or, in the event of his death, to his
Beneficiary) in a lump sum payment as soon as administratively feasible after
the Committee determines that the Participant has incurred a Disability.
57
<PAGE>
5. Distribution Upon Termination of Employment Before Retirement.
Notwithstanding Section 6.1, if the Participant incurs a Termination of
Employment other than a Retirement or a Termination for Cause, the Participant's
Account shall be distributed to the Participant (or, in the event of his death,
to his Beneficiary) in a lump sum payment as soon as administratively feasible
after the Participant's Termination of Employment.
6. Distribution Upon a Change in Control. (a) Notwithstanding any other
Section, if a Change in Control occurs, a Participant's Account shall be
distributed as soon as administratively feasible in a single lump sum payment to
the Participant (or, in the event of the Participant's death, before
distribution, to his Beneficiary).
(A) As used in this Plan, the term "Change in Control" means any of the
following events:
(1) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended, the "Exchange Act") ("any person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act as in effect from time to time) of 25% or more of either (A) the then
outstanding shares of common stock of the Company or (B) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors; provided, however,
that the following acquisitions shall not constitute an acquisition of
control: (A) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege); (B) any
acquisition by the Company; (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Related Employer; (D) any acquisition by any corporation pursuant to a
reorganization, merger, or consolidation, if, following that
reorganization, merger, or consolidation, the conditions described in
clauses (A), (B), and (C) of paragraph (3) of this subsection (b) are
satisfied; (E) any acquisition by William E. Bindley; or (F) upon the death
of William E. Bindley, any acquisition triggered by this death by operation
of law, by any testamentary bequest, or by the terms of any trust or other
contractual arrangement established by him.
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of the Directors; provided,
however, that any individual becoming a director subsequent to the
Effective Date whose election or nomination for election by the Company's
shareholders, with approval by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
58
<PAGE>
(3) Approval by the shareholders of the Company of a reorganization,
merger, or consolidation, in each case, unless following that
reorganization, merger, or consolidation, (A) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from the reorganization, merger, or consolidation and
the combined voting power of the then outstanding voting securities of that
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were then beneficiary owners,
respectively, of the outstanding Company common stock and outstanding
Company voting securities immediately prior to the reorganization, merger,
or consolidation in substantially the same proportions as their ownership,
immediately prior to the reorganization, merger, consolidation of the
outstanding Company stock and outstanding Company voting securities, as the
case may be; (B) no Person (excluding the Company, any employee benefit
plan or related trust of the Company or the corporation resulting from the
reorganization, merger, or consolidation, in any Person beneficially
owning, immediately prior to such reorganization, merger, or consolidation,
directly or indirectly, 25% or more of the outstanding Company common stock
or Company voting securities, as the case may be) beneficially owned,
directly or indirectly, 25% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from the
reorganization, merger, or consolidation, or the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors; and (C) at least a majority of the
members of the board of directors of the corporation resulting from the
reorganization, merger, or consolidation were members of the Incumbent
Board at the time of the execution of the initial agreement providing for
the reorganization, merger, or consolidation.
(4) Approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Corporation,
other than to a corporation with respect to which following such sale or
other disposition (i) more than 60% of, respectively, then outstanding
shares of common stock of that corporation and the combined voting power of
the then outstanding voting securities of the corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively of the outstanding Company
common stock and outstanding Company voting securities immediately prior to
the sale or other disposition in substantially the same proportion as their
ownership, immediately prior to the sale or other disposition, of the
outstanding Company common stock and outstanding Company voting securities,
as the case may be; (ii) no Person (excluding the Company and any employee
benefit plan or related trust of the Corporation or the corporation and any
Person beneficially owning, immediately prior to the sale or other
disposition, directly or indirectly, 25% or more of the outstanding Company
common stock or outstanding Company voting securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of,
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<PAGE>
respectively, the then outstanding shares of common stock of the
corporation and the combined voting power of the then outstanding
voting securities of the corporation entitled to vote generally in the
election of directors, and (iii) at least a majority of the members of
the board of directors of the corporation were members of the
Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for the sale or other disposition of
the assets of the Company.
7. Distribution of Small Amounts. Notwithstanding Section 6.1, if the
remaining value of a Participant's Account (other than that portion, if any, of
his Account consisting of Transferred Amounts) does not exceed $10,000.00, the
balance of his Account (other than the portion, if any, consisting of
Transferred Amounts) shall be distributed in a lump sum payment to the
Participant (or, in the event of his death, to his Beneficiary).
8. Distribution Upon Financial Emergency. A Participant or Beneficiary,
upon written petition to the Committee, may withdraw some or all of the balance
of the Participant's Account if the Committee, in its sole discretion,
determines that the requested withdrawal is on account of an Unforeseeable
Emergency and that the amount to be withdrawn does not exceed the amount
necessary to satisfy the Unforeseeable Emergency. Withdrawals under this
Section shall not be permitted to the extent that the Unforeseeable Emergency
may reasonably be relieved through (a) reimbursement or compensation by
insurance or otherwise, (b) liquidation of the Participant's or Beneficiary's
assets (to the extent liquidation would not itself cause a financial hardship),
or (c) suspension or cessation of elective deferrals under the Profit Sharing
Plan or the Bindley Western Industries, Inc. 401(k) Excess Plan.
9. Death Benefits. In the event that a Participant dies before his Account
is completely distributed, his Beneficiary shall be entitled to a death benefit.
The amount of the death benefit payable to the Beneficiary shall be determined
under Schedule A. If the amount of the death benefit determined under Schedule
A is greater than the amount credited to the Participant's Account immediately
before his death, then the value of the Participant's Account shall be adjusted
to equal the death benefit determined under Schedule A. The form and timing of
the payment of death benefit shall be determined pursuant to Section 6.1,
subject to Sections 6.2 through 6.7.
10. Designation of Beneficiary. A Participant's Beneficiary shall be the
person or persons, including a trustee, designated by the Participant in writing
pursuant to the practices of, or rules prescribed by, the Committee, as the
recipient of any benefits payable under the Plan following the Participant's
death. To be effective, a Beneficiary designation must be filed with the
Committee during the Participant's life on a form prescribed by the Committee;
provided, however, that finalized divorce or marriage (other than a common law
marriage) shall automatically revoke a previously filed Beneficiary designation,
unless in the case of divorce the former spouse was not designated as the
Beneficiary or in the case of marriage the Participant's new spouse is already
the designated Beneficiary. If no person has been designated as the
Participant's Beneficiary, if a Participant's Beneficiary designation has been
revoked by marriage or divorce, or if no person
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<PAGE>
designated as Beneficiary survives the Participant, the Participant's estate
shall be his Beneficiary.
VII
---
ADMINISTRATION
--------------
2. Administrator. The Committee shall be the Administrator of the Plan.
All decisions of the Committee shall be by a vote of a majority of its members
and shall be final and binding.
3. Notices. Any notice or filing required or permitted to be given to the
Committee under the Plan shall be sufficient if it is in writing or hand
delivered, or sent by registered or certified mail, to any member of the
Committee. The notice or filing shall be deemed made as of the date of
delivery, or if delivery is made by mail, as of the date shown on the postmark
on the receipt for registration or certification.
4. Powers and Duties of the Committee. Subject to the specific limitations
stated in this Plan, the Committee shall have the following powers, duties, and
responsibilities:
(a) To carry out the general administration of the Plan;
(b) To cause to be prepared all forms necessary or appropriate for the
administration of the Plan;
(c) To keep appropriate books and records;
(d) To determine amounts to be distributed to Participants and
Beneficiaries under the provisions of the Plan;
(e) To determine, consistent with the provisions of this instrument
all questions of eligibility, rights, and status of Participants and
Beneficiaries under the Plan;
(f) To issue, amend, and rescind rules relating to the administration
of the Plan, to the extent those rules are consistent with the
provisions of this instrument;
(g) To exercise all other powers and duties specifically conferred
upon the Committee elsewhere in this instrument; and
(h) To interpret, with discretionary authority, the provisions of this
Plan and to resolve, with discretionary authority, all disputed
questions of Plan interpretation and benefit eligibility.
61
<PAGE>
VIII
----
AMENDMENT AND TERMINATION
-------------------------
2. Amendment. The Company reserves the right to amend the Plan at any
time by action of the Board of Directors, with written notice given to each
Participant in the Plan. The Company, however, may not make any amendment that
reduces a Participant's benefits accrued as of the date of the amendment unless
the Participant consents in writing to the amendment. Notwithstanding the
foregoing, the Company may not amend any of the provisions of Section 6.5 within
three years of a Change in Control.
3. Termination. The Company reserves the right to terminate the Plan, by
action of the Board of Directors, at any time it deems appropriate. Upon
termination of the Plan, no further contribution shall be made to the Plan.
Subject to Section 6.5, distribution following termination of the Plan shall be
made at the time and under the terms and conditions as the Corporation, in its
sole discretion, shall determine, which shall commence no later than the
earliest of a Participant's Death, Disability, Retirement or other Termination
of Employment.
IX
--
MISCELLANEOUS
-------------
2. Relationship. Notwithstanding any other provision of this Plan, this
Plan and action taken pursuant to it shall not be deemed or construed to
establish a trust or fiduciary relationship of any kind between or among the
Company, Participants, Beneficiaries or any other persons. The Plan is intended
to be unfunded for purposes of the Code and the Employee Retirement Income
Security Act of 1974, as amended. The rights of Participants and Beneficiaries
to receive payment of benefits under the Plan is strictly a contractual right of
payment, and this Plan does not grant, nor shall it be deemed to grant
Participants, Beneficiaries, or any other person any interest or right to any of
the funds, property, or assets of the Employer other than as an unsecured
general creditor of the Employer.
3. Other Benefits and Plans. Nothing in this Plan shall be deemed to
prevent Participants from receiving, in addition to the benefits provided for
under this Plan, any funds that may be distributable to them at any time under
any other present or future retirement or incentive plan of the Employer.
4. Anticipation of Benefits. Neither Participants nor Beneficiaries shall
have the power to transfer, assign, anticipate, pledge, alienate, or otherwise
encumber in advance any of the payments that may become due under this Plan, and
any attempt to do so shall be void. Any payments that may become due under this
Plan shall not be subject to attachment, garnishment, execution, or be
transferrable by operation of law in the event of bankruptcy, insolvency, or
otherwise.
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<PAGE>
5. No Guarantee of Continued Employment. Nothing contained in this Plan
or any action taken under the Plan shall be construed as a contract of
employment or as giving any participant any right to be retained in employment
with the Employer. The Employer specifically reserves the right to terminate
any Participant's employment at any time with or without cause, and with or
without notice or assigning a reason, subject to the terms of any written
employment agreement between the Participant and the Employer.
6. Waiver of Breach. The Company's or the Committee's waiver of any Plan
provision shall not operate or be construed as a waiver of any subsequent breach
by the Participant.
7. Protective Provisions. Each Participant shall cooperate with the
Company and the Committee by furnishing any and all information requested by the
Company or the Committee in order to facilitate the payment of benefits under
the Plan, by taking any physical examinations the Committee may deem necessary
and by taking any other relevant action as may be requested by the Company or
the Committee. If any Participant refuses so to cooperate, the Company shall
have no further obligation to the Participant or his Beneficiary under this
Plan, other than to distribute to the Participant any Transferred Amounts. If a
Participant makes any material misstatement of information or nondisclosure of
medical history, then no distributions with respect to any affected contribution
shall be made under this Plan to the Participant or his Beneficiary, other than
payment to that Participant or his Beneficiary of any Transferred Amounts with
respect to the Participant; provided, however, that the Committee may determine
that benefits may be payable in an amount reduced to compensate the Company for
any loss, cost, damage, or expense suffered or incurred by the Company as a
result in any way of the Participant's action, misstatement, or nondisclosure.
8. Benefit. This Plan shall be binding upon and inure to the benefit of
the Employer and its successors and assigns.
9. Responsibility for Legal Affect. Neither the Committee nor the Company
makes any recommendations or warranties, express or implied, assumes any
responsibility concerning the legal context, or other implications or affects of
this Plan.
10. Tax Withholding. The Employer shall withhold from any payment made
under the Plan such amount or amounts as may be required by applicable federal,
state, or local laws.
Bindley Western Industries, Inc. has caused this Plan to be executed by
their duly authorized officers, as of the 9th day of December, 1994.
BINDLEY WESTERN INDUSTRIES, INC.
By:______________________________
Office:__________________________
ATTEST: By: ____________________________
Office:_________________________
63
<PAGE>
TRUST UNDER
BINDLEY WESTERN INDUSTRIES, INC.
PROFIT SHARING EXCESS PLAN
--------------------------------
This Trust Agreement is made this _____ day of January, 1995, by and
between Bindley Western Industries, Inc. (the "Company"), and Key Trust Company
of Indiana, N.A. (the "Trustee").
Recitals
--------
A. WHEREAS, the Company has adopted the Bindley Western Industries,
Inc. Profit Sharing Excess Plan (the "Plan");
B. WHEREAS, the Company has incurred or expects to incur liability
under the terms of the Plan with respect to the individuals participating in the
Plan;
C. WHEREAS, the Company wishes to establish a trust (the "Trust")
and contribute to the Trust assets that shall be held therein, subject to the
claims of the Company's creditors in the event of the Company's Insolvency, as
herein defined, until paid to Plan participants and their beneficiaries in such
manner and at such times as specified in the Plan;
D. WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA");
E. WHEREAS, it is the intention of the Company to make contributions
to the Trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held, and disposed of as follows:
64
<PAGE>
Agreement
---------
1. Establishment of Trust.
(a) The Company hereby deposits with the Trustee in trust
$__________, which shall become the principal of the Trust to be held,
administered, and disposed of by the Trustee as provided in this Trust
Agreement.
(b) The Trust shall become irrevocable 30 days following the issuance
of a favorable private letter ruling regarding the Trust from the Internal
Revenue Service.
(c) The Trust is intended to be a grantor trust, of which the Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be
held separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Plan participants and general creditors
as herein set forth. Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against the Company. Any assets held by the Trust shall be subject to the
claims of the Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) Within 90 days following the end of each Plan Year ending after
the Trust has become irrevocable pursuant to Section 1(b) hereof, the Company
shall be required irrevocably to deposit additional cash or property
65
<PAGE>
to the Trust in an amount sufficient to pay each Plan participant or beneficiary
the benefits payable pursuant to the terms of the Plan as of the close of the
Plan Year.
Section 2. Payments To Plan Participants And Their Beneficiaries.
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to the Trustee for determining the amount so payable,
the form in which such amount is to be paid (as provided for or available under
the Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payment to the Plan
participants and their beneficiaries in accordance with such Payment Schedule.
The Trustee shall make provision for the reporting and withholding of any
federal, state, or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld, and paid by the Company.
(b) The entitlement of the Plan participant or his or her beneficiary
to benefits under the Plan shall be determined by the party or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. The Company shall notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to participants and
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<PAGE>
their beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in accordance
with the terms of the Plan, the Company shall make the balance of each such
payment as it falls due. The Trustee shall notify the Company where principal
and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments To Trust Beneficiaries
When Company Is Insolvent.
(a) The Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Company is Insolvent. The Company shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) the Company
is unable to pay its debts as they become due or (ii) the Company is subject to
a pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(i) The Board of Directors and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of the Company
alleges in writing to the Trustee that the Company has become Insolvent,
the Trustee shall determine whether the Company is Insolvent and, pending
such determination, the Trustee shall discontinue payment of benefits to
Plan participants or their beneficiaries.
(ii) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming
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<PAGE>
to be a creditor alleging that the Company is Insolvent, the Trustee shall
have no duty to inquire whether the Company is Insolvent. The Trustee may
in all events rely on such evidence concerning the Company's solvency as
may be furnished to the Trustee and that provides the Trustee with a
reasonable basis for making the determination concerning the Company's
solvency.
(iii) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the benefit
of the Company's general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Plan participants or their beneficiaries
to pursue their rights as general creditors of the Company with respect to
benefits due under the Plan or otherwise.
(iv) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the Company is
not Insolvent (or is no longer Insolvent).
(a) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
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Section 2. Payments To Company. Except as provided in Section 3 hereof, after
the Trust has become irrevocable, the Company shall have no right or power to
direct the Trustee to return to the Company or to divert to others any of the
Trust assets before all payments of benefits have been made to Plan participants
and their beneficiaries pursuant to the terms of the Plan.
Section 3. Investment Authority.
(a) In no event may the Trustee invest in securities (including
stocks or rights to acquire stock) or obligations issued by the Company, other
than a de minimis amount held in common investment vehicles in which the Trustee
invests. All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Plan participants.
(b) Subject to the provisions of this Agreement and the investment
guidelines submitted to the Trustee from time to time by the Committee (as
defined in the Plan), the Trustee shall invest and reinvest in such stocks,
bonds, or other real or personal property, tangible or intangible, including
without limiting the generality of the foregoing, in trust funds and insurance
or annuity contracts, as, and in such proportions as, the Trustee, in its sole
discretion shall determine. The Trustee may, from time to time, transfer to a
common, collective, or pooled trust fund maintained by the Trustee, or any
affiliate of the Trustee, all or such part of the Trust assets as the Trustee
may deem advisable, and such part or all of the Trust assets transferred shall
be subject to all the terms and provisions of the common, collective, or pooled
trust fund, which contemplates the commingling for investment purposes of the
transferred portion of the Trust
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assets with trust assets of other participating trusts. The Trustee may, from
time to time, withdraw from such common, collective, or pooled trust fund all or
such part of the Trust assets as the Trustee may deem advisable.
Section 4. Disposition Of Income. During the term of this Trust, all income
received by the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 5. Accounting By The Trustee. The Trustee shall keep accurate and
detailed records of all investments, receipts, disbursements, and other
transactions required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee. Within 60 days
following the close of each calendar year and within 60 days after the removal
or resignation of the Trustee, the Trustee shall deliver to the Company a
written account of its administration of the Trust during that year or during
the period from the close of the last preceding year to the date of the
Trustee's removal or resignation, setting forth all investments, receipts,
disbursements, and other transactions effected by it, including a description of
all securities and investments purchased and sold with the cost or net proceeds
of such purchases or sales (accrued interest paid or receivable being separately
noted), and showing all cash, securities, and other property held in the Trust
at the end of the year or as of the date of the Trustee's removal or
resignation, as the case may be.
Section 6. Responsibility Of Trustee.
(a) The Trustee shall act with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, that the Trustee
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shall incur no liability to any person for any action taken pursuant to a
direction, request, or approval given by the Company or the Committee which is
contemplated by, and in conformity with, the terms of the Plan or this Trust
Agreement and is given in writing by the Company or the Committee.
(b) If the Trustee undertakes or defends any litigation arising in
connection with the Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses, and liabilities, including, without limitation,
reasonable attorneys' fees and expenses, relating to the litigation and to be
primarily liable for such payments.
(c) The Trustee may consult with legal counsel, who may also be
counsel for the Company generally, with respect to any of its duties or
obligations under this Trust Agreement.
(d) With the prior written approval of the Company, the Trustee may
hire suitable agents, accountants, actuaries, investment advisors, financial
consultants, or other professionals to assist it in performing any of its duties
or obligations under this Trust Agreement.
(e) The Trustee shall have, without exclusion, all powers conferred
on trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name the beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding the provisions of Section 8(e) above, the Trustee
may loan to the Company the proceeds of any borrowing against an insurance held
as an asset of the Trust.
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(g) Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any power
that could give this Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of section 301.7701-2 of the Procedure
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 7. Compensation And Expenses Of Trustee. The Trustee shall be paid
such reasonable compensation as shall, from time to time, be agreed upon in
writing between the Company and the Trustee. In addition, subject to Section
8(d) hereof, the Trustee shall be reimbursed for any reasonable fees and
expenses, including counsel fees, incurred by and in the administration of the
Trust. Such compensation, fees, and expenses shall be paid from the Trust
assets unless paid by the Company.
Section 8. Resignation And Removal Of Trustee.
(a) The Trustee may resign at any time by written notice to the
Company, which shall be effective 60 days after receipt of such notice unless
the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 60 days notice or
upon shorter notice accepted by the Trustee.
(c) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 60 days after receipt of notice
of resignation, removal, or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall be
appointed in accordance with Section 11 hereof, by the effective date of
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resignation or removal under paragraph (a) or (b) of this Section. If no such
appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses
of the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
Section 9. Appointment Of Successor.
(a) If the Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, the Company may appoint any third party, such as a bank
trust department or other party that may be granted corporate trustee powers
under state law, as a successor to replace the Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, which shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee shall execute
any instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for,
and the Company shall indemnify and defend the successor Trustee from, any claim
or liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes the
successor Trustee.
Section 10. Amendment Or Termination.
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the
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Trust revocable after it has become irrevocable in accordance with Section 1(b)
hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan, unless sooner revoked in accordance with Section 1(b)
hereof. Upon termination of the Trust any assets remaining in the Trust shall
be returned to the Company.
(c) Upon written approval of participants or beneficiaries entitled
to payment of benefits pursuant to the terms of the Plan, the Company may
terminate this Trust prior to the time all benefit payments under the Plan have
been made. All assets in the Trust at termination shall be returned to the
Company.
Section 11. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution, or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
(d) Each word and phrase defined in the Plan shall, whenever used in
this Trust Agreement, have the meaning subscribed to it in the Plan unless a
different meaning is plainly required by the context in which the
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word of phrase is used or unless otherwise expressly provided in this Trust
Agreement.
Section 12. Effective Date. The effective date of this Trust Agreement shall
be January 1, 1995.
Bindley Western Industries, Inc., and Key Trust Company of Indiana,
N.A., by their respective duly authorized officers, have caused this Trust Under
Bindley Western Industries, Inc. Profit Sharing Excess Plan to be executed on
the date written above.
BINDLEY WESTERN INDUSTRIES, INC.
ATTEST: By _____________________________
(Signature)
_______________________________ _____________________________
(Signature) (Printed)
_______________________________ _____________________________
(Printed) (Office)
_______________________________
(Office)
KEY TRUST COMPANY OF INDIANA, N.A.
ATTEST: By _____________________________
(Signature)
_______________________________ _____________________________
(Signature) (Printed)
_______________________________ _____________________________
(Printed) (Office)
_______________________________
(Office)
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EXHIBIT 10AA(ii)
BINDLEY WESTERN INDUSTRIES, INC.
401(K) EXCESS PLAN
------------------
I
NATURE AND PURPOSE OF PLAN
--------------------------
1. Type of Plan. The Bindley Western Industries, Inc. 401(k) Excess
Plan ("Plan") is established by the Company as an unfunded, non-qualified
deferred-compensation plan for a select group of the Employer's management and
highly-compensated employees.
2. Purpose of Plan. The purpose of the Plan is to provide a means for
the payment of deferred compensation to a select group of key senior management
employees of the Employer, in recognition of their substantial contributions to
the operation of the Employer, and to provide those individuals with additional
financial security as an inducement to them to remain in employment with the
Employer.
II
DEFINITIONS AND RULES OF CONSTRUCTION
-------------------------------------
2. Definitions. As used in the Plan, the following words and
phrases, when capitalized, have the following meanings except when used in a
context that plainly requires a different meaning:
(a) "Beneficiary" means, with respect to a Participant, the person or
persons designated pursuant to Section 6.9 to receive benefits under
the Plan in the event of the Participant's death.
(b) "Board of Directors" means the Board of Directors of the Company.
(c) "Change in Control" means an event described in Subsection 6.3(b).
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and interpretive rules and regulations.
(e) "Committee" means the Compensation and Stock Option Committee of
the Board of Directors.
(f) "Company" means Bindley Western Industries, Inc.
(g) "Compensation" means, with respect to a Participant for a Plan
Year, the Participant's salary and Bonus for the Plan Year (reduced by
any deferral elections or salary reductions made by the Participant
under the Profit Sharing Plan or a Code Section 125 cafeteria plan for
the Plan Year.
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(h) "Deferral Account" means, with respect to a Participant, the
bookkeeping account that serves as a record of the deferrals and
earnings and losses credited to the Participant under the terms of
this Plan.
(i) "Deferral Agreement" means the written agreement entered into
between an Eligible Employee and the Employer pursuant to which the
Eligible Employee elects to participate in the Plan.
(j) "Disability" means, with respect to a Participant, the
Participant's inability by reason of illness or other physical or
mental disability to perform the duties required by his employment for
any consecutive 180 day period. The existence of a Disability shall be
determined by the Committee on the basis of competent medical
evidence.
(k) "Effective Date" means December 9, 1994.
(l) "Eligible Employee" means a key management Employee who is
selected by the Committee as an individual who has the opportunity to
impact significantly the annual operating success of the Employer.
(m) "Employee" means any person employed by the Employer on a full-
time salaried basis, including officers of the Company or a Related
Employer.
(n) "Employer" means the Company and any Related Employer.
(o) "Investment Options" means, with respect to any Plan Year, the
investment options available under the Profit Sharing Plan as of the
first day of the Plan Year.
(p) "Participant" means an Eligible Employee who becomes a Participant
in the Plan pursuant to Section 3.2.
(q) "Plan" means this instrument, as amended from time to time, and
the non-qualified deferred compensation plan so established.
(r) "Plan Year" means a calendar year commencing on or after January
1, 1995. "Plan Year" also means the period commencing on the Effective
Date and ending December 31, 1994.
(s) "Profit Sharing Plan" means the Profit Sharing Plan of Bindley
Western Industries, Inc. and Subsidiaries.
(t) "Rabbi Trust" means a grantor trust established by the Company
pursuant to Subsection 4.4(b) for the deposit of funds to be used for
the exclusive purpose of paying benefits accrued under the Plan,
subject to the claims of the Company's general creditors in the event
of the Company's insolvency.
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(u) "Related Employer" means any Employer that, together with the
Company, is under common control or a member of an affiliated service
group, as determined under Code Subsections 414(b), (c), (m), and (o).
(v) "Retirement" means, with respect to a Participant, the
Participant's Termination of Employment, other than a Termination for
Cause, on or after the date the Participant attains age 65.
(w) "Schedule A" means the Schedule A attached to this Plan for the
purpose of determining the benefits payable under Section 5.7 in
connection with a Participant's death.
(x) "Termination of Employment" means, with respect to a Participant,
the cessation of the relationship of Employer and Employee between the
Participant and the Employer for any reason other than the
Participant's death or Disability. A Participant shall not be treated
as having incurred a Termination of Employment until the employment
relationship between the Participant and all Related Employers has
terminated.
(y) "Trustee" means the trustee of the Rabbi Trust.
(z) "Unforeseeable Emergency" means, with respect to a Participant or
Beneficiary, a severe financial hardship to the Participant or
Beneficiary resulting from a sudden and unexpected illness or accident
of the Participant, Beneficiary, or his or her dependents; loss of the
Participant's or Beneficiary's property due to casualty; or other
similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the Participant's or Beneficiary's control.
3. Rules of Construction. The following rules of construction shall
govern in interpreting the Plan:
(a) The provisions of this Plan shall be construed and governed in all
respects under and by the internal laws of the State of Indiana, to
the extent not preempted by federal law.
(b) Words used in the masculine gender shall be construed to include
the feminine gender, where appropriate, and vice versa.
(c) Words used in the singular shall be construed to include the
plural, where appropriate, and vice versa.
(d) The headings and subheadings in the Plan are inserted for
convenience of reference only and are not to be considered in the
construction of any provision of the Plan.
(e) If any provision of the Plan shall be held to be illegal or
invalid for any reason, that provision shall be deemed to be null
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and void, but the invalidation of that provision shall not otherwise
impair or affect the Plan.
III
ELIGIBILITY AND PARTICIPATION
-----------------------------
2. Eligibility. Participation in the Plan is limited to Eligible
Employees.
3. Election to Participate.
(a) Election Procedure. Within a reasonable time before the beginning
of each Plan Year, the Committee shall provide each Eligible Employee
with a Deferral Agreement. An Eligible Employee may become a
Participant in the Plan by filing a completed Deferral Agreement with
the Committee prior to the first day of the Plan Year. On the Deferral
Agreement, the Eligible Employee shall indicate the amount or
percentage of his Compensation to be deferred for the Plan Year,
subject to the provisions of Subsections (b) and (c). Subject to
Subsection (d), an election made under this Section shall be effective
as of the first day of the Plan Year, and subject to Subsection (e),
the election for any Plan Year shall be irrevocable.
(b) Initial Deferral. For the Plan Year beginning on the Effective
Date, each Eligible Employee may elect to defer up to 100% of the
Bonus, if any, payable with respect to the Participant for the Plan
Year and earned on or after the Effective Date.
(c) Subsequent Deferrals. For Plan Years beginning after the Effective
Date, each Eligible Employee may elect in writing to defer up to 100%
of his Compensation. The Participant may elect to defer a different
portion of his Bonus for the Plan Year than he elects to defer with
respect to the remainder of his Compensation for the Plan Year.
(d) New Participant Deferrals. The Committee, in its sole discretion,
may permit a new Eligible Employee to enroll in the Plan during a Plan
Year and make an irrevocable prospective election to defer a portion
of his Compensation for the remainder of the Plan Year.
(e) Suspension or Cessation of Deferrals. With the written consent of
the Committee, a Participant may suspend or cease deferrals, in whole
or in part, during the course of a Plan Year, due to an Unforeseeable
Emergency. Suspension or cessation of deferrals shall not in any way
affect a Participant's rights or benefits with respect to amounts
already deferred under the Plan. In the event a Participant suspends
or ceases deferrals pursuant to this Subsection, the Participant shall
not be permitted to resume deferrals before the first day of the
following Plan Year or such later date as specified by the Committee.
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4. Cessation of Participation. Any Participant who ceases to be an Eligible
Employee, but continues to be an Employee, shall cease to be eligible to make
deferrals under this Article but shall continue to have a Deferral Account and
to be credited with earnings and losses on his Deferral Account under Section
4.2 (until that Deferral Account is fully distributed pursuant to Article V),
and the Participant shall be entitled to receive benefits under Article V.
IV
PARTICIPANTS' DEFERRAL ACCOUNTS
-------------------------------
2. Establishment of Accounts. The Committee shall create and maintain adequate
records to disclose the interest in the Plan of each Participant and
Beneficiary. Records shall be in the form of individual bookkeeping accounts,
which should be credited with deferrals pursuant to Section 3.2 and earnings and
losses pursuant to Section 4.2. Each Participant shall have a separate Deferral
Account. The Participant's interest in his Deferral Account shall be fully
vested at all times.
3. Earnings and Losses.
(a) Deemed Investment of Deferral Accounts. During each Plan Year, a
Participant's Deferral Account shall be credited with investment earnings
and losses as though it is invested, in accordance with the Participant's
election pursuant to Subsection (b), in one or more of the Investment
Options. The deemed investment of a Participant's Deferral Account among
the Investment Options in accordance with the Participant's election is
solely the measure of the investment performance of the Deferral Account.
It does not give the Participant any ownership interest in any Investment
Option, nor does it bind the Company, the Committee, or the Trustee as to
the investment of the Rabbi Trust or any other amounts represented by the
Deferral Accounts.
(b) Election Procedure. Each Participant, upon first becoming an
Eligible Employee, may make an initial election, on a form provided by the
Committee, to allocate his Deferral Account among the Investment Options.
If the Participant fails to make an initial election, he shall be deemed to
have elected to allocate his Deferral Account among the Investment Options
in the same manner as he had allocated the investment of his accounts in
the Profit Sharing Plan as of the date he first became an Eligible
Employee. A Participant may change his Investment Option designations (for
his future deferrals, his existing Deferral Account, or both) once each
Plan Year, as of the first day of the Plan Year, by filing an appropriate
election form with the Committee by the prior December 30. Until a
Participant timely files a new investment election form, his prior
Investment Option designation shall control.
4. Credits to Deferral Accounts. A Participant's deferrals pursuant to Section
3.2 shall be credited to his Deferral Account as of the last day of
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the month in which the deferred amount would have otherwise been paid to the
Participant as salary or Bonus. Earnings and losses on the deemed investment of
the Participant's Deferral Account under Section 4.2 shall be credited monthly,
on the last day of each month, based on the value of the Participant's Deferral
Account as of the last day of the immediately preceding month.
5. Accounts Unfunded.
(a) Deferral Accounts shall be accounting accruals, in the names of
Participants, on the Employer's books. Deferral Accounts shall be unfunded,
so that the Employer's obligation to pay benefits under the Plan is merely
a contractual duty to make payments when due under the Plan. The Employer's
promise to pay benefits under the Plan shall not be secured in any way, and
except as provided in Subsection (b) the Company shall not set aside or
segregate assets for the purpose of paying amounts credited to
Participants' Deferral Accounts.
(b) Notwithstanding the positions of Subsection (a), the Company shall
establish a Rabbi Trust. The Employer, from time to time, shall make such
contributions to the Rabbi Trust as the Committee, in its sole discretion,
determines are appropriate to enable the Employer to meet its contractual
obligations to Participants to pay benefits under the Plan when due. The
Rabbi Trust established under this Section shall be created pursuant to a
written trust document that conforms to the model form of rabbi trust
agreement approved by the Internal Revenue Service in Revenue Procedure 92-
64 (as amended from time to time).
6. Valuation of Deferral Accounts. The value of a Participant's Deferral
Account as of any date shall equal the dollar amount of any deferrals credited
to the Deferral Account pursuant to Section 3.2, increased or decreased by the
earnings and losses deemed to be credited to the Deferral Account in accordance
with Section 4.2, and decreased by the amount of any payments made from the
Deferral Account to the Participant or his Beneficiary pursuant to Article V. In
the event that a Participant dies before his Deferral Account has been
distributed, the value of the Participant's Deferral Account shall be adjusted
in accordance with Section 5.8.
7. Annual Report. Within 120 days following the end of each Plan Year, the
Committee shall provide to each Participant a written statement of the amount
standing to his credit in his Deferral Account as of the end of that Plan Year.
V
DISTRIBUTION OF BENEFITS
------------------------
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2. General Distribution Rules.
(a) General Provisions. Except as otherwise provided in Section 5.2
through 5.6, a Participant's Deferral Account shall be distributed to the
Participant (or to his Beneficiary in the event of his death) as provided
in this Section.
(b) Participant's Election. As part of his Deferral Agreement for each
Plan Year, a Participant may select, from among the options described in
this Section, the form and time for the payment of his deferrals for the
Plan Year (and any investment earnings attributable to those deferrals). A
Participant's election for each Plan Year shall be irrevocable, but the
Participant may make a new election for each Plan Year's deferrals.
(1) Form of Distribution. A Participant may elect to have his
deferrals (and attributable earnings) for a Plan Year distributed in
one of the following forms:
(A) A lump sum payment; or
(B) Substantially equal annual or quarterly installments over a
specified number of years not exceeding 15.
(2) Time of Distribution. Distribution of a Participant's deferral
shall commence as soon as administratively feasible after the earlier
of the Participant's death or his Retirement, except that the
Participant may elect to have a specified dollar amount or percentage
of his deferrals (and attributable earnings) for a Plan Year
distributed in a lump sum on a specified future date not earlier than
five years from the date of the Participant's Deferral Election.
(c) If a Participant fails to make an election pursuant to this Section,
then, except as otherwise provided in Sections 5.2 through 5.7, the
Participant's deferrals (and attributable earnings) shall be distributed in
five substantially equal annual installments commencing as soon as
administratively feasible after the earlier of the Participant's death or
his Retirement.
3. Distribution Upon Disability. Notwithstanding Section 5.1, in the
event a Participant incurs a Disability, the Participant's Deferral Account
shall be distributed to the Participant (or, in the event of his death, to his
Beneficiary) in a lump sum payment as soon as administratively feasible after
the Committee determines that the Participant has incurred a Disability.
4. Distribution Upon Termination of Employment Before Retirement.
Notwithstanding Section 5.1, if the Participant incurs a Termination of
Employment other than a Retirement, the Participant's Deferral Account shall be
distributed to the Participant (or, in the event of his death, to his
Beneficiary) in a lump sum payment as soon as administratively feasible after
the Participant's Termination of Employment.
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5. Distribution Upon a Change in Control. (a) Notwithstanding any other
Section, if a Change in Control occurs, a Participant's Deferral Account shall
be distributed as soon as administratively feasible in a single lump sum payment
to the Participant (or, in the event of his death, to his Beneficiary).
(a) As used in this Plan, the term "Change in Control" means any of the
following events:
(1) The acquisition by any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended, the "Exchange Act") ("any person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act as in effect from time to time) of 25% or more of either (A) the then
outstanding shares of common stock of the Company or (B) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors; provided, however,
that the following acquisitions shall not constitute an acquisition of
control: (A) any acquisition directly from the Company (excluding an
acquisition by virtue of the exercise of a conversion privilege); (B) any
acquisition by the Company; (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Related Employer; (D) any acquisition by any corporation pursuant to a
reorganization, merger, or consolidation, if, following that
reorganization, merger, or consolidation, the conditions described in
clauses (A), (B), and (C) of paragraph (3) of this subsection (b) are
satisfied; (E) any acquisition by William E. Bindley; or (F) upon the death
of William E. Bindley, any acquisition triggered by this death by operation
of law, by any testamentary bequest, or by the terms of any trust or other
contractual arrangement established by him.
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of the Directors; provided,
however, that any individual becoming a director subsequent to the
Effective Date whose election or nomination for election by the Company's
shareholders, with approval by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board.
(3) Approval by the shareholders of the Company of a reorganization,
merger, or consolidation, in each case, unless following that
reorganization, merger, or consolidation, (A) more than 60% of,
respectively, the then outstanding shares of common stock of the
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corporation resulting from that reorganization, merger, or consolidation
and the combined voting power of the then outstanding voting securities of
that corporation entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were then beneficiary owners,
respectively, of the outstanding Company common stock and outstanding
Company voting securities immediately prior to that reorganization, merger,
or consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger, consolidation of the
outstanding Company stock and outstanding Company voting securities, as the
case may be; (B) no Person (excluding the Company, any employee benefit
plan or related trust of the Company, or the corporation resulting from the
reorganization, merger, or consolidation, in any Person beneficially
owning, immediately prior to such reorganization, merger, or consolidation,
directly or indirectly, twenty-five percent (25%) or more of the
outstanding Company's common stock or Company voting securities, as the
case may be) beneficialy owned, directly or indirectly, twenty-five percent
(25%) or more of, respectively, the then outstanding shares of common stock
of the corporation resulting from that reorganization, merger, or
consolidation, or the combined voting power of the then outstanding voting
securities of that corporation entitled to vote generally in the election
of directors; and (C) at least a majority of the members of the board of
directors of the corporation resulting from the reorganization, merger, or
consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement providing for the reorganization,
merger, or consolidation.
(4) Approval by the shareholders of the Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Corporation,
other than to a corporation with respect to which following such sale or
other disposition (i) more than 60% of, respectively, then outstanding
shares of common stock of the corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were the beneficial owners, respectively of the outstanding Company
common stock and outstanding Company voting securities immediately prior to
the sale or other disposition in substantially the same proportion as their
ownership, immediately prior to the sale or other disposition, of the
outstanding Company common stock and outstanding Company voting securities,
as the case may be; (ii) no Person (excluding the Company and any employee
benefit plan or related trust of the Company or the corporation and any
Person beneficially owning, immediately prior to the sale or other
disposition, directly or indirectly, 25% or more of the outstanding Company
common stock or outstanding Company voting securities, as the case may be)
beneficially owns, directly or indirectly, 25% or more of, respectively,
the then outstanding shares of common stock of the corporation and the
combined voting power of the then outstanding voting securities of the
corporation entitled to vote generally in the election
84
<PAGE>
of directors; and (iii) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or action of the Board
providing for such sale or other disposition of the assets of the Company.
6. Distribution of Small Amounts. Notwithstanding Section 5.1, if the
remaining value of a Participant's Deferral Account does not exceed $10,000.00,
the balance of his Deferral Account shall be distributed in a lump sum payment
to the Participant (or, in the event of his death, to his Beneficiary).
7. Distribution Upon Financial Emergency. A Participant or
Beneficiary, upon written petition to the Committee, may withdraw some or all of
the balance of the Participant's Deferral Account if the Committee, in its sole
discretion, determines that the requested withdrawal is on account of an
Unforeseeable Emergency and that the amount to be withdrawn does not exceed the
amount necessary to satisfy the Unforeseeable Emergency. Withdrawals under this
Section shall not be permitted to the extent that the Unforeseeable Emergency
may reasonably be relieved through (a) reimbursement or compensation by
insurance or otherwise, (b) liquidation of the Participant's or Beneficiary's
assets (to the extent liquidation would not itself cause a financial hardship),
or (c) suspension or cessation of elective deferrals under this Plan or the
Profit Sharing Plan.
8. Death Benefits. In the event that a Participant dies before his
Deferral Account is completely distributed, his Beneficiary shall be entitled to
a death benefit. The amount of the death benefit payable to the Beneficiary
shall be determined under Schedule A. If the amount of the death benefit
determined under Schedule A is greater than the amount credited to the
Participant's Deferral Account immediately before his death, then the value of
the Participant's Deferral Account shall be adjusted to equal the death benefit
determined under Schedule A. The form and timing of the payment of death
benefit shall be determined pursuant to Section 5.1, subject to Sections 5.2
through 5.6
9. Designation of Beneficiary. A Participant's Beneficiary shall be
the person or persons, including a trustee, designated by the Participant in
writing pursuant to the practices of, or rules prescribed by, the Committee, as
the recipient of any benefits payable under the Plan following the Participant's
death. To be effective, a Beneficiary designation must be filed with the
Committee during the Participant's life on a form prescribed by the Committee;
provided, however, that finalized divorce or marriage (other than a common law
marriage) shall automatically revoke a previously filed Beneficiary designation,
unless in the case of divorce the former spouse was not designated as the
Beneficiary or in the case of marriage the Participant's new spouse is already
the designated Beneficiary. If no person has been designated as the
Participant's Beneficiary, if a Participant's Beneficiary designation has been
revoked by marriage or divorce, or if no person designated as Beneficiary
survives the Participant, the Participant's estate shall be his Beneficiary.
85
<PAGE>
VI
ADMINISTRATION
--------------
2. Administrator. The Committee shall be the Administrator of the
Plan. All decisions of the Committee shall be by a vote of a majority of its
members and shall be final and binding.
3. Notices. Any notice or filing required or permitted to be given to
the Committee under the Plan shall be sufficient if it is in writing or hand
delivered, or sent by registered or certified mail, to any member of the
Committee. The notice or filing shall be deemed made as of the date of
delivery, or if delivery is made by mail, as of the date shown on the postmark
on the receipt for registration or certification.
4. Powers and Duties of the Committee. Subject to the specific
limitations stated in this Plan, the Committee shall have the following powers,
duties, and responsibilities:
(a) To carry out the general administration of the Plan;
(b) To cause to be prepared all forms necessary or appropriate for the
administration of the Plan;
(c) To keep appropriate books and records;
(d) To determine amounts to be distributed to Participants and
Beneficiaries under the provisions of the Plan;
(e) To determine, consistent with the provisions of this instrument
all questions of eligibility, rights, and status of Participants and
Beneficiaries under the Plan;
(f) To issue, amend, and rescind rules relating to the administration
of the Plan, to the extent those rules are consistent with the
provisions of this instrument;
(g) To exercise all other powers and duties specifically conferred
upon the Committee elsewhere in this instrument; and
(h) To interpret, with discretionary authority, the provisions of this
Plan and to resolve, with discretionary authority, all disputed
questions of Plan interpretation and benefit eligibility.
VII
AMENDMENT AND TERMINATION
-------------------------
86
<PAGE>
2. Amendment. The Company reserves the right to amend the Plan at
any time by action of the Board of Directors, with written notice given to each
Participant in the Plan. The Company, however, may not make any amendment that
reduces a Participant's benefits accrued as of the date of the amendment unless
the Participant consents in writing to the amendment. Notwithstanding the
foregoing, the Company may not amend any of the provisions of Section 5.4 within
three years of a Change in Control.
3. Termination. The Company reserves the right to terminate the Plan,
by action of the Board of Directors, at any time it deems appropriate. Upon
termination of the Plan, no further contribution shall be made to the Plan.
Subject to Section 6.5, distribution following termination of the Plan shall be
made at the time and under the terms and conditions as the Corporation, in its
sole discretion, shall determine, which shall commence no later than the
earliest of a Participant's Death, Disability, Retirement or other Termination
of Employment.
VIII
MISCELLANEOUS
-------------
2. Relationship. Notwithstanding any other provision of this Plan,
this Plan and action taken pursuant to it shall not be deemed or construed to
establish a trust or fiduciary relationship of any kind between or among the
Company, Participants, Beneficiaries or any other persons. The Plan is intended
to be unfunded for purposes of the Code and the Employee Retirement Income
Security Act of 1974, as amended. The rights of Participants and Beneficiaries
to receive payment of deferred compensation under the Plan is strictly a
contractual right of payment, and this Plan does not grant, nor shall it be
deemed to grant Participants, Beneficiaries, or any other person any interest or
right to any of the funds, property, or assets of the Employer other than as an
unsecured general creditor of the Employer.
3. Other Benefits and Plans. Nothing in this Plan shall be deemed to
prevent Participants from receiving, in addition to the benefits provided for
under this Plan, any funds that may be distributable to them at any time under
any other present or future retirement or incentive plan of the Employer.
4. Anticipation of Benefits. Neither Participants nor Beneficiaries
shall have the power to transfer, assign, anticipate, pledge, alienate, or
otherwise encumber in advance any of the payments that may become due under this
Plan, and any attempt to do so shall be void. Any payments that may become due
under this Plan shall not be subject to attachment, garnishment, execution, or
be transferrable by operation of law in the event of bankruptcy, insolvency, or
otherwise.
5. No Guarantee of Continued Employment. Nothing contained in this
Plan or any action taken under the Plan shall be construed as a contract of
employment or as giving any Participant any right to be retained in employment
with the Employer. The Employer specifically reserves the right to terminate
any Participant's employment at any time with or without cause, and with or
87
<PAGE>
without notice or assigning a reason, subject to the terms of any written
employment agreement between the Participant and the Employer.
6. Waiver of Breach. The Company's or the Committee's waiver of any
Plan provision shall not operate or be construed as a waiver of any subsequent
breach by the Participant.
7. Protective Provisions. Each Participant shall cooperate with the
Company and the Committee by furnishing any and all information requested by the
Company or the Committee in order to facilitate the payment of benefits under
the Plan, by taking any physical examinations the Committee may deem necessary
and by taking any other relevant action as may be requested by the Company or
the Committee. If any Participant refuses so to cooperate, the Company shall
have no further obligation to the Participant or his Beneficiary under this
Plan, other than to distribute to the Participant the cumulative deferrals he
has already made pursuant to the Plan. If a Participant makes any material
misstatement of information or nondisclosure of medical history, then no
distributions with respect to any affected deferrals shall be made under this
Plan to the Participant or his Beneficiary, other than payment to that
Participant or his Beneficiary of any cumulative deferrals he has already made
pursuant to the Plan; provided, however, that the Committee may determine that
benefits may be payable in an amount reduced to compensate the Company for any
loss, cost, damage, or expense suffered or incurred by the Company as a result
in any way of the Participant's action, misstatement, or nondisclosure.
8. Benefit. This Plan shall be binding upon and inure to the benefit of
the Employer and its successors and assigns.
9. Responsibility for Legal Affect. Neither the Committee nor the Company
makes any recommendations or warranties, express or implied, assumes any
responsibility concerning the legal context, or other implications or affects of
this Plan.
10. Tax Withholding. The Employer shall withhold from any deferrals or
from any payment made under the Plan such amount or amounts as may be required
by applicable federal, State, or local laws.
Bindley Western Industries, Inc. has caused this Plan to be executed
by their duly authorized officers, as of the 9th day of December, 1994.
BINDLEY WESTERN INDUSTRIES, INC.
By:
-------------------------------
(Signature)
-------------------------------
(Office)
ATTEST:
By:
---------------------------
(Signature)
---------------------------
(Office)
88
<PAGE>
TRUST UNDER
BINDLEY WESTERN INDUSTRIES, INC.
401(k) EXCESS PLAN
------------------------
This Trust Agreement is made this day of January, 1995, by and
between Bindley Western Industries, Inc. (the "Company"), and Key Trust Company
of Indiana, N.A. (the "Trustee").
Recitals
--------
A. WHEREAS, the Company has adopted the Bindley Western Industries,
Inc. 401(k) Excess Plan (the "Plan");
B. WHEREAS, the Company has incurred or expects to incur liability
under the terms of the Plan with respect to the individuals participating in the
Plan;
C. WHEREAS, the Company wishes to establish a trust (the "Trust")
and contribute to the Trust assets that shall be held therein, subject to the
claims of the Company's creditors in the event of the Company's Insolvency, as
herein defined, until paid to Plan participants and their beneficiaries in such
manner and at such times as specified in the Plan;
D. WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA");
E. WHEREAS, it is the intention of the Company to make contributions
to the Trust to provide itself with a source of funds to assist it in the
meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held, and disposed of as follows:
89
<PAGE>
Agreement
---------
1 . Establishment Of Trust.
-----------------------
(a) The Company hereby deposits with the Trustee in trust
$ , which shall become the principal of the Trust to be held,
administered, and disposed of by the Trustee as provided in this Trust
Agreement.
(b) The Trust shall become irrevocable 30 days following the
issuance of a favorable private letter ruling regarding the Trust from the
Internal Revenue Service.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I, subchapter
J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be
held separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Plan participants and general creditors
as herein set forth. Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against the Company. Any assets held by the Trust shall be subject to the
claims of the Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) Within 90 days following the end of each Plan Year ending after
the Trust has become irrevocable pursuant to Section 1(b) hereof, the Company
shall be required irrevocably to deposit additional cash or property
90
<PAGE>
to the Trust in an amount sufficient to pay each Plan participant or beneficiary
the benefits payable pursuant to the terms of the Plan as of the close of the
Plan Year.
Section 2. Payments To Plan Participants And Their Beneficiaries.
------------------------------------------------------
(a) The Company shall deliver to the Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect of each Plan
participant (and his or her beneficiaries), that provides a formula or other
instructions acceptable to the Trustee for determining the amount so payable,
the form in which such amount is to be paid (as provided for or available under
the Plan), and the time of commencement for payment of such amounts. Except as
otherwise provided herein, the Trustee shall make payment to the Plan
participants and their beneficiaries in accordance with such Payment Schedule.
The Trustee shall make provision for the reporting and withholding of any
federal, state, or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld, and paid by the Company.
(b) The entitlement of the Plan participant or his or her
beneficiary to benefits under the Plan shall be determined by the party or such
party as it shall designate under the Plan, and any claim for such benefits
shall be considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. The Company shall notify the Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable to participants and
91
<PAGE>
their beneficiaries. In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in accordance
with the terms of the Plan, the Company shall make the balance of each such
payment as it falls due. The Trustee shall notify the Company where principal
and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments To Trust Beneficiaries
----------------------------------------------------------------
When Company Is Insolvent.
--------------------------
(a) The Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent. The Company
shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the
Company is unable to pay its debts as they become due or (ii) the Company is
subject to a pending proceeding as a debtor under the United States Bankruptcy
Code.
(b) At all times during the continuance of this Trust, as provided
in Section 1(d) hereof, the principal and income of the Trust shall be subject
to claims of general creditors of the Company under federal and state law as set
forth below.
(i) The Board of Directors and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of the Company
alleges in writing to the Trustee that the Company has become Insolvent,
the Trustee shall determine whether the Company is Insolvent and, pending
such determination, the Trustee shall discontinue payment of benefits to
Plan participants or their beneficiaries.
(ii) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming
92
<PAGE>
to be a creditor alleging that the Company is Insolvent, the Trustee shall
have no duty to inquire whether the Company is Insolvent. The Trustee may
in all events rely on such evidence concerning the Company's solvency as
may be furnished to the Trustee and that provides the Trustee with a
reasonable basis for making the determination concerning the Company's
solvency.
(iii) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or
their beneficiaries and shall hold the assets of the Trust for the benefit
of the Company's general creditors. Nothing in this Trust Agreement shall
in any way diminish any rights of Plan participants or their beneficiaries
to pursue their rights as general creditors of the Company with respect to
benefits due under the Plan or otherwise.
(iv) The Trustee shall resume the payment of benefits to Plan
participants or their beneficiaries in accordance with Section 2 of this
Trust Agreement only after the Trustee has determined that the Company is
not Insolvent (or is no longer Insolvent).
(a) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
93
<PAGE>
Section 2. Payments To Company. Except as provided in Section 3 hereof, after
the Trust has become irrevocable, the Company shall have no right or power to
direct the Trustee to return to the Company or to divert to others any of the
Trust assets before all payments of benefits have been made to Plan participants
and their beneficiaries pursuant to the terms of the Plan.
Section 3. Investment Authority.
(a) In no event may the Trustee invest in securities (including
stocks or rights to acquire stock) or obligations issued by the Company, other
than a de minimis amount held in common investment vehicles in which the Trustee
invests. All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Plan participants.
(b) Subject to the provisions of this Agreement and the investment
guidelines submitted to the Trustee from time to time by the Committee (as
defined in the Plan), the Trustee shall invest and reinvest in such stocks,
bonds, or other real or personal property, tangible or intangible, including
without limiting the generality of the foregoing, in trust funds and insurance
or annuity contracts, as, and in such proportions as, the Trustee, in its sole
discretion shall determine. The Trustee may, from time to time, transfer to a
common, collective, or pooled trust fund maintained by the Trustee, or any
affiliate of the Trustee, all or such part of the Trust assets as the Trustee
may deem advisable, and such part or all of the Trust assets transferred shall
be subject to all the terms and provisions of the common, collective, or pooled
trust fund, which contemplates the commingling for investment purposes of the
transferred portion of the Trust
94
<PAGE>
assets with trust assets of other participating trusts. The Trustee may, from
time to time, withdraw from such common, collective, or pooled trust fund all or
such part of the Trust assets as the Trustee may deem advisable.
Section 4. Disposition Of Income. During the term of this Trust, all income
received by the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 5. Accounting by the Trustee. The Trustee shall keep accurate and
detailed records of all investments, receipts, disbursements, and other
transactions required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee. Within 60 days
following the close of each calendar year and within 60 days after the removal
or resignation of the Trustee, the Trustee shall deliver to the Company a
written account of its administration of the Trust during that year or during
the period from the close of the last preceding year to the date of the
trustee's removal or resignation, setting forth all investments, receipts,
disbursements, and other transactions effected by it, including a description of
all securities and investments purchased and sold with the cost or net proceeds
of such purchases or sales (accrued interest paid or receivable being separately
noted), and showing all cash, securities, and other property held in the Trust
at the end of the year or as of the date of the Trustee's removal or
resignation, as the case may be.
Section 6. Responsibility Of Trustee.
(a) The Trustee shall act with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, that the Trustee
95
<PAGE>
shall incur no liability to any person for any action taken pursuant to a
direction, request, or approval given by the Company or the Committee which is
contemplated by, and in conformity with, the terms of the Plan or this Trust
Agreement and is given in writing by the Company or the Committee.
(b) If the Trustee undertakes or defends any litigation arising in
connection with the Trust, the Company agrees to indemnify the Trustee against
the Trustee's costs, expenses, and liabilities, including, without limitation,
reasonable attorneys' fees and expenses, relating to the litigation and to be
primarily liable for such payments.
(c) The Trustee may consult with legal counsel, who may also be
counsel for the Company generally, with respect to any of its duties or
obligations under this Trust Agreement.
(d) With the prior written approval of the Company, the Trustee may
hire suitable agents, accountants, actuaries, investment advisors, financial
consultants, or other professionals to assist it in performing any of its duties
or obligations under this Trust Agreement.
(e) The Trustee shall have, without exclusion, all powers conferred
on trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name the beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding the provisions of Section 8(e) above, the
Trustee may loan to the Company the proceeds of any borrowing against an
insurance held as an asset of the Trust.
96
<PAGE>
(g) Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any power
that could give this Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of section 301.7701-2 of the Procedure
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
Section 7. Compensation And Expenses Of Trustee.
------------------------------------
The Trustee shall be paid such reasonable compensation as
shall, from time to time, be agreed upon in writing between the Company and the
Trustee. In addition, subject to Section 8(d) hereof, the Trustee shall be
reimbursed for any reasonable fees and expenses, including counsel fees,
incurred by and in the administration of the Trust. Such compensation, fees, and
expenses shall be paid from the Trust assets unless paid by the Company.
Section 8. Resignation And Removal Of Trustee.
----------------------------------
(a) The Trustee may resign at any time by written notice to the
Company, which shall be effective 60 days after receipt of such notice unless
the Company and the Trustee agree otherwise.
(b) The Trustee may be removed by the Company on 60 days notice or
upon shorter notice accepted by the Trustee.
(c) Upon resignation or removal of the Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 60 days after receipt of notice
of resignation, removal, or transfer, unless the Company extends the time limit.
(d) If the Trustee resigns or is removed, a successor shall be
appointed in accordance with Section 11 hereof, by the effective date of
97
<PAGE>
resignation or removal under paragraph (a) or (b) of this Section. If no such
appointment has been made, the Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for instructions. All expenses
of the Trustee in connection with the proceeding shall be allowed as
administrative expenses of the Trust.
Section 9. Appointment Of Successor.
------------------------
(a) If the Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, the Company may appoint any third party, such as a bank
trust department or other party that may be granted corporate trustee powers
under state law, as a successor to replace the Trustee upon resignation or
removal. The appointment shall be effective when accepted in writing by the new
Trustee, which shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee shall
execute any instrument necessary or reasonably requested by the Company or the
successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts of
any prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for,
and the Company shall indemnify and defend the successor Trustee from, any claim
or liability resulting from any action or inaction of any prior Trustee or from
any other past event, or any condition existing at the time it becomes the
successor Trustee.
Section 10. Amendment Or Termination.
------------------------
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the
98
<PAGE>
Trust revocable after it has become irrevocable in accordance with Section 1(b)
hereof.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan, unless sooner revoked in accordance with Section 1(b)
hereof. Upon termination of the Trust any assets remaining in the Trust shall be
returned to the Company.
(c) Upon written approval of participants or beneficiaries entitled
to payment of benefits pursuant to the terms of the Plan, the Company may
terminate this Trust prior to the time all benefit payments under the Plan have
been made. All assets in the Trust at termination shall be returned to the
Company.
Section 11. Miscellaneous.
-------------
(a) Any provision of this Trust Agreement prohibited by law shall
be ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution, or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Indiana.
(d) Each word and phrase defined in the Plan shall, whenever used
in this Trust Agreement, have the meaning subscribed to it in the Plan unless a
different meaning is plainly required by the context in which the
99
<PAGE>
word of phrase is used or unless otherwise expressly provided in this Trust
Agreement.
Section 12. EFFECTIVE DATE. The effective date of this Trust Agreement shall
--------------
be January 1, 1995.
Bindley Western Industries, Inc., and Key Trust Company of Indiana,
N.A., by their respective duly authorized officers, have caused this Trust Under
Bindley Western Industries, Inc. 401(k) Excess Plan to be executed on the date
written above.
BINDLEY WESTERN INDUSTRIES, INC.
ATTEST: By _____________________________
(Signature)
_______________________________ _____________________________
(Signature) (Printed)
_______________________________ _____________________________
(Printed) (Office)
_______________________________
(Office)
KEY TRUST COMPANY OF INDIANA, N.A.
ATTEST: By _____________________________
(Signature)
_______________________________ _____________________________
(Signature) (Printed)
_______________________________ _____________________________
(Printed) (Office)
_______________________________
(Office)
100
<PAGE>
EXHIBIT 22
BINDLEY WESTERN INDUSTRIES, INC.
LIST OF SUBSIDIARIES
1. BW Food Distributors, Inc. -- Methuen, MA
2. BW Transportation Services, Inc. -- Indianapolis, IN
3. First Choice, Inc. of Maine (formerly Glenlawn, Inc.) -- Indianapolis, IN
4. Special Services Company -- Orange, CT
5. Priority Healthcare Corporation -- Altamonte Springs, FL
NOTE: All are Indiana corporations. Priority Healthcare Corporation operates
three wholly-owned subsidiaries, each of which is a Florida corporation: IV-1,
Inc.; IV-One Services, Inc.; and National Pharmacy Providers, Inc.
101
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No.'s 33-15471, 33-37781 and 33-64828) of our report
dated February 27, 1995 appearing on page F-1 of Bindley Western Industries,
Inc. Annual Report on Form 10-K for the year ended December 31, 1994.
Price Waterhouse LLP
Indianapolis, Indiana
March 24, 1995
102
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 39,840
<SECURITIES> 1,024
<RECEIVABLES> 318,344
<ALLOWANCES> 2,455
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0
0
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</TABLE>
