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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER: 0-11355
BINDLEY WESTERN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
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 offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (317) 298-9900
Securities registered pursuant to Section 12(b) of the Act:
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Common Stock ($.01 par value) New York Stock Exchange
(Title of class) (Name of exchange on which registered)
</TABLE>
Securities registered pursuant to section 12(g) of the Act:
NONE
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 12 months (or for 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
--- ---
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. []
$433,102,790
Aggregate market value of the voting stock held by nonaffiliates of the
registrant based on the last sale price for such stock on March 20, 1998
(assuming solely for the purposes of this calculation that all Directors and
Officers of the Registrant are "affiliates")
15,994,616
Number of shares of Common Stock outstanding as of March 20, 1998
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document have been incorporated by reference into this
annual report on Form 10-K:
IDENTITY OF DOCUMENT PARTS OF FORM 10-K INTO WHICH
DOCUMENT IS INCORPORATED
PART III
Proxy Statement to be filed for the
1998 Annual Meeting of Common
Shareholders of Registrant
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BINDLEY WESTERN INDUSTRIES, INC.
Indianapolis, Indiana
Annual Report to Securities and Exchange Commission
December 31, 1997
Part I
Item 1. BUSINESS.
General
Bindley Western Industries, Inc., an Indiana corporation, together
with its subsidiaries ("BWI" or the "Company"), is the country's fifth largest
(in terms of annual sales) wholesale distributor of pharmaceuticals and related
health care products. Its product lines include ethical pharmaceuticals
(prescription drugs), dialysis supplies, health and beauty care products and
home health care merchandise. The Company's wholesale drug customer base
includes chain drug companies which operate their own warehouses, individual
drug stores, both chain and independent, hospitals, clinics, HMOs, state and
federal government agencies and other health care providers. The Company's drug
wholesaling operations service customers in approximately 37 states plus Puerto
Rico from its 15 distribution centers located in 13 states. By using the Company
as a primary source of pharmaceuticals, these customers can centralize
purchasing functions, exercise better inventory control, maintain better
security and reduce handling costs.
The Company has historically specialized in the distribution of
ethical pharmaceuticals to chain drug companies which maintain their own
warehouses. During 1997, the Company serviced four of the top 10 chain drug
companies, based on sales and number of stores, in the United States. The
Company believes that its technological innovation and superior customer service
has enabled it to better serve these customers.
Since 1987, the Company has focused its marketing efforts on
direct store delivery customers. The Company has increased sales to these
customers from $171 million in 1987 to $2,584 million in 1997. To further this
growth and strengthen the Company's position in the northeastern and
southeastern United States, the Company purchased J.E. Goold in 1992, Kendall
Drug in 1994 and Tennessee Wholesale Drug in 1997.
Priority Healthcare Corporation ("Priority") was formed by BWI on
June 23, 1994 as an Indiana corporation to focus on the distribution of products
and provision of services to the alternate site segment of the healthcare
industry. Priority conducts the business activities of alternate site healthcare
companies acquired by BWI or Priority in five transactions since February 1993.
The principal executive offices of Priority are located at 285 West Central
Parkway, Altamonte Springs, Florida 32714 and its telephone number at that
address is (407) 869-7001. On October 29, 1997, Priority consummated an initial
public offering of its Class B Common Stock. BWI owns all of the outstanding
shares of Class A Common Stock of Priority. The holders of Priority's Class A
Common Stock and Class B Common Stock are entitled to three votes per share and
one vote per share, respectively, and generally vote together as a single class
on all matters submitted to a vote of the shareholders of Priority.
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BWI owns 81.6% of the outstanding common stock of Priority and has 93.0% of the
voting power of the outstanding common stock of Priority. Priority is subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission. Additional information
about Priority is contained in Priority's Annual Report on Form 10-K for the
year ended December 31, 1997, which has been filed with, and is available from,
the Securities and Exchange Commission.
Effective as of February 28, 1993, BWI acquired substantially all of
the assets of Charise Charles, Ltd., Inc. ("Charise Charles"), a specialty
wholesale distributor of oncology and renal care biopharmaceuticals located in
Altamonte Springs, Florida. On October 6, 1993, BWI acquired substantially all
of the assets of PRN Medical, Inc. ("PRN"), a specialty wholesale distributor of
renal care supplies and dialysis equipment located in Orlando, Florida. In
August 1994, PRN was combined with Charise Charles as part of the formation of
Priority. On October 31, 1994, Priority acquired the stock of 3C Medical, Inc.
("3C"), a specialty distributor of acute dialysis products located in Santa Ana,
California. Effective January 1, 1995, Priority acquired all of the outstanding
stock of IV-1, Inc., IV-One Services, Inc. and National Pharmacy Providers, Inc.
(collectively, the "IV One Companies"), three related companies located in
Altamonte Springs, Florida that provided specialty pharmacy and other related
healthcare services. On August 6, 1997, Priority acquired substantially all of
the assets of Grove Way Pharmacy, Inc. ("Grove Way Pharmacy"), a specialty
distributor of vaccines located in Castro Valley, California.
The operations of Charise Charles, PRN, 3C and Grove Way Pharmacy now
comprise the Priority Healthcare Distribution division ("Priority
Distribution"). The IV One Companies now comprise the Priority Pharmacy Services
division ("Priority Pharmacy").
Priority is a national distributor of specialty pharmaceuticals and
related medical supplies to the alternate site healthcare market and is a
provider of patient-specific, self-injectable biopharmaceuticals and disease
treatment programs to individuals with chronic diseases. Through Priority
Distribution, Priority sells over 3,500 SKUs of specialty pharmaceuticals and
medical supplies to outpatient renal care centers and office-based physicians in
the oncology and infectious disease markets. With the acquisition of Grove Way
Pharmacy, Priority Distribution has entered the vaccine market. Priority
Distribution offers value-added services to meet the specific needs of these
markets by shipping refrigerated pharmaceuticals overnight in special packaging
to maintain appropriate temperatures, offering automated order entry services
and offering customized distribution for group accounts. From distribution
centers in Altamonte Springs, Florida, Santa Ana, California and Grove City,
Ohio, Priority Distribution services over 2,000 customers in all 50 states and
Puerto Rico, including approximately 550 office-based oncologists and 800 renal
dialysis clinics.
Through Priority Pharmacy, Priority fills individual patient
prescriptions for self-injectable biopharmaceuticals for over 1,400 patients.
These patient-specific prescriptions are filled at two licensed pharmacies in
Altamonte Springs, Florida, where Priority reconstitutes in syringes the
components of the biopharmaceuticals, according to manufacturer's instructions,
and ships these products directly to the patient overnight in specialized
packages. Priority Pharmacy also provides disease treatment programs for
hepatitis, melanoma, cancer, human growth deficiency and the complications of
HIV. Management believes that Priority is the only provider that offers this
range of services on a nationwide basis.
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The Company's sales of $7.3 billion for 1997 represented the 29th
consecutive year of record sales, equating to a compound growth rate of
approximately 20% since its inception in 1968. This growth is the result of
market share gains in existing markets, expansion into new markets and overall
growth in the health care delivery industry.
Suppliers
BWI
During each of the last five fiscal years, approximately 85%
(based on sales volume) of the Company's sales were ethical pharmaceutical
products. 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
supplier, SmithKline Beecham, accounted for 9% and the five largest suppliers,
SmithKline Beecham, Eli Lilly and Company, Astra Merck, Bristol-Myers Squibb
Company and Pfizer, accounted for approximately 39% of net sales during fiscal
1997. 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 if alternate sources of supply were
unavailable. The Company's arrangements with its suppliers typically may be
canceled by either party, without cause, on one month's notice, although many of
these arrangements are not governed by formal agreements. The Company believes
its relationships with its suppliers are generally good. See, also, Industry
Overview --Manufacturers' Pricing and Distribution Policies in Part I, Item 1.
Priority
In 1995, 1996 and 1997, Priority's single largest supplier, Amgen,
Inc. ("Amgen"), accounted for approximately 44%, 42% and 40%, respectively, of
Priority's revenues. During 1997, approximately 29% of Priority's revenues were
from sales of erythropoietin ("EPO") to the renal care market. EPO is available
only from Amgen. Priority's purchases from Amgen are currently guaranteed by
BWI, and there can be no assurance that Priority, as a stand-alone entity, will
be able to purchase products from Amgen on terms as favorable. Priority
continually evaluates its purchase requirements and likely increases in
manufacturer prices in order to obtain products at the most advantageous cost.
It has negotiated several partnership relationships with manufacturers that
offer favorable pricing, volume-based incentives and opportunities to reduce
supply chain costs for both parties.
Customers and Markets
BWI
The Company differentiates sales as either brokerage type sales
("brokerage sales") or sales from the Company's inventory ("from stock sales").
Brokerage sales are made to the chain warehouse market, whereas from stock sales
are made to both the chain warehouse and direct store delivery markets.
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Direct Store Delivery Market.
BWI provides direct store delivery service to customers from 15 of
its distribution centers. Independent drug stores, non-warehouse chain drug
stores, hospitals, clinics, HMOs, state and federal agencies and other health
care providers comprise the primary types of customers. Purchases by these
customers generally consist of less than full-case lots which are generated on a
daily basis when a customer needs a particular item. While smaller in quantity,
these sales typically generate higher margins than sales to warehouse customers.
Shipments to direct store customers are delivered on a daily basis by the
Company's vehicles or by a for-hire carrier.
While much less concentrated than chain warehouse sales, the
direct store delivery business has experienced significant growth as the Company
has successfully expanded its business scope. Since 1987, direct store sales
have increased from $171 million to $2,584 million, demonstrating a compound
annual growth rate of 31%. During 1997, direct store delivery sales were
comprised of approximately 38% to chain drug stores, 31% to independent
pharmacies and 31% to managed care institutions. Direct store delivery sales
have increased from approximately 16% of net sales in 1987 to approximately 35%
in 1997. During 1997, no single direct store delivery customer exceeded 10% of
the Company's total net sales and the loss of any one of these customers should
not have a material adverse effect on the Company's operations.
The Company's "Profit Partners" and the "1st Choice for Value"
programs are competitive, PC-based, marketing support and merchandising programs
which include a generic pharmaceutical source program, a home health care
program, a private label over the counter program and the Rx LINX and MASTER
LINX purchasing and inventory management systems. Designed to enhance the
competitiveness of retail, small chain and managed care pharmacies, these
programs reflect the Company's commitment to adding value to the services
provided to its customers. The Company believes that it would not be feasible
for these customers to independently develop and maintain these services on
their own.
The Company believes that the opportunities for growth for this
market of the business should continue through expansion into new geographical
areas and increasing market share in existing markets. The Company is focused on
the development of new services and programs through interaction and cooperation
with both customers and suppliers. These programs are designed to enhance
profitability, provide added value to the customer, and strengthen the Company's
role in the distribution channel. These programs include computerized ordering
systems, inventory management programs, generic pharmaceutical source programs,
repack programs, innovative advertising and marketing campaigns and
merchandising programs, including private label product lines.
Chain Warehouse Market.
Chain warehouse customers purchase in full-case lots for
redistribution to individual retail outlets. Approximately 65% of the Company's
1997 net sales are attributable to chain drug warehouse customers. At December
31, 1997, the Company's largest chain drug customers and the approximate period
of time they had done business with the Company were: Eckerd Corporation (25
years); Peyton (8 years); CVS (28 years); and Rite Aid
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Corporation (25 years). The following chain drug warehouse customers each
accounted for over 10% of the Company's net sales during the years shown: CVS
(22%), Rite Aid Corporation (18%) and Eckerd Corporation (16%) in 1997; Eckerd
Corporation (17%), Rite Aid Corporation (14%) and Revco D.S., Inc. (12%) in
1996; and Eckerd Corporation (19%); Rite Aid Corporation (15%) and Revco D.S.,
Inc. (10%) in 1995. Net sales to these customers aggregated 56%, 43% and 44% of
net sales for the past three years, respectively.
By using the Company as a primary source of pharmaceuticals, the
Company 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 these
customers because of the relatively high dollar value of pharmaceuticals in
relation to their physical size. In addition, the Company has developed systems
and procedures which the Company 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.
Additionally, the Company offers these customers software to permit direct
communication with the ordering computers, thus avoiding the need to change the
customers' existing software.
The Company, from time to time, has entered into written
understandings with certain of its major chain warehouse customers setting forth
various terms and conditions of sale. The Company, however, 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. See, also, Note 13 - Major Customers in the
Company's financial statements.
Priority
Priority Distribution serves over 2,000 customers located in all
50 states and Puerto Rico, including approximately 550 office-based oncologists
and 800 renal dialysis clinics. Priority Pharmacy serves approximately 1,400
patients nationwide.
During 1997, Priority's largest 20 customers accounted for
approximately 29% of Priority's revenues and one customer, Everest Healthcare
Services Corporation, accounted for 11% of Priority's revenues. Significant
declines in the level of purchases by one or more of Priority's largest
customers could have a material adverse effect on Priority's business and
results of operations. As is customary in its industry, Priority generally does
not have long-term contracts with its customers. Management believes that the
retention rate for Priority's customers is very favorable. Although Priority has
not to date experienced any failure to collect accounts receivable from its
largest customers, an adverse change in the financial condition of any of these
customers, including an adverse change as a result of a change in governmental
or private reimbursement programs, could have a material adverse effect on
Priority.
Priority sells the majority of its products and services into two
large and growing markets--oncology and chronic renal dialysis. Priority also
operates in certain segments of the infectious disease market and, with the
acquisition of Grove Way Pharmacy, has entered the vaccine market. The common
characteristics of these markets is that most products are
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administered in an alternate site setting by physicians or the patients
themselves and require specialized shipping and support services.
The alternate site supply market is fragmented with many public
and private companies focusing on different product or customer niches. Few
companies offer a wide range of pharmaceuticals and related supplies targeted to
multiple customer groups, specifically renal dialysis clinics and office-based
physicians. Historically, cancer therapy, renal dialysis and most other
treatments for chronic and life-threatening medical conditions were administered
almost exclusively in a hospital inpatient setting. During the 1990s, the
frequency with which these treatments have been administered outside the
hospital has increased dramatically in response to cost containment efforts and
the introduction of new biopharmaceutical products, such as interferon, EPO and
certain cancer drugs.
The service needs of office-based physicians and clinics differ
markedly from those of the hospital market, creating logistical challenges and
increasing administrative costs for those offices. Office-based physicians and
clinics generally order relatively small quantities of drugs at irregular
intervals and do not have inventory management systems or sufficient pharmacy
staffing. Challenges facing these caregivers include providing necessary
administrative and financial resources, managing relationships with multiple
suppliers, managing inventories, billing patients and third-party payers, and
monitoring new clinical developments. Priority believes that the shift from
hospital-based to office-based or home-based care delivery has created a
significant opportunity, particularly in the oncology, renal dialysis, vaccine
and homecare markets.
Oncology Market.
According to the American Cancer Society, in 1996 approximately
1.3 million new cases of cancer were diagnosed and approximately 550,000 deaths
were attributed to cancer in the United States. The principal treatments for
cancer are surgery and a regimen of pharmaceutical treatments. Surgery typically
involves hospitalization, but radiation and chemotherapy are increasingly being
delivered in alternate site settings such as the physician office and the home.
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Renal Dialysis Market.
End stage renal disease is characterized by the irreversible loss
of kidney function and requires kidney transplantation or routine dialysis
treatment (either periodialysis or hemodialysis), which involves removing waste
products and excess fluids from the blood. According to the Health Care
Financing Administration ("HCFA"), as of December 31, 1995 over 80% of dialysis
patients were receiving hemodialysis in outpatient treatment centers.
Hemodialysis typically utilizes various specialty pharmaceuticals and related
medical supplies as part of the treatment. Hemodialysis treatments usually last
three hours and are performed three times a week at over 3,000 outpatient
facilities in the United States. According to the HCFA, the number of patients
in the United States that received renal dialysis treatments grew from
approximately 157,000 in 1992 to approximately 200,000 at the end of 1995, a
compound annual growth rate of approximately 8%. The medication most frequently
prescribed to hemodialysis patients is EPO, which stimulates the production of
red blood cells, as well as Calcijex (calcium), INFeD (iron), hepatitis vaccine
and other nutrient compounds. Priority estimates that in 1996 the United States
market for EPO alone exceeded $1 billion. Growth in this market is driven by the
general aging of the population, favorable reimbursement trends and proposed
regulatory changes, expansion of ancillary services, and increased managed care
contracts.
Vaccine Market.
The worldwide vaccine market currently exceeds $3 billion
annually, and is expected to grow to $7 billion by 2001, according to SmithKline
Beecham, one of the leading vaccine manufacturers. Priority estimates that
pediatric vaccines represent 40% of the world market, and hepatitis vaccines
represent over 20% of the world market. Growth in the vaccine market is expected
to be driven by the growth of combination pediatric vaccines, travelers'
vaccines, vaccines for adolescent protection, vaccines for the elderly and
vaccines to treat chronic infectious disease and cancer.
Infectious Disease Market.
Priority operates in the infectious disease market, principally
through the sale of interferon for the treatment of hepatitis C. The National
Institutes of Health ("NIH") estimates that nearly four million Americans are
infected with hepatitis C and that approximately 30,000 new acute hepatitis C
infections occur each year. According to NIH, the incidence of hepatitis C
infection appears to be declining from its peak in 1989. However, because only
25% to 30% of new hepatitis C infections are currently diagnosed, as estimated
by NIH, Priority believes the treated portion of this population is likely to
increase as awareness of hepatitis disease management programs increases.
According to NIH, hepatitis C is responsible for 8,000 to 10,000 deaths annually
and is currently the leading reason for liver transplantation in the United
States.
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
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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,
Florida, Indianapolis, Indiana, Nashville, Tennessee and Portland, Maine
facilities. Data is transmitted to and from on-site data processing equipment at
the distribution centers.
The Company has conducted a review of its computer systems to
identify and address all code changes, testing, and implementation procedures
necessary to make its systems year 2000 compliant. The Company believes that
with the exception of the wholesale purchasing and accounting programs of the
J.E. Goold Division, which is based in Portland, Maine, all systems will be
fully compliant by the end of fiscal 1998. The J.E. Goold Division is scheduled
to be converted to the Company's system during the first quarter of 1999.
Although the Company will consider the status of a Company's computer systems in
evaluating any future acquisition opportunities, there can be no assurance that
acquisitions made or contemplated by the Company will be year 2000 compliant by
the date of purchase. There can also be no assurance that the systems of other
companies with which it transacts business will be updated or converted in a
timely manner, or that such failure will not have a material adverse effect on
the Company's operations. The Company estimates that it will incur approximately
$275,000 during fiscal 1998 and $200,000 during fiscal 1999 for the cost of this
project.
Expansion/Acquisitions
BWI
The Company continues to seek opportunities to expand its
operations geographically through the development of new distribution centers or
the acquisition of existing wholesale drug distributors. Presented below is a
brief discussion of acquisitions by the Company since 1992. All of the
acquisitions have been accounted for under the purchase method and, accordingly,
the results of operations of the acquired companies have been included in the
Company's financial statements from the effective date of acquisition. 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 not exceeding 40 years.
See, also, Note 14 - Statement of Cash Flows in the Company's financial
statements.
J.E. Goold.
On March 25, 1992, the Company effected a merger with J.E. Goold,
a full-line, full-service distributor of pharmaceutical, health and beauty care
and home health care products based in Portland, Maine.
Kendall Drug Company.
Effective July 1, 1994, the Company acquired the net assets of
Kendall Drug Company, a wholesale distributor of pharmaceutical products and
health and beauty care products based in Shelby, North Carolina.
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Priority Healthcare Services Corporation
On February 7, 1996, the Company acquired all of the assets of the
infusion services division of Infectious Disease of Indiana, P.S.C. Through
February 7, 1997, this business was operated as National Infusion Services,
Inc., a physician managed provider of infusion services programs to patients in
a variety of settings, including the home, extended care facilities and its
outpatient center in Indianapolis, Indiana. On that date, the corporate name was
changed to Priority Healthcare Services Corporation. The Company expended
approximately $9.0 million and incurred a long-term obligation of approximately
$1.5 million, resulting in approximately $9.8 million in intangible assets.
Although the acquisition was not significant to the Company as a whole, it
provides further opportunities for the Company's growth in the alternate
care/alternate site market.
Tennessee Wholesale Drug Company
Effective July 31, 1997, the Company purchased substantially all
of the operating assets and assumed most of the liabilities and contractual
obligations of Tennessee Wholesale Drug Company, Inc. ("Tennessee Wholesale
Drug"). Tennessee Wholesale Drug is a full-line, full-service wholesale drug
company with distribution facilities in Nashville, Tennessee, Baltimore,
Maryland and Tampa, Florida. The Company expended approximately $27 million
which approximated the net book value of the assets and liabilities acquired.
While the acquisition was not material to the Company as a whole, it provides
further opportunities for the Company to expand its presence in the direct store
delivery market.
Priority
Effective as of February 28, 1993, the Company acquired
substantially all of the assets of Charise Charles, a specialty wholesale
distributor of oncology and renal care biopharmaceuticals located in Altamonte
Springs, Florida. On October 6, 1993, the Company acquired substantially all of
the assets of PRN, a specialty wholesale distributor of renal care supplies and
dialysis equipment located in Orlando, Florida. In August 1994, PRN was combined
with Charise Charles as part of the formation of Priority. On October 31, 1994,
Priority acquired the stock of 3C, a specialty distributor of acute dialysis
products located in Santa Ana, California. Effective January 1, 1995, Priority
acquired all of the outstanding stock of the IV One Companies, three related
companies located in Altamonte Springs, Florida that provided specialty pharmacy
and other related healthcare services. On August 6, 1997, Priority acquired
substantially all of the assets of Grove Way Pharmacy, a specialty distributor
of vaccines located in Castro Valley, California. Priority expended
approximately $250,000, which approximated the fair value of the assets
acquired. Additionally, a three-year non-compete was obtained from the prior
owner for $100,000 due in four equal installments in 1998.
Employees
As of February 28, 1998, the Company employed 1,283 persons, of
which approximately 3% are covered by a single collective bargaining agreement.
Of this total, Priority employed 146 persons, none of which are covered by a
collective bargaining agreement. The Company and Priority believe that their
respective relationships with their employees is good.
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Competition
BWI
The markets in which the Company competes are highly competitive.
Not only does the Company compete with national and regional full-line,
full-service wholesale drug distributors, some of which are larger and have
substantially greater financial resources, but additional competition is
provided by direct selling manufacturers and specialty distributors. While
competition is primarily price oriented, it can also be affected by delivery
requirements, credit terms, depth of product line and other customer service
requirements. There can be no assurance that the Company will not encounter
increased competition in the future that could adversely affect the Company's
business. 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 national wholesalers. The Company estimates that there are
currently less than 50 full-line, full-service wholesale drug distributors in
the United States.
Priority
The alternate site specialty pharmaceutical and medical supply
industry is highly competitive and is experiencing both horizontal and vertical
consolidation. The industry is fragmented, with many public and private
companies focusing on different product or customer niches. Some of Priority's
current and potential competitors include regional and national full-line,
full-service medical supply distributors; independent specialty distributors;
national full-line, full-service wholesale drug distributors, such as Bergen
Brunswig Corporation and Cardinal Health, Inc., that operate their own specialty
distribution businesses; institutional pharmacies; hospital-based pharmacies;
home healthcare agencies; mail order distributors that distribute medical
supplies on a regional or national basis; and certain manufacturers, such as
Bristol-Myers Squibb, that own distributors or that sell their products both to
distributors and directly to users, including clinics and physician offices.
Some of Priority's competitors have greater financial, technical, marketing and
managerial resources than Priority. While competition is primarily price and
service oriented, it can also be affected by depth of product line, technical
support systems, specific patient requirements and reputation. There can be no
assurance that competitive pressures will not have a material adverse effect on
Priority.
Government Regulation
The Company and Priority are subject to regulation by federal, state
and local government agencies. As a result, the Company is required to register
for permits and/or licenses with, and comply with certain operating and security
standards, of the United States Drug Enforcement Administration, the Food and
Drug Administration (the "FDA"), and appropriate state agencies. Each of the
Company's full-line, full-service distribution centers is licensed to distribute
ethical pharmaceutical products and certain controlled substances in accordance
with the requirements of the Prescription Drug Marketing Act of 1987 and the
Controlled Substances Act of 1970. Similarly, the health care provider
businesses of Priority are licensed by the appropriate state board of pharmacy,
department of health, home health agency or related governmental agency. In
addition, certain of Priority's customers are subject
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to significant federal and state regulations, including the so called fraud and
abuse laws. The fraud and abuse laws impose criminal and civil sanctions on (a)
persons who solicit, offer, receive or pay any remuneration in return for
inducing the referral of a patient for treatment or the ordering or purchasing
of items or services that are in any way paid for by Medicare, Medicaid or
similar state programs and (b) physicians who make referrals for clinical
laboratory or certain designated health services to entities with which the
physician has a financial relationship. The fraud and abuse laws and regulations
are broad in scope, are subject to frequent modification and varied
interpretation and have recently been expanded by the Health Insurance
Portability and Accountability Act of 1996.
Failure to comply with these laws and regulations could subject the
Company to significant civil sanctions, especially under the strict liability
standards imposed by the Controlled Substances Act and the broad scope of
coverage imposed by the fraud and abuse laws. The Company has hired a full-time
Regulatory Compliance Manager, conducted compliance reviews at its locations by
outside advisors and implemented a company wide ethics and corporate compliance
program. As a result, the Company and Priority believe they comply in all
material respects with applicable laws and regulations. Because the health care
industry will continue to be subject to substantial regulations, however,
neither the Company nor Priority can give assurance that their activities will
not be reviewed or challenged by regulatory agencies in the future.
On November 14, 1995, an investigator for the FDA, accompanied by an
inspector from the State of Florida Board of Pharmacy, inspected Priority's
pharmacy in Altamonte Springs, Florida. At the end of the inspection, the FDA
investigator issued an FDA Form-483, which is the form used by FDA investigators
to identify any observed or suspected noncompliance with the laws administered
by the agency. The FDA Form-483 identified the facility as a pharmacy/repackager
and listed three observations related to certain requirements that the FDA
typically imposes on manufacturers of sterile products. Priority advised the FDA
in December 1995 that Priority believes it is not, within the statutory or
regulatory meaning of these terms, a repackager or a manufacturer. A second
inspection of the same facility occurred on June 26, 1997, in which the FDA
investigator was again accompanied by Florida pharmacy authorities. The FDA
investigator issued a substantially identical FDA Form-483 at the end of that
inspection. The Florida State Board of Pharmacy did not issue any deficiencies
regarding the operations of the Altamonte Springs pharmacy in either of these
inspections.
On March 16, 1992, the FDA issued a Compliance Policy Guide (CPG
460.200), which explains the criteria the FDA uses to distinguish between
pharmacy operations that are properly regulated under state law and drug
manufacturing regulated by the FDA. Priority's response to the FDA in December
1995 cited this CPG and explained Priority's contention that, according to the
FDA's own criteria, the Altamonte Springs pharmacy is a pharmacy properly
regulated under state and local laws.
On November 21, 1997, the President signed into law the FDA
Modernization Act of 1997, which, among a number of other items, adds a new
section on pharmacy compounding to the Federal Food, Drug and Cosmetic Act. In
this provision, Congress clarified a gray area by explicitly identifying the
circumstances in which pharmacies may compound drugs without the need for filing
a New Drug Application, observing the FDA's Good Manufacturing Practice
regulations or complying with certain other specific Federal Food, Drug and
Cosmetic Act requirements. Congress provided that the term "compounding" does
not include mixing or reconstituting that is done in accordance with directions
contained in approved labeling
12
<PAGE> 13
provided by the manufacturer of the product. Priority believes that, as a result
of this amendment, so long as Priority follows the manufacturer's approved
labeling in each case, and prepares drugs only for identified individual
patients using licensed practitioners, Priority's activities should be regulated
by the Florida State Board of Pharmacy and not be subjected by the FDA to a full
New Drug Application requirement demonstrating the basic safety and
effectiveness of the drugs.
If Priority is correct and its operations are limited to those engaged
in by pharmacies, there should be no material adverse effect from the FDA
Form-483s because Priority believes it is currently in compliance in all
material respects with applicable state and local laws. If Priority is deemed to
be a sterile product manufacturer or a sterile product repackager, Priority
would be subject to additional regulatory requirements. If for some reason the
FDA or other legal authorities decide that Priority must file for approval of a
New Drug Application, such an event could have a material adverse effect on
Priority.
There can be no assurance that future legislation, future rulemaking,
or active enforcement by the FDA of a determination that Priority is a drug
manufacturer will not have a material adverse effect on the business of
Priority.
The State of Florida Board of Pharmacy regulates the compounding
activities of Florida pharmacies, including certain activities of Priority.
Priority has obtained a Community/Special Parenteral/Enteral Compounding
Pharmacy Permit. Over the past several years, the Florida Board of Pharmacy has
proposed certain changes to its compounding requirements. Priority believes that
it is in compliance with such current requirements, but there can be no
assurance that other conditions or requirements would not be imposed in the
future that would have a material adverse effect on Priority.
Priority believes that its pharmacy practices and its contract
arrangements with other healthcare providers and pharmaceutical suppliers are in
compliance with applicable laws. To address the risks presented by such laws,
Priority has appointed an employee trained as a lawyer as Vice President of
Administration, arranged for compliance reviews conducted by outside advisors,
and implemented an ethics and corporate compliance program. There can be no
assurance that such laws will not, however, be interpreted in the future in a
manner inconsistent with Priority's interpretation and application.
Industry Overview
The wholesale drug industry in the United States continues to
experience significant growth. As reported by the National Wholesale Druggists'
Association, industry sales have grown from $25 billion in 1989 to approximately
$83.4 billion in 1997, a compound annual growth rate of 16%. Today, industry
analysts estimate approximately 80% of pharmaceutical manufacturers distribute
through wholesalers compared to less than 47% in 1970. Order processing,
inventory management and product delivery by wholesale distributors allow
manufacturers to better allocate their resources to research and development,
manufacturing and marketing their products. Customers benefit from wholesale
distribution by having access to a single supply source for a full line of
pharmaceutical and health care products from hundreds of individual
manufacturers. Further, inventory costs are lower, delivery is more timely and
efficient, and purchasing and inventory information improved. Customers
additionally benefit from the range of value added programs developed by
wholesale drug
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<PAGE> 14
distributors that are targeted to their specific needs which, in turn, reduce
their costs and increase their operating efficiencies.
The alternate care/alternate site industry is comprised of health care
distributors and providers serving health care facilities outside the hospital
environment, including physicians' offices, clinics and patients' homes. The
shift from the hospital has occurred primarily as a result of cost containment
pressures exerted by payers and the improvement in the treatment of various
types of diseases in alternate care/alternate site facilities. These facilities
administer pharmaceutical drugs and related medical supplies to patients who
generally require dialysis therapy for treatment of kidney failure, chemotherapy
for treatment of cancer or infusion therapy for treatment of a number of
conditions, including infectious diseases such as HIV and hepatitis. The
combined market for alternate care/alternate site distributors and providers
serving dialysis, cancer and infusion therapy facilities is much smaller than
the market being served by the wholesale drug industry. These three markets are
expected to continue to grow, however, as more health care services are shifted
from the hospital to the alternate care/alternate site facility. At the same
time, the consolidation exhibited within each market the past few years is also
expected to continue. See, also, Competition and Customers and Markets in Part
I, Item 1.
The Company believes the pharmaceutical industry, including drug
wholesalers and related health care distributors and providers, will continue to
grow as a result of the following trends:
Aging Population.
The number of individuals over 65 in the United States has grown 23%
from approximately 26 million in 1980 to approximately 32 million in 1990 and is
projected to increase an additional 9% to more than 35 million by the year 2000.
This age group suffers from a greater incidence of chronic illnesses and
disabilities than the rest of the population and is estimated to account for
approximately two-thirds of total health care expenditures by the end of the
decade.
Introduction of New Pharmaceuticals.
Traditional research and development as well as the advent of new
research and production methods, such as biotechnology, continue to generate new
compounds that are more effective in treating diseases. The Company believes
that ongoing research and development expenditures by the leading pharmaceutical
manufacturers will contribute to the continued growth of the industry. Drug
therapy has had a beneficial impact on the overall increase in aggregate health
care costs, by reducing expensive surgeries and prolonged hospital stays.
Industry observers expect the overall sales of pharmaceuticals to continue
double-digit increases through the year 2000, as was the case from 1989 to 1997.
Managed Care.
To remain competitive, pharmaceutical manufacturers are required to
sell their products to the managed care market, wherein employers negotiate
discounts from health care providers by committing to long-term contracts
involving thousands of patients. Health care costs are linked more tightly to
the provision of managed health care services, especially with hospitals and
doctors, than under traditional medical insurance plans. Managed care
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<PAGE> 15
organizations generally provide full coverage for prescription drugs to lower
health care 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.
Increased Use of Generic Drugs.
The growth of managed care's influence on pharmacy along with the
introduction of generic equivalent products for many top selling brand name
drugs has caused the generic market to grow substantially. A number of branded
drugs are expected to come off patent in the next three to five years, thus
expanding the generic marketing opportunity. In the next five years, the size of
the market is expected to nearly triple from $3.0 billion in 1997 to $8.0
billion in 2002.
Pharmaceutical Price Increases.
As a result of competitive market-driven cost containment
measures implemented by both the private and public sectors during the past five
years, pharmaceutical price increases are significantly less than in prior
years. Nevertheless, the Company believes that price increases by pharmaceutical
manufacturers will continue to equal or exceed the overall Consumer Price Index
which is due in large part to relatively inelastic demand in the face of higher
prices charged for patented drugs as manufacturers have attempted to recoup
costs associated with the research and development, clinical testing and FDA
approval of new products.
Continued Industry Consolidation.
In response to cost containment pressure from private and
governmental payers and the recent focus on health care reform in the United
States, there has been significant consolidation within the industry during the
past three years at the manufacturer, wholesaler and customer levels.
Pharmaceutical manufacturers have consolidated to reduce operating expenses,
gain access to new drugs in the pipeline and enhance marketing efforts in a
managed care environment. Likewise, chain drug stores are continuing to purchase
independent drug stores and, in some cases, other drug chains as demonstrated by
consolidations during the past two years involving Revco, Eckerd, Thrifty
Payless, Thrift, Medicine Shoppe, and Big B. Independent drug stores are also
consolidating into regional and national affiliations. At the same time that
sales through the wholesale drug industry have increased, the number of
pharmaceutical wholesalers in the United States has decreased from 139 in 1980
to less than 50 full-line, full-service at the end of 1997. During 1997, it is
estimated that the five largest national wholesalers distributed over 65% of the
prescription drugs in the United States.
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<PAGE> 16
Manufacturers' Pricing and Distribution Policies.
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 as much 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 one-price systems
for wholesalers and retailers. Although pharmaceutical manufacturers may adopt
one-price systems in the future, or may be required to pursuant to federal or
state legislation or through litigation, such developments have not had a
material adverse effect on the Company's business in the past. See, also, Note
15 - Legal Proceedings in the Company's financial statements.
In response to the above trends, the Company has focused its
efforts on higher margin direct store delivery sales, alternate care/alternate
site sales, managed care sales, better asset and cash flow management, and
containment of selling, general and administrative expenses through improved
technology, consolidation of distribution centers and increased sales through
market expansion and acquisitions.
Item 2. PROPERTIES.
The Company currently has 19 distribution centers located in 13
states. 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 the wholesale drug and alternate
care/alternate site customers. At each location, a manager supervises warehouse,
delivery and local sales functions. The Company utilizes owned vans and trucks,
contract carriers, common carriers and couriers to deliver its products. The
Company believes that its properties are adequate to serve the Company's current
and anticipated needs without making capital expenditures materially higher than
historical levels. See, also, Note 12 -Commitments in the Company's financial
statements.
These distribution centers are listed below:
<TABLE>
<CAPTION>
SQUARE OWNED OR
LOCATION FOOTAGE LEASED
-------- ------- ------
<S> <C> <C>
Altamonte Springs, Florida 33,000 Leased
Austell, Georgia 56,160 Leased
Baltimore, Maryland 48,000 Leased
Dallas, Texas 44,000 Owned
Grapevine, Texas 30,000 Leased
Grove City, Ohio 37,000 Leased
Houston, Texas 39,000 Owned
Indianapolis, Indiana 57,200 Owned
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C> <C>
Middletown, Pennsylvania 120,000 Owned
Nashville, Tennessee 112,000 Owned
Orange, Connecticut 185,000 Owned
Orlando, Florida 94,600 Owned
Portland, Maine 60,000 Owned
Portland, Oregon 46,000 Leased
San Dimas, California 65,400 Leased
Santa Ana, California 11,941 Leased
Shelby, North Carolina 103,500 Owned
Tampa, Florida 55,000 Leased
Woodland, California 47,000 Leased
</TABLE>
In 1997, the Company moved into the new distribution centers in
Houston, Texas, Middletown, Pennsylvania and Portland, Oregon. The Houston,
Texas and Middletown, Pennsylvania facilities are owned by the Company and
replace existing leased facilities. Through the acquisition of Tennessee
Wholesale Drug, the Company added additional distribution centers in Nashville,
Tennessee, Baltimore, Maryland and Tampa, Florida. In the first quarter of 1998,
the Company should begin operations from new distribution centers in Woodland,
California and Grapevine, Texas. Priority also leased a new distribution
facility in Grove City, Ohio in 1997.
In addition, in 1997, the Company sold the 60,000 square foot Brockton,
Massachusetts distribution center that was closed in the third quarter of 1996.
The Company also intends to close the leased facilities in Baltimore, Maryland
and Tampa, Florida in the first half of 1998. These customers will be serviced
from existing facilities.
In 1997, the Company began construction of a new 180,000 square foot
office building in Indianapolis, Indiana. This building will provide space for
the accounting, human resources, information systems and purchasing departments,
along with the Company's executive officers and related staff. Upon completion
and occupancy of the building, and subject to favorable market conditions, the
Company (through its wholly-owned subsidiary, College Park Plaza Associates,
Inc.) intends to sell the building at its fair market value to a third party.
The Company will then lease back the top two floors of the five-story building.
Approximately 32,000 square feet of the Company's existing Indianapolis
facility, consisting primarily of office space, will be leased or sold upon
relocation to the new facilities. The Company also leases at a separate location
7,566 square feet of office and medical building space in Indianapolis, Indiana
for its Priority Healthcare Services Corporation subsidiary, and 1,300 square
feet of office space in Salem, New Hampshire for its BW Food Distributors, Inc.
subsidiary.
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 15 - Legal Proceedings in the Company's
financial statements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of 1997 to a vote
of security holders of the Company, through the solicitation of proxies or
otherwise.
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<PAGE> 18
Executive Officers of the Company.
The following is a list of the Company's executive officers, the
ages and the positions held by the named individuals. These positions may
exclude other positions held with subsidiaries of the Company. These executive
officers serve at the discretion of the Board. There is no family relationship
between any of the executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William E. Bindley 57 Chairman of the Board, Chief
Executive Officer, and President
Keith W. Burks 40 Executive Vice President
Michael D. McCormick 50 Executive Vice President,
General Counsel, and Secretary
Thomas J. Salentine 58 Executive Vice President, Chief
Financial Officer
Gregory S. Beyerl 40 Vice President and Controller
Michael L. Shinn 43 Treasurer
</TABLE>
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.
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.
(Pursuant to General Instruction (G)(3) of Form 10-K, the
foregoing information pertaining to executive officers who are not standing for
election as members of the Board of Directors is included as an un-numbered Item
in Part I of this Annual Report in lieu of being included in the Company's Proxy
Statement for its 1998 Annual Meeting of Shareholders.)
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<PAGE> 19
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's common stock, $.01 par value, is traded on the New
York Stock Exchange under the symbol "BDY". Prior to listing on the New York
Stock Exchange, the common stock was quoted on the NASDAQ National Market System
under the symbol "BIND". The following table reflects the range of the reported
high and low prices for the Company's common stock as reported on the New York
Stock Exchange for the years ended December 31, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
1997 HIGH LOW
<S> <C> <C>
January 1 - March 31 $19.38 $17.38
April 1 - June 30 $22.94 $18.38
July 1 - September 30 $28.38 $21.38
October 1 - December 31 $32.44 $25.69
<CAPTION>
1996 HIGH LOW
<S> <C> <C>
January 1 - March 31 $21.00 $15.63
April 1 - June 30 $17.63 $15.00
July 1 - September 30 $18.25 $15.38
October 1 - December 31 $19.75 $16.50
</TABLE>
At March 20, 1998 there were outstanding 15,994,616 shares of the
Company's common stock, which were held by approximately 1,000 holders of
record.
The Company paid cash dividends on its common stock of 2 cents per
share on 19 different quarterly dates for the period beginning September 7, 1993
and ending March 24, 1998. Future dividends will be paid in accordance with
declarations by the Board of Directors in its sole discretion. The Company's
primary bank 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.
SALES OF UNREGISTERED SECURITIES
On May 15 and June 11, 1997, the Company issued a total of 1,680
shares of Common Stock to its seven non-employee Directors as the stock portion
of their annual retainer. This issuance was exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2)
thereof.
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<PAGE> 20
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)
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales from stock $2,760,235 $2,127,307 $1,928,738 $1,681,080 $1,344,355
Net brokerage sales 4,549,687 3,190,219 2,741,415 2,353,027 2,081,742
Other income 1,882 1,407 2,322 3,317 4,363
Cost of products sold 7,167,274 5,197,008 4,565,750 3,945,172 3,350,119
Selling, general and administrative 81,078 70,531 62,555 50,279 43,322
Other expenses 23,688 20,523 16,406 16,998 20,601
Earnings before income taxes 39,764 30,871 27,764 24,975 16,418
Provision for income taxes 15,806 12,865 11,383 10,240 6,854
Minority interest in net income
of consolidated subsidiary 212
Net earnings 23,746 18,006 16,381 14,735 9,564
Earnings per share:
Basic $ 1.84 $ 1.59 $ 1.49 $ 1.37 $ 0.89
Diluted 1.59 1.36 1.28 1.21 0.86
Cash dividends declared per Common Share $ 0.08 $ 0.08 $ 0.08 $ 0.08 $ 0.07
Other financial data:
Current assets $1,185,025 $ 850,965 $ 777,366 $ 736,687 $ 665,412
Total assets 1,291,007 941,206 848,708 803,447 732,204
Current liabilities 897,916 616,322 573,369 547,131 489,904
Long-term debt 32,142 99,766 69,473 69,461 69,733
Total liabilities 934,401 719,119 647,948 623,196 566,486
Minority interest 11,010
Shareholders equity 345,596 222,087 200,760 180,251 165,718
Book value per share 21.94 19.27 17.90 16.64 15.38
</TABLE>
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<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The discussion and analysis that follows should be read in conjunction
with the Consolidated Financial Statements and related notes included elsewhere
in this report.
The Company has made the following acquisitions which affect the
comparison of the results of operations on a year to year basis. All
acquisitions have been accounted for under the purchase method and, accordingly,
the results of operations of the acquired entities are included in the Company's
financial statements from the respective dates of acquisition.
The IV One Companies - Effective January 1995, the Company, through its
Priority Healthcare Corporation ("Priority") subsidiary, acquired all of the
outstanding stock of the IV One Companies ("IV One") in a cash transaction. IV
One is 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.
Priority Healthcare Services Corporation - In January 1996, the Company
formed a new subsidiary, National Infusion Services, Inc. ("NIS"). Effective
February 8, 1996, the Company, through its NIS subsidiary, purchased the assets
of the infusion services division of Infectious Disease of Indiana P.S.C. NIS is
a provider of quality care to patients in a variety of settings. In February of
1997, the corporate name was changed from NIS to Priority Healthcare Services
Corporation ("PHSC").
Tennessee Wholesale Drug Company - Effective July 31, 1997 the
Company acquired substantially all of the operating assets and assumed most of
the liabilities of Tennessee Wholesale Drug Company ("TWD"). TWD is a full-line
full-service wholesale drug company with distribution facilities in Nashville,
Tennessee, Baltimore, Maryland and Tampa, Florida.
Grove Way Pharmacy - Effective August 6, 1997, Priority acquired
substantially all of the assets of Grove Way Pharmacy, Inc. ("Grove Way"), a
specialty distributor of vaccines located in Castro Valley, California.
RESULTS OF OPERATIONS.
Net sales for 1997, 1996 and 1995 were $7,310 million, $5,318 million
and $4,670 million, respectively. The 37% increase in 1997 sales over 1996 was
generated primarily through internal growth. Only 6% of this increase was
attributable to the aforementioned acquisitions. In 1997, the 43% increase in
brokerage type sales ("brokerage sales") was fueled by the consolidation within
both the wholesale and chain drug industries. These sales generate very little
gross margin, however, they provide for increased working capital and support
the Company's programs to attract more direct store delivery business from chain
customers. Sales from the Company's inventory ("from stock sales") increased 30%
(24%, excluding TWD) in 1997. These sales include sales from the Company's
inventory to chain customers and direct store delivery business. Direct store
delivery sales increased 39% in 1997 and remained constant at 35% of total
sales. The Company continued its commitment to expand its presence in the direct
store delivery portion of the business through increased sales
21
<PAGE> 22
to existing customers and the addition of new customers. Substantially all of
the 14% increase in 1996 sales over 1995 was generated from internal growth
related primarily to increased sales to existing customers and the addition of
new direct store delivery customers. In both periods, the increase related to
pricing was approximately equal to the increase in the Consumer Price Index. Net
sales for Priority for 1997, 1996 and 1995 were $231 million, $158 million and
$124 million, respectively. This growth was generated internally and reflected
primarily the addition of new customers, new product introductions, additional
sales to existing customers and, to a lesser extent, inflationary price
increases.
Gross margins for 1997, 1996 and 1995 were $143 million, $121 million
and $104 million, respectively. The increase in net sales accounted for
approximately 77% of the increase in gross margins from 1996 to 1997 with the
acquisition of TWD accounting for the remaining 23%. The increase from 1995 to
1996 was primarily from internal growth. Gross margins as a percent of net sales
declined to 1.95% in 1997 from 2.27% in 1996. This decrease was the result of
the substantial increase in low margin brokerage sales and a shift in the
business mix of from stock sales to more managed care business. Gross margins as
a percent of net sales for 1996 had a slight increase from 2.24% in 1995. This
increase was the result of the growth in from stock sales in relation to the
increase in brokerage sales. In all years, the pressure on sell side margins
continued and the purchasing gains associated with pharmaceutical price
inflation remained relatively constant. Gross margins for Priority for 1997,
1996 and 1995 were $23.2 million, $17.2 million and $12.5 million, respectively.
The gross margin as a percent of sales for 1997, 1996 and 1995 was 10.01%,
10.85% and 10.12%, respectively. The reduction in 1997 is attributed to
increased competition and a change in sales mix to the lower margin wholesale
distribution business. The increase in 1996 over 1995 resulted from the
increased sales of the higher margin pharmacy business, notwithstanding
continued pressure on margins due to intense competition.
Other income in 1997 and 1996 represented finance charges on certain
customers' receivables and gains on the sale of assets. Other income in 1996
decreased as a result of reduced gains on marketable securities and a decrease
in service fee income on certain customer receivable balances.
Selling, general and administrative ("SGA") expenses were $81.1
million, $70.5 million and $62.6 million in 1997, 1996 and 1995, respectively.
The incremental costs associated with acquisitions were approximately $2.8
million in 1997 and were immaterial in 1996. The remainder of the increases for
both periods resulted from normal inflationary increases and costs to support
the growing direct store delivery business of Bindley Western Drug Company and
the alternate care/alternate site business of Priority. The cost increases
related to the direct store delivery and alternate care/alternate site
businesses include, among others, delivery expense, warehouse expense, and labor
costs, which are variable with the level of sales volume. SGA expenses will
continue to increase as direct store delivery and alternate care/alternate site
sales increase. However, in 1997 the SGA expense as a percent of from stock
sales decreased to 2.94% from 3.32% in 1996. The 1996 percentage represented a
slight increase from the 3.24% in 1995. Management remains focused on
controlling SGA through improved technology, better asset management and
opportunities to consolidate distribution centers. In 1997, SGA included
non-recurring expenses of approximately $575,000 (approximately $300,000
incurred in the fourth quarter) related to start up and moving of distribution
centers in Houston, Texas, Middletown, Pennsylvania, Portland, Oregon and
Sacramento, California. In 1996, SGA included approximately $200,000 associated
with the closing and consolidation of the Brockton, Massachusetts and Charlotte,
North Carolina
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<PAGE> 23
distribution centers.
Depreciation and amortization was $7.4 million, $6.7 million and $6.3
million in 1997, 1996 and 1995, respectively. These increases were the result of
the inclusion of acquired entities and the depreciation and amortization on new
facilities and equipment, particularly in management information systems and
systems to support customer needs.
Interest expense for 1997, 1996 and 1995 was $15.9 million, $13.0
million and $10.1 million, respectively. The average short-term borrowings
outstanding were $152 million, $119 million and $104 million at an average
short-term interest rate of 6.5%, 6.4% and 7.1% for 1997, 1996 and 1995,
respectively. In 1995, the Company provided extended receivable terms on
identifiable receivables of certain chain warehouse customers and charged
interest on these balances. To the extent this interest offset borrowing costs
incurred to support these receivables, it was treated as a reduction of interest
expense. The interest received from chain warehouse customers as a result of
extended receivable terms was immaterial in relation to total interest expense,
and therefore, presented on a net basis. On December 27, 1996, the Company
completed a private placement of $30 million Senior Notes due December 27, 1999
at an interest rate of 7.25%. Interest expense associated with these Notes was
approximately $2.2 million in 1997.
The provision for income taxes represented 39.8%, 41.7% and 41.0% of
earnings before taxes in 1997, 1996 and 1995, respectively.
On January 11, 1996, the Company was informed by the U.S. Attorney's
office in Indianapolis that the Drug Enforcement Administration ("DEA") was
alleging multiple violations of the recordkeeping and reporting regulations of
the Controlled Substances Act ("Act") resulting from a routine inspection of the
Company's Indianapolis Distribution Center during January and February 1994. On
November 7, 1996, the Company entered into a Civil Consent Decree with the
United States and the DEA resolving all issues relating to its Indianapolis
Distribution Center's alleged failure to comply with the Act. In exchange for
the settlement of all civil and administrative issues, the Company paid
$700,000, and agreed to pay an additional $300,000 if the Company does not
substantially comply with the terms of the Civil Consent Decree over the next
two years. The Company does not believe the amount of the settlement will exceed
the charge recognized by the Company in 1996, which included estimated related
professional fees of $112,000.
On October 7, 1996, the Company and its subsidiary, National Infusion
Services (now known as Priority Healthcare Services Corporation) ("PHSC"), were
named as defendants in an action filed by Thomas G. Slama, M.D. in the Superior
Court of Hamilton County, Indiana which is now pending in that Court as Cause
No. 29D03-9702-CP-81. Dr. Slama is a former director of the Company and
formerly was Chief Executive Officer and President of PHSC. The complaint
alleges breach of contract and defamation arising from the termination of Dr.
Slama's employment with PHSC in October 1996, and seeks damages in excess of
$3.4 million, punitive damages, attorneys' fees and costs. The Company and PHSC
believe Dr. Slama terminated his employment without "cause" (as defined in his
employment agreement), and alternatively, that PHSC had grounds to terminate
Dr. Slama for "cause" under his employment agreement. The Company and PHSC have
answered the complaint, denying the merits of Dr. Slama's claims, and have also
filed a counterclaim against Dr. Slama seeking, among other things, declaratory
relief, compensatory and (in some instances) treble damages, punitive damages,
attorneys' fees, interest and costs. Dr. Slama moved to dismiss portions of the
counterclaim, which motion was denied by the court on
23
<PAGE> 24
July 14, 1997. The Company and PHSC thereafter filed an amended counterclaim
adding additional claims against Dr. Slama. On March 12, 1998, Dr. Slama filed a
motion for leave to amend his complaint to add Priority and William E. Bindley
as defendants and to state additional claims for breach of contract, breach of
oral contract, breach of fiduciary duty, securities fraud and conversion. The
Company has entered into an Indemnification and Hold Harmless Agreement with
Priority, whereby the Company has agreed to indemnify and hold harmless Priority
and its subsidiaries from and against any and all claims, losses, liabilities,
costs, damages, charges and expenses (including without limitation legal and
other professional fees) which they might incur or which may be charged against
them in any way based upon, connected with or arising out of the lawsuit filed
by Dr. Slama. The Company intends to vigorously oppose Dr. Slama's motion to
amend his complaint, and to vigorously defend the amended complaint in the event
his motion is granted. Discovery is proceeding, and the matter is currently set
for trial on March 9, 1999. The Company and PHSC are contesting Dr. Slama's
complaint and pursuing their counterclaim vigorously. Although the outcome of
any litigation is uncertain, the Company believes after consultation with its
counsel that the attendant liability of the Company, if any, should not have a
material adverse effect on the Company's financial condition or liquidity. An
adverse decision, although not anticipated, could have a material effect on the
Company's results of operations.
The Company is still considering a pro rata distribution to its
shareholders of the stock of Priority. The possible spin-off would separate the
Company's wholesale drug business from the wholesale drug and alternate
care/alternate site business of Priority. The contemplated spin-off would be
subject to compliance with applicable securities and governmental regulations
and other business considerations.
LIQUIDITY-CAPITAL RESOURCES.
On October 29, 1997, Priority consummated an initial public
offering ("IPO"). Priority registered 2,300,000 shares of Class B Common Stock,
all of which were sold in a firm commitment underwriting at an aggregate
offering price of $33.35 million. After underwriters' discount of $2.32 million
and expenses incurred by Priority in conjunction with the IPO of $1.05 million,
the net offering proceeds to Priority were approximately $29.98 million. The
Company owns all of the outstanding shares of Class A Common Stock of Priority.
The holders of Priority's Class A Common Stock and Class B Common Stock are
entitled to three votes per share and one vote per share, respectively, and
generally vote together as a single class on all matters submitted to a vote of
the shareholders of Priority. The Company owns 81.6% of the outstanding common
stock of Priority and has 93.0% of the voting power of the outstanding common
stock of Priority. In 1997, the amount of net earnings associated with the
minority interest was $212,000.
The Company's operations consumed $107 million in cash for the year
ended December 31, 1997. The use of funds resulted from increases in accounts
receivable and inventories. These uses were partially offset by an increase in
accounts payable. The increase of accounts receivable resulted from the
significant increase in both brokerage and from stock sales. The increase in
accounts payable was attributed to the timing of payment terms and the build up
of inventories at the end of the year. The increase in merchandise inventory is
due to the procurement of inventory for the increased customer base and the
Company's decision to build inventories to reduce the possibility of shortages
due to potential reduction in shipments by certain vendors during the fourth
quarter. Management continues to control inventory levels to minimize carrying
costs and maximize purchasing opportunities.
24
<PAGE> 25
Capital expenditures, predominantly for the purchase of warehouse
facilities, the expansion and automation of existing warehouses and the
investment in additional management information systems and systems to support
customer needs were $22.6 million during 1997.
Effective July 31, 1997, the Company purchased substantially all of the
operating assets and assumed most of the liabilities and contractual obligations
of TWD. The Company expended approximately $27 million for the acquisition of
TWD, which approximated the fair value of the net assets acquired.
Effective August 6, 1997, Priority acquired substantially all of the
operating assets and assumed most of the liabilities of Grove Way Pharmacy,
Inc., a specialty distributor of vaccines and injectables located in Castro
Valley, California. The acquisition was not considered material and the amount
expended approximated the fair value of the net assets acquired.
On August 27, 1997 the Company called for redemption on September 12,
1997 all of its outstanding 6 1/2% Convertible Subordinated Debentures Due 2002
at a redemption price of $1,039 per $1,000 principal amount of Debentures plus
accrued interest through the redemption date. Debenture holders could elect to
convert their debentures into shares of common stock of the Company through
September 12, 1997, which was the redemption date. Holders of all but $119,000
principal amount of the $67,350,000 outstanding Debentures elected to convert
their Debentures into common stock at the rate of 50.4 shares of common stock
for each $1,000 principal amount of Debentures. The redemption reduced the
Company's long-term debt by $67,350,000 and increased by 3.4 million the number
of issued shares of the Company's common stock.
At December 31, 1997, the Company held a note receivable with a
principal balance of $3.2 million from the CEO of the Company. The proceeds of
this note, which bears interest at 6.5% per annum, matures on December 16, 2000
were used by the CEO to exercise stock options. The note provides for annual
interest only payments with outstanding interest and principal to be repaid at
maturity.
Net increase in borrowings under the bank credit agreement was $95
million during 1997. At December 31, 1997, the Company had borrowed $147 million
under the bank credit agreement and had a remaining availability of $123
million.
The Company believes that its cash on hand, cash equivalents, bank line
of credit and working capital management efforts are sufficient to meet future
working capital requirements. As of December 31, 1997, the Company's short-term
bank line of credit was $270 million.
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.
25
<PAGE> 26
YEAR 2000.
The Company has conducted a review of its computer systems to
identify and address all code changes, testing, and implementation procedures
necessary to make its systems year 2000 compliant. The Company believes that
with the exception of the wholesale purchasing and accounting programs of the
J.E. Goold Division, which is based in Portland, Maine, all systems will be
fully compliant by the end of fiscal 1998. The J.E. Goold Division is scheduled
to be converted to the Company's system during the first quarter of 1999.
Although the Company will consider the status of a Company's computer systems in
evaluating any future acquisition opportunities, there can be no assurance that
acquisitions made or contemplated by the Company will be year 2000 compliant by
the date of purchase. There can also be no assurance that the systems of other
companies with which it transacts business will be updated or converted in a
timely manner, or that such failure will not have a material adverse effect on
the Company's operations. The Company estimates that it will incur approximately
$275,000 during fiscal 1998 and $200,000 during fiscal 1999 for the cost of this
project.
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.
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.
FORWARD LOOKING STATEMENTS.
Certain statements included in this annual report which are not
historical facts are forward looking statements. Such forward looking statements
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward looking statements involve certain
risks and uncertainties including, but not limited to, changes in interest
rates, competitive pressures, changes in customer mix, financial stability of
major customers, investment procurement opportunities, changes in government
regulations or the interpretation thereof and the ability of the Company and the
entities with which it transacts business to modify or redesign their computer
systems to work properly in the year 2000, which could cause actual results to
differ from those in the forward looking statements.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
26
<PAGE> 27
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 DISCLOSURE.
Not applicable.
27
<PAGE> 28
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item concerning the Directors and
nominees for Directors of the Company and concerning disclosure of delinquent
filers is incorporated herein by reference to the Company's definitive Proxy
Statement for its 1998 annual meeting of common shareholders, to be filed with
the Commission pursuant to Regulation 14A within 120 days after the end of the
Company's last fiscal year. Information concerning the executive officers of the
Company is also included under "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 1998 annual
meeting of common shareholders to be filed with the Commission 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 1998
annual meeting of common shareholders to be filed with the Commission 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 1998 annual meeting of common
shareholders to be filed with the Commission pursuant to Regulation 14A within
120 days after the end of the Company's last fiscal year.
28
<PAGE> 29
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 F-1 through F-22.
<TABLE>
<S> <C>
Report of Independent Accountants F-1
Consolidated Statements of Earnings for each of the three
years in the period ended December 31, 1997 F-2
Consolidated Balance Sheets as of December 31, 1997
and 1996 F-3
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1997 F-4
Consolidated Statements of Shareholders' Equity for each
of the three years in the period ended December 31, 1997 F-5
Notes to Consolidated Financial Statements F6 to F-22
</TABLE>
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.
3. EXHIBITS. The list of exhibits filed as part of this report
is incorporated herein by reference to the Index to Exhibits beginning at
Page E-1.
(b) No reports on Form 8-K were filed by the Registrant during the
last quarter covered by this report.
29
<PAGE> 30
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 29 present fairly, in all material
respects, the financial position of Bindley Western Industries, Inc. and its
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, 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 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.
Price Waterhouse LLP
Indianapolis, Indiana
March 2, 1998
30
<PAGE> 31
CONSOLIDATED STATEMENTS OF EARNINGS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
(In thousands, except share data)
<S> <C> <C> <C>
Revenues:
Net sales from stock $ 2,760,235 $ 2,127,307 $ 1,928,738
Net brokerage sales 4,549,687 3,190,219 2,741,415
Other income 1,882 1,407 2,322
----------- ----------- -----------
7,311,804 5,318,933 4,672,475
Cost and expenses:
Cost of products sold 7,167,274 5,197,008 4,565,750
Selling, general and administrative 81,078 70,531 62,555
Depreciation and amortization 7,431 6,719 6,279
Interest 15,907 12,992 10,127
Settlement of 1994 DEA inspection matter 812
I.P.O. stock option grant 350
----------- ----------- -----------
7,272,040 5,288,062 4,644,711
Earnings before income taxes 39,764 30,871 27,764
----------- ----------- -----------
Provision for income taxes:
Current 19,640 14,896 13,944
Deferred (3,834) (2,031) (2,561)
----------- ----------- -----------
15,806 12,865 11,383
Minority interest in net income of
consolidated subsidiary 212
----------- ----------- -----------
Net earnings $ 23,746 $ 18,006 $ 16,381
=========== =========== ===========
Earnings per share:
Basic $ 1.84 $ 1.59 $ 1.49
Diluted 1.59 1.36 1.28
Average shares outstanding:
Basic 12,888,137 11,332,479 10,966,247
Diluted 16,131,150 15,270,151 14,926,317
</TABLE>
(See accompanying notes to consolidated financial statements)
31
<PAGE> 32
CONSOLIDATED BALANCE SHEETS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 42,895 $ 63,658
Accounts receivable, less allowance for doubtful
accounts of $4,756 for 1997 and $2,664 for 1996 606,265 346,802
Finished goods inventory 520,769 431,816
Deferred income taxes 9,707 4,560
Other current assets 5,389 4,129
---------- ---------
1,185,025 850,965
---------- ---------
Other assets 76 1,160
---------- ---------
Related party receivable 3,228
---------- ---------
Fixed assets, at cost 89,704 71,915
Less: accumulated depreciation (22,076) (19,935)
---------- ---------
67,628 51,980
---------- ---------
Intangibles, net 35,050 37,101
---------- ---------
TOTAL ASSETS $1,291,007 $ 941,206
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 147,000 $ 52,000
Accounts payable 734,346 555,034
Other current liabilities 16,570 9,288
---------- ---------
897,916 616,322
---------- ---------
Long-term debt 32,142 99,766
---------- ---------
Deferred income taxes 4,343 3,030
---------- ---------
Minority interest 11,010
---------- ---------
Shareholders' equity:
Common stock. $.01 par value-authorized 30,000,000 shares;
issued 16,135,319 and 11,871,042 shares, respectively 3,359 3,316
Special shares, $.01 par value-authorized 1,000,000 shares
Additional paid in capital 198,764 91,964
Retained earnings 147,400 129,958
---------- ---------
349,523 225,238
---------- ---------
Less: shares in treasury-at cost 380,942 and 348,291, respectively (3,927) (3,150)
---------- ---------
Total shareholders' equity 345,596 222,088
---------- ---------
Commitments and contingencies
---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,291,007 $ 941,206
========== =========
</TABLE>
(See accompanying notes to consolidated financial statements)
32
<PAGE> 33
CONSOLIDATED STATEMENTS OF CASH FLOWS
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
(In thousands)
<S> <C> <C> <C>
Cash flow from operating activities:
Net income $ 23,746 $ 18,006 $ 16,381
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 7,431 6,719 6,279
Deferred income taxes (3,834) (2,031) (2,561)
Minority interest 212
Compensation expense on stock option grant 350
Interest capitalized on conversion of debt 1,970
Gain on sale of marketable securities (96)
Gain on sale of fixed assets (103) (58) (27)
Change in assets and liabilities, net of acquisitions:
Accounts receivable (229,518) 51,826 (78,183)
Finished goods inventory (63,401) (99,713) 42,953
Accounts payable 151,302 63,106 85,781
Other current assets and liabilities 4,724 6,097 (7,537)
----------- ----------- -----------
Net cash provided (used) by operating
activities (107,121) 43,952 62,990
----------- ----------- -----------
Cash flow from investing activities:
Purchase of fixed assets and other assets (22,643) (15,581) (7,922)
Proceeds from sale of fixed assets 2,082 59 597
Proceeds from sale of investment securities 1,299
Related party note receivable (3,228)
Acquisition of businesses (27,295) (9,064) (4,125)
----------- ----------- -----------
Net cash used by investing activities (51,084) (24,586) (10,151)
----------- ----------- -----------
Cash flow from financing activities:
Proceeds from sale of stock 14,594 4,260 5,058
Proceeds from IPO of subsidiary 29,982
Addition (reduction) of long-term debt, net (274) 28,651 12
Proceeds under line of credit agreement 1,496,000 1,064,000 1,049,000
Payments under line of credit agreement (1,401,000) (1,086,500) (1,111,000)
Payments to acquire treasury shares (777)
Dividends (1,083) (938) (930)
----------- ----------- -----------
Net cash provided (used) by financing
activities 137,442 9,473 (57,860)
----------- ----------- -----------
Net increase (decrease) in cash (20,763) 28,839 (5,021)
Cash at beginning of year 63,658 34,819 39,840
----------- ----------- -----------
Cash at end of year $ 42,895 $ 63,658 $ 34,819
=========== =========== ===========
</TABLE>
(See accompanying notes to consolidated financial statements)
33
<PAGE> 34
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Common Stock Treasury Stock
--------------------------------------------------------------
SHARES SHARES
OUTSTANDING AMOUNT OUTSTANDING AMOUNT
- -------------------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C> <C> <C>
Balances at December 31, 1994 11,179,994 $ 3,310 348,291 $ (3,150)
Net earnings
Dividends
Shares issued upon exercise of
stock options 382,394 3
----------- ----------- ----------- -----------
Balances at December 31, 1995 11,562,388 3,313 348,291 (3,150)
Net earnings
Dividends
Shares issued upon exercise of
stock options 308,654 3
----------- ----------- ----------- -----------
Balances at December 31, 1996 11,871,042 3,316 348,291 (3,150)
Net earnings
Dividends
Shares issued upon exercise of
stock options 870,130 9
Shares issued upon conversion of
debt 3,394,147 34
IPO of subsidiary
IPO option grant
Purchase of treasury shares 32,651 (777)
=========== =========== =========== ===========
Balances at December 31, 1997 16,135,319 $ 3,359 380,942 $ (3,927)
=========== =========== =========== ===========
<CAPTION>
ADDITIONAL
PAID IN RETAINED SHAREHOLDERS'
CAPITAL EARNINGS EQUITY
- ---------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C> <C>
Balances at December 31, 1994 $ 82,652 $ 97,439 $ 180,251
Net earnings 16,381 16,381
Dividends (930) (930)
Shares issued upon exercise of
stock options 5,055 5,058
----------- ----------- -----------
Balances at December 31, 1995 87,707 112,890 200,760
Net earnings 18,006 18,006
Dividends (938) (938)
Shares issued upon exercise of
stock options 4,257 4,260
----------- ----------- -----------
Balances at December 31, 1996 91,964 129,958 222,088
Net earnings 23,746 23,746
Dividends (1,083) (1,083)
Shares issued upon exercise of
stock options 14,585 14,594
Shares issued upon conversion of
debt 67,460 67,494
IPO of subsidiary 24,405 (5,221) 19,184
IPO option grant 350 350
Purchase of treasury shares (777)
=========== =========== ===========
Balances at December 31, 1997 $ 198,764 $ 147,400 $ 345,596
=========== =========== ===========
</TABLE>
(See accompanying notes to consolidated financial statements)
34
<PAGE> 35
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 subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION. The Company differentiates sales as either
brokerage type sales ("brokerage sales") or sales from the Company's inventory
("from stock sales"). Brokerage sales are made to the chain warehouse market,
whereas from stock sales are made to both the chain warehouse and direct store
delivery markets. Revenues are recorded at the time of shipment.
MARKETABLE SECURITIES. The Company substantially liquidated its
investments in debt and equity securities in 1995.
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. Assets, valued at cost, are generally being depreciated over their
estimated useful lives as follows:
<TABLE>
<CAPTION>
Estimated useful life (years)
<S> <C>
Buildings and furnishings 5-35
Leasehold improvements 3-20
Transportation and other equipment 3-20
</TABLE>
In the event facts and circumstances indicate an asset could be
impaired, an evaluation of the undiscounted estimated future cash flows is
compared to the asset's carrying amount to determine if a write-down is
required.
DEBT ISSUE COSTS. Debt issue costs are amortized on a straight-line
basis over the life of the Convertible Subordinated Debentures ("Debentures")
and the Senior Notes.
INTANGIBLES. The Company continually monitors its cost in excess of net
assets acquired ("goodwill") and its other intangibles (customer lists and
covenants not to compete) to determine whether any impairment of these assets
has occurred. In making such determination, the Company evaluates the
performance, on an undiscounted basis, of the underlying businesses which gave
rise to such amounts. Goodwill is being amortized on the straight-line method
over periods not exceeding 40 years. Other intangibles are being amortized on
the straight-line method over six to 15 years.
EARNINGS PER SHARE. In February, 1997 the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS 128"), which replaces the presentation of
primary earnings per share with basic earnings per share and the presentation of
fully diluted earnings per share with diluted earnings per share. Basic earnings
per share is based on the weighted average number of
35
<PAGE> 36
common shares outstanding during each period. The diluted earnings per share is
based on the weighted average number of common shares and dilutive common share
equivalents outstanding during each period. The common share equivalents
included in these calculations are: (1) shares of common stock issuable upon
assumed exercise of stock options which would have a dilutive effect and (2) the
average number of common shares assumed to be outstanding during the year, as if
the 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. All periods presented have been restated to conform with the
requirements of SFAS 128.
INCOME TAXES. In accordance with the provisions of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes," the
Company accounts for income taxes using the 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.
USE OF ESTIMATES. The preparation of financial statements in accordance
with generally accepted accounting principles requires the use of estimates made
by management. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying values of cash,
accounts receivable, other current assets, 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 value of long
term debt was determined based on market quoted rates or was estimated using
rates currently available to the Company for debt with similar terms and
maturities.
NEW ACCOUNTING STANDARDS. In June 1997, the FASB issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", and
No. 131 "Disclosures about segments of an Enterprise and Related Information".
These Statements are effective for fiscal years beginning after December 15,
1997 and will affect the disclosure requirements of the interim and annual
financial statements beginning in 1998. The new requirements should not
significantly change the reporting and disclosures of the Company.
NOTE 2 - SHORT-TERM BORROWINGS
The Company's short-term bank line of credit was $270,000,000 as of
December 31,1997. The line was available, as necessary, for general corporate
purposes at rates based upon prevailing money market rates. At December 31,
1997, 1996 and 1995, the Company had borrowed on its short-term line of credit
$147,000,000 at a rate of 6.6%, $52,000,000 at a rate of 6.4% and $74,500,000 at
a rate of 6.9%, respectively.
36
<PAGE> 37
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.
A summary of 1997, 1996 and 1995 borrowings follows:
<TABLE>
<CAPTION>
Maximum short-term Average Average
Year borrowings borrowings interest rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
(in thousands)
1997 $270,000 $152,082 6.4%
1996 $192,000 $118,655 6.4%
1995 $189,500 $104,465 7.1%
</TABLE>
NOTE 3 - MARKETABLE SECURITIES AND INVESTMENT INCOME
The Company substantially liquidated its investments in debt and equity
securities in 1995. The proceeds on sales of securities of $1,047,000 in 1995,
approximated their amortized cost.
Other Income for 1997 and 1996 was substantially all interest income.
For 1995, the balance consisted of interest income of $2,194,000, dividends of
$32,000 and realized gains of $96,000, respectively.
NOTE 4- FIXED ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Land $ 6,321 $ 2,919
Buildings and furnishings 34,050 24,356
Leasehold improvements 2,705 2,307
Transportation and
other equipment 46,628 42,333
--------------------------------
89,704 71,915
Less: Accumulated
Depreciation (22,076) (19,935)
--------------------------------
$ 67,628 $ 51,980
================================
</TABLE>
37
<PAGE> 38
NOTE 5- INTANGIBLES
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Goodwill $ 35,184 $ 35,009
Accumulated amortization (5,849) (4,875)
----------------------------------
Goodwill, net 29,335 30,134
Other 13,664 13,664
Accumulated amortization (7,949) (6,697)
----------------------------------
Other, net 5,715 6,967
----------------------------------
Intangibles, net $ 35,050 $ 37,101
==================================
</TABLE>
NOTE 6 - RELATED PARTY TRANSACTIONS
At December 31, 1997, the Company held a note receivable with a
principal balance of $3.2 million from the Chief Executive Officer of the
Company in connection with his exercise of stock options granted to him under
the 1993 Stock Option and Incentive Plan. This note, which bears interest at
6.5% per annum, matures on December 16, 2000 and provides for annual interest
only payments with outstanding interest and principal to be repaid at maturity.
NOTE 7 - INCOME TAXES
The provision for income taxes includes state income taxes of
$2,657,000, $2,113,000, and $1,925,000 in 1997, 1996 and 1995, 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, 1997 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Percentage of earnings before taxes:
U.S. federal statutory rate 35.0% 35.0% 35.0%
State and local taxes on income, net of
Federal income tax benefit 4.4% 4.4% 4.5%
Other .6% 2.3% 1.5%
----------------------------
Effective rate 40.0% 41.7% 41.0%
============================
</TABLE>
38
<PAGE> 39
Presented below are the significant elements of the net deferred tax
balance sheet accounts at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Deferred tax assets: 1997 1996
---- ----
<S> <C> <C>
Current:
Accounts receivable $ 6,573 $ 4,857
Inventories 977 902
Deferred compensation 765 428
Other, net 1,392 769
---------- ----------
Subtotal 9,707 6,956
Long-term:
Acquired net operating loss benefits 425 482
Other, net 525 1,127
---------- ----------
Subtotal 950 1,609
---------- ----------
Total deferred tax assets $ 10,657 $ 8,565
========== ==========
Deferred tax liabilities:
Current:
Change in tax method for inventories $ - $ 2,396
---------- ----------
Subtotal 2,396
Long-term:
Fixed assets $ 4,129 $ 3,557
Other, net 1,164 1,082
---------- ----------
Subtotal 5,293 4,639
---------- ----------
Total deferred tax liabilities $ 5,293 $ 7,035
========== ==========
</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, 1997 is $1,378,298. The
carryover period expires in 2006.
39
<PAGE> 40
NOTE 8 - LONG-TERM DEBT
The primary components of long-term debt at December 31, 1997 are
$30,000,000 of Senior Notes. The remaining $2,142,000 is comprised of mortgage
obligations, and certain other obligations related to the purchase of the IV One
Companies and Priority Healthcare Services Corporation.
On September 24, 1992 and October 20, 1992, the Company concluded a
public offering of $65,000,000 and $2,350,000, respectively, of 6 1/2%
Convertible Subordinated Debentures, due 2002, for approximately $65,565,000,
net of underwriting and other costs. On August 27, 1997 the Company called for
redemption on September 12, 1997 all of these Debentures at a redemption price
of $1,039 per $1,000 principal amount of Debentures plus accrued interest
through the redemption date. Debenture holders could elect to convert their
debentures into shares of common stock of the Company through September 12,
1997. Holders of all but $119,000 principal amount of the $67,350,000
outstanding Debentures elected to convert their Debentures into common stock at
the rate of 50.4 shares of common stock for each $1,000 principal amount of
Debentures. The redemption reduced the Company's long-term debt by $67,350,000
and increased by 3.4 million the number of issued shares of the Company's
common stock.
On December 27, 1996, the Company completed a private placement of $30
million Senior Notes due December 27, 1999 at an interest rate of 7.25%. The
Company estimates the fair market value at December 31, 1997 approximates the
principal amount based on rates currently available to the Company for debt with
similar terms and maturities.
In 1995, the Company purchased its corporate offices from a partnership
controlled by the Company's principal shareholder at its fair market value of
$1,450,000. Prior to the purchase, the Company leased the building under a
capitalized lease with a minimum annual rental of $111,000 at an implicit rate
of 10.5%.
NOTE 9 - PROFIT SHARING PLAN
The Company and its subsidiaries maintain a qualified Profit Sharing
Plan ("Profit Sharing Plan") for eligible employees. All employees are generally
eligible to participate in the Profit Sharing Plan as of the first January 1,
April 1, July 1 or October 1 after having completed at least one year of service
(as defined in the Profit Sharing Plan) and having reached age 21.
The annual contribution of the Company and its subsidiaries to the
Profit Sharing Plan is at the discretion of the Board and is generally 8% of the
Participant's compensation for the year. The employer contribution for a year is
allocated among the Participants employed on the last day of the year in
proportion to their relative compensation for the year. The Company's
contributions to the plan for the years ended December 31, 1997, 1996 and 1995
were $1,576,000, $1,334,600 and $1,165,500, respectively.
Subject to limitations imposed by the Internal Revenue Code, a
Participant may have a whole percentage (ranging from 1% to 13%) of his or her
compensation withheld from pay and contributed to the Profit Sharing Plan and
make "rollover" contributions to the Profit Sharing Plan of qualifying
distributions from other employers' qualified plans.
40
<PAGE> 41
A Participant's interest in amounts withheld from his or her pay and
contributed to the Profit Sharing Plan or in rollover contributions and in the
earnings on those amounts are fully vested at all times. A Participant's
interest in employer contributions made on his or her behalf and the earnings on
those contributions become 20% vested after three years of service and an
additional 20% vested during each of the next four years. A Participant's
interest in employer contributions made on his or her behalf and the earnings on
those contributions will also become fully vested when the employee retires at
age 65 or older, dies or becomes totally disabled.
All contributions to the Profit Sharing Plan are paid in cash to a
trustee bank, as trustee, and are invested by the trustee until distributed to
Participants or their beneficiaries. Participants are permitted to direct the
trustee as to the investment of their accounts by choosing among several
investment funds that are offered under the Profit Sharing Plan, including one
fund consisting of common stock of the Company. Participants may elect to invest
in one fund or a combination of the available funds according to their
investment goals. If a Participant does not make an investment election, his or
her Profit Sharing Plan accounts will be invested in a fund designated by the
Company.
NOTE 10 - MINORITY INTEREST
On October 29, 1997, the Company consummated an initial public offering
("IPO") of its Priority Healthcare Corporation ("Priority") subsidiary. Priority
registered 2,300,000 shares of Class B Common Stock, all of which were sold in a
firm commitment underwriting at an aggregate offering price of $33.35 million.
After underwriters' discount of $2.32 million and expenses incurred in
conjunction with the IPO of $1.05 million, the net offering proceeds to Priority
were approximately $29.98 million. The Company owns all of the outstanding
shares of Class A Common Stock of Priority. The holders of Priority's Class A
Common Stock and Class B Common Stock are entitled to three votes per share and
one vote per share, respectively, and generally vote together as a single class
on all matters submitted to a vote of the shareholders of Priority. The Company
owns 81.6% of the outstanding common stock of Priority and has 93.0% of the
voting power of the outstanding common stock of Priority.
The Priority IPO resulted in the establishment of minority interest of
$11 million, which represents the minority shareholders' interest in
shareholders' equity of Priority, and an increase of $19.2 million in the
Company's additional paid in capital, which represents the Company's incremental
share of Priority's shareholders' equity, both at October 29, 1997.
NOTE 11 - 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.
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
41
<PAGE> 42
date of grant, were authorized under such plans.
On May 20, 1993, the Company's shareholders approved the 1993 Stock
Option and Incentive Plan (the "1993 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 holds 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
the 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 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. On May 16, 1996,
the Company's shareholders approved an amendment to the 1993 Plan to increase to
3,000,000 the number of shares authorized for issuance pursuant to awards made
under the 1993 Plan. At its March 26, 1998 meeting, the Company's Board will
propose to amend the 1993 Plan to (i) increase by 1,000,000 the number of shares
authorized for issuance pursuant to awards made under the 1993 Plan and (ii)
increase to 300,000 the number of shares that any one participant may receive
under the 1993 Plan during any calendar year subject to shareholder approval at
the Company's May 21, 1998 annual meeting.
On August 25, 1997, Priority's Board of Directors and the then sole
shareholder (the Company) adopted the 1997 Stock Option and Incentive Plan (the
"1997 Stock Option Plan"). The 1997 Stock Option Plan reserves for issuance
1,250,000 shares of Priority Class B Common Stock, subject to adjustment in
certain events. The 1997 Stock Option Plan provides for the grant to officers,
key employees and consultants of Priority of options to purchase shares of
Class B Common Stock and restricted shares of Class B Common Stock. Stock
options granted under the 1997 Stock Option Plan may be either options intended
to qualify for federal income tax purposes as "incentive stock options" or
options not qualifying for favorable tax treatment ("nonqualified stock
options"). No individual participant may receive awards for more than 300,000
shares in any calendar year.
In accordance with the provisions of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS 123), the Company has
elected to continue following Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its stock option plans, and accordingly, generally does not
recognize compensation expense related to these options. If the Company had
elected to recognize compensation expense based on the fair value of the
options at the grant date as prescribed by SFAS 123, pro forma net income and
42
<PAGE> 43
earnings would have been:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
(In thousands, except share data)
Net earnings - as reported $ 23,746 $ 18,006
Net earnings - pro forma $ 21,211 $ 16,019
Earnings per share
Basic - as reported 1.84 1.59
Basic - pro forma 1.65 1.41
Diluted - as
reported 1.59 1.36
Diluted - pro forma 1.43 1.22
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions for the years ended,
<TABLE>
<CAPTION>
1997 1997 1996 1996
------------------- ------------------ ------------------ -------------------
Company Options Priority Options Company Options Priority Options
------------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Risk free interest rates 5.71% 5.90% 6.05% -
Expected dividend yields .26% .00% .41% -
Expected life of options 4.66 4.60 4.60 -
Volatility of stock price 27.23% 54.79% 29.43% -
Weighted average fair value of
options $ 10.16 $ 7.52 $ 6.20 -
</TABLE>
Compensation expense based on the fair value of options granted prior
to January 1, 1995 was not included in the preceding pro forma calculations.
Therefore, the resulting pro forma compensation cost may not be representative
of that to be expected in future years.
43
<PAGE> 44
Changes in stock options under the Company's plans are shown below:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE PER
SHARES SHARES
- ---------------------------------------------------------------------------
<S> <C> <C>
Options outstanding
at December 31, 1994 2,629,471 $ 5.42 to $17.00
Forfeited during 1995 ( 102,598) $11.50 to $17.00
Granted during 1995 647,300 $14.50 to $19.39
Exercised during 1995 ( 382,394) $ 5.42 to $17.00
----------
Options outstanding
at December 31, 1995 2,791,779 $ 5.42 to $19.39
Forfeited during 1996 ( 56,600) $11.50 to $18.13
Granted during 1996 848,775 $14.56 to $20.08
Exercised during 1996 ( 308,654) $ 5.42 to $17.63
----------
Options outstanding
at December 31, 1996 3,275,300 $ 5.42 to $20.08
Forfeited during 1997 ( 39,162) $ 6.88 to $23.63
Granted during 1997 816,600 $17.63 to $31.50
Exercised during 1997 ( 870,130) $ 5.42 to $20.08
----------
Options outstanding
at December 31, 1997 3,182,608 $ 5.84 to $31.50
==========
Exercisable
at December 31, 1997 1,737,412
==========
Available for grant
at December 31, 1997 565,668 (1)
==========
</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.
(1) Subject to Shareholder approval at the Company's May 21, 1998 annual
meeting.
44
<PAGE> 45
Additional information regarding the Company's options outstanding at
December 31, 1997 is shown below:
<TABLE>
<CAPTION>
Exercise Price Range
- --------------------------------------------------------------------------------------------------------------------
$5.84 - $11.63 $12.88 -$20.08 $22.63 - $31.50 Total
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of options
outstanding 340,459 2,067,049 775,100 3,182,608
Weighted average
exercise price $ 10.72 $ 16.28 $ 31.30 $ 19.34
Remaining contractual life 4.72 7.41 9.94 7.74
Number of shares
exercisable 340,459 1,396,953 - 1,737,412
Weighted average
exercisable price $ 10.72 $ 15.85 - $ 14.85
</TABLE>
Changes in stock options under all of Priority's plans are shown below:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE PER
SHARES SHARES
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding
at December 31, 1996 -
Forfeited during 1997 ( 13,800) $ 14.50 to $14.50
Granted during 1997 473,050 $ 14.50 to $15.00
Exercised during 1997 -
Options outstanding
at December 31, 1997 459,250 $ 14.50 to $15.00
==========
Exercisable
at December 31, 1997 -
==========
Available for grant
at December 31, 1997 815,750
==========
</TABLE>
45
<PAGE> 46
Additional information regarding Priority's options outstanding at
December 31, 1997 is shown below:
<TABLE>
<CAPTION>
Exercise Price Range
- --------------------------------------------------------------------------------------------
$14.50 $15.00 Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Number of options
outstanding 441,250 18,000 459,250
Weighted average
exercise price $ 14.50 $ 15.00 $ 14.52
Remaining contractual life 9.81 9.96 9.82
Weighted average
exercisable price - - -
</TABLE>
NOTE 12 - COMMITMENTS
The Company leases warehouse and office space under noncancelable
operating leases expiring at various dates through 2002, with options to renew
for various periods. Minimum commitments under leases aggregate $1,437,700 for
1998, $899,001 for 1999, $823,698 for 2000, $552,529 for 2001 and $389,311 for
2002.
The consolidated rent expense for the years ended December 31, 1997,
1996 and 1995 was $2,107,169, $1,519,919 and $1,708,691, respectively, of which
approximately $1,034,247 in 1997, $208,728 in 1996 and $76,875 in 1995 pertained
to leases with terms of one year or less.
In 1997, the Company began construction of a new 180,000 square foot
office building in Indianapolis, Indiana. This building will provide space for
the accounting, human resources, information systems and purchasing departments,
along with the Company's executive officers and related staff. Upon completion
and occupancy of the building, and subject to favorable market conditions, the
Company (through its wholly-owned subsidiary, College Park Plaza Associates,
Inc.) intends to sell the building at its fair market value to a third party.
The Company will then lease back the top two floors of the five-story building.
Approximately 32,000 square feet of the Company's existing Indianapolis
facility, consisting primarily of office space, will be leased or sold upon
relocation to the new facilities.
NOTE 13 - MAJOR CUSTOMERS
The Company services customers in 50 states and Puerto Rico from
its 19 distribution centers located in 13 states. Its principal customers are
chain drug companies that operate their own warehouses. Other customers include
independent drug stores, chain drug stores, hospitals, clinics, HMOs, state and
federal government agencies and other health care providers. The following chain
drug warehouse customers each accounted for over 10% of the Company's net sales
during the years shown: CVS (22%), Rite Aid Corporation (18%) and Eckerd
Corporation (16%) in 1997; Eckerd Corporation (17%), Rite Aid Corporation (14%)
and Revco D.S., Inc. (12%) in 1996; and Eckerd Corporation (19%), Rite Aid
Corporation (15%)
46
<PAGE> 47
and Revco D.S., Inc. (10%) in 1995. Sales to these customers aggregated 56%, 43%
and 44% of net sales in 1997, 1996 and 1995, respectively. The Company sells
inventory to its chain drug warehouse and other customers on various payment
terms. This entails accounts receivable exposure, especially if any of its chain
warehouse 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 the write-off or writedown of chain drug accounts
receivable in the future.
NOTE 14 - STATEMENT OF CASH FLOWS
Cash paid for interest expense and income taxes was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 1996 1995
<S> <C> <C> <C>
(in thousands)
Interest $ 14,129 $ 13,126 $ 13,395
Income taxes $ 16,935 $ 13,640 $ 16,469
</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
not exceeding 40 years. All acquisitions were treated as purchases and the
financial statements include the results of operations from the respective
effective date of acquisition. Results of operations of the acquired companies
from January 1 of the year of acquisition to the effective dates of the
transactions are not material to the consolidated results of operations of the
Company for the respective years.
Effective January 1, 1995, Priority purchased the IV One Companies ("IV
One"). IV One is 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. The
consideration exchanged for IV One was approximately $2.9 million which exceeded
the fair value of net assets acquired and resulted in approximately $2.1 million
of intangible assets.
47
<PAGE> 48
In January 1996, the Company formed a new subsidiary, National Infusion
Services, Inc. ("NIS"). Effective February 8, 1996, the Company through its NIS
subsidiary purchased the assets of the infusion services division of Infectious
Disease of Indiana P.S.C. NIS is a provider of quality care to patients in a
variety of settings. In February 1997, the corporate name was changed from NIS
to Priority Healthcare Services Corporation . The Company acquired the assets of
NIS for approximately $9 million in cash and incurred a long-term obligation of
approximately $1.5 million, resulting in approximately $9.8 million in
intangible assets.
Effective July 31,1997, the Company purchased substantially all of the
operating assets and assumed most of the liabilities and contractual obligations
of Tennessee Wholesale Drug Company ("TWD"). The Company expended approximately
$27 million for the acquisition of TWD, which approximated the fair value of the
net assets acquired. In connection with this acquisition, the Company intends to
close the TWD divisions located in Baltimore, Maryland and Tampa, Florida. The
customers of these divisions will be serviced from existing facilities. The
Company has finalized an exit plan and recognized a liability of $413,000 as of
December 31, 1997. The plan offers all employees the chance to interview for
openings elsewhere in the Company and would pay a lump sum for relocation
assistance. Employees who do not relocate but work up to the designated date of
his/her separation of employment will receive a severance package based on his
or her tenure with the Company. The plan also includes operational and data
processing costs associated with these closures. The Company anticipates both
facilities will be closed by the end of the second quarter of 1998.
Effective August 6, 1997, Priority acquired substantially all of the
operating assets and assumed most of the liabilities of Grove Way Pharmacy,
Inc., a specialty distributor of vaccines and injectables located in Castro
Valley, CA. The acquisition was not considered material and the amount expended
approximated the fair value of the net assets acquired.
NOTE 15 - LEGAL PROCEEDINGS
The Company is a defendant in a consolidated class action filed in the
United States District Court for the Northern District of Illinois in 1993 which
names the Company, five other pharmaceutical wholesalers and 26 pharmaceutical
manufacturers as defendants, In re Brand Name Prescription Drugs Litigation, MDL
997. Plaintiffs allege that pharmaceutical manufacturers and wholesalers
conspired to fix prices of brand-name prescription drugs sold to retail
pharmacies at artificially high levels in violation of the federal antitrust
laws. The plaintiffs seek injunctive relief, unspecified treble damages, costs,
interest and attorneys' fees. The Company has denied the complaint allegations.
Several of the manufacturer defendants and the class plaintiffs have
reached settlement agreements. The trial against the remaining defendants,
including the Company, is scheduled to begin on September 14, 1998.
On November 20, 1997, the trial court granted leave to certain retail
pharmacies which had "opted out" of the class action to amend their complaints
to add the wholesalers, including the Company, as defendants. The majority of
these "opt-out" complaints, which initially named only pharmaceutical
manufacturers as defendants, were filed in 1994 and 1995.
48
<PAGE> 49
At this time, the Company has been served with 114 amended complaints
by the "opt-out" plaintiffs. One hundred ten of these complaints contain
allegations and claims for relief that are substantially similar to those in the
federal class action. The four remaining amended complaints add allegations that
the defendants' conduct violated state law. The Company has denied the complaint
allegations.
On November 20, 1997, Eckerd Corporation filed a complaint naming 11
manufacturers and three wholesalers, including the Company, as defendants. Also
on November 20, 1997, American Drug Stores filed a complaint naming 11
manufacturers and six wholesalers, including the Company, as defendants. These
complaints contain allegations and claims for relief that are substantially
similar to those in the federal class action. The Company has denied the
allegations in these complaints.
On July 1, 1996, the Company and several other wholesalers were joined
as the defendants in a seventh amended and restated complaint filed in the
Circuit Court of Greene County, Alabama, Durrett v. The Upjohn Company, Civil
Action No. 94-029. The case was first filed in 1994. The plaintiffs claim the
prices of prescription drugs they purchase in interstate commerce are
artificially high because of alleged illegal activities of the defendant
pharmaceutical manufacturers and wholesalers. The plaintiffs seek monetary
damages, injunctive relief and punitive damages. The Company has denied the
allegations of the complaint.
On October 21, 1994, the Company entered into an agreement with five
other wholesalers and 26 pharmaceutical manufacturers covering all of the cases
listed above. Among other things, the agreement provides that for all judgments
that might be entered against both the manufacturer and wholesaler defendants,
the Company's total exposure for joint and several liability is limited to
$1,000,000 and the six wholesaler defendants are indemnified for $9,000,000 in
related legal fees and expenses.
The Company is unable to form a reasonably reliable conclusion
regarding the likelihood of a favorable or unfavorable outcome of these cases.
The Company believes the allegations of liability are without merit with regard
to the wholesaler defendants and that the attendant liability of the Company, if
any, would not have a material adverse effect on the Company's financial
condition or liquidity. Adverse decisions, although not anticipated, could have
an adverse material effect on the Company's results of operations.
On October 7, 1996, the Company and its subsidiary, National Infusion
Services (now known as Priority Healthcare Services Corporation) ("PHSC"), were
named as defendants in an action filed by Thomas G. Slama, M.D. in the Superior
Court of Hamilton County, Indiana which is now pending in that Court as Cause
No. 29D03-9702-CP-81. Dr. Slama is a former director of the Company and formerly
was Chief Executive Officer and President of PHSC. The complaint alleges breach
of contract and defamation arising from the termination of Dr. Slama's
employment with PHSC in October 1996, and seeks damages in excess of $3.4
million, punitive damages, attorneys' fees and costs. The Company and PHSC
believe Dr. Slama terminated his employment without "cause" (as defined in his
employment agreement), and alternatively, that PHSC had grounds to terminate Dr.
Slama for "cause" under his employment agreement. The Company and PHSC have
answered the complaint, denying the merits of Dr. Slama's claims, and have also
filed a counterclaim against Dr. Slama seeking, among other things, declaratory
relief, compensatory and (in some instances) treble damages, punitive damages,
attorneys' fees, interest and costs. Dr.
49
<PAGE> 50
Slama moved to dismiss portions of the counterclaim, which motion was denied by
the court on July 14, 1997. The Company and PHSC thereafter filed an amended
counterclaim adding additional claims against Dr. Slama. On March 12, 1998, Dr.
Slama filed a motion for leave to amend his complaint to add Priority and
William E. Bindley as defendants and to state additional claims for breach of
contract, breach of oral contract, breach of fiduciary duty, securities fraud
and conversion. The Company has entered into an Indemnification and Hold
Harmless Agreement with Priority, whereby the Company has agreed to indemnify
and hold harmless Priority and its subsidiaries from and against any and all
claims, losses, liabilities, costs, damages, charges and expenses (including
without limitation legal and other professional fees) which they might incur or
which may be charged against them in any way based upon, connected with or
arising out of the lawsuit filed by Dr. Slama. The Company intends to vigorously
oppose Dr. Slama's motion to amend his complaint, and to vigorously defend the
amended complaint in the event his motion is granted. Discovery is proceeding,
and the matter is currently set for trial on March 9, 1999. The Company and PHSC
are contesting Dr. Slama's complaint and pursuing their counterclaim vigorously.
Although the outcome of any litigation is uncertain, the Company believes after
consultation with its counsel that the attendant liability of the Company, if
any, should not have a material adverse effect on the Company's financial
condition or liquidity. An adverse decision, although not anticipated, could
have a material effect on the Company's results of operations.
On January 11, 1996, the Company was informed by the U.S. Attorney's
office in Indianapolis that the Drug Enforcement Administration ("DEA") was
alleging multiple violations of the recordkeeping and reporting regulations of
the Controlled Substances Act ("Act") resulting from a routine inspection of the
Company's Indianapolis Distribution Center during January and February 1994. On
November 7, 1996, the Company entered into a Civil Consent Decree with the
United States and the DEA resolving all issues relating to its Indianapolis
Distribution Center's alleged failure to comply with the Act. In exchange for
the settlement of all civil and administrative issues, the Company paid
$700,000, and agreed to pay an additional $300,000 if the Company does not
substantially comply with the terms of the Civil Consent Decree over the next
two years. The Company does not believe the amount of the settlement will exceed
the charge recognized by the Company in 1996, which included estimated related
professional fees of $112,000.
50
<PAGE> 51
NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents the quarterly financial data for 1997 and 1996.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(in thousands, except per share data)
1997
Net sales $ 1,634,663 $ 1,811,028 $ 1,812,468 $ 2,051,763
Gross margin 32,831 33,997 35,777 40,043
Net earnings 5,521 5,554 5,523 7,147
Earnings per share:
Basic $ 0.48 $ 0.47 $ 0.44 $ 0.46
Diluted 0.40 0.39 0.37 0.43
1996
Net sales $ 1,188,988 $ 1,217,896 $ 1,336,265 $ 1,574,377
Gross margin 29,426 30,008 29,649 31,435
Net earnings 4,604 4,060 4,213 5,129
Earnings per share:
Basic $ 0.41 $ 0.36 $ 0.37 $ 0.45
Diluted 0.35 0.31 0.32 0.37
</TABLE>
51
<PAGE> 52
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.
March 26, 1998 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 President
- -------------------------------- (Principal Executive Officer); Director March 26, 1998
William E. Bindley
/s/ William F. Bindley, II Director
- --------------------------------
William F. Bindley, II March 26, 1998
/s/ Keith W. Burks Executive Vice President; Director
- --------------------------------
Keith W. Burks March 26, 1998
/s/ Seth B. Harris Director
- --------------------------------
Seth B. Harris March 26, 1998
/s/ Robert L. Koch, II Director
- --------------------------------
Robert L. Koch, II March 26, 1998
/s/ Michael D. McCormick Executive Vice President, General Counsel
- -------------------------------- and Secretary; Director March 26, 1998
Michael D. McCormick
/s/ J. Timothy McGinley Director
- --------------------------------
J. Timothy McGinley March 26, 1998
/s/ James K. Risk, III Director
- --------------------------------
James K. Risk, III March 26, 1998
/s/ Thomas J. Salentine Executive Vice President and Chief Financial
- -------------------------------- Officer (Principal Accounting and Financial March 26, 1998
Thomas J. Salentine Officer); Director
/s/ K. Clay Smith Director March 26, 1998
- --------------------------------
K. Clay Smith
/s/ Carolyn Woo Director March 26, 1998
- --------------------------------
Carolyn Woo
</TABLE>
<PAGE> 1
EXHIBIT 4-A(ii)
NOTICE OF REDEMPTION
BINDLEY WESTERN INDUSTRIES, INC.
6 1/2% Convertible Subordinated Debentures Due 2002
CUSIP NO. 090324ABO
NOTICE IS HEREBY GIVEN that on August 27, 1997, Bindley Western Industries,
Inc., (the "Company") called for redemption on September 12, 1997 (the
"Redemption Date"), all of its outstanding 6 1/2% Convertible Subordinated
Debentures due 2002 (the "Debentures") at a redemption price of 103.90 percent
of the principal face amount of the Debentures plus accrued interest to the
Redemption Date (the "Redemption Price"). On and after the Redemption Date,
interest on the Debentures will cease to accrue and the Debentures will cease to
be entitled to any lien, benefit or security under the Indenture governing the
terms of the Debentures.
ALTERNATIVES AVAILABLE TO HOLDERS OF DEBENTURES
1. Conversion of Debentures Into Common Stock of the Company by the Close
of Business on the Redemption Date. At any time until 5:00 p.m. Eastern Standard
Time on September 12, 1997, Debentures may be converted at the option of the
holder into shares of the common stock, $.01 par value, of the Company ("Common
Stock"), at a conversion price of $19.825 per share of Common Stock. No
fractional shares will be issued upon conversion of Debentures. Instead, a cash
adjustment equal to that same fraction of the closing sale price per share
of the Common Stock on the New York Stock Exchange on the business day next
preceding the date of conversion will be paid by the Company. The closing sale
price of the Common Stock on August 22, 1997, on the New York Stock Exchange was
$24 1/2. Between January 1, 1997, and August 22, 1997, the high and low closing
sale prices of the Common Stock on the New York Stock Exchange ranged from
$17 5/8 to $24 5/8.
Debentures may be converted into Common Stock by surrendering Debentures to
Bank One, Indiana, N.A. (formerly known as Bank One, Indianapolis, N.A.), at the
address specified below no later than the close of business on the Redemption
Date. Debentures must be surrendered together with a written notice of election
executed by the holder thereof, specifying the name(s) in which the shares of
Common Stock deliverable upon such conversion shall be registered with the
address and social security or taxpayer identification number of the person(s)
so named.
If the closing sale price per share of the Common Stock as reported on the
New York Stock Exchange is greater than $21 1/4 on the date of conversion,
holders of Debentures who elect to convert their Debentures will receive shares
of Common Stock having, at the time of such conversion, an aggregate market
value greater than the aggregate Redemption Price the holders would receive upon
redemption of their Debentures. On conversion no adjustment will be made for
accrued interest on the Debentures.
2. Redemption of Debentures. Debentures not properly submitted for
conversion by the close of business on the Redemption Date will be redeemed at
the Redemption Price. Payment of the Redemption Price will be made by Bank One,
Indiana, N.A., on and after the Redemption Date upon receipt at the address
specified below of the Debentures so redeemed.
3. SALE OF DEBENTURES IN BROKERAGE TRANSACTIONS Debentures may be sold in
the open market. Holders of Debentures who wish to sell their Debentures should
consult with their own financial advisors regarding if and when they should sell
their Debentures.
The Company has been advised that, under present federal income tax law, no
taxable gain or loss will be recognized by a holder of Debentures on the
conversion except to the extent that the holder receives cash in lieu of a
fractional share of Common Stock. A holder of Debentures who either redeems
or sells his Debenture will recognize gain or loss measured by the difference
4-A(ii)
<PAGE> 2
BINDLEY WESTERN INDUSTRIES, INC.
10333 NORTH MERIDIAN STREET, SUITE 300
INDIANAPOLIS, INDIANA 46290
(317) 298-9900
August 27, 1997
TO BANKS, BROKERS AND OTHER NOMINEE HOLDERS:
Enclosed is a copy of a Notice of Redemption by Bindley Western Industries,
Inc. of its 6 1/2% Convertible Subordinated Debentures Due 2002 (the
"Debentures") on September 12, 1997 (the "Redemption Date"). We are also
enclosing a form of Letter of Transmittal.
THE DEBENTURES ARE PRESENTLY CONVERTIBLE INTO SHARES OF BINDLEY WESTERN
INDUSTRIES, INC. COMMON STOCK AT A PRICE OF $19.825 PER SHARE OF COMMON STOCK.
AFTER 5:00 P.M. EASTERN STANDARD TIME ON THE REDEMPTION DATE, THE DEBENTURES
WILL NO LONGER BE SO CONVERTIBLE.
BASED ON THE CLOSING PRICE OF $24 1/2 FOR THE COMMON STOCK ON THE NEW YORK
STOCK EXCHANGE ON AUGUST 22, 1997, THE MARKET VALUE OF THE SHARES OF COMMON
STOCK INTO WHICH THE DEBENTURES ARE CONVERTIBLE IS GREATER THAN THE REDEMPTION
PRICE (WHICH INCLUDES A PREMIUM) OF THE DEBENTURES.
If you are a holder of Debentures, this information will be of importance
to you. If you are not a holder, we trust that this information may be helpful
to you in advising your clients who may have occasion to seek your counsel
regarding the redemption.
Please forward copies of these enclosures to any of your clients who hold
Debentures, and we will reimburse you for any expenses incurred by you in doing
so. Additional copies of the enclosures are available at:
Bank One, Indiana, N.A.
c/o Bank One Trust Company, N.A.
P.O. Box 710184
Columbus, Ohio 43271-0184
Attention: Corporate Trust Operations
(800) 346-5153
If you have any questions or require assistance in completing the Letter of
Transmittal, please contact Bank One, Indiana, N.A., at the address or phone
number indicated above.
Very truly yours,
BINDLEY WESTERN INDUSTRIES, INC.
By William E. Bindley
----------------------------------
William E. Bindley
Chairman of the Board
Enclosures:
A. Notice of Redemption
B. Letter of Transmittal
<PAGE> 3
If you wish to convert your Debentures by means of this Letter of Transmittal,
the Debentures and Letter of Transmittal must be RECEIVED by Bank One, Indiana,
N.A. at the address set forth below prior to 5:00 p.m. Eastern Standard Time on
September 12, 1997. See Instructions on the attached page.
BINDLEY WESTERN INDUSTRIES, INC.
LETTER OF TRANSMITTAL
(To Accompany 6 1/2% Convertible Subordinated Debentures due 2002)
By Mail By Hand or Overnight Courier Delivery
Bank One, Indiana, N.A. Bank One Indiana, N.A.
c/o Bank One Trust Company, N.A. c/o Bank One Trust Company, N.A.
P.O. Box 710184 235 West Schrock Road
Columbus, Ohio 43271-0184 Westerville, Ohio 43081-0184
Attention: Corporate Trust Operations Attention: Corporate Trust Operations
(800) 346-5153
Ladies and Gentlemen:
Surrendered herewith are 6 1/2% Convertible Subordinated Debentures due
2002 (the "Debentures") of Bindley Western Industries. Inc. (the "Company")
numbered and registered as listed below.
Items A, B and E of this Letter of Transmittal must be completed in all
cases.
PLEASE FOLLOW CAREFULLY THE INSTRUCTIONS ON THE ATTACHED PAGE.
<TABLE>
<CAPTION>
ITEM A
- -------------------------------------------------------------------------------------------------------------
PLEASE FILL IN NUMBERS
----------------------------------------
Certificate Principal Face Amount
Name and Address of registered holder Number(s) on Debentures
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
------------------- $---------------------
------------------- $---------------------
------------------- $---------------------
------------------- $---------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE-DESCRIBED DEBENTURES ARE SURRENDERED TO YOU FOR THE ACTION INDICATED
BELOW.
ITEM B
INDICATE CHOICE 1. [ ] Conversion, at the conversion price of
BY CHECKING ONE BOX $19.825 per share of Common Stock,
into approximately 50.4 shares of
Bindley Western Industries, Inc. Common
Stock $.01 par value (the "Common
Stock"), with a cash adjustment in
respect of fractional shares, for each
$1,000 principal face amount of
Debenture (see Instruction 2).
NOTE: SO LONG AS THE MARKET PRICE PER SHARE OF COMMON STOCK IS GREATER
THAN $21 1/4, THE AGGREGATE MARKET PRICE OF THE SHARES OF COMMON STOCK
(WITH CASH IN LIEU OF ANY FRACTIONAL SHARE) TO BE RECEIVED UPON
CONVERSION WILL BE GREATER THAN THE AMOUNT OF CASH RECEIVABLE UPON
REDEMPTION.
2. [ ] Redemption at 103.90 percent of the
principal face amount of Debentures
plus accrued interest (see
Instruction 3).
IF NO BOX IS CHECKED AND THE ABOVE DEBENTURES
ARE RECEIVED BY BANK ONE, INDIANA, N.A. PRIOR
TO 5:00 P.M. EASTERN STANDARD TIME ON SEPTEMBER
12 1997, SUCH DEBENTURES WILL BE DEEMED
SURRENDERED FOR CONVERSION INTO COMMON STOCK.
IF ANY DEBENTURES ARE RECEIVED AFTER THAT TIME,
SUCH DEBENTURES WILL BE REDEEMED.
<PAGE> 4
<TABLE>
<S><C>
ITEM C ITEM D
To be completed only if certificate(s) To be completed only if certificate(s)
evidencing shares of Common Stock and/or a check evidencing shares of Common Stock and/or a
to be issued shares in name(s) other than name(s) check to be mailed to address other than
indicated in Item A above (see Instructions address indicated in Item A above (see
3, 4, and 5) Instructions 4, and 5)
Issue to: Mail to:
Name(s):_________________________________________ Name(s):______________________________________
Type or Print Type or Print
Address:_________________________________________ Address:______________________________________
_________________________________________________ ______________________________________________
Zip Code Zip Code
_________________________________________________
Social Security Number or Taxpayer I.D. Number
ITEM E
REQUIRED SIGNATURES
The signature(s) on this Letter of
DEBENTUREHOLDER(S) Transmittal must correspond exactly
MUST with the name(s) on the Debenture
SIGN certificates or the name(s) of the
HERE person(s) to whom the Debentures have
been properly assigned and transferred (see
Instructions 1, 4, 5 and 6)
Dated:_______________________________________
Signature(s):________________________________
Signature(s):________________________________
Social Security Number or
Taxpayer I.D. Number:______________________
Telephone: ( )____________________________
</TABLE>
<PAGE> 5
IMPORTANT TAX INFORMATION
Under federal income tax law, Bank One, Indiana, N.A., may be required to
withhold 31% of payments to holders presenting their Debentures for redemption
who have failed to furnish a social security or other taxpayer identification
number to it, certified to be correct under penalty of perjury. Certification
may be made on Substitute Form W-9 below.
SUBSTITUTE FORM W-9 MUST BE COMPLETED
<TABLE>
<S><C>
- -----------------------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: BANK ONE, INDIANA, N.A.
- -----------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 -PLEASE PROVIDE YOUR TIN IN THE BOX AT
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
----------------------------------
Social Security Number
FORM W-9 OR
-------------------------------
Employer Identification Number
DEPARTMENT OF THE
TREASURY INTERNAL Part 2 - Certification - Under Penalties of Perjury, I certify that:
REVENUE SERVICE (1) The number shown on this form is my correct Taxpayer
Identification Number (or I am waiting for a number to
PAYER'S REQUEST FOR be issued to me) and
TAXPAYER (2) I am not subject to backup withholding either because I Part 3
IDENTIFICATION NUMBER have not been notified by the Internal Revenue Service --------------
("TIN") ("IRS") that I am subject to backup withholding as a Awaiting TIN
result of failure to report all interests or dividends, or the [ ]
IRS has notified me that I am no longer subject to
backup withholding.
Certification Instructions -You must cross out Item
(2) above if you have been notified by the IRS that
you are subject to backup withholding because of
under reporting interests or dividends on your tax
return. However, if after being notified by the IRS
that you were subject to backup withholding you
received another notification from the IRS that you
were no longer subject to backup withholding, do not
cross out item (2).
SIGNATURE Date , 1997
----------------------------- -----------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify that under penalties of perjury a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
, 1997
- -------------------------------- -------------------------
Signature Date
DO NOT WRITE BELOW
<TABLE>
<S><C>
- -----------------------------------------------------------------------------------------------------------
Date Received: Number of Common Shares Issued:
- -----------------------------------------------------------------------------------------------------------
Principal Face Amount of Debentures received for: Common Stock Certificate No(s):
Conversion $
-----------------
Redemption $ Amount of Check:
----------------- $
------------
- -----------------------------------------------------------------------------------------------------------
Certificate No(s): Number of Check:
- -----------------------------------------------------------------------------------------------------------
Checked by: Checked by: Date Delivered:
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
INSTRUCTIONS
1. GENERAL
Please do not send Debenture certificates directly to the Company. Your
Debentures, together with your signed and completed Letter of Transmittal (or
other notice) and any required supporting documents (see Instructions 4 and 5
below) should be mailed, or otherwise delivered, to Bank One, Indiana, N.A. at
the address indicated on the Letter of Transmittal. The method of delivery is at
your option and risk but, if mail is used, registered mail, return receipt
requested, is suggested.
Items A, B and E on the Letter of Transmittal must be completed in all
cases.
2. IF YOU WISH TO CONVERT YOUR DEBENTURES
If you wish to convert your Debentures into shares of Common Stock, your
Debentures and a completed Letter of Transmittal must be received by Bank One,
Indiana, N.A. at the address indicated on the Letter of Transmittal, prior to
5:00 p.m. Eastern Standard Time on September 12, 1997.
If you wish the certificate(s) evidencing shares of Common Stock to be
issued in the same name as the name in which the surrendered Debentures are
registered, complete Items A, B and E on the Letter of Transmittal.
If you wish the certificate(s) evidencing shares of Common Stock to be
issued in a different name, see Instruction 4 and complete items A, B, C and E
on the Letter of Transmittal.
3. IF YOU WISH TO HAVE YOUR DEBENTURES REDEEMED
If you wish to have your Debentures redeemed by the Company for cash, your
Debentures and a completed Letter of Transmittal must be sent to Bank One,
Indiana, N.A. at the address indicated on the Letter of Transmittal. A check
will be sent to you when your Debentures and Letter of Transmittal have been
received, but in no event earlier than September 15, 1997.
If you wish the check to be issued in the name in which the surrendered
Debentures are registered, complete Items A, B and E on the Letter of
Transmittal.
If you wish the check to be issued in a different name, see Instruction 4
and complete Items A, B, C and E on the Letter of Transmittal.
IF YOU FAIL TO INDICATE A CHOICE AS TO REDEMPTION OR CONVERSION AND YOUR
DEBENTURES ARE RECEIVED BY BANK ONE, INDIANA, N.A., PRIOR TO 5:00 P.M. EASTERN
STANDARD TIME ON SEPTEMBER 12, 1997, SUCH DEBENTURES WILL BE DEEMED SURRENDERED
FOR CONVERSION INTO COMMON STOCK. IF YOUR DEBENTURES ARE RECEIVED AFTER THAT
TIME, SUCH DEBENTURES WILL BE REDEEMED.
4. CERTIFICATE OR CHECK TO BE ISSUED IN A DIFFERENT NAME
If you wish the certificate(s) evidencing shares of Common Stock and / or
check to be issued in a name other than that of the registered holder of the
Debentures, your Debentures must be property endorsed or be accompanied by
appropriate stock powers, properly executed by the registered holder, so that
such endorsement or stock powers are signed exactly as the name of the
registered holder appearing on the Debenture certificates, and the signature
must be properly guaranteed by a commercial bank or trust company in the United
States or by a firm which is a member of a registered national securities
exchange. Complete Items A, B, C and E on the Letter of Transmittal.
5. SIGNATURE BY OTHER THAN REGISTERED HOLDER
If the Letter of Transmittal is signed in Item E by an executor,
administrator, trustee, guardian, attorney or the like, the Letter of
Transmittal and Debentures must be accompanied by evidence satisfactory to Bank
One, Indiana, N.A., and the Company of the authority of such person to sign the
Letter of Transmittal.
If the Letter of Transmittal is signed in Item E by someone other than the
registered holder, who is not a person described in the preceding paragraph, the
Debentures must be properly endorsed or be accompanied by appropriate stock
powers, properly executed by the registered holder, so that such endorsement or
stock powers are signed exactly as the name of the registered holder appears on
the Debentures, and the signature
<PAGE> 7
must be properly guaranteed by a commercial bank or trust company in the United
States or by a firm which is a member of a registered national securities
exchange. Complete Items A, B, D and E on the Letter of Transmittal.
6. JOINT HOLDERS
If Debentures are tendered by joint holders or owners, all such persons
must sign Item E on the Letter of Transmittal. If Debentures are registered in
different names or forms of ownership, separate Letters of Transmittal must be
completed, signed and returned for each different registration.
7. LOST OR DESTROYED DEBENTURE CERTIFICATES
If your Debenture certificates have been either lost or destroyed, notify
Bank One, Indiana, N.A., of this fact promptly at the address and phone number
set forth on the Letter of Transmittal. You will then be instructed as to the
steps you must take in order to convert or surrender for redemption your
Debentures.
8. QUESTIONS ON HOW TO SUBMIT YOUR DEBENTURE CERTIFICATES
Questions and requests for assistance on how to submit your Debentures
should be directed to Bank One, Indiana, N.A., at the address and phone number
set forth on the Letter of Transmittal.
9. TAXPAYER IDENTIFICATION NUMBER
Each holder who tenders Debentures for redemption is required to provide
Bank One, Indiana, N.A., with the holder's correct TIN, generally, the holder's
social security or federal employer identification number, on Substitute Form
W-9 which is provided under "Important Tax Information," and to certify
whether such person is subject to backup withholding of federal income tax.
A holder must cross out item (2) in the Certification box of Substitute Form
W-9, if such holder is subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the holder to 31% federal
income tax backup withholding on the payments made to the holder or other payee
with respect to Debentures tendered for redemption. The box in Part 3 of the
form should be checked if the tendering holder has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the box
in Part 3 is checked and Bank One, Indiana, N.A., is not provided with a TIN
within 60 days, thereafter Bank One, Indiana, N.A., will withhold 31% of all
such payments of the redemption price, if any, of Debentures tendered for
redemption until a TIN is provided.
<PAGE> 1
EXHIBIT 10-v(i)
AGREEMENT
This Agreement ("Agreement") is made this 14th day of July,
1997, between Bindley Western Industries, Inc., an Indiana corporation ("B-W"),
and Eaton & Lauth Real Estate Services, Inc., an Indiana corporation ("E&L"),
for the purchase of real estate and the complete development, design and
construction of College Park Plaza Office Building, Purdue Road, Indianapolis,
Indiana (the "Project"). The real estate to be sold and on which the Project is
to be constructed (the "Real Estate") consists of a tract of land of
approximately 10.21 acres and is more particularly described in the attached
Exhibit A. B-W and E&L agree as set forth below:
ARTICLE 1
General
1.1 E&L accepts the relationship of trust and confidence
established between it and B-W by this Agreement. E&L agrees (i) to furnish
all developmental, architectural, engineering and construction services
necessary to develop and design the Project and complete the Work in a good and
workmanlike manner, (ii) to furnish efficient business administration and
superintendents, and (iii) to use its best efforts to complete the Project in
the best and soundest way and in the most expeditious and economical manner
consistent with the interests of B-W. E&L will act as general contractor for
the Project.
1.1 Definitions. The Project is the total construction to
be designed and constructed of which the Work is a part. The Work comprises
the completed construction of a commercial office building containing
approximately 180,000 square feet to be designed in accordance with the outline
specifications, renderings and floor plans attached as Exhibit B and includes
(without limitation) all labor necessary to produce such construction and all
materials and equipment incorporated or to be incorporated in such
construction.
ARTICLE 2
Sale of Real Estate
1.1 B-W shall have fifteen (15) days from the date of this
Agreement (the "Due Diligence Period") to conduct any due diligence
investigation that B-W desires with respect to the Real Estate. E&L has
provided B-W with a preliminary ALTA title insurance commitment issued by
Commonwealth Land Title Insurance Company (the "Title Company") as Commitment
No. 97M 15246, dated April 15, 1997 and a minimum standard ALTA survey,
prepared by Paul I. Cripe, Inc. and dated June 25, 1997 for the Real Estate.
Within ten (10) days of the date of this Agreement, E&L shall provide B-W a
current environmental assessment report relating to the Real Estate, an update
of such report and a letter from the environmental assessment firm authorizing
B-W's reliance on the report, as updated. In addition, E&L shall cooperate
with B-W in any additional due diligence sought by B-W.
<PAGE> 2
2.1 If B-W shall be dissatisfied with the results of its
due diligence, as determined by B-W in its sole discretion, B-W may terminate
this Agreement by written notice to E&L mailed to E&L on or before the last day
of the Due Diligence Period. In the event of such termination, neither party
shall have any further liability hereunder.
2.1 E&L covenants and warrants as follows:
2.1.1 To the best of E&L's knowledge, the Real Estate
is in compliance with all applicable statutes, orders,
regulations, rules, covenants and restrictions including, but not
limited to, federal, state or local regulations or laws
pertaining to pollution or zoning, and no material capital
expenditures will be required for compliance with any such
regulations or laws currently in force.
2.1.1 To the best of E&L's knowledge, there are not
presently pending or threatened any litigation, action,
investigation, special assessments or condemnation actions
affecting the Real Estate or any part thereof, nor has E&L
received any notice of any of the foregoing being contemplated.
2.1.1 This Agreement and all other documents
delivered or to be delivered by E&L have been or will be duly
authorized and executed and delivered by E&L, and are legal,
valid and binding obligations of E&L, are enforceable in
accordance with their respective terms, and do not violate any
provisions of any agreement to which E&L is a party.
2.1.1 There are no contracts, licenses, commitments,
or undertakings respecting maintenance of the Real Estate or the
performance of services on the Real Estate, or the use of the
Real Estate or any part thereof, except as may be disclosed in
the title commitment delivered to B-W pursuant to Paragraph 2.1.
2.1.1 E&L has not received any notification from any
governmental agency, authority or instrumentality of any pending
or threatened assessments on or against the Real Estate.
2.1.1 To the best of E&L's knowledge, there are no
fuel, chemical or other storage tanks located on the Real Estate.
2.1.1 To the best of E&L's knowledge, the Real
Estate has not been used for the treatment, storage or disposal
of or otherwise contaminated by any toxic, hazardous or special
wastes, substances, materials, constituents, pollutants or
contaminants (as defined by federal, state or local laws,
statutes, ordinances, rules or regulations).
-2-
<PAGE> 3
2.1.1 To the best of E&L's knowledge, no claim,
action, suit, or proceeding relating to the Real Estate or the
transaction contemplated by this Agreement is pending or, to the
best of E&L's knowledge, threatened against E&L or the Real
Estate before any court or other governmental authority or
arbitration tribunal, and there is no outstanding judgment,
order, writ, injunction, decree, or award against or affecting
E&L, to the best of E&L's knowledge, the Real Estate, or the
transaction contemplated by this Agreement.
2.1.1 To the best of E&L's knowledge, no portion of
the Real Estate is a "wetlands" or in a flood plain for purposes
of any applicable law, rule, regulation, or ordinance.
2.1.1 To the best of E&L's knowledge, there are no
parties in possession of any portion of the Real Estate, whether
as lessees, tenants at sufferance, trespassers, or otherwise.
2.1.1 To the best of E&L's knowledge, there are no
changes pending in any applicable laws, ordinances or
restrictions, or any judicial or administrative action, or any
action by adjacent land owners, which would prevent, limit or
impede the use of the Real Estate for the purposes contemplated
by B-W.
To the best of E&L's knowledge shall mean the actual knowledge
of Robert L. Lauth, Jr., Gregory C. Gurnik, Jack Hogan, Robert Rydell or Steve
Catts without having undertaken any special investigation for B-W.
2.1 In the event B-W shall not terminate this Agreement as
provided in Paragraph 2.2, E&L shall transfer to B-W the Real Estate at the
time the First Installment of the Lump Sum Price, Two Million Nine Hundred
Twenty Nine Thousand Dollars ($2,929,000), is payable under Article 9. At such
time, E&L shall deliver, or cause to be delivered, the following:
2.1.1 A duly executed special warranty deed conveying
to B-W marketable fee simple title to the Real Estate free and
clear of any and all liens, encumbrances, easements, restrictions,
covenants, except the lien for nondelinquent real estate taxes
and other matters, if any, disclosed in the title commitment to
which B-W has not objected in writing during the Due Diligence
Period.
2.1.1 A duly executed vendor's affidavit in form and
substance satisfactory to B-W and the Title Company.
2.1.1 A duly executed non foreign entity affidavit in
form and substance satisfactory to B-W and the Title Company.
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2.1.1 A certification executed by E&L certifying that
all representations and warranties of E&L set out above are true
and correct at the time of the transfer.
2.1.1 Such corporate resolutions, certificate of good
standing and/or other evidence of authority as B-W and the Title
Company may reasonably request.
2.1.1 The disclosure document required by the Indiana
Responsible Property Transfer Law, if applicable.
2.1.1 An owner's policy of title insurance in the
full amount of the Lump Sum Price and the Tenant Build Out
Allowance, subject only to the exceptions contained in the deed.
2.1.1 A disclosure of sales information form properly
executed by E&L.
2.1 If E&L fails to deliver the items specified in
Paragraph 2.4 above, B-W may terminate this Agreement by written notice to E&L.
In the event of such termination, all amounts previously paid to E&L by B-W
shall be immediately refunded to B-W, and neither party shall have any further
liability hereunder.
2.1 At the time of transfer, possession of the Real Estate
shall be delivered to B-W free and clear of all rights and claims of any other
party to the possession, use or control of the Real Estate, except as set forth
in this Agreement.
ARTICLE 3
E&L's Responsibility
2.1 Responsibilities with respect to design work
3.1.1 For the design work, E&L shall utilize the
services of competent design professional subcontractors
to assure that the Work, as designed, will meet all applicable
laws, ordinances, codes and regulations, the usual design wind
loads, roof loads and other criteria utilized in the locale of
the Project, and B-W's requirements of function and quality.
Any design, engineering, architectural or other professional
service to be performed hereunder which requires personnel
licensed under the laws of the State of Indiana will be performed
by such licensed personnel. Any design, engineering,
architectural or other professional service under this Agreement
shall be provided in conformity with the standards of reasonable
care and skill of the profession for services of the type
provided.
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3.1.1 E&L shall provide for the Project and the
parking lot(s) and roadways serving the Project all architectural
services; landscape architectural services; structural,
mechanical (including heating, ventilating and air conditioning),
electrical, plumbing and civil engineering services; fire and
building code consultant services; and all interior and exterior
design services.
3.1.1 E&L shall prepare, at intervals to permit
construction in accordance with the terms of this Agreement, for
B-W's approval, drawings and specifications setting forth the
requirements for the construction of the Work in customary detail
sufficient to enable subcontractors and suppliers to bid their
respective portions of the Work and workmen of ordinary skill to
construct the Work. E&L warrants that the drawings and
specifications ultimately submitted to B-W for its approval shall
provide a facility which will be fit for the purposes intended,
comply with all applicable laws and codes, and meet B-W's
requirements of function and quality. Upon B-W's approval, each
of the drawings and specifications shall be attached hereto as
Exhibit C and shall be referred to hereinafter as the "Drawings
and Specifications."
3.1.1 E&L shall prepare and submit for B-W's approval
an estimated progress schedule for the Project as soon as the
Agreement is executed. This schedule shall indicate the
estimated amount of the itemized progress of the Project as well
as the dates for the starting and completion of the various
stages of the design and construction. Without prejudice to
Paragraph 6.1, it shall be revised as required by the conditions
of the Work. E&L shall issue to B-W monthly such progress
schedule updated for B-W's review.
3.1.1 E&L shall prepare all documents required for
approvals of governmental authorities having jurisdiction over
the Project.
3.1.1 E&L shall prepare renderings and one model for
B-W's use.
3.1.1 E&L shall document all changes in the Drawings
and Specifications made during the course of the Work and prepare
a complete set of as built drawings at the completion of the Work.
3.1.1 Notwithstanding the foregoing, it is agreed
that design services for build out of the non public usable areas
of the building ("Tenant Build Out") in the building will not be
performed during the building design. Design services for Tenant
Build Out will be provided from time to time at the request of
B-W. However, when performed, such
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services will be provided, to the extent appropriate, in
conformity with the requirements of this Paragraph 3.1 and the
remainder of this Agreement.
3.1 Responsibilities with respect to Construction
3.1.1 Construction of each portion of the Work shall
commence upon B-W's approval of the Drawings and Specifications.
3.1.1 E&L shall provide and pay for all construction
supervision, inspection, labor, materials, tools, construction
equipment, subcontracted items, taxes, fees, insurance and all
other items and services necessary for the execution and
completion of the Project in a good and workmanlike manner and in
accordance with the Drawings and Specifications.
3.1.1 E&L shall pay all sales, use, gross receipts
and other taxes related to the construction of the Project which
have been legally enacted at the time of execution of this
Agreement.
3.1.1 E&L shall at all times keep the Project site
free from the accumulation of waste materials or rubbish
caused by its operations. At the completion of the Work, E&L
shall remove all waste material and rubbish from and around the
Project site as well as all tools, construction equipment,
machinery and surplus materials, including surplus soil.
3.1.1 E&L shall give all notices and comply with all
laws, codes, ordinances, rules, regulations or orders which
govern the proper execution of the Work. E&L shall obtain all
permits and approvals of governmental authorities having
jurisdiction over the Project. E&L shall correct, at its
expense, Work which does not comply with the above mentioned
laws, codes, etc.
3.1.1 E&L shall take necessary precautions for the
safety of all who are providing material or labor for the
completion of the Work, and shall comply with all applicable
provisions of federal, state and municipal safety laws to prevent
accidents or injury to persons on, about or adjacent to the job
site. E&L shall erect and properly maintain, at all times, as
required by the conditions and progress of the Work, necessary
safeguards for the protection of workmen and the public.
3.1.1 E&L shall keep and provide to B-W such full and
detailed accounts, including evidence of payment of all sales,
use, gross receipts and other taxes related to the construction
of the Project, as may be necessary for proper financial
management under this Agreement.
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3.1.1 E&L shall, with due dispatch, prepare and
submit to B-W such data and information as may be requested from
time to time by B-W in connection with the construction of the
Project.
3.1.1 E&L shall provide and pay for all coordination,
supervision, inspection, labor, materials, construction
equipment, tools, subcontract items, transportation, temporary
buildings or facilities, taxes, fees, insurance and other items
of services which are necessary for the execution and completion
of the Work in a good and workmanlike manner and in accordance
with the Drawings and Specifications.
3.1.1 All portions of the Work shall be performed by
subcontractors under subcontracts between E&L and the
subcontractors. E&L shall be responsible for all construction
means, methods, techniques, sequences and procedures, whether the
Work is performed by E&L's own forces or by subcontractors.
3.1.1 All personnel and subcontractors used by E&L in
the performance of the Work shall be qualified by training and
experience to perform their assigned portion of the Work.
3.1.1 E&L shall maintain or cause to be maintained a
competent staff at the Project site as necessary to coordinate,
supervise and direct the progress of the Work. E&L's Project
Manager with overall responsibility for the Work is William
Spitler. No change of such Project Manager shall be made without
prior written notice to B-W.
3.1.1 E&L shall prepare or cause to be prepared, as
part of the Work, all shop drawings and other detail drawings not
made as part of the Drawings and Specifications which are
required in the performance of E&L's obligation hereunder.
3.1.1 E&L shall maintain current records of all Change
Orders, Drawings and Specifications, shop drawings, product data,
samples, applicable handbooks, federal, commercial and technical
standards and specifications, maintenance and operating manuals
and instructions, and other contract related documents, including
all revisions. E&L shall provide all representatives of B-W full
access to such records and to the Work during the progress of the
Work so that B W may verify that E&L is fully complying with this
Agreement. At the completion of the Work, E&L shall deliver all
such records to B-W. E&L shall not be required to provide copies
of subcontracts or purchase orders to B-W.
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3.1.1 E&L shall, with B-W's maintenance personnel,
direct the checkout of utilities, operations systems and
equipment for readiness and assist in their initial startup and
testing.
3.1.1 Notwithstanding anything implied or expressed
to the contrary, it is agreed that construction services for
Tenant Build Out shall not necessarily be performed during the
Building Construction. Construction services for Tenant Build
Out will be provided from time to time at the request of B-W.
However, when performed, such services will be provided in
conformity with the requirements of this Paragraph 3.2 and the
remainder of this Agreement, to the extent appropriate.
3.1.1 During the performance of this Agreement, E&L,
on behalf of B-W (a government contractor), agrees that the
applicable provisions of federal law with respect to Utilization
of Small Business Concerns and Small Disadvantaged Business
Concerns shall apply to all subcontractor and supplier bids and
to provide B-W with a fully completed Certification for Small
Business form (Exhibit D) for each such bidder contacted by E&L.
3.1 Royalties and Patents
3.1.1 E&L shall pay all royalties and license fees in
connection with the Project. E&L shall defend all suits or
claims for infringement of any patent rights and shall save B-W,
its agents, employees or anyone else acting for or on behalf of
any of them harmless from loss, damage, liability, costs and
expenses (including attorneys' and paralegals' fees) on account
thereof.
3.1.1 All Drawings and Specifications issued by,
submitted to or approved by B-W for this Project shall be the
property of B-W and shall belong to B-W, provided that such
Drawings and Specifications shall be used only in connection with
the Project. E&L shall indemnify, hold harmless and defend, at
its expense, B-W, its agents, employees and anyone acting for or
on behalf of any of them from all claims, suits or actions of any
nature whatsoever and all loss, damage, liability, costs and
expenses (including attorneys' and paralegals' fees) which arise
out of or are connected with or are alleged to arise out of or be
connected with rights or claims of rights in such Drawings or
Specifications or the use or adoption of any design, drawings or
specifications.
3.1 Warranties and Completion
3.1.1 E&L warrants to B-W that all the materials and
equipment furnished under this Agreement shall be new, unless
otherwise
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specified, and that all Work will be of good quality, free from
improper workmanship and defective materials and in conformance
with this Agreement.
3.1.1 E&L shall secure required certificates of
inspection, testing or approval and deliver them to B-W.
3.1.1 E&L shall collect all written warranties and
equipment operation and maintenance manuals and deliver them to
B-W. All the benefits of the warranties obtained by E&L from its
subcontractors, vendors, etc., shall be passed to B-W.
3.1.1 E&L agrees to correct all Work defective in
material or workmanship or not in conformance with the Drawings
and Specifications discovered within a period of one year from the
Date of Substantial Completion (or within such longer periods of
time as may be prescribed by law or set forth with respect to
specific warranties contained in the Specifications) promptly
after receipt of written notice thereof from B-W. This
obligation shall survive both final payment hereunder and the
termination of this Agreement. B-W shall give such notice
promptly after discovery of the condition. The establishment of
the time period noted in this Paragraph 3.4.4 relates only to the
specific obligation of E&L to correct the Work and has no
relationship to the time within which E&L's obligations under
this Agreement may be enforced, nor to the time within which
proceedings may be commenced to establish E&L's liability with
respect to its obligations other than specifically to correct the
Work.
ARTICLE 4
B-W's Responsibilities
3.1 B-W has designated Keith W. Burks and Michael D.
McCormick, acting individually, as its representatives for B-W's dealings with
the Program Manager. These representatives of B-W shall be fully acquainted
with the scope and objectives of the Project, and each acting individually
shall have full authority to approve any documents, Project specifications and
change orders. Each of B-W's representatives shall also have full authority to
approve on behalf of B-W the cost of any changes and the progress schedule.
Each of B-W's representatives shall render his decisions on behalf of B-W
promptly and shall furnish information pertaining to the Project upon the
request of E&L.
4.1 B-W shall make full and prompt payments to the Program
Manager as required by this Agreement.
4.1 If B-W becomes aware of any fault or defect in the
Project or nonconformance with the Plans and Specifications, B-W shall give
prompt written notice thereof
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to E&L for correction by E&L, but B-W shall have no duty or responsibility to
inspect the Project or to discover any fault or defect in the Project or
nonconformance with the Plans and Specifications.
ARTICLE 5
Subcontracts
4.1 All portions of the Work that E&L does not perform with
its own forces shall be performed under subcontractors. E&L shall require that
subcontracted Work be performed in accordance with the requirements of this
Agreement.
5.1 A subcontractor is a person or entity who has a direct
contract with E&L to perform any Work. E&L shall be responsible for the
management and acts of the subcontractors in the performance of their Work.
E&L shall also be responsible for the management and acts of any architect,
engineer or other professional hired by E&L.
5.1 E&L shall defend, indemnify and save harmless B-W, its
agents and employees against any and all losses, damages, liabilities, claims,
demands or costs (including attorneys' and paralegals' fees) resulting from any
act arising out of or in any way connected with the acts or failures to act of
any subcontractor or architect, engineer or other professional hired by E&L.
ARTICLE 6
Contract Time Schedule
5.1 Work (excluding Tenant Build Out) to be performed under
this Agreement shall be commenced upon the expiration of the Due Diligence
Period and shall be substantially completed on or before June 30, 1998 (the
"Date of Substantial Completion"). Tenant Build Out of the portion of the
building to be occupied by B-W shall be completed on or before July 15, 1998,
provided that B-W shall provide information necessary to complete such Work in
a timely manner. To the extent practical, E&L agrees to use reasonable efforts
to facilitate completion of the build out of the B-W space by June 30, 1998. A
separate Date of Substantial Completion shall be established for each
requested Tenant Build Out, and Paragraphs 6.2 and 6.3 shall apply to each
Tenant Build Out.
6.1 The Work shall be substantially completed when the
architect for the Project (the "Architect") certifies that it is substantially
complete. Warranties called for by this Agreement shall commence on the Date
of Substantial Completion. The date shall be established by a Certificate of
Substantial Completion signed by the Architect and shall state E&L's
responsibilities for security, maintenance, heat, utilities, damages to the
Work and insurance. This Certificate shall also list the items to be completed
or corrected and fix the time for their completion and correction. Within
fifteen (15) days of the issuance of the Architect's
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certificate, B-W shall inspect the Work and indicate any additional items to
be completed or corrected.
6.1 The Date of Substantial Completion shall be strictly
observed. If E&L is delayed at any time in the progress of the Project by any
act or neglect of B-W or its agents, by Change Orders, or by labor disputes,
fire, unusual delay in transportation, adverse weather conditions not
reasonably anticipated, unavoidable casualties, or similar causes beyond E&L's
control, then the Date of Substantial Completion shall be extended by the
amount of unavoidable delay. In such case, E&L shall apply for an extension of
time specifying the reason therefor within a reasonable time after E&L becomes
aware of such delay.
6.1 E&L recognizes that time is of the essence in this
Agreement and that B-W will suffer damage in the event that Substantial
Completion of the entire Project, less Tenant Build Out, is not achieved by
June 30, 1998. Liquidated damages shall be paid by E&L in the amount of $1,000
per day for each day after July 30, 1998, that the Project, less Tenant Build
Out, is not substantially complete. E&L agrees that the provisions contained
in this paragraph represent the reasonable estimate of E&L and B-W of the fair
compensation for the losses that may be sustained by B-W due to E&L's failure
to achieve Substantial Completion by June 30, 1998. Such sum shall be payable
by E&L on demand. If E&L fails to make such payments, B-W may deduct the
amounts of such payments from payments otherwise payable hereunder to E&L.
6.1 In any emergency affecting the safety of persons or
property, E&L may act, at its discretion, to prevent threatened damage, injury
or loss. Any extension of time claimed by E&L on account of emergency work
shall be determined as provided in this Article.
ARTICLE 7
Cost of the Project
6.1 B-W shall pay E&L in current funds for the performance
of the Work and all other services, duties, obligations and responsibilities of
E&L under this Agreement, subject to additions and deductions by Change Order
as provided herein, Nineteen Million Eight Hundred Fifty Thousand Dollars
($19,850,000), which includes an allowance in the amount of Three Million One
Hundred Eighty Six Thousand Dollars ($3,186,000) for Tenant Build Out and an
allowance of Nine Hundred Sixty Thousand Dollars ($960,000) for tenant leasing
commissions.
7.1 The cost of the Project, less Tenant Build Out and
leasing commissions, shall be Fifteen Million Seven Hundred Four Thousand
Dollars ($15,704,000) and shall be referred to as the Lump Sum Price.
7.1 The cost of Tenant Build Out and leasing commissions
shall not be limited to the allowance amounts in the event that the amounts
payable under this Agreement for Tenant Build Out and leasing commissions
exceed such allowances.
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ARTICLE 8
Changes in the Project
7.1 B-W, without invalidating this Agreement, may order
changes in the Project within the general scope of this Agreement consisting of
additions, deletions or other revisions, the Lump Sum Price being adjusted in
accordance with the terms set forth in this Article. All such changes in the
Project shall be authorized by a written Change Order to E&L signed by B-W's
authorized agent and issued after the execution of this Agreement.
8.1.1 The Lump Sum Price shall be adjusted if a
Change Order causes changes in the quantities or changes in the
Drawings or Specifications which changes affect the Lump Sum
Price.
8.1.1 The increase or decrease in the Lump Sum Price
resulting from the said changes shall be determined by mutual
acceptance of a lump sum properly itemized in such form as E&L
and B-W may prescribe and supported by sufficient substantiating
data to permit B-W's evaluation.
8.1.1 Upon receipt of the Change Order, E&L shall
forthwith comply with the Change Order and proceed with the work
involved so as to maintain the Contract Time Schedule.
8.1.1 No increase to the Lump Sum Price shall be made
except those resulting from Change Orders.
8.1.1 B-W will have authority to order minor changes
in the Work not involving an adjustment in the Lump Sum Price
and not inconsistent with the intent of the Drawings and
Specifications. Such changes may be effected by written order
and shall be binding on B-W and E&L.
ARTICLE 9
Payments to E&L
8.1 B-W shall pay E&L a lump sum payment of Two Hundred
Eighty Thousand Dollars ($280,000.00) on July 29, 1997.
9.1 B-W shall pay E&L progress installments as set forth on
Exhibit E. The amounts of the installments total Fifteen Million Four Hundred
Twenty Four Thousand Dollars ($15,424,000.00).
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9.1 E&L shall provide to B-W a Certificate of Completion
executed by the Architect certifying that the Work to be completed prior to the
making of an installment has been completed in accordance with this Agreement.
9.1 The allowance for Tenant Build Out of Three Million One
Hundred Eighty Six Thousand Dollars ($3,186,000.00) shall be billed to B-W
monthly at a rate equal to E&L's actual cost plus a five percent (5%) fee. On
or before the fifth (5th) day of each month following the commencement of the
construction of the Tenant Build Out and thereafter during the performance of
the Tenant Build Out, E&L shall submit to B-W for its approval an Application
for Payment in form and substance satisfactory to B-W and E&L.
9.1 E&L shall have the exclusive right to offer and
advertise for lease the portions of the Project not to be occupied by B-W for a
period of twelve months after Substantial Completion of the Project. The
allowance for Leasing Commissions of Nine Hundred Sixty Thousand Dollars
($960,000.00) shall be billed to B-W in accordance with E&L's Schedule of
Leasing Commissions attached hereto as Exhibit F. Leasing commissions shall be
earned for services rendered if the Project is leased to a tenant, other than
B-W, procured by E&L, B-W or anyone else. E&L is authorized to cooperate and
share its commission with other licensed real estate brokers, regardless of
whether said brokers represent prospective tenants or act as E&L's subagents.
The total amount of the allowances shall be paid to E&L only if earned.
9.1 Notwithstanding anything in this Article 9 to the
contrary, if any liability. claim or demand is filed with or against B-W, the
Project or the Real Estate by any person claiming that E&L or any material
supplier, subcontractor or other person under it has failed to make payment for
any labor, services, materials, equipment, taxes or other items or obligations
furnished or incurred in connection with the Project, E&L shall have said claim
or demand removed within forty-five (45) days or provide guarantee as
reasonably acceptable to B-W that the claim or demand will be financially
satisfied. If E&L cannot remove or guarantee satisfaction of the claim or
demand within forty-five (45) days, then B-W shall have the right to retain
from any payment then due or to become due an amount which it deems reasonably
sufficient to indemnify and compensate B-W against any such liability, claim,
or demand, including costs, expenses, fees and disbursements incurred in
connection therewith until E&L has removed or guaranteed satisfaction of the
claim. If the amount retained is insufficient therefor, E&L shall be liable
for the difference and pay same to B-W.
9.1 E&L warrants that title to all Work, materials and
equipment covered by any payment will pass to B-W either by incorporation in
the construction or upon receipt of payment by E&L, whichever occurs first,
free and clear of all liens, claims, security interests or encumbrances and
that no Work, materials or equipment covered by any payment will have been
acquired by E&L or by any other person performing Work or furnishing materials
and equipment for the Project subject to an agreement under which an interest
therein or an encumbrance thereon is retained by the seller or otherwise
imposed by E&L or such other person.
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9.1 No progress payment nor any partial or entire use or
occupancy of the Project by B-W shall constitute an acceptance of any Work not
in accordance with this Agreement.
9.1 Final payment of the Lump Sum Price shall be due and
payable as provided in Paragraph 9.2.
9.1 Before issuance of Final Payment, B-W may request
satisfactory evidence that all payrolls, materials, bills, taxes and other
indebtedness connected with the Project have been paid or otherwise satisfied.
9.1 The acceptance of Final Payment shall constitute a
waiver of all claims by E&L except those previously made in writing and
unsettled.
9.1 Except (i) in the event B-W is entitled to withhold
payments to E&L under the Contract, (ii) in the event of a dispute concerning
the stage of the completion of the Project or (iii) in the event B-W has paid
an amount equal to one hundred percent (100%) of the Lump Sum Price (as the
same has been expressly adjusted by Change Order as provided in the Contract
Documents), B-W shall make payment to E&L in the amount of the Application for
payment installment according to the payment schedule contained in Paragraph
9.2, within five (5) days after receipt of such Application.
9.1 E&L shall promptly pay each subcontractor upon receipt
of payment from B-W, out of the amount paid to E&L on account of such
subcontractor's Work, the amount to which such subcontractor is entitled. E&L
shall, by an appropriate agreement with each subcontractor, require each
subcontractor to make payments to their subcontractors in similar manner.
ARTICLE 10
Insurance, Indemnity and Waiver of Subrogation
9.1 Indemnity
10.1.1 E&L shall indemnify and hold harmless B-W, its
agents and employees from and against all claims, damages, losses
and expenses, including but not limited to attorneys' and
paralegals' fees, arising out of or resulting from the
performance of the Work and all other services, duties,
obligations and responsibilities of E&L under this Agreement;
provided that any such claim, damage, loss or expense is caused
in whole or in part by any negligent act or omission of E&L, any
subcontractor (including any architect, engineer or other design
professional employed or retained by E&L), anyone directly or
indirectly employed by any of them or anyone for whose acts any
of them may be liable. Such obligation shall not be construed to
negate, abridge, or
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otherwise reduce any other right or obligation of indemnity which
would otherwise exist as to any party or person described in this
paragraph.
10.1.1 In any and all claims against B-W or any of its
agents or employees by any employee of E&L, any subcontractor,
anyone directly or indirectly employed by any of them or anyone
for whose acts any of them may be liable, the indemnification
obligation under this Article shall not be limited in any way by
any limitation on the amount or type of damages, compensation or
benefits payable by or for E&L or any subcontractor under
worker's or workmen's compensation acts, disability benefit acts
or other employee benefit acts.
10.1.1 The obligations of E&L under this Article shall
extend to the liability of any architect, engineer or other
design professional employed or retained by E&L and such person's
or entity's agents or employees, arising out of (i) the
preparation or approval of maps, drawings, opinions, reports,
surveys, change orders, drawings or specifications, and (ii) the
giving of or the failure to give directions or instructions by
such person or entity, its agents, or employees.
10.1.1 E&L's obligations under this Article shall
survive both final payment and the termination of this Agreement.
10.1 E&L's Liability Insurance
10.1.1 E&L shall purchase and maintain such insurance
as will provide protection from the claims set forth below which
may arise out of or result from E&L's operations under this
Agreement, whether such operations be by E&L or by any
subcontractor or by anyone directly or indirectly employed by any
of them, or by anyone for whose acts any of them may be liable
and shall include B-W as an additional insured.
10.1.1.1 Claims under workers' compensation,
disability benefit and other similar employee benefit
acts which are applicable to the Work to be performed.
10.1.1.1 Claims for damage because of bodily
injury, or death of any person other than employees.
10.1.1.1 Claims for damages insured by usual
personal injury liability coverage which are sustained
(1) by any person as a result of an offense directly or
indirectly related to the employment of such person by
E&L or (2) by any other person.
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10.1.1.1 Claims for damages, other than to the
Work itself, because of injury to or destruction of
tangible property, including loss of use therefrom.
10.1.1.1 Claims for damages because of bodily
injury or death of any person or property damage
arising out of the ownership, maintenance or use of any
motor vehicle.
10.1.1 In addition, E&L's Comprehensive General
Liability Insurance shall include premises operations (including
explosion, collapse and underground coverage), elevators,
independent contractors, completed operations, and blanket
contractual liability on all written contracts, all including
broad form property damage coverage.
10.1.1 E&L's Comprehensive General and Automobile
Liability Insurance shall be written for not less than limits of
liability as follows:
a. Workmen's Compensation - Statutory
b. Comprehensive General Liability
1. Bodily Injury $5,000,000. - Each Occurrence
$5,000,000. - Aggregate
2. Property Damage $5,000,000. - Each Occurrence
$5,000,000. - Aggregate
c. Comprehensive Automobile Liability
1. Bodily Injury $5,000,000. - Each Person
$5,000,000. - Each Occurrence
2. Property Damage $500,000. - Each Occurrence
10.1.1 Insurance may be arranged under a single policy
for the full limits required or by a combination of underlying
policies with the balance provided by an Excess or Umbrella
Liability policy.
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<PAGE> 17
10.1.1 The foregoing policies shall contain a
provision that coverages afforded under the policies will not be
modified or canceled or not renewed until at least thirty days'
prior written notice has been given to B-W. Certificates of
Insurance showing such coverages to be in force shall be filed
with B-W prior to commencement of the Work. E&L will be
responsible for any deductibles or co insurance penalties or
provisions under E&L's Comprehensive General and Automobile
Liability Insurance and any other insurance required in this
paragraph.
10.1 Insurance to Protect Project (Builder's All Risk
Insurance)
10.1.1 E&L shall purchase and maintain in
force Builder's All Risk insurance upon the entire Project for
the full cost of replacement at the time of any loss. This
insurance shall include B-W and E&L as named insureds and shall
insure against loss from the perils of Fire and Extended
Coverage, and shall include "All Risk" insurance for physical
loss or damage including, without duplication of coverage, at
least theft, vandalism, malicious mischief, transit, collapse,
flood, earthquake, testing, and damage resulting from faulty
workmanship, defective material or error or omission or
deficiency in design or specifications (excluding the cost of
making good faulty workmanship, defective materials or error or
omission or deficiency in design or specifications). E&L will
increase limits of coverage, if necessary, to reflect estimated
replacement cost.
10.1 Property Insurance Loss Adjustment
10.1.1 Any loss insured under Paragraph 10.3 shall be
adjusted with and made payable to B-W as trustee for the
insureds, as their interests may appear.
10.1.1 Upon the occurrence of an insured loss, monies
received will be deposited in a separate account and the
trustee shall make distribution in accordance with the agreement
of the parties in interest.
10.1 Waiver of Subrogation
10.1.1 B-W and E&L waive all rights against each
other, the subcontractors and subsubcontractors for damages
caused by perils covered by insurance provided under Paragraph
10.3, to the extent that the limits of such insurance are
adequate to cover such damages. E&L shall require similar
waivers from all subcontractors and subsubcontractors.
10.1.1 If the policy of insurance referred to in
Paragraph 10.3 requires an endorsement to provide for continued
coverage
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<PAGE> 18
where there is a waiver of subrogation, E&L and B-W will cause
them to be so endorsed.
10.1 Professional Liability Insurance
10.1.1 E&L shall require any architect providing
services hereunder to carry and maintain, during the continuance
of the Contract and for a period of three (3) years following the
Completion of the Work, professional errors and omissions
insurance with respect to subcontracted work. Professional
errors and omissions insurance shall be endorsed to provide
contractual liability coverage. Such insurance for each
professional subcontractor shall be in an amount not less than
Five Million Dollars ($5,000,000) single claims and aggregate
limit of liability. E&L shall submit to B-W certificates
evidencing such insurance coverage. Such insurance policies
shall provide that B-W will be given at least thirty (30) days
notice prior to cancellation or nonrenewal of the policy.
ARTICLE 11
Termination of the Agreement and B-W's Right
to Perform E&L's Obligations
10.1 Termination by E&L. If the Project is stopped for a
period of ninety (90) days under an order of any court or other public
authority having jurisdiction, or as a result of an act of government, such as
a declaration of a national emergency making materials unavailable, through no
act or fault of E&L or if the Project should be stopped for a period of
fifteen (15) days by E&L for B-W's failure to make payments required by this
Agreement, then E&L may, upon seven (7) days' written notice to B-W, terminate
this Agreement and recover from B-W, payment for all Work executed and for any
proven loss sustained upon any materials, equipment, tools, construction
equipment and machinery. Except as expressly provided above, E&L shall not be
entitled to receive any further payment of any amount under or in respect of
the Contract.
11.1 Termination by B-W for Cause
11.1.1 If E&L is adjudged a bankrupt, or if E&L makes a
general assignment for the benefit of its creditors, or if a
receiver is appointed on account of its insolvency, or if E&L
refuses or fails, except in cases for which extension of time is
provided, to supply enough properly skilled workmen or proper
materials, or if E&L fails to make proper payment to
subcontractors or for materials or labor, or disregards law,
ordinances, rules, regulations or orders of any public authority
having jurisdiction, or otherwise is guilty of a violation of a
provision of this Agreement, then B-W may, without prejudice to
any right or remedy and after giving E&L and its surety, if any,
thirty (30) days' written notice, if
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<PAGE> 19
during which period E&L fails to cure the violation or, if such
default cannot be cured within thirty (30) days, begins and
diligently pursues the cure thereof, terminate this Agreement and
take possession of the site and of all materials, equipment,
tools, construction equipment and machinery thereon owned by E&L
and may finish the Work by whatever reasonable method B-W may
deem expedient. In such case, E&L shall not be entitled to
receive any further payment until the Work is finished nor shall
E&L be relieved from its obligations assumed under this
Agreement.
11.1.1 If the unpaid balance of the Lump Sum
Price (as the same has been expressly adjusted by Change Order)
exceeds the costs of finishing the Work, less Tenant Build Out,
and all losses, damages (including incidental and consequential
damages), costs and expenses incurred by B-W in connection with
finishing such Work or arising as a result of E&L's breach of its
obligations, such excess shall be paid to E&L. If such costs,
losses, damages, costs and expenses exceed the unpaid balance of
the Lump Sum Price, E&L shall pay the difference to B-W.
ARTICLE 12
Assignment
Neither B-W nor E&L shall assign its interest in this Agreement
without written consent of the other.
ARTICLE 13
Governing Law
The rights and obligations of the parties under this Agreement
are subject to the laws of the State of Indiana. This Agreement shall be
construed and interpreted under the laws of Indiana.
ARTICLE 14
Claims and Disputes
In all claims, controversies or disputes arising out of or
relating to this Agreement, or any breach thereof, E&L and B-W agree to the
consolidation of all parties necessary to the resolution of such claims,
controversies or disputes, provided that the inability to obtain jurisdiction
over other parties shall not bar an action between B-W and E&L from proceeding.
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<PAGE> 20
ARTICLE 15
Entire Agreement
This Agreement constitutes the entire agreement between the
parties. All prior negotiations, representations and agreements with respect
thereto not incorporated in such Agreement are hereby canceled.
ARTICLE 16
Severability
In the event any provision of this Agreement shall be
determined to be void, unlawful or otherwise unenforceable, such provision
shall be deemed severable from the remainder of this Agreement which shall
continue to be in full force and effect without such provision.
ARTICLE 17
No Lien Provision
11.1 This is a No-Lien Contract. No liens shall attach to
the Real Estate or any building, structure or improvement to such Real Estate.
Any attempted lien by E&L or any subcontractor, mechanic, journeyman, laborer,
person performing labor upon or furnishing materials or machinery for such real
estate shall not be valid. Simultaneously with the execution of this Agreement
and as part of this Agreement, the parties shall execute a No-Lien Agreement, a
duplicate original of which is attached hereto as Exhibit G and which is
incorporated herein by reference and made a part hereof. Within five (5) days
of the execution of this Agreement, the parties shall file the No-Lien
Agreement in the Office of the Recorder of Marion County, Indiana. A copy of
this Agreement shall be kept at the principal office of E&L which is located at
12220 North Meridian Street, Carmel, Indiana 46032, and shall be made available
at reasonable times for inspection upon the request of any subcontractor,
mechanic, journeyman, laborer or person performing labor or furnishing
materials or machinery for the Real Estate or improvements thereon.
17.1 E&L, on its own behalf and, to the extent permitted by
law, on behalf of all of its subcontractors and suppliers of material and
labor, hereby expressly waives the benefits of the Mechanics Lien Laws of the
State of Indiana. Compliance with this paragraph is a condition of payment by
B-W to E&L. Payments made by B-W without strict compliance with the terms of
this paragraph shall not be construed as a waiver by B-W of the right to insist
upon such compliance as a condition of later payments. E&L shall indemnify
and protect B-W from any and all costs incurred by B-W, including attorneys'
and paralegals' fees, resulting from the filing of any lien by E&L, its
subcontractors or suppliers. Such indemnification obligation shall survive the
expiration or early termination of this Agreement.
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<PAGE> 21
ARTICLE 18
Notices
All notices to be given shall be in writing and shall be sent
by United States Certified or Registered Mail or by facsimile. Notices shall
be deemed received on the actual date received. Notice given in any other
manner shall be effective only if and when received and acknowledged by the
party to be notified. All notices to be given to the parties hereto shall be
sent to:
B-W: Bindley Western Industries, Inc.
10333 North Meridian Street, Suite 300
Indianapolis, Indiana 46290
Attention: Michael D. McCormick
Fax No.: 580-9753
E&L: Eaton & Lauth Real Estate Services,
Inc.
12220 North Meridian Street
P.O. Box 1999
Carmel, Indiana 46032
Attention: Gregory C. Gurnik
Fax No.: 848-6511
Each party shall have the right to change its respective
address and specify as its address any other address by giving fifteen (15)
days written notice to the other party.
ARTICLE 19
Amendments
Any amendment or modification of this Agreement shall be in
writing and signed by all of the parties hereto.
ARTICLE 20
Miscellaneous
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<PAGE> 22
17.1 B-W shall have the right to inspect the Work and
conduct such tests of the Work and all components thereof and to review,
pursuant to 3.2.14, records of E&L as it considers appropriate to verify that
(i) the Work has been completed as indicated in any request for payment, (ii)
such Work has been completed in a good and workmanlike manner, free of defects
and in accordance with the Drawings and Specifications and all warranties
therein and in this Agreement, and (iii) all required payments to the
subcontractors and suppliers have been made. If B-W determines that the Work
has not been so competed or that required payments to subcontractors and
suppliers have not been made, then B-W may withhold from payments to E&L the
amount necessary to protect B-W from loss. When the cause for any such
withholding is removed, payment shall be made of the amount withheld for such
cause. This Paragraph 20.1 does not impose any duty on B-W to inspect or
observe the Work, nor shall any inspection, observation or payment relieve E&L
of any of its obligations under this Agreement. If the tests conducted
pursuant to this Paragraph 20.1 reveal a material defect or nonconformance in
the Work, the costs of such tests shall be paid by E&L; otherwise, the costs of
the tests shall be borne by B-W.
20.1 If E&L defaults or neglects to carry out the Work in
accordance with this Agreement and fails within seven (7) days after written
notice from B-W to commence and continue correction of such default or neglect
with diligence and promptness, B-W may, after seven (7) days following receipt
by E&L of an additional written notice and without prejudice to any other
remedy B-W may have, make good such deficiencies. In such case an appropriate
Change Order shall be issued deducting from the payments then or thereafter due
E&L all costs incurred by B-W in correcting such deficiencies. If the payment
then or thereafter due E&L are not sufficient to cover such amount, E&L shall
pay the difference to B-W.
20.1 No failure on the part of B-W or E&L to insist upon the
strict performance of any term or condition of this Agreement or to exercise
any right, remedy, power or privilege provided for therein or afforded by law
shall operate as a waiver or release thereof, nor shall any single or partial
exercise of any such right, remedy, power or privilege by B-W or E&L preclude
any other or further exercise thereof.
20.1 B-W and E&L or an affiliate of E&L, shall enter into a
management agreement, in a form to be agreed to by B-W and E&L, pursuant to
which E&L shall be the property manager of the Project for a period of three
(3) years from the date of Substantial Completion of the Tenant Build Out of
that portion of the building to be occupied by B-W. As compensation for its
services thereunder, E&L shall be paid a fee equal to the greater of fifty
cents ($0.50) per square foot for the space in the building that is occupied
divided by twelve (12) or $3,000.00 per month.
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<PAGE> 23
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties as of the day and year first above written.
WITNESS:
BINDLEY WESTERN INDUSTRIES, INC.
______________________________
______________________________
By: ______________________________
Printed: Michael D. McCormick
Its: Executive Vice President
and General Counsel
WITNESS:
EATON & LAUTH
REAL ESTATE SERVICES, INC.
______________________________
______________________________
By: ______________________________
Printed: Gregory C. Gurnik
Its: President
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<PAGE> 24
EXHIBIT D
SCHEDULE OF LEASING COMMISSIONS
Leasing commissions shall be due and payable upon the execution
of a third party (other than B-W) lease and shall be calculated as follows:
6% of the total lease value of the first five years of
the lease term.
3% of the total lease value of second five years (or
portion thereof) of the lease term.
The term "Total Lease Value" shall mean the sum total
of rentals to be paid during the term of the lease,
excluding operating costs and real estate taxes.
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<PAGE> 1
EXHIBIT 10-v(ii)
ASSIGNMENT AND ASSUMPTION AGREEMENT
This ASSIGNMENT AND ASSUMPTION AGREEMENT is made and entered
into as of the 14 day of January, 1998 (the "Effective Date"), by and among
BINDLEY WESTERN INDUSTRIES, INC., an Indiana corporation ("Assignor"), and
COLLEGE PARK PLAZA ASSOCIATES, INC., an Indiana corporation ("Assignee").
WITNESSETH
FOR AND IN CONSIDERATION of the sum of Ten and No/100 Dollars
($10.00) and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Assignor hereby assigns, sets over and
transfers to Assignee, its successors and assigns all of its right, title and
interest in, to and under the Agreement between Assignor and Eaton & Lauth Real
Estate Services, Inc., dated July 14, 1997, a copy of which is attached as
Exhibit A (the "Agreement").
Assignee hereby assumes the performance of all of the terms,
covenants and conditions of the Agreement to be performed on the part of
Assignor under the Agreement from and after the Effective Date, and agrees to
indemnify, save and hold harmless Assignor and its affiliates and their
directors, officers, employees, agents and attorneys and their respective
successors and assigns from any and all claims (whether liquidated or
unliquidated), demands, damages, losses, actions and causes of action of any
kind which arise from or relate to the failure of Assignee to perform such
terms, covenants and conditions in accordance with the terms of the Agreement
from and after the Effective Date.
Assignor agrees to indemnify, save and hold harmless Assignee
and its affiliates and their directors, officers, employees, agents and
attorneys and their respective successors and assigns from any and all claims
(whether liquidated or unliquidated), demands, damages, losses, actions and
causes of action of any kind which arise from or relate to the failure of
Assignee to perform all of the terms, covenants and conditions in accordance
with the terms of the Agreement before the Effective Date.
In addition, Assignor hereby assigns unto Assignee, its
successors and assigns all permits, licenses or other governmental
authorizations or approvals relating to the project which is the subject of the
Agreement.
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption Agreement to be duly executed as of the date first
above written.
COLLEGE PARK PLAZA ASSOCIATES, INC. BINDLEY WESTERN INDUSTRIES, INC.
By: /s/ Michael D. McCormick By: /s/ Thomas J. Salentine
----------------------------------- -----------------------------------
Printed: /s/ Michael D. McCormick Printed: /s/ Thomas J. Salentine
------------------------------ ------------------------------
Title: Secretary Title: Exec. Vice Pres., CFO
-------------------------------- --------------------------------
CONSENT TO ASSIGNMENT AND
ASSUMPTION OF JULY 14, 1997
AGREEMENT BY EATON & LAUTH
REAL ESTATE SERVICES, INC.
By: /s/
---------------------------------
Printed: /s/ Gregory Gurnik
----------------------------
Title: President
------------------------------
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<PAGE> 1
EXHIBIT 10-Z(v)
FIRST AMENDMENT TO THE PROFIT SHARING PLAN OF
BINDLEY WESTERN INDUSTRIES, INC., & SUBSIDIARIES
WHEREAS, Bindley Western Industries, Inc. (the "Company") established the Profit
Sharing Plan of Bindley Western Industries, Inc. and its Subsidiaries originally
effective on January 1, 1979, and amended and restated in the PRISM(R)
Nonstandardized Prototype Adoption Agreement effective January 1, 1996 (the
"Plan"); and
WHEREAS, the Company in the Adoption Agreement appointed the original members
of the Committee who were charged with operating the Plan; and
WHEREAS, the Company has decided to reconstitute the Committee effective
October 1, 1997.
NOW THEREFORE,
BE IT RESOLVED, that the Company amends the provisions of Item B.3. of the
Adoption Agreement to provide as follows:
B. BASIC PLAN PROVISIONS:
...
3. COMMITTEE MEMBERS:
Michael L. Shinn, Michael D. McCormick, Thomas Weakley, and Marion A.
McDermott
AND BE IT FURTHER RESOLVED, that except as amended herein, all other provisions
of the Profit Sharing Plan of Bindley Western Industries, Inc. and its
Subsidiaries shall remain effective as set forth in the Adoption Agreement.
PLAN SPONSOR: BINDLEY WESTERN INDUSTRIES, INC.
By: /s/ Michael D. McCormick, Sec. Dated: 10/24/97
---------------------------- --------------------
Trustee: KEY TRUST COMPANY
By: /s/ April M. Czenkush Dated: 10/24/97
---------------------------- --------------------
<PAGE> 1
EXHIBIT 10-Z(vi)
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS
(PLAN SECTION 1.1(KK))
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the Plan, as if the Participating
Employer were a signatory to the Adoption Agreement. The Participating
Employer accepts, and agrees to be bound by, all of the elections granted under
the provisions of the Plan as made by Bindley Western Industries, Inc.,
Employer of the Adoption Agreement ("Signatory Employer").
(1) The Effective Date of the undersigned Employer's participation in the
designated Plan is: July 31, 1997
(2) The undersigned Employer's adoption of this Plan constitutes:
(a) The adoption of a new plan by the Participating Employer.
(b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Bindley Western
Industries, Inc. & Subsidiaries Profit Sharing Plan and
having an original effective date of January 1, 1979.
In Witness Whereof, the Employer and the Trustee, by their respective
duly authorized officers, have caused this Adoption Agreement to be executed on
this 1st day of March, 1998.
Tennessee Wholesale Drug (TWD) Key Trust Company of Indiana, NA
- ------------------------------------ -------------------------------------
(Name of Participating Employer) (Name Of Trustee)
By: /s/ Michael D. McCormick By: /s/ April M. Czenkusch
- ------------------------------------ -------------------------------------
Sec. VP
- ------------------------------------ -------------------------------------
(Title) (Title)
Bindley Western Industries, Inc.
- ------------------------------------
(Name of Signatory Employer)
By: /s/
- ------------------------------------
Exec. V.P. & CFO
- ------------------------------------
(Title)
NOTE: Each Participating Employer must execute a separate Participation
Agreement. See the notes at the end of the Adoption Agreement for
important prototype plan information.
<PAGE> 1
EXHIBIT 10-Z(vii)
PARTICIPATION AGREEMENT
FOR PARTICIPATION BY RELATED GROUP MEMBERS
(PLAN SECTION 1.1(KK))
The undersigned Employer, by executing this Participation Agreement,
elects to become a Participating Employer in the Plan, as if the Participating
Employer were a signatory to the Adoption Agreement. The Participating
Employer accepts, and agrees to be bound by, all of the elections granted under
the provisions of the Plan as made by Bindley Western Industries, Inc.,
Employer of the Adoption Agreement ("Signatory Employer").
(1) The Effective Date of the undersigned Employer's participation in the
designated Plan is: August 8, 1997
(2) The undersigned Employer's adoption of this Plan constitutes:
(a) The adoption of a new plan by the Participating Employer.
(b) The adoption of an amendment and restatement of a plan currently
maintained by the Employer, identified as Bindley Western
Industries, Inc. & Subsidiaries Profit Sharing Plan and
having an original effective date of January 1, 1979.
In Witness Whereof, the Employer and the Trustee, by their respective
duly authorized officers, have caused this Adoption Agreement to be executed on
this 1st day of March, 1998.
Groveway Pharmacy Key Trust Company of Indiana, NA
- ------------------------------------ -------------------------------------
(Name of Participating Employer) (Name Of Trustee)
By: /s/ Michael D. McCormick By: /s/ April M. Czenkusch
- ------------------------------------ -------------------------------------
Sec. V.P.
- ------------------------------------ -------------------------------------
(Title) (Title)
Bindley Western Industries, Inc.
- ------------------------------------
(Name of Signatory Employer)
By: /s/ Thomas J. Salentine
- ------------------------------------
Exec. V.P. & CFO
- ------------------------------------
(Title)
NOTE: Each Participating Employer must execute a separate Participation
Agreement. See the notes at the end of the Adoption Agreement for
important prototype plan information.
<PAGE> 1
EXHIBIT 10-AA(iv)
BINDLEY WESTERN INDUSTRIES, INC.
PROFIT SHARING EXCESS PLAN
I ARTICLE
NATURE AND PURPOSE OF PLAN
1 Section 1. Type of Plan. This is a continuation and complete
restatement of The Bindley Western Industries, Inc. Profit Sharing Excess Plan,
effective __________________, 1996. The Plan is maintained by the Company as
an unfunded, non-qualified deferred compensation plan for a select group of the
Employer's management or highly-compensated employees.
1 Section 1. 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.
I ARTICLE
DEFINITIONS AND RULES OF CONSTRUCTION
1 Section 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.
(a) "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.
(a) "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.
<PAGE> 2
(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.
(a) "Board of Directors" means the Board of Directors of the
Company.
(a) "Change in Control" means an event described in
Subsection 6.5(b).
(a) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and interpretive rules and regulations.
(a) "Committee" means a committee comprised of those
members of the Compensation and Stock Option Committee of the Board of
Directors who are not Participants in the Plan.
(a) "Company" means Bindley Western Industries, Inc.
(a) "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).
(a) "Designated Participant" means a Participant designated
by the Committee to receive special contributions pursuant to Section
5.2.
(a) "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.
(a) "Effective Date" means December 9, 1994.
(a) "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.
(a) "Employee" means any person employed by the Employer on
a full-time salaried basis, including officers of the Company or a
Related Employer.
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<PAGE> 3
(a) "Employer" means the Company and any Related Employer.
(a) "Insolvent" means, with respect to the Company, the
Company being unable to pay its debts as they are due, or the Company
being subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(a) "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.
(a) "Participant" means an Eligible Employee who becomes a
Participant in the Plan pursuant to Section 3.2.
(a) "Plan" means this instrument, as amended from time to
time, and the non-qualified deferred compensation plan so established.
(a) "Plan Year" means a calendar year commencing on or after
January 1, 1994.
(a) "Pre 94 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 Code
Paragraph 401(a)(17) for 1993, increased for each Plan Year in
accordance with Code Subsection 415(d).
(a) "Profit Sharing Plan" means the Profit Sharing Plan of
Bindley Western Industries, Inc. and Subsidiaries.
(a) "Rabbi Trust" means the grantor trust that the Company,
in its sole discretion, may establish 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 the Company becomes Insolvent.
(a) "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).
(a) "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.
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<PAGE> 4
(a) "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.
(b) "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.
(a) "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.
(a) "Unforeseeable Emergency" means, for the purpose of
Section 6.7, 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.
1 Section 2. 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.
(a) Words used in the masculine gender shall be construed to
include the feminine gender, where appropriate, and vice versa.
(a) Words used in the singular shall be construed to
include the plural, where appropriate, and vice versa.
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<PAGE> 5
(a) 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.
(a) 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.
I ARTICLE
ELIGIBILITY AND PARTICIPATION
1 Section 3. Eligibility. Participation in the Plan is limited
to Eligible Employees.
1 Section 3. Date of Participation. An Eligible Employee shall
become a Participant on the date specified by the Committee.
1 Section 3. 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.
I ARTICLE
PARTICIPANTS' ACCOUNTS
1 Section 4. 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 shall be credited with contributions 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. Notwithstanding the preceding sentence, the Participant's interest
in his Account shall be subject to the claims of the Company's general
creditors in the event the Company becomes Insolvent.
1 Section 4. 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.
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2 Section 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.
(a) Notwithstanding the provisions of Subsection (a), the
Company, in its sole discretion, may establish a Rabbi Trust. The
Employer, in its sole discretion, may make such contributions to the
Rabbi Trust as the Committee determines are appropriate to enable the
Employer to pay benefits under the Plan. Any 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).
1 Section 4. Valuation of Accounts. The value of a
Participant's Account as of any date shall equal the dollar amount of any
contributions 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.
1 Section 4. 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.
1 Section 4. 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 amounts credited
to a Participant's Account pursuant to Section 5.3 shall not be forfeitable
pursuant to this Section.
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I ARTICLE
CONTRIBUTIONS
(a) Section 5. 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 the
Participant's Allocation Percentage multiplied by his Pre 94 Compensation and,
the Participant's Allocation Percentage multiplied by his Limited Compensation.
Contributions with respect to a Participant for a Plan Year shall be credited
to the Participant's Account as of the first day of the following Plan Year.
(1) Section 5. Special Contributions for Designated Participants.
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 $30,000 and the sum of the contribution
credited to the Participant's Account pursuant to Section 5.1 for the Plan Year
plus 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.
1 Section 5. Additional Contribution for William E. Bindley.
For the Plan Year commencing on January 1, 1996, the Account of Mr. William E.
Bindley in this Plan shall be credited with a special contribution equal to the
sum of (a) the sum of the difference between (1) and (2) for each calendar year
beginning with the 1989 calendar year and ending with the 1993 calendar year,
where (1) is the lesser of $30,000 and Mr. Bindley's Allocation Percentage for
that calendar year multiplied by his Compensation for that calendar year and
(2) is the contributions and forfeitures allocated to Mr. Bindley's account in
the Profit Sharing Plan for that calendar year, and (b) an amount equal to the
interest that would have been earned on those amounts during those calendar
years if one-third of the amounts had been invested in the Nations Prime Fund
Trust and two-thirds of the amounts had been invested in the Nations Strategic
Fixed Income Fund.
I ARTICLE
DISTRIBUTION OF BENEFITS
1 Section 6. General Distribution Rules.
(a) General Provisions. Except as otherwise provided in
Sections 6.2 through 6.7, a Participant's Account shall be 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).
(a) Participant's Election. Upon commencing participation in the
Plan, the Participant shall make an election, in writing and pursuant
to rules
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<PAGE> 8
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
(A) Substantially equal annual or quarterly
installments over a specified number of years not exceeding 15.
(1) Time of Distribution. Distribution of a
Participant's benefits shall commence no later than 30 days after
the earlier of the Participant's death or his Retirement.
(a) Default Procedure. If a Participant fails to make an
election pursuant to this Section, then, except as otherwise provided
in Sections 6.2 through 6.8, the Participant's benefits shall be
distributed in five substantially equal annual installments commencing
no later than 30 days after the earlier of the Participant's death or
his Retirement.
1 Section 6. Distribution of Additional Amounts. Any amounts
contributed pursuant to Section 5.3 shall be distributed in five substantially
equal annual installments as provided in this Section until all of the 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.
1 Section 6. Distribution Upon Disability. Notwithstanding
Section 6.1, if 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 no later than 30 days after the Committee
determines that the Participant has incurred a Disability.
1 Section 6. Distribution Upon Termination of Employment Before
Retirement. Notwithstanding Section 6.1, if a 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 no later than 30 days
after the Participant's Termination of Employment.
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<PAGE> 9
1 Section 6. Distribution Upon Plan Termination Due to a Change
in Control. (a) Notwithstanding any other Section, if the Plan terminates upon
a Change in Control as provided in Section 8.2, a Participant's Account shall be
distributed to the Participant (or, in the event of the Participant's death,
before distribution, to his Beneficiary) in a single lump sum payment no later
than 30 days after the Change in Control occurs.
(b) 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: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the exercise of
a conversion privilege); (ii) any acquisition by the Company; (iii) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any Related Employer; (iv) 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; (v) any acquisition
by William E. Bindley; or (vi) 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.
(1) 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.
(1) 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
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<PAGE> 10
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.
(1) 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 Company,
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, 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
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<PAGE> 11
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. Notwithstanding any other provision of this
Subsection, the sale or other disposition of all or substantially all
of the assets of the Bindley Western Drug Company division of the
Company shall not constituue a sale or other disposition of all or
substantially all of the assets of the Company under this Paragraph
6.5(b)(4).
1 Section 6. Distribution of Small Amounts. Notwithstanding
Section 6.1, if a Participant's Account is distributable pursuant to this
Article on account of death, Retirement, or Termination of Employment and the
remaining value of his Account (other than that portion, if any, of his Account
consisting of amounts contributed pursuant to Section 5.3) does not exceed
$10,000.00, the balance of his Account (other than the portion, if any,
consisting of amounts contributed pursuant to Section 5.3) shall be distributed
in a lump sum payment to the Participant (or, in the event of his death, to his
Beneficiary).
1 Section 6. 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.
1 Section 6. 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
1 Section 6. 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
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<PAGE> 12
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.
I ARTICLE
ADMINISTRATION
1 Section 7. 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.
1 Section 7. 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.
1 Section 7.. 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;
(a) To cause to be prepared all forms necessary or appropriate
for the administration of the Plan;
(a) To keep appropriate books and records;
(a) To determine amounts to be distributed to Participants and
Beneficiaries under the provisions of the Plan;
(a) To determine, consistent with the provisions of this
instrument all questions of eligibility, rights, and status of
Participants and Beneficiaries under the Plan;
(a) 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;
(a) To exercise all other powers and duties specifically
conferred upon the Committee elsewhere in this instrument; and
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<PAGE> 13
(a) 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.
I ARTICLE
AMENDMENT AND TERMINATION
1 Section 8. 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.
1 Section 8. Termination. The Company reserves the right to
terminate the Plan, by action of the Board of Directors, at any time it deems
appropriate. In addition, the Plan shall terminate upon a Change in Control
and all Participants' Accounts shall be distributed in accordance with Section
6.5. Upon termination of the Plan, no further contribution shall be made to
the Plan. Distribution following termination of the Plan, other than a
termination upon a Change in Control, shall be made at the time and under the
terms and conditions as the Company, 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.
I ARTICLE
MISCELLANEOUS
1 Section 9. 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.
1 Section 9. 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.
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<PAGE> 14
1 Section 9. 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.
1 Section 9. 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.
1 Section 9. 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.
1 Section 9. 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 amounts contributed pursuant to Section 5.3. 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 amounts contributed pursuant to Section
5.3 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.
1 Section 9. Benefit. This Plan shall be binding upon and
inure to the benefit of the Employer and its successors and assigns.
1 Section 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.
1 Section 9. 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.
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<PAGE> 15
Bindley Western Industries, Inc. has caused this restatement of the
Plan to be executed by their duly authorized officers, as of the ____ day of
_____________, 1997.
BINDLEY WESTERN INDUSTRIES, INC.
By: ______________________________
(Signature)
______________________________
(Office)
ATTEST:
By: ____________________________
(Signature)
____________________________
(Office)
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<PAGE> 1
EXHIBIT 10-AA(v)
BINDLEY WESTERN INDUSTRIES, INC.
401(K) EXCESS PLAN
I ARTICLE
NATURE AND PURPOSE OF PLAN
1 Section 1.. Type of Plan. This is a continuation and complete
restatement of the Bindley Western Industries, Inc. 401(k) Excess Plan,
effective _____________, 1996. The Plan is maintained by the Company as an
unfunded, non-qualified deferred compensation plan for a select group of the
Employer's management or highly-compensated employees.
1 Section 1.. 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.
I ARTICLE
DEFINITIONS AND RULES OF CONSTRUCTION
1 Section 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 5.8 to receive benefits
under the Plan in the event of the Participant's death.
(a) "Board of Directors" means the Board of Directors of the
Company.
(a) "Change in Control" means an event described in Subsection
5.4(b).
(a) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, and interpretive rules and regulations.
10-AA (v)
<PAGE> 2
(a) "Committee" means a committee composed of those members of
the Compensation and Stock Option Committee of the Board of Directors who
are not Participants in the Plan.
(a) "Company" means Bindley Western Industries, Inc.
(a) "Compensation" means, with respect to a Participant for a
Plan Year, the Participant's salary and bonus for the Plan Year, reduced by
any salary reductions made by the Participant under a Code Section 125
cafeteria plan for the Plan Year.
(a) "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.
(a) "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.
(a) "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.
(a) "Effective Date" means December 9, 1994.
(a) "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.
(a) "Employee" means any person employed by the Employer on a
full-time salaried basis, including officers of the Company or a Related
Employer.
(a) "Employer" means the Company and any Related Employer.
(a) "Insolvent" means, with respect to the Company, the Company
being unable to pay its debts as they are due, or the Company being subject
to a pending proceeding as a debtor under the United States Bankruptcy
Code.
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<PAGE> 3
(a) "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. (b) "Participant" means an Eligible Employee
who becomes a Participant in the Plan pursuant to Section 3.2.
(a) "Plan" means this instrument, as amended from time to time,
and the non-qualified deferred compensation plan so established.
(a) "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.
(a) "Profit Sharing Plan" means the Profit Sharing Plan of
Bindley Western Industries, Inc. and Subsidiaries.
(a) "Rabbi Trust" means the grantor trust that the Company, in
its sole discretion, may establish 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 the Company becomes Insolvent.
(a) "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).
(a) "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.
(a) "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 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
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was guilty of conduct constituting cause and specifying the particulars of
the conduct in detail.
(y) "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.
(z) "Trustee" means the trustee of the Rabbi Trust that the
Company, in its sole discretion, may establish pursuant to Subsection
4.4(b).
(aa) "Unforeseeable Emergency" means, for the purpose of Section 5.6,
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.
1 Section 2.. 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.
(a) Words used in the masculine gender shall be construed to
include the feminine gender, where appropriate, and vice versa.
(a) Words used in the singular shall be construed to include
the plural, where appropriate, and vice versa.
(a) 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.
(a) 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.
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I ARTICLE
ELIGIBILITY AND PARTICIPATION
1 Section 3.. Eligibility. Participation in the Plan is limited to
Eligible Employees.
1 Section 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 delivering a completed Deferral Agreement to 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 to the Plan for the Plan Year as an
elective contribution, subject to the provisions of Subsections (b) and
(c). On Deferral Agreements for Plan Years beginning after December 31,
1995, the Eligible Employee also shall indicate whether to contribute to
the Profit Sharing Plan that portion of his Compensation deferred pursuant
to the preceding sentence that he can contribute to the Profit Sharing Plan
for the Plan Year without exceeding the limitations of Code Subsection
402(g) and Paragraph 401(k)(3) for the Plan Year. 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.
(a) Initial Deferral. For the Plan Year beginning on the
Effective Date, each Eligible Employee may elect to defer to the Plan up to
100% of his bonus, if any, payable for the Plan Year and earned on or after
the Effective Date.
(a) Subsequent Deferrals. For Plan Years beginning after the
Effective Date, each Eligible Employee may elect to defer under the Plan 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.
(a) 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, no later than 30 days after becoming an Eligible Employee,
make an irrevocable prospective election to defer a portion of his
Compensation for the remainder of the Plan Year.
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<PAGE> 6
(a) 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.
1 Section 3.. 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.
I ARTICLE
PARTICIPANTS' DEFERRAL ACCOUNTS
1 Section 4.. 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 shall be credited with deferrals pursuant to Section
3.2 and earnings and losses pursuant to Section 4.2, and debited with any
contributions to the Profit Sharing Plan pursuant to Section 4.4 and any
payments pursuant to Article V. Each Participant shall have a separate Deferral
Account. The Participant's interest in his Deferral Account shall be fully
vested at all times. Notwithstanding the preceding sentence, the Participant's
interest in his Deferral Account shall be subject to the claims of the Company's
general creditors in the event the Company becomes Insolvent.
1 Section 4.. 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 any Rabbi Trust or any other amounts represented by the
Deferral Accounts.
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<PAGE> 7
(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.
1 Section 4.. Credits to Deferral Accounts. A Participant's deferrals
pursuant to Section 3.2 shall be credited to his Deferral Account as of the
first day of 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 first day of the month.
Section 4.4. 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.
(a) Notwithstanding the provisions of Subsection (a), the
Company, in its sole discretion, may establish a Rabbi Trust. The Employer,
in its sole discretion, may make such contributions to the Rabbi Trust as
the Committee determines are appropriate to enable the Employer to pay
benefits under the Plan. Any 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).
Section 4.5. 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
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<PAGE> 8
Section 4.2, and decreased by the amount of any contributions made or to be made
from the Deferral Account to the Profit Sharing Plan pursuant to Section 4.4 and
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 5.7.
Section 4.6. 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 Deferral Account as of the end of
that Plan Year.
Section 4.7. Determination and Treatment of Amounts Contributable to
Profit Sharing Plan. As soon as possible for each Plan Year, the Committee shall
determine the amount that each Eligible Employee electing deferrals pursuant to
Section 3.2 can contribute to the Profit Sharing Plan for the same Plan Year
without exceeding the limitations of Code Subsection 402(g) and Paragraph
401(k)(3) for the Plan Year. If an Eligible Employee elected to contribute to
the Profit Sharing Plan that portion of his deferrals that did not exceed the
determined amount, that portion shall be transferred directly to the Profit
Sharing Plan no later than March 15 of the following Plan Year. Alternatively,
if the Eligible Employee elected to receive a lump sum distribution of that
portion of his deferrals that did not exceed the determined amount, that portion
shall be distributed to him no later than March 15 of the following Plan Year.
The earnings and losses credited to the transferred or distributed portion
pursuant to Section 4.3 shall remain in the Eligible Employee's Deferral Account
until distributed pursuant to Article V.
I ARTICLE
DISTRIBUTION OF BENEFITS
1 Section 5.. 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.
(a) 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:
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<PAGE> 9
(A) A lump sum payment; or
(A) Substantially equal annual or quarterly installments
over a specified number of years not exceeding 15.
(1) Time of Distribution. Distribution of a Participant's
deferral shall commence no later than 30 days after the earlier of the
Participant's death or his Retirement.
(a) Default Procedure. 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 no later than 30 days after the earlier of the Participant's
death or his Retirement.
1 Section 5.. Distribution Upon Disability. Notwithstanding
Section 5.1, if 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 no later than 30 days after the
Committee determines that the Participant has incurred a Disability.
1 Section 5.. Distribution Upon Termination of Employment Before
Retirement. Notwithstanding Section 5.1, if a 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 single lump sum payment no later than 30 days after the
Participant's Termination of Employment.
1 Section 5.. Distribution Upon Plan Termination Due to a Change
in Control. (a) Notwithstanding any other Section, if the Plan terminates upon a
Change in Control as provided in Section 7.2, a Participant's Deferral Account
shall be distributed to the Participant (or, in the event of his death, to his
Beneficiary) in a single lump sum payment no later than 30 days after the Change
in Control occurs.
(b) 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
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<PAGE> 10
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: (i) any
acquisition directly from the Company (excluding an acquisition by virtue
of the exercise of a conversion privilege); (ii) any acquisition by the
Company; (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Related Employer; (iv)
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; (v) any acquisition by William E.
Bindley; or (vi) 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.
(1) 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.
(1) 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 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) beneficially
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<PAGE> 11
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.
(1) 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 Company, 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 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.
Notwithstanding any other provision of this Subsection, the sale or other
disposition of all or substantially all of the assets of the Bindley
Western Drug Company division of the Company shall not constitute a sale or
other disposition of all or substantially all of the assets of the Company
under this Paragraph 5.4(b)(4).
1 Section 5.. Distribution of Small Amounts. Notwithstanding Section
5.1, if a Participant's Deferral Account is distributable pursuant to this
Article on account of death, Retirement, or Termination of Employment and the
remaining value of his Account does not exceed $10,000.00, the balance of his
Account shall be distributed in a lump sum payment to the Participant (or, in
the event of his death, to his Beneficiary).
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<PAGE> 12
1 Section 5.. 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. The balance of the
Participant's Deferral Account shall not include any amount that the Participant
elected to contribute to the Profit Sharing Plan pursuant to Section 3.2 but
that has not yet been transferred to the Profit Sharing Plan pursuant to Section
4.4. 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.
1 Section 5.. 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
1 Section 5.. 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.
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I ARTICLE
ADMINISTRATION
1 Section 6.. 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.
1 Section 6.. 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.
1 Section 6.. 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;
(a) To cause to be prepared all forms necessary or appropriate for
the administration of the Plan;
(a) To keep appropriate books and records;
(a) To determine amounts to be distributed to Participants and
Beneficiaries under the provisions of the Plan;
(a) To determine, consistent with the provisions of this instrument
all questions of eligibility, rights, and status of Participants and
Beneficiaries under the Plan;
(a) 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;
(a) To exercise all other powers and duties specifically conferred
upon the Committee elsewhere in this instrument; and
(a) 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.
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I ARTICLE
AMENDMENT AND TERMINATION
1 Section 7.. 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.
1 Section 7.. Termination. The Company reserves the right to terminate
the Plan, by action of the Board of Directors, at any time it deems appropriate.
In addition, the Plan shall terminate upon the occurrence of a Change in Control
and all Participants' Accounts shall be distributed in accordance with Section
5.4. Upon termination of the Plan, no further contribution shall be made to the
Plan. Distribution following termination of the Plan, other than a termination
upon a Change in Control, shall be made at the time and under the terms and
conditions as the Company, 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.
I ARTICLE
MISCELLANEOUS
1 Section 8.. 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.
1 Section 8.. 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.
1 Section 8.. 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
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<PAGE> 15
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.
1 Section 8.. 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.
1 Section 8.. 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.
1 Section 8.. 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.
1 Section 8.. Benefit. This Plan shall be binding upon and inure to
the benefit of the Employer and its successors and assigns.
1 Section 8.. Responsibility for Legal Affect. Neither the Committee nor
the Company makes any recommendations or warranties, express or implied, or
assumes any responsibility concerning the legal context or other implications or
affects of this Plan.
1 Section 8.. 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.
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<PAGE> 16
Bindley Western Industries, Inc. has caused this restatement of the Plan
to be executed by its duly authorized officers, as of the ____ day of
_________________, 1997.
BINDLEY WESTERN INDUSTRIES, INC.
By:______________________________
(Signature)
______________________________
(Office)
ATTEST:
By: ____________________________
(Signature)
____________________________
(Office)
-16-
<PAGE> 1
BINDLEY WESTERN INDUSTRIES, INC.
LIST OF ACTIVE WHOLLY-OWNED SUBSIDIARIES
1. BW Food Distributors, Inc. -- Methuen, MA
2. BW Transportation Services, Inc. -- Indianapolis, IN
3. Priority Healthcare Corporation -- Altamonte Springs, FL
4. College Park Plaza Associates, Inc. - Indianapolis, IN
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. Priority
Healthcare Services Corporation (fka National Infusion Services, Inc.), an
Indiana corporation, is a 94% owned subsidiary of Bindley Western Industries,
Inc.
EXHIBIT 21
<PAGE> 1
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, 33-58947, 33-64828
and 333-04517) of Bindley Western Industries, Inc. of our report dated March 2,
1998 appearing on page F-1 of this Annual Report on Form 10-K.
Price Waterhouse LLP
Indianapolis, Indiana
March 27, 1998
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