<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-12
BINDLEY WESTERN INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
BINDLEY WESTERN INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 18, 2000
The annual meeting of shareholders of Bindley Western Industries, Inc.
will be held at The Marten House Hotel and Lilly Conference Center, 1801 West
86th Street, Indianapolis, Indiana, on Thursday, May 18, 2000, at 9:00 a.m.,
Indianapolis time, for the following purposes:
(1) To elect eleven directors to serve until the next annual meeting of
shareholders and until their successors are elected and have qualified;
(2) To approve or disapprove the appointment of PricewaterhouseCoopers LLP
as auditors for the Company for 2000;
(3) To approve the proposed Bindley Western Industries, Inc. 2000 Stock
Option and Incentive Plan; and
(4) To transact such other business as may properly come before the
meeting.
All shareholders of record at the close of business on March 17, 2000 will
be eligible to vote.
It is important that your shares be represented at this meeting. Whether
or not you expect to be present, please fill in, date, sign and return the
enclosed proxy form in the accompanying addressed, postage-prepaid envelope. If
you attend the meeting, you may revoke your proxy and vote in person.
Michael D. McCormick, Secretary
<PAGE>
BINDLEY WESTERN INDUSTRIES, INC.
8909 Purdue Road
Indianapolis, Indiana 46268
PROXY STATEMENT
Annual Meeting of Shareholders
May 18, 2000
This statement is being furnished to shareholders on or about March 30,
2000 in connection with a solicitation by the Board of Directors of Bindley
Western Industries, Inc. (the "Company") of proxies to be voted at the annual
meeting of shareholders to be held at 9:00 a.m., Indianapolis time, Thursday,
May 18, 2000, at The Marten House Hotel and Lilly Conference Center, 1801 West
86th Street, Indianapolis, Indiana, for the purposes set forth in the
accompanying Notice.
At the close of business on March 17, 2000, the record date for the
meeting, there were 34,157,479 shares of Common Stock of the Company outstanding
and entitled to vote at the meeting. On all matters, including the election of
directors, each shareholder will have one vote for each share held.
If the enclosed form of proxy is executed and returned, it may nevertheless
be revoked at any time insofar as it has not been exercised. If a shareholder
executes more than one proxy, the proxy having the latest date will revoke any
earlier proxies. A shareholder attending the meeting will be given the
opportunity to revoke his or her proxy and vote in person.
Unless revoked, a proxy will be voted at the meeting in accordance with the
instructions of the shareholder in the proxy, or, if no instructions are given,
for the election as directors of all nominees listed under Proposal 1 and for
Proposals 2 and 3. A proxy may indicate that all or a portion of the shares
represented by such proxy are not being voted with respect to a specific
proposal. This could occur, for example, when a broker is not permitted to vote
shares held in street name on certain proposals in the absence of instructions
from the beneficial owner ("broker non-votes"). Election of directors will be
determined by the vote of the holders of a plurality of the shares voting on
such election. Approval of Proposal 2 will be subject to the vote of the
holders of a greater number of shares favoring approval than those opposing it.
Broker non-votes with respect to Proposals 1 and 2 will be considered as not
present and entitled to vote on such proposal, even though such shares will be
considered present for purposes of determining a quorum. Abstentions on
Proposals 1 and 2 will be considered as present, but not as voting in favor of
such proposal. As a result, with respect to Proposals 1 and 2, neither broker
non-votes nor abstentions will affect the determination of whether such
proposals will be approved. With respect to Proposal 3, a majority of the
outstanding shares of Common Stock must vote on the matter, and abstentions will
count as votes but broker non-votes will not count as votes. Approval of
Proposal 3 will then be subject to the affirmative vote of a majority of that
number.
The Board of Directors knows of no matters, other than those described in
the attached Notice of Annual Meeting, which are to be brought before the
meeting. However, if other matters properly come before the meeting, it is the
intention of the persons named in the accompanying form of proxy to vote such
proxy in accordance with their judgment on such matters.
<PAGE>
The Company intends to retain Corporate Investor Communications ("CIC") to
assist in the solicitation of proxies. CIC may contact various shareholders by
telephone to solicit the return of their proxies. The fee to be paid to CIC is
not expected to exceed $5,500. The cost of the solicitation of proxies will be
borne by the Company.
ELECTION OF DIRECTORS
Nominees
Eleven directors are to be elected at the meeting, each to hold office for
a term of one year and until his or her successor is elected and has qualified.
It is the intention of the persons named in the accompanying form of proxy to
vote such proxy for the election to the Board of Directors of the persons
identified below. Each of the nominees for director is presently a director.
If any such person is unable or unwilling to accept nomination or election, it
is the intention of the persons named in the accompanying form of proxy to
nominate such other person as director as they may in their discretion
determine, in which event the shares will be voted for such other person.
Unless otherwise indicated in a footnote to the following table, the
principal occupation of each nominee has been the same for the last five years,
and such nominee possesses sole voting and investment power with respect to the
shares of Common Stock indicated as beneficially owned by such nominee. William
E. Bindley is the father of William F. Bindley II. There is no family
relationship between any other of the directors or executive officers of the
Company.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Shares Percent
Beneficially of Class
Present Owned on (if more
Principal Director January 31, than
Name Age Occupation Since 2000 1%)
- --------------------------- --- ------------------------------------ -------- ----------------- -----------
William E. Bindley (1) 59 Chairman of the Board, Chief 1970 6,619,148 (2)(3) 19.1%
Executive Officer and
President of the Company
Robert L. Koch II (4) 61 President and Chief Executive 1987 32,893 (5) ---
Officer, Koch Enterprises, Inc.
(manufacturer and distributor of
industrial painting systems)
James K. Risk III (6) 58 President and Chief Executive 1987 41,995 (7) ---
Officer, Kirby Risk Corporation
(electrical supply company)
K. Clay Smith (8) 62 President, Underwood Machinery 1983 15,650 (9) ---
Transport, Inc. (transportation
company)
J. Timothy McGinley (10) 59 Managing Partner of House 1987 57,594 (11) ---
Investments (real estate
investment company)
Michael D. McCormick (12) 52 Executive Vice President, 1990 1,003,713 (2)(13) 2.9%
General Counsel and
Secretary of the Company
William F. Bindley II 37 President, Heartland 1990 110,532 (14) ---
Films, Inc. (motion picture
production company)
</TABLE>
- 2 -
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Shares Percent
Beneficially of Class
Present Owned on (if more
Principal Director January 31, than
Name Age Occupation Since 2000 1%)
- --------------------------- --- ------------------------------------ -------- ----------------- -----------
Thomas J. Salentine (15) 60 Executive Vice President and 1990 1,109,593 (2)(16) 3.2%
Chief Financial Officer of
the Company
Keith W. Burks 42 Executive Vice President 1993 662,241 (2)(17) 1.9%
of the Company
Seth B. Harris (18) 60 Retired Chairman of the Board 1994 35,989 (19) ---
and President of Harris Wholesale
(wholesale pharmaceutical
distribution company)
Carolyn Y. Woo (20) 45 Dean, College of Business 1997 6,560 (21) ---
Administration, University of Notre
Dame
</TABLE>
__________
(1) Mr. Bindley also serves on the Board of Directors of Shoe Carnival, Inc., a
shoe retailer, and Priority Healthcare Corporation, a distributor and
provider to the alternate site health care market which was a subsidiary of
the Company through December 31, 1998 ("Priority").
(2) Does not include shares subject to stock options which are not exercisable
within 60 days.
(3) Includes 5,859,843 shares directly owned and presently exercisable stock
options to purchase 619,264 shares granted by the Company. Also includes
79,320 shares held by two family foundations and 60,721 shares held in a
charitable remainder trust of which Mr. Bindley is the trustee and has
investment control. Excludes 10,428 shares held by Mr. Bindley's spouse;
Mr. Bindley disclaims beneficial ownership of such shares.
(4) Mr. Koch also serves on the Board of Directors of Fifth Third Bancorp, a
bank holding company, SIGCORP, Inc., a public utility holding company, and
Southern Indiana Gas and Electric Company, a gas and electric utility.
(5) Mr. Koch shares voting and dispositive power with respect to 1,777 of such
shares with his wife and directly owns 6,214 shares. Includes presently
exercisable stock options to purchase 24,902 shares, granted under the
Company's Outside Directors Stock Option Plan.
(6) Mr. Risk also serves on the Board of Directors of Marsh Supermarkets, Inc.,
a retail grocery chain.
(7) Mr. Risk shares voting and dispositive power with respect to 364 of such
shares with his wife and directly owns 13,362 shares. Includes presently
exercisable stock options to purchase 28,269 shares, granted under the
Company's Outside Directors Stock Option Plan.
(8) Mr. Smith also serves on the Board of Directors of Marsh Supermarkets, Inc.
(9) Includes 6,216 shares directly owned and presently exercisable stock options
to purchase 9,434 shares, granted under the Company's Outside Directors
Stock Option Plan.
(10) Mr. McGinley also serves on the Board of Directors of Indiana Energy, Inc.,
a public utility holding company.
(11) Includes 29,325 shares directly owned and presently exercisable stock
options to purchase 28,269 shares, granted under the Company's Outside
Directors Stock Option Plan.
(12) Mr. McCormick also serves on the Board of Directors of Priority.
(13) Mr. McCormick shares voting and dispositive power with respect to 11,218 of
such shares with his wife and directly owns 176,232 shares. Includes
presently exercisable stock options to purchase 814,522 shares granted by
the Company. Also includes 1,741 shares held in a family foundation.
- 3 -
<PAGE>
(14) Mr. W.F. Bindley II shares voting and dispositive power with respect to
42,944 of such shares with his spouse or minor children and directly owns
39,319 shares. Includes presently exercisable stock options to purchase
28,269 shares, granted under the Company's Outside Directors Stock Option
Plan.
(15) Mr. Salentine also serves on the Board of Directors of Priority.
(16) Includes 200,983 shares directly owned and presently exercisable stock
options to purchase 908,610 shares granted by the Company.
(17) Includes 199,625 shares directly owned and presently exercisable stock
options to purchase 462,616 shares granted by the Company.
(18) Mr. Harris also serves on the Board of Directors of DataTRAK International,
Inc., a provider of electronic data capture technology and other services
to various clinical trial sponsors.
(19) Includes 34,656 shares directly owned and presently exercisable stock
options to purchase 1,333 shares granted under the Company's Outside
Directors Stock Option Plan.
(20) From January 1995 until June 1997, Dr. Woo was Associate Executive Vice
President for Academic Affairs and Professor of Management at Purdue
University. From March 1993 until July 1995, she held the positions of
Director, Professional M.S. Programs and Professor of Management at the
Krannert School of Management at Purdue University. Dr. Woo also serves on
the Board of Directors of NiSource, Inc., an energy/utility-based holding
company, Aon Corporation, an insurance holding company and Arvin
Industries, Inc., an automotive parts manufacturer and supplier.
(21) Includes 1,860 shares directly owned and presently exercisable stock
options to purchase 4,700 shares, granted under the Company's Outside
Directors Stock Option Plan.
The Board of Directors recommends a vote FOR each of the nominees listed
above.
Meetings and Committees
During 1999, the Board of Directors of the Company held four meetings.
During the period in 1999 that he or she served as a director, no director
attended fewer than 75% of the total meetings of the Board of Directors and each
committee on which he or she served. The Board of Directors does not have a
nominating committee. The Board of Directors has a Compensation and Stock
Option Committee (the "Committee"), which consists of Messrs. Harris, Koch,
McGinley, Risk and Smith. The primary function of the Committee is to establish
compensation policies and to administer all executive compensation and stock
option plans of the Company. The Committee met two times during 1999.
The Board of Directors of the Company has an Audit, Ethics and Compliance
Committee (the "Audit Committee"), the current members of which are Messrs. Koch
and Smith and Dr. Woo. The function of the Audit Committee is to meet with the
independent accountants of the Company, to review the audit plan for the
Company, to review the annual audit of the Company with the accountants together
with any other reports or recommendations made by the accountants, to recommend
whether the accountants should be continued as auditors for the Company and, if
others are to be selected, to recommend those to be selected, to meet with the
chief accounting officer for the Company and to review with him and the
accountants for the Company the adequacy of the Company's internal controls, to
review related party transactions, to monitor corporate policies and procedures
with respect to the Company's ethics and compliance program and to perform such
other duties as shall be delegated to the Audit Committee by the Board of
Directors. The Audit Committee met twice during 1999.
- 4 -
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership with the Securities and
Exchange Commission and the NYSE. Such persons also are required to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during 1999, all filing
requirements applicable to its executive officers, directors, and greater than
10% shareholders were complied with, except that three sales by Mr. Salentine
were not timely reported.
Executive Officers
As used throughout this Proxy Statement, the term "executive officers"
refers to William E. Bindley, Chairman of the Board, Chief Executive Officer and
President, Keith W. Burks, Executive Vice President, Michael D. McCormick,
Executive Vice President, General Counsel and Secretary, Thomas J. Salentine,
Executive Vice President and Chief Financial Officer, Gregory S. Beyerl, Vice
President and Controller, and Michael L. Shinn, Treasurer.
- 5 -
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of the Company's last three years to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers, based on salary and bonus earned during 1999 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------
Annual Compensation Awards
--------------------------------------- ----------------------------
Other Annual Restricted Securities
Name and Principal Compensation Stock Awards Underlying All Other
Position Year Salary Bonus (1) (2) (3) Options (4) Compensation
- ------------------------- ---- --------- --------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William E. Bindley 1999 $ 825,600 $ 618,750 $ 68,317 (5) $ 0 128,333 $ 353,398 (6)
Chairman, Chief Executive 1998 793,750 500,000 --- 3,877,500 0 335,812
Officer and President 1997 721,250 385,000 --- 0 336,751 313,029
Thomas J. Salentine 1999 $ 344,533 $ 232,500 --- $ 0 93,333 $ 30,247 (7)
Executive Vice President 1998 300,833 337,500 --- 2,467,500 0 30,834
and Chief Financial Officer 1997 278,765 270,000 --- 0 235,725 29,154
Michael D. McCormick 1999 $ 344,533 $ 232,500 --- $ 0 93,333 $ 29,782 (8)
Executive Vice President, 1998 297,918 337,500 --- 2,467,500 0 30,420
General Counsel and
Secretary 1997 271,434 270,000 --- 0 235,725 28,645
Keith W. Burks 1999 $ 344,533 $ 232,500 --- $ 0 93,333 $ 29,552 (9)
Executive Vice President 1998 297,918 337,500 --- 2,467,500 0 30,215
1997 265,669 270,000 --- 0 235,725 28,369
Michael L. Shinn 1999 $ 120,833 $ 70,000 --- $ 0 20,000 $ 12,955 (10)
Treasurer 1998 111,542 55,000 --- 528,750 0 12,950
1997 103,283 45,000 --- 0 50,512 11,541
</TABLE>
_______________
(1) Reflects bonus earned during the specified year, which bonuses at times
have been paid in the following year.
(2) Item 402 of Regulation S-K of the Securities and Exchange Commission does
not require the dollar value of perquisites and other personal benefits to
be reported unless the total amount of such compensation for a Named
Executive Officer exceeds the lesser of $50,000 or 10% of the total of the
Named Executive Officer's annual salary and bonus.
(3) The dollar amounts shown in this column represent the market value of the
restricted stock awarded under the 1993 Stock Option and Incentive Plan
and were calculated by multiplying the closing market price of the
Company's Common Stock on the date of award by the number of shares
awarded. Holders of restricted stock are eligible to vote the shares and
to receive dividends, if any. The total number of shares of restricted
stock awarded to the Named Executive Officers in 1998, as adjusted to
reflect the June 1998 and June 1999 four-for-three stock splits, were: Mr.
Bindley: 195,554 shares; each of Messrs. Salentine, McCormick and Burks:
124,444 shares; and Mr. Shinn: 26,666 shares. The restricted stock awards
vested as follows: Mr. Bindley: 195,554 shares on January 1, 1999; each of
Messrs. Salentine, McCormick and Burks: 31,110 shares on December 16, 1998
and 93,334 shares on January 1, 1999; and Mr. Shinn: 6,666 shares on
December 16, 1998 and 20,000 shares on January 1, 1999.
(4) The numbers in this column consist of options to acquire shares of Common
Stock of the Company. The Company has no SAR plan. The amounts shown for
stock options represent the number of shares of Common Stock resulting
from the adjustments relating to the June 1998 and June 1999 four-for-
three stock splits and the spin-off of Priority. The adjustments for the
stock splits and the spin-off of Priority were anti-dilution adjustments
pursuant to the stock option plans in order to preserve the economic value
of the options.
(5) Consists of $60,379 in personal use of the Company's aircraft, $4,800 in
an automobile allowance, $2,043 in country club dues payments and $1,095
in gasoline payments.
(6) Consists of $12,800 in Company contributions to the Company's profit
sharing plan, $17,200 in Company contributions under Mr. Bindley's
deferred compensation arrangement described under "---Nonqualified
Deferred Compensation Arrangements," $39,917 for the term insurance
portion and $242,302 for the non-term insurance portion of the split-
dollar life insurance plan described under "---Split Dollar Life
Insurance," $40,357 of above market interest and $822 in group life
insurance premiums.
- 6 -
<PAGE>
(7) Consists of $21,386 in Company contributions to the Company's profit
sharing plans, $7,963 of above market interest and $898 in group life
insurance premiums.
(8) Consists of $21,386 in Company contributions to the Company's profit
sharing plans, $7,963 of above market interest and $433 in group life
insurance premiums.
(9) Consists of $21,386 in Company contributions to the Company's profit
sharing plans, $7,963 of above market interest and $203 in group life
insurance premiums.
(10) Consists of $12,800 in Company contributions to the Company's profit
sharing plans and $155 in group life insurance premiums.
Employment Agreements and Termination Benefits Agreements
The Company has entered into a Termination Benefits Agreement with each of
Messrs. Bindley, Salentine, McCormick, and Burks (the "Covered Named Executive
Officers"). The purpose of the agreements is to encourage them to remain with
the Company by assuring them of certain benefits in the event of a "Change in
Control" of the Company.
The Termination Benefits Agreements provide for payments to the Covered
Named Executive Officers upon the occurrence of certain events. Each
Termination Benefits Agreement has a term of three years and is automatically
extended annually for an additional one-year period unless notice is given by
the Company or the Covered Named Executive Officer. The Termination Benefits
Agreements are designed to protect the Covered Named Executive Officer against
termination of his employment following a "Change in Control" of the Company.
For purposes of the Termination Benefits Agreement, "Change in Control" is
broadly defined to include, among other things, the acquisition by a person or
group of persons of 25% or more of the combined voting power of the stock of the
Company, the replacement of a majority of the current Board of Directors, the
approval by the shareholders of the Company of a reorganization, merger or
consolidation or the approval by shareholders of a liquidation or dissolution of
the Company or the sale or disposition of all or substantially all of the assets
of the Company.
Following a "Change in Control," the Covered Named Executive Officer is
entitled to the benefits provided by the Termination Benefits Agreement in the
event his employment is terminated for any reason other than his death,
disability, or normal retirement or is terminated by the Company for cause.
In addition, the Covered Named Executive Officer is entitled to the
benefits of the Termination Benefits Agreement if, after a "Change in Control,"
he terminates his employment with the Company in response to certain actions by
the Company which include, among other things, a substantial reduction in his
duties or responsibilities, a reduction in the level of salary payable to him,
the failure by the Company to continue to provide him with benefits
substantially similar to those previously provided to him, the required
relocation of the Covered Named Executive Officer, or the breach by the Company
of any of the provisions of the Termination Benefits Agreement.
Upon termination of employment, a Covered Named Executive Officer who is
entitled to the benefits payable under the Termination Benefits Agreement shall
receive within 30 days following the termination all earned but unpaid salary,
bonus and incentive payments through the date of his termination. In addition,
he shall be entitled to a lump-sum payment of an amount equal to 2.9 times the
Covered Named Executive Officer's average annual compensation paid by the
Company for the past five years. Any lump sum payment will be grossed up in an
amount sufficient to cover any excise tax imposed upon such payment pursuant to
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code").
- 7 -
<PAGE>
Compensation of Directors
During 1999, the Company paid directors who are not employees of the
Company an annual retainer of $20,000 and a fee of $1,000 for each Board meeting
or committee meeting attended. The annual retainer is paid 75% in cash and 25%
in the form of shares of Common Stock, valued at 100% of the fair market value
of such shares on the date of grant. Such shares are not registered and are
subject to the resale limitations of Rule 144 of the Securities Act of 1933, as
amended. Directors who are full-time employees do not receive any additional
compensation for serving as directors or for attending meetings, but all
directors are reimbursed for all reasonable out-of-pocket expenses incurred in
connection with attendance at meetings.
On March 29, 1991, the Board of Directors adopted, subject to shareholder
approval, an Outside Directors Stock Option Plan (the "Directors Plan"). The
shareholders approved the Directors Plan at the 1991 annual meeting. Pursuant
to the Directors Plan, each Eligible Director (as defined therein) is
automatically granted an option to purchase 1,000 shares of Common Stock on June
1 of each year beginning in 1991. The option price per share is 85% of the fair
market value of one share of Common Stock on the date of grant. The option
becomes exercisable six months following the date of grant and expires 10 years
following the date of grant. Options may be exercised by the holder only if he
or she has been in continuous service on the Board of Directors at all times
since the grant of the option. There are currently seven Eligible Directors -
Messrs. W.F. Bindley II, Harris, Koch, McGinley, Risk, Smith and Dr. Woo. On
June 1, 1999, each of such Eligible Directors received an option to purchase
1,000 (now 1,333 as adjusted for the June 1999 four-for-three stock split)
shares of Common Stock at the exercise price of $20.3602. The Eligible Directors
are not currently eligible for grants or awards under any other stock, bonus or
benefit plans of the Company.
On May 20, 1999, the Board of Directors adopted an amendment to the
Directors Plan, which amendment ensures that the annual option grant be 1,000,
regardless of changes in the outstanding Common Stock by reason of any stock
split, stock dividend, recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other similar event. The Directors Plan
continues to provide that the aggregate number of shares that may be issued
under the Directors Plan and the number of shares subject to outstanding options
will be adjusted in the case of such events.
Profit Sharing Plan
The Company and its subsidiaries maintain a qualified profit sharing plan
(the "Profit Sharing Plan") for eligible employees of the Company and its
subsidiaries. All employees are generally eligible to participate in the Profit
Sharing Plan as of the first January 1, 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 Profit Sharing Plan has been amended to adopt, effective as of January
1, 2000, one of the permissible safe harbor methods of satisfying the
nondiscrimination test for elective deferrals under the 401(k) feature of the
Profit Sharing Plan. Under this safe harbor method, the Company and its
subsidiaries will make a contribution each year, on behalf of their eligible
employees, equal to 3% of the employee's eligible compensation for the year.
These contributions, and attributable earnings, will be 100% vested at all
times, rather than subject to the graded vesting schedule that applies to the
discretionary contributions by the Company and its subsidiaries. The annual
contribution of the Company and its subsidiaries to the Profit Sharing Plan
beyond the 3% safe
- 8 -
<PAGE>
harbor contribution is at the discretion of the Board, and the Company expects
that the combination of safe harbor contributions and discretionary
contributions by the Company and its subsidiaries will generally total 8% of a
participant's compensation for the year. The employer contribution for a year is
allocated among participants employed on the last day of the year in proportion
to their relative compensation for the year.
Subject to limitations imposed by the Code, a participant may, in addition
to receiving a share of the employer contribution, have a percentage of his or
her compensation withheld from pay and contributed to the Profit Sharing Plan.
Subject to applicable Code requirements, employees may make "rollover"
contributions to the Profit Sharing Plan of qualifying distributions from other
employers' qualified plans.
Nonqualified Deferred Compensation Arrangements
On December 9, 1994, the Company established the Bindley Western
Industries, Inc. 401(k) Excess Plan (the "401(k) Excess Plan") and the Bindley
Western Industries, Inc. Profit Sharing Excess Plan (the "Profit Sharing Excess
Plan"), both of which are non-qualified deferred compensation plans for a select
group of executive employees. Messrs. Bindley, Burks, McCormick and Salentine
are currently eligible to participate in the plans. The Profit Sharing Excess
Plan was established to compensate the eligible executives for the effect of a
Code limitation on the compensation that can be taken into account in
calculating contributions made on their behalf to the Company's Profit Sharing
Plan. The 401(k) Excess Plan is designed to permit the eligible executives to
save for retirement on a pre-tax basis beyond the extent permitted under the
Profit Sharing Plan's 401(k) feature.
Effective January 1, 1994, the Omnibus Budget Reconciliation Act of 1993
("OBRA 93") reduced the amount of an employee's compensation that could be taken
into account in determining contributions or benefits under a qualified pension
or profit sharing plan. Under the Profit Sharing Excess Plan, for each year
that an executive is in the plan, the Company will credit to the executive's
account an amount designed to be equal to the difference between (1) the
contribution that the Company may lawfully make on the executive's behalf to the
Profit Sharing Plan for the year, and (2) the amount that the Company could have
contributed to the Profit Sharing Plan for the executive for that year had OBRA
93 not reduced the compensation limitation. The Profit Sharing Excess Plan also
provides for an additional annual contribution on behalf of Mr. Bindley, which
was formerly provided under a separate deferred compensation agreement between
Mr. Bindley and the Company. That arrangement has now been terminated, and the
amounts credited to Mr. Bindley's account under that arrangement have been
credited to his account under the Profit Sharing Excess Plan.
The 401(k) Excess Plan permits the eligible executives voluntarily to defer
portions of their pre-tax salary and bonus beyond what they can now defer under
the 401(k) feature of the Profit Sharing Plan. Under the 401(k) Excess Plan, an
eligible executive may elect to defer up to 100% of those portions of his salary
and bonus that he is not able to defer under the Profit Sharing Plan.
Amounts credited to an executive's account under the Profit Sharing Excess
Plan are deemed to bear interest each year at an annual rate equal to the rate
of return of the Standard & Poor's 500 Index ("S&P 500 Index") for the year.
With respect to amounts deferred under the 401(k) Excess Plan, each executive,
at the time he makes his deferral election for the coming year, may designate
the investment option or options (from among those available under the Profit
Sharing Plan plus the S&P 500 Index) to serve as the measure of the investment
earnings and
- 9 -
<PAGE>
losses on the executive's deferrals for the year. Under both
plans, a participating executive, at the time he makes his deferral election,
may choose the form in which his benefits attributable to those deferrals will
be paid to him or his beneficiary upon his retirement or death. The three
options available are a single lump sum payment, quarterly installment payments
for a specified period of up to 15 years, and annual installment payments over a
specified period of up to 15 years.
The Company's contributions under the Profit Sharing Excess Plan and
amounts deferred under the 401(k) Excess Plan may be credited to separate
grantor trusts. Each trust is what is commonly referred to as a "rabbi trust"
arrangement, pursuant to which the assets of the trust are subject to the claims
of the Company's general creditors in the event of the Company's insolvency. The
trust assets are principally comprised of corporate owned life insurance
policies on the lives of Messrs. Burks and McCormick.
Split Dollar Life Insurance
The Company and a family trust created by Mr. Bindley established in
December 1992 a split-dollar life insurance arrangement on the life of Mr.
Bindley. The life insurance policy provides coverage in the amount of $7
million. The trust pays premiums on the policy as if it were a one year term
life policy. The Company pays the excess premiums. In addition, the Company
pays to Mr. Bindley an annual bonus in an amount sufficient to cover the
premiums paid by the trust and the tax liability on the bonus.
At the earlier of Mr. Bindley's death or December 16, 2007, the Company
will be reimbursed for all premiums paid by it. In the event of Mr. Bindley's
death, the balance of the proceeds of the policy would be paid to the trust
established by Mr. Bindley and used to purchase Common Stock of the Company from
Mr. Bindley's estate. The annual premiums on the policy are $404,350, of which
$384,680, $383,280 and $381,880 were paid by the Company on December 8, 1997,
December 16, 1998, and December 9, 1999, respectively.
The Company also purchased a $13 million term life insurance policy on the
life of Mr. Bindley in June 1993. The Company is both the owner and beneficiary
of the policy. The premiums on the policy of $53,220, $61,540 and $72,720 were
paid by the Company in 1997, 1998, and 1999, respectively.
Stock Options
Prior to May 20, 1993, the Company had a 1983 Incentive Stock Option Plan,
a 1983 Nonqualified Option Plan (collectively, the "1983 Plans"), and a 1987
Stock Option and Incentive Plan (the "1987 Plan"). The number of shares
available for issuance pursuant to such plans aggregated 2,500,000 shares,
subject to adjustment for certain dilutive events. Incentive stock options,
granted at a minimum of 100% of fair market value, and nonqualified stock
options, granted at a minimum of 85% of fair market value, both exercisable for
up to 10 years from the date of grant, were authorized under the 1983 Plans and
the 1987 Plan.
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 shares of Common Stock that remained available for grants under the
1983 Plans or the 1987 Plan.
- 10 -
<PAGE>
On May 19, 1994, the Company's shareholders approved amendments to the 1983
Plans, the 1987 Plan and the 1993 Plan to permit the 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 at that time 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 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 Code. 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. On May 21,
1998, the Company's shareholders approved an amendment to the 1993 Plan to (i)
increase to 4,000,000 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. The number of shares authorized for issuance under the 1993 Plan
has now been adjusted upward to reflect the June 1998 and June 1999 four-for-
three stock splits and the Priority spin-off.
On December 11, 1998, the Company's Board of Directors adopted, and on
March 25, 1999 and July 22, 1999 amended, the 1998 Non-Qualified Stock Option
Plan (the "1998 Plan"), which reserves for issuance 1,200,000 shares of the
Company's Common Stock held by the Company as treasury shares. The 1998 Plan
provides for the sale or award of nonqualified stock options to employees who
are not officers or directors of the Company or its affiliates. Under the 1998
Plan, no individual participant may receive awards for more than 50,000 shares
in any calendar year.
The Company's Board of Directors has adopted the 2000 Stock Option and
Incentive Plan (the "2000 Plan") and directed that the 2000 Plan be submitted to
shareholders for consideration at the Annual Meeting. For a description of the
2000 Plan, see "Approval of 2000 Stock Option and Incentive Plan."
- 11 -
<PAGE>
The following table sets forth information with respect to options granted
to the Named Executive Officers during 1999.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Grant
Date
Name Individual Grants Value
- -----------------------------------------------------------------------------------------------------
% of Total
Options
Number of Granted
Securities to
Underlying Employees Grant Date
Options in Exercise Present Value
Granted Fiscal Year Price Expiration Date (1)
- -------------------- ----------- ----------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
William E. Bindley 5,136(2) 0.4% $21.3985 January 12, 2004 $ 28,710(3)
123,197(4) 9.0% 19.4531 January 12, 2009 853,755(5)
Thomas J. Salentine 5,136(6) 0.4% 19.4531 January 12, 2009 32,305(3)
88,197(4) 6.5% 19.4531 January 12, 2009 611,205(5)
Michael D. McCormick 5,136(6) 0.4% 19.4531 January 12, 2009 32,305(3)
88,187(4) 6.5% 19.4531 January 12, 2009 611,205(5)
Keith W. Burks 5,136(6) 0.4% 19.4531 January 12, 2009 32,305(3)
88,197(4) 6.5% 19.4531 January 12, 2009 611,205(5)
Michael L. Shinn 5,136(6) 0.4% 19.4531 January 12, 2009 32,305(3)
14,864(4) 1.1% 19.4531 January 12, 2009 103,008(5)
</TABLE>
- ---------------
(1) The Company does not believe that the Black-Scholes model or any other
valuation model is a reliable method of computing the present value of the
Company's employee stock options. The value ultimately realized, if any,
will depend on the amount by which the market price of the stock exceeds
the exercise price on the date of exercise. The grant date present value
calculation uses an expected option term based on past experience, rather
than the contract term of the options. The use of an expected term
produces a valuation adjustment for non-transferability of the options.
There have been no adjustments made for risk of forfeiture of the options.
(2) Incentive stock options granted at 110% of the fair market value of the
stock on the date of grant. The options became exercisable in full on
January 12, 2000.
(3) The grant date present value is based on a Black-Scholes model and assumes
a risk-free rate of return of 4.78%, an expected term of four years, a
dividend yield of 0.53% and a stock volatility of 33.94%.
(4) Nonqualified stock options granted at 100% of the fair market value of the
stock on the date of grant. The options are exercisable at the rate of 25%
per year, beginning on January 12, 2000.
(5) The grant date present value is based on a Black-Scholes model and assumes
a risk-free rate of return of 4.84%, an expected term of five years, a
dividend yield of 0.53% and a stock volatility of 32.79%.
(6) Incentive stock options granted at 100% of the fair market value of the
stock on the date of grant. The options became exercisable in full on
January 12, 2000.
- 12 -
<PAGE>
The following table sets forth information with respect to the exercise of
options by the Named Executive Officers during 1999.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal In-the-Money Options
Shares Year-End at Fiscal Year-End (1)
Acquired Value ------------------------------- ------------------------------
Name on Exercise Realized (2) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William E. Bindley 168,377 $1,421,152 583,329 331,762 $5,091,950 $1,338,925
Thomas J. Salentine --- --- 881,425 251,753 8,854,955 1,084,931
Michael D. McCormick 94,289 1,782,528 787,337 251,753 7,797,481 1,084,931
Keith W. Burks 176,795 2,683,565 435,431 251,753 3,790,537 1,084,931
Michael L. Shinn 34,204 587,072 42,072 47,928 328,820 190,965
</TABLE>
- ----------------
(1) The closing price for the Company's Common Stock as reported by the NYSE on
December 31, 1999 was $15.0625. The value is calculated on the basis of the
difference between the Common Stock option exercise price and $15.0625,
multiplied by the number of "In-the-Money" shares of Common Stock
underlying the option.
(2) The value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise, multiplied by the number of shares to which the exercise relates.
Restricted Stock
Under the 1993 Plan, incentive awards may be made in the form of restricted
stock, in which case the participant would be granted shares of the Company's
Common Stock, which shares would be subject to such forfeiture provisions and
transfer restrictions as the Committee determined at the time of grant. Pursuant
to the proposed 2000 Plan, the Committee may grant shares of restricted stock
that vest over time or upon the attainment of specified performance criteria, in
its discretion; see "Approval of 2000 Stock Option and Incentive Plan --
Restricted Stock." Pending the lapse of forfeiture provisions and transfer
restrictions, certificates representing restricted stock would be held by the
Company, but the grantee generally would have all of the rights of a
stockholder, including the right to vote the shares and the right to receive all
dividends thereon.
The Company did not grant any shares of restricted stock during 1999.
Committee Report On Executive Compensation
The Committee's established practice with respect to executive compensation
has been to: (a) conduct annual merit reviews in May of each year, generally to
become effective June 1; (b) grant stock options on such date as deemed
advisable by the Committee; and (c) approve annual bonuses payable, in whole or
part, during the following March. The Committee applied the criteria discussed
below to the June 1, 1999 annual merit reviews and the 1999 annual bonus amounts
for the executive officers.
- 13 -
<PAGE>
Executive Compensation Policy
The Company's compensation policy is designed to: (a) be competitive
so that the Company can attract, reward, and retain the quality talent that is
essential to its continued success; (b) motivate key employees through the use
of incentive compensation programs, including annual bonuses and stock option
grants; (c) treat employees fairly and, at the same time, be cost effective; (d)
foster teamwork within the Company so that employees share in the rewards and
risks of the Company; (e) offer executive officers the opportunity to achieve
significant levels of ownership in the Company's stock so that their interests
will be aligned with those of its shareholders; and (f) generally attempt to
assure that executive officers' compensation will be tax deductible to the
maximum extent permissible within the meaning of Section 162(m) of the Code.
Cash Based Compensation
Base Salary. In making compensation decisions, the Committee's
subjective review process primarily includes: (a) an analysis of executive
compensation levels within the pharmaceutical distribution industry at other
publicly-traded companies of comparable size and stature by reviewing proxy
statements and national compensation surveys and reports, including those of
consultants engaged by the Committee; (b) individual efforts and accomplishments
within the Company, the distribution industry, and the community; (c) management
experience and development; (d) team building skills consistent with the
Company's best interests; (e) base compensation paid to other executive officers
within the Company; and (f) observance of the Company's ethics and compliance
program. During May 1999, the Committee authorized the CEO to increase the base
salaries for Messrs. Burks, McCormick, and Salentine. These annual merit
increases averaged 15% and were made effective on June 1, 1999.
Bonus Compensation. In 1999, the Board of Directors of the Company
adopted and the shareholders approved the 1999 Cash Bonus Performance Plan for
Executives (the "Bonus Plan"). The purpose of the Bonus Plan is to promote the
success of the Company by providing to participating executives bonus incentives
that qualify as performance-based compensation within the meaning of Section
162(m) of the Code. Section 162(m) imposes a $1 million limit on the
deductibility of non-performance-based compensation paid to certain executive
officers of public companies.
Under the Bonus Plan, the Committee has discretion: (1) to determine
the executive officers of the Company and its subsidiaries eligible for bonus
awards; (2) to determine the amount of such bonuses, subject to the terms of the
Bonus Plan; and (3) to establish and administer performance targets. Such
performance targets may be based on one or more or any combination of the
following business criteria: (a) annual return to shareholders; (b) total net
sales; (c) total from stock net sales; (d) net earnings; (e) net earnings before
nonrecurring expenses; (f) return on equity; (g) return on assets; (h) diluted
earnings per share; (i) earnings before interest, taxes, depreciation and
amortization ("EBITDA"); and (j) EBITDA before nonrecurring expenses.
Participants chosen by the Committee may receive a bonus only if the performance
criteria established by the Committee have been met, as certified by the
Committee in writing. The Committee must establish the performance targets in
advance of deadlines applicable under Section 162(m) and while the performance
relating to the performance targets remains substantially uncertain within the
meaning of Section 162(m).
For 1999, the Committee selected each of Messrs. William E. Bindley,
Salentine, McCormick and Burks as executive officers eligible to receive bonus
awards, and set the maximum
- 14 -
<PAGE>
award payable to each, if all performance criteria were satisfied, as an amount
equal to his respective base salary. The Committee established performance
targets for 1999 based on the following four business criteria: annual return to
shareholders, diluted earnings per share, return on equity and total from stock
net sales. Following the end of 1999, after completion of the audit of the
Company's financial statements, the Committee reviewed the business results. The
performance targets established by the Committee for the year ended December 31,
1999 were satisfied for diluted earnings per share, return on equity and total
from stock net sales, but fell short for annual return to shareholders. Based on
those results, each of Messrs. Bindley, Salentine, McCormick and Burks received
a bonus equal to 75% of his base salary, or $618,750, $232,500, $232,500 and
$232,500, respectively. The bonuses to Messrs. Bindley, Salentine, McCormick and
Burks averaged 75% of the base compensation for these executive officers,
compared to 89% for 1998 and 75% for 1997. The combined bonuses equaled 1.47% of
operating earnings for 1999, compared to 1.88% for 1998 and 2.09% for 1997.
During 1999, a portion of the cash compensation of the Company's other
executive officers (and most other salaried employees) consisted of annual bonus
payments under the Company's bonus pool. Allocation of the bonus pool to the
other executive officers was based on recommendations made by the Committee with
input from the CEO.
The Committee gave equal consideration to the Company's overall
performance and the executive officer's performance for the specific areas of
the Company under his direct control. This 50-50 balance was used to support
accomplishment of overall objectives and to reward individual contributions by
the other executive officers.
For purposes of establishing the annual bonuses for the executive
officers who are not part of the Bonus Plan, the Committee used the measures of
the Company's performance contained in the Bonus Plan and, on March 23, 2000,
ratified bonuses of $70,000 for each of those executive officers. For 1999, the
Committee deemed these financial goals to be a valid measure of performance
within the pharmaceutical distribution industry and consistent with the
Company's best interests.
For 1999, the Committee's intent was to make the executive officers'
total cash compensation package (base compensation plus annual bonus)
competitive with other publicly-traded companies of comparable size and stature
within the pharmaceutical distribution industry. Based on its analysis of total
cash compensation for similar executive officers within the pharmaceutical
distribution industry, the Committee has determined the Company's cash
compensation for its executive officers to be competitive with respect to the
Company's relative position within the industry.
Equity Based Compensation
The Committee believes that equity compensation, in the form of stock
options or restricted stock, is an important element of performance based
compensation of executive officers. By granting equity awards, the Committee
will continue the Company's long-standing practice of increasing key employees'
equity ownership in order to ensure that their interests remain closely aligned
with those of the Company's shareholders. Stock options and equity ownership in
the Company provide a direct link between executive compensation and shareholder
value. Stock options also create an incentive for key employees to remain with
the Company for the long term because the options are not immediately
exercisable and, if not exercised, are forfeited if the employee leaves the
Company before retirement.
- 15 -
<PAGE>
Consistent with the above philosophy, the Committee, based on input
from the CEO, approved the granting of stock options to 269 key employees on
January 12, 1999. For the executive officers (other than the CEO) the Committee
considered: (a) the CEO's input; (b) the Company's long-standing practices with
respect to stock option grants; (c) the objective criteria for evaluating the
Company's performance previously set forth in the discussion with respect to
cash compensation; (d) subjective criteria with respect to individual
performance, including individual efforts and accomplishments, experience, and
team building skills; and (e) the number of stock option grants to other
executive officers within the Company.
Compensation of William E. Bindley, Chairman,Chief Executive Officer,
and President
For 1999, Mr. Bindley's base compensation was based on the same
factors as the other executive officers. As represented in the Summary
Compensation Table set forth under "Compensation of Executive Officers and
Directors," Mr. Bindley's cash compensation was 4.0% greater in 1999 than 1998.
For 1999, Mr. Bindley's bonus was determined pursuant to the Bonus Plan and, as
discussed above, because three of the four performance targets were met, Mr.
Bindley received a bonus equal to 75% of his base salary, or $618,750. Mr.
Bindley's 1999 annual bonus was in an amount equal to 0.69% of the Company's
1999 operating earnings, compared to 0.62% in 1998 and 0.67% in 1997. The
Committee's decision to increase Mr. Bindley's base compensation was based on
the subjective and objective criteria previously set forth in this report in the
discussion with respect to base compensation.
Since the approval of the 1993 Plan, Mr. Bindley has also participated
in the Company's equity based compensation program. By employing the subjective
and objective criteria previously set forth in the discussion with respect to
cash and equity based compensation, the Committee granted Mr. Bindley the stock
options shown in the Option Grants in Last Fiscal Year Table set forth under
"Compensation of Executive Officers and Directors -- Stock Options."
It is the Committee's view that Mr. Bindley's total compensation
package for 1999 was based on an appropriate balance of: (a) individual
performance; (b) Company performance; (c) other CEO compensation packages within
the pharmaceutical distribution industry; and (d) the goal of assuring that all
of his compensation will be fully deductible under Section 162(m) of the Code.
The Committee points out that the companies used for evaluation of competitive
compensation may not, in all cases, be the same as those companies comprising
the industry peer group described under "Compensation of Executive Officers and
Directors--Performance Graph."
Compensation and Stock Option Committee
Seth B. Harris
Robert L. Koch II
J. Timothy McGinley
James K. Risk III
K. Clay Smith
- 16 -
<PAGE>
Performance Graph
The performance graph set forth below compares the cumulative total
shareholder return on the Company's Common Stock with the New York Stock
Exchange Index and with peer companies within SIC Code 5122 (Drug, Drug
Proprietaries and Druggists' Sundries) for the years 1995 through 1999. The
Company's Common Stock has been listed on the NYSE since August 2, 1995. Prior
to that time, the Company's Common Stock was traded on the Nasdaq National
Market System.
Comparison of Five-Year Cumulative Total Return Among The Company,
New York Stock Exchange Index and SIC 5122 Companies
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------
December 31 1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------
Bindley Western 100.00 110.23 126.23 201.86 430.38 333.51
- -------------------------------------------------------------------------
SIC 5122 Companies 100.00 129.69 163.17 211.89 291.75 149.10
- -------------------------------------------------------------------------
New York Stock Exchange 100.00 129.66 156.20 205.49 244.57 267.75
- -------------------------------------------------------------------------
</TABLE>
[PERFORMANCE GRAPH APPEARS HERE]
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that may incorporate future filings (including
this Proxy Statement, in whole or in part), the preceding Committee Report on
Executive Compensation and the stock price Performance Graph shall not be
incorporated by reference in any such filings.
- 17 -
<PAGE>
Compensation Committee Interlocks and Insider Participation
On March 18, 1993, the Board of Directors established the Committee to
approve compensation and stock option grants for the Company's executive
officers. The Committee members during 1999 were Messrs. Harris, Koch,
McGinley, Risk and Smith. None of the Committee members are involved in a
relationship requiring disclosure as an interlocking executive officer/director
or under Item 404 of Regulation S-K or as a former officer or employee of the
Company.
CERTAIN TRANSACTIONS
Relationship and Transactions with Priority Healthcare Corporation
Priority is a former subsidiary of the Company. Mr. William E. Bindley is
the Chairman of the Board of Directors of Priority, and two other of the
Company's directors and executive officers (Mr. McCormick and Mr. Salentine) are
also directors of Priority. Mr. William E. Bindley is also a significant
shareholder of Priority.
Distribution Agreement. In connection with the spin-off of Priority's
Class A Common Stock by the Company (the "Distribution") on December 31, 1998
(the "Distribution Date"), the Company and Priority entered into a Distribution
Agreement (the "Distribution Agreement"). The Distribution Agreement contains a
number of provisions relating to the mechanics of the Distribution and the
arrangements between the Company and Priority subsequent to the Distribution.
The Distribution Agreement provides that, except as otherwise provided in the
Tax Sharing Agreement and the Indemnification and Hold Harmless Agreement
between the Company and Priority (see descriptions of each below), Priority will
pay, perform and discharge all obligations, liabilities and losses relating to,
and will indemnify and hold harmless the Company from and against, all
contracts, agreements, undertakings, liabilities, claims, suits and disputes
arising out of or relating to Priority, its subsidiaries and Priority's
business, assets, liabilities, operations, occupancies and employee benefit and
other plans. In addition, the Company will indemnify and hold harmless Priority
against all losses, liabilities, claims and damages in any way arising out of
the Company, its subsidiaries (other than Priority and Priority's subsidiaries)
and the Company's business, assets, liabilities, operations, occupancies and
employee benefit and other plans. The Distribution Agreement also provides that
each of the Company and Priority will waive, release, forever discharge and
forever be barred from asserting against the other and the other's executives
all claims, suits, disputes, violations, losses, liabilities and damages that
each may have against the other for events, acts or omissions occurring or taken
on or prior to the Distribution Date.
Borrowings. Since the consummation of Priority's initial public offering,
Priority has loaned funds to the Company. The largest amount outstanding during
1999 relating to this borrowing was approximately $15.9 million. The average
incremental borrowing rate applied to this borrowing was 5.4%. As of March 17,
2000, no amount was outstanding under this borrowing.
Tax Sharing Agreement. Prior to the Distribution, the results of operations
of Priority and its domestic subsidiaries that are at least 80% owned by
Priority (the "Priority Group") were included in the Company's consolidated
federal income tax returns and in the Company's consolidated or combined state
tax returns. In 1997, the Company and Priority entered into a Tax Sharing
Agreement that provides, among other things, for the allocation between the
Company and Priority of federal, state, local and foreign tax liabilities for
all periods through the Distribution Date.
- 18 -
<PAGE>
Generally, Priority will be responsible for the portion of any tax deficiencies
of the Company assessed with respect to all periods up to and including the
Distribution Date that give rise to a tax benefit to Priority in a post-
Distribution period. Priority will also be entitled to tax refunds received by
the Company that result in a tax detriment to Priority for those post-
Distribution periods. Priority will also be responsible for all income taxes
imposed on the Priority Group during the taxable period beginning on January 1,
1998 and ending on or before the Distribution Date. Furthermore, the Tax Sharing
Agreement provides that, if the Distribution fails to qualify as a tax-free
distribution as a result of any event occurring prior to the second anniversary
of the Distribution Date that results from the breach of certain covenants made
by Priority in the Tax Sharing Agreement or involves either the stock or assets
(or any combination thereof) of any member of the Priority Group, then Priority
must indemnify and hold the Company harmless, on an after-tax basis, from any
tax liability imposed upon it in connection with the Distribution. The Tax
Sharing Agreement also prohibits Priority from entering into certain
transactions or disposing of substantially all of its assets prior to the second
anniversary of the Distribution Date in the absence of a prior opinion of
independent tax counsel or the receipt of a private letter ruling from the
Internal Revenue Service that such transaction or disposition will not cause the
Distribution to be a taxable transaction.
Indemnification and Hold Harmless Agreement. The Company and Priority
entered into an Indemnification and Hold Harmless Agreement dated as of
September 30, 1997 (the "Indemnification Agreement"), in which each party agrees
to indemnify and hold harmless the other from and against certain obligations
and contingent liabilities. Specifically, the Indemnification Agreement
provides that Priority will indemnify and hold harmless the Company from
obligations related to a guarantee which the Company made in favor of Priority
and from certain indemnity and other obligations which the Company assumed, or
which could be charged against the Company, in connection with five acquisitions
by or on behalf of Priority. The Indemnification Agreement also provides that
the Company will indemnify and hold harmless Priority from and against
contingent liabilities in connection with certain litigation, which was settled
and dismissed in January 1999. In 1999, neither the Company nor Priority made
any payments to the other under the Indemnification Agreement.
Loan to Insider
On December 16, 1997, the Company made a loan of $3,219,803 to Mr. William
E. Bindley in connection with his exercise of stock options granted to him under
the 1993 Plan. The loan bears interest at the rate of 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. The amount
outstanding under this loan at December 31, 1999 was $3,228,389. The largest
amount outstanding during 1999 was $3,436,195. As of March 17, 2000, the amount
outstanding pursuant to Mr. Bindley's loan was $3,273,760.
APPOINTMENT OF AUDITORS
The appointment of PricewaterhouseCoopers LLP as auditors for the Company
during 2000 will be submitted to the meeting in order to permit the shareholders
to express their approval or disapproval. In the event of a negative vote, a
selection of other auditors will be made by the Board. A representative of
PricewaterhouseCoopers LLP is expected to be present at the meeting, will be
given an opportunity to make a statement if he or she desires and will respond
to appropriate questions. Notwithstanding approval by the shareholders, the
Board of Directors
- 19 -
<PAGE>
reserves the right to replace the auditors at any time upon the recommendation
of the Audit Committee of the Board of Directors.
The Board of Directors recommends a vote FOR
the appointment of PricewaterhouseCoopers LLP.
APPROVAL OF 2000 STOCK OPTION AND INCENTIVE PLAN
On March 23, 2000, the Board of Directors of the Company adopted the 2000
Stock Option and Incentive Plan (the "2000 Plan") and directed that the 2000
Plan be submitted to shareholders for consideration at the Annual Meeting. The
following is a summary of the principal features of the 2000 Plan and is
qualified in its entirety by reference to the complete text of the 2000 Plan as
set forth as Exhibit A to this Proxy Statement. Shareholders are urged to read
the actual text of the 2000 Plan.
The Board of Directors recommends a vote FOR adoption of the 2000 Plan.
Purpose
The purpose of the 2000 Plan is to promote the long-term interests of the
Company and its shareholders by providing a means for attracting and retaining
officers and key employees of the Company and its subsidiaries. The Company
believes that employees who own shares of the Company's Common Stock will have a
closer identification with the Company and greater motivation to work for the
Company's success by reason of their ability as shareholders to participate in
the Company's growth and earnings.
Eligible Persons
Recipients of awards under the 2000 Plan must be, or have been at the time
of grant, officers or key employees (as determined by the Committee). The
Company presently has approximately 300 officers and employees who fall within
the category of key employees who may be considered for awards under the 2000
Plan. No awards may be granted to directors who are not also employees of the
Company or one of its subsidiaries.
Shares Subject to the 2000 Plan
The 2000 Plan permits the granting of awards of stock options and
restricted stock. The total number of shares with respect to which awards may
be made under the 2000 Plan is 3,000,000, subject to antidilution adjustments.
The source of shares may be authorized and unissued shares or shares acquired by
the Company and held as treasury shares.
The number of shares covered by an award under the 2000 Plan reduces the
number of shares available for future awards under the 2000 Plan; however, any
shares of restricted stock that ultimately are forfeited to the Company by the
grantee will become available for further awards under the 2000 Plan.
Similarly, if any stock option granted under the 2000 Plan expires, terminates,
or is surrendered or cancelled without having been exercised in full, the number
of shares then subject thereto is added back to the number of remaining
available shares under the 2000 Plan.
- 20 -
<PAGE>
The total number of shares that may be granted to any individual during any
calendar year under all forms of awards may not exceed 300,000 shares.
The closing sale price of the Company's Common Stock on March 17, 2000, as
quoted on the NYSE and reported in The Wall Street Journal, was $15.5625 per
share.
Administration of the Plan
The 2000 Plan will be administered by the Committee. The members of the
Committee must qualify as "non-employee directors" as provided under Rule 16b-3
under the Securities Exchange Act of 1934, as amended, and as "outside
directors" as provided under Section 162(m) of the Code. Subject to the terms
of the 2000 Plan, the Committee has the sole authority and discretion to
determine those officers and key employees who are to be granted awards under
the 2000 Plan and the nature and terms of the awards to be granted, including
the number of shares covered by such awards.
Grant of Stock Options
With respect to the grant of stock options under the 2000 Plan that are
intended to qualify as "incentive stock options" under Section 422 of the Code,
the option price will be at least 100% (or 110% in the case of any holder of
more than 10% of the voting power of the Company) of the fair market value of
the Company's Common Stock on the date of the grant of the stock option. The
aggregate fair market value (determined on the date of grant) of the shares of
stock subject to incentive stock options that become exercisable for the first
time by a grantee in any calendar year may not exceed $100,000. The Committee
will establish the exercise price of options that do not qualify as incentive
stock options ("nonqualified stock options") at the time the options are
granted.
The exercise price of, and the number of shares subject to, an option will
be adjusted by the Committee in the event of stock splits, stock dividends,
recapitalizations and certain other events involving a change in the Company's
capital.
Exercise of Stock Options
No incentive stock option granted under the 2000 Plan may be exercised more
than ten years (or, in the case of any holder of more than 10% of the voting
power of the Company, five years) or such shorter period as the Committee may
determine from the date it is granted. Nonqualified stock options may be
exercised during such period as the Committee determines at the time of grant.
If a grantee's employment with the Company or a subsidiary is terminated
for cause or voluntarily by the grantee for any reason other than death,
disability or retirement, such grantee's options expire at the date of
termination, and the grantee must (unless waived by the Committee) repay to the
Company the amount of any gain realized by the grantee upon any exercise within
the 90-day period prior to the date of termination of any options granted to the
grantee under the 2000 Plan.
Stock options granted under the 2000 Plan will become exercisable in one or
more installments in the manner and at the time or times specified by the
Committee at the time of grant.
- 21 -
<PAGE>
Restricted Stock
Awards under the 2000 Plan may be made in the form of restricted stock, in
which case the participant would be granted shares of the Company's Common
Stock, which shares would be subject to such forfeiture provisions and transfer
restrictions as the Committee determined at the time of grant. Pending the
lapse of such forfeiture provisions and transfer restrictions, certificates
representing restricted stock would be held by the Company, but the grantee
generally would have all of the rights of a shareholder, including the right to
vote the shares and the right to receive all dividends thereon.
While restricted stock would be subject to forfeiture provisions and
transfer restrictions for a period or periods of time, the 2000 Plan does not
set forth any minimum or maximum duration for such provisions and restrictions.
It is expected that the terms of restricted stock awards ordinarily will provide
that the restricted stock will be forfeited to the Company if the grantee ceases
to be employed by the Company prior to the lapse of the forfeiture provisions
and transfer restrictions, subject to exceptions for death, disability or
retirement while employed by the Company. The Committee has the discretion to
determine whether an award of restricted stock will vest upon the lapse of
certain time period(s) or upon the achievement of specified performance targets
during a performance period. Performance targets may be based on one or more of
the following business criteria: annual return to shareholders; total net
sales; total from stock net sales; net earnings; net earnings before
nonrecurring expenses; return on equity; return on assets; diluted earnings per
share; earnings before interest, taxes, depreciation and amortization
("EBITDA"); and EBITDA before nonrecurring expenses. In the case of grants of
restricted stock that are intended to qualify as "performance-based
compensation" under Section 162(m) of the Code, no shares of restricted stock
will become vested unless the performance targets shall have been satisfied and
unless the Committee has certified, by resolution or other appropriate action in
writing, that the performance targets previously established by the Committee
have been satisfied.
Payment for Shares; Loans by the Company
The Committee may permit payment of the exercise price of stock options to
be made in cash, by the surrender of Common Stock valued at its then fair market
value, through a cashless exercise, or by such other means (including a
combination of stock and cash) as it deems appropriate.
The 2000 Plan empowers the Company to make loans to grantees in connection
with the exercise of stock options or the ownership of restricted stock, up to
the following amounts:
(1) With respect to the exercise of stock options, the sum of the exercise
price and the amount of income taxes reasonably estimated to be payable by the
grantee in connection with such exercise; or
(2) With respect to restricted stock, the amount of income taxes reasonably
estimated to be payable by the grantee in connection with the ownership of the
restricted stock.
Loans made under the terms of the 2000 Plan will bear interest at such
rates as may be established by the Committee. No loan may have an initial term
exceeding three years, but the loan may be renewed at the discretion of the
Committee. With the consent of the Committee, loans may be repaid in shares of
Common Stock at their then fair market value. Loans may, but are not required
to be, secured by shares of Common Stock.
- 22 -
<PAGE>
Miscellaneous Provisions
The Committee may accelerate the period of exercise or vesting of any award
made under the 2000 Plan, either absolutely or contingently, for such reasons as
the Committee may deem appropriate, except to the extent inconsistent with
qualification under Section 162(m) of the Code, when such qualification is
intended.
In general, if the employment of a recipient of restricted stock is
involuntarily terminated within 18 months following a change in control of the
Company, the forfeiture provisions and transfer restrictions applicable to such
stock lapse. In addition, in the event of a tender offer or exchange offer for
the Common Stock or upon the occurrence of certain other events, all options
granted under the 2000 Plan shall become exercisable in full, unless otherwise
provided by the Committee.
Amendment and Termination of the Plan
The Board may at any time terminate or amend the 2000 Plan. No amendments
to the 2000 Plan will require shareholder approval unless such approval is
required to comply with Section 422 of the Code, the requirements of the NYSE or
any other applicable law or regulation. Unless previously terminated by the
Board, no further awards may be made under the 2000 Plan after ten years from
the date of its adoption.
Federal Income Tax Consequences
The following is a brief summary of the principal federal income tax
consequences of awards under the 2000 Plan. The summary is based on current
federal income tax laws and interpretations thereof, all of which are subject to
change at any time, possibly with retroactive effect. The summary is not
intended to be exhaustive.
Limitation on Amount of Deduction. The Company generally will be entitled
to a tax deduction for awards under the 2000 Plan only to the extent that the
participants recognize ordinary income from the award. Section 162(m) of the
Code contains special rules regarding the federal income tax deductibility of
compensation paid to the Company's Chief Executive Officer and to each of the
other four most highly compensated executive officers of the Company. The
general rule is that annual compensation paid to any of these specified
executives will be deductible only to the extent that it does not exceed
$1,000,000 or it qualifies as "performance-based compensation" under section
162(m). The 2000 Plan has been designed to permit the Committee to grant awards
which qualify for deductibility under section 162(m).
Taxation of Ordinary Income and Capital Gains. Subject to certain
exceptions, the maximum rate of tax on "net capital gains" from the sale or
exchange of capital assets is 20%. "Net capital gain" is the excess of net
long-term capital gain over net short-term capital loss. Short-term capital
gains are taxed at the same rates applicable to ordinary income. Gains or
losses from the sale or exchange of capital assets will be "long term" if the
capital asset was held for more than one year and "short-term" if the capital
asset was held for one year or less. For taxpayers with certain income levels,
the marginal tax rate applicable to ordinary income can range up to 39.6%. The
classification of income as ordinary income or capital gain is also relevant for
income tax purposes for taxpayers who have capital losses and investment
interest.
- 23 -
<PAGE>
Nonqualified Stock Options. An employee who is granted a nonqualified
option does not recognize taxable income upon the grant of the option, and the
Company is not entitled to a tax deduction. The employee will recognize
ordinary income upon the exercise of the option in an amount equal to the excess
of the fair market value of the option shares on the exercise date over the
option price. Such income will be treated as compensation to the employee
subject to applicable withholding requirements. The Company is generally
entitled to a tax deduction in an amount equal to the amount taxable to the
employee as ordinary income in the year the income is taxable to the employee.
The employee may also be required to recognize gain or loss upon the sale
of the option shares. If the selling price of the option shares exceeds the
employee's basis in the shares, the employee will recognize long-term capital
gain if the option shares were held for more than one year, and short-term
capital gain if the shares were held for one year or less. If the selling price
of the option shares is less than the employee's basis in the shares, the
employee will recognize long-term or short-term capital loss depending on how
long the shares were held. The employee's basis in the option shares will equal
the amount of ordinary income recognized by the employee upon exercise of the
option, plus any cash paid to exercise the option.
Incentive Stock Options. An employee who receives an incentive stock
option does not recognize taxable income upon the grant or exercise of the
option, and the Company is not entitled to a tax deduction. The difference
between the option price and the fair market value of the option shares on the
date of exercise, however, will be treated as a tax preference item for purposes
of determining the alternative minimum tax liability, if any, of the employee in
the year of exercise. The Company will not be entitled to a deduction with
respect to any item of tax preference.
An employee will recognize gain or loss upon the disposition of shares
acquired from the exercise of incentive stock options. The nature of the gain
or loss depends on how long the option shares were held. If the option shares
are not disposed of pursuant to a "disqualifying disposition" (i.e., no
disposition occurs within two years from the date the option was granted nor one
year from the date of exercise), the employee will recognize long-term capital
gain or capital loss depending on the selling price of the shares. If option
shares are sold or disposed of as part of a disqualifying disposition, the
employee must recognize ordinary income in an amount equal to the lesser of the
amount of gain recognized on the sale, or the difference between the fair market
value of the option shares on the date of exercise and the option price. Any
additional gain will be taxable to the employee as a long-term or short-term
capital gain, depending on how long the option shares were held. The Company is
generally entitled to a deduction in computing its federal income taxes for the
year of disposition in an amount equal to any amount taxable to the employee as
ordinary income.
Restricted Stock. An employee who receives an award of restricted stock
generally will not recognize taxable income at the time of the award, nor will
the Company be entitled to a tax deduction at that time, unless the employee
makes an election under Section 83(b) of the Code to recognize the income upon
the receipt of the restricted stock. If the election is not made, the employee
will recognize ordinary income when the restricted stock becomes vested (i.e.,
when the restrictions lapse through attainment of specified performance goals or
otherwise) in an amount equal to the fair market value of the shares at that
time less any amount paid by the employee. The Company may claim a deduction
when the employee recognizes income, in an amount equal to the income recognized
by the employee. Dividends paid to the employee with respect to restricted
stock prior to vesting constitute compensation taxable to the employee and a tax
deduction to the Company.
- 24 -
<PAGE>
Pursuant to the provisions of Section 83(b) of the Code, an employee who
receives restricted stock may elect to be taxed at the time of the award. If
the employee so elects, the full value of the shares (without regard to
restrictions) at the time of the grant, less any amount paid by the employee,
will be taxed to the employee as ordinary income and will be deductible by the
Company. Dividends paid with respect to the shares during the period of
restriction will be taxable as dividends to the employee and not deductible by
the Company. If, after making an election pursuant to Section 83(b), any shares
are subsequently forfeited, the employee will be entitled to a capital loss
deduction.
- 25 -
<PAGE>
PRINCIPAL OWNERS OF COMMON STOCK
The following table sets forth as of January 31, 2000 the number of shares
of Common Stock of the Company owned by any person (including any group) known
by management to beneficially own more than 5% of the Common Stock of the
Company, by each of the Named Executive Officers, and by all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
Common Stock
-----------------------------------------------
Name and Address of Number of Shares
Individual or Beneficially Percent of Class
Identity of Group Owned (1) (if more than 1%)
----------------- --------- -----------------
<S> <C> <C> <C>
William E. Bindley (2) 6,619,148 (3)(4) 19.1%
Thomas J. Salentine 1,109,593 (3)(5) 3.2%
Michael D. McCormick 1,003,713 (3)(6) 2.9%
Keith W. Burks 662,241 (3)(7) 1.9%
Michael L. Shinn 80,924 (3)(8) ---
All current directors and executive 9,931,776 (3)(9) 26.7%
officers as a group (13 persons)
</TABLE>
__________
(1) For information regarding the beneficial ownership of shares held by non-
employee directors, see "Election of Directors--Nominees."
(2) The address of this shareholder is 8909 Purdue Road, Suite 500,
Indianapolis, Indiana 46268.
(3) Does not include shares subject to stock options which are not exercisable
within 60 days.
(4) Includes 5,859,843 shares directly owned and presently exercisable stock
options to purchase 619,264 shares granted by the Company. Includes 79,320
shares held by two family foundations and 60,721 shares held in a charitable
remainder trust of which Mr. Bindley is the trustee and has investment
control. Excludes 10,428 shares held by Mr. Bindley's spouse; Mr. Bindley
disclaims beneficial ownership of such shares.
(5) Includes 200,983 shares directly owned and presently exercisable stock
options to purchase 908,610 shares granted by the Company.
(6) Mr. McCormick shares voting and dispositive power with respect to 11,218 of
such shares with his wife and directly owns 176,232 shares. Includes
presently exercisable stock options to purchase 814,522 shares granted by
the Company. Also includes 1,741 shares held in a family foundation.
(7) Includes 199,625 shares directly owned and presently exercisable stock
options to purchase 462,616 shares granted by the Company.
(8) Includes 30,000 shares directly owned and presently exercisable stock
options to purchase 50,924 shares granted by the Company.
(9) Includes presently exercisable stock options to purchase 3,118,054 shares
granted by the Company.
- 26 -
<PAGE>
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
The date by which shareholder proposals must be received by the Company for
inclusion in proxy materials relating to the 2001 Annual Meeting of Common
Shareholders is November 30, 2000.
In order to be considered at the 2001 Annual Meeting, shareholder proposals
must comply with the advance notice and eligibility requirements contained in
the Company's By-Laws. The Company's By-Laws provide that shareholders are
required to give advance notice to the Company of any nomination by a
shareholder of candidates for election as directors and of any business to be
brought by a shareholder before a shareholders' meeting. With respect to annual
meetings, the By-Laws provide that a shareholder of record entitled to vote at
such meeting may nominate one or more persons for election as director or
directors or may properly bring business before such meeting only if the
shareholder gives written notice thereof to the Secretary of the Company not
less than 70 days nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting. In the event the annual meeting is more
than 30 days earlier or more than 60 days later than such anniversary date,
notice by the shareholder must be delivered or received not earlier than the
90th day prior to such annual meeting and not later than the later of the
70th day prior to such annual meeting or the tenth day following the day on
which public announcement of the date of such meeting is first made. The notice
must contain specified information about each nominee or the proposed business
and the shareholder making the nomination or proposal.
The advance notice provisions in the Company's By-Laws also provide that in
the case of a special meeting of shareholders called for the purpose of electing
directors, to be timely, a shareholder's notice must be delivered or received
not earlier than the 90th day prior to such special meeting and not later than
the close of business on the later of the 60th day prior to such special
meeting or the tenth day following the day on which public announcement of the
date of the special meeting and of nominees to be elected at such meeting is
first made.
The specific requirements of these advance notice and eligibility
provisions are set forth in Section 1.1(c) and Section 2.1 of the Company's By-
Laws, a copy of which is available upon request. Such requests and any
shareholder proposals should be sent to the Secretary of the Company at the
principal executive offices of the Company.
- 27 -
<PAGE>
Appendix A
BINDLEY WESTERN INDUSTRIES, INC.
2000 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
------------
interests of the Company and its shareholders by providing a means for
attracting and retaining officers and key employees of the Company and its
Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
-----------
"Affiliate" -- means any "parent corporation" or "subsidiary corporation" of
the Company as such terms are defined in Section 424(e) and (f), respectively,
of the Code.
"Annual Return To Shareholders" -- means the Company's return to shareholders
as represented by share price appreciation plus dividends paid on one share of
stock during any Year during a Restricted Period.
"Award" -- means the grant by the Committee of an Incentive Stock Option, a
Non-Qualified Stock Option, or Restricted Stock, or any combination thereof, as
provided in the Plan.
"Board" -- means the Board of Directors of the Company.
"Business Criteria" -- means any one or any combination of Annual Return to
Shareholders, Total Sales, Total From Stock Sales, Net Earnings, Net Earnings
before Nonrecurring Items, Return on Equity, Return on Assets, EPS, EBITDA or
EBITDA before Nonrecurring Items, in each case during any Year during a
Restricted Period.
"Change in Control" -- means each of the events specified in the following
clauses (i) through (iii): (i) any third person, including a "group" as
defined in Section 13(d)(3) of the Exchange Act shall, after the date of the
adoption of the Plan by the Board, first become the beneficial owner of shares
of the Company with respect to which 25% or more of the total number of votes
for the election of the Board of Directors of the Company may be cast, (ii) as a
result of, or in connection with, any cash tender offer, exchange offer, merger
or other business combination, sale of assets or contested election, or
combination of the foregoing, the persons who were directors of the Company
shall cease to constitute a majority of the Board of Directors of the Company or
(iii) the stockholders of the Company shall approve an agreement providing
either for a transaction in which the Company will cease to be an independent
publicly owned entity or for a sale or other disposition of all or substantially
all the assets of the Company; provided, however, that the occurrence of any of
such events shall not be deemed a Change in Control if, prior to such
occurrence, a resolution specifically providing that such occurrence shall not
constitute a Change in Control under the Plan shall have been adopted by at
least a majority of the Board of Directors of the Company.
"Code" -- means the Internal Revenue Code of 1986, as amended.
"Committee" -- means the Committee referred to in Section 3 hereof.
"Company" -- means Bindley Western Industries, Inc., an Indiana corporation.
A-1
<PAGE>
"Continuous Service" -- means the absence of any interruption or termination
of service as an employee of the Company or an Affiliate. Service shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Company or in the case of any transfer between
the Company and an Affiliate or any successor to the Company.
"EBITDA" for any Year means -- the consolidated earnings before interest,
taxes, depreciation and amortization of the Company as reflected in the
Company's audited consolidated financial statements for the Year.
"EBITDA before Nonrecurring Items" means -- for any Year EBITDA of the
Company before any extraordinary or unusual one-time nonrecurring expenses or
other charges as reflected in the Company's audited consolidated financial
statements for the Year.
"Employee" -- means any person, including an officer or director, who is
employed by the Company or any Affiliate.
"EPS" for any Year means -- diluted earnings per share of the Company, as
reported in the Company's audited consolidated financial statements for the
Year.
"Exchange Act" -- means the Securities Exchange Act of 1934, as amended.
"Exercise Price" -- means the price per Share at which the Shares subject to
an Option may be purchased upon exercise of such Option.
"Incentive Stock Option" -- means an option to purchase Shares granted by the
Committee pursuant to the terms of the Plan which is intended to qualify under
Section 422 of the Code.
"Market Value" -- means the last reported sale price on the date in question
(or, if there is no reported sale on such date, on the last preceding date on
which any reported sale occurred) of one Share on the principal exchange on
which the Shares are listed for trading, or if the Shares are not listed for
trading on any exchange, on the NASDAQ National Market System or any similar
system then in use, or, if the Shares are not listed on the NASDAQ National
Market System, the mean between the closing high bid and low asked quotations of
one Share on the date in question as reported by NASDAQ or any similar system
then in use, or, if no such quotations are available, the fair market value on
such date of one Share as the Committee shall determine.
"Net Earnings" for any Year means -- the consolidated net earnings of the
Company, as reported in the Company's audited consolidated financial statements
for the Year.
"Net Earnings before Nonrecurring Items" means -- for any Year the Net
Earnings of the Company before any extraordinary or unusual one-time
nonrecurring expenses or other charges as reflected in the Company's audited
consolidated financial statements for the Year.
"Non-Qualified Stock Option" -- means an option to purchase Shares granted by
the Committee pursuant to the terms of the Plan, which option is not intended to
qualify under Section 422 of the Code.
"Option" -- means an Incentive Stock Option or a Non-Qualified Stock Option.
A-2
<PAGE>
"Participant" -- means any officer or key employee of the Company or any
Affiliate who is selected by the Committee to receive an Award.
"Performance Target(s)" -- means the specific objective goal or goals (which
may be cumulative and/or alternative) that are timely set forth in writing by
the Committee for each Employee for the Restricted Period in respect of any one
or more of the Business Criteria.
"Plan" -- means this 2000 Stock Option and Incentive Plan of the Company.
"Reorganization" -- means the liquidation or dissolution of the Company or
any merger, consolidation or combination of the Company (other than a merger,
consolidation or combination in which the Company is the continuing entity and
which does not result in the outstanding Shares being converted into or
exchanged for different securities, cash or other property or any combination
thereof).
"Restricted Period" -- means the period of time selected by the Committee for
the purpose of determining when restrictions are in effect under Section 9
hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" -- means Shares which have been contingently awarded to a
Participant by the Committee subject to the restrictions referred to in Section
9 hereof, so long as such restrictions are in effect.
"Retirement" -- means the date on which a Participant retires in accordance
with the Company's retirement policies as in effect from time to time.
"Return on Assets" for any Year means -- Net Earnings (as reported in the
Company's audited consolidated financial statements for the Year) divided by the
average of the total assets of the Company at the end of the fiscal quarters of
the Year.
"Return on Equity" for any Year means -- the Net Earnings (as reported in the
Company's audited consolidated financial statements for the Year) divided by the
average of the shareholders equity of the Company at the end of each of the
fiscal quarters of the Year.
"Securities Act" -- means the Securities Act of 1933, as amended.
"Shares" -- means the Common Stock, $.01 par value, of the Company.
"Total From Stock Sales" for any Year -- means the Company's total net sales
from stock as reported in the Company's consolidated audited financial
statements for the Year.
"Total Sales" for any Year -- means the Company's total net sales from stock
and net brokerage sales as reported in the Company's consolidated audited
financial statements for the Year.
"Year" -- means any one or more fiscal years of the Company commencing on or
after January 1, 2000 that represent(s) the applicable Restricted Period.
3. Administration. The Plan shall be administered by the Committee, which
--------------
shall consist of three or more members of the Board, each of whom shall be a
"non-employee director" as
A-3
<PAGE>
provided under Rule 16b-3 of the Exchange Act, and an "outside director" as
provided under Code Section 162(m). The members of the Committee shall be
appointed by the Board. Except as limited by the express provisions of the Plan,
the Committee shall have sole and complete authority and discretion to (a)
select Participants and grant Awards; (b) determine the number of Shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (c) determine the terms and conditions upon which Awards shall
be granted under the Plan; (d) prescribe the form and terms of instruments
evidencing such grants; (e) establish procedures and regulations for the
administration of the Plan; (f) interpret the Plan; and (g) make all
determinations deemed necessary or advisable for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, or
acts approved in writing by all members of the Committee without a meeting,
shall be acts of the Committee. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan shall be final, conclusive and
binding on all persons, and shall be given the maximum deference permitted by
law.
4. Participants. The Committee may select from time to time Participants in
------------
the Plan from those officers and key employees of the Company or its Affiliates
who, in the opinion of the Committee, have the capacity for contributing in a
substantial measure to the successful performance of the Company or its
Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of Section
----------------------
10 hereof, the maximum number of Shares with respect to which Awards may be made
under the Plan is 3,000,000 Shares. The number of Shares which may be granted
under the Plan to any Participant during any calendar year of the Plan under all
forms of Awards shall not exceed 300,000 Shares. The Shares with respect to
which Awards may be made under the Plan may either be authorized and unissued
shares or unissued shares heretofore or hereafter reacquired and held as
treasury shares. With respect to any Option which terminates or is surrendered
for cancellation or with respect to Restricted Stock which is forfeited, new
Awards may be granted under the Plan with respect to the number of Shares as to
which such termination or forfeiture has occurred.
6. General Terms and Conditions of Options. The Committee shall have full
---------------------------------------
and complete authority and discretion, except as expressly limited by the Plan,
to grant Options and to provide the terms and conditions (which need not be
identical among Participants) thereof. In particular, the Committee shall
prescribe the following terms and conditions: (i) the Exercise Price, (ii) the
number of Shares subject to, and the expiration date of, any Option, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option, and
(iv) the restrictions, if any, to be placed upon such Option or upon Shares
which may be issued upon exercise of such Option.
7. Exercise of Options.
-------------------
(a) Except as provided in Section 13, an Option granted under the Plan
shall be exercisable during the lifetime of the Participant to whom such
Option was granted only by such Participant, and except as provided in
paragraphs (c), (d) and (e) of this Section 7, no such Option may be
exercised unless at the time such Participant exercises such Option, such
Participant has maintained Continuous Service since the date of the grant of
such Option.
(b) To exercise an Option under the Plan, the Participant must give
written notice to the Company specifying the number of Shares with respect to
which such Participant
A-4
<PAGE>
elects to exercise such Option together with full
payment of the Exercise Price. The date of exercise shall be the date on
which such notice is received by the Company. Payment may be made either (i)
in cash (including check, bank draft or money order), (ii) by tendering
Shares already owned by the Participant and having a Market Value on the date
of exercise equal to the Exercise Price, or (iii) by any other means
determined by the Committee in its sole discretion, including permitting a
Participant to elect to pay the Exercise Price upon the exercise of an Option
by authorizing a third party to sell the Shares (or a sufficient portion of
the Shares) acquired upon exercise of the Option and remit to the Company a
sufficient portion of the sale proceeds to pay the Exercise Price and any tax
withholding resulting from such exercise.
(c) If the Continuous Service of a Participant is terminated for cause, or
voluntarily by the Participant for any reason other than death, disability or
Retirement, all rights under any Options granted to such Participant shall
terminate immediately upon such Participant's cessation of Continuous
Service, and the Participant shall (unless the Committee in its sole
discretion waives this requirement) repay to the Company within 10 days the
amount of any gain realized by the Participant upon any exercise within the
90-day period prior to the cessation of Continuous Service of any Options
granted to such Participant under the Plan. If the Continuous Service of a
Participant is terminated by reason of death, disability or Retirement, such
Participant may exercise such Option, but only to the extent such Participant
was entitled to exercise such Option at the date of such cessation, at any
time during the remaining term of such Option, or, in the case of Incentive
Stock Options, during such shorter period as the Committee may determine and
so provide in the applicable instrument or instruments evidencing the grant
of such Option. If a Participant shall cease to maintain Continuous Service
for any reason other than those set forth above in this paragraph (c) of this
Section 7, such Participant may exercise such Option to the extent that such
Participant was entitled to exercise such Option at the date of such
cessation but only within the period of three (3) months immediately
succeeding such cessation of Continuous Service, and in no event after the
expiration date of the subject Option; provided, however, that such right of
exercise after cessation of Continuous Service shall not be available to a
Participant if the Company otherwise determines and so provides in the
applicable instrument or instruments evidencing the grant of such Option.
(d) In the event of the death of a Participant while in the Continuous
Service of the Company or an Affiliate, the person to whom any Option held by
the Participant at the time of his death is transferred by will or by the
laws of descent and distribution may exercise such Option on the same terms
and conditions that such Participant was entitled to exercise such Option.
At the time of the death of the Participant, all Options theretofore granted
to the Participant and not fully exercisable shall terminate. Following the
death of any Participant to whom an Option was granted under the Plan, the
Committee, as an alternative means of settlement of such Option, may elect to
pay to the person to whom such Option is transferred the amount by which the
Market Value per Share on the date of exercise of such Option shall exceed
the Exercise Price of such Option, multiplied by the number of Shares with
respect to which such Option is properly exercised. Any such settlement of
an Option shall be considered an exercise of such Option for all purposes of
the Plan.
(e) Notwithstanding the provisions of the foregoing paragraphs of this
Section 7, the Committee may, in its sole discretion, establish different
terms and conditions pertaining
A-5
<PAGE>
to the effect of the cessation of Continuous
Service, to the extent permitted by applicable federal and state law.
8. Incentive Stock Options. Incentive Stock Options may be granted only to
-----------------------
Participants who are Employees. Any provisions of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the Company
and no Incentive Stock Option shall be exercisable more than ten years from the
date such Incentive Stock Option is granted, (ii) the Exercise Price of any
Incentive Stock Option shall not be less than the Market Value per Share on the
date such Incentive Stock Option is granted, (iii) any Incentive Stock Option
shall not be transferable by the Participant to whom such Incentive Stock Option
is granted other than by will or the laws of descent and distribution and shall
be exercisable during such Participant's lifetime only by such Participant, and
(iv) no Incentive Stock Option shall be granted which would permit a Participant
to acquire, through the exercise of Incentive Stock Options in any calendar
year, Shares or shares of any capital stock of the Company or any Affiliate
thereof having an aggregate Market Value (determined as of the time any
Incentive Stock Option is granted) in excess of $100,000. The foregoing
limitation shall be determined by assuming that the Participant will exercise
each Incentive Stock Option on the date that such Option first becomes
exercisable. Notwithstanding the foregoing, in the case of any Participant who,
at the date of grant, owns stock possessing more than 10% of the total combined
voting power of all classes of capital stock of the Company or any Affiliate,
the Exercise Price of any Incentive Stock Option shall not be less than 110% of
the Market Value per Share on the date such Incentive Stock Option is granted
and such Incentive Stock Option shall not be exercisable more than five years
from the date such Incentive Stock Option is granted. Notwithstanding any other
provisions of this Plan, if for any reason any Option granted under this Plan
that is intended to be an Incentive Stock Option shall fail to qualify as an
Incentive Stock Option, such Option shall be deemed to be a Non-Qualified Stock
Option, and such Option shall be deemed to be fully authorized and validly
issued under this Plan.
9. Terms and Conditions of Restricted Stock. The Committee shall have full
----------------------------------------
and complete authority, subject to the limitations of the Plan, to grant awards
of Restricted Stock and, in addition to the terms and conditions contained in
paragraphs (a) through (g) of this Section 9, to provide such other terms and
conditions (which need not be identical among Participants) in respect of such
Awards, and the vesting thereof, as the Committee shall determine and provide in
the agreement referred to in paragraph (d) of this Section 9. Notwithstanding
any other provisions of this Plan, the Committee shall have full and complete
discretion, at the time of the grant of an award of Restricted Stock, to
determine whether or not the grant of Restricted Stock is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code.
(a) At the time of an award of Restricted Stock, the Committee shall
establish for each Participant a Restricted Period during which or at the
expiration of which, the Shares of Restricted Stock shall vest. The Committee
may also restrict or prohibit the sale, assignment, transfer, pledge or other
encumbrance of the Shares of Restricted Stock by the Participant during the
Restricted Period. Except for such restrictions, and subject to paragraphs
(c), (d) and (e) of this Section 9 and Section 10 hereof, the Participant as
owner of such Shares shall have all the rights of a stockholder, including
but not limited to, the right to receive all dividends paid on such Shares
and the right to vote such Shares. Except in the case of grants of Restricted
Stock which are intended to qualify as "performance-based compensation" under
Section 162(m) of the Code, the Committee shall have the authority, in its
discretion, to accelerate the time at which any or all of the restrictions
shall lapse with respect to any Shares of Restricted Stock prior to the
expiration
A-6
<PAGE>
of the Restricted Period with respect thereto, or to remove any or all of
such restrictions, whenever it may determine that such action is appropriate
by reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such Restricted Period.
(b) Except as provided in Section 12 hereof, if a Participant ceases to
maintain Continuous Service for any reason (other than death, total or
partial disability or Retirement) unless the Committee shall otherwise
determine, all Shares of Restricted Stock theretofore awarded to such
Participant and which at the time of such termination of Continuous Service
are subject to the restrictions imposed by paragraph (a) of this Section 9
shall upon such termination of Continuous Service be forfeited and returned
to the Company. If a Participant ceases to maintain Continuous Service by
reason of death or total or partial disability, then the restrictions with
respect to the Ratable Portion of the Shares of Restricted Stock shall lapse
and such Shares shall be free of restrictions and shall not be forfeited. The
Ratable Portion shall be determined with respect to each separate Award of
Restricted Stock issued and shall be equal to (i) the number of Shares of
Restricted Stock awarded to the Participant multiplied by the portion of the
Restricted Period that expired at the date of the Participant's death or
total or partial disability reduced by (ii) the number of Shares of
Restricted Stock awarded with respect to which the restrictions had lapsed as
of the date of the death or total or partial disability of the Participant.
(c) Each certificate issued in respect of Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Company and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) contained in the 2000 Stock Option and Incentive Plan of
Bindley Western Industries, Inc., and an Agreement entered into between
the registered owner and Bindley Western Industries, Inc. Copies of such
Plan and Agreement are on file in the office of the Secretary of Bindley
Western Industries, Inc.
(d) At the time of an award of Shares of Restricted Stock, the Participant
shall enter into an Agreement with the Company in a form specified by the
Committee, agreeing to the terms and conditions of the award and to such
other matters as the Committee shall in its sole discretion determine.
(e) At the time of an award of Shares of Restricted Stock, the Committee
may, in its discretion, determine that the payment to the Participant of
dividends declared or paid on such Shares by the Company or a specified
portion thereof, shall be deferred until the earlier to occur of (i) the
lapsing of the restrictions imposed under paragraph (a) of this Section 9 or
(ii) the forfeiture of such Shares under paragraph (b) of this Section 9, and
shall be held by the Company for the account of the Participant until such
time. In the event of such deferral, there shall be credited at the end of
each year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the Committee, in its
discretion, may determine. Payment of deferred dividends, together with
interest accrued thereon as aforesaid, shall be made upon the earlier to
occur of the events specified in (i) and (ii) of the first sentence of this
paragraph (e).
A-7
<PAGE>
(f) At the expiration of the restrictions imposed by paragraph (a) of this
Section 9, the Company shall redeliver to the Participant (or where the
relevant provision of paragraph (b) of this Section 9 applies in the case of a
deceased Participant, to his legal representative, beneficiary or heir) the
certificate(s) and stock power deposited with it pursuant to paragraph (c) of
this Section 9 and the Shares represented by such certificate(s) shall be free
of the restrictions referred to in paragraph (a) of this Section 9.
Notwithstanding any other provision of this Section 9 and Section 11 to the
contrary, in the case of grants of Restricted Stock that are intended to
qualify as "performance-based compensation" under Section 162(m) of the Code,
no Shares of Restricted Stock shall become vested unless the Performance
Targets with respect to such Restricted Stock shall have been satisfied and
unless the Committee has certified, by resolution or other appropriate action
in writing, that the Performance Targets previously established by the
Committee have been satisfied. If the vesting of Shares of Restricted Stock is
accelerated after the applicable Performance Targets have been met, the amount
of Restricted Stock distributed shall be discounted by the Committee to
reasonably reflect the time value of money in connection with such early
vesting.
(g) Notwithstanding any other provision of this Section 9 to the contrary,
for purposes of qualifying grants of Restricted Stock as "performance-based
compensation" under Section 162(m) of the Code, the Committee shall establish
restrictions based upon the achievement of Performance Targets. The specific
goal or goals under the Performance Targets that must be satisfied for the
Restricted Period to lapse or terminate shall be set by the Committee on or
before the latest date permissible to enable the Restricted Stock to qualify
as "performance-based compensation" under Section 162(m) of the Code. The
Business Criteria for Performance Targets under this Section 9 shall be any
one or any combination of Annual Return to Shareholders, Total Sales, Total
From Stock Sales, Net Earnings, Net Earnings before Nonrecurring Items, Return
on Equity, Return on Assets, EPS, EBITDA or EBITDA before Nonrecurring Items.
In granting Restricted Stock that is intended to qualify under Section 162(m),
the Committee shall follow any procedures determined by it in its sole
discretion from time to time to be necessary, advisable or appropriate to
ensure qualification of the Restricted Stock under Section 162(m) of the Code.
10. Adjustments Upon Changes in Capitalization. In the event of any change
------------------------------------------
in the outstanding Shares subsequent to the effective date of the Plan by reason
of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Company, the maximum aggregate number and
class of shares as to which Awards may be granted under the Plan and the number
and class of shares with respect to which Awards theretofore have been granted
under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received, as a result of any of the foregoing, by a Participant with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Company in the manner
provided in Section 9 hereof.
11. Effect of Reorganization. Awards will be affected by a Reorganization
------------------------
as follows:
(a) If the Reorganization is a dissolution or liquidation of the Company
then (i) the restrictions of Section 9(a) on Shares of Restricted Stock shall
lapse and (ii) each outstanding Option shall terminate, but each Participant
to whom the Option was granted
A-8
<PAGE>
shall have the right, immediately prior to such dissolution or liquidation to
exercise his Option in full, notwithstanding the provisions of Section 8, and
the Company shall notify each Participant of such right within a reasonable
period of time prior to any such dissolution or liquidation.
(b) If the Reorganization is a merger or consolidation, upon the effective
date of such Reorganization (i) each Optionee shall be entitled, upon exercise
of his Option in accordance with all of the terms and conditions of the Plan,
to receive in lieu of Shares, shares of such stock or other securities or
consideration as the holders of Shares shall be entitled to receive pursuant
to the terms of the Reorganization; and (ii) each holder of Restricted Stock
shall receive shares of such stock or other securities as the holders of
Shares received and the certificate(s) or other instruments representing or
evidencing such shares or securities shall be legended and deposited with the
Company in the manner provided in Section 9 hereof.
The adjustments contained in this Section and the manner of application of such
provisions shall be determined solely by the Committee.
12. Effect of Change of Control. If the Continuous Service of any
---------------------------
Participant of the Company or any Affiliate is involuntarily terminated, for
whatever reason, at any time within eighteen months after a Change in Control,
unless the Committee shall have otherwise provided in the agreement referred to
in paragraph (d) of Section 9 hereof, any Restricted Period with respect to
Restricted Stock theretofore awarded to such Participant shall lapse upon such
termination and all Shares awarded as Restricted Stock shall become fully vested
in the Participant to whom such Shares were awarded. If a tender offer or
exchange offer for Shares (other than such an offer by the Company) is
commenced, or if an event specified in clause (ii) or clause (iii) of the
definition of a Change in Control contained in Section 2 shall occur, unless the
Committee shall have otherwise provided in the instrument evidencing the grant
of an Option, all Options theretofore granted and not fully exercisable shall
become exercisable in full upon the happening of such event and shall remain so
exercisable in accordance with their terms; provided, however, that no Option
which has previously been exercised or otherwise terminated shall become
exercisable.
13. Assignments and Transfers. Except as otherwise determined by the
-------------------------
Committee, no Award nor any right or interest of a Participant under the Plan in
any instrument evidencing any Award under the Plan may be assigned, encumbered
or transferred except, in the event of the death of a Participant, by will or
the laws of descent and distribution.
14. Employee Rights Under the Plan. No officer, employee or other person
------------------------------
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no officer, employee or other person
shall have any claim or right to be granted an Award under the Plan or under any
other incentive or similar plan of the Company or any Affiliate. Neither the
Plan nor any action taken thereunder shall be construed as giving any employee
any right to be retained in the employ of the Company or any Affiliate.
15. Delivery and Registration of Stock. The Company's obligation to deliver
----------------------------------
Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Company shall determine to be necessary or advisable to comply with the
provisions of the Securities Act or any other applicable federal or state
securities legislation. It may be provided that any representation requirement
shall become inoperative upon
A-9
<PAGE>
a registration of the Shares or other action
eliminating the necessity of such representation under the Securities Act or
other securities legislation. The Company shall not be required to deliver any
Shares under the Plan prior to (i) the admission of such shares to listing on
any stock exchange or system on which Shares may then be listed, and (ii) the
completion of such registration or other qualification of such Shares under any
state or federal law, rule or regulation, as the Company shall determine to be
necessary or advisable.
16. Withholding Tax. Upon the termination of the Restricted Period with
---------------
respect to any Shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
any successor provision thereto, to include the value of such Shares in taxable
income), the Company may, in lieu of requiring the Participant or other person
receiving such Shares to pay the Company the amount of any taxes which the
Company is required to withhold with respect to such Shares, retain a sufficient
number of Shares held by it to cover the amount required to be withheld. The
Company shall have the right to deduct from all dividends paid with respect to
Shares of Restricted Stock the amount of any taxes which the Company is required
to withhold with respect to such dividend payments.
Where a Participant or other person is entitled to receive Shares pursuant to
the exercise of an Option pursuant to the Plan, the Company may, in lieu of
requiring the Participant or such other person to pay the Company the amount of
any taxes which the Company is required to withhold with respect to such Shares,
retain a number of such Shares sufficient to cover the amount required to be
withheld.
17. Loans.
-----
(a) The Company may make loans to a Participant in connection with
Restricted Stock or the exercise of Options subject to the following terms and
conditions and such other terms and conditions not inconsistent with the Plan,
including the rate of interest, if any, as the Company shall impose from time
to time.
(b) No loan made under the Plan shall exceed (i) with respect to Options,
the sum of (A) the aggregate option price payable upon exercise of the Option
in relation to which the loan is made, plus (B) the amount of the reasonably
estimated income taxes payable by the grantee and (ii) with respect to
Restricted Stock, the amount of reasonably estimated income taxes payable by
the grantee. In no event may any such loan exceed the Market Value of the
related Shares at the time of the loan.
(c) No loan shall have an initial term exceeding three years; provided,
that loans under the Plan shall be renewable at the discretion of the
Committee; and provided, further, that the indebtedness under each loan shall
become due and payable on a date no later than (i) one year after termination
of the Participant's employment due to death, Retirement or disability, or
(ii) the day of termination of the Participant's employment for any reason
other than death, Retirement or disability.
(d) Loans under the Plan may be satisfied by the Participant, as
determined by the Committee, in cash or, with the consent of the Committee, in
whole or in part in Shares at Market Value on the date of such payment.
(e) When a loan shall have been made, Shares having an aggregate Market
Value equal to the amount of the loan may, in the discretion of the Committee,
be required to
A-10
<PAGE>
be pledged by the Participant to the Company as security for payment of the
unpaid balance of the loan. Portions of such Shares may, in the discretion of
the Committee, be released from time to time as it deems not to be needed as
security.
(f) Every loan shall meet all applicable laws, regulations and rules of
the Federal Reserve Board and any other governmental agency having
jurisdiction.
18. Termination, Amendment and Modification of Plan. The Board may at any
-----------------------------------------------
time terminate, and may at any time and from time to time and in any respect
amend or modify, the Plan; provided however, that to the extent necessary and
desirable to comply with Section 422 of the Code (or any other applicable law or
regulation, including requirements of any stock exchange or Nasdaq system on
which the Shares are listed or quoted) shareholder approval of any Plan
amendment shall be obtained in such a manner and to such a degree as is required
by the applicable law or regulation; and provided further, that no termination,
amendment or modification of the Plan shall in any manner affect any Award
theretofore granted pursuant to the Plan without the consent of the Participant
to whom the Award was granted or transferee of the Award.
19. Section 162(m) Conditions; Bifurcation of Plan. It is the intent of the
----------------------------------------------
Company that the Plan and certain of the Awards granted hereunder satisfy and be
interpreted in a manner that, in the case of Participants who are or may be
persons whose compensation is subject to Section 162(m), satisfies any
applicable requirements as performance-based compensation. Any provision,
application or interpretation of the Plan inconsistent with this intent to
satisfy the standards in Section 162(m) of the Code shall be disregarded.
Notwithstanding anything to the contrary in the Plan, the provisions of the Plan
may at any time be bifurcated by the Board of Directors of the Company or the
Committee in any manner so that certain provision of the Plan or any Award
intended (or required in order) to satisfy the applicable requirements of
Section 162(m) are only applicable to persons whose compensation is subject to
Section 162(m).
20. Effective Date and Term of Plan. The Plan shall become effective upon
-------------------------------
its adoption by the Board of Directors and shareholders of the Company. Unless
sooner terminated under Section 18 hereof, no further Awards may be made under
the Plan after ten years from the date of adoption.
Adopted by the Board of Directors of
Bindley Western Industries, Inc. as of
March 23, 2000
Adopted by the Shareholders of
Bindley Western Industries, Inc. as of
______________, 2000
A-11
<PAGE>
BINDLEY WESTERN INDUSTRIES, INC.
This Proxy is Solicited on Behalf of the Board of Directors
<TABLE>
<S> <C>
P I hereby appoint William E. Bindley and Michael D. McCormick, or either
of them, my proxies, with power of substitution, to vote all shares of
R common stock of the Company which I am entitled to vote at the annual
meeting of common shareholders of said company, to be held at The
O Marten House Hotel and Lilly Conference Center, 1801 West 86th
Street, Indianapolis, Indiana, on May 18, 2000 at 9:00 a.m., Indianapolis
X time, and at any adjournment, as follows:
Y Election of Directors, Nominees: (change of address)
William E. Bindley, William F. Bindley II, ------------------------------------
Keith W. Burks, Seth B. Harris, Robert L. ------------------------------------
Koch II, Michael D. McCormick, ------------------------------------
J. Timothy McGinley, James K. Risk III, ------------------------------------
Thomas J. Salentine, K. Clay Smith, ------------------------------------
Carolyn Y. Woo ------------------------------------
(If you have written in the above
space, please mark the corresponding
box on the reverse side of this card.)
</TABLE>
This proxy when properly executed will be voted in the manner directed herein by
the signed shareholder. If no direction is made, this proxy will be voted FOR
the election as directors of all nominees listed under proposal 1, FOR proposal
2 and FOR proposal 3.
SEE REVERSE
SIDE
................................................................................
................................................................................
The 2000 Annual Meeting for Bindley Western Industries, Inc. will be held at:
The Marten House Hotel and Lilly Conference Center
1801 West 86th Street
Indianapolis, Indiana 46260
A rough map of directions to this site of the Annual Meeting is provided below:
[map]
