<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/ / Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
D & K Wholesale Drug, Inc.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
July 11, 1997
DEAR FELLOW STOCKHOLDERS:
Our Annual Meeting of Stockholders will be held at The Daniele
Hotel, Savoy Room, 216 North Meramec, St. Louis, Missouri, 63105, at 10:00
A.M., local time, on Thursday, August 14, 1997. The Notice of Annual Meeting
of Stockholders, Proxy Statement and Proxy Card which accompany this letter
outline fully matters on which action is expected to be taken at the Annual
Meeting.
We cordially invite you to attend the Annual Meeting. Even if you
plan to be present at the meeting, you are requested to date, sign and return
the enclosed Proxy Card in the envelope provided to ensure that your shares
will be voted. The mailing of an executed Proxy Card will not affect your
right to vote in person should you later decide to attend the Annual Meeting.
Sincerely,
J. HORD ARMSTRONG, III
Chairman of the Board, Chief Executive
Officer and Treasurer
<PAGE> 3
D & K WHOLESALE DRUG, INC.
8000 MARYLAND AVENUE, SUITE 1190
ST. LOUIS, MISSOURI 63105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 1997
Dear Stockholder:
The Annual Meeting of Stockholders of D & K Wholesale Drug, Inc.
(the "Company") will be held at The Daniele Hotel, Savoy Room, 216 North
Meramec, St. Louis, Missouri, 63105, on Thursday, August 14, 1997, at 10:00
A.M., local time, for the following purposes:
1. To elect three Class II directors to hold office for a term
of three years.
2. To elect one Class I director to hold office for a term of
two years.
3. To elect one Class III director to hold office for a term of
one year.
4. To consider and vote upon a proposal to approve an amendment
to the Restated Certificate of Incorporation of the Company
to change the corporate name to "D&K Healthcare Resources,
Inc."
5. To consider and vote upon a proposal to approve an amendment
to the D&K Wholesale Drug, Inc. 1992 Long-Term Incentive
Plan.
6. To transact any and all other business that may properly
come before the meeting or any adjournment thereof.
These items are more fully described in the following Proxy
Statement, which is hereby made a part of this Notice. Only stockholders of
record of the Company at the close of business on June 20, 1997 are entitled
to notice of, and to vote at, the meeting or any adjournment thereof.
By order of the Board of Directors,
MARTIN D. WILSON
President, Chief Operating Officer
and Secretary
July 11, 1997
<PAGE> 4
D & K WHOLESALE DRUG, INC.
8000 MARYLAND AVENUE, SUITE 1190
ST. LOUIS, MISSOURI 63105
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 14, 1997
-----------------
GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of D & K
WHOLESALE DRUG, INC. (the "Company") in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders to be held at The
Daniele Hotel, Savoy Room, 216 North Meramec, St. Louis, Missouri, 63105, at
10:00 A.M., local time, on Thursday, August 14, 1997, and at all adjournments
thereof (the "Annual Meeting"), for the purposes set forth in the preceding
Notice of Annual Meeting of Stockholders. The mailing address of the Company
is 8000 Maryland Avenue, Suite 1190, St. Louis, Missouri 63105, and its
telephone number is (314) 727-3485.
This Proxy Statement, the Notice of Annual Meeting and the
accompanying Proxy Card were first mailed to the stockholders of the Company
on or about July 11, 1997.
The proxy reflected on the accompanying Proxy Card is being
solicited by the Board of Directors of the Company. A proxy may be revoked at
any time before it is voted by filing a written notice of revocation or a
later-dated Proxy Card with the Secretary of the Company at the principal
offices of the Company or by attending the Annual Meeting and voting the
shares in person. Attendance alone at the Annual Meeting will not of itself
revoke a proxy. Proxy Cards that are properly executed, timely received and
not revoked will be voted in the manner indicated thereon at the Annual
Meeting and any adjournment thereof.
The Company will bear the entire expense of soliciting proxies.
Proxies will be solicited by mail initially. The directors, executive
officers and employees of the Company may also solicit proxies personally or
by telephone or other means but such persons will not be specially compensated
for such services. In addition, the Company has retained D.F. King & Co. to
assist in the solicitation of proxies on its behalf for a fee of $1,000 plus
reasonable out-of-pocket expenses.
Only stockholders of record at the close of business on June 20,
1997 are entitled to notice of, and to vote at, the Annual Meeting. On such
date, there were 3,056,217 shares of the Company's Common Stock, $.01 par
value ("Common Stock"), issued and outstanding.
Each outstanding share of the Common Stock is entitled to one vote
on each matter to be acted upon at the Annual Meeting. A quorum is required
for votes taken at the Annual Meeting to be deemed valid. A quorum shall be
attained if holders of a majority of the shares of Common Stock issued and
outstanding are present at the Annual Meeting in person or by proxy. After a
quorum has been established, a majority of the outstanding shares of Common
Stock shall be required to approve the
<PAGE> 5
proposal to change the Company's corporate name, and the vote of the holders
of a majority of the Common Stock present in person or by proxy shall be
required for the election of directors, the proposed amendment to the
Company's 1992 Long-Term Incentive Plan or any other matter which is submitted
to a vote of stockholders at the Annual Meeting. Stockholders do not have the
right to cumulate votes in the election of directors.
Shares subject to abstentions will be treated as shares that are
present at the Annual Meeting for purposes of determining the presence of a
quorum, and as voted for purposes of determining the base number of shares
voting on a particular proposal. Accordingly, abstentions will have the same
effect as a vote withheld on the election of directors or a vote against other
matters submitted to the stockholders for a vote, as the case may be. If a
broker or other nominee holder indicates on the Proxy Card that it does not
have discretionary authority to vote the shares it holds of record on a
proposal, those shares will not be considered as present for purposes of
determining a quorum or as voted for purposes of determining the approval of
the stockholders on a particular proposal.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following persons were known to management of the Company to
be the beneficial owners of five percent or the Company's outstanding Common
Stock as of June 20, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK<F1>
- ------------------------------------ ------------------ ----------------------
<S> <C> <C>
Gateway Venture Partners II, L.P. 502,270<F2> 16.4%
8000 Maryland Avenue
Suite 1190
St. Louis, Missouri 63105
Massachusetts Mutual Life 265,490<F3> 8.0
Insurance Company
MassMutual Corporate Investors 265,490<F4> 8.0
1295 State Street
Springfield, Massachusetts 01111
J. Hord Armstrong, III 251,597<F5> 8.2
8000 Maryland Avenue
Suite 1190
St. Louis, Missouri 63105
- ---------------------------------------
<FN>
<F1> The percentage calculations are based upon 3,056,217 shares of the
Company's Common Stock that were issued and outstanding as of June 20,
1997, plus, with respect to Massachusetts Mutual Life Insurance Company
and MassMutual Corporate Investors only, the number of shares subject to
conversion privileges exercisable by each such stockholder as of
June 20, 1997.
<F2> Shares are owned of record by Gateway Venture Partners II, L.P. Richard
F. Ford, a director of the Company, serves as a general partner of
Gateway Associates L.P., the General Partner of Gateway Venture Partners
II, L.P., and may be deemed to have shared voting and investment power
with respect to these shares. See "Security Ownership By Management."
- 2 -
<PAGE> 6
<F3> Shares are beneficially owned by Massachusetts Mutual Life Insurance
Company by virtue of its right to convert into Common Stock of the
Company the 11% Joint and Several Convertible Subordinated Notes due
1997 issued to it by the Company.
<F4> Shares are beneficially owned by MassMutual Corporate Investors by
virtue of its right to convert into Common Stock of the Company the 11%
Joint and Several Convertible Subordinated Notes due 1997 issued to it
by the Company. MassMutual Corporate Investors is a closed-end
investment company for which Massachusetts Mutual Life Insurance Company
serves as an investment advisor.
<F5> Total does not include 10,000 shares that are owned by Mr. Armstrong's
wife, as to which shares Mr. Armstrong has no voting or investment power
and as to which Mr. Armstrong disclaims beneficial ownership.
</TABLE>
ITEM 1. ELECTION OF DIRECTORS
At the Annual Meeting, three individuals will be elected to serve
as Class II directors of the Company for a term of three years, one individual
will be elected to serve as a Class I director for a term of two years and one
individual will be elected to serve as a Class III director for a term of one
year. Except as otherwise directed by the stockholder on the Proxy Card, the
persons named as proxies on the accompanying Proxy Card intend to vote all
duly executed proxies received by the Board of Directors for the election of
Bryan H. Lawrence, Robert E. Korenblat and James M. Usdan as Class II
directors, for J. David McCay as a Class I director and for Thomas F. Patton
as a Class III director. Mr. Lawrence is currently a director of the Company.
If for any reason Messrs. Lawrence, Korenblat, Usdan, McCay or Patton becomes
unavailable for election, which is not now anticipated, the persons named on
the accompanying Proxy Card will vote for such substitute nominee as
designated by the Board of Directors. The Board of Directors recommends a vote
"FOR" the election of Bryan H. Lawrence, Robert E. Korenblat and James M. Usdan
as Class II directors, "FOR" the election of Mr. J. David McCay as a Class I
director and "FOR" the election of Thomas F. Patton as a Class III director.
Pursuant to the stock purchase agreement under which Gateway
Venture Partners II, L.P. made its initial investment in the Company, the
Company agreed to use its best efforts to cause and maintain the election to
the Board of Directors of a representative of Gateway Venture Partners II,
L.P. Richard F. Ford, a Class III Director, currently represents Gateway
Venture Partners II, L.P. on the Board of Directors.
The name, age, principal occupation or position and other
directorships with respect to Messrs. Lawrence, Korenblat, Usdan, McCay and
Patton and the directors whose terms of office will continue after the Annual
Meeting is set forth below.
CLASS II - TO BE ELECTED FOR A TERM EXPIRING IN 2000
Bryan H. Lawrence, age 54, has served as a director of the Company
since its founding in December 1987. Since February, 1966, Mr. Lawrence has
been associated with Dillon, Read & Co., Inc., New York, New York, an
investment banking firm, and currently serves as Managing Director of such
firm. Mr. Lawrence also serves as a director of Vintage Petroleum, Inc.,
Continental Ozark Corporation, Fintube L.P., Meenan Oil Co., Willbros Group,
Inc., Benson Petroleum, Cavell Energy and Interenergy Corporation.
- 3 -
<PAGE> 7
Robert E. Korenblat, age 57, is a director and the President and
Chief Executive Officer of Pharmaceutical Buyers, Inc., a Colorado-based group
purchasing organization in which the Company holds a 50% ownership interest
("PBI"). Mr. Korenblat additionally served as Vice President of PBI from
1989-1991. Mr. Korenblat is a graduate of the University of Arkansas School of
Pharmacy.
James M. Usdan, age 47, is a director and the President and Chief
Executive Officer of RehabCare Group, Inc., a St. Louis-based provider of
rehabilitation, outpatient and therapist staffing services. From April 1990
to June 1991, Mr. Usdan was also Executive Vice President of CompCare, the
former corporate parent of RehabCare. Mr. Usdan is also a director of Metro
One Telecommunications.
CLASS I - TO BE ELECTED FOR A TERM EXPIRING IN 1999
J. David McCay, age 56, is the founder, director and Chairman of
PBI. Since 1983, Mr. McCay has held various positions with PBI including
President (1983-1994), Chief Executive Officer (1989-1994) and Chairman
(1994-present). Mr. McCay is a graduate of the University of Arkansas School of
Pharmacy.
CLASS III - TO BE ELECTED FOR A TERM EXPIRING IN 1998
Thomas F. Patton, Ph.D., age 49, is President of the St. Louis
College of Pharmacy and has served in that capacity since June 1994. From
April 1993 until January 1994 and from January 1994 until May 1994, Dr. Patton
served as Executive Director of Pharmaceutical Research and Development and as
Vice President of Pharmaceutical Research and Development, respectively, at
Dupont-Merck Pharmaceutical Co. From March 1990 through March 1993, Dr. Patton
served as Director and Senior Director of Pharmaceutical Research and
Development at Merck and Co., Inc. In 1993, Dr. Patton was President of the
American Association of Pharmaceutical Scientists. Dr. Patton's career also
includes tenures as Professor of Pharmaceutical Chemistry and Pharmacy
Practice at the University of Kansas, Associate Director Control Development
at the Upjohn Co., a pharmaceutical company, and Vice President of Operations
at Oread Laboratories, Inc., a pharmaceutical company. Dr. Patton also serves
as a director of Jones Medical Industries, Inc.
CLASS I - TO CONTINUE IN OFFICE UNTIL 1999
Elliot H. Stein, age 79, has served as a director of the Company
since its founding in 1987. Mr. Stein is Chairman Emeritus, Stifel Financial
Corporation, St. Louis, Missouri, of which he was Chairman of the Board from
January 1986 through May 1988. Prior to such time he was President of
Scherck, Stein & Frank, Inc., a New York Stock Exchange member firm.
Mr. Stein also serves as a director of Angelica Corporation and West Indies
Sugar Company.
Martin D. Wilson, age 36, has served as President and Chief
Operating Officer of the Company since April 1996 and as Secretary since
August 1993. Mr. Wilson has previously served as Executive Vice
President-Finance and Administration (May 1995 to April 1996), Vice
President-Finance and Administration (April 1991 to May 1995) and Controller
(March 1988 to April 1991) of the Company. Prior to joining the Company, Mr.
Wilson, a certified public accountant, was associated with KPMG Peat Marwick, a
public accounting firm.
CLASS III - TO CONTINUE IN OFFICE UNTIL 1998
J. Hord Armstrong, III, age 56, has served as Chairman of the
Board, Chief Executive Officer and Treasurer and as a director of the Company
since December 1987. Prior to joining the Company, Mr. Armstrong served as
Treasurer (1978-1981) and Vice President and Chief Financial Officer
(1981-1987) of Arch Mineral Corporation, a coal mining and sales corporation.
Mr. Armstrong also serves as a Trustee of the St. Louis College of Pharmacy.
Richard F. Ford, age 61, has served as a director of the Company
since its founding in December 1987. Mr. Ford has been engaged in venture
capital investing as a general partner of affiliates of Gateway Venture
Partners II, L.P. in St. Louis, Missouri, since 1984. Mr. Ford also serves as
a director of Stifel Financial Corporation and CompuCom Systems, Inc.
- 4 -
<PAGE> 8
BOARD OF DIRECTORS AND COMMITTEES
During fiscal 1997, the Board of Directors of the Company met four
times and each of the directors attended not fewer than 75% of the meetings of
the Board of Directors and committees of which such director was a member
during fiscal 1997.
The Board of Directors has a standing Audit Committee and Stock
Option and Compensation Committee.
The members of the Audit Committee are Messrs. Ford and Stein.
The Audit Committee reviews the scope of the Company's engagement of its
independent public accountant and their reports. The Audit Committee also
meets with the financial staff of the Company to review accounting procedures
and reports. The Audit Committee met one time in fiscal 1997.
The Stock Option and Compensation Committee is composed of Messrs.
Ford and Lawrence. The Stock Option and Compensation Committee is authorized
to review and make recommendations to the Board of Directors regarding the
salaries payable corporate officers and to administer the Company's 1992 Long
Term Incentive Plan. The Stock Option and Compensation Committee acted by
written consent one time during fiscal 1997.
DIRECTORS' FEES
Directors currently receive no compensation (other than
reimbursement of expenses) for serving as a director or member of a committee
of the Board of Directors or attending Board or Committee meetings.
SECURITY OWNERSHIP BY MANAGEMENT
The following table indicates, as of June 20, 1997, the beneficial
ownership of the Company's Common Stock by each person who is a director or
nominee for director and the persons named in the Summary Compensation Table,
individually, and all directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED<F1> PERCENT OF CLASS<F2>
- ------------------------ ---------------------- --------------------
<S> <C> <C>
J. Hord Armstrong, III 251,597<F3> 8.2%
Richard F. Ford 504,270<F4> 16.5
J. David McCay 4,000 <F5>
Bryan H. Lawrence 28,318 1.0
Robert E. Korenblat 4,000<F6> <F5>
Thomas F. Patton -- <F5>
Elliot H. Stein 10,000<F7> <F5>
James M. Usdan --<F8> <F5>
Martin D. Wilson 49,199<F9> 1.6
All directors, nominees and executive officers as a group 919,384 29.0
(12 persons)
- ---------------------------------------
<FN>
<F1> Except as noted, each individual has sole voting and investment power
over the shares listed beside his name.
- 5 -
<PAGE> 9
<F2> Based upon 3,056,217 shares of the Company's Common Stock issued and
outstanding as of June 20, 1997 and, for each director or executive
officer or the group, the number of shares subject to options
exercisable by such director or executive officer or the group within
60 days.
<F3> Total does not include 10,000 shares that are owned by Mr. Armstrong's
wife, as to which shares Mr. Armstrong has no voting or investment power
and as to which Mr. Armstrong disclaims beneficial ownership.
<F4> Total includes 2,000 shares as to which Mr. Ford has sole voting and
investment power. Total also includes 502,270 shares owned of record by
Gateway Venture Partners II, L.P. Mr. Ford serves as a general partner
of Gateway Associates L.P., the General Partner of Gateway Venture
Partners II, L.P., and may be deemed to share voting and investment
power with respect to such shares. Total does not include 1,000 shares
owned by Mr. Ford's wife, as to which shares Mr. Ford has no voting or
investment power and as to which Mr. Ford disclaims beneficial
ownership.
<F5> Less than one percent.
<F6> Total includes 2,000 shares held in a trust by Mr. Korenblat's wife.
<F7> Total does not include 80,135 shares held by irrevocable trusts for the
benefit of Mr. Stein's adult children, as to which shares Mr. Stein
disclaims beneficial ownership.
<F8> Total does not include 500 shares that are owned by Mr. Usdan's
spouse, as to which shares Mr. Usdan has no voting or investment
power.
<F9> Total includes 49,199 shares subject to stock options.
</TABLE>
REPORT OF THE STOCK OPTION AND COMPENSATION
COMMITTEE REGARDING EXECUTIVE COMPENSATION
GENERAL
The Company's executive compensation program is administered by
the Stock Option and Compensation Committee of the Board of Directors (the
"Committee") which is composed of Messrs. Ford and Lawrence.
The Company's executive compensation policy is designed and
administered to provide a competitive compensation program that will enable
the Company to attract, motivate, reward and retain executives who have the
skills, education, experience and capabilities required to discharge their
duties in a competent and efficient manner. The Company's compensation policy
is based on the principle that the financial rewards to the executive should
be aligned with the financial interests of the stockholders of the Company.
In this manner, the Company will meet its ultimate responsibility to its
stockholders by striving to create a suitable long-term return on their
investment through earnings from operations and prudent management of the
Company's business and operations.
The Company's executive compensation strategy consists of salary
and long-term incentive compensation. The following is a summary of the
policies underlying each element.
ANNUAL COMPENSATION
The annual compensation salary for individual executive officers
of the Company is based upon the level and scope of the responsibility of the
office, the pay levels of similarly positioned
- 6 -
<PAGE> 10
executive officers among companies competing for the services of such
executives and a consideration of the level of experience and performance
profile of the particular executive officer. Based upon its review and
evaluation, the Committee makes a recommendation to the Board of Directors of
the salary to be paid to each executive officer.
LONG TERM INCENTIVE COMPENSATION
The Committee believes that long-term incentive compensation is
the most effective way of tying executive compensation to increases in
stockholder value. The Company's long-term incentive programs authorize the
grant of both cash- and stock-based awards, thereby providing a means through
which executive officers will be given incentives to continue high quality
performance with the Company over a long period of time while allowing such
executive officers to build a meaningful investment in the Company's Common
Stock.
In May 1993, the Committee initiated a program (the "Program") to
provide incentives to certain executive officers during the 1994 and 1995
fiscal years. Under the Program, the participating executive officers each
received an initial grant of non-qualified stock options pursuant to the
Company's 1992 Long Term Incentive Plan. At the end of each of the 1994 and
1995 fiscal years, the executive officers received additional grants of stock
options, in recognition of attainment of certain pre-tax earnings goals for
the Company and satisfactory performance evaluations from the Committee.
Additionally, provided the pre-tax earnings and performance evaluation
criteria are met, grants may be accelerated upon the Common Stock of the
Company attaining certain market price levels. The Committee determined that
Mr. Armstrong, who individually owns approximately 8.2% of the Company's
outstanding Common Stock, would not receive stock option grants as incentives
under the Program. The Committee may determine to grant equity-based
incentives to Mr. Armstrong in the future.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Armstrong's minimum salary for fiscal 1997 was determined by
the Committee in the same manner as is used by the Committee for executive
officers generally. The Committee believes that Mr. Armstrong's compensation
is competitive within the industry and, when combined with Mr. Armstrong's
significant ownership of the Company's Common Stock, provides incentives for
performance which are aligned with the financial interests of the stockholders
of the Company.
CODE SECTION 162(m)
The Committee has considered Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), regarding qualifying
compensation paid to the Company's executive officers for deductibility. The
Committee intends to make every effort to ensure that all compensation awarded
to the Company's executives is fully deductible for income tax purposes. The
promulgation of proposed regulations under Section 162(m) has not required any
change in the Company's current executive compensation program in order to
maintain the deductibility of executive compensation. The Committee may in
the future deem it advisable to take certain action to preserve the
deductibility of executive compensation under Section 162(m).
THE STOCK OPTION AND COMPENSATION COMMITTEE
Richard F. Ford Bryan H. Lawrence
- 7 -
<PAGE> 11
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation for each of the
last three fiscal years of the executive officers of the Company whose annual
salary and other reportable compensation exceeded $100,000 in fiscal 1997.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------ ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) OPTIONS
--------------------------- ---- --------- ----------
<S> <C> <C> <C>
J. Hord Armstrong, III 1997 $195,000 --
Chairman of the Board, Chief 1996 175,000 --
Executive Officer and Treasurer 1995 193,325 --
Martin D. Wilson, 1997 $113,750 33,999<F1>
President, Chief Operating Officer 1996 90,903 12,666
and Secretary 1995 97,894 26,333
- ---------------------------------------
<FN>
<F1> On January 2, 1997 the Company repriced certain outstanding non-
qualified stock options. In connection with such repricing, non-
qualified stock options previously granted to Mr. Wilson for an
aggregate of 39,999 shares of Common Stock were cancelled and replaced
with an equivalent number of options with an exercise price of $3.75 per
share. See "Repricing of Stock Options."
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock option
grants made fiscal 1997 to the individuals named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATE OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS VALUE FOR OPTION TERM
------------------------------------------------------------ --------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED EXERCISE OR
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#)<F1> FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
J. Hord Armstrong, III -- -- -- -- -- --
Martin D. Wilson 1,333 1.0% $3.75 5/14/03 $ 3,146 $ 7,971
20,000 10.3% 3.75 8/11/04 47,200 119,600
12,666 6.0% 3.75 5/11/05 29,892 75,743
- ---------------------------------------
- 8 -
<PAGE> 12
<FN>
<F1> On January 2, 1997, the Company repriced certain outstanding non-
qualified stock options. Pursuant to such repricing, the exercise price
of options for an aggregate of 39,999 shares of Common Stock previously
granted to Mr. Wilson were repriced at $3.75 per share. See "Repricing
of Stock Options." Options terminate on the earlier of ten years after
grant or twelve months after termination of employment.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information concerning the number
of exercisable and unexercisable stock options at March 28, 1997 as well as
the value of such stock options having an exercise price lower than the last
reported trading price on March 28, 1997 ("in-the-money" options) held by the
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at Fiscal
Shares Value Fiscal Year-End (#) Year-End($)<F1>
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($)<F1> Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. Hord Armstrong, III -- -- -- --
Martin D. Wilson 4,000 $2,000 44,199/10,000 $34,896/$6,250
- ---------------------------------------
<FN>
<F1> Based on a price per share of $4.375, being the last reported trading
price before the fiscal year end.
</TABLE>
REPRICING OF STOCK OPTIONS
On January 2, 1997, the Compensation Committee of the Board of
Directors (the "Committee") approved the repricing of the outstanding stock
option agreements of each of the executive officers and certain other
employees of the Company (the "Repricing"). Pursuant to the Repricing,
non-qualified stock options to purchase an aggregate of 127,999 shares of
Common Stock at exercise prices ranging from $3.875 to $7.00 per share were
cancelled and replaced with an equivalent number of non-qualified stock options
with an exercise price of $3.75 per share, the market value of the Common Stock
on the date of the Repricing. Except for such amendment, the vesting periods
and other terms of the stock options affected were not changed.
The Committee believes that the Repricing was necessary and
appropriate in light of competitive conditions and other factors relevant to
the Company's business and in order to provide key personnel whose efforts are
essential to the Company's success a meaningful long-term incentive
compensation opportunity in light of trading prices of the Common Stock.
- 9 -
<PAGE> 13
The following table contains certain information concerning the
amendments to stock options of the executive officers of the Company pursuant
to the Repricing:
<TABLE>
TEN-YEAR OPTION/SAR REPRICINGS TABLE
<CAPTION>
LENGTH OF
NUMBER OF ORIGINAL
SECURITIES MARKET PRICE EXERCISE OPTION TERM
UNDERLYING OF STOCK AT PRICE AT REMAINING AT
OPTIONS/SARS TIME OF TIME OF NEW DATE OF
REPRICED OR REPRICING OR REPRICING OR EXERCISE REPRICING OR
NAME DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDMENT
---- ------ ------------ ------------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. Hord Armstrong -- -- -- -- -- --
Chairman of the Board,
Chief Executive Officer
and Treasurer
Martin D. Wilson 1/2/97 1,333<F2> $3.75 $3.875 $3.75 6 yrs., 4 mos.
President and Chief 20,000 3.75 5.85 3.75 7 yrs., 7 mos.
Operating Officer 12,666 3.75 7.00 3.75 8 yrs., 4 mos.
Dennis A. White 1/2/97 17,000 3.75 6.375 3.75 9 yrs., 4 mos.
Vice President, Chief
Information Officer
</TABLE>
THE STOCK OPTION AND COMPENSATION COMMITTEE
BRYAN H. LAWRENCE
RICHARD F. FORD
CERTAIN TRANSACTIONS
In November 1995, the Company completed the purchase of
approximately 50% of the capital stock of Pharmaceutical Buyers, Inc., a
Colorado-based group purchasing organization ("PBI"). J. David McCay and
Robert E. Korenblat, each a nominee for election as a director of the Company
at the Annual Meeting, are each a director, executive officer and shareholder
of PBI. Pursuant to its ownership of PBI capital stock, in fiscal 1997 the
Company received cash dividends of $300,000 from PBI.
The Company believes that the transactions set forth above were
made on terms not less favorable to the Company than would have been obtained
from unaffiliated third parties. All future transactions (including loans)
between the Company and its officers, directors, principal stockholders and
affiliates, are required to be approved by a majority of the Board of
Directors, including a majority of the independent and disinterested outside
directors and must be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.
- 10 -
<PAGE> 14
ITEM 2. PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF
THE COMPANY TO CHANGE THE CORPORATE NAME TO
"D&K HEALTHCARE RESOURCES, INC."
In May 1997, the Board of Directors of the Company approved the
following resolution, subject to the approval of the stockholders of Company
by the requisite vote at the Annual Meeting:
RESOLVED, that Article First of the Restated Certificate of
Incorporation of the Company be amended in its entirety to read as
follows:
FIRST: The name of this corporation is D&K Healthcare
Resources, Inc.
The Board of Directors believes that the change of the corporate
name to "D&K Healthcare Resources, Inc." will better reflect the recent
repositioning of the Company from being exclusively a regional wholesale drug
distributor to being a more diversified provider of healthcare services.
While the Board believes that it is important to maintain the substantial
goodwill associated with the "D&K" name, the addition of the words "Healthcare
Resources" to the corporate name signals the intention of the Company to
continue to expand the breadth of its business in the healthcare industry. If
the proposed amendment to the Company's Restated Certificate of Incorporation
is approved by the requisite vote of the stockholders at the Annual Meeting,
such amendment will become effective when the Certificate of Amendment to the
Company's Restated Certificate of Incorporation is filed with the Secretary of
State of the State of Delaware.
The Board of Directors has unanimously approved the proposed
amendment to the Company's Restated Certificate of Incorporation to change the
corporate name. The affirmative vote of a majority of the outstanding shares
of the Common Stock will be necessary for approval of the proposal. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE
CORPORATE NAME TO "D&K HEALTHCARE RESOURCES, INC."
ITEM 3. PROPOSAL TO APPROVE AMENDMENT TO
THE D & K WHOLESALE DRUG, INC.
1992 LONG TERM PERFORMANCE PLAN
The Board of Directors has adopted an amendment to the D & K
Wholesale Drug, Inc. 1992 Long Term Performance Plan (the "Plan") and has
directed that such amendment be submitted to the stockholders for approval.
The affirmative vote of the holders of a majority of the shares of Common
Stock represented in person or by proxy at the Annual Meeting is required for
approval of the proposed amendment. If the proposed amendment is not
approved, the amendment will not be implemented and the existing Plan will
continue in effect. A copy of the Plan as amended is attached as Appendix A to
this Proxy Statement, and the following description of the Plan as amended is
qualified in its entirety by reference to Appendix A.
The amendment being submitted for the approval of stockholders
increase the number of shares of Common Stock that may be issued pursuant to
the Plan from 200,000 shares to 500,000 shares. As of June 30, 1997, 122,199
shares were subject to outstanding awards under the Plan and 27,468 shares were
available for future awards. The Board of Directors believes that the proposed
amendment is appropriate and will enhance the purposes of the Plan by
enhancing the ability of the Company to continue to provide incentives to its
key employees induce qualified individuals to serve as, or remain, employees
of the Company and to promote the best interests of the Company.
- 11 -
<PAGE> 15
The Plan is administered by the Stock Option and Compensation
Committee of the Board of Directors (the "Committee"), consisting of two or
more directors of the Company. Members of the Committee must be "outside
directors" within the meaning of the proposed regulations implementing Section
162(m) of the Code and are not eligible to receive a benefit under the Plan
for a period of at least one year prior to appointment to the Committee and
during the period that they serve on the Committee. The Committee, by
majority action thereof, is authorized in its sole discretion to determine the
individuals to whom the benefits will be granted, the type and amount of such
benefits and the terms of the benefit grants, as well as to interpret the Plan
and to make all other determinations necessary or advisable for the
administration of the Plan to the extent not contrary to the express
provisions of the Plan.
The following stock options were granted by the Committee under
the Plan during fiscal 1997:
<TABLE>
D & K WHOLESALE DRUG, INC. 1992 LONG TERM PERFORMANCE PLAN
--------------------------------------------------------------------------------------
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE($)<F1> UNITS<F2>
--------------------------------------------------------------------------------------
<S> <C> <C>
Executive Group $29,749 67,999
Non-Executive Director Group -- --
Director Nominee Group -- --
Associates of Directors, Executive
Officers or Nominees -- --
Non-Executive Officer Employee Group -- --
- ---------------------------------------
<FN>
<F1> The dollar value set forth in the table is based on the $4.375 last
transaction price of the Company's Common Stock as reported in the
Nasdaq Small-Cap Market on March 28, 1997, less the option exercise
price.
<F2> A total of 50,999 of such shares were issued in connection with the
January 1997 repricing by the Company of certain outstanding non-
qualified stock options. See "Repricing of Stock Options."
</TABLE>
Under the terms of the Plan, key employees of the Company and its
subsidiaries as determined in the sole discretion of the Committee will be
eligible to receive (a) stock options ("Stock Options") exercisable into
shares of the Company's Common Stock which may or may not qualify as incentive
stock options within the meaning of Section 422 of the Internal Revenue Code,
as amended, (b) Stock Appreciation Rights, (c) restricted shares of the
Company's Common Stock ("Restricted Stock"), and (d) performance awards
("Performance Awards").
STOCK OPTIONS. Stock Options granted under the Plan shall
entitle the holder thereof to purchase the Company's Common Stock at a
purchase price established therefor by the Committee, which price shall not be
less than the Fair Market Value (as defined in the Plan) of the Company's
Common Stock on the date of grant. The Committee shall determine the term of
such Stock Options and the times at, and conditions under which, such Stock
Options will become exercisable. Stock Options are not exercisable earlier
than six months from the date of grant (except in the case of death or
disability of the employee holding the same), nor later than ten years from
the date of the grant. For any employee, the aggregate fair market value of
the Company's Common Stock subject to qualifying incentive stock options that
are exercisable for the first time in any calendar year may not exceed
$100,000.
- 12 -
<PAGE> 16
STOCK APPRECIATION RIGHTS. The Committee may grant stock
appreciation rights (a "SAR") giving the holder thereof a right to receive, at
the time of surrender, Common Stock of the Company equal in value to the
difference between the Fair Market Value of such stock at the date of
surrender of the SAR and the "Base Price" established by the Committee
therefor at the time of grant, subject to any limitation imposed by the
Committee on appreciation. The "Base Price" shall not be less than the Fair
Market Value of the Company's Common Stock on the date of the grant of the
SAR. A SAR may be granted either independent of, or in conjunction with, any
Stock Option. If granted in conjunction with a Stock Option, at the
discretion of the Committee a SAR may either be surrendered (a) in lieu of the
exercise of such Stock Option, (b) in conjunction with the exercise of such
Stock Option, or (c) upon expiration of such Stock Option. The term of any
SAR shall be established by the Committee, but in no event shall such term
exceed ten years from the date of grant.
RESTRICTED STOCK. The Committee may issue shares of the
Company's Common Stock either as a stock bonus or at a purchase price of less
than fair market value, subject to the restrictions or conditions specified by
the Committee at the time of grant. In addition to any other restrictions or
conditions that may be imposed on the Restricted Stock, shares of Restricted
Stock may not be sold or disposed of for a period of six months after the date
of grant. During the period of restriction, holders of Restricted Stock shall
be entitled to receive all dividends and other distributions made in respect
of such stock and to vote such stock without limitation.
PERFORMANCE AWARDS. The Committee may grant Performance
Awards consisting of shares of the Company's Common Stock, monetary units
payable in cash or a combination thereof. These grants would result in the
issuance, without payment therefor, of Common Stock or the payment of cash
upon the achievement of certain pre-established performance criteria (such as
return on average total capital employed, earnings per share or return on
stockholders' equity) during a specified performance period not to exceed five
years. The participating employee would have no right to receive dividends on
or to vote any shares subject to Performance Awards until the award is
actually earned and the shares are issued. In the event that a person who is
required to file reports under Section 16 of the Securities Exchange Act of
1934 receives a Performance Award that includes shares of the Company's Common
Stock, such shares received may not be disposed of by such person until six
months following the date of issuance.
The Plan is to remain in effect until (a) all Common Stock
reserved under the Plan shall have been purchased or acquired, (b) the Board
terminates the Plan, or (c) April 27, 2002, whichever shall first occur. The
Board, in its sole discretion may terminate the Plan at any time and from time
to time may amend or modify the Plan; provided, however, that no such action
of the Board may, without the approval of the stockholders of the Company,
change: (w) the maximum number of shares for which options may be granted
under the Plan; (x) the provisions of the Plan regarding the "Base Price" of
awards; (y) the maximum period during which an option may be granted; or (z)
the class of employees entitled to participate in the Plan. No amendment,
modification or termination of the Plan shall in any manner adversely affect
any award theretofore granted under the Plan, without the consent of the
participant affected thereby.
FEDERAL INCOME TAX CONSEQUENCES
No income will be realized by a participating officer or employee
on the grant of an incentive stock option or an option which is not an
incentive stock option ("non-qualified option") or upon the award of
Restricted Stock, and the Company will not be entitled to a deduction at such
time. If a holder exercises an incentive stock option and does not dispose of
the shares acquired within two years from the date of the grant, or within one
year from the date of exercise of the option, no income will be
- 13 -
<PAGE> 17
realized by the holder at the time of exercise. The Company will not be
entitled to a deduction by reason of the exercise.
If a holder disposes of the shares acquired pursuant to an
incentive stock option within two years from the date of grant of the option
or within one year from the date of exercise of the option, the holder will
realize ordinary income at the time of disposition which will equal the
excess, if any, of the lesser of (a) the amount realized on the disposition,
or (b) the fair market value of the shares on the date of exercise, over the
holder's basis in the shares. The Company generally will be entitled to a
deduction in an amount equal to such income in the year of the disqualifying
disposition.
Upon the exercise of a non-qualified option, the excess, if any,
of the fair market value of the stock on the date of exercise over the
purchase price is ordinary income to the holder as of the date of exercise.
The Company generally will be entitled to a deduction equal to such excess
amount in the year of exercise.
Subject to a voluntary election by the holder under Section 83(b)
of the Internal Revenue Code of 1986, as amended (the "Code"), a holder will
realize income as a result of the award of Restricted Stock at the time the
restrictions expire on such shares. An election pursuant to Section 83(b) of
the Code would have the effect of causing the holder to realize income in the
year in which such award was granted. The amount of income realized will be
the difference between the fair market value of the shares on the date such
restrictions expire (or on the date of issuance of the shares, in the event of
a Section 83(b) election) over the purchase price, if any, of such shares.
The Company generally will be entitled to a deduction equal to the income
realized in the year in which the holder is required to report such income.
An employee will realize income as a result of a Performance Award
at the time the award is issued or paid. The amount of income realized by the
participant will be equal to the fair market value of the shares on the date
of issuance, in the case of a stock award, and to the amount of the cash paid,
in the event of a cash award. The Company will be entitled to a corresponding
deduction equal to the income realized in the year of such issuance or
payment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND
THE D & K WHOLESALE DRUG, INC. 1992 LONG TERM INCENTIVE PLAN.
- 14 -
<PAGE> 18
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative
total stockholder return on its Common Stock for the period beginning
September 1, 1992, the date that the Company became publicly held, and ending
March 28, 1997, with the cumulative return of the NASDAQ Stock Market - U.S.
Index, the Standard & Poor's Health Care Composite Index, and a peer group of
companies selected by the Company. Dividend reinvestment has been assumed,
and with respect to companies in the peer group, the returns of each such
company have been weighted to reflect relative stock market capitalization.
The peer group of companies selected by the Company is made up of the
Company's publicly held competitors in the wholesale drug industry: Bergen
Brunswig Corporation, Bindley Western Industries, Inc., Cardinal Health, Inc.,
Avatex Corporation (formerly Foxmeyer Corporation) and McKesson Corporation.
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN<F*>
AMONG D & K WHOLESALE DRUG, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX,
THE S & P HEALTH CARE SECTOR AND A PEER GROUP
[GRAPH]
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------------------------------------------
9/01/92 4/02/93 4/01/94 3/31/95 3/29/96 3/28/97
<S> <C> <C> <C> <C> <C> <C> <C>
D & K Wholesale Drug Inc DKWD 100 90 68 138 168 88
PEER GROUP PPEER1 100 105 140 143 176 213
NASDAQ STOCK MARKET (U.S.) INAS 100 123 133 148 200 223
S & P HEALTH CARE SECTOR IHCC 100 85 80 113 167 203
</TABLE>
[FN]
<F*>$100 INVESTED ON 9/01/92 IN STOCK OR ON 8/31/92
IN INDEX - INCLUDING REINVESTMENT OF DIVIDENDS.
APPOINTMENT OF AUDITORS
Arthur Andersen LLP served as the Company's independent public
accountants for fiscal 1997 and has been selected by the Board of Directors to
continue in such capacity during fiscal 1998. The Board of Directors
anticipates that representatives of Arthur Andersen LLP will be present at the
Annual Meeting of Stockholders to respond to appropriate questions.
PROPOSALS OF STOCKHOLDERS
Under applicable regulations of the Securities and Exchange
Commission, all proposals of stockholders to be considered for inclusion in
the proxy statement for, and to be considered at, the 1998 Annual Meeting of
Stockholders must be received at the offices of the Company, c/o Secretary,
8000 Maryland Avenue, Suite 1190, St. Louis, Missouri 63105 by not later than
March 10, 1998. The Company's By-laws also prescribe certain time limitations
and procedures regarding prior written notice to the Company by stockholders,
which limitations and procedures must be complied with for proposals of
stockholders to be included in the Company's proxy statement for, and to be
considered at, such annual meeting. Any stockholder who wishes to make such a
proposal should request a copy of the applicable provisions of the Company's
By-laws from the Secretary of the Company.
- 15 -
<PAGE> 19
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of
the Company does not intend to present, nor has it been informed that other
persons intend to present, any matters for action at the Annual Meeting, other
than those specifically referred to herein. If, however, any other matters
should properly come before the Annual Meeting, it is the intention of the
persons named on the Proxy Card to vote the shares represented thereby in
accordance with their judgment as to the best interest of the Company on such
matters.
J. HORD ARMSTRONG, III
Chairman of the Board, Chief Executive
Officer and Treasurer
July 11, 1997
- 16 -
<PAGE> 20
Appendix A
----------
D & K WHOLESALE DRUG, INC.
AMENDED AND RESTATED
1992 LONG TERM INCENTIVE PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
D & K Wholesale Drug, Inc. hereby establishes a long term incentive plan
to be named the D & K Wholesale Drug, Inc. Amended and Restated 1992 Long Term
Incentive Plan, for certain employees of the Company and its subsidiaries.
The purpose of this Plan is to encourage certain employees of the Company, and
of such subsidiaries of the Company as the Committee administering the Plan
designates, to acquire Common Stock of the Company or to receive monetary
payments based on the value of such stock or based upon achieving certain
goals on a basis mutually advantageous to such employees and the Company and
thus provide an incentive for continuation of the efforts of employees for the
success of the Company and for continuity of employment.
SECTION 2. DEFINITIONS.
Whenever used herein, the following terms shall have the respective
meanings set forth below:
(a) AWARD means any Stock Option, Stock Appreciation Right, Restricted
Stock, or Performance Award granted under the Plan.
(b) BASE PRICE means, in the case of an Option or a Stock Appreciation
Right, a price fixed by the Committee, which shall not be less than
100% of the par value of a share of Stock on the date of grant of
such option or right.
(c) BOARD means the Board of Directors of the Company.
(d) CODE means the Internal Revenue Code of 1986, as amended and in
effect from time to time.
(e) COMMITTEE means those members of the Compensation Committee of the
Board who are an "outside director" within the meaning of any rules
promulgated pursuant to Section 162(m) of the Code and who are not
eligible for participation in the Plan or any other plan of the
Company, except plans meeting the requirements of Rule
16b-3(c)(2)(i)(A)-(D), and who during the one year period prior to
becoming a member of the Compensation Committee were not eligible
for selection as a Participant in the Plan or any other plan of the
Company, except plans meeting the requirements of Rule
16b-3(c)(2)(i)(A)-(D).
(f) COMPANY means D & K Wholesale Drug, Inc., a Delaware corporation.
<PAGE> 21
(g) DISABILITY means permanent and total disability as defined in
Section 22(e)(3) of the Code, as determined by the Committee in good
faith, upon receipt of and in reliance on sufficient competent
medical advice.
(h) EMPLOYEE means a salaried employee (including officers and
directors who are also employees) of any member of the Group.
(i) EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
(j) FAIR MARKET VALUE means, for any particular date, (i) for any
period during which the Stock shall not be listed for trading on a
national securities exchange, but when prices for the Stock shall be
reported by the National Market System of the National Association
of Securities Dealers Automated Quotation System ("NASDAQ"), the
last transaction price per share as quoted by National Market System
of NASDAQ, (ii) for any period during which the Stock shall not be
listed for trading on a national securities exchange or its price
reported by the National Market System of NASDAQ, but when prices
for the Stock shall be reported by NASDAQ, the closing bid price as
reported by the NASDAQ, (iii) for any period during which the Stock
shall be listed for trading on a national securities exchange, the
closing price per share of Stock on such exchange as of the close of
such trading day or (iv) the market price per share of Stock as
determined by a nationally recognized investment banking firm
selected by the Board of Directors in the event neither (i), (ii) or
(iii) above shall be applicable. If Market Price is to be
determined as of a day when the securities markets are not open, the
Market Price on that day shall be the Market Price on the preceding
day when the markets were open.
(k) GROUP means the Company and every Subsidiary of the Company.
(l) OPTION means the right to purchase Stock at the Base Price for a
specified period of time. For purposes of the Plan, an Option may
be an INCENTIVE STOCK OPTION within the meaning of Section 422
of the Code, a NONSTATUTORY STOCK OPTION, or any other type of
option encompassed by the Code.
(m) PARTICIPANT means any Employee designated by the Committee to
participate in the Plan.
(n) PERFORMANCE AWARD means a right to receive a payment equal to the
value of a unit or other measure as determined by the Committee
based on performance during a Performance Period.
(o) PERFORMANCE PERIOD means a period of not more than ten years
established by the Committee during which certain performance goals
set by the Committee are to be met.
(p) PERIOD OF RESTRICTION means the period during which a grant of
shares of Restricted Stock is restricted pursuant to Section 11 of
the Plan.
A-2
<PAGE> 22
(q) REPORTING PERSON means a person subject to Section 16 of the
Securities Exchange Act of 1934, as amended.
(r) RESTRICTED STOCK means Stock granted pursuant to Section 11 of
the Plan, but a share of such Stock shall cease to be Restricted
Stock when the conditions to and limitations on transferability
under Section 11 have been satisfied or have expired, respectively.
(s) RETIREMENT (including NORMAL, EARLY, and DISABILITY Retirement)
means termination of employment with eligibility for normal, early
or disability retirement benefits under the terms of any pension
plan adopted by the Company, as amended and in effect at the time of
such termination of employment.
(t) STOCK means the authorized and unissued shares of common stock of
the Company or reacquired shares of the Company's common stock held
in its treasury.
(u) STOCK APPRECIATION RIGHT or SAR means the right to receive a
payment from the Company equal to the excess of the Fair Market
Value of a share of Stock at the date of exercise over the Base
Price. In the case of a Stock Appreciation Right which is granted
in conjunction with an Option, the Base Price shall be the Option
exercise price.
(v) SUBSIDIARY means a subsidiary corporation as defined in Section
425 of the Code.
(w) WINDOW PERIOD means the third to the twelfth business day
following the release for publication of the Company's quarterly or
annual earnings report.
SECTION 3. ADMINISTRATION.
The Plan will be administered by the Committee. The determinations of
the Committee shall be made in accordance with their judgment as to the best
interests of the Company and its stockholders and in accordance with the
purpose of the Plan. A majority of members of the Committee shall constitute
a quorum, and all determinations of the Committee shall be made by a majority
of its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee, by a writing signed by a majority
of the Committee members. Determinations, interpretations, or other actions
made or taken by the Committee pursuant to the provisions of the Plan shall be
final and binding and conclusive for all purposes and upon all persons
whomsoever.
SECTION 4. SHARES RESERVED UNDER THE PLAN.
There is hereby reserved for issuance under the Plan an aggregate of
500,000 shares of Stock, which may be authorized but unissued or treasury
shares. No more than 20,000 of these shares may be issued as Restricted
Stock. Stock underlying outstanding options or Performance
-A-3
<PAGE> 23
Awards will be counted against the Plan maximum while such options or awards
are outstanding. Shares underlying expired, canceled or forfeited options or
awards (except Restricted Stock) may be added back to the Plan maximum. When
the exercise price of stock options is paid by delivery of shares of Stock,
the number of shares available for issuance under the Plan shall continue to
be reduced by the gross (rather than the net) number of shares issued pursuant
to such exercise, regardless of the number of shares surrendered in payment.
Restricted Stock issued pursuant to the Plan will be counted against the Plan
maximum while outstanding even while subject to restrictions. Shares of
Restricted Stock may not be added back to the Plan maximum if such Restricted
Stock is forfeited.
SECTION 5. PARTICIPANTS.
Participants will consist of such officers and key employees of the
Company or any designated subsidiary as the Committee in its sole discretion
determines have a major impact on the success and future growth and
profitability of the Company. Designation of a Participant in any year shall
not require the Committee to designate such person to receive an Award in any
other year or to receive the same type or amount of Award as granted to the
Participant in any other year or as granted to any other Participant in any
year. The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the type and amount of their
respective Awards.
SECTION 6. TYPES OF AWARDS; LIMITATIONS ON GRANTS.
(a) The following Awards may be granted under the Plan:
(i) Incentive Stock Options; (ii) Nonqualified Stock Options;
(iii) Stock Appreciation Rights; (iv) Restricted Stock; and
(v) Performance Awards; all as described below. Except as specifically
limited herein, the Committee shall have complete discretion in
determining the type and number of Awards to be granted to any
Participant, and the terms and conditions which attach to each Award,
which terms and conditions need not be uniform as between different
Participants. All Awards shall be in writing.
(b) The number of shares of Stock with respect to which Awards may
be granted any Participant pursuant to the Plan, over the term Plan,
shall not exceed 50,000, subject to adjustment as provided in Section 12
hereof.
SECTION 7. DATE OF GRANTING AWARDS.
All Awards granted under the Plan shall be granted as of an Award Date.
Within ten business days after each Award Date, the Company shall notify the
Participant of the grant of the Award, and shall hand deliver or mail to the
Participant an Award Agreement, duly executed by and on behalf of the Company,
with the request that the Participant execute the Agreement within thirty days
after the date of mailing or delivery by the Company of the Agreement to the
A-4
<PAGE> 24
participant. If the Participant shall fail to execute the written Award
Agreement within said thirty-day period, his or her Award shall be
automatically terminated.
SECTION 8. INCENTIVE STOCK OPTIONS.
Incentive Stock Options shall consist of options to purchase shares of
Stock at purchase prices not less than 100% of the fair market value of the
shares on the date the option is granted. Said purchase price may be paid by
check or, in the discretion of the Committee, by the delivery of shares of
Stock then owned by the Participant. Incentive Stock Options will be
exercisable not earlier than six months and not later than ten years after the
date they are granted and will terminate not later than three months after
termination of employment for any reason other than death or disability. In
the event termination of employment occurs as a result of death or disability,
such an option will be exercisable for 12 months after such termination. If
the optionee dies within 12 months after termination of employment by reason
of disability, then the period of exercise following death shall be the
remainder of the 12-month period, or three months, whichever is longer. If
the optionee dies within three months after termination of employment for any
other reason, then the period of exercise following death shall be three
months. However, in no event shall any Incentive Stock Option be exercised
more than ten years after its grant. Leaves of absence granted by the Company
for military service, illness, and transfers of employment between the Company
and any subsidiary thereof shall not constitute termination of employment.
The aggregate Fair Market Value (determined as of the time an option is
granted) of the stock with respect to which an Incentive Stock Option is
exercisable for the first time during any calendar year (under all option
plans of the Company and its subsidiary corporations) shall not exceed
$100,000.
SECTION 9. NONQUALIFIED STOCK OPTIONS.
Nonqualified Stock Options shall consist of nonqualified stock options
to purchase shares of Stock at purchase prices not less than the par value of
the shares on the date the option is granted. Said purchase price may be paid
by check or, in the discretion of the Committee, by the delivery of shares of
Stock then owned by the Participant. Nonqualified Stock Options will be
exercisable not earlier than six months and not later than ten years after the
date they are granted and will terminate not later than three months after
termination of employment for any reason other than death, retirement or
disability. In the event termination of employment occurs as a result of
death, retirement or disability, such an option will be exercisable for 12
months after such termination. If the optionee dies within 12 months after
termination of employment by retirement or disability, then the period of
exercise following death shall be three months. However, in no event shall
any option be exercised more than ten years after its grant. Leaves of
absence granted by the Company for military service, illness, and transfers of
employment between the Company and any subsidiary thereof shall not constitute
termination of employment. The Committee shall have the right to determine at
the time the option is granted whether shares issued upon exercise of a
Nonqualified Stock Option shall be subject to restrictions, and if so, the
nature of the restrictions.
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<PAGE> 25
SECTION 10. STOCK APPRECIATION RIGHTS.
Stock Appreciation Rights may be granted which, at the discretion of the
Committee, may be surrendered (1) in lieu of exercise of an Option, (2) in
conjunction with the exercise of an Option, (3) upon lapse of an Option, (4)
independent of an Option, or (5) each of the above in connection with a
previously awarded Option under the Plan. SARs issued to Reporting Persons
shall be held for at least six months prior to surrender. If the Option
referred to in (1), (2), or (3) above qualified as an Incentive Stock Option
pursuant to Section 422 of the Code, the related SAR shall comply with the
applicable provisions of the Code and the regulations issued thereunder. At
the time of grant, the Committee may establish, in its sole discretion, a
maximum amount per share which will be payable upon surrender of a SAR, and
may impose such conditions on surrender of a SAR (including, without
limitation, the right of the Committee to limit the time of surrender to
specified periods) as may be required to satisfy the requirements of Rule
16b-3 (or any successor rule), under the Exchange Act. At the discretion of
the Committee, payment for SARs may be made in cash or Stock, or in a
combination thereof, provided, however, that payment may be made in cash for
SARs surrendered by Reporting Persons only upon the condition that such
surrender is made during the Window Period. The following will apply upon
surrender of a SAR:
(a) Surrender of SARs in Lieu of Exercise of Options. SARs
------------------------------------------------
surrenderable in lieu of Options may be surrendered for all or part
of the shares of Stock subject to the related Option upon the
surrender of the right to exercise an equivalent number of Options.
A SAR may be surrendered only with respect to the shares of Stock
for which its related Option is then exercisable. Upon surrender of
a SAR in lieu of exercise of an Option, shares of Stock equal to the
number of SARs surrendered shall no longer be available for Awards
under the Plan, provided that if SARs are surrendered for cash,
shares of stock equal to the number of SARs surrendered shall be
restored to the number of shares available for issuance under the
Plan.
(b) Surrender of SARs in Conjunction with Exercise of Options. SARs
---------------------------------------------------------
surrenderable in conjunction with the exercise of Options shall be
deemed to be surrendered upon the exercise of the related Options,
and shares of Stock equal to the sum of the number of shares
acquired by exercise of the Option plus the number of SARs
surrendered shall no longer be available for Awards under the Plan,
provided that if SARs are surrendered for cash, shares of stock
equal to the number of SARs surrendered shall be restored to the
number of shares available for issuance under the Plan.
(c) Surrender of SARs Upon Lapse of Options. SARs surrenderable upon
---------------------------------------
lapse of Options shall be deemed to have been surrendered upon the
lapse of the related Options as to the number of shares of Stock
subject to the Options. Shares of Stock equal to the number of SARs
deemed to have been surrendered shall not be available again for
Awards under the Plan, provided that if SARs are surrendered for
cash, shares of stock equal to the number of SARs surrendered shall
be restored to the number of shares available for issuance under the
Plan.
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<PAGE> 26
(d) Surrender of SARs Independent of Options. SARs surrenderable
----------------------------------------
independent of Options may be surrendered upon whatever terms and
conditions the Committee, in its sole discretion, imposes upon the
SARs, and shares of Stock equal to the number of SARs surrendered
shall no longer be available for Awards under the Plan, provided
that if SARs are surrendered for cash, shares of stock equal to the
number of SARs surrendered shall be restored to the number of shares
available for issuance under the Plan.
SECTION 11. RESTRICTED STOCK.
Restricted Stock shall consist of Stock issued or transferred under the
Plan (other than upon exercise of Stock Options or as Performance Awards) at
any purchase price less than the Fair Market Value thereof on the date of
issuance or transfer, or as a bonus. In the case of any Restricted Stock:
(a) The purchase price, if any, will be determined by the Committee.
(b) Restricted Stock may be subject to (i) restrictions on the sale
or other disposition thereof, provided, however, that Restricted Stock
granted to a Reporting Person shall, in addition to any other
restrictions thereon, not be sold or disposed of for six (6) months
following the date of grant; (ii) rights of the Company to reacquire
such Restricted Stock at the purchase price, if any, originally paid
therefor upon termination of the employee's employment within specified
periods, (iii) representation by the employee that he or she intends to
acquire Restricted Stock for investment and not for resale, and (iv)
such other restrictions, conditions and terms as the Committee deems
appropriate.
(c) The Participant shall be entitled to all dividends paid with
respect to Restricted Stock during the Period of Restriction and shall
not be required to return any such dividends to the Company in the event
of the forfeiture of the Restricted Stock.
(d) The Participant shall be entitled to vote the Restricted Stock
during the Period of Restriction.
(e) The Committee shall determine whether Restricted Stock is to be
delivered to the Participant with an appropriate legend imprinted on the
certificate or if the shares are to be deposited in escrow pending
removal of the restrictions.
SECTION 12. PERFORMANCE AWARDS.
Performance Awards shall consist of Stock, monetary units or some
combination thereof, to be issued without any payment therefor, in the event
that certain performance goals established by the Committee are achieved
during the Performance Period. The goals established by the Committee may
include return on average total capital employed, earnings per
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<PAGE> 27
share, return on stockholders' equity and such other goals as may be
established by the Committee. In the event the minimum Corporate goal is not
achieved at the conclusion of the Performance Period, no payment shall be made
to the Participant. Actual payment of the award earned shall be in cash or in
Stock or in a combination of both, in a single sum or in periodic
installments, all as the Committee in its sole discretion determines. If
Stock is used, the Participant shall not have the right to vote and receive
dividends until the goals are achieved and the actual shares are issued. In
the event a Reporting Person receives a Performance Award which includes
Stock, such stock shall not be sold or disposed of for six (6) months
following the date of issuance pursuant to such award. In the event of a cash
payment, the number of shares reserved for issuance hereunder and the number
of shares which may be granted in the form of Restricted Stock or Performance
Awards shall be reduced as if shares had been issued.
SECTION 13. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued
shares of Stock without new consideration to the Company (such as by
stock dividends or stock splits), the total number of shares reserved
for issuance under this Plan, the number of shares which may be granted
in the form of Restricted Stock or Performance Awards, the maximum
number of shares available to a particular Participant, and the number
of shares covered by each outstanding Award, shall be adjusted so that
the aggregate consideration payable to the Company, if any, and the
value of each such Award shall not be changed. Awards may also contain
provisions for their continuation or for other equitable adjustments
after changes in the Stock resulting from reorganization, sale, merger,
consolidation, issuance of stock rights or warrants, or similar
occurrence.
(b) Notwithstanding any other provision of this Plan, and without
affecting the number of shares reserved or available hereunder, the
Board of Directors may authorize the issuance or assumption of benefits
in connection with any merger, consolidation, acquisition of property or
stock, or reorganization upon such terms and conditions as it may deem
appropriate.
SECTION 14. NONTRANSFERABILITY.
Each Award granted under the Plan to a Participant shall not be
transferable otherwise than by will or the laws of descent and distribution or
pursuant to a Qualified Domestic Relations Order (as defined in Section
206(d)(3) of the Employee Retirement Income Security Act of 1974, as amended,
and the rules promulgated thereunder), and shall be exercisable, during the
Participant's lifetime, only by the Participant. In the event of the death of
a Participant, exercise or payment shall be made only:
(a) By or to the executor or administrator of the estate of the
deceased Participant or the person or persons to whom the deceased
Participant's rights under the Award shall pass by will or the laws of
descent and distribution; and
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<PAGE> 28
(b) To the extent that the deceased Participant was entitled thereto
at the date of his death, provided, however, that any otherwise
applicable six-month holding period shall not be required for exercise
by or payment to an executor or administrator of the estate of a
deceased Reporting Person.
SECTION 15. TAXES.
The Company shall be entitled to withhold the amount of any tax
attributable to any amounts payable or shares deliverable under the Plan after
giving the person entitled to receive such payment or delivery notice as far
in advance as practicable, and the Company may defer making payment or
delivery as to any Award if any such tax is payable until indemnified to its
satisfaction. The person entitled to any such delivery may, by notice to the
Company at the time the requirement for such delivery is first established,
elect to have such withholding satisfied by a reduction of the number of
shares otherwise so deliverable (a "Stock Withholding Election"), such
reduction to be calculated based on a closing market price on the date of such
notice. Reporting Persons may make a Stock Withholding Election either (i)
during a Window Period, as to an Option exercise or SAR surrender during such
Window Period, or (ii) six months in advance of an Option exercise or SAR
surrender, which exercise or surrender need not occur during a Window Period,
and which election may not be suspended or revoked except by another such
election which shall not become effective until six months after it is made.
SECTION 16. NO RIGHT TO EMPLOYMENT.
A Participant's right, if any, to continue to serve the Company and its
subsidiaries as an officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a Participant under the Plan.
SECTION 17. DURATION, AMENDMENT AND TERMINATION.
No Award shall be granted more than ten years after the date of adoption
of this Plan; provided, however, that the terms and conditions applicable to
any Award granted within such period may thereafter be amended or modified by
mutual agreement between the Company and the Participant or such other person
as may then have an interest therein. Also, by mutual agreement between the
Company and a Participant hereunder, Stock Options or other Awards may be
granted to such Participant in substitution and exchange for, and in
cancellation of, any Awards previously granted such Participant under this
Plan, provided that any such substitution shall be deemed a new award for
purposes of calculating any applicable six-month holding periods. To the
extent that any Stock Options or other Awards which may be granted within the
terms of the Plan would qualify under present or future laws for tax treatment
that is beneficial to a recipient, then any such beneficial treatment shall be
considered within the intent, purpose and operational purview of the Plan and
the discretion of the Committee, and to the extent that any such Stock Options
or other Awards would so qualify within the terms of the Plan, the Committee
shall have full and complete authority to grant Stock Options or other
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<PAGE> 29
Awards that so qualify (including the authority to grant, simultaneously or
otherwise, Stock Options or other Awards which do not so qualify) and to
prescribe the terms and conditions (which need not be identical as among
recipients) in respect to the grant or exercise of any such Stock Option or
other Awards under the Plan. The Board of Directors may amend the Plan from time
to time or terminate the Plan at any time. However, no action authorized by
this paragraph shall reduce the amount of any existing Award or change the terms
and conditions thereof without the Participant's consent. No amendment of the
Plan shall, without approval of the stockholders of the Company (a) increase the
total number of shares which may be issued under the Plan or increase the amount
or type of Awards that may be granted under the Plan; (b) change the minimum
purchase price, if any, of shares of Common Stock which may be made subject to
Awards under the Plan; or (c) modify the requirements as to eligibility for
Awards under the Plan.
SECTION 18. STOCKHOLDER APPROVAL.
The Plan shall be effective as of June 30, 1994 and shall be submitted
for approval by the stockholders of the Company at the 1994 Annual Meeting of
Stockholders. If the stockholders do not approve the Plan, it, and any action
taken hereunder, shall be void and of no effect, however, the 1992 Long Term
Incentive Plan and grants thereunder shall remain in full force and effect.
A-10
<PAGE> 30
D & K WHOLESALE DRUG, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
August 14, 1997
The undersigned hereby appoints J. HORD ARMSTRONG, III and MARTIN D.
WILSON, and each of them, with or without the other, proxies with full power
of substitution to vote as designated below, all shares of stock of D & K
Wholesale Drug, Inc. (the "Corporation") that the undersigned signatory
hereof is entitled to vote at the Annual Meeting of Stockholders of the
Corporation to be held at The Daniele Hotel, Savoy Room, 216 Noth Meramec,
St. Louis, Missouri, on Thursday, August 14, 1997, at 10:00 a.m., and all
adjournments thereof, all in accordance with and as more fully described in
the Notice and accompanying Proxy Statement for such meeting, receipt of
which is hereby acknowledged.
1. Election of three Class II directors to hold office for a term of
three years or until their respective successors are duly elected and
qualified.
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY to vote
for the nominees listed below
BRYAN H. LAWRENCE ROBERT E. KORENBLAT JAMES M. USDAN
(INSTRUCTION: To withhold authority to vote for an individual nominee,
write that nominee's name in the space provided below)
-----------------------------------------
2. Election of one Class I director to hold office for a term of two
years or until his successor is duly elected and qualified.
/ / FOR the nominee listed below / / WITHHOLD AUTHORITY to vote
for the nominee listed below
J. DAVID MCCAY
3. Election of one Class III director to hold office for a term of one
year or until his successor is duly elected and qualified.
/ / FOR the nominee listed below / / WITHHOLD AUTHORITY to vote
for the nominee listed below
THOMAS F. PATTON
4. Proposal to approve an amendment to the Restated Certificate of
Incorporation of the Company to change the corporate name to "D&K
Healthcare Resources, Inc."
/ / FOR / / AGAINST / / ABSTAIN
5. Proposal to approve an amendment to the D & K Wholesale Drug, Inc.
1992 Long Term Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
6. To transact any and all other business, including adjournment of the
meeting, which may properly come before the meeting or any adjournment
thereof.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE> 31
(continued, and to be signed, on the other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL OF THE NOMINEES FOR DIRECTOR
LISTED IN ITEMS 1, 2 and 3, "FOR" THE APPROVAL OF THE AMENDMENT TO THE
CORPORATION'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE CORPORATE
NAME, "FOR" THE APPROVAL OF THE AMENDMENT TO THE D & K WHOLESALE DRUG, INC.
1992 LONG TERM INCENTIVE PLAN AND "FOR" THE GRANT OF DISCRETIONARY AUTHORITY.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SIGN
HERE______________________________________________
(Please sign exactly as name appears hereon)
SIGN
HERE______________________________________________
Executors, administrators, trustees, etc.
should so indicate when signing
Dated ____________________________________________
<PAGE> 32
APPENDIX
Page 15 of the proxy contains a graph. The information contained in said
graph is depicted in the table immediately following the graph.
