1 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of l934 Filed by Registrant [x] Filed by Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [x] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12 [ ] Confidential, for Use of the Commission Only(as permitted by Rule 14a-6(e)(2)) National Sanitary Supply Company ................................................................................ (Name of Registrant as Specified in its Charter) National Sanitary Supply Company ................................................................................ (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [x] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] 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 of other underlying value of transaction computed pursuant to Exchange Act Rule 0-11_/ ......................................................................... 4) Proposed maximum aggregate value of transaction: ......................................................................... 5) Total fee paid: ......................... Set forth the amount on which the filing fee is calculated and state how it was determined. [ ] Fee previously paid with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Action 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 No.: .......................................................................... 3) Filing Party: .......................................................................... 4) Date Filed: .......................................................................... 2 NATIONAL SANITARY SUPPLY COMPANY NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 20, 1996 The Annual Meeting of Stockholders of National Sanitary Supply Company will be held at The Phoenix Club, 812 Race Street, Cincinnati, Ohio, on Monday, May 20, 1996 at 11:30 a.m. for the following purposes: (1) To elect directors; (2) To ratify the selection by the Board of independent accountants; and (3) To transact such other business as may properly be brought before the meeting. Stockholders of record at the close of business on March 25, 1996 are entitled to notice of, and to vote at, the meeting. IF YOU DO NOT PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENVELOPE PROVIDED AT YOUR EARLIEST CONVENIENCE. NO POSTAGE IS REQUIRED IF IT IS MAILED IN THE UNITED STATES. Naomi C. Dallob Secretary and General Counsel April 8, 1996 1 3 NATIONAL SANITARY SUPPLY COMPANY PROXY STATEMENT This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of National Sanitary Supply Company (hereinafter called the "Company" or "National") of proxies to be used at the Annual Meeting of Stockholders of the Company to be held on May 20, 1996 ("Annual Meeting") and any adjournments thereof. The Company's mailing address is 2900 Chemed Center, 255 E. Fifth Street, Cincinnati, Ohio 45202. The approximate date on which this Proxy Statement and the enclosed proxy are being sent to stockholders is April 8, 1996. Each valid proxy received in time will be voted at the meeting and, if a choice is specified on the proxy, the shares represented thereby will be voted accordingly. The proxy may be revoked by the stockholder at any time before the meeting by providing notice to the Secretary. Only stockholders of record as of the close of business on March 25, 1996 will be entitled to vote at the meeting or any adjournments thereof. On such date, the Company had outstanding 6,137,178 shares of common stock, $1 par value ("Common Stock"), entitled to one vote per share. ELECTION OF DIRECTORS Twenty directors are to be elected at the Annual Meeting to serve until the following annual meeting of stockholders and until their successors are duly elected and qualified. Set forth below are the names of the persons to be nominated by the Board of Directors, together with a description of each person's principal occupation during the past five years and other pertinent information. Unless authority is withheld or names are stricken, it is intended that the shares covered by each proxy will be voted for the nominees listed. Votes that are withheld will be excluded entirely from the vote and will have no effect. The Company anticipates that all nominees listed in this Proxy Statement will be candidates when the election is held. However, if for any reason any nominee is not a candidate at that time, proxies will be voted for any substitute nominee designated by the Board of Directors (except where a proxy withholds authority with respect to the election of directors). The affirmative vote of the holders of a plurality of the votes cast will be necessary to elect each of the nominees for director. NOMINEES EDWARD L. HUTTON Mr. Hutton is Chairman of the Company and has held Director since 1983 this position since November 1983. Mr. Hutton is Age: 76 also Chairman, Chief Executive Officer, and a director of Chemed Corporation, Cincinnati, Ohio (a diversified public corporation with interests in residential and commercial plumbing and drain cleaning services, home-repair service contracts, janitorial supply products distribution, medical and dental disposable product supply distribution and home healthcare services), a Delaware corporation, the majority (84 percent) owner of the Company's outstanding Common Stock ("Chemed") and has held those positions since November 1993 and 1970, respectively. He was also President of Chemed from 1970 to 1993. Mr. Hutton is Chairman and a director of Omnicare, Inc., Cincinnati, Ohio (healthcare services and medical equipment and supplies) ("Omnicare"), a publicly held corporation in which Chemed holds a 2.8 percent ownership interest; and Chairman and a director of Roto-Rooter, Inc., Cincinnati, Ohio (plumbing and drain cleaning services and home-repair service contracts) ("Roto-Rooter"), a publicly held corporation in which Chemed holds a 58 percent ownership interest. Mr. Hutton is the father of Thomas C. Hutton, a director of the Company. 2 4 KEVIN J. MCNAMARA Mr. McNamara is Vice Chairman of the Company and Director since 1988 President of Chemed, having held these positions Age: 42 since August 1994. Previously, he served as General Counsel and Assistant Secretary of the Company from August 1986, and as Executive Vice President, General Counsel and Secretary of Chemed, from November 1993. He served as a Vice Chairman of Chemed from May 1992 to November 1993. He is a director of Chemed, Omnicare and Roto-Rooter PAUL C. VOET Mr. Voet is President and Chief Executive Officer Director since 1983 of the Company and has held these positions since Age: 49 January 1992. Previously, from November 1983 to January 1992, he was Vice Chairman and Chief Executive Officer of the Company. Mr. Voet is also an Executive Vice President of Chemed. He held the position of Vice Chairman of Chemed from May 1988 to November 1993. He is a director of Chemed. ROBERT B. GARBER Mr. Garber is a Vice Chairman of the Company and Director since 1984 has held this position since January 1992. Age: 69 Previously, from April 1986 to January 1992, he was President and Chief Operating Officer of the Company. ARTHUR J. BENNERT, JR. Mr. Bennert is Vice President of Marketing of the Director since 1992 Company and has held this position since February Age: 38 1996. Previously, from April 1991, he was Vice President of Corporate Planning. JAMES A. CUNNINGHAM Mr. Cunningham is a Senior Chemical Adviser to Director since 1990 Schroder Wertheim, Inc., New York, New York (an Age: 51 investment banking, asset management and securities firm) and has held this position since March 1992. From October 1990 to March 1992 he was a Managing Director of Furman Selz Incorporated, New York, New York (an institutional investment firm). He is a director of Roto-Rooter and Chemed. NAOMI C. DALLOB Ms. Dallob is Secretary and General Counsel of the Director since 1987 Company and has held these positions since Age: 42 November 1986 and August 1994, respectively. Ms. Dallob is also a Vice President and Secretary of Chemed and has held these positions since February 1987 and August 1994, respectively. She is a director of Roto-Rooter. CHARLES H. ERHART, JR. Mr. Erhart retired as President of W. R. Grace & Director since 1989 Co., Boca Raton, Florida (international specialty Age: 70 chemicals and health care) ("Grace") in August 1990, having held this position since July 1989. Previously, from November 1986 to July 1989, he served Grace as Chairman of its Executive Committee. He is a director of Omnicare, Chemed and Roto-Rooter. NEAL GILLIATT Mr. Gilliatt is President of Neal Gilliatt/Stuart Director since 1986 Watson, Inc., New York, New York (management Age: 78 consulting), having held this position since April 1982. On April 1, 1982 he retired as Chairman of the Executive Committee of the Interpublic Group of Companies, Inc., New York, New York (advertising and related communications), having held that position since February 1980. Mr. Gilliatt is a director of Consolidated Products, Inc. (restaurants) and Roto-Rooter. He is a director emeritus of Chemed. 3 5 WILL J. HOEKMAN Mr. Hoekman is an Executive Vice President of Director since May 1994 Firstar Bank Iowa, N.A. Des Moines, Iowa. Age: 50 Previously, since November 1980, he was a Senior Vice President of Firstar Bank Iowa, N.A. He is a director of Roto-Rooter. THOMAS C. HUTTON Mr. T. C. Hutton is a Vice President of Chemed and Director since 1986 has held this position since February 1988. Mr. Age: 45 Hutton is a director of Chemed, Omnicare, and Roto-Rooter and is the son of Edward L. Hutton, Chairman and a director of the Company. W. DWIGHT JACKSON Mr. Jackson is an Executive Vice President of the Director since February 1995 Company and Executive Vice President and General Age: 49 Manager of its Century Papers, Inc. subsidiary ("Century"). He has held these positions since November and October 1994, respectively. Previously, from January 1990 to October 1994, he was Director of Sales for Scott Paper Co.'s Southwest Division. CHARLES O. LANE Mr. Charles Lane retired in February 1996 as Director since l984 Executive Vice President of Marketing and Age: 65 Manufacturing of the Company having held this position since April 1986. Mr. Lane is the brother of Mr. Thomas Lane, Vice President-Administration of the Company. SANDRA E. LANEY Mrs. Laney is Senior Vice President and Chief Director since 1986 Administrative Officer of Chemed and has held Age: 52 these positions since November 1993 and May 1991, respectively. She served as a Vice President of Chemed from May 1984 to November 1993. Mrs. Laney is a director of Chemed, Omnicare and Roto-Rooter. JOHN M. MOUNT Mr. Mount is a Principal of Lynch-Mount Not previously a director Associates, Cincinnati, Ohio (management Age: 54 consulting) and has held this position since November 1993. From April 1991 to November 1993, Mr. Mount was Senior Vice President of Diversey Corporation, Detroit, Michigan (specialty chemicals) and President of Diversey's DuBois Industrial Division. He is a director of Chemed and Omnicare. TIMOTHY S. O'TOOLE Mr. O'Toole is an Executive Vice President and the Director since May 1994 Treasurer of Chemed and has held these positions Age: 40 since May 1992. Previously, from February 1989 to May 1992, he held the positions of Vice President and Treasurer of Chemed. He is a director of Chemed, Vitas Healthcare Corporation, Roto-Rooter and Omnicare. D. WALTER ROBBINS, JR. Mr. Robbins retired as Vice Chairman of Grace in Director since 1991 January 1987 and thereafter became a consultant to Age: 76 Grace until July 1995. He is a director of Chemed, Omnicare and Roto-Rooter. GARY H. SANDER Mr. Sander is Vice President, Treasurer and Chief Director from May 1986 Financial Officer of the Company and has held to May 1988 and since these positions since August 1988. August 1988 Age: 46 4 6 KENNETH F. VUYLSTEKE Mr. Vuylsteke is an Executive Vice President of Director since 1991 the Company and General Manager of National West Age: 49 and has held these positions since January 1992 and July 1991, respectively. Previously, from February 1989 to July 1991, he was Vice President and General Manager of the Company's Northwest division. GEORGE J. WALSH III Mr. Walsh is a Partner in the law firm of Gould & Not previously a director Wilkie, New York, New York and has held this Age: 50 position since January 1978. He is a director of Chemed. COMPENSATION OF DIRECTORS During 1995 each member of the Board of Directors who was not an executive officer or an officer-employee of the Company was paid $925 for attendance at each meeting of the Board and $500 for each meeting of a Committee of the Board attended. The Chairman of each Committee was paid $550 for each Committee meeting attended. Effective February 7, 1996, each member of the Board of Directors who is not an executive officer or an officer-employee of the Company is paid $1,000 for attendance at each meeting of the Board and $550 for each meeting of a Committee of the Board attended. The Chairman of each committee is paid $600 for each Committee meeting attended. Members of the Incentive Committee are also paid a fee at the rate of $1,200 per annum. Since May 1991, each member of the Board of Directors (other than those serving on the Incentive Committee and Mr. Robbins) has been granted an annual unrestricted stock award covering 100 shares of the Company's Common Stock under the 1988 Stock Incentive Plan. Incentive Committee members and Mr. Robbins were paid the cash equivalent of the stock award. In addition, each member of the Board of Directors and of a Committee is reimbursed for reasonable travel expenses incurred in connection with such meetings. COMMITTEES AND MEETINGS OF THE BOARD The Company has the following Committees of the Board of Directors: Audit Committee, Compensation Committee, and Incentive Committee. It does not have a nominating committee of the Board of Directors. The Audit Committee (a) recommends to the Board of Directors a firm of independent accountants to audit the Company and its consolidated subsidiaries, (b) reviews and reports to the Board of Directors on the Company's annual financial statements and the independent accountants' report on such financial statements and (c) meets with the Company's senior financial officers, internal auditors and independent accountants to review audit plans and work and other matters regarding the Company's accounting, financial reporting and internal control systems. The Audit Committee consists of Messrs. Erhart, T. C. Hutton and Hoekman. The Audit Committee met twice during 1995. The Incentive Committee administers the Company's 1986, 1988 and 1995 Stock Incentive Plans. In addition, the Incentive Committee grants stock options and stock awards to key employees of the Company and recommends to the Board of Directors additional year-end contributions by the Company under The National Sanitary Supply Company Employees Thrift and Profit Sharing Plan. The Incentive Committee consists of Messrs. Cunningham, Erhart and Gilliatt. The Incentive Committee met twice during 1995. The Compensation Committee reviews, approves and recommends to the Board of Directors matters concerning base salary and annual cash incentive compensation for key executives of the Company. The Compensation Committee, consisting of Messrs. McNamara and Cunningham and Mrs. Laney, met three times in l995. During 1995 there were five meetings of the Board of Directors. Each incumbent director attended at least 75 percent of the aggregate of (a) the total number of meetings held by the Board of Directors and (b) the total number of meetings held by all Committees of the Board of Directors on which he served that were held during the period for which he was a director or member of any such Committee. 5 7 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS Mr. McNamara, a member of the Company's Compensation Committee, is Vice Chairman of the Company and is an executive officer and director of Chemed. Mrs. Laney, also a member of the Compensation Committee, is also an executive officer and a director of Chemed. Messrs. E. L. Hutton and Voet are directors of Chemed. EXECUTIVE COMPENSATION JOINT REPORT OF THE COMPENSATION COMMITTEE AND INCENTIVE COMMITTEE ON EXECUTIVE COMPENSATION The Company believes that executive compensation must align executive officers' interests with those of the Company's shareholders and that such are best served by directly and materially linking compensation to financial and operating performance criteria, which, when successfully achieved, will enhance shareholder value. The Company attempts to achieve this objective with an executive compensation package for its senior executives which combines base salary, annual cash incentive compensation, long-term incentive compensation in the form of stock options and restricted stock awards along with various benefit plans, including pension plans, savings plans and medical benefits generally available to the employees of the Company. The executive compensation program is administered through the coordinated efforts of the Compensation and the Incentive Committees of the Board of Directors. The membership of the Incentive and Compensation Committees is composed of outside directors (i.e., non-employees of the Company), although the Compensation Committee includes two officers of Chemed (see "Compensation Committee Interlocks and Insider Participation in Compensation Decisions" above). The recommendations of the Compensation Committee on base salary and annual cash incentive compensation for key executives must be approved by the full Board of Directors. The Incentive Committee administers the Company's stock incentive plans under which it reviews and approves grants of stock options and restricted stock awards. Both the Compensation and Incentive Committees may use their discretion subjectively to set executive compensation where, in their collective judgment, external, internal or individual circumstances warrant. The Compensation and Incentive Committees have considered, and are continuing to review, the qualifying compensation regulations issued by the Internal Revenue Service in December of 1995. As compensation is currently not expected to exceed the $1 million base, it is not presently affected by these regulations. Following is a discussion of the components of the executive officer compensation program. In determining base salary levels for the Company's executive officers, the Compensation Committee takes into account the magnitude of responsibility of the position, individual experience and performance and specific issues particular to the Company. In general, base salaries are set at levels believed by this Compensation Committee to be sufficient to attract and retain qualified executives when considered with the other components of the Company's compensation structure. The Compensation Committee believes that a significant portion of total cash compensation should be linked to annual performance criteria. Consequently, the purpose of annual incentive compensation for senior executives and key managers is to provide a direct financial incentive in the form of an annual cash bonus to these executives to achieve their business unit's and the Company's annual goals. Operational and financial goals are established at the beginning of each fiscal year and generally take into account such measures of performance as sales and earnings growth, profitability, cash flow and return on investment. Other non-financial and somewhat subjective measures of performance relate to organizational development, service expansion and strategic positioning of the Company's assets. 6 8 Individual performance is also taken into account in determining individual bonuses. It is the Company's belief that bonuses as a percent of a senior executive's salary should be sufficiently high to provide a major incentive for achieving annual performance targets. Bonuses for senior executives of the Company generally range from 10 percent to 40 percent of base salary. The stock option and restricted stock award program forms the basis of the Company's incentive plans for executive officers and key managers. The objective of these plans is to align executive and long-term shareholder interests by creating a strong and direct link between executive pay and shareholder return. Stock options and restricted stock awards are generally granted annually and are generally regarded as the primary incentive for long-term performance as they are granted at fair market value and have vesting restrictions which generally lapse over three or four year periods. The Committee considers each grantee's current option and award holdings in making grants. Both the amounts of restricted stock awards and proportion of stock options increase as a function of higher salary and positions of responsibility within the Company. Mr. P. C. Voet's compensation costs were paid 75 percent by the Company and 25 percent by Chemed Corporation in 1995, with the exception of a $35,000 special bonus in December, 1995, paid wholly by Chemed. His base salary was not increased in 1995, remaining at the base rate of $264,500. His cash bonus paid 75 percent by the Company in respect of 1995 services was $106,250, which represents an increase of 25 percent over 1994 and 40 percent of his current base salary. Restricted stock awards granted to Mr. Voet in respect of 1995 services are consistent with his responsibilities and relative position in the Company and are shown on the Summary Compensation Table. He received 40,000 stock options in 1995. By the Compensation Committee: Kevin J. McNamara, Chairman James A. Cunningham Sandra E. Laney By the Incentive Committee: Neal Gilliatt, Chairman Charles H. Erhart, Jr. James A. Cunningham 7 9 SUMMARY COMPENSATION TABLE The following table shows the plan and non-plan compensation awarded to, earned by, or paid to the Chief Executive Officer and the four most highly compensated executive officers of the Company for the past three years for all services rendered in all capacities to the Company and its subsidiaries: - -------------------------------------------------------------------------------- SUMMARY COMPENSATION TABLE - -------------------------------------------------------------------------------- LONG-TERM COMPENSATION ---------------------- ANNUAL COMPENSATION AWARDS - ------------------------------------------------------------------- NAME RESTRICTED SECURITIES ALL AND STOCK UNDERLYING OTHER PRINCIPAL AWARDS STOCK COMPEN- POSITION YEAR SALARY $ BONUS $ $ (1) OPTIONS # SATION $ - -------------------------------------------------------------------------------- Paul C. Voet 1995 $198,378 $79,688 $109,992 40,000 $199,154(3) President and 1994 171,150 59,500 79,625 -- 37,854 CEO(2) 1993 156,325 45,500 55,125 -- 33,958 Kenneth F 1995 152,500 57,609 49,996 20,000 19,850(4) Vuylsteke 1994 143,958 42,000 42,875 -- 8,672 Executive Vice 1993 132,500 35,000 28,788 -- 3,804 President Charles O. Lane 1995 135,000 12,000 -- -- 12,857(5) Executive Vice 1994 135,000 12,000 -- -- 10,109 President- 1993 174,215 12,000 -- -- 8,343 Marketing and Manufacturing W. Dwight 1995 125,000 56,215 39,997 15,000 12,517(6) Jackson 1994 120,000 7,500 18,375 -- 1,837 Executive Vice 1993 -- -- -- -- -- President Gary H. Sander 1995 96,250 35,568 29,998 7,500 96,893(8) Vice President, 1994 93,125 26,000 24,500 -- 17,209 Treasurer and 1993 88,417 22,000 20,213 -- 18,878 Chief Financial Officer(7) 8 10 FOOTNOTES TO SUMMARY COMPENSATION TABLE (1) The number and value of aggregate restricted stock holdings at December 31, 1995 are as follows:Paul C. Voet 18,861 shares, $226,367; Charles O. Lane 0 shares, $0; Kenneth F. Vuylsteke 9,322 shares, $112,067; W. Dwight Jackson 4,904 shares, $58,372; Gary H. Sander 5,653 shares, $67,973. Dividends are paid to the holders of restricted stock, who are entitled to vote them, whether or not vested. Restricted stock awards vest evenly over three-year periods. (2) Represents 75 percent of total compensation, as charged to the Company by Chemed in 1995, 70 percent in 1994, and 65 percent in 1993. Excludes a $35,000 special bonus paid by Chemed in each December of l994 and 1995. (3) Composed of contributions to defined contribution plans - $181,424 which includes $122,676 allocated to Mr. Voet's account under Chemed's Employee Stock Ownership Plans with respect to an adjustment for prior periods and vesting over a five year period beginning September 1995 ("ESOP Adjustment"); term life insurance premiums - $4,712; $13,018, which is the value of premium payments made by the Company for his benefit under a split dollar life insurance policy, which provides for refund of premiums to the Company on termination of the policy ("Split Dollar Premiums"). (4) Composed of contributions to defined contribution plans - $9,446; term life insurance premiums - $276; Split Dollar Premiums - $10,128. (5) Composed of contributions to defined contribution plans - $7,328; term life insurance premiums - $5,529. (6) Mr. Jackson was hired in October, 1994. Composed of contributions to defined contribution plans - $4,076; term life insurance premiums - $168; Split Dollar Premiums - $8,273. (7) Mr. Sander is an employee of Chemed Corporation, these costs are reimbursed 100 percent by the Company. (8) Composed of contributions to defined contribution plans - $90,525 which includes $66,154 in ESOP Adjustment; term life insurance premiums - $711; Split Dollar Premiums - $5,657. OPTION GRANTS The table below shows information concerning stock options granted in l995 to the executive officers named in the Summary Compensation Table. STOCK OPTION GRANTS IN 1995 - ------------------------------------------------------------------------------------ Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Individual Grants Option Term - ------------------------------------------------------------------------------------ % of Total Number of Options Securities Granted to Underlying Employees Exercise Options in Fiscal Price Expiration Name Granted(#)(1) Year $/Sh Date 5%($) 10%($) - ------------------------------------------------------------------------------------ P. C. Voet 40,000 19.8% $12.00 3/01/06 $340,800 $889,600 K. F. Vuylsteke 20,000 9.9% 12.00 3/01/06 170,400 440,800 C. O. Lane -- -- -- -- -- -- W. D. Jackson 15,000 7.4% 12.00 3/01/06 127,800 333,600 G. H. Sander 7,500 3.7% 12.00 3/01/06 63,900 166,800 - ------------------------------------------------------------------------------------ (1) These options, which were granted on March 1, 1995, provide for the purchase price of option shares equal to the fair market value of Common Stock on that date and become exercisable in four equal annual installments beginning December 1, 1995. 9 11 The following table summarizes stock option exercises during 1995 and the year-end number and value of unexercised stock options held by the named executive officers. AGGREGATED OPTION EXERCISES IN 1995 AND STOCK OPTION VALUES AS OF DECEMBER 31, 1995 - ------------------------------------------------------------------------------------------------------ VALUE OF NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY SHARES OPTIONS AT 12/31/95 (#) OPTIONS AT 12/31/95 (1) ACQUIRED VALUE ------------------------------------------------------ NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------------------------------------------------------------------------------------ Paul C. Voet 13,223 $66,115 57,500 30,000 $164,925 $0 Kenneth F. -- -- 8,688 15,000 17,640 0 Vuylsteke Charles O. Lane 8,750 54,688 50,000 0 137,500 0 W. Dwight -- -- 3,750 11,250 0 0 Jackson Gary H. -- -- 9,875 5,625 33,860 0 Sander - ------------------------------------------------------------------------------------------------------ (1) Based upon the market value of the underlying securities at year-end, minus the exercise or base price. EMPLOYMENT AGREEMENTS The Company had an employment agreement with Mr. C. Lane, who retired in February 1996, providing for his services to the Company through December 31, 1995 and has an agreement with Mr. Jackson providing for services through October 31, 1996, at specified minimum annual rates of compensation of $135,000 and $125,000, respectively. These agreements also provide for limited restrictions against competition during and for a two-year period after the term of employment, and provide assurances to the Company concerning use or disclosure of trade secrets and confidential information. The Company has an employment agreement with Mr. Vuylsteke providing for his continued employment as an executive until May 31, 1998 at a specified base salary rate of $155,000 per year. In the event of employment termination without cause, the Company shall pay him monthly severance for the remaining term of the agreement, at the rate of 150 percent of his then-current base salary and incentive bonus and the fair market value of all stock awards which vested during the twelve months prior to termination. Messrs. Voet and Sander are employed by Chemed pursuant to agreements providing for their continued employment as senior executives until May 31, 1999 and 1998, respectively. The remaining terms and conditions of these agreements are the same as those of Mr. Vuylsteke's agreement, except that Mr. Voet is to be a management nominee for election as a Chemed director. The Company reimburses Chemed for 80 percent of such costs in 1996 with respect to Mr. Voet, and 100 percent with respect to Mr. Sander, valued at $705,931 in the aggregate for l995, pursuant to a services agreement with Chemed referred to below under "Certain Arrangements and Transactions." 10 12 COMPARATIVE STOCK PERFORMANCE GRAPH The line graph below compares the yearly percentage change in the Company's cumulative total shareholder return on its Common Stock, as measured by dividing (i) the sum of (A) the cumulative amount of dividends for the period January 1, 1991 to December 31, 1995, assuming dividend reinvestment, and (B) the difference between the Company's share price at January 1, 1991 and December 31, 1995; by (ii) the share price at January 1, 1991, with (i) the cumulative total return, assuming reinvestment of dividends, of the Media General Market Index; and (ii) the cumulative total return, assuming reinvestment of dividends, of the Media General Wholesale-Nondurable Index. TOTAL CUMULATIVE SHAREHOLDER RETURN FOR FIVE-YEAR PERIOD ENDING DECEMBER 31, 1995 [GRAPH] - ---------------------------------------------------------------------------------------- December 31 . . . 1990 1991 1992 1993 1994 1995 - ---------------------------------------------------------------------------------------- National Sanitary Supply Co. 100.00 106.15 138.99 206.88 191.59 187.93 - ---------------------------------------------------------------------------------------- Media General Market Index 100.00 129.09 134.25 154.11 152.83 198.15 - ---------------------------------------------------------------------------------------- Media General Wholesale-Nondurable Index 100.00 143.42 156.87 168.76 164.68 211.60 - ---------------------------------------------------------------------------------------- (a) Fiscal year ends 12/31. Assumes $100 invested on 1/1/91. SOURCE: MEDIA GENERAL 11 13 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of December 31, 1995 information with respect to the only persons who are known to be the beneficial owner of more than 5 percent of the Common Stock of the Company: - -------------------------------------------------------------------------------- NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF BENEFICIAL OF BENEFICIAL OF TITLE OF CLASS OWNER OWNERSHIP (1) CLASS (4) - -------------------------------------------------------------------------------- Common Stock Chemed Corporation 5,144,551 84% Par Value $1 2600 Chemed Center Shares; Direct Per Share 255 East Fifth St. (2) Cincinnati, OH 45202 - -------------------------------------------------------------------------------- Common Stock PNC Bank Corporation 346,670 shares; 5.7% Par Value $1 One PNC Plaza Trustee of the Company's Per Share 249 Fifth Avenue Profit Sharing and Thrift Pittsburgh, PA 15222 Savings Plan (3) - -------------------------------------------------------------------------------- (1) As reported to the Securities and Exchange Commission by the beneficial owners. (2) Sole voting power, 5,144,551 shares; sole dispositive power, 5,144,551 shares. (3) Shared voting power, 346,670 shares; shared dispositive power 346,670 shares. (4) For purposes of calculating percent of class, all shares subject to stock options which were exercisable within 60 days from December 31, 1995 were assumed to have been issued. The following table sets forth information as of December 31, 1995 with respect to the Common Stock of the Company and the capital stock of Chemed beneficially owned by all nominees and Directors of the Company, each of the executive officers named in the Summary Compensation Table, and its directors and executive officers as a group: - -------------------------------------------------------------------------------- AMOUNT AND NATURE PERCENT OF BENEFICIAL OF NAME TITLE OF CLASS OWNERSHIP (1) CLASS (2) - -------------------------------------------------------------------------------- E.L. Hutton National Common Stock 28,729 Direct 57,223 Option 3,194 Trustee Chemed Capital Stock 42,321 Direct 36,750 Option 3,967 Trustee P.C. Voet National Common Stock 35,959 Direct 57,500 Option Chemed Capital Stock 24,883 Direct 750 Option Trustee(3) R.B. Garber National Common Stock 41,184 Direct 2,500 Option Chemed Capital Stock 677 Direct A.J. Bennert, Jr. National Common Stock 5,490 Direct 1,875 Option Chemed Capital Stock 4,535 Direct - -------------------------------------------------------------------------------- 12 14 - -------------------------------------------------------------------------------- AMOUNT AND NATURE PERCENT OF BENEFICIAL OF NAME TITLE OF CLASS OWNERSHIP (1) CLASS (2) - -------------------------------------------------------------------------------- J. A. Cunningham National Common Stock 1,000 Direct Chemed Capital Stock 1,000 Direct 500 Trustee N. C. Dallob National Common Stock 3,637 Direct 2,375 Option Chemed Capital Stock 6,846 Direct 750 Option C. H. Erhart, Jr. National Common Stock 5,000 Direct Chemed Capital Stock 1,500 Direct N. Gilliatt National Common Stock 1,000 Direct Chemed Capital Stock 3,400 Direct W. J. Hoekman National Common Stock 1,000 Trustee(4) Chemed Capital Stock 109,100 Trustee(4) 1.09% T. C. Hutton National Common Stock 3,673 Direct 2,750 Option 3,194 Trustee Chemed Capital Stock 16,607 Direct 1,750 Option 4,467 Trustee W. D. Jackson National Common Stock 1,644 Direct 3,750 Option Chemed Capital Stock 90 Direct C. O. Lane National Common Stock 29,092 Direct 50,000 Option Chemed Capital Stock 8,484 Direct S. E. Laney National Common Stock 3,988 Direct 1,313 Option Chemed Capital Stock 23,319 Direct 31,000 Option Trustee(3) J. M. Mount National Common Stock None Chemed Capital Stock 7,520 Direct 600 Trustee K. J. McNamara National Common Stock 3,072 Direct 3,750 Option Chemed Capital Stock 12,611 Direct 7,500 Option Trustee(3) T. S. O'Toole National Common Stock 2,898 Direct 500 Option Chemed Capital Stock 12,458 Direct 5,250 Option D. W. Robbins, Jr. National Common Stock 2,000 Trustee Chemed Capital Stock 2,000 Trustee G. H. Sander National Common Stock 8,782 Direct 9,875 Option Chemed Capital Stock 7,847 Direct 1,250 Option - -------------------------------------------------------------------------------- 13 15 - -------------------------------------------------------------------------------- AMOUNT AND NATURE PERCENT OF BENEFICIAL OF NAME TITLE OF CLASS OWNERSHIP (1) CLASS (2) - -------------------------------------------------------------------------------- J. E. Schnee National Common Stock 600 Direct Chemed Capital Stock None K. F. Vuylsteke National Common Stock 12,012 Direct 8,688 Option Chemed Capital Stock 867 Direct G. J. Walsh III National Common Stock None Chemed Capital Stock 1,000 Direct Directors and National Common Stock 187,960 Direct 2.99% Executive Officers 202,099 Option 3.21% as a Group 6,194 Trustee (19 Persons) Chemed Capital Stock 175,365 Direct 1.76% 113,000 Option 1.13% 172,778 Trustee(5) 1.73% FOOTNOTES TO STOCK OWNERSHIP TABLE (1) Includes securities beneficially owned (a) by the named persons or group members, their spouses and their minor children (including shares of Chemed capital stock and the Company's Common Stock allocated as at December 31, 1995 to the account of each named person or member of the group participating under Chemed's Savings and Investment Plan, Chemed's Employee Stock Ownership Plans, and the Company's Thrift and Profit Sharing Plan), (b) by trusts and custodianships for their benefit and (c) by trusts and other entities as to which the named person or group has or shares the power to direct voting or investment of securities. "Direct" refers to securities in categories (a) and (b) and "Trustee" to securities in category (c). Where securities would fall into both "Direct" and "Trustee" classifications, they are included under "Trustee" only. "Option" refers to shares which the named person or group has a right to acquire within 60 days from December 31, 1995. For purposes of determining the Percent of Class, all shares subject to stock option, which were exercisable within 60 days of December 31, 1995, were assumed to have been issued. (2) Percent of Class under 1.0 percent is not shown. (3) Messrs. T. C. Hutton, McNamara and Voet and Mrs. Laney are trustees of the Chemed Foundation which holds 57,971 shares of Chemed capital stock over which the trustees share both voting and investment power. This number is included in the total number of "Trustee" shares held by the Directors and Executive Officers as a group, but is not reflected in the respective holdings of the individual trustees. (4) Comprises shares with respect to which Mr. Hoekman shares the power to direct the voting as a member of a bank trust committee. (5) Shares over which more than one individual holds beneficial ownership have only been counted once in calculating the aggregate number of shares owned by Directors and Executive Officers as a Group. 14 16 COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Securities Exchange Act of 1934 and the regulations thereunder require the Company's directors and certain officers, and persons who own more than 10 percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than 10 percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. Based on review of the copies of such forms furnished to the Company and on the written representations of those who have not furnished such forms that, with respect to 1995, no Forms 5 were required to be filed with the SEC, the Company believes that during the period January 1, 1995 through December 31, 1995, the Company's officers, directors and greater than 10 percent shareholders have complied with all Section 16(a) filing requirements. CERTAIN ARRANGEMENTS AND TRANSACTIONS TRANSACTIONS WITH CHEMED CASH MANAGEMENT AND FINANCING. The Company deposits funds in excess of its working capital requirements with Chemed for short-term investment and Chemed may make short-term loans to the Company for working capital needs. These unsecured demand deposits and short-term loans bear interest at fifty basis points over U.S. Treasury Notes. At February 28, 1995, the Company had a short-term loan from Chemed of $12,618,000, which represented the largest loan balance during the year. The amount of interest expense paid to Chemed during 1995 for the combination of demand deposits and short-term loans was $629,000. Chemed loaned the Company $11 million on November 10, 1988 at an interest rate of 10.67 percent, due in eleven equal annual installments beginning November 1, 1993. The Company paid $1 million on this note November 1, 1995. The Company borrowed $8 million from Chemed on January 1, 1993, executing a promissory note at an interest rate of 7.66 percent, with interest payable quarterly and the principal payable in full on January 1, 1998. The Company paid Chemed interest of $1,555,000 in l995 on these loans. The Company used these funds to acquire Century and real estate in Tempe, Arizona. The loans are evidenced by promissory notes which provide Chemed with a call at any time in the event the debtor becomes insolvent; files, or consents to the filing of, a petition for protection under any bankruptcy or insolvency law in any jurisdiction; makes an assignment for the benefit of its creditors; or assigns its obligations thereunder to any third party without Chemed's consent. During 1995, non-union employees of the Company participated in Chemed's ESOPs. The Company paid Chemed 75 percent of the average monthly price of Chemed stock during 1995 for these shares to be allocated to employees' accounts, or $1,502,000. SERVICE ARRANGEMENTS. As a subsidiary of Chemed and pursuant to an agreement with Chemed, the Company uses certain administrative, financial, insurance, tax, audit, legal, managerial and other services provided by Chemed. The Company pays fees for these services based on Chemed's costs. During 1995, the Company paid Chemed $567,000 for such services. LEASES. The Company has lease arrangements with Chemed for its headquarters office facility in Cincinnati, Ohio and for a portion of its transportation equipment. The rents paid by the Company to Chemed totaled $392,000 in 1995 and represented Chemed's cost to provide such leases. STATE AND LOCAL INCOME TAXES. Should any state or locality impose an income or franchise tax on Chemed or the Company by combining or consolidating all or part of the income, losses, properties, payrolls, sales or other attributes of Chemed and the Company or one of Chemed's subsidiaries, Chemed and the Company have agreed the Company will reimburse Chemed for the Company's share of such franchise or income tax, or Chemed shall reimburse the Company for Chemed's share of such franchise or income tax, as the case may be. The amount to be reimbursed is equal to the tax that would have been required to be paid had the Company or Chemed, as the case may be, filed a separate return without the inclusion of any income, losses, properties, payrolls, sales or other attributes of any related parent or subsidiary corporation. 15 17 RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS The Board of Directors has selected the firm of Price Waterhouse LLP as independent accountants for the Company and its consolidated subsidiaries for the year 1996. This firm has acted as independent accountants for Chemed since 1970 and for the Company since 1983. Although the submission of this matter to the stockholders is not required by law or by the By-Laws of the Company, the selection of Price Waterhouse will be submitted for ratification at the Annual Meeting. The affirmative vote of the holders of a majority of the voting power of the stockholders represented at the meeting with abstentions having the effect of negative votes and broker nonvotes deemed to be absent shares, will be necessary to ratify the selection of Price Waterhouse as independent accountants for the Company and its consolidated subsidiaries for the year 1996. If the selection is not ratified at the meeting, the Board of Directors will reconsider its selection of independent accountants. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION. It is expected that a representative of Price Waterhouse will be present at the Company's Annual Meeting. Such representative shall have the opportunity to make a statement if he so desires and shall be available to respond to appropriate questions raised at the meeting. STOCKHOLDER PROPOSALS Any proposals by stockholders intended to be included in the proxy materials for presentation at the 1997 Annual Meeting of Stockholders must be in writing and received by the Secretary of the Company no later than December 10, 1996. OTHER MATTERS As of the date of this Proxy Statement, management knows of no other matters which will be presented for consideration at the Annual Meeting. However, if any other business should come before the meeting, the persons named in the enclosed proxy (or their substitutes) will have discretionary authority to take such action as shall be in accordance with their best judgment. EXPENSES OF SOLICITATION The expense of soliciting proxies in the accompanying form will be borne by the Company. The Company will request banks, brokers and other persons holding shares beneficially owned by others to send proxy materials to the beneficial owners and to secure their voting instructions, if any. The Company will reimburse such persons for their expenses in so doing. In addition to solicitation by mail, officers and regular employees of the Company may solicit, without extra remuneration, proxies personally, by telephone or by facsimile from some stockholders if such proxies are not promptly received. This Proxy Statement and the accompanying Notice of Meeting are sent by order of the Board of Directors. Naomi C. Dallob Secretary April 8, 1996 16 18 NATIONAL SANITARY SUPPLY COMPANY 2900 Chemed Center 255 East Fifth Street PLEASE MARK, SIGN, DATE AND RETURN PROXY Cincinnati, Ohio 45202 CARD PROMPTLY USING THE ENCLOSED ENVELOPE. - ----------------------------------------------------------------------------------------------------------- P THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS, MAY 20, 1996. R The undersigned hereby appoints E. L. Hutton and P. C. Voet as Proxies, both with the power to appoint O a substitute, and hereby authorizes them to represent and to vote, as designated below, all of the shares of stock of National Sanitary Supply Company held of record by the undersigned on March 25, 1996 X at the Annual Meeting of Stockholders to be held on May 20, 1996, or at any adjournment thereof. Y (Continued and to be signed on reverse side) (1) Election of Directors: FOR FOR WITHHOLD Edward L. Hutton, Paul C. Voet, Robert B. Garber, Arthur J. Bennert, Jr., all nominees ALL James A. Cunningham, Naomi C. Dallob, Charles H. Erhart, Jr., nominees listed AUTHORITY Neal Gilliatt, Will J. Hoekman, Thomas C. Hutton, W. Dwight Jackson, listed EXCEPT those to vote in Charles O. Lane, Sandra E. Laney, Kevin J. McNamara, John M. Mount, whose names I the election Timothy S. O'Toole, D. Walter Robbins, Jr., Gary H. Sander, Kenneth F. have stricken of directors Vuylsteke, George J. Walsh, III [ ] [ ] [ ] (2) Ratifying the selection of (3) In their discretion, the Proxies are independent accountants. authorized to vote upon such other business as may properly come before the meeting. FOR AGAINST ABSTAIN [ ] [ ] [ ] IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR PROPOSALS (1) AND (2). DATED: , 1996 ------------------------------- (Be sure to date Proxy) SIGNED: ------------------------------------ --------------------------------------------- (Please sign exactly as names appear at left) When signed on behalf of a corporation, partnership, estate, trust, or other shareholder, state your title or capacity or otherwise indicate that you are authorized to sign. PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD YOUR VOTES