EXHIBIT INDEX TOTAL NUMBER OF PAGES
FOUND ON PAGE 63. INCLUDED IN THIS ANNUAL
REPORT IS 94.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended SEPTEMBER 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number 1-5110
BERGEN BRUNSWIG CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1444512
------------------------------- -----------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4000 METROPOLITAN DRIVE, ORANGE, CALIFORNIA 92868-3598
--------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (714) 385-4000
--------------
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
Class A Common Stock New York Stock Exchange
Par Value $1.50 per share
6 7/8% Exchangeable Subordinated New York Stock Exchange
Debentures due July 15, 2011
$150,000,000 7 3/8% Senior Notes New York Stock Exchange
due 2003
Securities registered pursuant to Section 12(g) of the Act:
7% Convertible Subordinated Debentures due March 1, 2006 - Durr-Fillauer
Medical, Inc.
================================================================================
(Cover page continued)
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ x ]
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[ ]
At November 30, 1996, 40,091,818 shares of Class A Common Stock were
outstanding. The aggregate market value of the voting Class A Common Stock held
by nonaffiliates of the registrant on November 30, 1996 was $1,035,575,483.
DOCUMENTS INCORPORATED BY REFERENCE
===================================
List hereunder the following documents if incorporated by reference and the part
of the Form 10-K into which the document is incorporated:
Portions of the definitive proxy statement dated December 22, 1994 relating to
the registrant's annual meeting of shareowners held January 26, 1995, as filed
with the Securities and Exchange Commission, are incorporated herein by
reference in Part IV.
The Company's Current Report on Form 8-K dated November 10, 1996, relating to
the execution of a definitive merger agreement with IVAX Corporation, as filed
with the Securities and Exchange Commission, is incorporated herein by reference
in Part I.
<PAGE>
TABLE OF CONTENTS
PART I
------
ITEM PAGE
- ---- ----
1. Business I - 1
2. Properties I - 5
3. Legal Proceedings I - 5
4. Submission of Matters to a Vote of Security Holders I - 9
4A. Executive Officers of the Registrant I - 9
PART II
-------
5. Market for the Registrant's Common Equity and II - 1
Related Stockholder Matters
6. Selected Financial Data II - 2
7. Management's Discussion and Analysis of Financial II - 3
Condition and Results of Operations
8. Financial Statements and Supplementary Data II - 8
9. Changes in and Disagreements with Accountants II - 27
on Accounting and Financial Disclosure
PART III
--------
10. Directors and Executive Officers of the Registrant III - 1
11. Executive Compensation III - 4
12. Security Ownership of Certain Beneficial Owners III - 11
and Management
13. Certain Relationships and Related Transactions III - 13
PART IV
-------
14. Exhibits, Financial Statement Schedules and Reports IV - 1
on Form 8-K
Signatures IV - 7
<PAGE>
PART I
ITEM 1. BUSINESS
A. GENERAL DEVELOPMENT OF BUSINESS
-------------------------------
Bergen Brunswig Corporation, a New Jersey corporation formed
in 1956, and its subsidiaries (collectively, the "Company") are a diversified
drug and health care distribution organization and is the nation's largest
supplier of pharmaceuticals to the managed care market and the second largest
wholesaler to the retail pharmacy market. The Company is the only pharmaceutical
distributor to provide both pharmaceuticals and medical-surgical supplies on a
national basis.
On November 11, 1996, the Company announced that it had
entered into a definitive merger agreement with IVAX Corporation ("IVAX"). IVAX,
headquartered in Miami, Florida, is a holding company with subsidiaries engaged
in the research, development, manufacture and distribution of health care
products, including generic and branded pharmaceuticals, intravenous solutions
and related products, and IN VITRO diagnostics. The agreement, which has been
unanimously approved by the Board of Directors of the Company and IVAX, calls
for the formation of a new combined company to be known as BBI Healthcare
Corporation ("BBI"), which will be headquartered in Miami, Florida. Under the
agreement, BBI will acquire both the Company and IVAX through an exchange of
common stock, whereby IVAX shareowners will receive 0.42 shares of common stock
of BBI for each share of IVAX common stock and the Company's shareowners will
receive 1.00 share of BBI common stock for each share of Class A Common Stock of
the Company. After the merger, BBI is expected to have approximately 91 million
shares outstanding of which the Company and IVAX shareowners will hold
approximately 44% and 56%, respectively.
The merger is expected to be accounted for as a pooling of
interests, and is expected to be tax-free to shareowners. The merger is expected
to close during the first calendar quarter of 1997, subject to regulatory
approvals, the approval of the Company and IVAX shareowners, and certain other
conditions. Additional information regarding the proposed business combination
is set forth in the Company's Current Report on Form 8-K dated November 12,
1996, as filed with the Securities and Exchange Commission, and is incorporated
herein by reference.
On August 7, 1996, the Company acquired certain net assets of
Oncology Supply Company ("Oncology"), a privately-held oncology supply
distributor located in Dothan, Alabama, for approximately $5.8 million in cash
plus expenses and the assumption of certain liabilities. The Oncology
acquisition is more fully described in Note 4 of Notes to Consolidated Financial
Statements appearing in Part II, Item 8, "Financial Statements and Supplementary
Data" of this Annual Report.
The Company filed a shelf registration statement with the
Securities and Exchange Commission which became effective on March 27, 1996. The
registration statement allows the Company to sell senior and subordinated debt
I - 1
<PAGE>
or equity securities to the public from time to time up to an aggregate maximum
principal amount of $400 million. The Company intends to use the proceeds from
the sale of such securities for general corporate purposes, which may include,
without limitations, the repayment of indebtedness of the Company or of any of
its subsidiaries, possible acquisitions, capital expenditures and working
capital needs. Pending such application, the net proceeds may be temporarily
invested in short-term securities. No offering has occurred since the effective
date of the registration statement. Any offering of such securities shall be
made only by means of prospectus.
On March 15, 1996, the Company's credit agreement (the "Credit
Agreement") with a group of domestic and foreign banks was amended to, among
other things, increase the maximum borrowing to $400 million, to extend the
maturity date to March 15, 2001 and to allow borrowing under discretionary
credit lines ("discretionary lines") outside of the Credit Agreement.
Outstanding borrowings under the Credit Agreement averaged $129 million during
the fiscal year ended September 30, 1996. The maximum outstanding borrowings
under the Credit Agreement including discretionary lines for the year ended
September 30, 1996 were $319 million.
On January 15, 1996, the Company repaid the $100 million
aggregate principal amount of its 5 5/8% Senior Notes, plus accrued interest.
These notes were issued pursuant to the $400 million shelf registration filed by
the Company in December 1992.
B. NARRATIVE DESCRIPTION OF BUSINESS
---------------------------------
Bergen Brunswig Drug Company (the "Drug Company"), a
wholly-owned and the largest subsidiary of the Company, is one of the largest
national distributors of products sold or used by institutional (hospital) and
retail pharmacies. The Drug Company distributes a full line of products,
including pharmaceuticals, proprietary medicines, cosmetics, toiletries,
personal health products, sundries, and home healthcare supplies and equipment
from 32 locations in 23 states . These products are sold to a large number of
hospital pharmacies, managed care facilities, health maintenance organizations
("HMOs"), independent retail pharmacies, pharmacy chains, supermarkets,
food-drug combination stores and other retailers located in all 50 states, the
District of Columbia, Guam and Mexico. During fiscal 1996, no single customer or
affiliated group of customers of the Company accounted for more than 10% of its
net sales and other revenues. However, purchasing groups are expected to
represent increasing percentages of total sales in the future.
The Drug Company has been an innovator in the development and
utilization of computer-based retailer order entry systems and of electronic
data interchange ("EDI") systems including computer-to-computer ordering systems
with suppliers. During fiscal 1996, substantially all of Drug Company's customer
orders were received via electronic order entry systems. These systems, combined
with daily delivery, improve customers' cash and inventory management and
profitability by freeing them from the burden of maintaining large inventories.
Although these systems require capital expenditures by the Company, benefits
from these systems to the Drug Company are expected to be realized through
increased productivity. The Drug Company is expanding its electronic interface
I - 2
<PAGE>
with its suppliers and now electronically processes a substantial portion of its
purchase orders, invoices and payments. The Drug Company has opened eight
regional distribution centers ("RDCs") since fiscal 1986, replacing 19 older,
smaller, less efficient facilities. RDCs help improve customer service levels
because a wider product selection is more readily available. These facilities
serviced 49% of the Drug Company sales volume in 1996.
In June 1996, the Company introduced its Generic Purchasing
Program ("GPP"). Designed to streamline customers' generic pharmaceutical costs,
GPP utilizes the products of a selected group of generic manufacturers and
combines that benefit with substantial volume to leverage buying power for the
Company's customers.
In July 1994, the Company introduced AccuSource(R), a
multimedia communication, product information, and electronic ordering system
for pharmacies. AccuSource was developed jointly by the Drug Company and Apple
Computer, Inc. and is the first link of its kind between supplier, wholesaler
and retailer in the pharmaceutical distribution process. AccuSource simplifies
the ordering process and gives retailers detailed information on thousands of
products, services and special purchase opportunities, as well as prescription
substitution alternatives and Medicaid coverage information. AccuSource's
on-line feature provides retailers with a convenient method for ensuring product
availability by giving immediate information on quantity levels at their Drug
Company distribution center.
The Drug Company also provides a wide variety of promotional,
advertising, merchandising, and marketing assistance to independent community
pharmacies. For example, the Good Neighbor Pharmacy(R) program utilizes circular
and media advertising to strengthen the consumer image of the independent
pharmacy without sacrificing its local individuality. Other programs for the
independent community pharmacy include in-store merchandising programs, private
label products, shelf management systems, pharmacy computers and a
fully-integrated point-of-sale system marketed under the Drug Company's
trademark of OmniPhase(TM).
Hospital and other institutional accounts are offered a wide
variety of inventory management and information services by the Drug Company to
better manage inventory investment and contain costs. AccuLine(TM), introduced
in June 1995, provides an on-line, real-time, hospital, pharmacy management
system in a Windows(TM) (a trademark of Microsoft(R) Corporation) environment
and features local area network capability.
Bergen Brunswig Medical Corporation (formerly known as Durr
Medical Corporation), Southeastern Hospital Supply Corporation, Professional
Medical Supply Co., Biddle & Crowther Company and Colonial Healthcare Supply Co.
(collectively, "Medical") wholly-owned subsidiaries of the Company, distribute a
variety of medical and surgical products to individual hospitals and alternate
site healthcare providers through 27 distribution centers located in 22 states
in every region of the United States except the northeast.
I - 3
<PAGE>
Medical serves hospital customers and alternate site customers
in 44 states and the District of Columbia. Alternate site customers include
outpatient clinics, nursing homes, surgery centers, dialysis and oncology
centers, emergency centers, laboratories and veterinary clinics. Medical's
distribution centers range between 14,000 and 70,000 square feet and average
40,000 square feet. Medical employs approximately 1,300 people.
Alternate Site Distributors ("ASD"), the Company's specialty
wholesale subsidiary, supplies pharmaceuticals and oncology products to
physician and clinic accounts. The Company created ASD during fiscal 1994 to
respond to the rapid growth in the alternate site market business. As a major
supplier to the alternate site market, ASD gives its customers quick access to a
broad range of specialty, value-added products and services, and commercial
outsourcing.
In September 1995, the Company formed IntePlex(TM) Inc.
("IntePlex"), a subsidiary of the Company, to focus exclusively on the evolving
integrated healthcare marketplace. The foundation of IntePlex involves the
development of an electronic catalog for one-stop-shopping and a centralized
database for tracking customers' purchasing information. IntePlex's offerings
are expected to include logistics management, continuous replenishment,
just-in-time delivery, and benefit plan compliance for both medical-surgical
supplies and pharmaceuticals combined with delivery to all points in a network:
hospitals, alternate site, physician offices and retail stores.
1. COMPETITION
-----------
The Drug Company, which is the second largest national
pharmaceutical distributor measured by sales, faces intense competition from
other national pharmaceutical distributors, as well as regional and local
full-line and short-line distributors, direct selling manufacturers and
specialty distributors. The principal competitive factors of the businesses of
the Drug Company, Medical and ASD are service and price.
2. EMPLOYEES
---------
As of November 30, 1996, the Company employed approximately
4,900 people. The Company considers its relationship with its employees and the
unions representing certain of its employees to be satisfactory.
3. OTHER
-----
While the Company's operations may show quarterly
fluctuations, the Company does not consider its business to be seasonal in
nature on a consolidated basis.
I - 4
<PAGE>
Although the Company's computer service operations expend time
and effort on the development and marketing of computer programs relating to the
services for its subsidiaries, which are described in part elsewhere herein, the
Company has not during the past three fiscal years expended any material amounts
on research and development of computer software for sale.
ITEM 2. PROPERTIES
Because of the nature of the Company's business, office and
warehousing facilities are operated in widely dispersed locations in the United
States. Some of the facilities are owned by the Company, but most are leased on
a long-term basis. The Company considers its operating properties to be in
satisfactory condition and well utilized with adequate capacity for growth.
For certain financial information regarding the Company's warehouse
and office leases, see Note 6 of Notes to Consolidated Financial Statements
appearing in Part II, Item 8, "Financial Statements and Supplementary Data," of
this Annual Report.
ITEM 3. LEGAL PROCEEDINGS
On July 7, 1992, two putative class action complaints were filed in
the Delaware Court of Chancery against Durr-Fillauer Medical, Inc. and
subsdiaries ("Durr") and its directors: STEINER V. ADAIR, ET AL., C.A. No. 12634
and GOLDWURM V. ADAIR, ET AL., C.A. No. 12635. These actions were consolidated
on July 15, 1992. On July 17, 1992, another putative class action complaint was
filed in the Delaware Court of Chancery against Durr and its directors: TRIEF V.
ADAIR, ET AL., C.A. No. 12648. This action was consolidated with C.A. Nos. 12634
and 12635 on August 7, 1992. The named plaintiffs in the three complaints (the
"Class Action Complaints") allegedly owned an undisclosed number of shares of
Durr common stock. The plaintiffs sought certification of a class consisting of
all public stockholders of Durr who held Durr stock at the time of the filing of
the Class Action Complaints and who were not affiliated with any of the
defendants. The Class Action Complaints alleged, among other things, that Durr's
directors breached their fiduciary duties in entering into a June 2, 1992,
Agreement and Plan of Reorganization which contemplated the merger of Durr's
wholesale drug business with Cardinal Distribution, Inc. and the spin-off of
Durr's remaining businesses into a newly formed entity. The Class Action
Complaints sought a variety of relief, including an injunction requiring the
Durr directors to consider competing offers, damages, attorneys fees and costs.
The Company subsequently acquired Durr in September 1992.
In connection with the acquisition of Durr, and for the purpose of
settling the expressed concern of the Attorneys General of the States of
Alabama, Florida and Louisiana (collectively, the "Attorneys General") over the
alleged potential lessening of competition in the wholesale distribution of
I - 5
<PAGE>
pharmaceutical products, the Company and Durr entered into an agreement dated
September 18, 1992, with the Attorneys General wherein the Company agreed that:
(1) subject to certain exceptions, no existing customer of either the Company or
Durr in Alabama, Florida and Louisiana (the "Customers") will suffer a
diminution of service levels until April 30, 1997; (2) except for price
increases resulting from taxes, fees or governmental charges, neither the
Company nor Durr will increase the markup percentage for the Customers in
Alabama, Florida and Louisiana for a period of two years and from September 1994
through April 1997 will not increase such percentage in excess of the percentage
increase in the Consumer Price Index; (3) Durr will maintain its distribution
facilities in Montgomery and Mobile, Alabama; Lakeland, Florida; and Shreveport,
Louisiana for a period of at least two years; (4) Durr will maintain and enhance
its AccuNetR system for a period of at least two years; and (5) the Company will
reimburse the States of Alabama, Florida and Louisiana for their legal fees,
costs and expenses incurred in the investigation of the acquisition of Durr by
the Company.
Drug Barn, Inc. ("Drug Barn"), a former retail pharmacy chain in the
San Francisco Bay Area, owed the Company approximately $6.2 million in principal
obligations as of October 31, 1996, of which approximately $1.2 million
represents trade receivables and $5.0 million represents a note which matured on
March 25, 1993 and has not been paid to date. The Company has a security
interest in virtually all of Drug Barn's assets, as well as personal guaranties,
which collaterize the note and trade receivables.
In May 1992, Drug Barn requested additional financing which the
Company denied to extend. In December 1992, Drug Barn commenced an action
against the Company in the Santa Clara Superior Court (State of California)
alleging breach of contract, misrepresentation and violations of certain
California antitrust and unfair practices laws. Drug Barn sought a variety of
damage claims including compensatory, treble and punitive damages, an injunction
against collection on the note, and declaratory judgment as to Drug Barn's
rights under an alleged oral joint venture agreement with the Company.
On April 20, 1993, the Company filed a complaint in the Orange
County Superior Court (State of California), Case No. 709136 against Drug Barn
and Milton Sloban and Barbara Sloban, as guarantors on the defaulted note and
open trade receivables, alleging breach of contract and guaranty, and requesting
judicial foreclosure of and the possession of collateral.
Drug Barn commenced a Chapter 11 case in U.S. Bankruptcy Court for
the Northern District of California, Case No. 93-3-3437 TC, by filing a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code on July 29, 1993 and remained in possession pursuant to 11 U.S.C. Section
1107. In April 1994, this matter (excluding the bankruptcy court matter) was
transferred to the San Francisco County Superior Court with the California state
actions referenced in the next paragraph. In April 1996, the Company filed a
plan of reorganization with the Bankruptcy Court to resolve all of its claims
with Drug Barn and its guarantors. The plan of reorganization provides for,
among other things, a sale of all Drug Barn's assets, a distribution of the
asset sale proceeds to creditors and a settlement of all claims of any nature
between the Company and Drug Barn (but not its guarantors, Milton and Barbara
Sloban). The Company's plan was confirmed by the Bankruptcy Court on June 14,
I - 6
<PAGE>
1996. The actions brought by Milton and Barbara Sloban and the Company's
collection suit commenced trial on August 14, 1996 in San Francisco County
Superior Court. On August 29, 1996, the Company won a $3.4 million jury verdict
against Milton and Barbara Sloban. Milton and Barbara Sloban have filed a Notice
of Appeal with the aforementioned court.
Between August 3, 1993 and February 14, 1994, the Company, along
with various other pharmaceutical industry-related companies, was named as a
defendant in eight separate state antitrust actions in three courts in
California. These lawsuits are more fully detailed in "Item 1 - Legal
Proceedings" of Part II of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 as filed with the Securities and Exchange Commission
and is incorporated herein by reference. In April 1994, these California state
actions were all coordinated as Pharmaceutical Cases I, II and III, and assigned
to a single judge in San Francisco Superior Court. On August 22, 1994, a
Consolidated Amended Complaint ("California Complaint"), which supersedes and
amends the eight prior complaints, was filed in these actions.
The California Complaint alleges that the Company and 35 other
pharmaceutical industry-related companies violated California's Cartwright Act,
Unfair Practices Act, and the Business and Professions Code unfair competition
statute. The California Complaint alleges that defendants jointly and separately
engaged in secret rebating, price fixing and price discrimination between
plaintiffs and plaintiffs' alleged competitors who sell pharmaceuticals to
patients or retail customers. Plaintiffs seek, on behalf of themselves and a
class of similarly situated California pharmacies, injunctive relief and treble
damages in an amount to be determined at trial. The judge struck the class
allegations from the Unfair Practices Act claims.
Between August 12, 1993 and November 29, 1993, the Company was also
named in 11 separate Federal antitrust actions. All 11 actions were consolidated
into one multidistrict action in the Northern District of Illinois entitled, IN
RE BRAND-NAME PRESCRIPTION DRUGS ANTITRUST LITIGATION, No. 94 C. 897 (MDL 997).
On March 7, 1994, plaintiffs in these 11 actions filed a consolidated amended
class action complaint ("Federal Complaint") which amended and superseded all
previously filed Federal complaints against the Company. The Federal Complaint
names the Company and 30 other pharmaceutical industry-related companies. The
Federal Complaint alleges, on behalf of a nationwide class of retail pharmacies,
that the Company conspired with other wholesalers and manufacturers to
discriminatorily fix prices in violation of Section 1 of the Sherman Act. The
Federal Complaint seeks injunctive relief and treble damages. On November 15,
1994, the Federal court certified the class defined in the Federal Complaint for
the time period October 15, 1989 to the present. These lawsuits are more fully
detailed in "Item 1 - Legal Proceedings" of Part II of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994 as filed with the
Securities and Exchange Commission and is incorporated herein by reference.
On March 9, 1995, the Company was named along with 30 other
pharmaceutical industry-related companies in a separate complaint filed in the
U.S. District Court, Eastern District of Arkansas entitled LAWRENCE ADAMS D/B/A
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<PAGE>
MC SPADDEN DRUG STORE, ET AL. V. ABBOTT LABORATORIES, ET AL., Case No.
LR-C-95-153, alleging similar claims as in the Federal complaint. The Company
believes that this action will be consolidated into the Federal multidistrict
action.
On May 2, 1994, the Company and Durr Drug Company were named as
defendants, along with 25 other pharmaceutical related-industry companies, in a
state antitrust class action in the Circuit Court of Greene County, Alabama
entitled DURRETT V. UPJOHN COMPANY, ET AL., No. 94-029 ("Alabama Complaint").
The Alabama Complaint alleges on behalf of a class of Alabama retail pharmacies
and a class of Alabama consumers that the defendants conspired to
discriminatorily fix prices to plaintiffs at artificially high levels. The
Alabama Complaint seeks injunctive relief and treble damages.
On October 21, 1994, the Company entered into a sharing agreement
with five other wholesalers and 26 pharmaceutical manufacturers. Among other
things, the agreement provides that: (a) if a judgment is entered into against
both the manufacturer and wholesaler defendants, the total exposure for joint
and several liability of the Company is limited to $1.0 million; (b) if a
settlement is entered into by, between, and among the manufacturer and
wholesaler defendants, the Company has no monetary exposure for such settlement
amount; (c) the six wholesaler defendants will be reimbursed by the 26
pharmaceutical defendants for related legal fees and expenses up to $9.0 million
total (of which the Company will receive a proportionate share); and (d) the
Company is to release certain claims which it might have had against the
manufacturer defendants for the claims presented by the plaintiffs in these
cases. The agreement covers the Federal court litigation, as well as the cases
which have been filed in various state courts. In December 1994, plaintiffs in
the Federal action had moved to set aside the agreement, but plaintiffs' motion
was denied on April 25, 1995. On February 9, 1996, the class plaintiffs filed a
motion for preliminary approval of a settlement with 15 of the manufacturer
defendants, which, if approved by the court, would have resulted in dismissal of
claims against those manufacturers and a reduction of the potential claims
against the remaining defendants, including those against the Company. The Court
did not grant approval for the settlement and the decision was approved by the
plaintiffs. A second motion was filed by the class plaintiffs for preliminary
approval of a settlement with 12 of the manufacturer defendants, which would
result in dismissal of claims against those manufacturers and a reduction of the
potential claims against the remaining defendants, including those against the
Company. The Court granted preliminary approval for the settlement. The Company
is not a party to this proposed settlement but retains protection afforded by
the sharing agreement referenced above. In April 1996, the Company's motion for
summary judgment was granted and the Company was dismissed from the Federal
Class Action.
In November 1995 in the U.S. District Court, Northern District of
Illinois, Abbott Laboratories filed a complaint seeking damages of approximately
$4.0 million against the Company and various affiliates for credits allegedly
due in connection with the purchase and subsequent sale of Abbott products by
the Company. The Company has filed various counter claims and has asked for
damages according to proof at trial. This matter is in its initial discovery
stage. After discussions with counsel, management of the Company believes that
the allegations of liability set forth in these lawsuits are without merit as to
the wholesaler defendants and that any attendant liability of the Company,
although unlikely, would not have a material adverse effect on the Company's
financial position or results of operations.
I - 8
<PAGE>
The Company is involved in various additional items of litigation.
Although the amount of liability at September 30, 1996 with respect to these
items of litigation cannot be ascertained, in the opinion of management, any
resulting future liability will not have a material adverse effect on its
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of shareowners during the three
months ended September 30, 1996.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Executive Officers.
The executive officers of the Company are elected by, and serve at
the pleasure of, the Board of Directors. Each executive officer holds office
until the next annual election of officers held in December, January or February
of each year. The current executive officers of the Company, and their
respective principal occupations and employment during the last five years ended
September 30, 1996, are listed alphabetically as follows:
LINDA M. BURKETT, 46, Executive Vice President, Chief Information
Officer (since September 1996); Executive Vice President and Chief Information
Officer, Bergen Brunswig Drug Company (since 1995); Vice President, IR Support
Services (1992-1995); Director, Data Processing (1988-1992).
JOHN CALASIBETTA, 91, Senior Vice President since 1974. Mr.
Calasibetta is also a member of the Board of Directors.
CHARLES J. CARPENTER, 47, Executive Vice President, Chief
Procurement Officer (since September 1996); Executive Vice President, Supplier
Relations and Operations (1995-1996), Bergen Brunswig Drug Company; Executive
Vice President, Northeast Region (1994-1995); Vice President, Northeast Region
(1989-1994).
NEIL F. DIMICK, 47, Executive Vice President, Chief Financial
Officer (since 1992); formerly Vice President, Finance (1991-1992); President,
Alternate Site Distributors, Inc. (since September 1996). Mr. Dimick is also a
member of the Board of Directors.
WILLIAM J. ELLIOTT, 47, President, Bergen Brunswig Medical
Corporation (since October 1996). Formerly Senior Vice President of Supply Chain
Management, VHA Inc. (1984-October 1996).
I - 9
<PAGE>
BRENT R. MARTINI, 37, President, Bergen Brunswig Drug Company (since
September 1996); Executive Vice President, Bergen Brunswig Drug Company, West
Region (1994-1996); Vice President, Quality Organizational Development and
Training (1991-1994); Director, Quality Support Group (1989-1991). Brent R.
Martini is the son of Robert E. Martini.
ROBERT E. MARTINI, 64, Chairman of the Board (since 1992) and Chief
Executive Officer (since 1990 and until January 1997); formerly President
(1981-1992). Mr. Martini is also a member of the Board of Directors.
JOHN P. NAUGHTON, 58, Vice President and Controller of Bergen
Brunswig Drug Company since 1981.
DONALD R. RODEN, 50, President and Chief Operating Officer (since
1995) and Chief Executive Officer-Elect (commencing January 1997); formerly a
healthcare industry consultant (1993-1995); formerly Chief Executive, North
America of Reed Elsevier Medical (publishing) (1989-1993). Mr. Roden is also a
member of the Board of Directors.
MILAN A. SAWDEI, 50, Secretary (since July 1992); Executive Vice
President (since April 1992); Chief Legal Officer (since 1989); formerly Vice
President and Assistant Secretary (1989-1992).
CAROL E. SCHERMAN, 41, Executive Vice President, Human Resources
(since September 1996); Executive Vice President, Human Resources (since 1994),
Bergen Brunswig Drug Company; Vice President, Human Resources and Associate
Relations (1993-1994); Director, Human Resources and Associate Relations
(1991-1993); Manager, Associate Relations (1991); Area Human Resources Manager
(1989-1991).
ERIC J. SCHMITT, 46, Vice President, Finance and Treasurer (since
February 1994); Vice President, Financial Planning (1989-1994).
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<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
For certain information regarding shares of the Company's Class A
Common Stock, including cash dividends per share, market prices per share, stock
market information and number of shareowners, see "Selected Quarterly Results
(unaudited)" as set forth in Part II, Item 8, "Financial Statements and
Supplementary Data," of this Annual Report.
On February 9, 1994, the Board adopted a Shareowner Rights Plan
which provided that a dividend of one Preferred Share Purchase Right (the
"Rights") was declared for each share of Common Stock outstanding at the close
of business on February 18, 1994. The Rights are generally not exercisable until
10 days after a person or group acquires 15% of the Common Stock or announces a
tender offer which could result in a person or group owning 15% or more of the
Common Stock (an "Acquisition"). Each Right, should it become exercisable, will
entitle the owner to buy 1/100th of a share of a new series of the Company's
Series A Junior Preferred Stock at an exercise price of $80.00.
In the event of an Acquisition without the approval of the Board,
each Right will entitle the owner, other than an acquiror, to buy at the Rights'
then current exercise price a number of shares of Common Stock with a market
value equal to twice the exercise price. In addition, if at the time when there
was a 15% shareowner, the Company were to be acquired by merger, shareowners
with unexercised Rights could purchase common stock of the acquiror with a value
of twice the exercise price of the Rights. The Board may redeem the Rights for
$0.01 per Right at any time prior to an Acquisition. Unless earlier redeemed,
the Rights will expire on February 18, 2004.
II - 1
<PAGE>
<TABLE>
Item 6. SELECTED FINANCIAL DATA (unaudited)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Dollars in thousands, except for per share amounts
================================================================================================================
September 30, August 31,
------------------------------------ -------------------------
Years Ended: 1996 1995 1994(b) 1993 1992
================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales and other revenues $9,942,697 $8,447,607 $7,483,801 $6,823,552 $5,048,309
Earnings from continuing operations 73,533 63,942 56,120(c) 28,607(d) 53,012
Earnings per share from continuing operations 1.83 1.61 1.45(c) 0.75(d) 1.29
Cash dividends per share:
Class A Common 0.480 0.474 0.438 0.381 0.381
Class B Common - - 1.996 3.630 3.630
Pre-tax margin (a) 1.26% 1.30% 1.31%(c) 0.71%(d) 1.65%
At Years Ended:
================================================================================================================
Total assets $2,489,826 $2,405,530 $1,995,057 $1,772,337 $1,412,177
Long-term obligations 419,275 557,771 342,094 309,781 245,586
Shareowners' equity 578,966 519,349 461,851 417,800 395,262
Return on average shareowners' equity (a) 13.39% 13.03% 12.76%(c) 7.04%(d) 12.47%
================================================================================================================
<FN>
(a) From continuing operations.
(b) Reflects change in year-end from August 31 to September 30.
(c) Includes gain recognized from sale of investment securities of $2.9 million, net of income tax of $2.2
million and provision for an earthquake-related charge of $0.8 million, net of income tax benefit of
$0.6 million.
(d) Includes provision for restructuring charge of $20.8 million, net of income tax benefit of $12.2 million.
</FN>
II - 2
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS 1996 COMPARED WITH 1995.
Net sales and other revenues in fiscal 1996 were 18% higher than in
1995 while operating earnings and pre-tax earnings showed increases of 11% and
14%, respectively.
Of the 18% increase in net sales and other revenues, approximately
2% is attributable to the acquisition of Colonial Healthcare Supply Co.,
("Colonial") in August 1995. Approximately 16% of the net sales and other
revenues increase reflects internal growth within both the Company's existing
pharmaceutical and medical-surgical supply distribution businesses.
Earnings per share increased 14% compared to 1995. The average
number of common and common equivalent shares outstanding increased 1% for the
earnings per share computation.
Cost of sales increased 18% compared to 1995 due mainly to the
Company's increased sales levels. The overall gross profit as a percent of net
sales and other revenues decreased as a result of a decrease in gross margins
due to continued price competition and a change in customer mix in the Company's
pharmaceutical distribution business, partially offset by sales from the
Company's higher gross margin medical-surgical supply distribution business. In
the pharmaceutical distribution industry, it has been customary to pass on to
customers price increases from manufacturers. Investment buying enables
distributors such as the Company, to benefit from anticipated price increases.
The rate or frequency of future price increases by manufacturers, or lack
thereof, influences the profitability of the Company.
Management of the Company anticipates further downward pressure on
gross margins in the Company's pharmaceutical and medical-surgical supply
distribution businesses during fiscal year 1997 because of continued price
competition influenced by large customers. The Company expects that these
pressures on operating margins may be offset to some extent by increased sales
of more profitable products, such as generic drugs and medical-surgical
supplies, and continued reduction of distribution, selling, and general
administrative expenses ("DSG&A") as a percentage of net sales and other
revenues through more efficient operations.
DSG&A increased 15% over 1995, while net sales and other revenues
increased 18% over the prior year. These expenses decreased as a percentage of
net sales and other revenues from 4.3% in fiscal 1995 to 4.2% in fiscal 1996.
The decreased DSG&A as a percentage of net sales and other revenues in the
current year reflects continued operating efficiencies, including the positive
effects of the continuing consolidation of distribution divisions into larger
regional distribution centers, partially offset by increased DSG&A in the
II - 3
<PAGE>
Company's medical-surgical supply distribution business, principally due to the
acquisition of Colonial.
Net interest expense decreased from $30.5 million in 1995 to $30.2
million in 1996, primarily due to decreased interest on the 5 5/8% Senior Notes
which were repaid on January 15, 1996, and decreased borrowings under the Credit
Agreement, partially offset by interest on the 7 1/4% Senior Notes due June 1,
2005 ("7 1/4% Senior Notes") which were issued June 1, 1995.
The effective tax rate in 1996 decreased to 41.30% from 41.60% in
1995 reflecting the higher earnings in 1996 and, therefore, minimizing the
impact of non-deductible expenses.
Inflation has not been a significant factor in either year. The
Company uses the LIFO method of accounting for inventory which reduces the
effects of inflation by reporting the cost of products sold at approximate
current cost.
RESULTS OF OPERATIONS 1995 COMPARED WITH 1994.
Net sales and other revenues in fiscal 1995 were 13% higher than
1994 while operating earnings and pre-tax earnings showed increases of 21% and
12%, respectively. Major influences which impacted pre-tax earnings for 1994
were a charge of $1.4 million for the uninsured portion of an earthquake loss
incurred in the second quarter of fiscal 1994 and a gain recognized from the
sale of investment securities of $5.1 million in the third and fourth quarters
of fiscal 1994, equivalent in the aggregate to a net $0.06 per share. See Note
10 of Notes to Consolidated Financial Statements.
Of the 13% increase in net sales and other revenues, approximately
1% in the aggregate is attributable to the acquisitions of Colonial Healthcare
Supply Co. ("Colonial") in August 1995 and Southeastern Hospital Supply
Corporation ("Southeastern") in April 1994. Approximately 12% of the net sales
and other revenues increase reflects internal growth within the Company's
existing pharmaceutical distribution business.
Earnings per share before extraordinary loss increased 11% compared
to 1994. The average number of common and common equivalent shares outstanding
increased 3% for the earnings per share computation.
Cost of sales increased 13% compared to 1994 due mainly to the
Company's increased sales levels. The overall gross margin as a percentage of
net sales and other revenues decreased due to continued price competition,
partially offset by increased opportunities for investment buying in the
Company's pharmaceutical distribution business, and by a higher mix of sales
from the Company's higher gross margin medical-surgical distribution business.
II - 4
<PAGE>
DSG&A increased 10% over 1994, while net sales and other revenues
increased 13% over the prior year. These expenses decreased as a percentage of
net sales and other revenues from 4.4% in fiscal 1994 to 4.3% in fiscal 1995.
The decreased DSG&A as a percentage of net sales and other revenues in the
current year reflects operating efficiencies achieved from the positive effects
of the Company's restructuring plan adopted for its pharmaceutical distribution
business in the fourth quarter of fiscal 1993 and the continuing consolidation
of distribution divisions into larger regional distribution centers, partially
offset by increased DSG&A in the Company's medical-surgical supply distribution
business.
Net interest expense, excluding the aforementioned unusual
investment gain in 1994, increased from $23.0 million in 1994 to $30.5 million
in 1995, primarily due to increased borrowings and higher interest rates under
the Credit Agreement and interest on the new $100 million 7 1/4% Senior Notes
which were issued June 1, 1995.
The effective tax rate in 1995 decreased to 41.60% from 42.80% in
1994 reflecting the higher earnings in 1995 and, therefore, minimizing the
impact of non-deductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, capitalization consisted of 41% debt and 59%
equity, as compared to 51% and 49%, respectively, at September 30, 1995. The
decreased debt percentage primarily reflects decreased borrowings under the
Credit Agreement. Borrowings under the Credit Agreement were $120.0 million and
$159.0 million at September 30, 1996 and 1995, respectively. Cash and cash
equivalents of $21.4 million at September 30, 1996, decreased from $64.4 million
at September 30, 1995, primarily as a result of decreased borrowings under the
Credit Agreement, partially offset by an increase in net cash flows from
operating activities (principally due to a decrease in investment in
inventories, net of trade accounts payable).
On March 15, 1996, the Credit Agreement was amended to, among other
things, increase the maximum borrowing to $400 million and to extend the
maturity date to March 15, 2001. See Note 2 of Notes to Consolidated Financial
Statements.
On January 15, 1996, the Company repaid the $100 million aggregate
principal amount of its 5 5/8% Senior Notes plus accrued interest. These notes
were issued in January 1993 pursuant to the $400 million shelf registration
filed by the Company in December 1992.
The Company filed a shelf registration statement with the Securities
and Exchange Commission which became effective on March 27, 1996. The
registration statement allows the Company to sell senior and subordinated debt
or equity securities to the public from time to time up to an aggregate maximum
principal amount of $400 million. The Company intends to used the net proceeds
from the sale of any such securities for general corporate purposes, which may
include, without limitations, the repayment of indebtedness of the Company or of
II - 5
<PAGE>
any of its subsidiaries, possible acquisitions, capital expenditures and working
capital needs. See Note 2 of Notes to Consolidated Financial Statements.
On November 11, 1996, the Company announced that it had entered into a
definitive merger agreement with IVAX Corporation ("IVAX"). IVAX, headquartered
in Miami, Florida, is a holding company with subsidiaries engaged in the
research, development, manufacture and marketing of health care products,
including generic and branded pharmaceuticals, intravenous solutions and related
products, and IN VITRO diagnostics. The agreement, which has been unanimously
approved by the Board of Directors of the Company and IVAX, calls for the
formation of a new combined company to be known as BBI Healthcare Corporation
("BBI"), which will be headquartered in Miami, Florida. Under the agreement, BBI
will acquire both the Company and IVAX through an exchange of common stock,
whereby IVAX shareowners will receive 0.42 shares of common stock of BBI for
each share of IVAX common stock and the Company's shareowners will receive 1.00
share of BBI common stock for each share of Class A Common Stock of the Company.
After the merger, BBI is expected to have approximately 91 million shares
outstanding of which the Company and IVAX shareowners will hold approximately
44% and 56%, respectively.
The merger is expected to be accounted for as a pooling of interests, and
is expected to be tax-free to shareowners. The merger is expected to close
during the first calendar quarter of 1997, subject to regulatory approvals, the
approval of the Company and IVAX shareowners, and certain other conditions.
On August 7, 1996, the Company acquired certain net assets of
Oncology Supply Company, a privately-held oncology supply distributor for
approximately $5.8 million in cash plus expenses and the assumption of certain
liabilities. See Note 4 of Notes to Consolidated Financial Statements.
Dividends on Class A Common Stock amounted to $19.2 million in 1996
compared to $18.8 million in 1995. Dividends on Class A and Class B Common Stock
were $17.0 million in 1994. The increase from 1994 to 1995 resulted, primarily,
from a 20% increase in the quarterly dividend rate on both the Class A and Class
B Common Stock during the second quarter of fiscal 1994. Shares of Class B
Common Stock were converted into shares of the Company's Class A Common Stock in
February 1994 and all shares of Class B Common Stock were subsequently
cancelled. While the Company has no policy with regard to the payment of
dividends, during the three-year period ended September 30, 1996, dividends have
averaged 28% of earnings.
Capital expenditures for 1996 were $16.7 million and related
principally to additional investments in existing locations, the acquisition of
automated warehouse equipment and additional investments in data processing
equipment.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure provisions for the
II - 6
<PAGE>
Company's fiscal year beginning October 1, 1996 and adoption of the recognition
and measurement provisions for non-employee transactions entered into after
December 15, 1995. The Company intends to adopt this standard in fiscal 1997 by
making the required footnote disclosures only. Therefore, the adoption of this
new standard will have no effect on the Company's consolidated financial
position, results of operations or cash flows. See Note 3 of Notes to
Consolidated Financial Statement.
In June 1996, the Financial Accounting Standard Board issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities," which
requires recognition of financial assets and liabilities, including receivables
sold with recourse, using a financial-components approach which focuses on
control of the assets transferred. This standard is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996. Management believes the adoption of this new standard will
not have a material effect on the consolidated financial position of the
Company.
The Company's working capital of $440.6 million at September 30,
1996 decreased from the $515.5 million at September 30, 1995 and represented 18%
of total assets at September 30, 1996. The Company's current ratio was 1.30 at
September 30, 1996, compared to 1.39 at September 30, 1995. Trade receivables
outstanding were 19 days for 1996 and 18 days for 1995. The inventory turnover
rate on a FIFO basis was 7.0 times for 1996 and 6.9 times for 1995.
The Company believes that internally generated funds, funds
available under the existing Credit Agreement and funds potentially available
under the exiting shelf registration will be sufficient to meet anticipated cash
and capital needs.
II - 7
<PAGE>
<TABLE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
a. Supplementary Data
SELECTED QUARTERLY RESULTS (unaudited)
<CAPTION>
Dollars in thousands, except for per share amounts
==================================================================================================================================
First Second Third Fourth Fiscal
Year Ended September 30, 1996 Quarter Quarter Quarter Quarter Year
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales and other revenues $2,377,362 $2,454,360 $2,492,194 $2,618,781 $9,942,697
Gross margin 134,227 147,883 144,892 146,802 573,804
Net earnings 15,627 20,389 19,195 18,322 73,533
Earnings per share 0.39 0.51 0.48 0.45 1.83
Cash dividends per Class A Common share 0.120 0.120 0.120 0.120 0.480
Market prices per Class A Common share $26-20 1/2 $27 3/8-24 1/8 $28 3/8-25 3/8 $32 1/2-24 3/4 $32 1/2-20 1/2
Year Ended September 30, 1995
==================================================================================================================================
Net sales and other revenues $1,983,863 $2,084,216 $2,157,361 $2,222,167 $8,447,607
Gross margin 115,943 127,548 124,050 135,670 503,211
Net earnings 13,549 17,864 16,875 15,654 63,942
Earnings per share 0.35 0.45 0.42 0.39 1.61
Cash dividends per Class A Common share 0.114 0.120 0.120 0.120 0.474
Market prices per Class A Common share $19 7/8-13 5/8 $29 1/8-19 1/8 $27 3/4-21 $24 3/8-19 1/4 $29 1/8-13 5/8
==================================================================================================================================
<FN>
Bergen Brunswig Corporation Class A Common Stock is listed on the New York Stock Exchange. There were approximately 2,500
Class A Common Stock shareowners of record on September 30, 1996.
</FN>
II - 8
</TABLE>
<PAGE>
<TABLE>
b. Financial Statements
STATEMENTS OF CONSOLIDATED EARNINGS AND RETAINED EARNINGS
<CAPTION>
Dollars in thousands, except for per share amounts
===================================================================================================
Years Ended September 30, 1996 1995 1994
===================================================================================================
<S> <C> <C> <C>
CONSOLIDATED EARNINGS
Net sales and other revenues $9,942,697 $8,447,607 $7,483,801
-------------------------------------------
Costs and expenses:
Cost of sales 9,368,893 7,944,396 7,036,249
Distribution, selling, general and
administrative expenses 418,364 363,179 331,530
-------------------------------------------
Total costs and expenses 9,787,257 8,307,575 7,367,779
-------------------------------------------
Operating earnings 155,440 140,032 116,022
Net interest expense 30,170 30,542 17,910
-------------------------------------------
Earnings before taxes on income 125,270 109,490 98,112
Taxes on income 51,737 45,548 41,992
-------------------------------------------
Net earnings $ 73,533 $ 63,942 $ 56,120
===========================================
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 1.83 $ 1.61 $ 1.45
===========================================
CONSOLIDATED RETAINED EARNINGS
Balance at beginning of year $ 378,229 $ 378,867 $ 342,166
Net earnings 73,533 63,942 56,120
5% stock dividend on Class A Common Stock - (44,207) -
Excess cost of Treasury shares issued for an acquisition - (1,579) (2,457)
Cash dividends on Class A Common Stock ($0.480 in
1996, $0.474 in 1995 and $0.438 in 1994 per share) (19,182) (18,794) (16,751)
Cash dividends on Class B Common Stock ($1.996
per share) - - (211)
-------------------------------------------
Balance at end of year $ 432,580 $ 378,229 $ 378,867
===========================================
===================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 9
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Dollars in thousands
===============================================================================================
September 30, 1996 1995
===============================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,408 $ 64,400
Accounts and notes receivable, less allowance for
doubtful receivables: 1996, $23,459; 1995, $21,364 667,255 603,830
Inventories 1,220,975 1,158,465
Income taxes receivable 13,915 4,801
Prepaid expenses 8,656 12,389
----------------------------
Total current assets 1,932,209 1,843,885
----------------------------
Property - at cost:
Land 12,452 12,443
Buildings and leasehold improvements 79,048 81,729
Equipment and fixtures 163,827 144,562
----------------------------
Total property 255,327 238,734
Less accumulated depreciation and amortization 112,600 85,675
----------------------------
Property - net 142,727 153,059
----------------------------
Other assets:
Excess of cost over net assets of acquired companies 339,030 341,125
Other investments 5,161 3,799
Noncurrent receivables 9,939 7,706
Deferred charges and other assets 60,760 55,956
----------------------------
Total other assets 414,890 408,586
----------------------------
Total assets $2,489,826 $2,405,530
============================
===============================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 10
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Dollars in thousands
===============================================================================================
September 30, 1996 1995
===============================================================================================
<S> <C> <C>
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $1,249,167 $1,140,466
Accrued liabilities 92,005 84,500
Customer credit balances 133,282 94,766
Deferred income taxes 16,006 7,353
Current portion of long-term obligations 1,125 1,325
----------------------------
Total current liabilities 1,491,585 1,328,410
----------------------------
Long-term obligations:
7 3/8% senior notes 149,300 149,189
7 1/4% senior notes 99,696 99,662
5 5/8% senior notes - 99,983
Revolving bank loan payable 120,000 159,000
7% convertible subordinated debentures 20,609 20,914
6 7/8% exchangeable subordinated debentures 8,425 10,575
Deferred income taxes 3,489 2,719
Other 17,756 15,729
----------------------------
Total long-term obligations 419,275 557,771
----------------------------
Shareowners' equity:
Capital stock:
Preferred - Authorized 3,000,000 shares; issued: none - -
Class A Common - Authorized 100,000,000 shares;
issued: 1996, 44,416,940 shares; 1995, 44,183,074 shares 66,626 66,275
Paid-in capital 167,308 163,075
Net unrealized gain (loss) on investments, net of income
tax of: 1996, $231; 1995, $(121) 363 (319)
Retained earnings 432,580 378,229
----------------------------
Total 666,877 607,260
Less Treasury shares, at cost: 1996 and 1995, 4,354,558 shares 87,911 87,911
----------------------------
Total shareowners' equity 578,966 519,349
----------------------------
Total liabilities and shareowners' equity $2,489,826 $2,405,530
============================
===============================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 11
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
<CAPTION>
Dollars in thousands
============================================================================================================
Years Ended September 30, 1996 1995 1994
============================================================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 73,533 $ 63,942 $ 56,120
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Provision for doubtful accounts 8,213 5,810 7,060
Depreciation and amortization of property 25,183 21,474 19,065
Deferred compensation 2,242 1,394 949
Amortization of customer lists 1,749 1,749 1,749
Amortization of excess of cost over net assets
of acquired companies 9,647 9,003 8,696
Deferred income taxes 9,070 3,178 (3,545)
Amortization of original issue discount on senior notes 162 180 168
Amortization of other intangible assets 1,645 1,748 1,657
Loss (gain) on dispositions of property 12 1,570 (1,229)
Effects of changes, net of acquisitions:
Receivables (76,926) (74,683) (49,625)
Inventories (60,699) (225,555) (241,585)
Prepaid expenses and other assets (5,985) (423) (1,965)
Accounts payable 108,701 129,553 109,890
Accrued liabilities 2,252 (31,223) 9,736
Customer credit balances 38,516 11,979 12,542
Income taxes payable (9,114) (2,514) 5,509
------------------------------------------
Net cash flows from operating activities 128,201 (82,818) (64,808)
------------------------------------------
INVESTING ACTIVITIES
(Sale) purchase of other investments (327) 17,824 (1,769)
Proceeds from sale of notes receivable with recourse 7,712 13,791 14,831
Property acquisitions (16,696) (41,078) (24,876)
Proceeds from dispositions of property 1,833 7,228 2,204
Acquisition of businesses, less cash acquired (5,999) (50,983) (2,701)
------------------------------------------
Net cash flows from investing activities (13,477) (53,218) (12,311)
------------------------------------------
FINANCING ACTIVITIES
Repayment of senior notes (100,000) - -
Repayment of revolving bank loan (39,000) - -
Redemption of exchangeable subordinated debentures (2,150) - (330)
Redemption of convertible subordinated debentures (305) (20) (2,212)
Repayment of other obligations (2,565) (6,556) (14,370)
Increase in other obligations 902 - -
Proceeds from revolving bank loan - 119,000 30,000
Proceeds from issuance of senior notes - 99,650 -
Shareowners' equity transactions:
Exercise of stock options 4,584 1,892 495
Cash dividends on Common Stock (19,182) (18,794) (16,962)
------------------------------------------
Net cash flows from financing activities (157,716) 195,172 (3,379)
------------------------------------------
Net (decrease) increase in cash and cash equivalents (42,992) 59,136 (80,498)
Cash and cash equivalents at beginning of year 64,400 5,264 85,762
------------------------------------------
Cash and cash equivalents at end of year $ 21,408 $ 64,400 $ 5,264
==========================================
============================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 12
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Bergen
Brunswig Corporation and its subsidiaries (the "Company"), after elimination of
the effect of intercompany transactions and balances. Certain reclassifications
have been made in the consolidated financial statements and notes to conform to
1996 presentations.
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the balance sheet dates and the reported amounts of revenue and expense during
the reporting periods. Actual results could differ from these estimates and
assumptions.
The Company records revenues when product is shipped or services are
provided to its customers. Net sales and other revenues include service fees of
$1.1 million, $5.4 million and $4.4 million for the years ended September 30,
1996, 1995, and 1994, respectively, related to bulk shipments of
pharmaceuticals.
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Other
investments include primarily debt instruments, principally variable rate demand
notes having maturities of more than one year.
The Company has classified its investments in debt and equity securities
as "available for sale" securities and has reported such investments at fair
value, with unrealized gains and losses excluded from earnings, and reported as
a separate component of shareowners' equity. Realized gains and losses on
investments are determined by the specific identification method and are
included in net earnings. Such unrealized gains and losses at September 30, 1996
and 1995 and realized gains and losses for the years then ended were not
material.
Inventories are valued at the lower of cost or market, determined on the
last-in, first-out (LIFO) method. If the Company had used the first-in,
first-out (FIFO) method of inventory valuation, which approximates current
replacement cost, inventories would have been higher than reported at September
30, 1996, by $144.1 million and at September 30, 1995, by $147.0 million.
Depreciation and amortization of property are computed principally on a
straight-line basis over estimated useful lives. Generally, the estimated useful
lives are 15 to 40 years for buildings and leasehold improvements, and 3 to 10
years for equipment and fixtures.
II - 13
<PAGE>
The excess of cost over net assets of acquired companies (net of
accumulated amortization of $47.6 million at September 30, 1996; $38.0 million
at September 30, 1995) is amortized on a straight-line basis principally over 40
years. Customer lists, included in deferred charges and other assets, ($8.8
million at September 30, 1996, net of accumulated amortization of $17.4 million;
$10.5 million at September 30, 1995, net of accumulated amortization of $15.7
million) are amortized on a straight-line basis over 15 years. At each balance
sheet date, management reviews tangible and intangible assets for possible
impairment based on several criteria, including, but not limited to sales
trends, undiscounted operating cash flows and other operating factors.
Noncurrent receivables include notes receivable from employees and
officers due at the Company's discretion in the amount of $3.6 million and $3.2
million at September 30, 1996 and 1995, respectively.
In June 1996, the Financial Accounting Standards Boards issued Statement
of Financial Accounting Standards No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," which
requires recognition of financial assets and liabilities, including receivables
sold with recourse, using a financial-components approach which focuses on
control of the assets transferred. This standard is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996. Management believes the adoption of this new standard will
not have a material effect on the consolidated financial position of the
Company.
2. BORROWING ARRANGEMENTS
On March 15, 1996, the Company's credit agreement (the "Credit Agreement")
with a group of domestic and foreign banks was amended to, among other things
increase the maximum borrowing to $400 million, extend the maturity date to
March 15, 2001, and allow borrowing under discretionary credit lines
("discretionary lines") outside of the Credit Agreement. Borrowings outstanding
under the Credit Agreement were $120 million at September 30, 1996. The maximum
outstanding borrowings under the Credit Agreement including discretionary lines
for the year ended September 30, 1996 were $319 million.
On May 23, 1995, the Company sold $100 million aggregate principal amount
of 7 1/4% Senior Notes due June 1, 2005 (the "7 1/4% Senior Notes"). On June 1,
1995, the Company received net proceeds of $99.0 million (after underwriting
discount of $0.6 million) from the 7 1/4% Senior Notes. Interest on the 7 1/4%
Senior Notes is payable semi-annually on June 1 and December 1 of each year. The
net proceeds were used to reduce the outstanding balance under the Credit
Agreement. On January 14, 1993, the Company sold $100 million aggregate
principal amount of 5 5/8% Senior Notes due January 15, 1996 (the "5 5/8%
Notes") and $150 million aggregate principal amount of 7 3/8% Senior Notes due
January 15, 2003 (the "7 3/8% Notes"). On January 15, 1996, the Company repaid
the $100 million aggregate principal amount of the 5 5/8% Notes plus accrued
interest. The 7 1/4% Notes and 7 3/8% Notes were issued pursuant to the $400
million shelf registration filed by the Company in December 1992 and are not
II - 14
<PAGE>
redeemable prior to maturity and are not entitled to any sinking fund. Interest
on the 7 3/8% Notes is payable semi-annually on January 15 and July 15 of each
year. The carrying value of 7 1/4% Notes and 7 3/8% Notes represents gross
proceeds plus amortization of the original issue discount ratably over the life
of each issue.
The Company filed a shelf registration statement with the Securities and
Exchange Commission which became effective on March 27, 1996. The registration
statement allows the Company to sell senior and subordinated debt or equity
securities to the public from time to time up to an aggregate maximum principal
amount of $400 million. The Company intends to use the net proceeds from the
sale of any such securities for general corporate purposes, which may include,
without limitations, the repayment of indebtedness of the Company or of any of
its subsidiaries, possible acquisitions, capital expenditures and working
capital needs. Pending such application, the net proceeds may be temporarily
invested in short-term securities. No offering has occurred since the effective
date of the the registration statement. Any offering of such securities shall be
made only by means of prospectus.
In July 1986, the Company issued $43.0 million of 6 7/8% Exchangeable
Subordinated Debentures due July 2011 (the "6 7/8% Debentures") and during March
1990, $32.1 million principal amount of the 6 7/8% Debentures was tendered and
purchased pursuant to an offer from the Company. On July 15, 1996, the Company
elected to redeem an additional $2.2 million of principal amount of the 6 7/8%
Debentures plus accrued interest. Between March 1990 and July 15, 1996, an
additional $0.3 million aggregate principal amount had been redeemed. The
remaining unredeemed 6 7/8% Debentures receive interest on January 15 and July
15 of each year.
In connection with the acquisition of Durr-Fillauer Medical Inc. and
subsidiaries ("Durr") in September 1992, the Company assumed $69.0 million of
Durr's 7% Convertible Subordinated Debentures due March 1, 2006 (the "7%
Debentures"). The acquisition of Durr by the Company resulted in each holder
receiving the right, at such holder's option, to require Durr to redeem, on
November 22, 1992, all or any portion of such holder's 7% Debentures for cash
equal to the principal amount plus all accrued interest to that date. As a
result, the Company redeemed $45.6 million aggregate principal amount on
November 23, 1992. Since that date an additional $2.8 million aggregate
principal amount has been redeemed. The remaining unredeemed 7% Debentures
receive interest on March 1 and September 1 of each year.
Cash paid for interest, net of amounts capitalized ($0.5 million in 1994),
was $31.3 million, $28.4 million and $24.1 million in 1996, 1995, and 1994,
respectively.
Scheduled future principal payments of long-term obligations, excluding
deferred income taxes, for the next five fiscal years are $1.1 million in 1997,
$1.0 million in 1998, $4.9 million in 1999, $0.9 million in 2000, and $121.0
million in 2001.
II - 15
<PAGE>
3. CAPITAL STOCK, PAID-IN CAPITAL AND STOCK OPTIONS
The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common Stock, par value $1.50 per share (the "Common Stock"); and
3,000,000 shares of Preferred Stock without nominal or par value (the "Preferred
Stock").
The Board of Directors (the "Board") is authorized to divide the Preferred
Stock into one or more series to determine the relative rights, preferences and
limitations of the shares of any class or of any such series. In addition, the
Board may give the Preferred Stock (or any series) special, limited, multiple or
no voting rights.
Subject to the preferences and other rights of the Preferred Stock, the
Common Stock may receive stock or cash dividends as declared by the Board and
each share of Common Stock is entitled to one vote per share at every meeting of
shareowners. In the event of any liquidation, dissolution or winding up of the
affairs of the Company, after payment to the owners of the Preferred Stock of
the full amounts to which they have a liquidation preference, the owners of
Common Stock shall be entitled to receive a distribution of all assets then
remaining.
On February 9, 1994, the Board adopted a Shareowner Rights Plan which
provided that a dividend of one Preferred Share Purchase Right (the "Rights")
was declared for each share of Common Stock outstanding at the close of business
on February 18, 1994. The Rights are generally not exercisable until 10 days
after a person or group acquires 15% of the Common Stock or announces a tender
offer which could result in a person or group owning 15% or more of the Common
Stock (an "Acquisition"). Each Right, should it become exercisable, will entitle
the owner to buy 1/100th of a share of a new series of the Company's Series A
Junior Preferred Stock at an exercise price of $80.00.
In the event of an Acquisition without the approval of the Board, each
Right will entitle the owner, other than an acquiror, to buy at the Rights' then
current exercise price a number of shares of Common Stock with a market value
equal to twice the exercise price. In addition, if at the time when there was a
15% shareowner, the Company were to be acquired by merger, shareowners with
unexercised Rights could purchase common stock of the acquiror with a value of
twice the exercise price of the Rights. The Board may redeem the Rights for
$0.01 per Right at any time prior to an Acquisition. Unless earlier redeemed,
the Rights will expire on February 18, 2004.
On February 24, 1994 (the "Conversion Date"), in accordance with the
provisions of the Recapitalization Plan approved by the Company's shareowners on
January 31, 1989, all of the 100,492 then outstanding shares of the Company's
Class B Stock were automatically converted into shares of the Company's Class A
Common Stock at the stated conversion rate of 9.5285 shares of Class A Common
Stock for each share of Class B Common Stock. All shares of Class B Common Stock
were subsequently cancelled.
II - 16
<PAGE>
Changes in Class A and Class B Common Stock, Paid-in capital and Treasury
shares for the fiscal years ended September 30, 1996, 1995, and 1994 were as
follows:
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON
-------------- -------------- PAID-IN TREASURY
DOLLARS AND SHARES IN THOUSANDS SHARES AMOUNT SHARES AMOUNT CAPITAL SHARES
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance September 30, 1993 43,026 $64,539 101 $151 $156,312 $(152,586)
Exercise of stock options 75 113 - - 733 (351)
Conversion of Class B
Common Stock into
Class A Common Stock 958 1,436 (101) (151) (1,286) -
Recapitalization costs - - - - (680) -
Acquisition of Southeastern
Hospital Supply Corporation - - - - - 15,098
Adjustment of Healthcare
Distribution of Indiana, Inc.
acquisition price - - - - - (344)
---------------------------------------------------
Balance, September 30, 1994 44,059 66,088 - - 155,079 (138,183)
5% Class A Common
Stock dividend - - - - 5,996 38,185
Exercise of stock options 124 187 - - 2,000 (295)
Acquisition of Biddle &
Crowther Company - - - - - 12,382
---------------------------------------------------
Balance, September 30, 1995 44,183 66,275 - - 163,075 (87,911)
Exercise of stock options 234 351 - - 4,233 -
---------------------------------------------------
Balance, September 30, 1996 44,417 $66,626 - $ - $167,308 $ (87,911)
===================================================
</TABLE>
At September 30, 1996, there were outstanding options to purchase 131,178
shares of Class A Common Stock, under a 1983 stock option plan, at prices per
share not less than the fair market value on the dates the options were granted.
No additional options may be granted under this plan.
The Company has an amended and restated 1989 stock incentive plan which
authorizes the granting of stock options to officers, key employees and other
recipients to purchase shares of Class A Common Stock within a ten-year period
from date of grant at a price per share as may be set by the Company's
Compensation/Stock Option Committee. The number of shares available for grant
under the plan is formula-based, providing that, upon certain conditions, no
more than 1% of the number of issued shares at the immediately preceding fiscal
year-end may be added to the shares available for the grant pool in any fiscal
year to this class of optionees. Stock option grants are also available to
non-employee directors and only at a price per share equal to the market value
on the grant date. At September 30, 1996, there were 354,562 shares available
for grant under the plan, with 106,319 specifically reserved for non-employee
directors.
Stock appreciation rights may be offered to some or all of the employees,
but not non-employee directors, who hold or receive options granted under the
stock option plans. No stock appreciation rights were outstanding as of
September 30, 1996, 1995, or 1994.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
II - 17
<PAGE>
Compensation," which requires adoption of the disclosure provisions for the
Company's fiscal year beginning October 1, 1996 and adoption of the recognition
and measurement provisions for non-employee transactions entered into after
December 15, 1995. The new standard defines a fair value method of accounting
for stock options and other equity instruments. Under the fair value method,
compensation cost is measured at the grant date based on the fair value of the
award and is recognized over the service period, which is usually the vesting
period.
Pursuant to the new standard, companies are encouraged, but not required,
to adopt the fair value method of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," but would be required to disclose in a note to the
financial statements pro forma net earnings and, if presented, earnings per
share as if the Company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption. The
Company intends to adopt this standard in fiscal 1997 by making the required
footnote disclosures only. Therefore, the adoption of the new standard will have
no effect on the Company's consolidated financial position, results of
operations or cash flows.
Changes in the number of shares represented by outstanding options during
the years ended September 30, 1996, 1995, and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at beginning of year 1,409,094 1,282,983 929,775
Options granted (1996, $21.56 to $28.75 per share; 1995,
$15.00 to $22.63 per share; 1994, $14.29 to $16.90 per share) 755,000 319,500 542,325
Options exercised (1996, $7.42 to $21.19 per share; 1995,
$7.42 to $21.29 per share; 1994,$7.42 to $12.42 per share) (233,866) (126,432) (78,791)
Options cancelled (40,802) (66,957) (110,326)
-----------------------------------
Outstanding at end of year (1996, $7.42 to $28.75 per share) 1,889,426 1,409,094 1,282,983
===================================
</TABLE>
At September 30, 1996, options for 666,732 shares were exercisable. The
remaining options become exercisable in the following fiscal years: 1997,
423,691 shares; 1998, 363,171 shares; 1999, 250,332 shares; 2000, 185,500
shares.
At September 30, 1996, an aggregate of 2,935,658 shares of Class A Common
Stock was reserved for the exercise of stock options and for issuance under the
elective retirement savings plan (see Note 8).
II - 18
<PAGE>
4. ACQUISITIONS
On August 7, 1996, the Company completed the acquisition of certain net
assets of Oncology Supply Company ("Oncology"), a privately-held oncology supply
distributor located in Dothan, Alabama. The Company paid approximately $5.8
million in cash, plus expenses of $.2 million, acquired assets of fair value of
approximately $6.5 million and assumed liabilities of approximately $5.6
million. The Company recorded an excess of cost over net assets acquired of
approximately $5.1 million in the transaction.
On August 2, 1995, the Company completed the acquisition of Colonial
Healthcare Supply Co. ("Colonial"), a privately-held medical-surgical supply
distributor headquartered in Lake Zurich, Illinois, for approximately $50.7
million in cash. The Company acquired assets at fair value of approximately
$47.3 million and assumed liabilities of approximately $19.7 million, including
approximately $2.7 million of long-term debt which was paid by the Company on
the acquisition date. This acquisition was financed from borrowings under the
Credit Agreement. The Company recorded an excess of cost over net assets
acquired of approximately $23.1 million in the transaction.
On January 10, 1995 the Company completed the acquisition of Biddle &
Crowther Company ("B&C"), a privately-held medical-surgical supply distributor
headquartered in Seattle, Washington for 643,604 shares of the Company's Class A
Common Stock, previously held as Treasury shares. The transaction was valued at
approximately $10.8 million, plus expenses, acquired assets at fair value of
approximately $12.0 million and assumed liabilities of approximately $5.2
million. The Company recorded an excess of cost over net assets acquired of
approximately $4.4 million in the transaction.
On August 31, 1994, the Company completed the acquisition of certain net
assets of Professional Medical Supply Co., a privately-held medical-surgical
supply distributor located in Denver, Colorado. The Company paid approximately
$2.4 million in cash, plus expenses, acquired assets at fair value of
approximately $0.5 million, including excess of cost over net assets acquired
and other intangible assets of $1.9 million.
On April 29, 1994, the Company completed the acquisition of Southeastern
Hospital Supply Corporation ("Southeastern"), a privately-held medical supply
distributor located in Fayetteville, North Carolina, for 784,793 shares of the
Company's Class A Common Stock, previously held as Treasury shares, valued at
approximately $12.6 million, plus expenses, acquired assets at fair value of
approximately $23.9 million and assumed liabilities of approximately $16.3
million including approximately $6.7 million of debt, which was paid by the
Company on the acquisition date. The Company recorded an excess of cost over net
assets acquired of approximately $5.4 million in the transaction.
5. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Earnings per common and common equivalent share are based on the weighted
average number of shares of Class A Common Stock outstanding during each year,
the assumed conversion of the weighted average number of shares of Class B
II - 19
<PAGE>
Common Stock outstanding during each year through the Conversion Date (see Note
3) and the assumed exercise of dilutive employees' stock options (less the
number of Treasury shares assumed to be purchased from the proceeds using the
average market price of the Company's Class A Common Stock). Earnings per share
are based upon 40,259,072 shares in 1996; 39,800,954 shares in 1995; and
38,683,775 shares in 1994.
6. LEASES
The Company conducts most of its operations from leased warehouse and
office facilities and uses certain data processing, transportation, and other
equipment under lease agreements expiring at various dates through 2008,
excluding renewal options. Future minimum rental commitments at September 30,
1996, under operating leases having noncancelable lease terms in excess of one
year, aggregated $48.8 million, with rental payments during the five succeeding
years of $16.5 million, $11.8 million, $8.8 million, $5.1 million and $2.3
million, respectively. Future minimum rentals to be received under noncancelable
subleases at September 30, 1996 were not material. Net rental expense for the
years ended September 30, 1996, 1995, and 1994, was $17.9 million, $17.0
million, and $15.9 million, respectively, after deducting sublease income of
$0.1 million, $0.1 million, and $0.2 million, respectively.
7. TAXES ON INCOME
The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred tax assets and liabilities are established
for temporary differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities at tax rates expected to be in
effect when such assets or liabilities are realized or settled.
Total Federal and state taxes on income for the fiscal years ended
September 30, 1996, 1995, and 1994 are summarized as follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1996 1995 1994
------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable
Federal $35,985 $35,865 $36,818
State 6,682 6,505 6,588
Deferred (principally Federal) 9,070 3,178 (1,414)
-------------------------------
Total $51,737 $45,548 $41,992
===============================
</TABLE>
II - 20
<PAGE>
Taxes on income vary from the statutory Federal income tax rate applied to
earnings before taxes on income as the result of the following:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1996 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal income tax rate applied
to earnings before taxes on income $43,844 $38,322 $34,340
Increase (decrease) in taxes resulting from:
Amortization of excess of cost over
net assets of acquired companies 2,447 3,055 2,912
State income taxes - net of Federal benefits 4,992 4,610 4,141
Governmental investment income (157) (366) (348)
Other 611 (73) 947
-------------------------------
Total taxes on income $51,737 $45,548 $41,992
===============================
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax liability as of September 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1996 1995
------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Inventory basis difference due to LIFO
method and uniform capitalization $38,602 $31,947
Accelerated depreciation 8,722 7,967
Other 2,918 3,307
-------------------
Total 50,242 43,221
-------------------
Deferred tax assets:
Reserves for doubtful receivables 12,527 12,217
Restructuring charge not currently deductible 2,203 3,777
Vacation pay not currently deductible 1,659 1,566
Accrued liabilities not currently deductible 13,641 12,554
Other 717 3,035
-------------------
Total 30,747 33,149
-------------------
Net deferred tax liability $19,495 $10,072
===================
</TABLE>
Deferred taxes result from temporary differences in the recognition of
revenues and expenses for tax and financial reporting purposes. During 1995,
deferred taxes were increased to reflect purchase accounting on acquisitions.
Cash paid for income taxes was $51.1 million, $41.0 million, and $39.0
million in 1996, 1995, and 1994, respectively.
In the opinion of management of the Company, no valuation reserve related
to deferred tax assets is considered necessary.
II - 21
<PAGE>
8. RETIREMENT AND SAVINGS PLANS
The Company provides for retirement benefits through an elective
retirement savings plan and supplemental retirement plans.
The Company has an elective retirement savings plan generally available to
all employees with six months of service. Under the terms of the plan, the
Company guarantees a contribution of $0.50 for each $1.00 invested by the
participant up to the participant's investment of 6% of salary, subject to plan
and regulatory limitations. The Company may also make additional cash or stock
contributions to the plan at its discretion. The Company's contributions are
vested to participants over five years. The Company made contributions of $3.4
million, $3.9 million, and $4.1 million to the plan in 1996, 1995, and 1994,
respectively.
The supplemental retirement plans provide benefits for certain officers
and key employees. The Company has a Supplemental Executive Retirement Plan
("SERP") for officers and key employees. SERP is a "target" benefit plan, with
the annual lifetime benefit based upon a percentage of salary during the final
five years of pay at age 62, offset by several other sources of income including
benefits payable under a prior supplemental retirement plan.
The components of net periodic pension cost for the supplemental
retirement plans for 1996, 1995, and 1994 are as follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 294 $ 221 $ 131
Interest cost 1,519 1,261 1,643
Amortization of prior service cost 378 378 397
Amortization of initial unrecognized
net obligation 264 264 286
------------------------------
Total $2,455 $2,124 $2,457
==============================
</TABLE>
Assumptions used to develop the net periodic pension cost for supplemental
retirement plans were:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.00-8.00% 7.25%-8.25% 7.25%-8.25%
Rate of increase in salary levels 5.50% 5.25% 5.50%
</TABLE>
II - 22
<PAGE>
The funded status of the supplemental retirement plans at September 30,
1996 and 1995 is as follows:
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS 1996 1995
-------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $15,572 $14,346
Nonvested benefits - 7
Accumulated benefit obligation 15,572 14,353
Effect of assumed increase in future compensation levels 3,998 3,555
Projected benefit obligation 19,570 17,908
Assets of plans at fair value (2,898) (2,898)
Excess of projected benefit obligation over assets 16,672 15,010
Unrecognized prior service cost (2,510) (2,888)
Unrecognized net loss (5,166) (4,386)
Unrecognized net obligation remaining from date of adoption (3,578) (3,842)
-------------------
Pension liability recognized in the consolidated balance sheets $ 5,418 $ 3,894
===================
</TABLE>
At September 30, 1996, the Company owns life insurance in the aggregate
amount of $45 million covering substantially all the participants in the
supplemental retirement plans. The Company intends to keep this life insurance
in force until the demise of the participants.
Contributions are also made to multi-employer defined benefit plans
administered by labor unions for certain union employees. Amounts charged to
pension expense and contributed to these plans were $0.4 million, $0.4 million,
and $0.3 million in 1996, 1995, and 1994, respectively.
9. CONTINGENCIES
The Company received proceeds of $7.7 million and $13.8 million in 1996
and 1995, respectively, from receivables sold with recourse by the Company to
financial institutions and is contingently liable as guarantor of $15.9 million
and $23.0 million at September 30, 1996 and 1995, respectively, of such
receivables.
The Company has been named as a defendant along with several
pharmaceutical industry-related companies in several State antitrust actions in
California and Alabama and a Federal multidistrict antitrust action. The
California State action purports to be a coordinated class action under
California's Cartwright Act, Unfair Practices Act and Business and Professions
Code. The Alabama State complaint purports to be a class action under Alabama
antitrust law. The Federal class action complaint alleges that the Company and
numerous manufacturers and other wholesalers violated the Sherman Act. In
November 1994, the Federal court certified the class defined in the Federal
class action complaint for the time period October 15, 1989 to the present.
Plaintiffs seek injunctive relief and treble damages in an amount to be
determined at trial.
II - 23
<PAGE>
In October 1994, the Company entered into a sharing agreement with five
other wholesalers and 26 pharmaceutical manufacturers. Among other things, the
agreement provides that: (a) if a judgment is entered into against both the
manufacturer and wholesaler defendants, the total exposure for joint and several
liability of the Company is limited to $1.0 million; (b) if a settlement is
entered into by, between, and among the manufacturer and wholesaler defendants,
the Company has no monetary exposure for such settlement amount; (c) the six
wholesaler defendants will be reimbursed by the 26 pharmaceutical defendants for
related legal fees and expenses up to $9.0 million total (of which the Company
will receive a proportionate share); and (d) the Company is to release certain
claims which it might have had against the manufacturer defendants for the
claims presented by the plaintiffs in these cases. The agreement covers the
Federal court litigation as well as the cases which have been filed in the
various state courts. In April 1996, the Company's Motion for Summary Judgment
was granted and the Company was dismissed from the Federal class action.
The Company believes that the allegations of liability set forth in these
lawsuits are without merit as to the wholesaler defendants and that any
attendant liability of the Company, although unlikely, would not have a material
effect on the Company's financial condition.
The Company is involved in various additional items of litigation.
Although the amount of liability at September 30, 1996 with respect to these
items of litigation cannot be ascertained, in the opinion of management, any
resulting future liability will not have a material adverse effect on its
financial position or results of operations.
10. OTHER UNUSUAL ITEMS
During fiscal 1994, the Company recognized a gain from the sale of
investment securities of $5.1 million before income taxes of $2.2 million.
During the second quarter of fiscal 1994, the Company recorded a pre-tax
charge of $1.4 million ($0.8 million after tax) for the uninsured portion of an
earthquake loss sustained by the Company's Valencia, California regional
distribution center on January 17, 1994.
II - 24
<PAGE>
11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded amounts of the Company's cash and cash equivalents, accounts
and notes receivable, other investments, non-current receivables, accounts
payable and the revolving bank loan payable, the 6 7/8% Debentures and the 7%
Debentures at September 30, 1996 approximate fair value. The fair values of the
Company's 7 3/8% Notes and 7 1/4% Notes are estimated as follows, based on the
market prices of these instruments as of September 30, 1996:
<TABLE>
<CAPTION>
RECORDED
DOLLARS IN THOUSANDS AMOUNT FAIR VALUE
------------------------------------------------------------------
<S> <C> <C>
7 3/8% Senior Notes $149,300 $154,194
7 1/4% Senior Notes 99,696 101,519
</TABLE>
12. MERGER AGREEMENT WITH IVAX CORPORATION
On November 11, 1996, the Company announced that it had entered into a
definitive merger agreement with IVAX Corporation ("IVAX"). IVAX, headquartered
in Miami, Florida, is a holding company with subsidiaries engaged in the
research, development, manufacture and distribution of health care products,
including generic and branded pharmaceuticals, intravenous solutions and related
products, and IN VITRO diagnostics. The agreement, which has been unanimously
approved by the Board of Directors of the Company and IVAX, calls for the
formation of a new combined company to be known as BBI Healthcare Corporation
("BBI"), which will be headquartered in Miami, Florida. Under the agreement, BBI
will acquire both the Company and IVAX through an exchange of common stock,
whereby IVAX shareowners will receive 0.42 shares of common stock of BBI for
each share of IVAX common stock and the Company's shareowners will receive 1.00
share of BBI common stock for each share of Class A Common Stock of the Company.
After the merger, BBI is expected to have approximately 91 million shares
outstanding of which the Company and IVAX shareowners will hold approximately
44% and 56%, respectively.
The merger is expected to be accounted for as a pooling of interests, and
is expected to be tax-free to shareowners. The merger is expected to close
during the first calendar quarter of 1997, subject to regulatory approvals, the
approval of the Company and IVAX shareowners, and certain other conditions.
II - 25
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE DIRECTORS AND SHAREOWNERS OF
BERGEN BRUNSWIG CORPORATION:
We have audited the accompanying consolidated balance sheets of Bergen
Brunswig Corporation and subsidiaries as of September 30, 1996 and 1995 and the
related statements of consolidated earnings and retained earnings and cash flows
for each of the three years in the period ended September 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Bergen
Brunswig Corporation and subsidiaries at September 30, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1996, in conformity with generally accepted
accounting principles.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
Costa Mesa, California
October 30, 1996
II - 26
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
II - 27
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF DIRECTORS.
The Company's Restated Certificate of Incorporation provides that
the Board of Directors shall consist of not more than 15 directors nor less than
9 directors, the exact number within such limits to be fixed by the Board as
provided in the By-Laws, which currently provide for 12 directors. The directors
are divided into three approximately equivalent-sized classes, each class
serving for a period of three years on a staggered term basis.
The following sets forth information concerning the individuals
currently serving as directors of the Company:
DIRECTORS WHOSE TERM EXPIRES JANUARY 1997
(CLASS III DIRECTORS)
RODNEY H. BRADY Director since 1973. Age 63.
President and Chief Executive Officer, Deseret Management
Corporation since April 1996. Former President and Chief Executive Officer,
Bonneville International Corporation (broadcast communications) (1985-1996). Mr.
Brady is a director of Deseret Mutual Insurance Company and First Security
Corporation. Mr. Brady is a member of the Company's Executive, Financing and
Nominating Committees.
CHARLES C. EDWARDS, M.D. Director since 1985. Age 73.
Former President (1993 to 1994) of California Healthcare Institute
(nonprofit association). Former President and Chief Executive Officer,
ScrippsHealth and Scripps Institutions of Medicine and Science (health care)
(1991 to 1993). Dr. Edwards is a director of Molecular Biosystems, Inc.,
Northern Trust Bank and IDEC Pharmaceutical Company. Dr. Edwards is Chairman of
the Company's Audit Committee and a member of the Investment/Retirement Plan
Committee.
JAMES R. MELLOR Director since 1979. Age 66.
Chairman of the Board and Chief Executive Officer (since 1993),
former President and Chief Operating Officer (1991 to 1993), General Dynamics
Corporation (diversified defense and aerospace). Mr. Mellor is a director of
Kerr Group, Inc., General Dynamics Corporation, Aeromovel USA, Inc. and Computer
Sciences Corporation. Mr. Mellor is Vice Chairman of the Company's
Compensation/Stock Option Committee and a member of the Investment/Retirement
Plan Committee.
III - 1
<PAGE>
FRANCIS G. RODGERS Director since 1982. Age 70.
Author and Lecturer. Former Vice President, Marketing, IBM
(information processing systems), retired. Mr. Rodgers is a director of Dialogic
Corporation, Mercantile Stores, Inc. and Milliken and Company. Mr. Rodgers is
Chairman of the Company's Compensation/Stock Option Committee and a member of
the Audit Committee.
DIRECTORS WHOSE TERM EXPIRES JANUARY 1998
(CLASS I DIRECTORS)
ROBERT E. MARTINI Director since 1962. Age 64.
Chairman of the Board (since 1992) and Chief Executive Officer
(since 1990 and until January 1997) of the Company and formerly served as its
President (1981 to 1992). Mr. Martini is a director of Mossimo, Inc. Mr. Martini
is Chairman of the Company's Executive, Financing and Nominating Committees.
JOHN CALASIBETTA Director since 1962. Age 91.
Senior Vice President of the Company.
NEIL F. DIMICK Director since 1995. Age 47.
Executive Vice President and Chief Financial Officer (since 1992)
and formerly served as Vice President, Finance (1991 to 1992) of the Company.
President, Alternate Site Distributors, Inc., a subsidiary of the Company, since
September 1996. Mr. Dimick is a member of the Company's Financing and
Investment/Retirement Plan Committees.
DONALD R. RODEN Director since 1995. Age 50.
President and Chief Operating Officer (since 1995), and Chief
Executive Officer-Elect (commencing January 1997) of the Company. Prior to
joining the Company in 1995, Mr. Roden was a healthcare industry consultant
(1993 to 1995) and Chief Executive, North America (1989 to 1993) of Reed
Elsevier Medical (publishing). Mr. Roden is a member of the Company's Executive,
Financing and Nominating Committees.
III - 2
<PAGE>
DIRECTORS WHOSE TERM EXPIRES JANUARY 1999
(CLASS II DIRECTORS)
JOSE E. BLANCO, SR. Director since 1992. Age 70.
Chairman of the Board (since 1987) of J.M. Blanco, Inc. (wholesale
pharmaceutical distribution). Mr. Blanco is Vice Chairman of the Company's Audit
and Investment/Retirement Plan Committees, and a member of the
Compensation/Stock Option Committee.
CHARLES J. LEE Director since 1972. Age 71.
Former Managing Director, Smith Barney Inc. (investment banking)
(1989 to 1996). Mr. Lee is a member of the Company's Executive, Financing and
Nominating Committees.
GEORGE R. LIDDLE Director since 1969. Age 69.
Investment Adviser. Former Vice President, Kidder, Peabody & Co.,
Inc. (stockbrokers), retired. Mr. Liddle is Chairman of the Company's
Investment/Retirement Plan Committee.
GEORGE E. REINHARDT, JR. Director since 1985. Age 67.
Formerly served as consultant (1992 to 1995), Senior Vice President
(1991), Chief Financial Officer (1976 to 1991) and Vice President, Finance (1981
to 1991) of the Company. Mr. Reinhardt is a member of the Company's Executive,
Financing and Nominating Committees.
IDENTIFICATION OF EXECUTIVE OFFICERS.
Information required by this item is contained in Item 4A captioned
"Executive Officers of the Registrant" and is included in Part I of this Annual
Report.
III - 3
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR COMPENSATION.
Employee directors of the Company are not paid any fees, as such,
for service on the Board or on any Board Committee. Each non-employee director
received for fiscal 1996 an annual fee of $30,000 for Board service and an
attendance fee of $2,000 for each Board meeting attended in person or $600 for
each such meeting participated in by telephone. For Committee meetings,
non-employee directors received $1,000 for each Committee meeting attended in
person or $600 for each such meeting participated in by telephone. The Chairman
of each Committee who is a non-employee director received a fee of $1,500 for
each Committee meeting attended in person or $900 for each telephone meeting of
the Committee in which he participated. Non-employee directors are also
reimbursed for all expenses incident to their Board service. Each non-employee
director who serves less than six months in a fiscal year receives 50% of the
annual fee, and if he serves six months or more in a fiscal year, receives 100%
of the prevailing annual fee. Under the Company's Deferred Compensation Plan, a
non-employee director of the Company may elect to defer up to 100% of these fees
or any fixed amount not less than $2,500 of such fees.
The Company has a nonqualified Capital Accumulation Plan for its
non-employee directors. The maximum benefit available to these directors is
$150,000, payable upon retirement in 120 equal consecutive monthly installments.
If the non-employee director has served for less than ten years, his benefit
upon retirement will be based upon 10% of the maximum benefit for each year of
Board service with a minimum of three years of service required for inclusion in
the plan. If a director dies before the normal retirement age of 70 and his
termination from Board service, his beneficiary will receive an amount equal to
100% of the amount the Company would have paid the director had normal
retirement age been attained.
Each non-employee director is automatically entitled to an option
grant of 3,000 shares of Common Stock under the Company's Amended and Restated
1989 Stock Incentive Plan upon his initial election or appointment to the Board,
and is thereafter entitled to an annual grant of 2,000 shares ("Annual Grant")
only if the Company attains a ten percent or greater return on common equity in
the preceding fiscal year. During fiscal 1996, each non-employee director
received an Annual Grant of 2,000 shares.
COMPENSATION OF EXECUTIVE OFFICERS.
The following table sets forth information for the fiscal years
ended September 30, 1996, 1995, and 1994, respectively, with respect to certain
compensation awarded or paid to the Company's Chief Executive Officer and its
other four most highly compensated executive officers (collectively, the "Named
Executive Officers"):
III - 4
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
ANNUAL COMPENSATION Compensation
------------------- Awards
Other Securities
Annual Underlying All Other
Compen- Options/ Compen-
Name and Salary Bonus sation SARs sation(1)
Principal Position Year ($) ($) ($) (#) ($)
- ------------------ ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Robert E. Martini 1996 560,000 502,600 108,561(2) 25,000 33,005(3)
Chairman and Chief 1995 553,269 428,000 168,229(2) 15,750 36,774(3)
Executive Officer 1994 534,808 350,000 117,356(2) 10,000 34,278(3)
Donald R. Roden 1996 400,000 359,000 63,601(5) 95,000 ---
President and Chief 1995(4) --- --- --- --- ---
Operating Officer 1994(4) --- --- --- --- ---
Neil F. Dimick 1996 275,000 269,300 132,631(6) 40,000 4,571
Executive Vice President, 1995 256,731 200,000 35,049(6) 5,250 4,500
Chief Financial Officer 1994 233,654 175,000 30,604(6) 20,000 2,520
Milan A. Sawdei 1996 210,000 141,400 48,087(7) 30,000 4,571
Executive Vice President, 1995 180,000 105,000 33,457(7) 5,250 4,500
Chief Legal Officer and 1994 165,478 100,000 34,855(7) 15,000 2,520
Secretary
Denny W. Steele (8) 1996 200,000 134,700 34,824(9) 15,000 4,598
Executive Vice President 1995 184,809 120,000 29,464(9) 10,250 5,000
1994 165,354 100,000 29,323(9) 15,750 2,520
- -------------------------------------------------
<FN>
(1) Reflects Company contributions under the Company's Pre-Tax Investment
Retirement Account Plus Plan, unless otherwise indicated in the following notes.
(2) Includes $68,250, $92,120 and $80,780 of imputed compensation reflecting the
difference between the average market interest rate for the Company and the
interest free loan to Mr. Martini during fiscal years 1994, 1995 and 1996,
respectively, described under Item 13.
(3) Includes $31,198, $31,774 and $28,418 of allocated premiums paid by the
Company to a split dollar life insurance plan on Mr. Martini during fiscal years
1994, 1995 and 1996, respectively.
(4) Mr. Roden's employment with the Company commenced during fiscal year 1996,
and accordingly, no amounts are reportable for fiscal years 1994 and 1995.
(5) Includes $16,362 of imputed compensation reflecting the difference between
the average market interest rate for the Company and the interest free loan to
Mr. Roden for fiscal year 1996, described under Item 13.
(6) Includes $12,174, $18,506 and $16,288 of imputed compensation reflecting the
difference between the average market interest rate for the Company and the
interest free loan to Mr. Dimick for fiscal years 1994, 1995 and 1996,
respectively, described under Item 13.
(7) Includes $9,100, $13,160 and $11,540 of imputed compensation reflecting the
difference between the average market interest rate for the Company and the
interest free loan to Mr. Sawdei for fiscal years 1994, 1995 and 1996,
respectively, described under Item 13.
(8) Mr. Steele tendered his resignation as an executive officer of the Company
in September 1996.
(9) Includes $9,100, $13,160 and $11,540 of imputed compensation reflecting the
difference between the average market interest rate for the Company and the
interest free loan to Mr. Steele for fiscal years 1994, 1995 and 1996,
respectively, described under Item 13.
</FN>
</TABLE>
III - 5
<PAGE>
EMPLOYMENT AND SEVERANCE AGREEMENTS.
In May 1994, the Board authorized the Company to enter into written
employment agreements (the "Employment Agreements") and severance agreements
(the "Severance Agreements") with Mr. Martini (as Chairman and Chief Executive
Officer), Mr. Dimick (as Executive Vice President, Chief Financial Officer), Mr.
Sawdei (as Executive Vice President, Chief Legal Officer and Secretary) and Mr.
Steele (as Executive Vice President, Chief Information Officer); and, in October
1995, with Mr. Roden (as President and Chief Operating Officer). As previously
indicated, Mr. Steele is no longer an executive officer of the Company, and his
status under the Employment Agreement is currently under review.
Each of the Employment Agreements is for a term of three years. The
Employment Agreements automatically extend on a monthly basis so that the
outstanding term is always three years, subject to the option of either party to
terminate the automatic extension provision at any time. Pursuant to each
Employment Agreement, each Named Executive Officer is to receive his then
effective annual base compensation, a bonus that shall be equal to that paid to
other executive officers at the same level, but, regardless of what may be paid
to other executives, in any event no less than fifty percent of the average of
the Named Executive Officer's previous three annual bonuses, and other benefits
and allowances. In the event of death or disability, each Named Executive
Officer or their beneficiary, as the case may be, will receive the compensation
provided for under his Employment Agreement for the term of the Agreement,
calculated as if notice to terminate had been given 30 days prior to such event.
Pursuant to the Employment Agreements, the Company will indemnify
each Named Executive Officer with respect to any actions, claims or settlements
arising out of the performance of his duties, including the payment of all
reasonable attorneys' fees and necessary costs and expenses. In addition, the
Company will pay as incurred all reasonable attorneys' fees and necessary costs
and disbursements incurred by the Named Executive Officer in connection with any
dispute under the Employment Agreement, whether or not the Named Executive
Officer prevails.
Pursuant to the Employment Agreements, a Named Executive Officer's
employment may be terminated without a claim for damages arising against the
Company (1) upon notice by the Named Executive Officer, except for "good reason"
discussed below; (2) by mutual agreement between the Named Executive Officer and
the Company; or (3) by the Company for cause. If the Employment Agreement is
terminated by the Company for any other reason, or if the Named Executive
Officer terminates the Employment Agreement for good reason (including, but not
limited to, an adverse change in such officer's position from his position at
the time he entered into the Employment Agreement), he will be entitled to
damages equal to the present value equivalent of the compensation he would have
been paid under the Employment Agreement for the next three years, less his
earned income from other employment, if any.
The Severance Agreements, which provide for benefits additional to
the Employment Agreements, with the Named Executive Officers require payment of
cash and other benefits in the event of a voluntary or involuntary termination
III - 6
<PAGE>
of employment within three years following a Change in Control (as hereinafter
defined) of the Company. Payment under the Severance Agreements would consist of
2.99 times the average annual W-2 compensation paid by the Company for the most
recent five taxable years of the Named Executive Officer ending before the date
of the Change in Control if, following a Change in Control, such Named Executive
Officer is terminated without cause, such Named Executive Officer terminates for
any reason within 180 days after a Change in Control, or if such Named Executive
Officer terminates for good reason (including, but not limited to, an adverse
change in such officer's position from his position at the time of the Change in
Control). The Severance Agreement continues until three years and one day after
a Change in Control or until the Named Executive Officer receives the severance
payment under the Agreement.
Under the Severance Agreement, a Change in Control with respect to
the Company is deemed to occur 90 days prior to (i) the acquisition by any
person, entity or group, within the meaning of Section 13(d) and 14(d) of the
Exchange Act (excluding for this purpose, (A) the Company, or (B) any employee
benefit plan of the Company which acquires beneficial ownership of voting
securities of the Company) of 50% or more of beneficial ownership (within Rule
13(d)-3 promulgated under the Exchange Act) of the combined voting power of the
Company's then outstanding securities; (ii) any rolling period of two
consecutive years in which individuals who at the beginning of such period
constitute the Board of Directors of the Company (and any new director whose
election or nomination for election was approved by a vote of at least 2/3 of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors; provided, however, no director shall be considered to have been so
approved if such director initially assumed office as a result of either an
actual or threatened "election contest" (as described in Rule 14(a)-11 under the
Exchange Act) or other actual or threatened solicitation of proxies or consent
by or on behalf of any person other than the Board of Directors, including as a
result of any agreement intended to avoid or settle any such election contest or
proxy contest; (iii) the approval by the Company's shareowners of a dissolution
or liquidation of the Company; (iv) the sale (or similar transaction) of
substantially all of the Company's operating assets; or (v) a merger or
consolidation, or a transaction having a similar effect, where (A) the Company
is not the survivor, (B) the majority of the Common Stock of the Company is no
longer held by the holders of Common Stock of the Company immediately prior to
the transaction, or (C) the Company's Common Stock is converted into cash,
securities or other property.
If any payment or acceleration of any benefits extended from the
Company to any Named Executive Officer upon a Change in Control would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended ("Code"), then the Named Executive Officer shall be entitled to
receive an additional "gross up bonus" in an amount necessary to provide the
Named Executive Officer with sufficient after income tax funds to fully pay all
such excise taxes on both the payment and the gross up bonus.
Pursuant to the Severance Agreement, the Company will pay as
incurred all reasonable attorneys' fees and necessary costs and disbursements
incurred by the Named Executive Officer in connection with any dispute under the
Severance Agreement, whether or not the Named Executive Officer prevails.
III - 7
<PAGE>
In addition to the above arrangements, the Company has an unfunded,
non-qualified Retired Officers Medical Plan available to certain executive
officers of the Company and their spouses, including executive officers now
retired from the Company. The plan provides for payment of the covered
individual's medical, dental, vision and prescription expenses at a level
commensurate with the Company's medical benefit plans that are in effect upon
the executive officer's retirement (as defined in the plan documents), but
limited to the difference between benefits received or potentially available
from other insurance sources (including governmental programs), if any, and the
total expense actually incurred. The duration of the benefit is for the lifetime
of the executive officer and the executive officer's spouse if such officer is
married. Upon a change of control (as defined in the plan documents), it is
contemplated that the Company would pre-fund the plan in an amount necessary to
provide future benefits to the covered individuals eligible to receive benefits
under the plan. Based upon the various eligibility criteria under the plan, two
of the Named Executive Officers (Messrs. Martini and Sawdei) would be eligible
to receive benefits upon their retirement from the Company.
STOCK OPTION GRANTS AND EXERCISES.
The following tables provide information with respect to stock
options granted to and held by the Named Executive Officers:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
% of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise Grant Date
Granted Fiscal Year Price Expiration Present
NAME (#)(1) 1996 ($/SHARE) DATE VALUE($)
- ---- ------ ---- --------- ---- --------
<S> <C> <C> <C> <C> <C>
Robert E. Martini 25,000 3.3 $24.44 11/08/05 $219,000(6)
Donald R. Roden 50,000(2) 12.6 21.56 10/15/04 401,500(7)
20,000 24.44 11/08/05 175,200(6)
25,000(3) 28.75 09/04/06 260,750(8)
Neil F. Dimick 15,000 5.3 24.44 11/08/05 131,400(6)
25,000(4) 28.75 09/04/06 260,750(8)
Milan A. Sawdei 15,000 4.0 24.44 11/08/05 131,400(6)
15,000(5) 28.75 09/04/06 156,450(8)
Denny W. Steele 15,000 2.0 24.44 11/08/05 131,400(6)
- -----------------------------------------------------
<FN>
(1) All shares granted as nonstatutory stock options at 100% of fair market
value on the date of grant, unless otherwise noted, and vest 25% one year after
the date of grant and then 25% per year thereafter.
(2) Granted as incentive stock options.
(3) Of this amount, 3,478 shares granted as incentive stock options.
III - 8
<PAGE>
(4) Of this amount, 11,733 shares granted as incentive stock options.
(5) Of this amount, 9,396 shares granted as incentive stock options.
(6) The grant date present value is based on a Black-Scholes model and assumes a
risk-free rate of return of 6.25%, an option term of ten years, a dividend yield
of 2.58% and a stock volatility of .322.
(7) The grant date present value is based on a Black-Scholes model and assumes a
risk-free rate of return of 6.25%, an option term of ten years, a dividend yield
of 2.11% and a stock volatility of .301.
(8) The grant date present value is based on a Black-Scholes model and assumes a
risk-free rate of return of 6.72%, an option term of ten years, a dividend yield
of 2.40% and a stock volatility of .296.
</FN>
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs at In-the-Money Options/
Acquired on Value FY END (#) SARS AT FY END($) (1)
Exercise Realized ---------- ---------------------
Name (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Martini 0 0 115,308 29,775 $1,396,520 $269,156
Donald R. Roden 0 0 17,500 74,022 163,975 566,925
Neil F. Dimick 0 0 26,325 45,175 367,426 294,874
Milan A. Sawdei 0 0 34,234 36,750 530,519 264,874
Denny W. Steele 0 0 26,657 25,500 345,074 257,862
- ----------------------------------
<FN>
(1) Pursuant to the rules promulgated by the Securities and Exchange Commission,
these values were calculated by determining the difference between the value of
the Company's stock at fiscal year end ($31.75 on September 30, 1996) and the
exercise price of the options.
</FN>
</TABLE>
PENSION TABLE.
The following table shows the estimated annual benefits payable
under the Company's non-qualified Supplemental Executive Retirement Plan
("SERP") at age 62 to persons in specified compensation and years of service
classifications, based on a joint and 75 percent survivor annuity form of
retirement income. The table also includes benefits payable under the Company's
Capital Accumulation Plan ("CAP") for executives who participate in the CAP,
which was the SERP's predecessor plan and which was frozen to all employee
participants on October 7, 1987.
III - 9
<PAGE>
<TABLE>
<CAPTION>
Average Annual
Compensation Estimated Annual Retirement Benefits For
During Highest Three Of Final Years Of Credited Service Shown Below
Five Years Before Retirement 10 20 30 40
- ---------------------------- -- -- -- --
<C> <C> <C> <C> <C>
$ 200,000 $73,500 $126,800 $126,800 $126,800
400,000 176,100 282,700 282,700 282,700
600,000 278,700 438,700 438,700 438,700
800,000 381,500 594,800 594,800 594,800
1,000,000 488,000 754,700 754,700 754,700
</TABLE>
As of September 30, 1996, full years of actual credited service in
these plans are: Mr. Martini--40 years; Mr. Roden--1 year; Mr. Dimick--5 years;
Mr. Sawdei--13 years; and, Mr. Steele--6 years.
Compensation for a particular year as used for the calculation of
retirement benefits under SERP includes base salary received during the year
(including salary deferred under a salary deferral plan) and excludes all other
compensation. Benefits are reduced by the following amounts: (1) the
participant's primary insurance amount payable under the Social Security Act at
retirement age; (2) the participant's benefit under the CAP; (3) an annuitized
amount based upon an assumed level of participation in the Company's Pre-Tax
Investment Retirement Account Plus Plan; and (4) any amounts owed by a
participant to the Company (except to the extent that such amount owed is under
a program that expressly provides that there will not be an offset). Benefits
are payable under the SERP in the form of a joint and survivor annuity,
consisting of periodic payments to each participant or a lump sum distribution
to a participant's beneficiary should a participant die before attaining normal
retirement age. In the alternative, a participant may elect to receive his or
her benefit in a lump sum. A $5,000 funeral benefit is available to a
participant's estate, offset by any funeral benefit paid under the CAP Plan.
Because participants may be required to pay income and payroll taxes based upon
payments made by the Company under SERP, the Company will pay affected
participants an additional amount that the Company estimates will be equal to
such tax liability. Generally, the CAP benefit is a monthly retirement benefit
paid over a specified number of months that, at the election of a participant,
may be paid in a lump sum. Upon a change in control (as defined in the CAP and
SERP), certain senior executive officers' benefits payable under the SERP would
be accelerated such that their credited years of service in these plans would be
as if they had attained the normal retirement age. In addition, a master trust
for certain executive officer deferral plans has been established to preserve
these and certain other executive benefits.
III - 10
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
BENEFICIAL OWNERSHIP OF SECURITIES
The following table lists the beneficial ownership of each person or
group who owns, to the Company's knowledge, more than five percent of its
outstanding voting securities, based on the number of shares outstanding as of
November 30, 1996:
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of Percent of
Beneficial Beneficial Outstanding
Owner Title Of Class Ownership Shares
- ----- -------------- --------- ------
<S> <C> <C> <C>
FMR Corp. (1) Common Stock 4,241,410(1) 10.58
(including subsidiaries)
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Common Stock 2,219,918(2) 5.54
Company, LLP
75 State Street
Boston, Massachusetts 02109
Robert E. Martini (3) Common Stock 2,204,356(4) 5.50
4000 Metropolitan Drive
Orange, California 92868
- ------------------------------------
<FN>
(1) This information was provided by FMR Corp. ("FMR") in its capacities as
serving as an investment advisor to various registered investment companies and
other funds as well as serving as trustee or managing agent for various private
investment accounts. According to a Schedule 13G, dated June 10, 1996, as filed
with the Securities and Exchange Commission, FMR had sole voting power over
598,315 shares and sole dispositive power over 4,241,410 shares.
(2) This information has been furnished to the Company by Wellington Management
Company, LLP ("WMC") as of December 24, 1996. WMC advises that it is an
investment advisor registered with the Securities and Exchange Commission under
the Investment Advisors Act of 1940, as amended, and as of December 24, 1996, in
its capacity as investment advisor, WMC may be deemed to have beneficial
ownership of the number of shares indicated, that are owned by numerous
investment advisory clients, none of which is known to have such interest with
respect to more than five percent of the class. As of such date, WMC advises it
had shared voting power over 1,764,908 shares and shared dispositive power over
2,219,918 shares.
(3) Information as to beneficial ownership has been furnished to the Company by
Robert E. Martini as of September 30, 1996. Except as indicated otherwise by the
following notes, shares shown beneficially owned are those to which Mr.
Martini may have sole voting and dispositive power.
(4) Includes 115,308 shares which, as of October 31, 1996, may be acquired
within sixty days pursuant to the exercise of stock options and 29,925 shares
beneficially owned by Mr. Martini for which he does not have voting and
dispositive power.
</FN>
</TABLE>
III - 11
<PAGE>
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of October 31, 1996, by: (a) each
director; (b) the chief executive officer and the four most highly compensated
executive officers named in the Summary Compensation Table (see "Compensation of
Executive Officers") under Item 11; and (c) all directors and executive officers
as a group:
<TABLE>
<CAPTION>
Aggregate Number
of Shares Percent
Beneficially of
Owned(1)(2) Outstanding Shares
----------- ------------------
<S> <C> <C>
Jose E. Blanco, Sr. 5,601 *
Rodney H. Brady (3) 42,306 *
John Calasibetta 185,910 *
Neil F. Dimick 30,525 *
Dr. Charles C. Edwards 9,929 *
Charles J. Lee 13,401 *
George R. Liddle (4) 30,079 *
Robert E. Martini (5) 2,204,356 5.50
James R. Mellor 12,250 *
George E. Reinhardt, Jr. 84,787 *
Donald R. Roden 27,500 *
Francis G. Rodgers 12,122 *
Milan A. Sawdei (6) 34,864 *
Denny W. Steele 26,657 *
All directors and executive officers as a group
including those above (20 persons) 2,843,476 7.10
- --------------------------------------------
<FN>
* Denotes ownership of less than 1% of the outstanding shares of Common Stock.
(1) Information as to beneficial ownership by the directors and executive
officers named above has been furnished to the Company by such individuals.
Except as indicated otherwise in the footnotes, shares shown as beneficially
owned are those to which the individual has sole voting and dispositive power.
Such shares, where applicable, may be subject to community property laws and
related statutes under which a spouse may be entitled to share in the management
of the community property, which may include the right to vote or dispose of the
shares.
(2) Reflects the number of shares that could be purchased by exercise of options
exercisable as of October 31, 1996 or within 60 days thereafter under the
Company's stock option or stock incentive plans, as follows: Jose E. Blanco, Sr.
5,601 shares; Rodney H. Brady 8,752 shares; Neil F. Dimick 26,325 shares; Dr.
Charles C. Edwards 7,439 shares; Charles J. Lee 8,752 shares; George R. Liddle
5,602 shares; Robert E. Martini 115,308 shares; James R. Mellor 8,752 shares;
George E. Reinhardt, Jr. 5,601 shares; Donald R. Roden 17,500 shares; Francis G.
Rodgers 8,752 shares; Milan A. Sawdei 34,234 shares; Denny W. Steele 26,657
shares; and all directors and executive officers as a group, including those
above (20 persons) 369,250 shares.
(3) Includes 1,850 shares held by two sons living at home and 31,704 shares held
in trust by Mr. Brady as trustee for his own benefit.
(4) Includes 23,735 shares held by Mr. Liddle as co-trustee for the benefit of
him and his wife.
(5) Includes 29,925 shares beneficially owned by Mr. Martini for which he does
not have voting and dispositive power.
(6) Includes 630 shares held by Mr. Sawdei as trustee for his son.
</FN>
</TABLE>
III - 12
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN TRANSACTIONS.
In April 1990, the Board approved an unfunded deferred compensation
loan program available to the executive officers of the Company (the "Executive
Loan Program") for the purpose of providing them with an incentive to remain
with the Company. Under this program, loans are available to all executive
officers of the Company, except those who are also members of the Board. Each
outstanding loan matures upon the officer's termination of employment unless
extended by the Board and is evidenced by a secured promissory note in the
principal amount of the loan which bears no interest. An executive officer may
borrow up to 125% of his or her annual salary then in effect upon the date of
request. The value of collateral securing the loan must equal at least 125% of
the principal loan amount. Although no interest is charged by the Company to the
employee, the employee is deemed by the Internal Revenue Service to have
compensation in the amount of interest calculated according to a formula
prescribed by the Internal Revenue Service. The employee is also deemed to have
paid interest in a like amount to the Company. The Company has the right at any
time to amend, modify or terminate this program but is limited in terminating or
modifying outstanding loans.
In addition to the above loans, the Board has approved making loans
to other key employees under terms similar to the Executive Loan Program and the
principal amount of these loans outstanding as of November 30, 1996, to Messrs.
Martini, Roden and Steffensen were $1,400,000, $500,000 and $481,250,
respectively. The loans to Messrs. Dimick (at the time made), Sawdei and Steele
were made pursuant to the Executive Loan Program and are in the amounts of
$281,250, $200,000 and $200,000, respectively. In addition, William J. Elliott,
Executive Vice President of the Company and President of Bergen Brunswig Medical
Corporation, a Company subsidiary, received a loan in the amount of $331,250
under the Executive Loan Program, and a relocation loan in the amount of
$100,000. Such amounts represent the largest aggregate amount of each executive
officer's indebtedness during the Company's last fiscal year. In the event of a
change in control (as defined in the promissory notes for the applicable loans),
the indebtedness to the Company of Messrs. Martini, Dimick, Elliott (for the
Executive Loan Program loan, only), Roden and Sawdei would be deemed forgiven.
The Company entered into a life insurance plan for Mr. Martini in
1985. Under this insurance plan, the Company pays the premiums on certain life
insurance policies which provide him (or his assignees) with a death benefit of
$1,400,000 and which may provide certain alternative benefits in the event of a
lifetime surrender of the policy. The Company expects to maintain this policy in
force until his 75th birthday, whether he is employed by the Company or has
retired.
Dwight A. Steffensen, formerly a director (1985 to 1996), President
(1992 to 1995), Chief Operating Officer (1990 to 1995) and Executive Vice
President (1985 to 1992) of the Company, currently serves as a consultant to the
Company under a consulting agreement entered into as of February 1, 1996, and
which expires October 15, 1998. The agreement provides for bi-weekly payments
averaging approximately $19,000, lump sum payments at fiscal year-end averaging
III - 13
<PAGE>
approximately $339,000, and upon successful completion of the full term, a lump
sum payment of $1,500,000, to be offset in the amount of $481,250 to reflect
repayment by Mr. Steffensen of his Company loan. In addition, upon completion of
the term of the agreement, the Company shall pay Mr. Steffensen lump sum
payments of $1,026,013 and $1,667,247 as benefits accrued under the Company's
SERP and CAP Plans, respectively through October 15, 1998. However, in the event
Mr. Steffensen breaches certain terms and provisions of the agreement, the SERP
and CAP payments, payable at October 15, 1998, will be reduced in the amounts of
$444,639 and $221,025, respectively.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Article VII of the Company's Restated Certificate of
Incorporation ("Restated Certificate"), every person who is or was a director,
officer, employee or agent of the Company and the legal representative of such a
person is entitled to receive indemnification from the Company to the fullest
extent permitted by law. Under New Jersey law, directors and officers may be
indemnified in certain situations, subject to the Company's having taken certain
actions and the directors and officers having met certain specified standards of
conduct. In 1986, the Company entered into individual agreements (collectively,
the "Indemnity Agreement") to indemnify each of its directors against
liabilities and defense costs to the extent that such directors would have been
insured under the director and officer liability insurance policies which were
in effect on December 31, 1984 (the "1984 Policy"). The Company believes that
the coverage addresses liabilities arising under ERISA, securities and antitrust
laws. The obligation of the Company to indemnify a director under the Indemnity
Agreement is limited to $30 million, in the aggregate, the maximum coverage
available under the 1984 Policy. However, the Indemnity Agreement does not limit
a director's right to recover in excess of such $30 million maximum from the
Company if the director is otherwise entitled to statutory indemnification. The
Indemnity Agreement was ratified by the shareowners at the December 1986 Annual
Meeting.
III - 14
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
--------------------
The following Consolidated Financial Statements
of Bergen Brunswig Corporation and Subsidiaries are
included in Part II, Item 8:
Statements of Consolidated Earnings and
Retained Earnings for the Years Ended
September 30, 1996, 1995, and 1994
Consolidated Balance Sheets, September 30, 1996
and 1995
Statements of Consolidated Cash Flows for the
Years Ended September 30, 1996, 1995, and
1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
Financial statements and schedules not listed are omitted because of the
absence of the conditions under which they are required or because all
material information is included in the consolidated financial statements
or notes thereto.
IV - 1
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Continued)
3. Exhibits
--------
***2 Agreement and Plan of Merger, dated as of November 10,
1996, among BBI, IVAX, the Company, IVAX Merger Sub and
Bergen Merger Sub.
3(a) The By-Laws as amended and restated and dated November
8, 1996.
*3(b) The Restated Certificate of Incorporation dated May 23,
1994 is set forth as Exhibit 3 to the Company's Current
Report on Form 8-K dated May 23, 1995.
*4(a) The Senior Indenture for $400,000,000 of Debt Securities
dated as of December 1, 1992 between the Company and
Chemical Trust Company of California as Trustee is set
forth as Exhibit 4.1 to the Company's Registration
Statement on Form S-3 dated December 1, 1992 (file no.
33-55136).
The Company agrees to furnish to the Securities and
Exchange Commission, upon request, a copy of each
instrument with respect to other issues of long-term
debt of the Company, the authorized principal amount of
which does not exceed 10% of the total assets of the
Company on a consolidated basis.
*4(b) Rights Agreement, dated as of February 8, 1994, between
Bergen Brunswig Corporation and Chemical Trust Company
of California, as Rights Agent, including all exhibits
thereto, is incorporated herein by reference to Exhibit
1 to the Company's Registration Statement on Form 8-A
dated February 14, 1994.
***10(a) Stock Option Agreement, dated as of November 10, 1996,
between IVAX and the Company.
***10(b) Stock Option Agrement, dated as of November 10, 1996,
between the Company and the IVAX.
***10(c) Voting Agreement, dated as of November 10, 1996, between
IVAX and Robert E. Martini.
***10(d) Voting Agreement, dated as of November 10, 1996, among
the Company, Frost-Nevada, Limited Partnership and Dr.
Phillip Frost.
IV - 2
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Continued)
3. Exhibits (Continued)
--------
**10(e) Bergen Brunswig Corporation Deferred Compensation Plan.
**10(f) Director Indemnification Agreement and Amendmentto
Director Indemnification Agreement.
*10(g) Bergen Brunswig Corporation Bonus Plan as adopted
September 1, 1977, amended October 19, 1990, is set
forth as Exhibit 10(i) in the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 1991.
**10(h) Bergen Brunswig Corporation Stock Option Plans, other
than the 1989 Stock Incentive Plan.
*10(i) 1989 Stock Incentive Plan of Bergen Brunswig Corporation
is set forth as Exhibit 10(j) in the Company's Annual
Report on Form 10-K for the fiscal year ended August 31,
1989.
*10(j) Amendments to the Amended and Restated 1989 Stock
Incentive Plan of Bergen Brunswig Corporation dated
October 20, 1994 are set forth as Appendix A on pages 28
and 29 of the Company's definitive Proxy Statement dated
December 22, 1994 for its January 26, 1995 Annual
Meeting of Shareowners.
*10(k) Form of Amended and Restated Supplemental Executive
Retirement Plan.
*10(l) Form of Amended and Restated Capital Accumulation Plan.
Exhibits 10(k) and 10(l) above are set forth as Exhibits
10.1 and 10.2 in the Company's Registration Statement on
Form S-3 and Amendment No.1 thereto relating to a shelf
offering of $400 million in securities filed February 1,
1996 and March 19, 1996, respectively (file no.
333-631).
10(m) Amendment No.1 to the Amended and Restated Capital
Accumulation Plan.
*10(n) Executive Loan Program is set forth as Exhibit 10(k) in
the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1990.
IV - 3
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(Continued)
3. Exhibits (Continued)
--------
*10(o) Amended and Restated Executive Loan Program dated March
3, 1995 is set forth as Exhibit 10(g) in the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1995.
*10(p) Non-Solicitation Agreement dated as of September 4, 1992
among W.A. Williamson, Jr., Durr-Fillauer Medical, Inc.
and Bergen Brunswig Corporation is set forth as Exhibit
(c)(2) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement pursuant to Section 14(d)(1) of the Securities
and Exchange Act of 1934.
*10(q) Non-Solicitation Agreement dated as of September 4, 1992
among Charles E. Adair, Durr-Fillauer Medical, Inc. and
Bergen Brunswig Corporation is set forth as Exhibit
(c)(3) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement pursuant to Section 14(d)(1) of the Securities
and Exchange Act of 1934.
*10(r) Non-Solicitation Agreement dated as of September 4, 1992
among Winfield Cotton, Durr-Fillauer Medical, Inc. and
Bergen Brunswig Corporation is set forth as Exhibit
(c)(4) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement pursuant to Section 14(d)(1) of the Securities
Exchange Act of 1934.
*10(s) Agreement dated as of September 18, 1992 by and among
Bergen Brunswig Corporation, Durr-Fillauer Medical, Inc.
and the Attorneys General of the States of Alabama,
Florida and Louisiana is set forth as Exhibit 10(p) in
the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1992.
*10(t) Employment Agreement and Schedule.
*10(u) Severance Agreement and Schedule.
Exhibits 10(t) and 10(u) above are set forth as Exhibit
10(q) and 10(r) in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1994.
11 Computation of earnings per share for the three years
ended September 30, 1996.
IV - 4
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
21 List of subsidiaries of Bergen Brunswig Corporation.
23 Independent Auditors' Consent.
24 Power of Attorney is set forth on the Signature pages in
Part IV of this Annual Report.
27 Financial Data Schedule for the year ended September 30,
1996.
*99(a) Split Dollar Life Insurance Plan with Emil P. Martini,
Jr. and Robert E. Martini.
*99(b) Amended and Restated Credit Agreement dated as of
September 30, 1994 among Bergen Brunswig Drug Company,
Bergen Brunswig Corporation and Bank of America National
Trust and Savings Association is set forth as Exhibit
99(h) in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1994.
*99(c) First and Second Amendments to Amended and Restated
Credit Agreement dated as of February 27, 1995 and March
16, 1996, respectively, are set forth as Exhibits 99(a)
and 99(b), respectively, in the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1996.
*99(d) Item 1 - Legal Proceedings of Part II of the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1994 as filed with the Securities and Exchange
Commission, are incorporated herein by reference in Part
I, Item 3 of this Annual Report.
*99(e) The Company's Current Report on Form 8-K dated November
10, 1996, relating to the execution of a definitive
merger agreement with IVAX Corporation, is incorporated
herein by reference in Part I, Item 1 of this Annual
Report.
*99(f) The Company's Schedule 13D and Form 3 dated November 10,
1996 relating to the definitive merger agreement with
IVAX Corporation.
IV - 5
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
*99(g) Agreement and Plan of Merger dated as of September 4,
1992 by and among Bergen Brunswig Corporation, BBC
Acquisition Corp. and Durr-Fillauer Medical, Inc. is set
forth as Exhibit (c)(1) to Amendment No. 16 to Bergen
Brunswig Corporation's and BBC Acquisition Corp.'s
Tender Offer Statement Pursuant to Section 14(d)(1) of
the Securities and Exchange Act of 1934.
* Document has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
** Incorporated herein by reference to the exhibits filed as part of the
Company's Registration Statement on Form S-3 (Registration No. 33-5530)
and Amendment Nos. 1 and 2 thereto relating to an offering of $43,000,000
principal amount of 6 7/8% Exchangeable Subordinated Debentures due 2011,
filed with the Securities and Exchange Commission on May 8, July 1, and
July 8, 1986, respectively.
*** Incorporated herein by reference to the exhibits filed as part of the
Company's Current Report on Form 8-K relating to the execution of a
definitive merger agreement with IVAX Corporation, filed with the
Securities and Exchange Commission on November 12, 1996.
(b) Reports on Form 8-K:
On November 12, 1996, a Current Report on Form 8-K, dated November 10,
1996, was filed reporting under Item 5, the execution of a definitive
merger agreement with IVAX Corporation.
IV - 6
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BERGEN BRUNSWIG CORPORATION
December 27, 1996 By /S/ ROBERT E. MARTINI
-----------------------
Robert E. Martini
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below, hereby constitutes and appoints Robert E. Martini, Donald R. Roden and
Milan A. Sawdei and each of them singly, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any or all
amendments (including pre-effective amendments and post-effective amendments) to
this Annual Report on Form 10-K, and to file the same with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/ ROBERT E. MARTINI Chairman of the Board December 27, 1996
- --------------------- and Chief Executive
Robert E. Martini Officer and Director
(Principal Executive
Officer)
/S/ DONALD R. RODEN President and Chief December 27, 1996
- ------------------- Operating Officer and Chief
Donald R. Roden Executive Officer-Elect
and Director
/S/ NEIL F. DIMICK Executive Vice President, December 27, 1996
- ------------------ Chief Financial Officer
Neil F. Dimick and Director
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
IV - 7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/S/ JOHN CALASIBETTA Senior Vice President December 27, 1996
- -------------------- and Director
John Calasibetta
/S/ JOSE E. BLANCO, SR. Director December 27, 1996
- -----------------------
Jose E. Blanco, Sr.
/S/ RODNEY H. BRADY Director December 27, 1996
- -------------------
Rodney H. Brady
/S/ CHARLES C. EDWARDS, M.D. Director December 27, 1996
- ----------------------------
Charles C. Edwards, M.D.
/S/ CHARLES J. LEE Director December 27, 1996
- ------------------
Charles J. Lee
/S/ GEORGE R. LIDDLE Director December 27, 1996
- --------------------
George R. Liddle
/S/ JAMES R. MELLOR Director December 27, 1996
- -------------------
James R. Mellor
/S/ GEORGE E. REINHARDT, JR. Director December 27, 1996
- ----------------------------
George E. Reinhardt, Jr.
/S/ FRANCIS G. RODGERS Director December 27, 1996
- ----------------------
Francis G. Rodgers
IV - 8
<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. PAGE NO.
- ----------- --------
***2 Agreement and Plan of Merger, dated as of November 10,
1996, among BBI, IVAX, the Company, IAX Merger Sub and
Bergen Merger Sub
3(a) The By-Laws as amended and restated and dated 68
November 8, 1996.
*3(b) The Restated Certificate of Incorporation dated May 23,
1994 is set forth as Exhibit 3 to the Company's Current
Report on Form 8-K dated May 23, 1995.
*4(a) The Senior Indenture for $400,000,000 of Debt Securities
dated as of December 1, 1992 between the Company and
Chemical Trust Company of California as Trustee is set
forth as Exhibit 4.1 to the Company's Registration
Statement on Form S-3 dated December 1, 1992 (file no.
33-55136).
The Company agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of each instrument with
respect to other issues of long-term debt of the Company,
the authorized principal amount of which does not exceed
10% of the total assets of the Company on a consolidated
basis.
*4(b) Rights Agreement, dated as of February 8, 1994, between
Bergen Brunswig Corporation and Chemical Trust Company of
California, as Rights Agent, including all exhibits
thereto, is incorporated herein by reference to Exhibit 1
to the Company's Registration Statement on Form 8-A dated
February 14, 1994.
***10(a) Stock Option Agreement, dated as of November 10, 1996,
between IVAX and the Company.
***10(b) Stock Option Agreement, dated as of November 10, 1996,
between the Company and IVAX.
***10(c) Voting Agreement, dated as of November 10, 1996, between
IVAX and Robert E. Martini.
***10(d) Voting Agreement, dated as of November 10, 1996, among the
Company, Frost-Nevada, Limited Partnership and Dr. Phillip
Frost.
**10(e) Bergen Brunswig Corporation Deferred Compensation Plan.
**10(f) Director Indemnification Agreement and Amendment to
Director Indemnification Agreement.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
-----------------------------
EXHIBIT NO. PAGE NO.
- ----------- --------
*10(g) Bergen Brunswig Corporation Bonus Plan as adopted
September 1, 1977, amended October 19, 1990, is set forth
as Exhibit 10(i) in the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 1991.
**10(h) Bergen Brunswig Corporation Stock Option Plans, other than
the 1989 Stock Incentive Plan.
*10(i) 1989 Stock Incentive Plan of Bergen Brunswig Corporation
is set forth as Exhibit 10(j) in the Company's Annual
Report on Form 10-K for the fiscal year ended August 31,
1989.
*10(j) Amendments to the Amended and Restated 1989 Stock
Incentive Plan of Bergen Brunswig Corporation dated
October 20, 1994 are set forth as Appendix A on pages 28
and 29 of the Company's definitive Proxy Statement
dated December 22, 1994 for its January 26, 1995 Annual
Meeting of Shareowners.
*10(k) Form of Amended and Restated Supplemental Executive
Retirement Plan.
*10(l) Form of Amended and Restated Capital Accumulation Plan.
Exhibits 10(k) and 10(l) above are set forth as Exhibits
10.1 and 10.2 in the Company's Registration Statement Form
S-3 and Amendment No. 1 thereto relating to a shelf
offering of $400 million in securities filed February 1,
1996 and March 19, 1996, respectively (file no. 333-631).
10(m) Amendment No. 1 to the Amended and Restated Capital 90
Accumulation Plan.
*10(n) Executive Loan Program is set forth as Exhibit 10(k) in
the Company's Annual Report on Form 10-K for the fiscal
year ended August 31, 1990.
*10(o) Amended and Restated Executive Loan Program dated March 3,
1995 is set forth as Exhibit 10(g) in the Company's Annual
Report on Form 10-K for the fiscal year ended September
30, 1995.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
-----------------------------
EXHIBIT NO. PAGE NO.
- ----------- --------
*10(p) Non-Solicitation Agreement dated as of September 4, 1992
among W.A. Williamson, Jr., Durr-Fillauer Medical, Inc.
and Bergen Brunswig Corporation is set forth as Exhibit
(c)(2) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement pursuant to Section 14(d)(1) of the Securities
and Exchange Act of 1934.
*10(q) Non-Solicitation Agreement dated as of September 4, 1992
among Charles E. Adair, Durr-Fillauer Medical, Inc. and
Bergen Brunswig Corporation is set forth as Exhibit (c)(3)
to Amendment No. 16 to Bergen Brunswig Corporation's and
BBC Acquisition Corp.'s Tender Offer Statement pursuant to
Section 14(d)(1) of the Securities and Exchange Act of
1934.
*10(r) Non-Solicitation Agreement dated as of September 4, 1992
among Winfield Cotton, Durr-Fillauer Medical, Inc. and
Bergen Brunswig Corporation is set forth as Exhibit (c)(4)
to Amendment No. 16 to Bergen Brunswig Corporation's and
BBC Acquisition Corp.'s Tender Offer Statement pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934.
*10(s) Agreement dated as of September 18, 1992 by and among
Bergen Brunswig Corporation, Durr-Fillauer Medical, Inc.
and the Attorneys General of the States of Alabama,
Florida and Louisiana is set forth as Exhibit 10(p) in the
Company's Annual Report on Form 10-K for the fiscal year
ended August 31, 1992.
*10(t) Employment Agreement and Schedule.
*10(u) Severance Agreement and Schedule.
Exhibit 10(t) and 10(u) above are set forth as Exhibits
10(q) and 10(r) in the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1994.
11 Computation of earnings per share for the three years 91
ended September 30, 1996.
21 List of subsidiaries of Bergen Brunswig Corporation 92
23 Independent Auditors' Consent. 93
24 Power of Attorney is set forth on the Signature pages in
Part IV of this Annual Report.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
-----------------------------
EXHIBIT NO. PAGE NO.
- ----------- --------
27 Financial Data Schedule for the year ended September
30, 1996. 94
*99(a) Split Dollar Life Insurance Plan with Emil P. Martini,
Jr. and Robert E. Martini.
*99(b) Amended and Restated Credit Agreement dated as of
September 30, 1994 among Bergen Brunswig Drug Company,
Bergen Brunswig Corporation and Bank of America National
Trust and Savings Association is set forth as Exhibit
99(h) in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994.
*99(c) First and Second Amendments to Amended and Restated Credit
Agreement dated as of February 27, 1995 and March 16,
1996, respectively, are set forth as Exhibits 99(a) and
99(b), respectively, in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996.
*99(d) Item 1 - Legal Proceedings of Part II of the Company's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1994 as filed with the Securities and Exchange
Commission, are incorporated herein by reference in Part
I, Item 3 of this Annual Report.
*99(e) The Company's Current Report on Form 8-K dated November
10, 1996, relating to the execution of a definitive merger
agreement with IVAX Corporation, is incorporated herein by
reference in Part I, Item 1 of this Annual Report.
*99(f) The Company's Schedule 13D and Form 3 dated November 10,
1996 relating to the definitive merger agreement with IVAX
Corporation.
*99(g) Agreement and Plan of Merger dated as of September 4, 1992
by and among Bergen Brunswig Corporation, BBC Acquisition
Corp. and Durr-Fillauer Medical, Inc. is set forth as
Exhibit (c)(1) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement Pursuant to Section 14(d)(1) of the Securities
and Exchange Act of 1934.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
-----------------------------
* Document has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
** Incorporated herein by reference to the exhibits filed as part of the
Company's Registration Statement on Form S-3 (Registration No. 33-5530)
and Amendment Nos. 1 and 2 thereto relating to an offering of $43,000,000
principal amount of 6 7/8% Exchangeable Subordinated Debentures due 2011,
filed with the Securities and Exchange Commission on May 8, July 1, and
July 8, 1986, respectively.
*** Incorporated herein by reference to the exhibits filed as part of the
Company's Current Report on Form 8-K relating to the execution of a
definitive merger agreement with IVAX Corporation, filed with the
Securities and Exchange Commission on November 12, 1996.
<PAGE>
Exhibit 3(a)
AMENDED AND RESTATED BY-LAWS
BERGEN BRUNSWIG CORPORATION
AS OF NOVEMBER 8, 1996
----------------------------------
ARTICLE I
OFFICE
------
Section 1. PRINCIPAL OFFICE. The principal office of the corporation is
-----------------
hereby fixed and located at 4000 Metropolitan Drive, in the City of Orange,
County of Orange, and State of California. The board of directors is hereby
granted full power and authority to change said principal office to another
office within or without the State of California.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any time be
-------------
established by the board of directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
MEETING OF SHAREHOLDERS
-----------------------
Section 1. PLACE OF MEETINGS. All meetings of shareholders shall be held
-----------------
at the principal office of the corporation or at such other place in the States
of New Jersey, California or New York as may be designated by the board of
directors or its executive committee and stated in the notice of the meeting.
Section 2. ANNUAL MEETINGS. An annual meeting of the shareholders of the
----------------
corporation shall be held on such day during the months of December, January or
February of each year, and at
<PAGE>
such hour, as shall be fixed by the board of directors and designated in the
notice of the meeting.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders may be
-----------------
called for any purpose and at any time by the chairman of the board, the
president or by the board of directors or as provided in the certificate of
incorporation.
Section 4. NOTICE OF MEETINGS. Written notice of the time, place and
-------------------
purposes of annual and special meetings of shareholders shall be given to each
shareholder entitled to vote at such meeting at least ten (10) days and not more
than sixty (60) days before the date of such meeting, either personally or by
mail, charges prepaid, addressed to such shareholder at his address appearing on
the books of the corporation.
Section 5. RECORD DATE. The board of directors shall fix the record date
-----------
for determination of shareholders entitled to notice of and to vote at any
annual or special meeting of shareholders. Such record date shall not be more
than sixty (60) days nor less than ten (10) days before the date of such
meeting.
Section 6. NOMINATIONS OF DIRECTORS AND PROPOSALS OF BUSINESS TO BE
---------------------------------------------------------------
CONSIDERED. (a) Nominations of persons for election to the board of directors of
- ----------
the corporation and the proposal of business to be considered by the
shareholders may be made at an annual meeting of shareholders (i) pursuant to
the corporation's notice of such annual meeting, (ii) by or at the direction of
the board of directors or (iii) by any shareholder of the corporation who was a
shareholder of record at the time of giving of the notice provided for in this
Article II, Section 6 and who is entitled to vote at the meeting, provided that
such shareholder has complied with the notice procedures set forth in this
Article II, Section 6.
(b) For nominations or other business to be properly brought before
an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) of
this Article II, Section 6, the shareholder must have given timely notice
thereof in writing to the secretary of the corporation. To be timely, a
shareholder's notice shall be delivered to the secretary at the principal
executive offices of the corporation not less than sixty (60) days nor more than
ninety (90) days prior to the first anniversary of the preceding year's annual
<PAGE>
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than thirty (30) days or delayed by more than sixty
(60) days from such anniversary date, notice by the shareholder to be timely
must be so delivered not earlier than the ninetieth (90th) day prior to such
annual meeting and not later than the close of business on the later of the
sixtieth (60th) day prior to such annual meeting or the tenth (10th) day
following the day on which public announcement of the date of such meeting is
first made. Such shareholder's notice shall set forth (i) as to each person whom
the shareholder proposes to nominate for election or reelection as a director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including, without limitation, such person's
name, address and principal occupation and such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the shareholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any financial or other interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to
the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (1) the name and address of such
shareholder, as they appear on the corporation's books, and of such beneficial
owner and (2) the class and number of shares of the corporation which are owned
beneficially and of record by such shareholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of paragraph (b)
of this Article II, Section 6 to the contrary, in the event that the number of
directors to be elected to the board of directors of the corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased board of directors made by the
corporation at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting, a shareholder's notice required by this Article
<PAGE>
II, Section 6 shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to the
secretary at the principal executive offices of the corporation not later than
the close of business on the tenth (10th) day following the day on which such
public announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Article II, Section 6 shall be eligible to serve as
directors and only such business shall be conducted at an annual meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Article II, Section 6; provided, however, that
the presiding officer of the meeting may elect, for good cause shown, to waive
one or more of the procedures of this Article II, Section 6. The presiding
officer of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Article II, Section 6 and, if
any proposed nomination or business is not in compliance with this Article II,
Section 6 and the presiding officer elects not to waive such non-compliance, to
declare that such defective proposed business or nomination shall be
disregarded.
(e) For purposes of this Article II, Section 6, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or a comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(f) Notwithstanding the foregoing provisions of this Article II,
Section 6, a shareholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Article II, Section 6. Nothing in this Article II,
Section 6 shall be deemed to affect any rights of shareholders to request
inclusion of proposals in the corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
Section 7. QUORUM. Except as otherwise provided in the certificate of
------
incorporation, the presence in person or by proxy of the holders of a majority
<PAGE>
of any class or series voting separately at a meeting and a majority of any two
or more classes voting together as a class at such meeting shall constitute a
quorum for the transaction of business; if any matter to come before the meeting
requires a vote of less than all the outstanding classes, then the presence in
person or by proxy of the holders of a majority of the class or classes or
series having the right to vote on such matter or matters shall constitute a
quorum for the transaction of such business. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
Section 8. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders'
------------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares the holders of which
are either present in person or represented by proxy at such meeting, but in the
absence of a quorum no other business may be transacted at such meeting;
provided, however, that if a quorum of any class or series is present and
objects to such adjournment, the meeting shall not be adjourned.
When any shareholders' meeting, either annual or special, is
adjourned for more than thirty days, notice of the adjourned meeting shall be
given as in the case of an original meeting. If any such meeting is adjourned
for thirty days or less, however, and the time and place of the adjourned
meeting is announced at the meeting at which the adjournment is taken, and the
only business transacted at the adjourned meeting is such as might have been
transacted at the original meeting, no further notice of the adjourned meeting
need be given to shareholders. If after the adjournment, the board of directors
fixes a new record date for the adjourned meeting, however, a notice of the
adjourned meeting shall be given to each shareholder of record on the new record
date.
Section 9. VOTING. Shareholders shall vote their stock in the manner
-------
provided in the certificate of incorporation as amended from time to time.
Shares held by the corporation shall not be voted at any meeting of shareholders
for any purpose.
Section 10. PROXIES. Every shareholder entitled to vote at a meeting of
--------
shareholders may authorize another person or persons to act for him by proxy.
<PAGE>
Every proxy shall be executed in writing by the shareholder or his agent, except
that a proxy may be given by a shareholder or his agent by telegram or cable or
by any means of electronic communication which results in a writing. No proxy
shall be valid after eleven months from the date of its execution unless a
longer time is expressly provided therein. Unless it states that it is
irrevocable and is coupled with an interest either in the stock itself or in the
corporation, a proxy shall be revocable at will. A proxy shall not be revoked by
the death or incapacity of the shareholder but the proxy shall continue to be in
force until revoked by the personal representative or guardian of the
shareholder. The presence at a meeting of any shareholder who has given a proxy
does not revoke the proxy unless the shareholder files written notice of the
revocation with the secretary of the meeting prior to the voting of the proxy or
votes the shares subject to the proxy by written ballot. A person named in a
proxy as the attorney or agent of a shareholder may, if the proxy so provides,
substitute another person to act in his place, including any other person named
as an attorney or agent in the same proxy. The substitution shall not be
effective until an instrument effecting it is filed with the secretary of the
corporation.
Section 11. OFFICERS OF MEETINGS. The chairman of the board, if present,
--------------------
shall preside at all meetings of shareholders. In his absence, the president, if
present, shall preside. In his absence, the vice president of the corporation
who has held that office for the longest period of those present at the meeting
shall preside. The secretary of the corporation shall, if present, act as
secretary of all meetings of shareholders. In his absence, any assistant
secretary of the corporation who is present shall act as secretary of the
meeting. If no assistant secretary is present, a temporary secretary for that
particular meeting shall be elected.
Section 12. ORDER OF BUSINESS. The order of business at all meetings of
------------------
the shareholders, unless changed by a majority vote of the shares entitled to
vote at such meeting, shall be as follows: (i) call to order; (ii) proof of
mailing of notice of meeting, proxy and proxy statement; (iii) report on
presence of a quorum; (iv) reading or waiver of minutes of preceding meeting;
(v) election of directors; (vi) vote on other proposals; (vii) report of
officers; and (viii) other business and adjournment.
<PAGE>
Section 13. VOTING LIST. The secretary or any assistant secretary shall
-----------
produce at each shareholders' meeting a list of shareholders entitled to vote at
the meeting or any adjournment thereof. Such list shall (a) be arranged
alphabetically within each class and series, with the address of, and the number
of shares held by, each shareholder, (b) be subject to the inspection of any
shareholder for reasonable periods during the meeting, and (c) be prima facie
evidence as to persons who are the shareholders entitled to examine such list or
to vote at the meeting.
Section 14. ACTION BY SHAREHOLDERS WITHOUT A MEETING. In order that the
------------------------------------------
corporation may determine the shareholders entitled to consent to corporate
action in writing without a meeting pursuant to Section 14A:5-6 of the New
Jersey Business Corporation Act, any shareholder of record seeking to have the
shareholders authorize or take corporate action by written consent shall, by
written notice to the secretary, request that the board of directors set a
record date. Upon receipt of such written notice, or in the absence of such
written notice at any time at its election, the board of directors may, as it
deems appropriate and in the best interests of the corporation, adopt a
resolution setting a record date for purposes of determining the shareholders
entitled to consent to corporate action in writing without a meeting. Any record
date set by the board of directors pursuant to this Section 14 shall not
precede, and shall not be more than ten (10) days after, the date on which the
resolution setting the record date is adopted by the board of directors.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. NUMBER OF DIRECTORS. The board of directors of the corporation
-------------------
shall be composed of not less than nine (9) nor more than fifteen (15) until
changed by an amendment of the certificate of incorporation duly adopted by the
shareholders of the corporation.
The board of directors, following the adoption of these amended
by-laws, shall consist of twelve (12) members. The number of directors may be
<PAGE>
increased or decreased within the foregoing limitations by an amendment to this
Section 1 of Article III duly adopted by the board of directors.
Section 2. TERM OF OFFICE; CLASSIFICATION OF DIRECTORS. The board shall be
-------------------------------------------
divided into three classes, which shall be denominated Classes I, II and III,
respectively. The number of directors in each class shall be as nearly equal as
possible. All persons who are now Class A directors shall continue in office
until the expiration of the terms for which they were elected and thereafter
until their successors shall have been elected and qualified. All other
directors shall continue in office until the first meeting of shareholders
following the conversion of all Class B Common Stock into Class A Common Stock
pursuant to the certificate of incorporation (the "First Meeting"), and
thereafter until their successors shall have been elected and qualified.
At the First Meeting, Class I directors shall be elected for a term
ending at the third annual meeting of shareholders thereafter; Class II
directors shall be elected for a term ending at the first annual meeting of
shareholders thereafter; and Class III directors shall be elected for a term
ending at the second annual meeting of shareholders thereafter. Management shall
recommend, and the board of directors shall determine, which directors shall be
nominated for each such Class.
At each meeting of shareholders after the First Meeting, directors
shall be elected to fill the directorships of the Class of directors whose terms
have expired. Those directors shall hold office until the third successive
annual meeting of shareholders after their election and until their successors
shall have been elected and qualified, so that directors elected at annual
meetings of shareholders subsequent to the First Meeting shall each be elected
for a three year term, and that the term of one class of directors shall expire
at each annual meeting.
Section 3. RESIGNATION AND REMOVAL. Any director may resign at any time.
Any director may be removed with or without cause as provided in the certificate
of incorporation. A special meeting for the purpose of removing a director may
be called for by the chairman of the board, the president or the board of
directors. Notice of such meeting shall be given to all the shareholders of
<PAGE>
Class A Common Stock in the manner provided by these by-laws for any annual or
special meeting. A new director may be elected at the special meeting called for
the purpose of removing such director or at any subsequent annual or special
meeting of shareholders. If such director is elected at a special meeting of
shareholders, he shall serve until the term of the removed director would have
expired and thereafter until his successor shall have been elected and
qualified.
Section 4. VACANCIES. If any vacancy should occur in the board of
---------
directors for any reason whatsoever, such vacancy may be filled by a majority of
the remaining directors. Each director so elected shall hold office until the
next succeeding annual or special meeting of the shareholders and thereafter
until his successor shall have been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist in the case of the death, resignation or removal of any director, or if
the authorized number of directors be increased, or if the shareholders fail at
any special meeting of the shareholders at which any director or directors are
elected to elect the authorized number of directors to be voted for at that
meeting. No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Subject to the provisions of the certificate of incorporation, the
shareholders may elect a director or directors at any time to fill any vacancy
or vacancies not filled by the directors. If the board of directors accepts the
resignation of a director tendered to take effect at a future time, the board or
the shareholders shall have the power to elect a successor to take office when
the resignation is to become effective.
If the chairman of the board, the president or the board of
directors shall so direct, the secretary shall promptly call a special meeting
of shareholders to elect a director to fill such vacancy. Any director so
elected shall hold office for a term which is not inconsistent with Section 2 of
Article III of these by-laws, and thereafter until his successor shall have been
elected and qualified.
<PAGE>
If a vacancy of all directors shall occur, the president or
secretary shall promptly call a special meeting of the shareholders to elect
directors to fill such vacancies. The persons so elected shall hold office until
the next annual meeting of shareholders and thereafter until their respective
successors shall have been elected and qualified.
Section 5. PLACE OF MEETING. The board of directors may hold its meetings
----------------
at such place or places within or without the State of New Jersey as the board
may from time to time determine.
Section 6. REGULAR MEETINGS. Regular meetings of the board of directors
-----------------
shall be held on such day in March or April, June or July and September or
October as shall be determined from time to time by the board, at 10:00 a.m. or
at such other time designated by the board on such day; provided, however, that
should said day fall upon a legal holiday, then any such meeting shall be held
at the same hour and place on the next succeeding day which is not a legal
holiday. A fourth regular meeting of the board of directors shall take place
immediately following the conclusion of the annual meeting of shareholders. At
the regular meeting of the board held immediately following the annual meeting
of shareholders, the board of directors shall organize and elect officers.
Section 7. SPECIAL MEETINGS. Special meetings of the board of directors
-----------------
for any purpose or purposes may be called at any time by the chairman of the
board, the president, or by any three (3) directors.
Section 8. NOTICE OF MEETINGS. Notice of the place of each regular meeting
------------------
of the board, and notice of the time and place of each special meeting of the
board, shall be given in writing to each director either by hand delivery,
facsimile transmission or mail, to the address or facsimile number, as the case
may be, of such director as shown upon the records of the corporation. If such
notice is delivered by hand or by facsimile transmission, it shall be delivered
or transmitted, as the case may be, at least twenty-four (24) hours prior to the
time of the holding of the meeting. If such notice is mailed, it shall be sent
either by overnight mail, in which case it shall be deposited with the overnight
mail service at least two days prior to the time of the holding of the meeting,
or by airmail, in which case it shall be deposited in the United States Mails at
least one week prior to the time of the holding of the meeting. Such hand
<PAGE>
delivery, facsimile transmission or mailing as above provided shall be due,
legal and personal notice to such director.
Section 9. WAIVER OF NOTICE AND CONSENT. The transactions of any meeting
----------------------------
of the board, however called and noticed or wherever held, shall be as valid as
though such meeting had been duly held after a regular call and notice, if a
quorum be present and if, before or after the meeting, each of the directors not
present signs a written waiver of notice or a consent to the holding of such
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 10. ACTION WITHOUT MEETING. Any action required or permitted to be
----------------------
taken by the board of directors by law or these by-laws may be taken without a
meeting, if, prior or subsequent to such action, all members of the board shall
individually or collectively consent in writing to such action. Each such
written consent or consents shall be filed with the minutes of the proceedings
of the board. Such action by written consent shall have the same force and
effect as a unanimous vote of such directors, for all purposes. Any certificate
or other document which relates to action so taken shall state that the action
was taken by unanimous written consent of the board of directors without a
meeting, and that the by-laws authorize the directors so to act.
Section 11. QUORUM. A majority of the entire board of directors shall
------
constitute a quorum for the transaction of business.
Section 12. VOTING. Every act or decision done or made by a majority of
------
the directors present at a meeting duly held at which a quorum is present shall
be regarded as the act of the board of directors. In determining the presence of
a quorum and the result of a vote taken by the board, no distinction shall be
made among the directors with respect to the class or classes or series of
shareholders which elected them.
Section 13. PRESIDING OFFICER. The chairman of the board shall preside at
-----------------
all meetings of the board at which he is present. In the absence of the chairman
of the board, the president shall preside. If the secretary of the corporation
<PAGE>
or any assistant secretary is present, he shall record the minutes of the
meeting, and if neither of them is present the board shall designate a secretary
to record the minutes of the meeting.
Section 14. ADJOURNMENT. A quorum of the directors may adjourn any
-----------
directors' meeting to meet again at a time and place fixed in the resolutions
adjourning such meeting, and no notice of the time and place of the adjourned
meeting need be given if the period of adjournment does not exceed ten days in
any one adjournment. A meeting of directors at which less than a quorum is
present may also be adjourned until the next regular meeting of the board.
Section 15. DIRECTORS EMERITUS. The title of director emeritus may be
--------------------
conferred by the board of directors upon any former director of the corporation
or of a corporation acquired by the corporation who, in the judgment of the
board, has brought credit and distinction to this corporation, or such acquired
corporation, through long and faithful service. The title hereby created is
honorary only and does not carry with it the powers, duties or obligations of a
director of this corporation or any other power, duty or obligation. The title
may be conferred upon as many persons as the board deems appropriate. A director
emeritus shall not be deemed a director or member of the board of directors but
may attend meetings of the board and, upon invitation of the chairman, may take
part in the deliberative proceedings of the board, but may not vote.
Section 16. FEES AND COMPENSATION. Directors shall receive for attendance
---------------------
at each regular or special meeting of the board a fixed sum and expenses of
attendance, if any, and an annual fee for service as a director, such as may be
allowed by resolution of the board. The board of directors may, if it so
desires, fix one fee for directors who are officers or employees of the
corporation (or who are receiving retirement benefits from it or a subsidiary or
under a pension trust of a subsidiary) and a higher fee for other directors.
Nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
<PAGE>
ARTICLE IV
COMMITTEES
----------
Section 1. ESTABLISHMENT OF COMMITTEES. The board of directors may, by
-----------------------------
resolution adopted by a majority of the entire board, designate an executive
committee, consisting of the chairman of the board, the president and two (2) or
more other directors, and may at any time designate additional committees, each
of which shall consist of two (2) or more directors. Subject to the limitations
contained in Section 8 of this Article IV, the executive committee shall have
the maximum authority permitted by law in effect at the time of the exercise of
such authority and each other committee shall have such authority, not exceeding
the authority of the executive committee, as is provided by the board of
directors in the resolutions creating such committee.
Section 2. PRESIDING OFFICER AND SECRETARY. The chairman of the board
---------------------------------
shall be chairman of the executive committee. In the absence of the chairman of
the board, the president shall reside. Each other committee shall choose one of
its members to act as chairman. Each committee shall from time to time designate
a secretary of the committee who shall keep a record of its proceedings.
Section 3. VACANCIES. Vacancies occurring from time to time in the
---------
membership of any committee may be filled by a majority of the entire board for
the unexpired term of the member whose death, resignation, removal or disability
causes such vacancy, and shall be so filled, if, as the result of such vacancy,
there shall be less than three (3) directors on the executive committee or less
than two (2) directors on any other committee, or, in the case of the executive
committee, if the chairman of the board should be the one whose death,
resignation, removal or disability causes such vacancy.
Section 4. MEETINGS. Each committee shall adopt its own rules of procedure
--------
and shall meet at such stated time as it may, by resolution, appoint, and shall
also meet whenever called together by the chairman of the board or the
president.
Section 5. NOTICE OF MEETINGS. If the committee established regular
-------------------
meeting dates, it shall not be necessary to give notice of any such regular
meeting. Notice of every special meeting shall be given in the manner and within
the time periods specified in Section 8 of Article III with respect to notices
<PAGE>
of special meetings of the board of directors. Notice of any special meeting may
be waived in writing by all of the absent members of the committee either before
or after the meeting.
Section 6. QUORUM. A quorum at any meeting of any committee shall be not
------
less than one-half (1/2) of the entire committee. In the case of the executive
committee, however, a quorum shall be not less than three (3) members. Every act
or decision done or made by a majority of the directors present at a committee
meeting duly held at which a quorum is present shall be regarded as the act of
the committee.
Section 7. REPORTS. Actions taken at a meeting of any committee shall be
-------
reported to the board at its next meeting following such committee meeting,
except that when the meeting of the board is held within two (2) days after the
committee meeting, such report shall, if not made at the first meeting, be made
to the board at the second meeting following such committee meeting.
Section 8. LIMITATION OF POWERS. No committee of the board of directors
---------------------
shall have authority to do any of the following:
(a) make, alter or repeal any by-law of the corporation;
(b) elect or appoint any director, or remove any officer or director;
(c) submit to shareholders any action that requires shareholders'approval;
(d) amend or repeal any resolution theretofore adopted by the board
which by its terms is amendable or repealable only by the board;
(e) fix the compensation of any officer who is a member of the committee
for serving as an officer of the corporation.
Section 9. ADDITIONAL POWERS OF THE BOARD. The board shall have the power,
------------------------------
with respect to existing committees, to
(a) fill any vacancy in any such committee;
(b) appoint one or more directors to serve as alternative members of any
such committee to act in the absence or disability of members of any
such committee with all the powers of such absent or disabled members;
(c) abolish any such committee at its pleasure; and
<PAGE>
(d) remove any director from membership on such committee at any time,
with or without cause.
ARTICLE V
OFFICERS
--------
Section 1. OFFICERS ENUMERATED. The board of directors shall designate and
-------------------
elect the officers of the corporation which shall include but shall not be
limited to a chairman of the board, a president, one or more vice presidents, a
treasurer, one or more assistant treasurers, a secretary, and one or more
assistant secretaries. Any two or more offices may be held by the same person,
except that no one person may hold the offices of president and secretary. The
chairman of the board and the president shall be directors.
Section 2. ADDITIONAL OFFICERS. The board of directors may from time to
--------------------
time elect such other officers as it shall deem necessary, who shall hold their
offices for such terms and have such powers and perform such duties as shall be
prescribed from time to time by the board.
Section 3. ELECTION AND TERM OF OFFICE. Each officer shall hold office
---------------------------
until the next annual election of officers, and until his successor has been
elected and qualified, unless he is earlier removed. All officers of the
corporation shall hold office at the pleasure of the board of directors, except
as otherwise provided by contract between the corporation and any such officer.
Section 4. VACANCIES. Any vacancy in an enumerated office or in any
---------
other office may be filled by the board of directors.
Section 5. REMOVAL AND RESIGNATION. Except as provided by contract between
-----------------------
the corporation and any officer, any officer may be removed, either with or
without cause, by a majority of the directors at any regular or special meeting
of the board or by any officer upon whom such power of removal may be conferred
by the board. Any officer may resign at any time by giving written notice to the
board or to the president. Any such resignation shall take effect at the date of
<PAGE>
the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 6. POWERS AND DUTIES. The officers shall each have such authority
-----------------
and perform such duties in the management of the corporation as from time to
time may be prescribed by the board of directors or the executive committee and
as may be delegated by the chairman of the board or president.
Without limiting the foregoing,
(a) CHAIRMAN OF THE BOARD. The chairman of the board shall be the
---------------------
chief executive officer of the corporation. He shall preside at all
meetings of the shareholders and at all meetings of the directors. He
shall, subject only to the direction and control of the board of
directors, have general charge of, supervision over and responsibility for
the business and affairs of the corporation. He shall generally possess
such powers and perform such duties as usually pertain to his office or to
the office of the president.
(b) PRESIDENT. The president shall generally possess such powers and
---------
perform such duties as usually are incident to the office of the
president, including power to supervise the business and activities of the
corporation and to instruct, direct and control its other officers, agents
and employees, and shall perform such other duties as the chairman of the
board shall direct. In the absence of the chairman of the board, he shall
preside at all meetings of shareholders and of the board of directors.
(c) VICE PRESIDENT. The corporation shall have one or more vice
---------------
presidents as determined by the board of directors. The board of directors
may designate one or more of such vice presidents as executive vice
president or senior vice president. All vice presidents shall have such
authority and shall perform such duties as may be delegated from time to
time by the chairman of the board, the president or the board of
directors. Unless otherwise ordered by the board of directors, any vice
president may sign contracts or other instruments authorized either
generally or specifically by the board of directors.
<PAGE>
(d) SECRETARY. The secretary or any assistant secretary shall cause
---------
notices of all meetings to be served as prescribed in these by-laws and
shall keep the minutes of all meetings of the shareholders, board of
directors and all committees of the board of directors or shareholders,
and shall have charge of the seal of the corporation. He shall perform
such other duties and possess such other powers as are incident to his
office or as are assigned to him by the chairman of the board, the
president or the board of directors.
(e) TREASURER. The treasurer shall have the custody of the funds and
---------
securities of the corporation and shall keep or cause to be kept regular
books of account for the corporation. He shall account to the chairman of
the board, the president or the board of directors whenever they may
require concerning all his transactions as treasurer and concerning the
financial condition of the corporation. The treasurer shall perform such
other duties and possess such other powers as are incident to his office
or as shall be assigned to him by the chairman of the board, the president
or the board of directors.
(f) CONTROLLER. The Controller shall have the immediate
----------
responsibility for the corporation's accounting practices, maintenance of
its fiscal records, preparation of its financial reports and the
responsibility for general accounting, cost accounting, budgetary controls
and insurance functions of the corporation. He shall be under the broad
administrative direction of the Vice President, Financial and Chief
Financial Officer, and shall perform such other duties and possess such
other powers as are incident to his office or as shall be assigned to him
by the chairman of the board, the president or the board of directors.
ARTICLE VI
CAPITAL STOCK AND OTHER SECURITIES
----------------------------------
Section 1. ISSUANCE OF STOCK AND OTHER SECURITIES. Certificates of any
---------------------------------------
class of capital stock of the corporation and certificates representing any
other securities of the corporation shall be signed by the president or any vice
president and may be countersigned by the secretary or the treasurer or the
<PAGE>
assistant secretary. Any or all signatures upon a certificate may be a
facsimile. Such certificates shall be sealed with the seal of the corporation,
or shall bear a facsimile of such seal; and such certificates shall be
registered in such manner as the board of directors may by resolution prescribe.
Section 2. LOST, STOLEN AND DESTROYED CERTIFICATES. In case of lost,
------------------------------------------
stolen or destroyed certificates, new certificates may be issued to take their
place upon receipt by the corporation of such bond of indemnity and under such
regulations as shall be prescribed by the board of directors, but the giving of
a bond of indemnity may be waived by the board.
Section 3. TRANSFER OF SECURITIES. Shares of capital stock or any other
-----------------------
registered securities of the corporation shall be transferable on the books of
the corporation by the holder thereof in person or by his authorized attorney
upon surrender for cancellation to the transfer agent for such security of an
outstanding certificate or certificates for the same number of shares or other
security with an assignment and authorization to transfer endorsed thereon or
attached thereto, duly executed, together with such proof of the authenticity of
the signature and of the power of assignor to transfer such securities as the
corporation or its agents may require.
Section 4. RECORD DATE FOR DIVIDENDS OR RIGHTS. The board of directors may
-----------------------------------
fix a record date in advance as of which shares of stock shall be held of record
to entitle a shareholder to the payment of any dividend, to the allotment of
rights, or to exercise rights in respect to any change, conversion or exchange
of capital stock of the corporation. Such record date shall not precede by more
than sixty (60) days the date of such dividend payment, or such allotment of
rights, or the date when such change, conversion or exchange of capital stock
shall take effect. Only shareholders of record on such record date shall be
entitled to receive or exercise such rights or benefits when they shall accrue,
notwithstanding any transfer of any stock on the books of the corporation
subsequent to the record date which is fixed.
Section 5. ISSUE OF NEW SHARES OR SALE OF TREASURY STOCK. Shares of the
-----------------------------------------------
capital stock of the corporation which have been authorized but not issued and
<PAGE>
treasury shares may be issued or sold from time to time and for such
consideration as may be determined by the board of directors. This amendment
shall be effective as of December 1, 1988.
ARTICLE VII
CORPORATE SEAL
--------------
Section 1. FORM AND USE. The corporate seal shall have inscribed thereon
------------
the name of the corporation, the year of its incorporation, and the words
"Corporate Seal, New Jersey". The seal may be used by causing it or a facsimile
thereof to be impressed or reproduced on a document or instrument, or affixed
thereto.
ARTICLE VIII
FISCAL YEAR
-----------
Section 1. TIME. The fiscal year of the corporation shall commence on
----
October 1 of each calendar year.
ARTICLE IX
AMENDMENTS
----------
Section 1. AMENDMENTS BY SHAREHOLDERS. These by-laws may be altered,
----------------------------
amended or repealed and new by-laws may be added by the shareholders.
Section 2. AMENDMENTS BY THE BOARD OF DIRECTORS. Subject to the right of
------------------------------------
the shareholders provided in Section 1 of this Article IX to adopt, amend or
repeal the by-laws, the board of directors may adopt, amend or repeal these
by-laws; provided, however, that a by-law or amendment thereto changing the
number of directors may be adopted, amended or repealed by the board of
directors only for the purpose of fixing the exact number of directors within
the limits specified in Article III, Section 1, hereof.
<PAGE>
ARTICLE X
MISCELLANEOUS
-------------
Section 1. INSPECTION OF CORPORATE RECORDS. The share register, or
----------------------------------
duplicate share register, the books of accounts and minutes of proceedings of
the shareholders, directors and of the executive committee may be examined for
any proper purpose upon the written demand of any person who shall have been a
shareholder of record or holder of a voting trust certificate for at least six
(6) months immediately preceding his demand, or any person holding, or so
authorized in writing by the holders of, at least five percent (5%) of the
outstanding shares of any class. Such inspection shall be made at any reasonable
time not less than five (5) days after such person shall have given written
notice of his demand to the corporation. Such inspection may be made in person
or by an agent or attorney and shall include the right to make extracts. Demand
for inspection other than at a shareholders' meeting shall be made in writing
upon the president or secretary of the corporation.
Section 2. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
-------------------
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner, manually or by facsimile signature, as shall be
determined from time to time by the board of directors.
Section 3. EXECUTION OF CONTRACTS. The board of directors may authorize
-----------------------
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances and, unless so
authorized by the board of directors, no officer, agent or employee shall have
any power or authority to bind the corporation by any contract or engagement or
to pledge its credit or to render it liable for any purpose or for any amount.
Section 4. VOTING SHARES OF OTHER CORPORATIONS. The chairman of the board,
-----------------------------------
the president or any vice president is hereby authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all shares
<PAGE>
of stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised by such officers
either in person or by proxy or by power of attorney duly executed by said
officer.
Section 5. EMPLOYEE BENEFIT PLANS. The corporation, by resolution of the
----------------------
board of directors, may adopt any one or more of the following plans for the
benefit of some or all employees, as hereinafter defined, and their families,
dependents or beneficiaries:
(a) plans providing for the sale or distribution of its shares of
any class or series, held by it or issued or purchased by it for the
purpose, including stock option, stock purchase, stock bonus,
profit-sharing, savings, pension, retirement, deferred compensation and
other plans of similar nature, whether or not such plans also provide for
the distribution of cash or property other than its shares;
(b) plans providing for payments solely in cash or property other
than shares of the corporation, including profit-sharing, bonus, savings,
pension, retirement, deferred compensation and other plans of similar
nature; and
(c) plans for the furnishing of medical service, life, sickness,
accident, disability or unemployment insurance or benefits; education;
housing, social and recreational service; and other similar aids and
services.
The term "employees" as used in this Section means employees, officers,
directors, and agents of the corporation or any subsidiary thereof, or other
persons who are or have been actively engaged in the conduct of the business of
the corporation or any subsidiary thereof, including any who have retired,
become disabled or died prior to the establishment of any plan heretofore or
hereafter adopted.
Section 6. DIRECTOR LOANS. The corporation may lend money to or guarantee
--------------
any obligation of, or otherwise assist any director of the corporation or of any
subsidiary, whenever, in the judgment of the board of directors, such loan,
guarantee or assistance may reasonably be expected to benefit the corporation.
Any such loan, guarantee or other assistance may be made only when authorized by
a majority of the entire board of directors and may be made with or without
interest and whether unsecured or secured in such manner as the board shall
approve, including, without limitation, by a pledge of shares of the
<PAGE>
corporation, and may be made upon such other terms and conditions as the board
may determine. A director shall be disqualified from voting on any loan,
guarantee or other assistance proposed to be made to him or her pursuant to this
section. The statutory power of the board of directors to make such loans and
guarantees and to provide other assistance to employees of the corporation other
than directors shall not in any way be limited to this section.
By order of the Board of Directors of Bergen Brunswig Corporation
this 8th day of November, 1996.
Secretary
[ Seal ]
</TABLE>
Exhibit 10(m)
AMENDMENT NO. 1 TO THE
BERGEN BRUNSWIG AMENDED AND RESTATED
CAPITAL ACCUMULATION PLAN
THIS AMENDMENT No. 1 dated June 20, 1996, hereby amends the Amended and
Restated Bergen Brunswig Capital Accumulation Plan dated as of March 3, 1996
(the "Plan") to correct a scrivener's error in Section 3.3.
Section 3.3 of the Plan is hereby deleted and replaced with the following:
"3.3 FUTURE PARTICIPANTS.
Effective October 7, 1997, the Plan, including each of its component
plans but excluding the Outside Director Plan, is hereby frozen to new
participants. Hence, on and after that date, except for the Outside
Director Plan, no one shall become a member of the Plan, or if already a
member of one of its component plans, become a member of any of its other
component plans."
Except as set forth herein the plan shall remain unchanged.
Executed at Orange, California, this 20th day of June, 1996.
BERGEN BRUNSWIG CORPORATION
BY: /S/ MILAN A. SAWDEI
---------------------------------
Milan A. Sawdei
Executive Vice President, Chief
Legal Officer & Secretary
<TABLE>
EXHIBIT 11
BERGEN BRUNSWIG CORPORATION
---------------------------
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1996,
(in thousands except for share and per share amounts)
<CAPTION>
- --------------------------------------------------------------------------------------------------
Years Ended
September 30,
-----------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DATA AS TO EARNINGS
Net earnings applicable to common and
common equivalent shares $73,533 $63,942 $56,120
===================================
DATA AS TO NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Weighted average number of shares outstanding:
Class A Common Stock 39,979,250 39,588,670 38,215,314
Class B Common Stock - - 40,675
Shares of Class A Common Stock to be issued from assumed
conversion of remainder of Class B Common Stock - - 346,900
Common equivalent shares assuming issuance of shares
represented by outstanding employees' stock options:
Additional shares assumed to be issued 1,673,606 1,314,239 506,751
Reduction of such additional shares assuming
proceeds invested in treasury stock (at average
market prices during each year) (1,393,784) (1,101,955) (425,865)
-----------------------------------
Average number of common and common
equivalent shares outstanding 40,259,072 39,800,954 38,683,775
===================================
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE OUTSTANDING:
Net earnings $ 1.83 $ 1.61 $ 1.45
===================================
</TABLE>
<TABLE>
EXHIBIT 21
BERGEN BRUNSWIG CORPORATION AND SUBSIDIARIES
SUBSIDIARIES OF REGISTRANT
The following is a list of the significant subsidiaries of registrant as of
November 30, 1996:
<CAPTION>
PERCENTAGE
OF VOTING
SECURITIES
STATE OF OWNED BY
NAME INCORPORATION REGISTRANT
- ---- ------------- ----------
<S> <C> <C>
Durr-Fillauer Medical, Inc. Delaware 100%
Bergen Brunswig Drug Company California (1)
Bergen Brunswig Medical Corporation
(formerly known as Durr Medical
Corporation) Alabama (1)
<FN>
(1) 100% owned by Durr-Fillauer Medical, Inc.
</FN>
</TABLE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
2-54345, 2-63803, 2-75715, 2-88474, 2-96491, 33-32465 and 33-57537 on Form S-8
and in Registration Statement Nos. 33-55136, 33-53817, 33-57325, 33-59784 and
333-631 on Form S-3 of our report dated October 30, 1996, appearing in this
Annual Report on Form 10-K of Bergen Brunswig Corporation for the fiscal year
ended September 30, 1996.
/S/ DELOITTE & TOUCHE LLP
- -------------------------
Costa Mesa, California
December 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 21,408
<SECURITIES> 0
<RECEIVABLES> 690,714
<ALLOWANCES> 23,459
<INVENTORY> 1,220,975
<CURRENT-ASSETS> 1,932,209
<PP&E> 255,327
<DEPRECIATION> 112,600
<TOTAL-ASSETS> 2,489,826
<CURRENT-LIABILITIES> 1,491,585
<BONDS> 419,275
<COMMON> 66,626
0
0
<OTHER-SE> 512,340
<TOTAL-LIABILITY-AND-EQUITY> 2,489,826
<SALES> 0
<TOTAL-REVENUES> 9,942,697
<CGS> 9,368,893
<TOTAL-COSTS> 9,787,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,170
<INCOME-PRETAX> 125,270
<INCOME-TAX> 51,737
<INCOME-CONTINUING> 73,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,533
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.83
</TABLE>
