EXHIBIT INDEX TOTAL NUMBER OF PAGES
FOUND ON PAGE 53. INCLUDED IN THIS ANNUAL
REPORT IS 174.
================================================================================
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, 1997
------------------
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:
<TABLE>
<CAPTION>
Name of each exchange on
Title of each class which registered
- --------------------------------- ------------------------
<S> <C>
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
</TABLE>
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, 1997, 50,425,459 shares of Class A Common Stock were
outstanding. The aggregate market value of the Class A Common Stock held by
nonaffiliates of the registrant on November 30, 1997 was $2,062,652,922.
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:
Within 120 days after September 30, 1997, the Company will either file a
definitive proxy statement for its 1998 annual meeting of shareowners which will
be incorporated by reference in Part III of this Annual Report on Form 10-K or
will file an amendment to this Annual Report to provide the information called
for by such Part III.
<PAGE>
TABLE OF CONTENTS
PART I
------
ITEM PAGE
- ---- ----
Forward-looking Statements I - 1
1. Business I - 1
2. Properties I - 5
3. Legal Proceedings I - 6
4. Submission of Matters to a Vote of Security Holders I - 10
4A. Executive Officers of the Registrant I - 10
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 - 9
9. Changes in and Disagreements with Accountants II - 30
on Accounting and Financial Disclosure
PART III
--------
10. Directors of the Registrant III - 1
11. Executive Compensation III - 1
12. Security Ownership of Certain Beneficial Owners III - 1
and Management
13. Certain Relationships and Related Transactions III - 1
PART IV
-------
14. Exhibits, Financial Statement Schedules and Reports IV - 1
on Form 8-K
Signatures IV - 6
<PAGE>
Portions of this Annual Report on Form 10-K include "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks, uncertainties and other factors
which could cause actual results to materially differ from those projected or
implied. The most significant of such risks, uncertainties and other factors are
described in Exhibit 99(a) to this Annual Report.
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. The Company 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 one of
the largest pharmaceutical distributors to provide both pharmaceuticals and
medical-surgical supplies on a national basis.
On August 23, 1997, the Company signed a definitive
merger agreement with Cardinal Health, Inc. ("Cardinal"), a distributor of
pharmaceuticals and provider of value-added pharmaceutical-related services,
headquartered in Dublin, Ohio. The merger agreement, which has been unanimously
approved by the Boards of Directors of the Company and Cardinal, calls for the
Company to become a wholly-owned subsidiary of Cardinal. The combined company is
expected to be known as Cardinal Bergen Health, Inc. and would be headquartered
in Dublin, Ohio. Under the terms of the proposed merger, shareowners of the
Company would receive 0.775 of a Cardinal Common Share in exchange for each
outstanding share of the Company's Class A Common Stock. Cardinal would issue
approximately 40 million Common Shares in the transaction and would assume the
Company's long-term debt which was approximately $418.2 million at September 30,
1997. The merger has been structured as a tax-free transaction and would be
accounted for as a pooling of interests for financial reporting purposes. The
merger is currently expected to be completed by the end of the second quarter of
fiscal 1998, subject to the satisfaction of certain conditions, including
approvals by the Company's shareowners and Cardinal's shareholders, and the
receipt of certain regulatory approvals. Additional information regarding the
proposed merger is set forth in the Company's Current Report on Form 8-K dated
August 23, 1997, as filed with the Securities and Exchange Commission, and is
incorporated herein by reference.
On November 18, 1997, the Company signed an agreement
to acquire substantially all of the net assets of Besse Medical Services, Inc.,
a privately-held distributor of injectables, diagnostics and medical supplies.
Under the agreement, the Company would pay approximately $20.0 million in cash,
plus estimated expenses and assume certain liabilities. This transaction is more
fully described in Note 12 of Notes to Consolidated Financial Statements
appearing in Part II, Item 8, "Financial Statements and Supplementary Data" of
this Annual Report.
On April 24, 1997, the Company declared a 5-for-4
stock split on the Company's Class A Common Stock which was paid on June 2, 1997
to shareowners of record on May 5, 1997.
On March 20, 1997, the Company announced that it had
terminated its previously announced merger agreement with IVAX Corporation
("IVAX"). See Notes 9 and 10 of Notes to Consolidated Financial Statements
apprearing in Part II, Item 8, "Financial Statements and Supplementary Data" of
this Annual Report.
I - 1
<PAGE>
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 31 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 1997, no single customer or
affiliated group of customers of the Drug 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 1997, substantially all of the
Drug Company's customer orders were received via electronic order entry systems.
These systems, combined with daily delivery, are designed to 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 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 20 older, smaller, less efficient facilities. RDCs help
improve customer service levels because a wider product selection is more
readily available. These facilities serviced 51% of the Drug Company sales
volume in fiscal 1997.
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.
I - 2
<PAGE>
In July 1994, the Company introduced AccuSource(R), a
multimedia communication, product information, and electronic ordering system
for pharmacies. Developed jointly by the Drug Company and Apple Computer, Inc.,
Accusource links the 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 OmniPhaseTM.
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. AccuLineTM,
introduced in June 1995, provides an on-line, real-time, hospital, pharmacy
management system in a WindowsTM (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 28 distribution
centers located in 23 states in every region of the United States except the
northeast.
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.
Alternate Site Distributors ("ASD"), the Company's
specialty wholesale subsidiary, supplies pharmaceuticals and oncology products
to physician and clinic accounts through two locations in two states. 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 seeks to give its customers quick access to a broad range of
specialty, value-added products and services, and commercial outsourcing.
I - 3
<PAGE>
In September 1995, the Company formed IntePlexTM 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 sites, 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. During periods of low
price inflation, which has occurred the last few years, wholesalers receive less
benefit from manufacturers' price increases but also incur lower last-in, first
out ("LIFO") charges. Also, pharmaceutical distributors are impacted because
service fee revenue is generally based on cost plus a markup percentage. Low
inflation has limited markup growth due to slow growth in the base cost.
Competition during this period has driven down the service fee markup
percentage, thereby lowering pharmaceutical distributors' gross profit margins.
2. Employees
---------
As of November 30, 1997, the Company employed
approximately 5,100 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.
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.
The Company relies heavily on computer technology
throughout its businesses to effectively carry out its day-to-day operations. As
I - 4
<PAGE>
the millennium approaches, the Company is assessing all of its computer systems
to ensure that they are "Year 2000"-compliant. In this process, the Company
expects to both replace some systems and upgrade others which are not Year
2000-compliant, in order to meet its internal needs and those of its customers.
The Company expects its Year 2000 project to be completed on a timely basis.
However, there can be no assurance that the systems of other companies on which
the Company may rely also will be timely converted or that such failure to
convert by another company would not have an adverse effect on the Company's
systems. To date, the Company has spent approximately $1.5 million on the Year
2000 project. Costs related to this project will continue through calendar 1999.
These costs are difficult to estimate accurately and they will not necessarily
be incremental. The Company's stated expectations regarding its Year 2000
project constitute forward-looking statements. Actual results could differ
materially from the Company's expectations due to unanticipated technological
difficulties, project vendor delays and project vendor cost overruns. Reference
is also made to the introductory paragraph of this Annual Report and Exhibit
99(a) hereto.
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.
As of November 30, 1997, the Drug Company's operations were located in
37 owned and leased warehouse and office facilities in Alabama, Arizona,
California, Colorado, Florida, Georgia, Hawaii, Indiana, Kentucky,
Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico,
North Carolina, Oklahoma, Oregon, Tennessee, Texas, Utah, Virginia and
Washington. Leased facilities range in size from approximately 5,800 to 181,300
square feet and have a combined area of approximately 1,612,300 square feet. The
expiration dates of the leases range from 1998 to 2008. Owned facilities range
in size from approximately 46,000 to 231,500 square feet.
As of November 30, 1997, Medical's operations were located in 34 owned
and leased warehouse and office facilities in Alabama, Alaska, Arizona,
California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Michigan,
Minnesota, Missouri, Nevada, North Carolina, Ohio, Oklahoma, Oregon, South
Carolina, Tennessee, Texas, Utah, Virginia and Washington. Leased facilities
range in size from approximately 6,600 to 97,000 square feet and have a combined
area of approximately 1,002,100 square feet. The expiration dates of the leases
range from 1998 to 2005. Owned facilities range in size from 30,800 to 188,000
square feet.
As of November 30, 1997, ASD's operations were located in three leased
warehouse and office facilities in Alabama, Kentucky and Texas ranging in size
from 9,800 to 64,000 square feet, respectively. The expiration dates of the
leases range from 1999 to 2001.
I - 5
<PAGE>
The combined area of the Company's owned facilities was approximately
2,200,000 square feet as of November 30, 1997.
The Company maintains general and executive offices in Orange,
California, with approximately 208,800 square feet which are leased pursuant to
a 15-year lease which expires in 2000, at which time Bergen has the option to
purchase the premises at the then fair market value.
For additional information regarding the Company's lease obligations,
see Note 6 of Notes to Consolidated Financial Statements 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
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
I - 6
<PAGE>
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, 1997, 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, 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, which the court rejected on October 31, 1996. The judgment
debtors have since filed a Notice of Appeal to a higher state court of appeals,
I - 7
<PAGE>
which is still pending. In the meantime, on September 11, 1997, the judgment
debtors filed for protection under the federal bankruptcy laws.
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 as defendants 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
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.
I - 8
<PAGE>
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 appealed 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. The effect of the sharing agreement is that the
Company's potential loss would be $1.0 million, regardless of the outcome of the
lawsuits, plus possible legal fee expenses in excess of the Company's
proportionate share of $9.0 million reimbursement of such fees to be paid by the
manufacturer defendants. In April 1996, summary judgment was granted in favor of
the Company and the other wholesaler defendants and the Company was dismissed
from the Federal Class Action. However, this decision was appealed and, on
August 15, 1997, the Court of Appeals for the Seventh Circuit, along with other
rulings, reversed the District Court's decision granting summary judgment to the
wholesaler defendants.
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 counterclaims and has asked for
I - 9
<PAGE>
damages according to proof at trial. This matter is in the 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 consolidated
financial position or results of operations.
On March 20, 1997, the Company announced that it had terminated its
previously announced merger agreement with IVAX. In connection with such
termination the Company filed a lawsuit against IVAX in the United States
District Court for the Southern District of New York alleging, among other
things, various breaches of its merger agreement. On May 2, 1997, IVAX filed an
Answer and Counterclaim against the Company denying various allegations in the
Company's complaint, raising various affirmative defenses and alleging that the
Company has breached the merger agreement entered into between the parties. On
August 15, 1997, the Company and IVAX settled the lawsuits over the abandoned
merger.
The Company is involved in various additional items of litigation.
Although the amount of liability at September 30, 1997 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 the
Company's consolidated 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, 1997.
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 election of officers which is generally 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, 1997, are listed alphabetically as follows:
Linda M. Burkett, 47, 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).
I - 10
<PAGE>
John Calasibetta, 92, Senior Vice President since 1974. Mr. Calasibetta
is also a member of the Board of Directors.
Charles J. Carpenter, 48, 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, 48, Executive Vice President, Chief Financial Officer
(since 1992); President, Alternate Site Distributors, Inc. (since September
1996). Mr. Dimick is also a member of the Board of Directors.
William J. Elliott, 48, President, Bergen Brunswig Medical Corporation
(since October 1996). Formerly Senior Vice President of Supply Chain Management,
VHA Inc. (1984-October 1996).
Brent R. Martini, 38, 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). Brent R. Martini is the son of Robert E. Martini.
Robert E. Martini, 65, Chairman of the Board (since 1992) and Chief
Executive Officer (1990-January 1997). Mr. Martini is also a member of the Board
of Directors.
John P. Naughton, 59, Vice President and Controller of Bergen Brunswig
Drug Company since 1981.
Donald R. Roden, 51, President (since 1995); Chief Executive Officer
(since January 1997); Chief Operating Officer (1995-December 1996); 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, 51, Secretary (since July 1992); Executive Vice
President (since April 1992); Chief Legal Officer (since 1989).
Carol E. Scherman, 42, 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).
Eric J. Schmitt, 47, Vice President, Finance and Treasurer (since
February 1994); Vice President, Financial Planning (1989-1994).
I - 11
<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
provides for the issuance of one Preferred Share Purchase Right (the "Rights")
for each outstanding share of Common Stock. The Rights are generally not
exercisable until 10 days after a person or group (an "Acquiror") 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, after an Acquisition, 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.
Pursuant to action of the Company's Board of Directors, consummation of
the pending merger with Cardinal will not constitute an Acquisition or otherwise
trigger the exercise of Rights under the Shareowner Rights Plan.
II - 1
<PAGE>
Item 6. SELECTED FINANCIAL DATA (unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Dollars in thousands, except for per share amounts
===================================================================================================================
September 30, August 31,
---------------------------------------------------- -------------
Years Ended: 1997 1996 1995 1994(c) 1993
===================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales and other revenues $11,660,496 $9,942,697 $8,447,607 $7,483,801 $6,823,552
Net earnings 81,679(b) 73,533 63,942 56,120(d) 28,607(e)
Earnings per share (a) 1.61(b) 1.46 1.29 1.16(d) 0.60(e)
Cash dividends per share (a):
Class A Common 0.432 0.384 0.379 0.350 0.305
Class B Common - - - 1.597 2.904
Pre-tax margin 1.19%(b) 1.26% 1.30% 1.31%(d) 0.71%(e)
At Years Ended:
===================================================================================================================
Total assets $2,707,123 $2,489,826 $2,405,530 $1,995,057 $1,772,337
Long-term obligations 437,956 419,275 557,771 342,094 309,781
Shareowners' equity 644,861 578,966 519,349 461,851 417,800
Return on average shareowners' equity 13.35%(b) 13.39% 13.03% 12.76%(d) 7.04%(e)
===================================================================================================================
<FN>
(a) Gives effect to the 5-for-4 stock split declared April 24, 1997.
(b) Includes provision for merger expenses of $3.4 million, net of income tax benefit of $2.4 million, relating to the terminated
IVAX merger. See Item I of the Annual Report.
(c) Reflects change in year-end from August 31 to September 30.
(d) 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.
(e) 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 ANDRESULTS OF OPERATIONS
Results of Operations Fiscal 1997 Compared with Fiscal 1996
-----------------------------------------------------------
Net sales and other revenues in fiscal 1997 were 17% higher than in
fiscal 1996, while operating earnings and pre-tax earnings showed increases of
9% and 11%, respectively. Operating earnings and pre-tax earnings for fiscal
1997 were impacted by a pre-tax charge of $5.8 million for expenses recorded in
the second quarter of fiscal 1997, related to the proposed merger agreement with
IVAX which was terminated on March 20, 1997. See Notes 9 and 10 of Notes to
Consolidated Financial Statements. Had the Company not recorded the $5.8 million
pre-tax charge, operating earnings and pre-tax earnings for fiscal 1997 would
have increased 13% and 15%, respectively, compared to fiscal 1996.
Substantially all of the net sales and other revenues increase for
fiscal 1997 reflects internal growth within both the Company's existing
pharmaceutical and medical-surgical supply distribution businesses.
Earnings per share increased 10% compared to fiscal 1996. The average
number of common and common equivalent shares outstanding increased 1% for the
earnings per share computation. The after-tax merger expenses referred to above
were equivalent to $.07 per share.
Cost of sales increased 17% compared to fiscal 1996, due mainly to the
Company's increased sales levels. The overall gross profit as a percent of net
sales and other revenues ("gross profit margin") for fiscal 1997 decreased as a
result of a decrease in gross margins due to continued price competition,
partially offset by a higher mix of sales from the Company's higher gross margin
medical-surgical supply distribution business. The gross profit margin in the
Company's pharmaceutical distribution business for fiscal 1997 declined 2.6%
from the prior year, primarily due to competitive factors. The gross profit
margin in the Company's medical-surgical supply distribution business for fiscal
1997 declined 6.1% over the prior year, primarily due to a higher mix of lower
gross margin acute care business. In both the pharmaceutical and
medical-surgical supply distribution industries, 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.
During periods of low inflation, which has occurred the last few years,
wholesalers receive less benefit from manufacturers' price increases but also
incur lower LIFO charges. The rate or frequency of future price increases by
manufacturers, or the 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 1998 because of continued price
competition influenced by large customers. The Company expects that these
pressures on operating margin may be offset to some extent by increased sales of
more profitable products, such as generic drugs and medical-surgical supplies,
II - 3
<PAGE>
and continued reduction of distribution, selling, general and administrative
expenses ("DSG&A") as a percentage of net sales and other revenues through more
efficient operations.
DSG&A, including the expenses associated with the terminated IVAX
merger agreement, increased 16%, while net sales and other revenues increased
17%. These expenses decreased as a percent of net sales and other revenues from
4.21% in fiscal 1996 to 4.16% in fiscal 1997. Excluding such merger expenses,
DSG&A in fiscal 1997 were 4.11% of net sales and other revenues. The decreased
DSG&A as a percent of net sales and other revenues in fiscal 1997 reflects
continued operating efficiencies, including the positive effects of the
consolidation of distribution locations.
Net interest expense increased from $30.2 million in fiscal 1996 to
$30.8 million in fiscal 1997, primarily due to increased borrowings under the
the Company's $400 million Credit Agreement (the "Credit Agreement"), partially
offset by decreased interest on the $100 million 5 5/8% Senior Notes ("5 5/8%
Notes") which were repaid on January 15, 1996.
The effective tax rate in fiscal 1997 decreased to 41.0% from 41.3% in
fiscal 1996 reflecting the higher earnings in fiscal 1997 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 Fiscal 1996 Compared with Fiscal 1995
-----------------------------------------------------------
Net sales and other revenues in fiscal 1996 were 18% higher than in
fiscal 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%
was attributable to the acquisition of Colonial Healthcare Supply Co.,
("Colonial") in August 1995. Approximately 16% of the net sales and other
revenues increase reflected internal growth within both the Company's existing
pharmaceutical and medical-surgical supply distribution businesses.
Earnings per share increased 13% compared to fiscal 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 fiscal 1995, due mainly to the
Company's increased sales levels. The overall gross profit margin for fiscal
1996 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
II - 4
<PAGE>
distribution business, partially offset by sales from the Company's higher gross
margin medical-surgical supply distribution business. The gross profit margin in
the Company's pharmaceutical distribution business for fiscal 1996 declined 3.2%
from the prior year, primarily due to competitive factors. The gross profit
margin in the Company's medical-surgical supply distribution business for fiscal
1996 declined 11.7% over the prior year, primarily due to a higher mix of lower
gross margin acute care business.
DSG&A increased 15% over fiscal 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 4.30% in fiscal 1995 to 4.21% in
fiscal 1996. The decreased DSG&A as a percentage of net sales and other revenues
in fiscal 1996 reflected 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
Company's medical-surgical supply distribution business, principally due to the
acquisition of Colonial.
Net interest expense decreased from $30.5 million in fiscal 1995 to
$30.2 million in fiscal 1996, primarily due to decreased interest on the 5 5/8%
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% Notes"), which were issued June 1, 1995.
The effective tax rate in fiscal 1996 decreased to 41.30% from 41.60%
in fiscal 1995 reflecting the higher earnings in fiscal 1996 and, therefore,
minimizing the impact of non-deductible expenses.
Liquidity and Capital Resources
-------------------------------
At September 30, 1997, capitalization consisted of 39% debt and 61%
equity, as compared to 41% and 59%, respectively, at September 30, 1996. The
decreased debt percentage primarily reflects an increase in shareowners' equity
of $65.9 million offset by increased borrowings under the Credit Agreement.
Borrowings under the Credit Agreement were $140.0 million and $120.0 million at
September 30, 1997 and 1996, respectively. Cash and cash equivalents of $54.5
million at September 30, 1997, increased from $21.4 million at September 30,
1996, primarily as a result of an increase in cash flows from operating
activities principally due to the Company's profitable operations and increased
borrowings under the Credit Agreement, partially offset by increases in both
accounts receivable and investment in inventories (net of increases in trade
accounts payable).
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
II - 5
<PAGE>
from the sale of any such securities for general corporate purposes, which may
include, without limitation, the repayment of indebtedness of the Company or of
any of its subsidiaries, possible acquisitions, capital expenditures and working
capital needs. See Note 2 of Notes to Consolidated Financial Statements.
The Company's Credit Agreement provides for maximum borrowing up to
$400 million and has loan covenants which require the Company to maintain
certain financial statement ratios. The Company is in compliance with all
required ratios at September 30, 1997. See Note 2 of Notes to Consolidated
Financial Statements.
On April 24, 1997, the Company declared a 5-for-4 stock split on the
Company's Class A Common Stock, which was paid on June 2, 1997 to shareowners of
record on May 5, 1997.
Dividends on Class A Common Stock amounted to $21.7 million in fiscal
1997 compared to $19.2 million in fiscal 1996, and $18.8 million in fiscal 1995,
reflecting, primarily, a 20% increase in the quarterly dividend rate during the
second quarter of fiscal 1997. While the Company has no policy with regard to
the payment of dividends, during the three-year period ended September 30, 1997,
dividends have averaged 27% of earnings.
Capital expenditures for fiscal 1997 were $23.8 million and related
principally to additional investments in existing locations, the acquisition of
automated warehouse equipment and additional investments in data processing
equipment.
The Company's working capital of $531.2 million at September 30, 1997
increased from the $440.6 million at September 30, 1996 and represented 20% of
total assets at September 30, 1997. The Company's current ratio was 1.33 at
September 30, 1997, compared to 1.30 at September 30, 1996. Trade receivables
outstanding, net of customer credit balances, were 15 days for both fiscal 1997
and fiscal 1996. The inventory turnover rate on first-in, first-out ("FIFO")
basis was 7.7 times for fiscal 1997 and 7.0 times for fiscal 1996.
The Company relies heavily on computer technology throughout its
businesses to effectively carry out its day-to-day operations. As the millennium
approaches, the Company is assessing all of its computer systems to ensure that
they are "Year 2000"-compliant. In this process, the Company expects to both
replace some systems and upgrade others which are not Year 2000-compliant, in
order to meet its internal needs and those of its customers. The Company expects
its Year 2000 project to be completed on a timely basis. However, there can be
no assurance that the systems of other companies on which the Company may rely
also will be timely converted or that such failure to convert by another company
would not have an adverse effect on the Company's systems. To date, the Company
has spent approximately $1.5 million on the Year 2000 project. Costs related to
II - 6
<PAGE>
this project will continue through calendar 1999. These costs are difficult to
estimate accurately and they will not necessarily be incremental. The Company's
stated expectations regarding its Year 2000 project constitute forward-looking
statements. Actual results could differ materially from the Company's
expectations due to unanticipated technological difficulties, project vendor
delays and project vendor cost overruns. Reference is made to the introductory
paragraph of this Annual Report and Exhibit 99(a) hereto.
The Company believes that internally generated funds, funds available
under the existing Credit Agreement and funds potentially available under the
existing shelf registration will be sufficient to meet anticipated cash and
capital needs.
On November 18, 1997, the Company signed an agreement to acquire
substantially all of the net assets of Besse Medical Services, Inc., a
privately-held distributor of injectables, diagnostics and medical supplies.
Under the agreement, the Company would pay approximately $20.0 million in cash,
plus estimated expenses, and assume certain liabilities. See Note 12 of Notes to
Consolidated Financial Statements.
On August 23, 1997, the Company signed a definitive merger agreement
with Cardinal, a distributor of pharmaceuticals and provider of value-added
pharmaceutical- related services, headquartered in Dublin, Ohio. The merger
agreement, which has been unanimously approved by the Boards of Directors of the
Company and Cardinal, calls for the Company to become a wholly-owned subsidiary
of Cardinal. The combined company is expected to be known as Cardinal Bergen
Health, Inc. and would be headquartered in Dublin, Ohio. Under the terms of the
proposed merger, shareowners of the Company would receive 0.775 of a Cardinal
Common Share in exchange for each outstanding share of the Company's Class A
Common Stock. Cardinal would issue approximately 40 million Common Shares in the
transaction and would assume the Company's long-term debt which was
approximately $418.2 million at September 30, 1997. The merger of the two
companies has been structured as a tax-free transaction and would be accounted
for as a pooling of interests for financial reporting purposes. The merger is
currently expected to be completed by the end of the second quarter of fiscal
1998, subject to the satisfaction of certain conditions, including approvals by
the Company's shareowners and Cardinal's shareholders, and the receipt of
certain regulatory approvals.
On March 20, 1997, the Company announced that it had terminated its
previously announced merger agreement with IVAX. See Notes 9 and 10 of Notes to
Consolidated Financial Statements.
Accounting Pronoucements
------------------------
During fiscal 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". This standard
requires recognition of impairment losses on long-lived assets and certain
identifiable intangibles, including goodwill, used in operations, when
indications of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
II - 7
<PAGE>
adoption of this new standard did not have a material effect on the Company's
consolidated financial position, results of operations or cash flows. See Note 1
of Notes to Consolidated Financial Statements.
During fiscal 1997, the Company also adopted the disclosure-only
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." No
compensation cost has been recognized for the Company's stock option plans.
Therefore, adoption of this standard had no effect on the Company's consolidated
financial position, results of operations or cash flows. See Note 3 of Notes to
Consolidated Financial Statements.
During fiscal 1997, the Company also adopted SFAS 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 was effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. The adoption of this new standard
did not have a material effect on the consolidated financial statements of the
Company.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share (EPS)," which will require the Company
to disclose basic EPS and diluted EPS for all periods for which an income
statement is presented, and which will replace disclosure currently being made
for primary EPS and fully-diluted EPS. The Company is required to adopt this
standard in its quarter ended December 31, 1997. See Note 5 of Notes to
Consolidated Financial Statements for pro forma disclosure of basic EPS and
diluted EPS for the three years ended September 30, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which establishes standards for the reporting and display
of comprehensive income and its components in financial statements. This new
statement defines comprehensive income as "all changes in equity during a
period, with the exception of stock issuances and dividends."
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131") which requires
companies to define and report financial and descriptive information on an
annual and quarterly basis about their operating segments. This new statement
also establishes standards for related disclosures about products and services,
geographic areas and major customers.
Both SFAS 130 and SFAS 131 will be adopted by the Company's in its 1999
fiscal year. Management believes the adoption of these standards will not have a
material effect on the Company's consolidated financial position, results of
operations or cash flows, and any effect will be limited to the form and content
of its disclosures.
II - 8
<PAGE>
<TABLE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
a. Supplementary Data
<CAPTION>
SELECTED QUARTERLY RESULTS (unaudited)
Dollars in thousands, except for per share amounts
====================================================================================================================================
First Second Third Fourth Fiscal
Year Ended September 30, 1997 Quarter Quarter Quarter Quarter Year
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales and other revenues $2,822,122 $2,890,457 $2,927,874 $3,020,043 $11,660,496
Gross margin 153,976 169,664 158,981 171,810 654,431
Net earnings 18,178 0,505(b) 22,224 20,772 81,679
Earnings per share (a) 0.36 0.40(b) 0.44 0.41 1.61
Cash dividends per Class A Common share (a) 0.096 0.096 0.120 0.120 0.432
Market prices per Class A Common share (a) $26 3/8-20 3/4 $26 5/8-22 $31-22 1/2 $45 3/4-28 1/16 $45 3/4-20 3/4
Year Ended September 30, 1996
====================================================================================================================================
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 (a) 0.31 0.41 0.38 0.36 1.46
Cash dividends per Class A Common share (a) 0.096 0.096 0.096 0.096 0.384
Market prices per Class A Common share (a) $20 3/4-16 3/8 $21 7/8-19 1/4 $22 3/4-20 1/4 $26-19 3/4 $26-16 3/8
====================================================================================================================================
<FN>
(a) Gives effect to the 5=for=4 stock split declared April 24, 1997.
(b) Includes provision for merger expenses of $3.4 million, net of income tax benefit of $2.4 million, relating to the termination
of the proposed IVAX merger.
Bergen Brunswig Corporation Class A Common Stock is listed on the New York Stock Exchange. There were approximately 2,300 Class
A Common Stock shareowners of record on September 30, 1997.
</FN>
II - 9
</TABLE>
<PAGE>
<TABLE>
b. Financial Statements
<CAPTION>
STATEMENTS OF CONSOLIDATED EARNINGS AND RETAINED EARNINGS
Dollars in thousands, except for per share amounts
==========================================================================================
Years Ended September 30, 1997 1996 1995
==========================================================================================
<S> <C> <C> <C>
CONSOLIDATED EARNINGS
Net sales and other revenues $11,660,496 $9,942,697 $8,447,607
----------------------------------------------
Costs and expenses:
Cost of sales 11,006,065 9,368,893 7,944,396
Distribution, selling, general and
administrative expenses 479,399 418,364 363,179
Merger expenses 5,800 - -
----------------------------------------------
Total costs and expenses 11,491,264 9,787,257 8,307,575
----------------------------------------------
Operating earnings 169,232 155,440 140,032
Net interest expense 30,793 30,170 30,542
----------------------------------------------
Earnings before taxes on income 138,439 125,270 109,490
Taxes on income 56,760 51,737 45,548
----------------------------------------------
Net earnings $ 81,679 $ 73,533 $ 63,942
==============================================
EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 1.61 $ 1.46 $ 1.29
==============================================
CONSOLIDATED RETAINED EARNINGS
Balance at beginning of year $ 432,580 $ 378,229 $ 378,867
Net earnings 81,679 73,533 63,942
5% stock dividend on Class A Common Stock - - (44,207)
Excess cost of Treasury shares issued
for an acquisition - - (1,579)
Cash dividends on Class A Common Stock
($0.432 in 1997, $0.384 in 1996 and
$0.379 in 1995 per share) (21,694) (19,182) (18,794)
----------------------------------------------
Balance at end of year $ 492,565 $ 432,580 $ 378,229
==============================================
=========================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
=======================================================================================
September 30, 1997 1996
=======================================================================================
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 54,494 $ 21,408
Short-term investments 2,786 -
Accounts and notes receivable, less allowance for
doubtful receivables: 1997, $29,022; 1996, $23,459 772,342 667,255
Inventories 1,309,359 1,220,975
Income taxes receivable 6,628 13,915
Prepaid expenses 9,866 8,656
------------------------
Total current assets 2,155,475 1,932,209
------------------------
Property - at cost:
Land 12,602 12,452
Buildings and leasehold improvements 83,829 79,048
Equipment and fixtures 173,875 163,827
------------------------
Total property 270,306 255,327
Less accumulated depreciation and amortization 131,944 112,600
------------------------
Property - net 138,362 142,727
------------------------
Other assets:
Excess of cost over net assets of acquired companies - net 329,100 339,030
Other investments 5,895 5,161
Noncurrent receivables 12,651 9,939
Deferred charges and other assets 65,640 60,760
------------------------
Total other assets 413,286 414,890
------------------------
Total assets $2,707,123 $2,489,826
========================
========================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Dollars in thousands
=======================================================================================
September 30, 1997 1996
=======================================================================================
<S> <C> <C>
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Accounts payable $1,336,070 $1,249,167
Accrued liabilities 82,070 92,005
Customer credit balances 176,864 133,282
Deferred income taxes 28,281 16,006
Current portion of long-term obligations 1,021 1,125
------------------------
Total current liabilities 1,624,306 1,491,585
------------------------
Long-term obligations:
7 3/8% senior notes 149,411 149,300
7 1/4% senior notes 99,732 99,696
Revolving bank loan payable 140,000 120,000
7% convertible subordinated debentures 20,609 20,609
6 7/8% exchangeable subordinated debentures 8,425 8,425
Deferred income taxes 1,791 3,489
Other 17,988 17,756
------------------------
Total long-term obligations 437,956 419,275
------------------------
Shareowners' equity:
Capital stock:
Preferred - Authorized 3,000,000 shares; issued: none - -
Class A Common - Authorized 100,000,000 shares;
issued: 1997, 55,870,183 shares; 1996, 55,521,175 shares 83,805 83,282
Paid-in capital 156,361 150,652
Net unrealized gain on investments, net of income
tax of: 1997, $260; 1996, $231 409 363
Retained earnings 492,565 432,580
------------------------
Total 733,140 666,877
Less Treasury shares, at cost: 1997, 5,454,983 shares;
1996, 5,443,198 shares 88,279 87,911
-------------------------
Total shareowners' equity 644,861 578,966
------------------------
Total liabilities and shareowners' equity $2,707,123 $2,489,826
========================
=======================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 12
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
Dollars in thousands
================================================================================================================
Years Ended September 30, 1997 1996 1995
================================================================================================================
<S> <C> <C> <C>
OPERATING ACTIVITIES
- --------------------
Net earnings $ 81,679 $ 73,533 $ 63,942
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Provision for doubtful accounts 11,899 8,213 5,810
Depreciation and amortization of property 26,919 25,183 21,474
(Gain) loss on dispositions of property (382) 12 1,570
Amortization of customer lists 1,749 1,749 1,749
Amortization of excess of cost over net assets of acquired companies 9,709 9,647 9,003
Amortization of other intangible assets 2,232 1,645 1,748
Amortization of original issue discount on senior notes 147 162 180
Deferred compensation 2,266 2,242 1,394
Deferred income taxes 10,577 9,070 3,178
Effects of changes, net of acquisitions:
Receivables (103,814) (76,926) (74,683)
Inventories (88,384) (60,699) (225,555)
Income taxes receivable 7,287 (9,114) (2,514)
Prepaid expenses and other assets (8,043) (5,985) (423)
Accounts payable 86,903 108,701 129,553
Accrued liabilities (9,935) 2,252 (31,223)
Customer credit balances 43,582 38,516 11,979
-----------------------------------
Net cash flows from operating activities 74,391 128,201 (82,818)
-----------------------------------
INVESTING ACTIVITIES
- --------------------
Property acquisitions (23,806) (16,696) (41,078)
Proceeds from dispositions of property 1,634 1,833 7,228
(Purchase) sale of other investments (3,447) (327) 17,824
Repurchase of notes receivable with recourse (17,740) - -
Proceeds from sale of notes receivable with recourse 1,856 7,712 13,791
Acquisition of businesses, less cash acquired - (5,999) (50,983)
-----------------------------------
Net cash flows from investing activities (41,503) (13,477) (53,218)
-----------------------------------
FINANCING ACTIVITIES
- --------------------
Proceeds from revolving bank loan 20,000 - 119,000
Repayment of revolving bank loan - (39,000) -
Repayment of senior notes - (100,000) -
Proceeds from issuance of senior notes - - 99,650
Redemption of convertible subordinated debentures - (305) (20)
Redemption of exchangeable subordinated debentures - (2,150) -
Repayment of other obligations (3,972) (2,565) (6,556)
Increase in other obligations - 902 -
Shareowners' equity transactions:
Exercise of stock options 5,786 4,584 1,892
Cash dividends on Common Stock (21,694) (19,182) (18,794)
Acquisition of Treasury shares (36) - -
Other 114 - -
-----------------------------------
Net cash flows from financing activities 198 (157,716) 195,172
-----------------------------------
Net increase (decrease) in cash and cash equivalents 33,086 (42,992) 59,136
Cash and cash equivalents at beginning of year 21,408 64,400 5,264
-----------------------------------
Cash and cash equivalents at end of year $ 54,494 $ 21,408 $ 64,400
===================================
================================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
II - 13
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended September 30, 1997, 1996, and 1995
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
1997 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 $1.4 million, $1.1
million and $5.4 million for the years ended September 30, 1997, 1996, and 1995,
respectively, related to bulk shipments of pharmaceuticals. Bulk shipment
transactions are arranged by the Company with its suppliers at the express
direction of the customer, and involve either shipments from the supplier
directly to customers' warehouse sites or shipments of customer bulk orders to
Company warehouses for immediate shipments to customers' warehouse sites. Bulk
sales of pharmaceuticals do not impact the Company's inventory levels in any
respect, since the Company merely processes the orders that it receives from its
customers directly to the applicable suppliers. Because the nature of these bulk
sales are significantly different, both in terms of the processing involved and
the financial return to the Company, as compared with the Company's traditional
wholesaling activities, and because the approach of including the gross amount
of such sales in the Company's revenues would make it more difficult to analyze
the Company's traditional revenues from wholesaling activities, cost of sales
and gross margins, the Company presents such sales on a net basis. Service fee
income from bulk sales was not material to the Company's overall gross profit
for the years ended September 30, 1997, 1996 and 1995. Service fee income from
bulk sales was $1.4 million, $1.1 million and $5.4 million for the years ended
September 30, 1997, 1996 and 1995, respectively. As a percentage of the
Company's total gross profit, such income amounted to .21%, .19% and 1.06% of
overall gross profit for the years ended September 30, 1997, 1996 and 1995,
respectively.
The Company considers all highly-liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents. Short-term
investments include debt instruments, principally variable rate demand notes
having maturities of more than three months but less than one year. Other
investments consist of equity securities and are classified as noncurrent
assets.
II - 14
<PAGE>
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,
1997, 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, 1997, by $136.4 million, and at September 30, 1996, by $144.1 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.
The excess of cost over net assets of acquired companies (net of
accumulated amortization of $57.3 million at September 30, 1997; $47.6 million
at September 30, 1996) is amortized on a straight-line basis principally over 40
years. Customer lists, included in deferred charges and other assets, ($7.1
million at September 30, 1997, net of accumulated amortization of $19.1 million;
$8.8 million at September 30, 1996, net of accumulated amortization of $17.4
million) are amortized on a straight-line basis over 15 years. During fiscal
1997, the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of. " This standard requires recognition of impairment
losses on long-lived assets and certain identifiable intangibles, including
goodwill, used in operations, when indications of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. 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. The adoption of this new standard did
not have a material effect on the Company's consolidated financial position,
results of operations or cash flows.
Noncurrent receivables include notes receivable from employees and
officers due at the Company's discretion in the amount of $4.9 million and $3.6
million at September 30, 1997 and 1996, respectively.
During fiscal 1997, the Company also adopted SFAS 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 was effective
for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996. The adoption of this new standard
II - 15
<PAGE>
did not have a material effect on the consolidated financial statements of the
Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130") which establishes standards for the reporting and display
of comprehensive income and its components in financial statements. This new
statement defines comprehensive income as "all changes in equity during a
period, with the exception of stock issuances and dividends."
In June 1997, the FASB also issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131") which requires
companies to define and report financial and descriptive information on an
annual and quarterly basis about their operating segments. This new statement
also establishes standards for related disclosures about products and services,
geographic areas and major customers.
Both SFAS 130 and SFAS 131 will be adopted in the Company's 1999 fiscal
year as required. Management believes the adoption of these standards will not
have a material effect on the Company's consolidated financial position, results
of operations or cash flows, and any effect will be limited to the form and
content of its disclosures.
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 $140 million at September 30, 1997.
The maximum outstanding borrowings under the Credit Agreement including
discretionary lines for the year ended September 30, 1997 were $393 million. The
Credit Agreement has loan covenants which require the Company to maintain
certain financial statement ratios. The Company is in compliance with all
required ratios at September 30, 1997.
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% 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% Notes. 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 redeemable prior to maturity and are not entitled
to any sinking fund. Interest on the 7 1/4% Notes is payable semi-annually on
June 1 and December 1 of each year. Interest on the 7 3/8% Notes is payable
II - 16
<PAGE>
semi-annually on January 15 and July 15 of each year. The carrying value of the
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 limitation, 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 was $32.1 million, $31.3 million and $28.4
million in fiscal 1997, 1996, and 1995, respectively.
Scheduled future principal payments of long-term obligations, excluding
deferred income taxes, for the next five fiscal years are $1.0 million in 1998,
$5.0 million in 1999, $0.9 million in 2000, $141.0 million in 2001, $.8 million
in 2002, and $288.5 million thereafter.
II - 17
<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 and to determine the relative rights,
preferences and limitations of the shares 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
provides for the issuance of one Preferred Share Purchase Right (the "Rights")
for each outstanding share of Common Stock. The Rights are generally not
exercisable until 10 days after a person or group ("Acquiror") 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, after an Acquisition,
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.
Pursuant to action of the Company's Board of Directors, consummation of
the pending merger with Cardinal Health, Inc. ("Cardinal") (see Note 12) will
not constitute an Acquisition or otherwise trigger the exercise of Rights under
the Shareowner Rights Plan.
On April 24, 1997, the Company declared a 5-for-4 stock split on the
Company's Class A Common Stock which was paid on June 2, 1997 to shareowners of
record on May 5, 1997. Share and per share amounts included in the accompanying
consolidated financial statements and notes are based on the increased number of
shares giving retroactive effect to the stock dividend.
II - 18
<PAGE>
Changes in Class A Common Stock, Paid-in capital and Treasury shares
for the fiscal years ended September 30, 1997, 1996, and 1995 were as follows:
<TABLE>
<CAPTION>
Class A Common Paid-in Treasury
Dollars and shares in thousands Shares Amount Capital Shares
================================================================================================
<S> <C> <C> <C> <C>
Balance, September 30, 1994
as previously reported 44,059 $66,088 $155,079 $(138,183)
1997 5-for-4 Class A Common Stock split 11,015 16,523 (16,523) -
--------------------------------------------
Balance, September 30, 1994 as adjusted 55,074 82,611 138,556 (138,183)
5% Class A Common Stock dividend - - 5,996 38,185
Exercise of stock options 155 232 1,955 (295)
Acquisition of Biddle & Cowther Company - - - 12,382
--------------------------------------------
Balance, September 30, 1995 55,229 82,843 146,507 (87,911)
Exercise of stock options 292 439 4,145 -
---------------------------------------------
Balance, September 30, 1996 55,521 83,282 150,652 (87,911)
Exercise of stock options 344 515 5,603 (332)
Acquisition of Treasury shares - - - (36)
Other 5 8 106 -
--------------------------------------------
Balance, September 30, 1997 55,870 $83,805 $156,361 $ (88,279)
============================================
</TABLE>
At September 30, 1997, there were outstanding options to purchase
57,395 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 such 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
nonemployee directors and only at a price per share equal to the market value on
the grant date. At September 30, 1997, there were 213,503 shares available for
grant under the plan, with 109,130 shares specifically reserved for nonemployee
directors.
Stock appreciation rights may be offered to some or all of the
employees, but not nonemployee directors, who hold or receive options granted
under the stock option plans. No stock appreciation rights were outstanding as
of September 30, 1997, 1996, or 1995.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," ("SFAS 123"). No compensation cost
has been recognized for the Company's stock option plans. Had compensation cost
for the Company's 1989 stock incentive plan been determined based on the fair
value at the grant date for grants in fiscal 1997 and fiscal 1996 consistent
with the provisions of SFAS 123,
II - 19
<PAGE>
the Company's net earnings and earnings per common and common
equivalent share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1997 1996
===========================================================================
(in thousands, except for per share amounts)
<S> <C> <C>
Net earnings - as reported $81,679 $73,533
Net earnings - pro forma $80,474 $73,000
Earnings per common and common
equivalent share - as reported $ 1.61 $ 1.46
Earnings per common and common
equivalent share - pro forma $ 1.59 $ 1.45
</TABLE>
The fair value of options granted under the 1989 stock incentive plan
during fiscal 1997 and fiscal 1996 were used to calculate the pro forma net
earnings and earnings per common and common equivalent share above, on the
various grant dates, using a binomial option=pricing model with the following
weighted average assumptions:
<TABLE>
<CAPTION>
1997 1996
===========================================================================
<S> <C> <C>
Dividend yield 2.0% 2.0%
Expected volatility 36.6% 31.7%
Risk=free interest rate 5.9% 5.8%
Expected life 4 years 4 years
Fair value of grants $8.29 $5.80
</TABLE>
Changes in the number of shares represented by outstanding options
during the years ended September 30, 1997, 1996, and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
===================== =================== ===================
Weighted Weighted Weighted
Actual Average Actual Average Actual Average
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 2,361,783 $16.01 1,761,368 $13.16 1,603,729 $13.07
Options granted ($12.00 to
$29.15 per share) 393,753 $25.71 943,750 $20.24 399,375 $12.55
Options exercised ($5.94 to
$20.80 per share) (344,171) $12.67 (292,332) $12.64 (158,040) $11.00
Options cancelled ($5.94 to
$26.00 per share) (177,573) $17.00 (51,003) $14.99 (83,696) $12.82
-------------------------------------------------------------
Outstanding at end of year
(1997, $5.94 to $29.15 per share) 2,233,792 $18.26 2,361,783 $16.01 1,761,368 $13.16
===============================================================
Exercisable at end of year 1,290,796 833,415 711,825
========== ======= =======
Available for grant at end of year 213,503 443,203 839,385
========== ======= =======
</TABLE>
II - 20
<PAGE>
The following table summarizes information concerning outstanding and
exercisable options at September 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------- ---------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of exercise prices Outstanding Life Price Exercisable Price
=======================================================================================================
<S> <C> <C> <C> <C> <C>
$5.94 = $11.86 244,040 5.82 $11.59 238,724 $11.59
$12.00 = $13.52 353,249 6.69 $12.57 211,147 $12.71
$14.48 = $16.95 398,288 4.12 $15.62 398,288 $15.62
$17.03 = $17.81 104,290 7.42 $17.35 44,946 $17.38
$19.55 496,417 8.11 $19.55 248,209 $19.55
$20.80 = $23.10 266,255 8.89 $22.74 63,856 $22.68
$24.60 = $29.15 371,253 9.15 $26.18 85,626 $26.00
--------------------------------------------------------
2,233,792 1,290,796
============ ===========
</TABLE>
At September 30, 1997, an aggregate of 3,328,445 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).
4. Acquisitions
On August 7, 1996, the Company completed the acquisition of certain net
assets of Oncology Supply Company, 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 at fair value of approximately
$6.5 million and assumed liabilities of approximately $5.4 million. The Company
recorded an excess of cost over net assets acquired of approximately $4.9
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 plus expenses of $.3 million. 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 $23.4 million in the
transaction.
On January 10, 1995, the Company completed the acquisition of Biddle &
Crowther Company, a privately-held medical-surgical supply distributor
headquartered in Seattle, Washington, for 804,505 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; the Company acquired assets at
fair value of approximately $12.0 million and assumed liabilities of
II - 21
<PAGE>
approximately $5.2 million. The Company recorded an excess of cost over net
assets acquired of approximately $4.4 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 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 50,714,317 shares in fiscal 1997, 50,323,840 shares in
fiscal 1996 and 49,751,193 shares in fiscal 1995.
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share
(EPS)," which will require the Company to disclose basic EPS and diluted EPS for
all periods for which an income statement is presented, and which will replace
disclosure currently being made for primary EPS and fully-diluted EPS. The
Company will adopt this standard in its quarter ending December 31, 1997. Pro
forma basic EPS and diluted EPS for the three years ended September 30, 1997 are
indicated below, had the Company applied the provisions of this pronouncement:
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1997 1996 1995
=======================================================================
<S> <C> <C> <C>
Earnings Per Share:
Basic $1.63 $1.47 $1.29
Diluted $1.61 $1.46 $1.29
</TABLE>
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 fiscal 2008,
excluding renewal options. Future minimum rental commitments at September 30,
1997, under operating leases having noncancelable lease terms in excess of one
year, aggregated $73.3 million, with rental payments during the five succeeding
fiscal years of $22.7 million, $18.6 million, $11.7 million, $7.8 million and
$4.7 million, respectively. Future minimum rentals to be received under
noncancelable subleases at September 30, 1997 were not material. Net rental
expense for the years ended September 30, 1997, 1996, and 1995, was $22.3
million, $17.9 million, and $17.0 million, respectively, after deducting
sublease income of $0.3 million, $0.1 million, and $0.1 million, respectively.
II - 22
<PAGE>
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 bases and
the tax bases 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 years ended September
30, 1997, 1996, and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1997 1996 1995
======================================================================
<S> <C> <C> <C>
Currently payable
Federal $38,964 $35,985 $35,865
State 7,219 6,682 6,505
Deferred (principally Federal) 10,577 9,070 3,178
---------------------------------
Total $56,760 $51,737 $45,548
=================================
</TABLE>
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 1997 1996 1995
=============================================================================
<S> <C> <C> <C>
Statutory Federal income tax rate applied
to earnings before taxes on income $48,454 $43,844 $38,322
Increase (decrease) in taxes resulting from:
Amortization of excess of cost over
net assets of acquired companies 3,262 2,447 3,055
State income taxes - net of Federal benefits 5,578 4,992 4,610
Governmental investment income (184) (157) (366)
Other (350) 611 (73)
-----------------------------
Total taxes on income $56,760 $51,737 $45,548
=============================
</TABLE>
II - 23
<PAGE>
The tax effects of significant items comprising the Company's net
deferred tax liability as of September 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1997 1996
=====================================================================
<S> <C> <C>
Deferred tax liabilities:
Inventory basis difference due to LIFO
method and uniform capitalization $49,142 $38,602
Accelerated depreciation 8,223 8,722
Employee benefits 4,048 -
Other 3,074 2,918
---------------------
Total 64,487 50,242
---------------------
Deferred tax assets:
Reserves for doubtful receivables 15,639 12,527
Restructuring charge not currently deductible 1,264 2,203
Vacation pay not currently deductible 1,933 1,659
Accrued liabilities not currently deductible 15,579 13,641
Other - 717
---------------------
Total 34,415 30,747
---------------------
Net deferred tax liability $30,072 $19,495
=====================
</TABLE>
Deferred taxes result from temporary differences in the recognition of
revenues and expenses for tax and financial reporting purposes.
Cash paid for income taxes was $50.7 million, $51.1 million, $41.0
million, and $39.0 million in fiscal 1997, 1996, and 1995, respectively.
In the opinion of management of the Company, no valuation reserve
related to deferred tax assets is considered necessary.
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 $3.8
million, $3.4 million, and $3.9 million to the plan in fiscal 1997, 1996, and
1995, respectively.
The supplemental retirement plans provide benefits for certain officers
and key employees. The Company has a Supplemental Executive Retirement Plan
II - 24
<PAGE>
("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 fiscal 1997, 1996, and 1995 are as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1997 1996 1995
======================================================================
<S> <C> <C> <C>
Service cost $ 598 $ 294 $ 221
Interest cost 1,596 1,519 1,261
Amortization of prior service cost 378 378 378
Amortization of initial unrecognized
net obligation 264 264 264
----------------------------
Total $2,836 $2,455 $2,124
============================
</TABLE>
Assumptions used to develop the net periodic pension cost for
supplemental retirement plans were:
<TABLE>
<CAPTION>
1997 1996 1995
==============================================================================
<S> <C> <C> <C>
Discount rate 7.00-8.00% 7.00-8.00% 7.25%-8.25%
Rate of increase in salary levels 5.50% 5.50% 5.25%
</TABLE>
The funded status of the supplemental retirement plans at September 30,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Dollars in thousands 1997 1996
====================================================================================
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $15,961 $15,572
Nonvested benefits - -
-----------------
Accumulated benefit obligation 15,961 15,572
Effect of assumed increase in future compensation levels 5,522 3,998
-----------------
Projected benefit obligation 21,483 19,570
Assets of plans at fair value (2,865) (2,898)
------------------
Excess of projected benefit obligation over assets 18,618 16,672
Unrecognized prior service cost (2,132) (2,510)
Unrecognized net loss (7,882) (5,166)
Unrecognized net obligation remaining from date of adoption (3,314) (3,578)
------------------
Pension liability recognized in the consolidated balance sheets $ 5,290 $ 5,418
=================
</TABLE>
At September 30, 1997 and 1996, the Company owned life insurance in the
aggregate amounts of $46.5 million and $45.0 million, respectively, covering
II - 25
<PAGE>
substantially all of 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 $0.4 million in fiscal 1997, 1996, and 1995, respectively.
9. Contingencies
The Company received proceeds of $1.9 million and $7.7 million in 1997
and 1996, respectively, from receivables sold with recourse by the Company to
financial institutions and repurchased $17.7 million of such receivables during
1997.
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 from October 15, 1989 to the present. Plaintiffs seek
injunctive relief and treble damages in an amount to be determined at trial.
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, summary judgment was granted in favor of
the Company and the other wholesaler defendants and the Company was dismissed
from the Federal class action. However, the decision was appealed and, on August
15, 1997, the Court of Appeals for the Seventh Circuit, along with other
rulings, reversed the District Court's decision granting summary judgment to the
wholesaler defendants. The effect of the sharing agreement is that the Company's
maximum potential loss would be $1.0 million, regardless of the outcome of the
lawsuits, plus possible legal fee expenses in excess of the Company's
proportionate share of the $9.0 million reimbursement of such fees to be paid by
the manufacturer defendants.
II - 26
<PAGE>
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 consolidated financial condition or results of
operations.
On March 20, 1997, the Company announced that it had terminated its
previously announced merger agreement with IVAX Corporation ("IVAX") (See Note
10). In connection with such termination the Company filed a lawsuit against
IVAX in the United States District Court for the Southern District of New York
alleging, among other things, various breaches of its merger agreement. On May
2, 1997, IVAX filed an Answer and Counterclaim against the Company denying
various allegations in the Company's complaint, raising various affirmative
defenses and alleging that the Company has breached the merger agreement entered
into between the parties. On August 15, 1997, the Company and IVAX settled the
lawsuits over the abandoned merger.
The Company is involved in various additional items of litigation.
Although the amount of liability at September 30, 1997 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 the
Company's consolidated financial position or results of operations.
10. Other Unusual Items
During the second quarter of fiscal 1997, the Company recorded a
one-time, pre-tax charge of $5.8 million ($3.4 million, net of income tax
benefit of $2.4 million, or $.07 per share) for expenses related to the
terminated merger with IVAX (see Note 9).
11. Disclosures About Fair Value of Financial Instruments
The recorded amounts of the Company's cash and cash equivalents,
short-term investments, accounts and notes receivable, other investments,
noncurrent receivables, accounts payable and the revolving bank loan payable,
the 6 7/8% Debentures and the 7% Debentures at September 30, 1997 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, 1997:
<TABLE>
<CAPTION>
Recorded
Dollars in thousands Amount Fair Value
=====================================================
<S> <C> <C>
7 3/8% Notes $149,411 $154,140
7 1/4% Notes 99,732 103,801
</TABLE>
II - 27
<PAGE>
12. Pending Business Combinations
On November 18, 1997, the Company signed an agreement to acquire
substantially all of the net assets of Besse Medical Services, Inc., a
privately-held distributor of injectables, diagnostics and medical supplies.
Under the agreement, the Company would pay approximately $20.0 million in cash,
plus estimated expenses of $.2 million, acquire assets at fair value of
approximately $6.6 million and assume liabilities of approximately $4.6 million.
Consummation of this transaction, to be accounted for as a purchase for
financial reporting purposes, is subject to certain conditions, including the
receipt of regulatory approvals, and is expected to be completed in the second
quarter of fiscal 1998. The acquisition will be financed from borrowings under
the Credit Agreement.
On August 23, 1997, the Company signed a definitive merger agreement
with Cardinal, a distributor of pharmaceuticals and provider of value-added
pharmaceutical related services, headquartered in Dublin, Ohio. The merger
agreement, which has been unanimously approved by the Boards of Directors of the
Company and Cardinal, calls for the Company to become a wholly-owned subsidiary
of Cardinal. The combined company is expected to be known as Cardinal Bergen
Health, Inc. and would be heardquartered in Dublin, Ohio. Under the terms of the
proposed merger, shareowners of the Company would receive 0.775 of a Cardinal
Common Share in exchange for each outstanding share of the Company's Class A
Common Stock. Cardinal would issue approximately 40 million Common Shares in the
transaction and would assume the Company's long-term debt which was
approximately $418.2 million at September 30, 1997. The merger of the two
companies has been structured as a tax-free transaction and would be accounted
for as a pooling of interests for financial reporting purposes. The merger is
currently expected to be completed by the end of the second quarter of fiscal
1998, subject to the satisfaction of certain conditions, including approvals by
the Company's shareowners and Cardinal's shareholders, and the receipt of
certain regulatory approvals.
II - 28
<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, 1997 and 1996 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, 1997. 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, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1997, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
- -------------------------
Costa Mesa, California
October 31, 1997
II - 29
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
II - 30
<PAGE>
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT
The registrant incorporates by reference herein information to
be set forth in its definitive proxy statement for its 1998 annual meeting of
shareowners that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to shareowners and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The registrant incorporates by reference herein information to
be set forth in its definitive proxy statement for its 1998 annual meeting of
shareowners that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to shareowners and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The registrant incorporates by reference herein information to
be set forth in its definitive proxy statement for its 1998 annual meeting of
shareowners that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to shareowners and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The registrant incorporates by reference herein information to
be set forth in its definitive proxy statement for its 1998 annual meeting of
shareowners that is responsive to the information required with respect to this
Item. If such proxy statement is not mailed to shareowners and filed with the
Securities and Exchange Commission within 120 days after the end of the
registrant's most recently completed fiscal year, the registrant will provide
such information by means of an amendment to this Annual Report on Form 10-K.
III - 1
<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,
1997, 1996, and 1995
Consolidated Balance Sheets, September 30, 1997 and
1996
Statements of Consolidated Cash Flows for the Years
Ended September 30, 1997, 1996, and 1995
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 August
23, 1997, among Cardinal Health, Inc.,
Bruin Merger Corp. and the Company.
*3(a) The By-Laws as amended and restated and
dated November 8, 1996 are set forth as
Exhibit 3(a) in the Company's Annual Report
on Form 10-K for the fiscal year ended
September 30, 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 August 23,
1997 between Cardinal Health, Inc. and
the Company.
***10(b) Support/Voting Agreement, dated August 23,
1997, by and between Robert E. Martini
and Cardinal Health, Inc.
**10(c) Bergen Brunswig Corporation Deferred
Compensation Plan.
**10(d) Director Indemnification Agreement and
Amendment to Director Indemnification
Agreement.
IV - 2
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
10(e) Bergen Brunswig Corporation Bonus Plan as
adopted September 1, 1977 and amended
October 19, 1990.
**10(f) Bergen Brunswig Corporation Stock Option
Plans, other than the Amended and
Restated 1989 Stock Incentive Plan.
10(g) Amended and Restated 1989 Stock Incentive
Plan of Bergen Brunswig Corporation and
Subsidiary Companies.
*10(h) Form of Amended and Restated Supplemental
Executive Retirement Plan.
*10(i) Form of Amended and Restated Capital
Accumulation Plan.
Exhibits 10(h) and 10(I) 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(j) Amendment No.1 to the Amended and Restated
Capital Accumulation Plan is set forth as
Exhibit 10(m) in the Company's Annual Report
on Form 10-K for the fiscal year ended
September 30, 1996.
*10(k) 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(l) Employment Agreement and Schedule.
*10(m) Severance Agreement and Schedule.
Exhibits 10(l) and 10(m) 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.
10(n) Supplemental Agreement and Schedule.
10(o) Retired Officers' Medical Plan.
IV - 3
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. Exhibits (Continued)
--------
11 Computation of earnings per share for the
three years ended September 30, 1997.
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, 1997.
99(a) Statement Regarding Forward-Looking
Information.
99(b) Split Dollar Life Insurance Plan with
Robert E. Martini.
*99(c) 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(d) 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(e) 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(f) The Company's Current Report on Form 8-K
dated August 23, 1997, relating to the
execution of a definitive merger agreement
with Cardinal Health, Inc., is incorporated
herein by reference in Part I, Item 1 of
this Annual Report.
IV - 4
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K (Continued)
3. 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 Cardinal Health, Inc., filed with the
Securities and Exchange Commission on August 27, 1997.
(b) Reports on Form 8-K:
On August 27, 1997, a Current Report on Form 8-K, dated August 23,
1997, was filed reporting under Item 5, the execution of a definitive
merger agreement with Cardinal Health, Inc.
IV - 5
<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 19, 1997 By /s/ Donald R. Roden
-------------------------------------
Donald R. Roden
President 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.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Robert E. Martini Chairman of the Board December 19, 1997
- ----------------------- and Director
Robert E. Martini
/s/ Donald R. Roden President and Chief December 19, 1997
- --------------------- Executive Officer
Donald R. Roden and Director (Principal
Executive Officer)
/s/ Neil F. Dimick Executive Vice President, December 19, 1997
- -------------------- Chief Financial Officer
Neil F. Dimick and Director
(Principal Financial
Officer and Principal
Accounting Officer)
IV - 6
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ John Calasibetta Senior Vice President December 19, 1997
- ---------------------- and Director
John Calasibetta
/s/ Jose E. Blanco, Sr. Director December 19, 1997
- -------------------------
Jose E. Blanco, Sr.
/s/ Rodney H. Brady Director December 19, 1997
- ---------------------
Rodney H. Brady
/s/ Charles C. Edwards, M.D. Director December 19, 1997
- ------------------------------
Charles C. Edwards, M.D.
/s/ Charles J. Lee Director December 19, 1997
- --------------------
Charles J. Lee
/s/ George R. Liddle Director December 19, 1997
- ----------------------
George R. Liddle
/s/ James R. Mellor Director December 19, 1997
- ---------------------
James R. Mellor
/s/ George E. Reinhardt, Jr. Director December 19, 1997
- ------------------------------
George E. Reinhardt, Jr.
/s/ Francis G. Rodgers Director December 19, 1997
- ------------------------
Francis G. Rodgers
IV - 7
<PAGE>
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. PAGE NO.
- ----------- --------
***2 Agreement and Plan of Merger, dated August 23,
1997, among Cardinal Health, Inc., Bruin Merger
Corporation and the Company.
*3(a) The By-Laws as amended and restated and dated
November 8, 1996 is set forth as Exhibit 3(a) in the
Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 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 August 23, 1997,
between Cardinal Health, Inc. and the Company.
***10(b) Support/Voting Agreement, dated August 23, 1997, by
and between Robert E. Martini and Cardinal Health,
Inc.
**10(c) Bergen Brunswig Corporation Deferred Compensation
Plan.
**10(d) Director Indemnification Agreement and Amendment to
Director Indemnification Agreement.
10(e) Bergen Brunswig Corporation Bonus Plan as adopted 56
September 1, 1977 and amended October 19, 1990.
**10(f) Bergen Brunswig Corporation Stock Option Plans,
other than the Amended and Restated 1989 Stock
Incentive Plan.
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
-----------------------------
EXHIBIT NO. PAGE NO.
- ----------- --------
10(g) Amendments to the Amended and Restated 1989 Stock
Incentive Plan of Bergen Brunswig Corporation and
Subsidiary Companies.
*10(h) Form of Amended and Restated Supplemental Executive
Retirement Plan.
*10(i) Form of Amended and Restated Capital Accumulation
Plan.
Exhibits 10(h) and 10(i) 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(j) Amendment No. 1 to the Amended and Restated Capital
ccumulation Plan is set forth as Exhibit 10(m) in
the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996.
*10(k) 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(l) Employment Agreement and Schedule.
*10(m) Severance Agreement and Schedule.
Exhibit 10(l) and 10(m) 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.
10(n) Supplemental Agreement and Schedule. 79
10(o) Retired Officers' Medical Plan. 94
11 Computation of earnings per share for the three 166
years ended September 30, 1997.
21 List of subsidiaries of Bergen Brunswig Corporation 167
23 Independent Auditors' Consent. 168
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 169
30, 1997.
99(a) Statement Regarding Forward-Looking Information. 170
99(b) Split Dollar Life Insurance Plan with Robert E. 171
Martini.
*99(c) 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(d) 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(e) 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(f) The Company's Current Report on Form 8-K dated
August 23, 1997, relating to the execution of a
definitive merger agreement with Cardinal Health,
Inc., is incorporated herein by reference in Part I,
Item 1 of this Annual Report.
* 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 Cardinal Health, Inc., filed with the
Securities and Exchange Commission on August 27, 1997.
Exhibit 10(e)
BERGEN BRUNSWIG CORPORATION
BONUS PLAN
As Adopted September 1, 1977
(Amended October 19, 1990)
I. Three Level Plan
The Bergen Brunswig Corporation Bonus Plan consists of plans
established at the following three levels:
A. A Corporate Staff Bonus Plan for executives and key employees
having corporate-wide line or staff responsibilities.
Participants will be selected by the President and Chief
Executive Officer of Bergen Brunswig Corporation.
B. Division Chief Executive Officer Bonus Plan for executives
having line responsibility over the divisions or the groups
comprising the major profit centers of the Corporation. (see
Exhibit B)
C. A series of Division Executive Bonus Plans designed to meet
the needs of executives below the Chief Executive Officer in
each division including those having responsibility for both
profit and cost centers. Separate plans will, therefore, be
established for each of the following organizations.
Drug
Commtron
The design of the plans under this category are the responsibility of
the Chief Executive Officer of each division. Divisional plans, prior
to their finalization, communication, and implementation, however, will
require the approval of the President and Chief Executive Officer of
Bergen Brunswig Corporation, with participants in these plans begin
nominated prior to the beginning of the fiscal year by their respective
Chief Executive Officers and approved by the President and Chief
Executive Officer of Bergen Brunswig Corporation.
II. Corporate Staff Bonus Plan
A. Participation
Participants in the Corporate Staff Bonus Plan consist of
Corporate Officers with corporate-wide responsibilities and a
limited number of other corporate staff management personnel
to be nominated by their respective Corporate Officers. This
latter group will normally include only those of Staff
Director and Manager title and above and earning a minimum
annual base salary of $40,000. The President and Chief
Executive Officer of Bergen Brunswig Corporation will approve
all corporate staff management participants, relying
EXH 10(e) - Page 1
<PAGE>
upon the recommendations of the respective Corporate Officers.
Qualifying employees who are hired after the beginning of the
fiscal year may be included under this Plan on such terms and
conditions as shall be established by the President and Chief
Executive Officer of Bergen Brunswig Corporation.
B. Maximum Bonus Payments
Maximum bonus payments to participants in the Corporate Staff
Bonus Plan will be as follows:
Corporate Officers
and Key Executives ..........Base salary at the end of the
applicable fiscal year.
Corporate Staff
Management ..................50% of base salary at the end of
the fiscal year.
C. Bonus Pool
A maximum Corporate Staff bonus pool will be approved by the
Board of Directors for each of the Company's fiscal years. The
maximum pool will generally be the amount provided in that
fiscal year's Board-approved annual plan.
1. The basis for the generation of an actual bonus
pool to be available for payment awards to
participants will be the achievement of two defined
elements, plus a discretionary element. Each of the
defined elements will be of equal value, i.e. 25% of
potential, and will be derived from the following
performance factors: (a) Return on Equity (R.O.E.),
(b) Net Earnings before minority interest (N.E.). In
the event of a significant acquisition or divestiture
during the fiscal year, the Return on Equity and Net
Earnings performance factors will be adjusted on a
proforma basis giving effect to the projected impact
of such a transaction. The discretionary element
value will be 50% of potential.
(a) Return on Equity - A minimum acceptable
level of R.O.E. will be established for each
fiscal year which must be achieved before
the first dollar becomes available for this
element.
(b) Net Earnings - N.E. as set out in the Board
approved annual plan will be the basis of
measuring the amount of contribution
available from this element. Full
achievement of plan will generate the
maximum, while achievement of less than an
established minimum level will result in no
contribution from this element.
EXH 10(e) - Page 2
<PAGE>
(c) Discretionary - There exists certain
factors, such as market environment, the
economy, legal requirements, etc., which
should be recognized when evaluating overall
Company performance. This element, subject
to a predetermined limitation will be
determined by the Board after a review of
the actual fiscal year performance.
See Exhibit C for the current fiscal year proposed maximum
pool and application of the proposed formulas to the
respective pool elements.
2. Estimated amounts for a Corporate Staff Bonus
provision will be charged to earnings on a cumulative
basis during each fiscal year and adjusted to the
amount determined to be payable at each year-end
closing.
D. Individual Bonus Award Determination
1. As a first step in quantifying individual amounts,
bonus awards will be calculated on a ratable basis;
i.e., using the individual base compensation at
fiscal year-end as the numerator and the aggregate
base compensation of all participants as the
denominator, applied to the total available annual
bonus pool amount. For this purpose, the calculation
will utilize 200%, 100% and 50% of the respective
Corporate Officer and Director, Corporate Officer and
non-officer compensation amounts.
2. Thereafter, individual award approval will be a
function of the Compensation Committee of the Board
of Directors as to corporate officers who are also
Directors and a function of the President and Chief
Executive Officer of Bergen Brunswig Corporation as
to all other participants.
3. Award and payment of the amounts so determined will
take into account the individual's annual performance
and contributions made during the course of the
fiscal year. In certain positions, this evaluation
will take into account the extent of achieving
specific goals assigned at the beginning of the
fiscal year.
E. Payment of Bonus
Payment made under the Corporate Staff Bonus Plan will be
described in Section IV of this proposal.
III. Division Chief Executive Officer Bonus Plan
A. Participation
EXH 10(e) - Page 3
<PAGE>
Participants in the Division Chief Executive Officer Bonus
Plan include the operating heads of units set out in Exhibit
B. Qualifying employees who are hired after the beginning of
the fiscal year may be included under this Plan on such terms
and conditions as shall be established by the President and
Chief Executive Officer of Bergen Brunswig Corporation.
B. Maximum Bonus Payments.
The maximum bonus amount available for payment to each
Division Chief Executive Officer will be established at the
start of each fiscal year.
C. Bonus Computation - General
Bonus amounts earned by each executive under the Division
Chief Executive Officer Bonus Plan will be directly influenced
by factors such as the following:
1. Annual plan performance.
2. Strategic plan performance.
3. Achievement of specific goals established at the
beginning of the fiscal year.
4. Discretionary factors which cannot be easily
quantified, but which require judgment on the part
of senior Bergen Brunswig Corporation management.
The above factors will each receive weights as determined
annually by Bergen Brunswig Corporation management immediately
following approval of the ensuing fiscal year annual plan. The
earnings achievement relative to annual plan factor (no. 1,
above) will be reduced through application of a penalty to the
extent that 100% of annual plan results are not achieved. The
minimum and maximum levels of performance may be different for
each Division Chief Executive Officer, depending upon the
nature and condition of the business involved.
D. Bonus Compensation - Detail
1. Bonus Based on Earnings Achievement Relative to
Annual Plan.
a. Earnings will be expressed on a before tax
basis after cost of money at the annual
established rate.
b. A minimum of 95% achievement of earnings
plan will be required with an intervening
straight line calculation up to 100%
achievement determining a maximum bonus
award.
c. The minimum and maximum performance levels
will be the same for all divisions.
EXH 10(e) - Page 4
<PAGE>
2. Bonus Based on R.O.I. Achievement.
a. R.O.I. will be expressed on a before tax
basis after cost of money at the annual
established rate. Average investment for the
year will be used as the investment base.
b. A minimum and maximum R.O.I. range will be
established which will determine the
percentage of maximum bonus and dollar
amount of bonus that will be earned on a
straight line basis at various levels of
R.O.I.
c. Though the minimum and maximum performance
levels, as well as the formula, may be
different for each Division, an R.O.I. of
20% before taxes will be regarded as a
minimum acceptable R.O.I.
3. Bonus Based on Achievement of Strategic Plan and
Specific Goals.
At the start of the fiscal year, each Division
Executive will be given certain goals to accomplish
during the course of the year. In instances of
multiple goals, each will be given a weight for
purposes of valuing this element of bonus award.
4. Bonus Based on Discretion.
It is recognized that there are a number of executive
performance factors that do not lend themselves to
numerical or formula measurements. For this reason,
under unusual circumstances, a part of an executive's
maximum bonus may be awarded by the President an
Chief Executive Officer of Bergen Brunswig
Corporation on the basis of achieving prearranged
goals and objectives and/or discretionary factors. It
should be understood that this discretionary
component of the bonus will be awarded only for
extraordinary performance and circumstances and
should not be expected in cases on normal
performance.
IV. Payment of Bonus and Right to Receive
A. Bonus awards will be payable and will vest as follows:
1. Payable in full ten business days after the date the
fiscal year results have been officially released to
the public.
2. Employees shall not have earned nor be entitled to
receive any bonus award unless they are in the employ
of the Company on the scheduled date payable, except
in the event of death, permanent disability, or
EXH 10(e) - Page 5
<PAGE>
retirement where the fiscal year award will be
prorated on the basis of that part of the year the
participant was gainfully employed as the numerator
and 365 days as the denominator and will be paid to
the employee or his beneficiary on the appropriate
date.
3. Employees shall not have earned nor shall they be
entitled to receive any bonus in the event of
termination prior to payable date for any reason
other than as listed in Item 2 above.
EXH 10(e) - Page 6
<PAGE>
EXHIBIT A
PARTICIPANTS IN CORPORATE STAFF BONUS PLAN
Emil P. Martini, Jr.........Chairman of the Board
Robert E. Martini...........President and Chief Executive Officer
George E. Reinhardt, Jr.....Vice President, Finance and Chief Financial Officer
Dwight A. Steffensen........Executive Vice President and Chief Operating Officer
Anthony A. Vallario.........Senior Vice President
Cheryl S. Byrne.............Vice President, Planning and Development
John T. Fay, Jr.............Vice President, Corporate Affairs
Michael W. Fipps............Vice President, Treasurer
Richard G. Gerlach..........Vice President, Controller
Jerold O. Gutman............Vice President, Human Resources
Bernard J. Hale.............Vice President, Distribution Planning
Milan A. Sawdei.............Vice President, Chief Legal Officer
Eric J. Schmitt.............Vice President, Financial Planning
Denny W. Steele.............Vice President, Corporate Information Resources
Robert W. Teal..............Vice President, Taxes
Various Non-Corporate
Officers with
Corporate-wide
Responsibilities............Staff Directors and Managers
EXH 10(e) - Page 7
<PAGE>
EXHIBIT B
PARTICIPANTS IN DIVISION CHIEF EXECUTIVE OFFICER BONUS PLAN
Phillip Engle President, Bergen Brunswig Drug Company
EXH 10(e) - Page 8
<PAGE>
EXHIBIT C
CORPORATE STAFF BONUS PLAN
As Proposed for the Fiscal Year Ending
August 31, 1991
- --------------------------------------------------------------------------------
Approved Annual Plan Items and Amounts:
Maximum pool (amount provided in Plan) $2,200,000
Planned Return on Average Equity 15.2%
Planned Net Earnings Before Minority
Interest $71,759,000
Application of Formulas:
a) A return on Equity of 10% will be the minimum. Achievement
above 10% up to 14.0% will ratably determine bonus pool
contribution up to $500,000. Example:
<TABLE>
<CAPTION>
Rate Achievement Pool Contribution
---------------- -----------------
<S> <C>
10% $ -0-
12% 183,333
13% 366,667
14% and above 550,000
</TABLE>
b) Achievement of 90% to 100% of planned net earnings before
minority interest will be the basis for determining bonus pool
contribution. Example:
<TABLE>
<CAPTION>
Net Earnings Percentage
Achieved of Plan Pool Contribution
-------- ------- -----------------
<S> <C> <C>
$64,583,000 90% $ -0-
$68,171,000 95% 275,000
$70,324,000 98% 440,000
$71,759,000 and above 100% 550,000
</TABLE>
c) A discretionary amount up to a maximum of $1,100,000.
EXH 10(e) - Page 9
Exhibit 10(g)
AMENDED AND RESTATED
1989 STOCK INCENTIVE PLAN OF
BERGEN BRUNSWIG CORPORATION AND
SUBSIDIARY COMPANIES
Section 1. PURPOSE AND EFFECTIVE DATE OF PLAN
1.1 PURPOSE. The purpose of the Amended 1989 Stock Incentive Plan (the "Amended
Plan" or "Plan") is to promote the success of Bergen Brunswig Corporation (the
"Company") by providing a method whereby eligible directors, officers and key
employees of the Company and its Subsidiary Companies, and other recipients, may
be awarded additional remuneration for services rendered and encourage such
persons to invest in the common stock of the Company, thereby increasing their
proprietary interest in the Company's business while encouraging them to remain
in the employ of the Company, or its Subsidiary Companies, and increasing their
personal interest in the continued success and progress of the Company and its
Subsidiary Companies.
1.2 EFFECTIVE DATE. This Plan originally became effective on October 20, 1989.
The amendments to this Plan shall become effective as of October 20, 1994, the
date of adoption of such amendments by the Board of Directors of the Company
subject to the ratification by the shareowners of the Company.
Section 2. DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meaning described below when
used in this Plan:
(a) "Amended Plan" shall mean the Amended and Restated 1989 Stock
Incentive Plan of Bergen Brunswig Corporation and Subsidiary
Companies.
(b) "Award" means any Option or Stock Appreciation Right, or
combination thereof, granted under Section 6 of this Plan.
(c) "Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as it may
be amended from time to time.
(e) "Committee" shall mean the Compensation/Stock Option
Committee, or any successor committee, appointed from time to
time by the Board of Directors to administer the Plan pursuant
to Section 3.
EXH 10(g) - Page 1
<PAGE>
(f) "Common Stock" shall mean the Company's Class A Common Stock,
par value $1.50.
(g) "Company" shall mean Bergen Brunswig Corporation, a New Jersey
corporation or any successor to it in ownership of all or
substantially all of its assets.
(h) "Disability" shall mean a medically determinable physical or
mental impairment which has made an individual incapable of
engaging in any substantial gainful activity. A condition
shall be considered a Disability only if (1) it can be
expected to result in death or has lasted, or can be expected
to last, for a continuous period of not less than twelve
months, and (2) the Committee, based on medical evidence, has
expressly determined that such impairment exists.
(i) "Director Stock Option" means an option granted to an Eligible
Director under Section 7 of this Plan. Each Director Stock
Option shall be a Nonstatutory Stock Option whose grant is not
intended to fall under the provisions of Section 422 of the
Code, but shall not mean, in any instance, an Option.
(j) "Earlier Plan" shall mean the Company's 1983 Stock Option
Plan.
(k) "Eligible Director" means any director of the Company, or any
of its Subsidiary Companies, who is not an employee of either
the Company or any of its Subsidiaries.
(l) "Fair Market Value" shall mean in the event the Common Stock
is traded on a recognized securities exchange or quoted by the
National Association of Securities Dealers Automated
Quotations on National Market Issues (or successor quotation
system), an amount equal to the average of the high and low
prices of such stock on such exchange or such quotation system
on the date set for valuation or, if no sales of such stock
were made on said exchange or so quoted on that date, the
average of the high and low prices of such stock on the next
preceding day on which sales were made on said exchange or
quotation system; or, if the Common Stock is not so traded or
quoted, that value determined, in its sole discretion, by the
Board with respect to Director Stock Options or the Committee,
in its sole discretion, with respect to Options and Stock
Appreciation Rights.
(m) "Incentive Stock Option" shall mean a stock option granted
under Section 6 which is intended to meet the requirements of
Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee at the time of grant.
(n) "Nonstatutory Stock Option" shall mean a stock option granted
under Section 6 or Section 7 and which is not intended to be
an Incentive Stock Option and which, in the case of options
granted pursuant to paragraph 7.1 is designated as a
Nonstatutory Stock Option by the Committee. Any stock option
granted under Section 6 which is not designated shall be a
Nonstatutory Stock Option.
EXH 10(g) - Page 2
<PAGE>
(o) "Option" shall mean an Incentive Stock Option or a
Nonstatutory Stock Option granted under Section 6 including,
for purposes of interpreting paragraph 6.5 hereof, any stock
option granted under the Earlier Plan, but, shall not mean, in
any instance, a Director Stock Option.
(p) "Recipients" means any individual described in paragraph 5.1,
as designated by the Committee to receive Awards under the
Plan.
(q) "Retirement" shall mean the voluntary termination of
employment by an employee after qualifying for early or normal
retirement under any tax-qualified pension, profit-sharing or
stock bonus plan of the Company or any Subsidiary. If an
employee is not covered by any such plan, or such plan does
not exist, "Retirement" shall mean voluntary termination of
employment after the employee has attained age 65 and after
the employee has attained the tenth anniversary of his or her
last preceding date of hire.
(r) "Stock Appreciation Right" shall mean a right granted under
paragraph 6.5 hereof.
(s) "Subsidiary" or "Subsidiary Companies" shall mean any
corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of an Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing
50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(t) "Ten Percent Shareowner" shall mean any person if he, directly
or indirectly, owns stock possessing more than ten percent of
the total combined voting power of all classes of stock of the
Company, or any Subsidiary.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context, words in
the masculine gender when used in the Plan shall include the feminine gender,
the singular shall include the plural, and the plural shall include the
singular.
Section 3. ADMINISTRATION
3.1 ADMINISTRATION OF PLAN. (a) The Board of Directors of the Company shall
appoint, from time to time, not less than three Directors to the Committee which
shall administer the Plan. Each member of the Committee shall both be a
"disinterested person" as defined in Rule 16b-3(c)(1)(i) (or any successor
provision) promulgated under the Exchange Act, and an "outside director" as
defined for purposes of Section 162(m) (or any successor provision) of the Code
and the regulations promulgated thereunder. The Committee shall have full power
and authority, subject to such orders or resolutions not inconsistent with the
provisions of the Plan as may from time to time be issued or adopted by the
Board of Directors, to grant to eligible persons, as described in paragraph 5.1,
EXH 10(g) - Page 3
<PAGE>
Options and Stock Appreciation Rights under Section 6 of the Plan, to interpret
the provisions of the Plan and any terms of any Award under the Plan, and to
supervise the administration of the Plan.
(b) All decisions made by the Committee pursuant to the provisions of the Plan
and related orders or resolutions of the Board of Directors shall be final,
conclusive and binding on all persons, including the Company, shareowners,
Recipients, Eligible Directors and beneficiaries of Recipients and Eligible
Directors.
Section 4. SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES AND ADJUSTMENTS.
(a) Subject to the adjustment pursuant to subparagraph 4.1(c), the
maximum aggregate number of shares of Common Stock with
respect to which Options, Stock Appreciation Rights and
Director Stock Options may be granted in any fiscal year under
the Plan shall equal the number of shares remaining available
for grant from prior years plus, if applicable, the increased
number of shares determined as set forth below. If at any time
during the fiscal year, the number of shares available for
grant to individuals other than Eligible Directors falls below
1% of the issued shares of Common Stock as of the last day of
the immediately preceding fiscal year (including in such
number of issued shares any shares reacquired by the Company),
then the maximum number of shares with respect to which
Options, Stock Appreciation Rights and Director Stock Options
may be granted in the current fiscal year shall be increased
by an amount equal to 1% of the issued shares of Common Stock
of the Company as of the last day of the immediately preceding
fiscal year. Any increase in the number of shares which may be
granted, as described in the preceding sentence, may only
occur once during any fiscal year. Notwithstanding the
foregoing, no more than 370,000 shares of Common Stock shall
be available for the grant of Incentive Stock Options during
each fiscal year. The aggregate number of shares of Common
Stock with respect to which Options, Stock Appreciation Rights
and Director Stock Options may be granted to any one
individual in any fiscal year may not exceed 150,000, subject
to adjustment pursuant to subparagraph 4.1(c). If an Option
granted under the Plan shall expire or terminate for any
reason other than the exercise of a Stock Appreciation Right,
the shares subject to such Option grant shall be available for
other Option grants, and not be included within the 1%
calculation described above.
(b) Subject to adjustment pursuant to subparagraph 4.1(c), of the
total shares of Common Stock referred to in subparagraph
4.1(a), the number of shares of Common Stock with respect to
which Director Stock Options may be granted to Eligible
Directors shall not exceed one hundred eighty-seven thousand
five hundred (187,500) shares of Common Stock.
EXH 10(g) - Page 4
<PAGE>
(c) In the event that subsequent to the date of adoption of the
Plan by the Board the shares of Common Stock should as a
result of a stock split, stock dividend, combination or
exchange of shares, exchange for other securities,
reclassification, reorganization, redesignation, merger,
consolidation, recapitalization or other such change, be
increased or decreased or changed into or exchanged for a
different number or kind of shares of Common Stock or other
securities of the Company, or of another corporation, then (a)
there shall automatically be substituted for each share of
Common Stock subject to an unexercised Option and Director
Stock Option (in whole or in part) granted under the Plan and
each share of Common Stock available for additional grants of
Options and Director Stock Options under the Plan, the number
and kind of shares of Common Stock or other securities into
which each outstanding share of Common Stock shall be changed
or for which each such share shall be exchanged, (b) the
option price shall be increased or decreased proportionately
so that the aggregate purchase price for the securities
subject to the Option and Director Stock Option shall remain
the same as immediately prior to such event and (c) the Board
shall make such other adjustments to the securities subject to
Options and Director Stock Options and the provisions of the
Plan as may be appropriate and equitable. Any adjustment may
provide for the elimination of fractional shares.
Section 5. ELIGIBILITY
5.1 ELIGIBILITY AND PARTICIPATION. Participants in the Plan who will be eligible
to receive Awards shall be selected by the Committee from among those key
employees of the Company, and its Subsidiaries, and such other persons who are
or have been actively engaged in the conduct of the business of the Company, or
any of its Subsidiaries (hereinafter, for convenience such persons are referred
to as "Consultants"), who are recommended for participation by the management of
the Company and who, in the opinion of the Committee, are in a position to
contribute materially to the Company's continued growth, development, and
long-term financial success. Persons serving on the Committee and Eligible
Directors shall not be eligible to be a Recipient and, therefore, not eligible
to receive an Award.
5.2 ELIGIBLE DIRECTORS. Eligible Directors are entitled to participate in the
Plan solely with respect to the grant of Director Stock Options and may not
receive any other benefit under the Plan. The selection of Eligible Directors is
not subject to the discretion of the Committee and persons serving on the
Committee, who are Eligible Directors, may only receive grants of Director Stock
Options.
Section 6. OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 GRANT OF OPTIONS OTHER THAN DIRECTOR STOCK OPTIONS. Subject to the
limitations of the Plan, the Committee shall, after such consultation with and
consideration of the recommendations of management as the Committee considers
desirable, select from
EXH 10(g) - Page 5
<PAGE>
eligible Recipients those to be granted Options and determine the time when each
Option shall be granted and the number of shares subject to each Option and
shall select the Recipients to receive Stock Appreciations Rights and the
Options to which such rights shall relate. Options may be either Incentive Stock
Options or Nonstatutory Stock Options and more than one Option may be granted to
the same person, however, only employees of the Company, or its Subsidiaries,
may be granted Incentive Stock Options. The aggregate Fair Market Value
(determined as of the date an option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year under this Plan, and all other plans maintained by the
Company, its parent (within the meaning of Code Section 424(e)), if any, or its
Subsidiaries, shall not exceed $100,000. Except as otherwise provided pursuant
to Code Section 422, if an Incentive Stock Option which becomes exercisable
during a calendar year is cancelled or ceases to be exercisable during the same
calendar year, the unexercised portion of that Incentive Stock Option shall not
be taken into account in applying the $100,000 limit. If the $100,000 is
exceeded, only the portion of the Incentive Stock Option which exceeds that
limit shall constitute a Nonstatutory Option but this shall not cause the terms
and conditions of the option grant which created the Option to cease to apply or
to be modified. If more than one Incentive Stock Option causes the $100,000
limit to be violated, the previous sentence shall be applied to Incentive Stock
Options in reverse order of grant and pro-rata for Incentive Stock Options
simultaneously granted.
6.2 EVIDENCE OF GRANTS AND REPLACEMENT OPTIONS. Each Option under the Plan shall
be evidenced by an option grant which shall be signed by an officer of the
Company and shall contain such provisions as may be approved by the Committee.
Any such option grant may be supplemented and amended from time to time, as
approved by the Committee, provided that the terms of such option grant, after
being amended or supplemented, conform to the terms of the Plan. Before the
issuance of a replacement option, the Committee may require surrender of a fully
or partially unexercised Option (the "surrendered option") granted under this or
any other stock option plan of the Company as a condition precedent to the grant
of a new Option (the "replacement option") for the same, a greater, or a fewer
number of shares as are surrendered under the surrendered option. The
replacement option shall be exercisable in accordance with the terms and
conditions specified by the Committee in granting thereof, in accordance with
the provisions of the Plan, and without regard to the period of exercise and
other terms and conditions of the surrendered option.
6.3 OPTION PRICE. The price at which shares may be purchased upon exercise of a
particular Option shall not be less than the par value of the Common Stock and
(a) in the case of any Incentive Stock Option, shall not be less than (1) 100%
of the Fair Market Value of such shares on the date such Option is granted, or
(2) 110% of Fair Market Value of the shares on the date of grant in the case of
an optionee who is a Ten Percent Shareowner, and (b) in the case of a
Nonstatutory Stock Option (other than a Director Stock Option), the price
determined by the Committee, in its sole discretion, however, such price may not
be less that 50% of the Fair Market Value of the Common Stock at the time such
Option is granted.
EXH 10(g) - Page 6
<PAGE>
6.4 EXERCISE OF OPTIONS. (a) Subject to the provisions of the Plan with respect
to death, retirement and termination of employment, the period during which each
Option may be exercised shall be fixed by the Committee at the time such Option
is granted; but, such period in no event shall expire later than ten years from
the date the Option is granted or, in the case of an Incentive Stock Option to a
Ten Percent Shareowner, later than five years from the date the Option is
granted.
(b) Except as permitted by paragraph 6.7, each Incentive Stock Option may be
exercised only after one year of continued employment by the Company, or any of
its Subsidiaries, and only during the continuance of the optionee's employment
with the Company, or any of its Subsidiaries. Subject to the foregoing
limitations and the terms and conditions of the option grant and unless
cancelled prior to exercise, each Option shall be exercisable in whole or in
part in installments at such time or times as the Committee may prescribe and
specify in the applicable option grant.
(c) No shares shall be delivered pursuant to any exercise of an Option until
payment in full of the option price therefor is received by the Company. Such
payments shall be made in (1) cash or a cash equivalent acceptable to the
Committee and whether or not such cash equivalent was a common practice at the
time of approval of the Plan by shareowners, or (2) unless prohibited by the
Committee, through the delivery of shares of Common Stock of the Company with a
value equal to the total option price, or (3) such other consideration,
including but not limited to, a secured or unsecured promissory note acceptable
to the Committee, or (4) a combination of cash, shares and such other
consideration as may be specified by the Committee. Any shares so delivered
shall be valued at their Fair Market Value on the exercise date. No optionee or
legatee or distributee of any optionee shall be deemed to be a holder of any
shares subject to any Option prior to the issuance of such shares upon exercise
of such Option or any related Stock Appreciation Right.
6.5 STOCK APPRECIATION RIGHTS. (a) Stock Appreciation Rights may be granted to
such optionees holding Options granted under the Plan, or the Earlier Plan, as
the Committee may select and upon such terms and conditions as the Committee may
prescribe. Each Stock Appreciation Right shall relate to a specific Option
granted and may be granted concurrently with the Option to which it relates or
at any time prior to the exercise, expiration or termination of such Option. A
Stock Appreciation Right shall entitle the optionee, subject to the provisions
of the Plan and the related option grant, to receive from the Company an amount
not more than the excess of the Fair Market Value on the exercise date of the
number of shares for which the Stock Appreciation Right is exercised over the
option price for such shares under the related Option.
(b) A Stock Appreciation Right shall be exercisable on such dates or during such
periods as may be determined by the Committee from time to time, provided that,
the Committee may, for administrative convenience, determine that, for any Stock
Appreciation Right relating to an Option which right can only be exercised
during a limited period of time in order to satisfy rules imposed by the
Securities and Exchange Commission, the exercise of any such right for cash
during such limited period shall be deemed to occur for all purposes hereunder
on the date during such limited period on which the Fair Market Value
EXH 10(g) - Page 7
<PAGE>
of the Common Stock is the highest, and provided, further, that no Stock
Appreciation Rights shall be exercisable at a time when the related Option could
not be exercised nor may it be exercised with respect to a number of shares in
excess of the number for which such Option could then be exercised. Subject to
paragraph 9.5, any such determination by the Committee may be changed by the
Committee, from time to time, and may govern the exercise of Stock Appreciation
Rights granted prior to such determination as well as Stock Appreciation Rights
thereafter granted.
(c) A Stock Appreciation Right may be exercised only upon surrender of the
related Option by the optionee, which shall be terminated to the extent of the
number of shares for which the Stock Appreciation Right is exercised. Shares
covered by such a terminated Option, or portion thereof, granted under the Plan
shall not be available for other Options under the Plan.
(d) The amount payable by the Company upon exercise of a Stock Appreciation
Right may be paid in cash, in shares of Common Stock (valued at Fair Market
Value on the exercise date) or in any combination thereof as the Committee shall
determine from time to time. No fractional shares shall be issued and the
optionee shall receive cash in lieu thereof.
(e) The Committee may impose any other conditions upon the exercise of a Stock
Appreciation Right, which conditions may include a condition that the Stock
Appreciation Right may be exercised only in accordance with rules and
regulations adopted by the Committee from time to time. Such rules and
regulations may govern the right to exercise Stock Appreciation Rights granted
prior to the adoption or amendment of such rules and regulations as well as
Stock Appreciation Rights granted thereafter.
(f) Subject to paragraph 9.5, the Committee may at any time amend or suspend any
Stock Appreciation Right theretofore granted under the Plan, provided that the
terms of any Stock Appreciation Right after any amendment shall conform to the
provisions of the Plan. A Stock Appreciation Right shall terminate upon the
termination or expiration of the related Option.
6.6 Transferability of Options and Stock Appreciation Rights. Except as set
forth in the following sentences, an Award granted under the Plan may not be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the person to whom granted, may be exercised only by such person
or his guardian or legal representative. The Committee shall have discretionary
authority to grant Awards which would be transferable to members of an
employee's immediate family, including trusts for the benefit of such family
members and partnerships in which such family members are the only partners. For
purposes of paragraph 6.7, a transferred Award may be exercised by the
transferee to the extent that the employee would have been entitled had the
Award not been transferred.
6.7 DEATH, RETIREMENT AND TERMINATION OF EMPLOYMENT. To the extent provided in
this paragraph 6.7 and consistent with the rules for determining employee status
described in paragraph 6.8 below, each Award granted to an employee may be
exercised by such
EXH 10(g) - Page 8
<PAGE>
Recipient after he ceases to be an employee. No Award, however, may be exercised
after the Recipient ceases to be an employee, except to the extent that the
Award was exercisable at the time of such cessation nor may the Award be
exercisable after its term expires or it is otherwise cancelled. If a Recipient
who has ceased to be an employee resumes any such position before the time for
exercising his Award under this Section has expired, the Award shall thereafter
be exercisable to the same extent as if the Recipient had never ceased to be an
employee. If the Award, however, has ceased to be exercisable, it shall not
again become exercisable even if the Recipient again becomes an employee.
(a) Except as provided in the Award, if an employee resigns, is
discharged or is otherwise terminated and his resignation,
discharge or termination in not on account of misconduct, and,
if such Recipient is not rendering services for any
organization engaged directly or indirectly in any business
which, in the opinion of the Committee, competes with or is in
conflict with the interest of the Company, or any of its
Subsidiaries, his Award, to the extent exercisable under this
Section, may be exercised within three months after the date
of such Recipient's resignation, discharge or other
termination. If such resignation, discharge or termination is
on account of misconduct, or, such Recipient is rendering
services for any organization as described above, his Award
shall terminate and shall no longer be exercisable upon notice
of such resignation, discharge or termination. A Recipient
shall be considered to have been terminated for misconduct if
he resigns, is discharged or is otherwise terminated on
account of (1) a conviction of a felony, (2) misappropriation
of the assets or property of the Company, or any Subsidiary,
(3) a violation of any of the Company's (or its Subsidiaries')
policies or procedures, or (4) a refusal to carry out the
reasonable directions of the Board.
(b) Except as otherwise provided in an Award, if a Recipient dies
while he could have exercised his Award (whether pursuant to
this paragraph or otherwise), the Award, to the extent
exercisable under this Section, may be exercised within 365
days after the Recipient's death by the executors or
administrators of his estate or by any person who has acquired
the Award directly from the Recipient by bequest or
inheritance.
(c) Except as otherwise provided in an Award, if a Recipient
ceases active service as an employee on account of a
Disability, the Recipient may exercise the Award, to the
extent exercisable under this Section, within 365 days after
his last day of work.
(d) Except as otherwise provided in an Award granted subsequent to
January 26, 1995, if a Recipient terminates active service
because of Retirement (and not on account of misconduct, as
determined under subparagraph (a)), the exercise period of the
Award shall automatically be extended to its expiration date.
In addition, the Committee may, in its discretion, extend to
the expiration date the exercise period of Awards granted
prior to January 26,
EXH 10(g) - Page 9
<PAGE>
1995, for Recipients who terminate active service because of
Retirement (and not on account of misconduct, as determined
under subparagraph (a)).
6.8 TERMINATION OF EMPLOYMENT. A Recipient shall cease to be an employee upon
his death, cessation of active services by reason of a Disability, resignation,
Retirement, discharge or layoff. Solely for purposes of this Plan, the
employment relationship shall be treated as continuing intact while an employee
is on military leave, sick leave or other bona fide leave of absence (to be
determined in the sole discretion of the Committee) and it shall not terminate
because of the transfer of an employee among the Company and its Subsidiaries.
In the case of an Incentive Stock Option, however, employment shall not be
deemed to continue beyond the ninetieth day after the optionee ceases active
employment for the Company, or a Subsidiary, unless the optionee's reemployment
rights are guaranteed by statute or by contract. A Recipient shall also cease to
be an employee on the date he ceases to be employed by the Company, or a
Subsidiary, in connection with the sale of a business or facility. If the
Recipient works for a Subsidiary which ceases to be a Subsidiary because of the
sale of stock or assets, the Recipient shall also cease to be an employee. The
two preceding sentences shall apply even if the Recipient continues to be
employed by the former Subsidiary, or the buyer of assets, or any other
successor.
Section 7. DIRECTOR STOCK OPTIONS
7.1 GRANT OF DIRECTOR STOCK OPTIONS. Subject to the provisions of Sections 4 and
8, Director Stock Options shall be granted to Eligible Directors as provided in
this paragraph 7.1 and the Committee shall have no discretion with respect to
any matters set forth in this Section 7.
(a) Vesting. Each Director Stock Option shall be 100% vested on
the date of grant and exercisable in three annual installments
on the first and on each succeeding anniversary of the date of
granting thereof. Each installment shall allow an Eligible
Director to acquire one-third ( ) of the total number of
shares subject to such Director Stock Option. The right to
purchase any shares under a Director Stock Option shall be
cumulative, so that when the right to purchase any shares has
accrued, such shares may be purchased at any time, or from
time to time, thereafter until expiration of the Director
Stock Option, and such expiration shall be on the tenth
anniversary of the date of grant of such Director Stock
Option.
(b) Number of Shares. Director Stock Options shall be granted as
follows:
(i) Each person who is an Eligible Director immediately
after adjournment of the Company's annual meeting of
shareowners (the "Annual Meeting") in 1989, shall
automatically be granted on the date of the 1989
Annual Meeting a Director Stock Option for 3,000
shares of Common Stock (an "Initial Director Stock
Option Grant");
EXH 10(g) - Page 10
<PAGE>
(ii) Each other person who is elected or appointed to
serve as a director of the Company, or a Subsidiary,
after the 1989 Annual Meeting and who is an Eligible
Director shall, upon his initial appointment or
election as an Eligible Director, if such person has
not already received an Initial Director Stock Option
Grant, automatically be granted a Director Stock
Option for 3,000 shares of Common Stock (which shall
also be referred to as an "Initial Director Stock
Option Grant");
(iii) Commencing immediately after the adjournment of the
Annual Meeting in 199(5), and immediately after the
adjournment of the Annual Meeting each year
thereafter, each person who was an Eligible Director
immediately following such Annual Meeting, shall
automatically be granted a Director Stock Option for
2,000 shares of Common Stock if, but only if, the
return on common equity of the Company as set forth
in the Company's annual report to shareowners for the
immediately preceding fiscal year is equal to or
greater than ten percent (10%); and
(iv) If a Director Stock Option granted under the Plan
shall expire or terminate for any reason, the shares
subject to such Director Stock Option grant shall be
available for other Director Stock Option grants to
the same Eligible Directors or other Eligible
Directors.
(c) Price. The price at which shares may be purchased upon the
exercise of a Director Stock Option shall be 100% of the Fair
Market Value of such shares on the date such Director Stock
Option is granted.
(d) Payment. The price upon exercise of any Director Stock Option
shall be payable in full either (1) in cash, or (2) by
tendering shares of previously acquired Common Stock having a
Fair Market Value at the time of exercise equal to the total
price to be paid for the Director Stock Option, or (3) any
combination of (1) and (2). No shares shall be delivered
pursuant to an exercise of a Director Stock Option until
payment in full of the option price therefor is received by
the Company and no Eligible Director, guardian,
representative, legatee or distributee of any Eligible
Director shall be deemed to be a holder of any shares subject
to a Director Stock Option prior to the issuance of such
shares upon exercise of such Director Stock Option.
(e) Transferability. A Director Stock Option may not be
transferred except by will or the laws of descent and
distribution and, during the lifetime of the Eligible Director
to whom granted, may be exercised only by such person or his
guardian or legal representative provided, however, that a
Director Stock Option shall be transferable to members of an
Eligible Director's immediate family, including trusts for the
benefit of such family members and partnerships in which such
family members are the only partners. If an
EXH 10(g) - Page 11
<PAGE>
Eligible Director dies, all Director Stock Options shall be
immediately exercisable and may be exercised, subject to the
last sentence in subparagraph 7.1(a), by the executor or
administrator of his estate or by any person who has acquired
the Director Stock Option directly from the Eligible Director
by bequest or inheritance.
Section 8. DURATION OF THE PLAN
The Plan shall remain in effect, subject to the Board's right to earlier
terminate the Plan pursuant to paragraph 10.1 hereof, until all Common Stock
subject to it shall have been purchased or acquired pursuant to the provisions
hereof. Notwithstanding the foregoing, no Director Stock Option, Option or Stock
Appreciation Right may be granted under the Plan on or after the tenth (10th)
anniversary of the Plan's original effective date of October 20, 1989.
Section 9. GENERAL PROVISIONS
9.1 DESIGNATION OF BENEFICIARY. Each Recipient and Eligible Director who shall
be granted an Option or Director Stock Option, as the case may be, under the
Plan may designate a beneficiary or beneficiaries and may change such
designation from time to time by filing a written designation of beneficiaries
with the Committee on a form to be prescribed by it, provided that no such
designation shall be effective unless so filed prior to the death of such
Recipient or Eligible Director, as the case may be.
9.2 NO RIGHT OF CONTINUED EMPLOYMENT. Neither the establishment of the Plan, the
granting of Options or Stock Appreciation Rights, nor the payment of any
benefits hereunder nor any action of the Company or of the Board of Directors or
of the Committee shall be held or construed to confer upon any person any legal
right to be continued in the employ of the Company, or its Subsidiaries, each of
which expressly reserves the right to discharge any Recipient whenever the
interest of any such company in its sole discretion may so require without
liability to such company, the Board of Directors or the Committee, except as to
any rights which may be expressly conferred upon such Recipient under the Plan.
9.3 NO SEGREGATION OF CASH OR SHARES. The Company shall not be required to
segregate any cash or any shares of Common Stock which may at any time be
represented by Options or Director Stock Options and the Plan shall constitute
an "unfunded" plan of the Company. No Recipient or Eligible Director shall have
voting or other rights with respect to shares of Common Stock prior to the
delivery of such shares. The Company shall not, by any provisions of the Plan,
be deemed to be a trustee of any Common Stock or any other property, and the
liabilities of the Company to any Recipient or Eligible Director pursuant to the
Plan shall be those of a debtor pursuant to such contract obligations as are
created by or pursuant to the Plan, and the rights of any Recipient or Eligible
Director, former Recipient or Eligible Director or beneficiary under the Plan
shall be limited to those of a general creditor of the Company.
EXH 10(g) - Page 12
<PAGE>
In its sole discretion, the Board of Directors may authorize the creation of
trusts or other arrangements to meet the obligations of the Company under the
Plan, provided, however, that existence of such trusts or other arrangements is
consistent with the unfunded status of the Plan.
9.4 DELIVERY OF SHARES. No share shall be delivered pursuant to any exercise of
an Option or Stock Appreciation Right or Director Stock Option until the
requirements of such laws and regulations as may be deemed by the Committee (or
the Board with respect to Director Stock Options) to be applicable thereto are
satisfied. At the discretion of the Committee, any Award or Director Stock
Option may provide that the holder, by accepting such Award or Director Stock
Option, represents and agrees, for such holder's permitted transferees, that
none of the shares acquired through such grants will be acquired with a view of
any sale, transfer or distribution of said shares in violation of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder,
or any applicable "blue sky" laws, and the holder of such Award shall furnish
evidence satisfactory to the Company (including a written and signed
representation) to that effect in form and substance satisfactory to the
Company, including an indemnification of the Company in the event of any
violation by such person of the Securities Act of 1933, as amended, or state
blue sky law.
9.5 CANCELLATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Subject to the
provisions of paragraph 10.1, the Committee may, in its sole discretion and with
or without cause, cancel any Option or Stock Appreciation Right, in whole or in
part, to the extent it has not theretofore been exercised, however, no
modification of an Award shall, without the consent of the Recipient, materially
alter or impair any rights of such Recipient under the Award.
9.6 NEW JERSEY LAW TO GOVERN AND REQUIREMENTS OF LAW. All questions pertaining
to the construction, regulation, validity and effect of the provisions of the
Plan shall be determined in accordance with the laws of the State of New Jersey.
The granting of Options, Stock Appreciation Rights and Director Stock Options
and the issuance of shares of Common Stock upon the exercise of an Option,
Director Stock Option or Stock Appreciation Right shall be subject to all
applicable laws, rules and regulations, and to such approvals by any
governmental or national securities exchanges as may be required. No Option or
Stock Appreciation Right shall be granted to a person if the grant to such
person shall make this Plan ineligible for registration under Form S-8.
9.7 PAYMENTS AND TAX WITHHOLDING. The delivery of any shares of Common Stock or
the payment of any amount in respect to a Stock Appreciation Right shall be for
the account of the Company and any such delivery or payment shall not be made
until the Recipient or Eligible Director shall have made arrangements
satisfactory to the Company for the payment of any applicable withholding taxes;
however, a Recipient or Eligible Director, as the case may be, may satisfy this
obligation in whole or in part by electing to have the Company withhold from the
distribution, shares of Common Stock having a value equal to the amount required
to be withheld. The value of the shares to be withheld shall be based on the
Fair Market Value of the Common Stock on the date that the amount of tax to be
withheld shall be determined.
EXH 10(g) - Page 13
<PAGE>
Section 10. AMENDMENT AND TERMINATION
10.1 AMENDMENTS, SUSPENSION OR DISCONTINUANCE. The Board of Directors may amend,
suspend or discontinue the Plan, provided, however, that except as permitted by
subparagraph 4.1(c), the Board of Directors may not, without the prior approval
of the shareowners of the Company, make any amendment for which shareowners
approval is necessary to comply with New Jersey law or any applicable tax or
regulatory requirement, including for these purposes any approval requirement
which is a prerequisite for exemptive relief under Section 16(b) of the Exchange
Act, and provided, further, no amendment or termination of the Plan shall in any
manner adversely affect any Award, or Director Stock Option theretofore granted
under the Plan without the consent of the Recipient or Eligible Director, as the
case may be.
10.2 RIGHT OF FIRST REFUSAL. The Committee may, from time to time, before or
after a grant of any Option, establish such rights of the Company to have the
right of first refusal with respect to the sale of any Common Stock acquired
pursuant to the Plan.
10.3 THE COMMITTEE. The Board of Directors may, from time to time, remove
members from or add members to the Committee. Vacancies on the Committee,
however caused, shall be filled by the Board of Directors. The Board of
Directors shall appoint one of the members of the Committee as Chairman. The
Committee shall hold meetings at such times and places as it may determine. Acts
of a majority of the Committee at which a quorum is present, or acts reduced to
writing or approved in writing by a majority of the members of the Committee
shall be valid acts of the Committee.
To record the adoption of various amendments to the Plan by the Board of
Directors on October 20, 1994, and the shareowners on January 26, 1995, the
Company has caused its authorized officers to affix the corporate name hereto.
BERGEN BRUNSWIG CORPORATION
By: /s/
-----------------------------
EXH 10(g) - Page 14
Exhibit 10(n)
SUPPLEMENTAL AGREEMENT
----------------------
THIS SUPPLEMENTAL AGREEMENT (this "Agreement") by and among Bergen Brunswig
Corporation, a New Jersey corporation (the "Company"), Milan A. Sawdei (the
"Executive") and, solely for purposes of Section 6 hereof, Cardinal Health,
Inc., an Ohio corporation ("Cardinal"), is dated as of August 23, 1997.
RECITALS
--------
WHEREAS, the Company has entered into an Agreement and Plan of Merger (as
the same may be amended from time to time, the "Merger Agreement") dated as of
August 23, 1997, with Cardinal and Bruin Merger Corp., a New Jersey corporation
and wholly owned subsidiary of Cardinal ("Subcorp"), whereby Subcorp will be
merged as of the Effective Time (as defined in the Merger Agreement) with and
into the Company (the "Merger"), with the Company as the surviving corporation
of the Merger (and references herein to the "Company" refer to the Company both
before and after the Merger); and
WHEREAS, the Company and the Executive desire to amend certain of the terms
and conditions under which the Executive will continue to be employed by the
Company.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, the parties hereto
agree as follows:
1. The Employment Agreement between the Executive and the Company dated
--------------------------------------------------------------------------
as of April 21, 1994 (the "Employment Agreement") is hereby amended as set forth
- --------------------------------------------------------------------------------
in this Section 1, effective as of the date of this Agreement.
- -------------------------------------------------------------
(a) Section 2 of the Employment Agreement is hereby amended to read in
its entirety as follows:
Effective Date and Term. The effective date of this Agreement
(the "Effective Date") shall be April 21, 1994. Unless the
Executive's employment is sooner terminated as provided in
Section 6, the Company shall employ the Executive until the
third anniversary of the Transaction Date (as defined below)
(such anniversary, the "Expiration Date"). The "Transaction
Date" means the day on which occurs the Effective Time (as
defined in the Merger Agreement dated as of August 23, 1997,
by and among the Company, Cardinal Health, Inc., ("Cardinal")
and Bruin Merger Corp. (as the same may be amended from time
to time, the "Merger Agreement")). All references in Section 5
EXH 10(n) - Page 1
<PAGE>
of this Agreement to the Effective Date are hereby deemed to
refer to August 23, 1997.
(b) Section 3(a) of the Employment Agreement is hereby amended to read
in its entirety as follows:
(a) Position. During the term of this Agreement, the Executive
shall be employed by the Company, and shall perform such
duties and responsibilities of an executive nature, consistent
with the Executive's training, education and experience as may
be determined from time to time by the Company's Board of
Directors (the "Board" or the "Board of Directors") or its
lawfully designated representative. In addition, following the
Transaction Date, the Executive shall be a Senior Vice
President and Assistant General Counsel of Cardinal.
(c) The second sentence of Section 5(a) of the Employment Agreement is
hereby amended to read in its entirety as follows:
The Base Salary as of the Transaction Date will be reviewed
annually as of each anniversary of the Transaction Date during
the term of this Agreement, and shall be increased as
necessary to cause the Base Salary to be substantially
comparable to the base salaries of other executives of the
same level of importance, responsibility and performance
within Cardinal (hereinafter, "Peer Company Executives").
(d) The first sentence of Section 5(b) of the Employment Agreement is
hereby amended to read in its entirety as follows:
On each of the first three anniversaries of the Transaction
Date, the Company shall pay to the Executive a bonus in such
amount as may determined by the Company in its discretion, in
accordance with the criteria used by the Company for Peer
Company Executives; provided, however, that in no event shall
such annual bonus for any year be less than fifty percent
(50%) of the average of the two most recent annual bonuses
received by the Executive before the Transaction Date, and the
Executive's target bonus shall in each case be at least equal
to the Executive's target bonus as in effect on the
Transaction Date.
(e) The last subsection of Section 5 of the Employment Agreement is
hereby amended to read in its entirety as follows:
During the term of this Agreement, the Executive shall be
entitled to receive all benefits and perquisites made
available to Peer Company Executives from time to time. Such
benefits and perquisites shall include the Company's Executive
A Healthcare program, 401(k) Plan and first class air travel;
provided, that the Company shall not be required to provide
any particular benefit or perquisite so long as the aggregate
value of the Executive's benefits and perquisites is
substantially equivalent to such value as of the Transaction
EXH 10(n) - Page 2
<PAGE>
Date, and any changes to such benefits and perquisites shall
be reasonable, taking into account the nature of such benefits
and perquisites as well as their value to the Executive. In
addition, during the term of this Agreement following the
Transaction Date, the Executive shall be eligible to be
considered for grants of options to purchase common stock of
Cardinal pursuant to the Cardinal Equity Incentive Plan on the
standard terms and conditions applicable to option grants
thereunder to similarly situated Cardinal executives.
(f) Section 6(d) of the Employment Agreement is hereby amended by
deleting the first sentence thereof and adding the following additional sentence
at the end thereof:
The Company shall also have the right to terminate the
Executive's employment under this Agreement without Cause upon
thirty calendar days' written notice to the Executive, in
which event the Executive shall be entitled to the severance
payments provided for in Section 13 of this Agreement.
(g) Clause (i) of the first sentence of Section 6(e) of the Employment
Agreement is hereby amended to read in its entirety as follows:
(i) without the express written consent of the Executive, the
assignment to the Executive by the Company of duties
inconsistent with Section 3(a) hereof;
(h) Clause (iii) of the first sentence of Section 6(e) of the
Employment Agreement is hereby amended to read in its entirety as follows:
(iii) the Company's requiring the Executive to be based at any
office or location that is not within 25 miles from the office
at which the Executive is based on the Transaction Date (any
such other office or location, a "Nonqualifying Location"),
other than business trips reasonably required in the
performance of the Executive's responsibilities under this
Agreement; provided, that if the Company notifies the
Executive that it desires to assign the Executive to a
position requiring the Executive to be based at a
Nonqualifying Location, the Executive agrees to consider, in
good faith and in light of the proposed location, title,
responsibilities, supervisory and surbordinate relationships
and other material factors relating to such position and
location, whether to accept such position and such location
change, in the Executive's sole discretion; or
(i) The portion of Section 6(e) of the Employment Agreement that
follows the first sentence thereof is hereby replaced in its entirety with the
following:
If the Executive elects to terminate the Executive's
employment for Good Reason, the Executive shall so notify the
Company in writing after the occurrence of the event
constituting Good Reason, specifying the basis for such
termination. If the Company fails, within ten (10) days after
EXH 10(n) - Page 3
<PAGE>
receiving such written notice, to remedy the facts and
circumstances that provided Good Reason, the Executive's
employment shall be deemed to have terminated for Good Reason
on the tenth day after the Company receives such written
notice, and the Executive shall be entitled to the severance
payments provided for in Section 13. If the Company does
remedy such facts and circumstances within such ten (10) days,
the Executive shall be deemed to no longer have Good Reason,
and shall continue in the employ of the Company as if no
notice had been given.
(j) The first sentence of Section 9 of the Employment Agreement is
hereby amended by deleting the phrase "During the Term hereof, the" and
substituting the word "The."
(k) Section 13 of the Employment Agreement is hereby amended to read
in its entirety as follows:
BREACH BY THE COMPANY; DAMAGES; ATTORNEYS' FEES. If the
Executive's employment is terminated by the Executive for Good
Reason or by the Company without Cause (as defined in Section
6(d) of this Employment Agreement), the Company shall provide
the Executive with the following compensation and benefits as
liquidated damages for such termination: the Company (i) shall
continue to pay the Executive the Base Salary, at the rate in
effect as of the date of such termination of employment, for
and with respect to the period beginning on the date of such
termination of employment and ending on the Expiration Date
(hereinafter the "Continuation Period"), at the same times and
in the same manner as specified in Section 5(a) hereof; (ii)
shall pay the Executive, in lieu of annual bonuses pursuant to
Section 5(b) hereof, an annual amount equal to the average of
the Executive's two most recent previous annual bonuses (or,
if the Executive has not been employed by the Company for two
years, the amount of the Executive's most recent previous
annual bonus before the date of such termination) at the same
times and in the same manner as such annual bonuses would have
been paid pursuant to Section 5(b) hereof; (iii) shall
continue to provide the Executive with a car allowance (or use
of a Company car, if applicable) on the terms and conditions
in effect immediately before the termination of employment;
(iv) shall continue to provide the Executive during the
Continuation Period with group health benefits on terms and
conditions substantially similar to those provided to the
Executive immediately before the termination of employment;
provided, that (x) if the Group Health Benefits cannot be
provided to the Executive under the terms of the applicable
plans or applicable law, the Company shall provide the
Executive (and his family, where applicable) with substitute
benefits that are comparable and substantially equivalent in
value to such benefits, and (y) during any period when the
Executive is eligible to receive any such benefits under
another employer-provided plan or a government plan, the Group
Health Benefits or substitute benefits provided by the Company
under this clause (iv) may be made secondary to those provided
under such other plan; provided, that in all events
EXH 10(n) - Page 4
<PAGE>
the Executive shall be entitled, after such termination, to
participate in the Company's Retired Officer Medical Plan
subject to the terms and conditions thereof; (v) shall, with
respect to each employee stock option held by the Executive as
of August 23, 1997 that remains outstanding but has not vested
and become exercisable as of the date of such termination,
either (A) cause such option to become fully vested and
exercisable as of the date of termination or (B) arrange for
the Executive to enjoy a status, during the Continuation
Period, such that such option continues to vest and become
exercisable in accordance with its terms in the same manner as
would have occurred if the Executive had remained employed
under this Agreement during the Continuation Period, as the
Company shall elect; provided, that the Company may not elect
to take the action provided for in clause (B) with respect to
options that are "incentive stock options" within the meaning
of Section 422 of the Internal Revenue Code of 1986, as
amended ("ISOs"), if such action would cause such options no
longer to qualify as ISOs; and (v) shall pay all amounts due
pursuant to Section 20 hereof, subject to the terms and
conditions of said Section 20. No mitigation of damages shall
be required of the Executive. The Company shall pay to the
Executive all reasonable attorneys' fees and necessary costs
and disbursements incurred by or on behalf of the Executive in
connection with or as a result of a dispute under this
Agreement or the Supplemental Agreement, if the Executive
ultimately prevails in such dispute. Attorneys' fees that
become payable pursuant to the preceding sentence shall be
paid by the Company within thirty days of presentment by the
Executive to the Company of an invoice received by the
Executive from the Executive's attorneys.
1. The Employment Agreement is hereby amended by adding
the following new Sections at the end thereof, reading in their entirety as
follows:
19. Survival. Notwithstanding any other provision of
this Agreement, Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 16,
17, 18, 20 and this Section 19 shall survive the termination
of the Executive's employment under this Agreement and the
termination of this Agreement.
20. (a) Effective as of ninety days before the
Transaction Date (the "Conversion Date"), all of the
Executive's benefits, rights and entitlements under the Bergen
Brunswig Amended and Restated Supplemental Executive
Retirement Plan (the "SERP") and the Bergen Brunswig Capital
Accumulation Plan (the "CAP"), shall be replaced by the
benefits provided by this Section 20. The Company shall
maintain three bookkeeping accounts for the benefit of the
Executive, one of which ("Account A"), which shall initially
be credited with $226,012, shall represent the Executive's
entire accrued benefit under the CAP (which is currently fully
vested), one of which ("Account B"), which shall initially be
credited with $128,534, shall represent the portion of the
Executive's accrued benefit under the SERP that was fully
vested as of the Conversion Date, without giving effect to the
provisions of Section 5.1(b) of the SERP, as in effect before
the amendment dated as of August 23, 1997,
EXH 10(n) - Page 5
<PAGE>
and one of which ("Account C"), which shall initially be
credited with $801,095, shall represent the additional vested
benefit that would have been credited to the Executive as of
the Conversion Date pursuant to said Section 5.1(b) before
such amendment. (Account A, Account B and Account C are
referred to collectively as the "Accounts.") The amounts
credited to the Accounts pursuant to the foregoing shall be
nonforfeitable from and after the Conversion Date. Except as
specifically provided in Section 20(c) below, each of the
Accounts shall be credited with interest on the balance
therein ("Interest") at the rate of 6.25% per annum,
compounded quarterly, from the Conversion Date until the
balance therein has been reduced to zero by distributions
pursuant to Section 20(c).
(b) The balance (with Interest) of Account A
and Account B and, if Section 20(c) is not applicable, the
balance (with Interest) of Account C shall be paid or begin to
be paid to the Executive as soon as practicable after the date
of the Executive's termination of employment with the Company
(whether or not such termination occurs during the term of
this Agreement) (such date, the "Starting Date"). The
Executive shall be entitled to elect by written notice to the
Company whether to receive payment in a single lump sum or in
annual installments over a specified period of years (the
"Installment Period"). Any such election may be revoked,
amended or superseded by a subsequent election; provided, that
no such election shall be effective if it is made less than
one year before the Starting Date. If, as of the Starting
Date, the Executive has not made an effective election to
receive installment payments, the Executive will be paid in a
single lump sum. If the Executive elects to receive
installment payments, then as soon as practicable after the
Starting Date, and on each anniversary thereof until the
expiration of the Installment Period, the Executive shall
receive a payment equal to (i) the balance in Account A and
Account B and, if it is being paid pursuant to this Section
20(b), the balance in Account C, divided by (ii) the number of
anniversaries of the Starting Date remaining in the
Installment Period, plus one. Notwithstanding the foregoing,
in the event of the Executive's death before the Starting Date
or before completion of any such installment payments, any
balances in the Accounts that remain payable hereunder shall
be paid to the Executive's designated beneficiary (or, if the
Executive had not designated a beneficiary, to the Executive's
estate) in a single lump sum as soon as practicable after such
death.
(c) If the Executive's employment with the
Company is terminated before the Expiration Date by the
Company for Cause or by the Executive without Good Reason,
then the balance in Account C shall not be paid pursuant to
Section 20(b) above, but shall instead be paid without
Interest (i) to the Executive on the Executive's 65th birthday
or (ii) if the Executive dies before the Executive's 65th
birthday, to the Executive's designated beneficiary (or, if
the Executive had not designated a beneficiary, to the
Executive's estate) on the 65th anniversary of the Executive's
birth.
EXH 10(n) - Page 6
<PAGE>
2. The promissory note evidencing each loan to the
-------------------------------------------------------
Executive that is outstanding as of the date of this Agreement under the
- --------------------------------------------------------------------------------
Company's Executive Loan Program is hereby amended, effective as of the date of
- --------------------------------------------------------------------------------
this Agreement, by adding to it the following:
- ---------------------------------------------
Notwithstanding any other provision of this Note: (i) the
consummation of the transactions contemplated by the Agreement
and Plan of Merger dated as of August 23, 1997, by and among
the Company, Cardinal Health, Inc., and Bruin Merger Corp. (as
the same may be amended from time to time, the "Merger
Agreement"), shall not be deemed to constitute a "Change in
Control" for purposes of this Agreement, and from and after
the Effective Time (as defined in the Merger Agreement), the
provisions of this Note providing for forgiveness and
cancellation of this Note upon a Change in Control shall be
null and void and of no further force or effect; and (ii) if
either (A) the Maker remains in continuous employment with the
Holder until the Expiration Date (as defined in the Employment
Agreement between the Maker and the Holder dated as of April
21, 1994 (the "Employment Agreement"), as amended by the
Agreement between the Maker and the Holder dated as of August
23, 1997 (the "Supplemental Agreement")) or (B) the Maker's
employment with the Holder is terminated before such
expiration by the Holder without Cause or by the Maker with
Good Reason or as a result of the Maker's death or disability
(as those terms are defined in the Employment Agreement as
amended by the Supplemental Agreement), then upon the
Expiration Date or the date of such termination, as
applicable, the entire unpaid principal balance of the Loan
shall be automatically forgiven and cancelled with no interest
due and without any further action required on the part of the
Holder or its Board of Directors, and the Holder shall
thereafter take such steps as the Maker may reasonably request
in order to evidence such forgiveness and cancellation of the
Loan and the immediate release of the collateral securing the
Loan.
3. From and after the date of this Agreement, the
-------------------------------------------------------
Severance Agreement dated as of April 21, 1994, by and between the Company and
- --------------------------------------------------------------------------------
the Executive shall terminate and shall be null and void and of no further force
- --------------------------------------------------------------------------------
or effect, and the Executive shall not be entitled to any payments or benefits
- --------------------------------------------------------------------------------
thereunder.
- ----------
4. (a) In consideration for the addition of Section 20
-------------------------------------------------------
to the Employment Agreement pursuant to Section 1(l) above and the loan
- --------------------------------------------------------------------------------
forgiveness provided pursuant to Section 2 above, during the Noncompetition
- --------------------------------------------------------------------------------
Period (as defined below), the Executive shall not, without the prior written
- --------------------------------------------------------------------------------
consent of the Board, engage in or become associated with a Competitive
- --------------------------------------------------------------------------------
Activity. For purposes of this Section 4: (i) the "Noncompetition Period" means
- --------------------------------------------------------------------------------
(A) the period during which the Executive is employed by the Company or any of
- --------------------------------------------------------------------------------
its affiliates, plus (B) the Continuation Period (if any) pursuant to Section 13
- --------------------------------------------------------------------------------
of the Employment Agreement, as amended by Section 1 of this Agreement; (ii) a
- --------------------------------------------------------------------------------
"Competitive Activity" means any
- --------------------------------
EXH 10(n) - Page 7
<PAGE>
business or other endeavor, in any county of any state of the United States of a
- --------------------------------------------------------------------------------
kind being conducted by the Company or any of its affiliates (the "Affiliated
- --------------------------------------------------------------------------------
Companies") in such jurisdiction as of the Effective Time or at any time
- --------------------------------------------------------------------------------
thereafter through such date of termination, if and only if the Executive
- --------------------------------------------------------------------------------
performed services in such business or endeavor during the Executive's
- --------------------------------------------------------------------------------
employment by the Company; provided, that no business or endeavor shall be
- --------------------------------------------------------------------------------
deemed to be a Competitive Activity if it is not a Competitive Activity at the
- --------------------------------------------------------------------------------
time the Executive begins participating in such business or endeavor; and (iii)
- --------------------------------------------------------------------------------
the Executive shall be considered to have become "associated with a Competitive
- --------------------------------------------------------------------------------
Activity" if the Executive becomes directly or indirectly involved as an owner,
- --------------------------------------------------------------------------------
principal, employee, officer, director, independent contractor, representative,
- --------------------------------------------------------------------------------
stockholder, financial backer, agent, partner, advisor, lender, or in any other
- --------------------------------------------------------------------------------
individual or representative capacity with any individual, partnership,
- --------------------------------------------------------------------------------
corporation or other organization that is engaged in a Competitive Activity.
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, the Executive may make and retain investments
- --------------------------------------------------------------------------------
during the Noncompetition Period in less than four and nine-tenths percent
- --------------------------------------------------------------------------------
(4.9%) of the equity of any entity engaged in a Competitive Activity, if such
- --------------------------------------------------------------------------------
equity is listed on a national securities exchange or regularly traded in an
- --------------------------------------------------------------------------------
over-the-counter market.
- ------------------------
(b) The Executive acknowledges and agrees that: (i) the
purpose of the noncompetition covenant of this Section 4 is to protect the
goodwill, trade secrets and other confidential information of the Company being
acquired by Cardinal; (ii) because of the nature of the business in which
Cardinal, the Company and the Affiliated Companies are engaged and because of
the nature of the Confidential Information to which the Executive has access, it
would be impractical and excessively difficult to determine the actual damages
of Cardinal, the Company and the Affiliated Companies in the event the Executive
breached the noncompetition covenant of this Section 4; and (iii) remedies at
law (such as monetary damages) for any breach of the Executive's obligations
under this Section 4 would be inadequate. The Executive therefore agrees and
consents that if the Executive commits any material breach of the noncompetition
covenant of this Section 4, and the Executive fails to cure such breach within
15 days after receiving notice from the Company thereof, the Executive shall
forfeit all of the Executive's rights to any unpaid pay or benefits pursuant to
Section 13 of the Employment Agreement, as amended by Section 1 of this
Agreement, other than the Executive's rights with respect to the Accounts
pursuant to Section 20 thereof, and the Company shall have the right (in
addition to, and not in lieu of, any other right or remedy that may be available
to it) to temporary and permanent injunctive relief from a court of competent
jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage. With respect to any provision of this
Section 4 finally determined by a court of competent jurisdiction to be
unenforceable, the Executive and the Company hereby agree that such court shall
have jurisdiction to reform this Agreement or any provision hereof so that it is
enforceable to the maximum extent permitted by law, and the parties agree to
abide by such court's determination. If the noncompetition covenant of this
Section 4 is determined to be wholly or partially unenforceable in any
jurisdiction, such determination shall not be
EXH 10(n) - Page 8
<PAGE>
a bar to or in any way diminish the Company's right to enforce such covenant in
any other jurisdiction.
5. The Executive acknowledges and agrees that each of
-------------------------------------------------------
the Bergen Brunswig Amended and Restated Supplemental Executive Retirement Plan
- --------------------------------------------------------------------------------
(the "SERP") and the Amended and Restated Bergen Brunswig Capital Accumulation
- --------------------------------------------------------------------------------
Plan (the "CAP") has been amended, and the Company has executed an amendment to
- --------------------------------------------------------------------------------
the Master Trust Agreement for Bergen Brunswig Corporation Executive Deferral
- --------------------------------------------------------------------------------
Plans dated as of December 27, 1994, between the Company and Wachovia Bank of
- --------------------------------------------------------------------------------
North Carolina, N.A., which amendment the Company intends to have executed by
- --------------------------------------------------------------------------------
the Trustee. Such amendments provide that, except as set forth in the
- --------------------------------------------------------------------------------
immediately following sentence, (i) the consummation of the Merger shall not
- --------------------------------------------------------------------------------
effectuate a "Change in Control" within the meaning thereof, and (ii) effective
- --------------------------------------------------------------------------------
as of the Effective Time, all provisions thereof that relate to a "Change in
- --------------------------------------------------------------------------------
Control" shall be null and void and of no further effect, as if deleted.
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, the consummation of the Merger shall effectuate a
- --------------------------------------------------------------------------------
"Change in Control" solely for purposes of giving effect to (A) the provisions
- --------------------------------------------------------------------------------
of Section 5.1(b)(i) of the SERP that call for full vesting of the "Accrued
- --------------------------------------------------------------------------------
Benefit" of each "Participant" upon a "Change in Control" (as those terms are
- --------------------------------------------------------------------------------
defined in the SERP, as amended to exclude from participation, contingent upon
- --------------------------------------------------------------------------------
consummation of the Merger, the Executive and certain other executives who
- --------------------------------------------------------------------------------
previously participated therein), and (B) the provisions of Section 5.4(a)(F) of
- --------------------------------------------------------------------------------
the CAP that call for the benefit of a "Participant" that is "Accrued" as of a
- --------------------------------------------------------------------------------
"Change in Control" (without giving effect to clauses (A)-(E) of Section 5.4(a))
- --------------------------------------------------------------------------------
to become fully "Vested" as of a "Change in Control" (as those terms are defined
- --------------------------------------------------------------------------------
in the CAP, as similarly amended to exclude from participation, contingent upon
- --------------------------------------------------------------------------------
consummation of the Merger, the Executive and certain other executives who
- --------------------------------------------------------------------------------
previously participated therein). The Executive hereby irrevocably waives any
- --------------------------------------------------------------------------------
rights the Executive may have to require the Company to fund or pre-fund, upon a
- --------------------------------------------------------------------------------
change in control, future benefits under the Retired Officers Medical Plan.
- --------------------------------------------------------------------------------
6. Effective as of the Effective Time of the Merger,
-------------------------------------------------------
Cardinal hereby irrevocably, absolutely and unconditionally guarantees the
- --------------------------------------------------------------------------------
payment by the Company of all compensation that the Company is obligated to pay
- --------------------------------------------------------------------------------
to the Executive pursuant to the Employment Agreement and this Agreement,
- --------------------------------------------------------------------------------
including without limitation the amount payable pursuant to Section 20 of the
- --------------------------------------------------------------------------------
Employment Agreement, subject to the terms and conditions of said Section 20.
- --------------------------------------------------------------------------------
7. (a) (i) In addition to any other payment required
-------------------------------------------------------
pursuant to this Agreement and the Employment Agreement as amended hereby, the
- --------------------------------------------------------------------------------
Company shall pay the Executive the amount (the "Gross-up Bonus") necessary to
- --------------------------------------------------------------------------------
provide the Executive, on an After-Tax Basis, with the amount equal to the 4999
- --------------------------------------------------------------------------------
Amount. As an advance against the Company's obligation to pay the Gross-up
- --------------------------------------------------------------------------------
Bonus, the Company shall pay to the Executive, within ten (10) days of the
- --------------------------------------------------------------------------------
receipt of Tax Counsel's opinion described in Section 7(b) below, a cash lump
- --------------------------------------------------------------------------------
sum payment
- -----------
EXH 10(n) - Page 9
<PAGE>
(the "Gross-Up Advance") equal to the Gross-up Bonus (if any) as determined by
- --------------------------------------------------------------------------------
Tax Counsel and set forth in Tax Counsel's opinion, along with a copy of Tax
- --------------------------------------------------------------------------------
Counsel's opinion.
- -----------------
(b) (i) If the Company or the Executive believes that
Code Section 4999 will apply to the Executive, such party shall notify the other
party. Within three (3) days of such notice, the Company shall request the
Company's independent auditors to select Tax Counsel to calculate the 4999
Amount and the Gross-up Bonus. Such Tax Counsel shall be retained by the Company
within ten (10) days of the notice described in the first sentence of this
Section 7(a). Tax Counsel's fees and other costs shall be paid by the Company.
(ii) Within thirty (30) days of retention, Tax Counsel
shall prepare a written opinion addressed to both the Company and the Executive,
setting forth his or her determination of the 4999 Amount and the Gross-up Bonus
applicable to the Executive. Tax Counsel's opinion shall set forth his or her
calculations and factual assumptions used in arriving at his or her opinion.
(iii) For purposes of Tax Counsel's opinion, Tax
Counsel may take into account such facts and circumstances as he or she deems
relevant. Tax Counsel also may take into account such authorities as he or she
deems relevant, and shall not be limited to those items that constitute
"substantial authority" under Section 6661 of the Code.
(c) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the determination of the 4999 Amount
and the Gross-up Bonus by Tax Counsel, it is possible that the actual Gross-Up
Bonus will exceed the sum of the Gross-Up Advance plus any amounts advanced to
the Executive pursuant to Section 7(d) below (such excess, an "Underpayment"),
or that the sum of the Gross-up Advance plus any amounts advanced to the
Executive pursuant to Section 7(d) below will exceed the actual Gross-Up Bonus
(such excess, an "Overpayment"). In the event of an Underpayment, after the
Company exhausts its remedies pursuant to Section 7(d) below, such Underpayment
shall be promptly paid by the Company to or for the benefit of the Executive,
together with an amount equal to any interest actually paid by the Executive
with respect to such underpayment pursuant to Section 6601 of the Code. In the
event that it is finally determined, pursuant to Section 7(d) below or
otherwise, that an Overpayment has occurred, the Executive shall repay to the
Company the amount of the Overpayment, together with an amount equal to any
interest actually received by the Executive with respect to such Overpayment
pursuant to Section 6611 of the Code.
(d) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company to the Executive of a Gross-Up Bonus or Underpayment.
Such notification shall be given as soon as practicable but no later than ten
EXH 10(n) - Page 10
<PAGE>
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the date that is
five days before the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, or if the
Company notifies the Executive that it desires the Executive to bring a claim
for refund that, if successful, would result in an Overpayment, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting or
pursuing such claim (as applicable) as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest or pursue such claim (as applicable),
(iv) and permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly, on an After-Tax
Basis with respect to the Executive, all costs and expenses (including
additional interest and penalties) incurred in connection with the contest or
pursuit (as applicable) of such claim. Without limiting the foregoing provisions
of this Section 7(d), the Company shall control all proceedings taken in
connection with such claim and, at its sole option, may pursue or forgo any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay any tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to contest or pursue
such claim to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and on an After-Tax Basis
with respect to the Executive.
(e) For purposes of this Section 7, the following terms
shall have the meanings set forth below:
(i) "4999 Amount" shall mean the amount of excise tax
for which the Executive is liable under Section 4999 of the Internal
EXH 10(n) - Page 11
<PAGE>
Revenue Code of 1986, as amended (the "Code"), or any successor provision, after
taking into consideration all compensation includable in the computation under
Section 280G of the Code (or its successor), other than compensation or benefits
specifically contractually excluded from this computation under terms set forth
in the applicable benefit plan or other written agreement between the Company
and the Executive. Without limiting the foregoing, such computation shall take
into account all Gross-up Bonus and Gross-up Advance payments received or to be
received by the Executive under this Agreement.
(ii) "After-Tax Basis" shall mean on a basis
taking into account all federal, state and local income and
employment taxes, based upon the highest marginal rates of
such taxes actually applicable to the Executive in the
relevant year or years.
(iii) "Tax Counsel" shall mean an attorney
at law or certified public account who (A) is a partner at a
law firm of at least 25 attorneys or at a "Big 6" national
accounting firm, which firm has not provided services to the
Company or any affiliate of the Company within the last year,
(B) is experienced in matters concerning Section 280G of the
Code, and (C) is retained pursuant to Section 7(a) above.
(f) In consideration of the foregoing provisions of
this Section 7, the Executive agrees to use reasonable efforts at no cost to the
Executive to minimize the 4999 Amount.
8. If the Executive remains employed by the Company
-------------------------------------------------------
from the date hereof through December 31, 1997, then on December 31, 1997, the
- --------------------------------------------------------------------------------
entire unpaid principal balance of each loan to the Executive that is then
- --------------------------------------------------------------------------------
outstanding under the Company's Executive Loan Program shall be automatically
- --------------------------------------------------------------------------------
forgiven and cancelled with no interest due and without any further action
- --------------------------------------------------------------------------------
required on the part of the Company or its Board of Directors, and the Company
- --------------------------------------------------------------------------------
shall thereafter take such steps as the Executive may reasonably request in
- --------------------------------------------------------------------------------
order to evidence such forgiveness and cancellation of the loan and the
- --------------------------------------------------------------------------------
immediate release of the collateral securing such loan.
- ------------------------------------------------------
9. From and after the date of this Agreement, any
-------------------------------------------------------
reference to "this Agreement" in the Employment Agreement shall mean the
- --------------------------------------------------------------------------------
Employment Agreement as amended by this Supplemental Agreement.
- --------------------------------------------------------------
10. Nothing in this Agreement or in the Employment
-------------------------------------------------------
Agreement as amended hereby shall be construed to limit the rights of the
- --------------------------------------------------------------------------------
Company to monetary damages or any other remedy against the Executive for any
- --------------------------------------------------------------------------------
breach of any of the Executive's obligations under this Agreement or the
- --------------------------------------------------------------------------------
Employment Agreement as amended hereby; provided, that any such monetary damages
- --------------------------------------------------------------------------------
for a breach of
- ---------------
EXH 10(n) - Page 12
<PAGE>
Section 4 of this Agreement shall be reduced (but not below zero) by any amounts
- --------------------------------------------------------------------------------
that the Executive forfeits pursuant to the second sentence of said Section
- --------------------------------------------------------------------------------
4(b).
- ----
11. All references in this Agreement to sections,
-------------------------------------------------------
subsections and clauses of the Employment Agreement are based upon the form of
- --------------------------------------------------------------------------------
employment agreement filed by the Company with the Securities Exchange
- --------------------------------------------------------------------------------
Commission. To the extent that the actual references in the Employment Agreement
- --------------------------------------------------------------------------------
differ from such form, the references herein shall be deemed to refer to the
- --------------------------------------------------------------------------------
correct corresponding sections, subsections and clauses in the Employment
- --------------------------------------------------------------------------------
Agreement.
- ---------
12. Notwithstanding any other provision of this
-------------------------------------------------------
Agreement, all provisions of this Agreement other than Section 8 and this
- --------------------------------------------------------------------------------
Section 12 shall terminate and be null and void ab initio after any termination
- --------------------------------------------------------------------------------
of the Merger Agreement without consummation of the Merger.
- ----------------------------------------------------------
EXH 10(n) - Page 13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
"The Company"
BERGEN BRUNSWIG CORPORATION,
a New Jersey corporation
By_____________________________
Its
"The Executive"
________________________________
Milan A. Sawdei
Solely for purposes of
Section 6 of this
Agreement:
"CARDINAL"
CARDINAL HEALTH, INC., an Ohio
corporation
By_____________________________
Its
EXH 10(n) - Page 14
<PAGE>
SCHEDULE 10(n)
The Company has entered into supplemental agreements (the
"Supplemental Agreements"), a form of which is set forth as Exhibit 10(n), with
eight senior management employees - Linda M. Burkett, Charles J. Carpenter, Neil
F. Dimick, William A. Elliott, Brent R. Martini, Donald R. Roden, Milan A.
Sawdei and Carol E. Scherman. The Supplemental Agreements amend and supplement
existing employment agreements and terminate existing severance agreements;
however, if the Company's pending merger agreement with Cardinal Health, Inc.
terminates for any reason, the Supplemental Agreement will, with certain
exceptions, be void ab initio and the employment agreements and severance
agreements will be fully reinstated. The Supplemental Agreements are
substantially identical, except that the relocation and retiree medical benefits
provisions vary from employee to employee.
EXH 10(n) - Page 15
EXHIBIT 10(o)
BERGEN BRUNSWIG CORPORATION
RETIRED OFFICER MEDICAL PLAN
AS AMENDED AND RESTATED EFFECTIVE AUGUST 23, 1997
As of August 23, 1997
EXH 10(o) - Page 1
<PAGE>
ARTICLE I DEFINITIONS.......................................................1
ARTICLE II ELIGIBILITY AND PARTICIPATION...................................14
2.01 Conditions of Eligibility to Participate..........................14
2.02 Effective Date of Coverage........................................14
2.03 Dependent Coverage................................................14
2.04 Effective Date of Dependent Coverage..............................15
2.05 Determination of Coverage Eligibility.............................15
2.06 Cessation of Covered Retiree Participation........................15
2.07 Cessation of Dependent Coverage...................................15
ARTICLE III MEDICAL BENEFITS...............................................16
3.01 Benefit Provisions................................................16
3.02 Coinsurance Percentage ...........................................16
3.03 Eligible Expenses for Covered Persons.............................16
3.04 Care for Mouth, Teeth and Gums....................................21
3.05 Podiatry Care.....................................................21
3.06 Spinal Manipulation/Chiropractic Services.........................21
3.07 Preventative Care.................................................22
3.08 Transplant Coverage Limits........................................23
3.09 Exclusions and Limitations for Organ Transplants..................24
3.10 Coverage of Nursery Care .........................................25
3.11 Coverage of Pregnancy.............................................25
3.12 Christian Science Practitioners and Nurses........................26
3.13 Medical Benefit Exclusions .......................................26
3.14 Mental Health, Substance Abuse Treatment Benefits ................29
3.15 Chemical Dependency/Substance Abuse...............................30
3.16 Subrogation.......................................................31
ARTICLE IV PRESCRIPTION BENEFITS...........................................32
4.01 Prescription Drug Benefits........................................32
4.02 Exclusions........................................................32
ARTICLE V DENTAL CARE BENEFITS.............................................34
5.01 Plan Limits for Dental Care.......................................34
5.02 Eligible Expenses for Dental Care.................................34
5.03 Dental Benefit Exclusions.........................................37
ARTICLE VI VISION CARE BENEFITS ...........................................39
6.01 Plan Limits.......................................................39
6.02 Provider Reimbursement ..........................................39
6.03 Vision Care Limits and Exclusions.................................39
ARTICLE VII CONTINUATION OF COVERAGE.......................................41
7.01 General...........................................................41
7.02 Continuation of Coverage..........................................41
EXH 10(o) - Page 2
<PAGE>
ARTICLE VIII COORDINATION OF BENEFITS......................................44
8.01 Definitions.......................................................44
8.02 Medicare..........................................................46
8.03 Mandatory Other Plan Coverage.....................................46
8.04 Intent............................................................46
8.05 Dispute...........................................................47
ARTICLE IX CLAIMS PROCEDURE AND PAYMENT OF BENEFITS........................48
9.01 Application for Benefits..........................................48
9.02 Claims Procedure..................................................48
9.03 Payment of Benefits...............................................49
9.04 Delay in Payment..................................................50
9.05 Attorneys Fees....................................................50
9.06 Right of Recovery.................................................50
9.07 Assignment........................................................50
9.08 Facility of Payment...............................................51
9.09 Responsibility for Payment........................................51
ARTICLE X ADMINISTRATION...................................................52
10.01 Appointment of the Claims Administrator...........................52
10.02 Power of the Claims Administrator.................................52
10.03 Powers of Plan Administrator......................................52
10.04 Effect of Fiduciary Action........................................53
10.05 Proof of Coverage.................................................53
ARTICLE XI DURATION AND AMENDMENT OF THIS PLAN.............................54
11.01 Permanence of this Plan...........................................54
11.02 Right to Amend....................................................54
ARTICLE XII GENERAL PROVISIONS.............................................55
12.01 Gender and Number.................................................55
12.02 Action by the Plan Administrator..................................55
12.03 Named Fiduciaries and Allocation of Responsibility................55
12.04 Duty to Provide Data..............................................55
12.05 Indemnification...................................................56
12.06 Funding...........................................................56
12.07 Headings..........................................................56
12.08 Governing Instrument..............................................56
12.09 Uniformity........................................................57
12.10 Severability......................................................57
12.11 Plan Does Not Provide Services....................................57
12.12 Governing Law.....................................................57
12.13 Limitations on Rights of Participants.............................57
EXH 10(o) - Page 3
<PAGE>
APPENDIX A ELIGIBLE RETIREES...............................................59
APPENDIX B.................................................................61
A. ASO Managed Referral Program.............................61
B. Specialty Review.........................................62
C. Diagnostic Testing.......................................63
D. Outpatient Surgical Review...............................63
E. Hospital Stay, Skilled Nursing Facilities, Private Duty
Nursing, and Hospice Care Review.........................63
F. Alternate Medical Care...................................65
G. Maternity Access Program.................................65
H. Patient Assist Line......................................66
I. Centers of Excellence....................................66
J. Medical Case Management For Covered Person Not
Eligible For Medicare. . . . ............................66
EXH 10(o) - Page 4
<PAGE>
INTRODUCTION
------------
ESTABLISHMENT OF THIS PLAN
--------------------------
Bergen Brunswig Corporation, a New Jersey corporation (the "Employer"),
previously established the Bergen Brunswig Corporation Officer Medical Plan (the
"Plan") for the purpose of providing specified medical benefits to a select
group of officers of the Employer and their respective dependents after the
employment of such officers with the Employer terminates following their
satisfaction of certain eligibility requirements. This Plan has been amended and
restated, as set forth herein, effective as of August 23, 1997 (the "Effective
Date"). The rights and benefits under this Plan of all Eligible Retirees and
Covered Persons (as hereinafter defined) as of the Effective Date shall be
determined solely in accordance with the terms hereof and the terms as set forth
herein supersede and control all other previous interpretation, arrangements,
agreements, course of conduct, understandings or actions, including but not
limited to, those of this Plan's Administrators.
EXH 10(o) - Page 5
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
The following definitions shall apply for purposes of this Plan:
1.01 Accident or Accidental is a happening arising from identifiable,
extrinsic sources that is not expected, foreseen, or intended resulting
in injury, loss or damage.
1.02 Acute Medical Distress shall mean an Illness requiring immediate medical
attention as directed by the Physician, an Illness which would result in
subsequent death, or an emergency occurring at a time other than during
normal office daytime hours of a Physician.
1.03 Administrative Service Manager - see Claims Administrator.
1.04 Alcoholism is the condition caused by regular excessive drinking of
alcohol that results in harm to either physical health or personal or
social functioning.
1.05 Ambulatory Surgical Center is a licensed facility that is used mainly
for performing outpatient surgery, has a staff of Physicians, has
continuous Physician and nursing care by Registered Nurses when patients
are there, and does not provide for overnight stays.
1.06 ASO means the administrative services organization selected by the
Employer to perform certain services for this Plan including but not
limited to Hospital stay pre-certifications and authorizations, second
surgical opinion authorization, Hospital bill audits, and review as to
whether any treatment is Medically Necessary.
1.07 Benefit is the payment or reimbursement of a health care expense
Incurred by a Covered Person. A Benefit includes a payment or
reimbursement by this Plan or any other source including federal or
state governments or the plan of another employer.
1.08 Benefit Period means each Calendar Year. Such Benefit Period shall
terminate on the earliest of the following dates:
(a) The last date of the one year period so established; or
(b) The day the Maximum Lifetime Benefit applicable to the
Covered Person becomes payable; or
(c) The day the Covered Person ceases to be covered for Medical
Expense Benefits.
EXH 10(o) - Page 6
<PAGE>
1.09 Birthing Center is an area of a Hospital which is designated as a
birthing center, which is set aside to provide a home-like atmosphere in
which to deliver a child and provides immediate related aftercare.
1.10 Calendar Year means the period of 12 months beginning on January 1 and
ending the following December 31.
1.11 Chemical Dependency is physical dependence on Prescription Drugs and
other controlled substances. This does not include dependence on
alcohol, tobacco and caffeine-containing drinks.
1.12 Child or Children - see Dependent.
1.13 Claims Administrator is the person or firm employed by the Employer to
provide clerical and administrative services to the Employer in
connection with the operation of this Plan and any other functions,
including the processing of claims. In the event that no Claims
Administrator is hired by the Employer at any particular point in time,
Claims Administrator means the Employer.
1.14 COBRA means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended from time to time.
1.15 Coinsurance is the amount of Covered Expenses for which the Covered
Person is responsible under the terms of this Plan. The Coinsurance
percentage is specified in the specific provision in this Plan requiring
Coinsurance.
1.16 Confinement means registered as a bed patient in a facility upon the
recommendation of a Physician.
1.17 Congenital Anomaly means a condition deviating significantly from the
norm which exists at or from birth and is diagnosed and conclusively
verified by acceptable tests within twelve (12) months after birth.
1.18 Consultation means services rendered by a Physician whose opinion or
advice is requested by another Physician or agency in the evaluation
and/or treatment of an Illness or Injury.
1.19 Continuation Coverage means coverage under this Plan which, as of the
time coverage is being provided, is identical to the coverage provided
under this Plan immediately prior to the Qualifying Event with respect
to similarly situated Covered Persons for whom a Qualifying Event has
not occurred.
1.20 Contribution means the amount, if any, required to be paid by or on
behalf of individuals for participation in, and coverage under, this
Plan.
1.21 Copayment means the portion of any eligible expenses that a Covered
Person must pay before this Plan pays for any eligible expenses as
provided under this Plan.
EXH 10(o) - Page 7
<PAGE>
1.22 Cosmetic Procedure is a procedure performed solely for the improvement
of a Covered Person's appearance rather than for the improvement or
restoration of bodily function.
1.23 Covered Dependent means any person who qualifies for coverage hereunder,
and with respect to whom (if applicable) an application for
participation has been timely filed, in accordance with Section 2.04.
1.24 Covered Expense means the Usual and Customary Charge associated with a
procedure actually performed in accordance with Articles III, IV, V, and
VI.
1.25 Covered Person means a person who is covered under this Plan as a
Covered Retiree or Dependent.
1.26 Covered Retiree means (a) any person who is listed in Part I.A. of
Appendix A, (b) each person listed in Part I.B. of Appendix A whose
employment with the Employer terminates for any reason, (c) each person
listed in Part I.C. of Appendix A whose employment with the Employer
terminates for any reason on or after he reaches his Retirement Date
(regardless of his age on such Retirement Date), and (d) each other
person (if any) listed in Part II from time to time who qualifies as an
Eligible Retiree under Section 2.01 and whose employment with the
Employer terminates for any reason on or after he reaches his Retirement
Date (regardless of his age on such Retirement Date).
1.27 Custodial or Custodial Care is that type of care or service, wherever
furnished and by whatever name called, which is designed primarily to
assist a Covered Person, whether or not Totally Disabled, in the
activities of daily living. Such activities include, but are not limited
to, bathing, dressing, feeding, preparation of special diets, assistance
in walking or in getting in and out of bed, and supervision over
medication which can normally be self-administered.
1.28 Deductible is a specified amount of otherwise covered charges which must
be Incurred by a Covered Person before Benefits will be paid under this
Plan.
1.29 Dentist is a person who is properly trained and licensed to practice
dentistry.
1.30 Dependent is any one of the following persons:
(a) A Covered Retiree's Spouse and never married Children from birth to
19 years of age. However, a Dependent Child shall continue to be covered
after age 19, provided the Child is (i) a student at any accredited
school, or is primarily dependent upon the Covered Retiree for support
and maintenance, (ii) has never been married, and (iii) is under age 25.
Coverage ends on the Child's birthday on which he attains the limiting
age.
EXH 10(o) - Page 8
<PAGE>
The term "Spouse" shall mean the legally recognized marital partner of a
Covered Retiree. Should a Spouse and Covered Retiree no longer be
legally recognized marital partners, such Spouse shall no longer be
eligible for any Benefits under this Plan (except as and to the extent
provided in Article VII). The Plan Administrator may require
documentation proving a marital relationship.
The term "Child" or "Children" shall include natural children, adopted
children, or children placed with a Covered Retiree in anticipation of
adoption. Step-children who reside in the Covered Retiree's household
and of whom the Covered Retiree's Spouse has legal and physical custody
are also included.
The phrase "primarily dependent upon" shall mean dependent upon the
Covered Retiree for support and maintenance within the meaning of the
Internal Revenue Code and the Covered Retiree claims such person as a
dependent for federal income tax purposes. The Plan Administrator may
require documentation proving dependency.
(b) A Covered Dependent Child who is incapable of self-sustaining
employment by reason of mental retardation or physical handicap, is
primarily dependent upon the Covered Retiree for support and
maintenance, has never been married, and is covered under this Plan when
reaching the limiting age. Notice of such incapacity must be provided to
the Plan Administrator within thirty (30) days after the limiting age.
The Plan Administrator may require, at reasonable intervals during the
two years following the Dependent's reaching the limiting age,
subsequent proof of the Child's disability and dependency.
After such two-year period, the Plan Administrator may require such
proof not more than once each 12-month period. The Plan Administrator
reserves the right to have such Dependent examined by a Physician of the
Plan Administrator's choice, at this Plan's expense, to determine the
existence of such incapacity.
(c) A Covered Retiree's Child who is an alternate recipient under a
qualified medical child support order, within the meaning of section 609
of ERISA.
The following persons are excluded as Dependents: other individuals
living in the Covered Retiree's home but who are not eligible as
defined; the legally separated or divorced former Spouse of the Covered
Retiree; and any person who is on active duty in any military service of
any country.
If both husband and wife are Covered Retirees, their Children shall be
covered as Dependents of the husband or wife, but not of both.
EXH 10(o) - Page 9
<PAGE>
No person shall be covered or eligible for coverage under this Plan
simultaneously as a Covered Retiree and a Dependent.
1.31 Durable Medical Equipment is equipment which is (a) able to withstand
repeated use, (b) primarily and customarily used to treat an illness or
injury, and (c) not generally useful for a person in the absence of
illness or injury.
1.32 Effective Date is August 23, 1997.
1.33 Election Period is the sixty (60) day period during which a Qualified
Beneficiary who would lose coverage as a result of a Qualifying Event
may elect Continuation Coverage. This sixty (60) day period begins on
the date of termination of coverage as a result of a Qualifying Event
and ends sixty (60) days after the later of such date of termination of
coverage or the receipt of notice of the right to elect Continuation
Coverage under this Plan.
1.34 Elective Procedure is a medical procedure which, if not provided within
seventy two (72) hours, does not cause a life-threatening situation for
the Covered Person.
1.35 Eligible Expense is an expense for which this Plan provides Benefits.
Eligible Expenses shall not include any expenses Incurred outside of the
United States of America except to the extent that such expenses are
Incurred for emergency services.
1.36 Eligible Retiree means a person who satisfies the requirements of
Section 2.01 of this Plan.
1.37 Emergency Admission means an admission to a Hospital or other eligible
facility for a condition which is either life-threatening or, unless
promptly treated, which could cause serious damage to bodily functions.
All other admissions shall be considered routine.
1.38 Emergency Care means initial treatment given in a Hospital's emergency
room directly following the sudden and unexpected acute medical
condition that, without medical care within 24 hours of onset, could
result in death or cause serious impairment to bodily functions,
including without limitation treatment for an Accident causing injuries
which are severe enough to require immediate Hospital level of care.
Hospital care shall be deemed to be required only if safe and adequate
care could not have been provided elsewhere.
1.39 Employee means a person who is employed and classified by the Employer
as an employee.
1.40 Employer means Bergen Brunswig Corporation, a New Jersey corporation,
and its successors.
EXH 10(o) - Page 10
<PAGE>
1.41 Endodontic Services are procedures usually employed by a Dentist for the
treatment of teeth with diseased pulps (i.e., root canals).
1.42 ERISA is the Employee Retirement Income Security Act of 1974, as
amended.
1.43 Experimental or Investigational shall mean any treatment unless it is
generally accepted by the medical community in the United States and, as
compared to accepted alternative treatments for that condition, can
reasonably be expected to: (1) result in similar or improved survival,
health or function, or (2) alleviate symptoms of or stabilize the
condition. Generally accepted by the medical community in the United
States means that the clinical efficacy of the treatment has been
documented in credible published medical literature which demonstrates
that the results of the treatment have been measured for a five year
period or other period generally regarded as valid.
1.44 Facility refers to facilities such as a general Hospital, surgi-center,
mental/nervous/ substance abuse facility, Hospice facility, nursing
home, half-way house, and other facilities of confinement when used in
the treatment of any illness, injury, mental or nervous condition,
Chemical Dependency or alcoholism.
1.45 Family Unit is the Covered Retiree and his family members who are
Covered Dependents under this Plan.
1.46 Freestanding Birthing Center is a freestanding facility which is not
connected with a Hospital which provides "at home" atmosphere for the
delivery of babies.
1.47 Intentionally Omitted.
1.48 Gingivectomy is the excision of loose gum tissue to eliminate infection
when not performed in connection with extraction or repair of teeth,
gingivoplasty, osseous surgery, and osteotomy surgery (collectively
called periodontal surgery).
1.49 Health Care Provider means any of the institutions or persons listed
below engaged in providing medical care or diagnostic treatment to sick
or injured persons.
(a) Hospital
(b) Extended Care Facility
(c) Home Health Care Agency
(d) Licensed Ambulance Service
(e) Birthing Center
(f) Ambulatory Surgical Center
EXH 10(o) - Page 11
<PAGE>
(g) Clinical Laboratory
(h) Physician
(i) Practitioner
(j) Hospice Agency
1.50 Health Maintenance Organization (HMO) means an organized system of
health care providing a comprehensive package of health services through
a group of Health Care Providers, to a voluntarily enrolled membership,
within a particular geographic area, on a fixed, prepaid basis.
1.51 Home Health Care Agency is an agency that meets all of the following
tests:
(a) Its main function is to provide Home Health Care services.
(b) It is federally certified as a Home Health Care Agency.
(c) It is licensed by the state, if licensing is required.
1.52 Home Health Care Plan shall meet all of the following tests:
(a) It shall be a formal written plan made by the patient's
attending Physician which is reviewed every 30 days.
(b) It shall certify that the home health care is in place of
Hospital Confinement.
(c) It shall specify the type and extent of home health care
required for the treatment of the patient.
(d) It shall be approved by the ASO.
1.53 Home Health Care Services and Supplies include:
(a) part-time care or Intermittent Care by or under the
supervision of a Registered Nurse;
(b) part-time or intermittent home health aide services
provided through a Home Health Care Agency (excluding
general housekeeping services);
(c) physical, occupational and speech therapy;
(d) medical supplies; and
(e) clinical laboratory services by or on behalf of the
Hospital.
EXH 10(o) - Page 12
<PAGE>
1.54 Hospice Agency is an agency where its main function is to provide
Hospice Care Services and Supplies and it is licensed by the state, if
licensing is required.
1.55 Hospice Care Plan is a plan of terminal patient care that is established
and conducted by a Hospice Agency and supervised by a Physician. The
Hospice Care Plan shall be subject to approval by the ASO.
1.56 Hospice Care Services and Supplies are those provided through a Hospice
Agency and under a Hospice Care Plan, and include inpatient care in a
Hospice Unit or other licensed facility, home care, and family
counseling during the bereavement period.
1.57 Hospice Unit is a facility or separate Hospital Unit that provides
treatment under a Hospice Care Plan and admits at least two unrelated
persons who are expected to die within six months.
1.58 Hospital is an institution which is engaged primarily in providing
medical care and treatment of sick and injured persons on an inpatient
basis at the patient's expense and which fully meets all of the
following tests:
(a) It is accredited as a Hospital by the Joint Commission on
Accreditation of Hospitals or the Joint Commission on
Accreditation of Osteopathic Hospitals.
(b) It is approved by Medicare as a Hospital.
(3) It maintains on the premises diagnostic and therapeutic
facilities for surgical and medical diagnosis and
treatment of sick and injured persons by or under the
supervision of a staff of Physicians.
(c) It continuously provides on the premises 24-hour-a-day
nursing service by or under the supervision of Registered
Nurses.
(d) It is operated continuously with organized facilities for
operative surgery on the premises.
The definition of "Hospital" also shall include each of the
following:
A facility operating legally as a psychiatric Hospital and
licensed as such by the state in which the facility operates.
A facility operating primarily for the treatment of Alcoholism and
Chemical Dependency if it:
(f) maintains permanent and full-time facilities for bed care
and full-time Confinement of at least 15 resident
patients;
EXH 10(o) - Page 13
<PAGE>
(g) has a Physician in regular attendance;
(h) continuously provides 24-hour a day nursing service by a
Registered Nurse;
(i) has a full-time Psychiatrist or Psychologist on the staff;
and
(j) is primarily engaged in providing diagnostic and
therapeutic services and facilities for treatment of
Alcoholism and Chemical Dependency.
A Christian Science Sanatorium, if operated or listed and
certified by the First Church of Christ, Scientist, is also
considered a Hospital, but only for a Covered Person admitted for
healing (not rest or study) while under the care of a practitioner
listed in the Christian Science Journal as an authorized
practitioner.
1.59 Hospital Confinement means any period of Confinement in a Hospital or
which a Room and Board charge is Incurred and/or surgery is performed.
1.60 Illness is a bodily disorder, disease, physical sickness, pregnancy,
mental infirmity, or functional nervous disorder for a Covered Person. A
recurrent illness shall be considered one illness. Concurrent illnesses
shall be considered totally unrelated. All such disorders existing
simultaneously which are due to the same or related causes shall be
considered one illness.
1.61 Incurred means the date on which a service or supply was rendered or
furnished. In the absence of due proof to the contrary, when a single
charge is made for a series of services, each service shall be
considered to bear a pro rata share of the charge.
1.62 Injury is an Accidental bodily injury.
1.63 In-Patient is a person who is a resident patient using and being charged
for Room and Board by a Hospital, but shall not include any such person
for any day on which he is on leave or otherwise is absent from the
facility where he is a resident patient, irrespective of whether a Room
and Board charge is made.
1.64 Intensive Care Unit is defined as a separate, clearly designated service
area which is maintained within a Hospital solely for the care and
treatment of patients who are critically ill. This also includes what is
referred to as a "coronary care unit" or an "acute care unit". It has:
(a) facilities for special nursing care not available in
regular rooms and wards of the Hospital;
(b) special life saving equipment which is immediately
available at all times;
(c) at least two beds for the accommodation of the critically
ill; and
EXH 10(o) - Page 14
<PAGE>
(d) at least one Registered Nurse in continuous and constant
attendance 24 hours a day.
1.65 Intermittent Care means to meet the requirements for "intermittent"
skilled nursing care, an individual shall have a medically predictable
recurring need for skilled nursing services. In most instances, this
definition shall be met if a patient requires a skilled nursing service
at least once every sixty (60) days.
1.66 Internal Revenue Code means the Internal Revenue Code of 1986, as
amended.
1.67 Licensed Practical Nurse is an individual who has received specialized
nursing training, performs practical nursing services, and is licensed
by the state or regulatory agency responsible for such licensing in the
state in which that individual performs such services.
1.68 Lifetime when used in reference to Benefit maximums and limitations
means "while covered under this Plan" during the lifetime of the Covered
Person.
1.69 Medical Care Facility means a Hospital, a facility that treats one or
more specific ailments, or any type of Skilled Nursing Facility.
1.70 Medically Confined means that due to Illness, a person is an inpatient
in a medical facility, and includes confinement in a Hospital, nursing
home, Alcoholism or Chemical Dependency treatment facility, mental
health treatment center, hospice or any other facility engaged in the
treatment of illness.
1.71 Medically Necessary care and treatment:
(a) is recommended or approved by a Physician;
(b) is consistent with the patient's condition or accepted
standards of good medical practice;
(c) is medically proven to be effective treatment of the
condition;
(d) is not conducted for research purposes.
The Employer follows the recommendations of the ASO's "Medically
Necessary" determinations.
1.72 Medicare means the Part A and Part B plans described in Title XVIII of
the Social Security Act, as amended from time to time or any similar
successor statue designed to provide health care benefits to a wide
population of the United States of America.
EXH 10(o) - Page 15
<PAGE>
1.73 Mental Disorder is neurosis, psychoneurosis, psychopathy, psychosis, or
mental or emotional disease or disorder of any kind, even if organic
origin is believed contributory.
1.74 Mental Health Program Administrator means such mental health
administrative services organization as the Employer may select.
1.75 Myofascial Pain Dysfunction shall mean a disorder involving muscles
surrounding and adjacent to the temporomandibular joint area which is
characterized by:
(a) pre-auricular, temporal, occipital and/or jaw pain;
(b) spasm and/or tenderness of the masticatory muscles; and
(c) limited jaw movement.
1.76 Named Fiduciary is the Plan Administrator, which has the authority to
control and manage the operation and administration of this Plan.
1.77 Network is an organization that has contracted with the Claims
Administrator to provide certain health care services to Covered Persons
at specific rates.
1.78 Network Provider is a Provider who has contracted with a participating
provider organization associated with this Plan to render specific
services to a Plan participant for a predetermined fee. That fee is
automatically paid to such organization upon receipt of a claim by the
Claims Administrator.
1.79 Newborn is an infant from the date of his birth until the initial
Hospital discharge or until the infant is 14 days old, whichever occurs
first.
1.80 No-Fault Auto Insurance is the basic reparations provision of a law
providing for payments without determining fault in connection with
automobile Accidents.
1.81 Nurse Midwife is a Registered Nurse who has been certified by the
American College of Nurse-Midwives as a nurse midwife, other than one
who ordinarily resides in the patient's home or who is a member of the
patient's family.
1.82 Nursery Care is routine nursery care during the period of the mother's
Hospital Confinement.
1.83 Optometrist is a graduate of a school of optometry, is not a medical
doctor, is licensed by the governmental authority having jurisdiction
over such licensure, is acting within the scope of such license, and is
a designated O.D.
1.84 Orthodontic means the division of dentistry dealing with the prevention
or correction of teeth irregularities and malocclusion of jaws by wire
appliances, braces, and other mechanical aids.
EXH 10(o) - Page 16
<PAGE>
1.85 Outpatient Care is treatment performed in a Hospital on a basis other
than as a registered bed patient. Outpatient Care includes:
(a) services, supplies and medicines provided and used at a
Hospital under the direction of a Physician to a person
not admitted as a registered bed patient; and
(b) services rendered in a Physician's office, a laboratory or
X-ray facility, an Ambulatory Surgical Center, or the
patient's home.
1.86 Period of Hospital Confinement is a period of confinement as a bed
patient in a Hospital.
1.87 Pharmacy means a licensed establishment where covered Prescription Drugs
are filled and dispensed by a pharmacist licensed under the laws of the
state where he practices.
1.88 Physical Therapist is an individual licensed to practice physical
therapy, or where there is no license involved, an individual certified
as a physical therapist by an appropriate professional body to practice
physical therapy.
1.89 Physical Therapy is the treatment by physical means, including
hydrotherapy, heat, or similar modalities, physical agents, biochemical,
and neurophysiological principles and devices, to relieve pain, restore
maximum function, and prevent disability following disease, injury, or
loss of body part.
1.90 Physician means a duly licensed practitioner of the healing arts acting
within the scope of his practice, such as a Doctor of Medicine (M.D.),
Doctor of Osteopathy (D.O.), Doctor of Dental Surgery (D.D.S.), Doctor
of Podiatry (D.P.M.), Doctor of Chiropractic (D.C.), Psychologist
(Ph.D., Psy.D., Ed.D.), Licensed Professional Physical Therapist,
Physiotherapist, Psychiatrist (M.D.), Audiologist, Speech Language
Pathologist, and Nurse Midwife.
1.91 Plan means this Bergen Brunswig Corporation Retired Officer Medical
Plan.
1.92 Plan Administrator is the Vice President of Human Resources of the
Employer, or such other officer of the Employer as may be designated
from time to time by the Board of Directors of the Employer. The Plan
Administrator may employ persons or firms to process claims and perform
other Plan-related services.
1.93 Podiatrist is an individual licensed to practice podiatry by the
governmental authority having jurisdiction over such licensure, who is
acting within the scope of such license and who is designated as a
D.P.M.
1.94 Practitioner means a person, other than a doctor, who (a) upon referral
by a Doctor of Medicine or Doctor of Osteopathy, provides services which
are covered by this Plan; and (b) is practicing within the scope of his
or her license.
EXH 10(o) - Page 17
<PAGE>
1.95 Pre-Admission Testing means when surgery has been authorized (inpatient
or outpatient), the patient may have the doctor set up the necessary
tests to be done on an outpatient basis prior to the surgery.
1.96 Predecessor Plan means the Retired Officer Medical Plan maintained by
the Employer prior to August 23, 1997, the date upon which it was
amended and restated by this Plan.
1.97 Pregnancy is childbirth and conditions associated with pregnancy,
including complications.
1.98 Prescription Drug means any of the following:
(a) A drug or medicine which, under federal law, is required
to bear the legend: "Caution: Federal law prohibits
dispensing without prescription."
(b) Compounded medicines of which at least one ingredient is
included under item (a) above.
(c) Injectable insulin.
1.99 Private Duty Nursing means Registered Nurses or Licensed Practical
Nurses engaged in private duty nursing, other than one who ordinarily
resides in the patient's home or who is a member of the patient's
immediate family.
1.100 Provider is a legally qualified Physician, Dentist, nurse, chiropractor,
Physical Therapist, Podiatrist, Psychologist, or speech therapist who is
practicing within the scope of their license, or a Home Health Care
Agency or facility legally licensed to perform a covered medical
service.
1.101 Psychiatrist is a person who is legally qualified and licensed to
practice psychiatry at the time and place services are rendered.
1.102 Psychologist is a person who is legally qualified and licensed to
practice psychology at the time and place services are rendered.
1.103 Qualified Beneficiary (see Article VII).
1.104 Qualifying Event means, with respect to any Covered Person, any of the
following events which, but for the Continuation Coverage required under
Section 7.02, would result in the loss of coverage for a Qualified
Beneficiary:
(a) The death of the Covered Retiree.
(b) The divorce or legal separation of the Covered Retiree
from such Covered Retiree's Spouse.
EXH 10(o) - Page 18
<PAGE>
(c) A Child of the Covered Retiree ceasing to be a Dependent.
(d) The Employer's proceeding under Title 11 of the United
States Code. A substantial elimination of coverage within
one year of the commencement of the proceedings described
herein shall constitute a loss of coverage.
1.105 Registered Nurse is an individual who has received specialized nursing
training and is authorized to the designation of "RN" and who is duly
licensed by the state or regulatory agency responsible for such
licensing in the state in which the individual performs such nursing
services.
1.106 Retirement Date means the date on which an Eligible Retiree's employment
with the Employer terminates for any reason after such Eligible Retiree
has completed ten (10) Years of Service, regardless of the Eligible
Retiree's age on such date.
1.107 Room and Board is all charges by whatever name called which are made by
a Hospital, Hospice Unit, or Skilled Nursing Facility as a condition of
occupancy. Such charges do not include the professional services of
Physicians or intensive nursing care by whatever name called.
1.108 Routine Physical Examination is a physical examination of the heart,
lungs, abdomen, and other vital body areas, and such diagnostic services
as may be required in conjunction with such examination, when such
services are not required as the result of symptoms of Illness or
Injury.
1.109 Semi-Private is a class of accommodations in a Hospital, Hospice Unit,
or Skilled Nursing Facility in which at least two patients beds are
available per room.
1.110 Skilled Nursing Facility is a facility that fully meets all of the
following tests:
(a) It is licensed to provide for persons convalescing from
Injury or Illness, professional nursing services on an
inpatient basis. The service shall be rendered by a
Registered Nurse or by a Licensed Practical Nurse under
the direction of a Registered Nurse. Physical restoration
services to assist patients to reach a degree of body
functioning to permit self-care in essential daily living
activities shall be provided.
(b) Its services are provided for compensation from its
patients and under the full-time supervision of a
Physician or a Registered Nurse.
(c) It provides twenty-four (24) hour per day nursing services
by licensed nurses, under the direction of a full-time
Registered Nurse.
(d) It maintains a complete medical record on each patient.
EXH 10(o) - Page 19
<PAGE>
(e) It has an effective utilization review plan.
(f) It is not, other than incidentally, a place for: rest the
aged, drug addicts, alcoholics, mental retardates,
Custodial care, educational care, or care of Mental
Disorders.
(g) It is approved and licensed by Medicare.
This term also applies to charges Incurred in a Facility referring
to itself as a Skilled Nursing Facility, or any other similar
nomenclature.
1.111 Spouse - see Dependent.
1.112 Subrogation is the right of this Plan to succeed to a Covered Person's
right of recovery against a third party for Benefits paid by this Plan
to, or on behalf of, a Covered Person for services Incurred for which
the third party is, or may be, legally liable.
1.113 Terminal Illness is an Illness not responsive to treatment currently
available, and which is expected to result in death of a Covered Person
within six (6) months or less.
1.114 Total Disability or Totally Disabled means (a) in the case of an Covered
Retiree, the complete inability to perform, because of Injury or
Illness, any and every duty of his occupation or employment, and (b) in
the case of a Dependent, the complete inability to perform the normal
activities of a person of like age and sex in good health.
1.115 Treatment Plan means a program approved by this Plan which describes the
expected duration, frequency, and type of service to be performed, and
which is reviewed and approved by a Physician no less frequently than
every three (3) months.
1.116 Usual and Customary Charge is a charge Incurred by a Covered Person for
Medically Necessary health care services or supplies and shall be equal
to the lesser of (a) the actual charges for such services or supplies,
or (b) the general level of charges made by others with similar training
and expertise for rendering like services and for furnishing like
supplies in the same locality in which the services or supplies are
administered.
1.117 Well-Child Care is medical treatment, services or supplies rendered to a
Child or Newborn solely for the purpose of health maintenance and not
for the treatment of an Illness or Injury.
1.118 Year of Service means a period consisting of 365 consecutive days of
service with the Employer or any predecessor thereof as an Employee,
beginning with
EXH 10(o) - Page 20
<PAGE>
the first day of the person's employment thereby and ending on the date
that his employment thereby terminates for any reason. Years of Service
shall include any period during which the Employee is not actively at
work due to vacation, leave of absence, layoff, any other absence at the
end of which his reemployment rights are protected, or temporary
disability.
EXH 10(o) - Page 21
<PAGE>
ARTICLE II
----------
ELIGIBILITY AND PARTICIPATION
-----------------------------
2.01 Conditions of Eligibility to Participate
----------------------------------------
Each person listed in Parts I.A., I.B., and I.C. of Appendix A attached
hereto as of the Effective Date shall be an Eligible Retiree and shall
participate in this Plan on the Effective Date. Each other Employee who
is an officer of the Employer shall become an Eligible Retiree on the
later of (a) the Effective Date, or (b) the date as of which such
Employee (i) is designated in writing as an Eligible Retiree by the
Chief Executive Officer of the Employer, and (ii) is listed in Part II
of Appendix A.
2.02 Effective Date of Coverage
--------------------------
(a) Coverage of each person listed in Part I.A. of Appendix A
begins on the Effective Date. Coverage of each person listed
in Part I.B. of Appendix A begins on the date that such
person's employment with the Employer terminates for any
reason. Coverage of each person listed in Part I.C. of
Appendix A, and of each other person (if any) listed in Part
II of Appendix A from time to time who qualifies as an
Eligible Retiree under Section 2.01, begins on the date such
person's employment with the Employer terminates for any
reason on or after he reaches his Retirement Date (regardless
of his age on such Retirement Date). Each such covered person
shall become a Covered Retiree as of the date his coverage
hereunder begins in accordance with the foregoing provisions
of this Section 2.02.
(b) This Plan shall not exclude any portion or all of any Eligible
Expense on the basis that it is Incurred with respect to an
Illness or Injury that exists on the date coverage hereunder
becomes effective (it being the intent that any Eligible
Expense Incurred after coverage hereunder becomes effective
for any "preexisting" Illness or Injury shall be covered
hereunder on the same basis as if such Illness or Injury did
not exist on the date coverage hereunder becomes effective),
except as expressly provided otherwise in this Plan.
2.03 Dependent Coverage
------------------
An individual who is or becomes a Dependent of a Covered Retiree shall
participate in this Plan to the extent and so long as the Covered
Retiree is eligible to participate hereunder. As a condition of
eligibility to participate, an application for participation with
respect to an eligible Dependent shall be filed by either the eligible
Dependent or Eligible Retiree within thirty (30) days after the later
of (a) the date the Eligible Retiree ceases to be an Employee, or (b)
the date the individual becomes a Dependent; provided, however, that no
such application shall be required if such eligible Dependent is
covered under the Employer's medical program for active
EXH 10(o) - Page 22
<PAGE>
employeesas a dependent of the Eligible Retiree immediately prior to
the Retirement Date of such eligible Retiree. If such application is
filed within such 30-day period, Dependent coverage shall be effective
as of the first day of such period. Such application may be filed at
any time after such 30-day period, in which event coverage of any
Dependent shall be effective as of the day on which such application is
filed with respect to such Dependent.
2.04 Effective Date of Dependent Coverage
------------------------------------
(a) Except as provided in subsection (b) below, Dependent coverage
begins on the date the Dependent becomes eligible under
Section 2.03 or the date the Eligible Retiree enrolls,
whichever is later.
(b) If a Dependent is Medically Confined on the date the coverage
would otherwise start, coverage shall not start until a final
release from Medical Confinement is made by the treating
Physician. This provision also applies when there is any
increase in Benefits which become effective under this Plan.
2.05 Determination of Coverage Eligibility
-------------------------------------
Except for those persons listed in Part I of Appendix A (such persons
are expressly eligible to participate in this Plan), the Employer shall
determine the eligibility of each Eligible Retiree and Dependent for
coverage under this Plan based upon any information to which it has
access and such other information furnished by the Eligible Retiree or
Covered Retiree (as applicable).
2.06 Cessation of Covered Retiree Participation
------------------------------------------
A Covered Retiree shall cease to participate in this Plan on the date
of the Covered Retiree's death.
2.07 Cessation of Dependent Coverage
(a) Except as provided in this Section 2.07, Dependents of a
Covered Retiree cease to participate in this Plan on the
earlier of:
(i) The date such person ceases to qualify as a Dependent
under the terms of this Plan (other than as a
deceased Spouse); or
(ii) The date such person enters active military or
similar service of any country.
(b) Notwithstanding subsection (a) above, if the Covered Retiree
should die, the coverage for the Covered Retiree's Spouse and
Children who were covered under this Plan as Dependents on the
date of death shall continue, with no
EXH 10(o) - Page 23
<PAGE>
required contributions on their part (other than as expressly
provided in Section 3.03), until the later of (i) or (ii),
where (i) is the third anniversary of the date of the Covered
Retiree's death, and (ii) is the earlier of (A) the date the
surviving Spouse, if any, remarries or dies, or (B) the date
coverage would have ceased for any other reason had the
Covered Retiree's death not occurred. Such continued coverage
shall be provided only if such Dependents decline continuation
coverage under Article VII.
EXH 10(o) - Page 24
<PAGE>
ARTICLE III
-----------
MEDICAL BENEFITS
----------------
3.01 Benefit Provisions
------------------
Benefits under this Plan shall be payable when Covered Expenses
specifically described in Article III are Incurred for services
rendered to a Covered Person after 12:01 A.M. of the first day of his
participation under this Plan and before 12:01 A.M. of the last day of
his participation under this Plan. An expense is considered to be
Incurred at the time the service or supply for which it is Incurred is
actually provided.
3.02 Copayments
----------
(a) Except as provided in subsections (b), (c), (d), and (e) below
or in Sections 3.09, 3.13 or 3.16, this Plan shall pay one
hundred percent (100%) of the Covered Expenses Incurred during
a Calendar Year without requiring any deductibles or
copayments by the Covered Person.
(b) In the event a Covered Expense is Incurred for a Mental or
Nervous Disorder or for Alcoholism or Chemical Dependency
treatment, when not administered by the Mental Health Program
Administrator, this Plan shall pay eighty percent (80%) of
such Covered Expenses.
(c) The amount otherwise payable under subsection (a) above, shall
be reduced to eighty percent (80%) thereof if, with respect to
certain nonemergency procedures, the Covered Person does not
comply with the procedures of the ASO Managed Referral Program
set forth in Appendix B.
(d) The percentage otherwise payable under subsection (a) above
shall be reduced to eighty percent (80%) of eligible Hospital
Room and Board Charges if the Hospital review procedures
described in Appendix B are not complied with by a Covered
Person.
(e) Subsections (b), (c), and (d) above will not apply with
respect to expenses Incurred while a Covered Person is
receiving benefits under Medicare.
3.03 Eligible Expenses for Covered Persons
-------------------------------------
The term "Eligible Expenses" means the expenses actually Incurred by or
on behalf of a Covered Person for the charges listed below, but only if
the expenses are Incurred after such Covered Person becomes covered
under this Plan, the expenses are the Usual and Customary Charges, and
the services or supplies provided are recommended by a Physician and
are Medically Necessary for the care and appropriate treatment of the
Illness or Injury. Except as set forth in Sections 3.09 and 3.13,
anything not specifically excluded is included as an Eligible Expense.
EXH 10(o) - Page 25
<PAGE>
Eligible Expenses shall include, but are not limited to, the following:
(a) Hospital Care
-------------
The following medical services and supplies furnished by a Hospital,
Ambulatory Surgical Center, or a Birthing Center (such services shall
be subject to precertification, as and to the extent set forth in
Appendix B):
(i) Hospital Confinement
(A) Room and Board, limited to Semi-Private room rate;
(B) Intensive care Room and Board, limited to Hospital
ICU Rate;
(C) Preadmission Testing;
(D) Physician In-Patient Services;
(E) In-Patient surgery and anesthesia;
(F) In-Patient Prescription Drugs;
(G) In-Patient lab and x-ray services;
(H) In-Patient ancillary Hospital services;
(I) In-Patient maternity care;
(J) In-Patient blood and hemodialysis; and
(K) In-Patient therapy services such as, radiation
therapy, chemotherapy, dialysis treatments, physical
therapy, respiratory and pulmonary therapy,
occupational therapy, and speech therapy.
(ii) Outpatient Services
(A) Outpatient surgery;
(B) Outpatient Physician office visits and injections;
(C) Outpatient laboratory services;
(D) Outpatient x-ray services;
(E) Outpatient therapy services, such as radiation
therapy, chemotherapy, dialysis treatments, physical
therapy, respiratory and pulmonary therapy,
occupational therapy, and speech therapy; and
EXH 10(o) - Page 26
<PAGE>
(F) Outpatient medical supplies, such as dressings,
splints, casts, bandages, etc. ordered and dispensed
in a doctor's office.
(b) Skilled Nursing Facility Care
-----------------------------
Daily Room and Board and nursing care furnished by a Skilled Nursing
Facility shall be payable at one hundred percent (100%) of the Usual
and Customary Charge only if and when:
(i) the patient is confined as a bed patient in the
Facility;
(ii) the Confinement starts within fourteen (14) days
after a Hospital Confinement of at least three (3)
days; and
(iii) the attending Physician certifies that the
Confinement is needed for further care of the
condition that caused the Hospital Confinement.
The amount of Benefits for such services shall be subject to reduction
in accordance with Appendix B if such services are not approved by the
ASO in accordance therewith.
Covered Expenses for a Covered Person's daily room charge in a Skilled
Nursing Facility is limited to the daily charge of a Semi-Private room.
(c) Physician Care
--------------
The professional services of a Physician for surgical or medical
services.
(d) Assistant Surgeon
-----------------
The professional services of any assisting Physician other than a house
staff member, intern, or resident for professional services rendered in
the performance of a surgical or radiotherapy procedure. This Plan
shall pay an amount equal to one hundred percent (100%) of the Usual
and Customary Charge for the surgery, subject to reduction in
accordance with Appendix B if precertification by the ASO in accordance
therewith is not obtained.
(e) Multiple Surgical Procedures
----------------------------
When more than one surgical procedure is performed through the same
body opening during one operation, a Covered Person is covered for each
procedure.
(f) Private Duty Nursing Care
-------------------------
One hundred percent (100%) of the Usual and Customary Charges of
Private Duty Nursing care approved by ASO shall be Eligible Expenses.
Such amount shall be
EXH 10(o) - Page 27
<PAGE>
subject to reduction in accordance with Appendix B if such services are
not approved by the ASO in accordance therewith.
Private Duty Nursing care by a licensed nurse (Registered Nurse,
Licensed Practical Nurse, or Licensed Visiting Nurse) shall be limited
to the following extent:
(i) Inpatient Nursing Care. Charges are covered only when
care is Medically Necessary or not Custodial in nature
and the Hospital's Intensive Care Unit is filled or the
Hospital has no Intensive Care Unit.
(ii) Outpatient Nursing Care. Charges are covered only when
care is Medically Necessary and not Custodial in
nature.
(g) Home Health Care Services and Supplies
--------------------------------------
One hundred percent (100%) of the Usual and Customary Charges for any
service provided by a state-licensed Home Health Care Agency shall be
considered Eligible Expenses for Home Health Care Services and
Supplies, provided: (i) such agency services are prescribed by a
Physician in writing in lieu of Hospital services as part of a Home
Health Care Plan and such services begin within seven (7) days
following a Hospital Confinement; and (ii) Benefits would have been
payable as Medically Necessary if the services had been performed in
the Hospital. Such amount shall be subject to reduction in accordance
with Appendix B if such services are not approved by the ASO in
accordance therewith;
A home health care visit will be considered a periodic visit by either
a nurse or therapist, as the case may be, or four (4) hours of home
health aide services.
(h) Hospice Care Services and Supplies
----------------------------------
One hundred percent (100%) of the Usual and Customary Charges for
Hospice Care Services and Supplies shall be covered, but only when the
attending Physician has diagnosed the Covered Person's condition as
being a Terminal Illness and placed the Covered Person under a Hospice
Care Plan. Such amount shall be subject to reduction in accordance with
Appendix B if such services are not approved by the ASO in accordance
therewith.
Treatment shall be rendered and billed by the Hospice Unit and may be
provided either in the Hospice Unit or in the home. The program shall
be accredited by the National Hospice Organization and approved by the
Claims Administrator.
(i) Other Medical Services and Supplies:
------------------------------------
The following services and supplies not otherwise included in the items
above shall be Eligible Expenses:
EXH 10(o) - Page 28
<PAGE>
(i) Anesthetic; oxygen; blood and blood derivatives that
are not donated or replaced; intravenous injections and
solutions and the administration of these items is
included;
(ii) Diagnostic x-rays;
(iii) Laboratory studies;
(iv) Radiation or chemotherapy and treatment with
radioactive substances, including the materials and
services of technicians;
(v) Rental of Durable Medical Equipment or surgical
equipment if deemed Medically Necessary, provided that
any expense over Five Thousand Dollars ($5,000.00)
shall be subject to precertification of the ASO as to
whether it is Medically Necessary. These items may be
bought rather than rented, but only if agreed to by the
Plan Administrator;
(vi) Locally Medically Necessary professional land or air
ambulance service. A charge for this item shall be a
Covered Expense only if the service is to the nearest
Hospital or Skilled Nursing Facility where necessary
treatment can be provided, but in any event, no more
than fifty (50) miles from the place of pickup, unless
the Claims Administrator finds a longer trip Medically
Necessary.
(vii) Surgical dressings, splints, casts, and other devices
used in the reduction of fractures and dislocations;
(viii) Leg, arm, back, and neck braces or trusses which are
required as a result of a disabling Congenital Anomaly
or an Injury or Illness that occurred while covered
under this Plan;
(ix) Artificial legs, arms, or eyes required to replace a
lost natural body part provided that the loss occurred
while covered under this Plan;
(x) Physical Therapy by a Physical Therapist. The therapy
shall be in accordance with a Physician's exact orders
as to type, frequency, and duration and to improve a
body function;
(xi) Speech therapy by a licensed speech therapist. Therapy
shall be ordered by a Physician and follow either: (i)
surgery for correction of a Congenital Anomaly of the
oral cavity, throat or nasal complex (other than a
frenectomy) of a person born while covered under this
Plan; (ii) an Injury; or (iii) an Illness that is other
than a learning disorder or a Mental Disorder;
(xii) Occupational therapy by a licensed occupational
therapist. Therapy shall be ordered by a Physician,
result from an Injury or Illness that occurred while
covered under this Plan and improve a body function;
EXH 10(o) - Page 29
<PAGE>
(xiii) Sterilization procedures;
(xiv) Initial contact lenses or glasses required following
cataract surgery;
(xv) Hypodermic needles and syringes, and diabetic testing
agents.
(xvi) Norplant;
(xvii) Diaphragms. A copy of the prescription along with the
Pharmacy receipt shall be submitted for review;
(xviii) Abortion;
(xix) Charges for smoking cessation program for cigarettes,
cigars, pipes, and chewing tobacco for the Covered
Person and Spouse only; provided, however, that upon
completion of the program the patient sends a
certificate of completion of the program to the Claims
Administrator and remains "smoke free" for a period of
six (6) months.
(xx) Charges for hearing aids that are prescribed by a
Physician; and
(xxi) Expenses Incurred as a result of a nonrelated adoption
of a Child. Eligible Expenses include, but are not
limited to, legal fees and medical expenses of the
birth mother.
(j) This Plan is intended to allow any service eligible under Medicare
or any successor program to be eligible for Benefits under this Plan,
subject to the Medicare maximum allowable expense this Plan limits for
Usual and Customary Charges, preauthorization considerations, and
maximums. However, Benefits under this Plan are not intended to be
limited to only those services eligible under Medicare, but rather are
provided as set forth in this Plan. Any questions concerning services
eligible for benefits under Medicare and not specifically excluded or
included under this Plan shall be resolved by the Plan Administrator
consistent with such intent.
3.04 Care for Mouth, Teeth, and Gums
-------------------------------
Charges for the care of the mouth, teeth, gums, and alveolar processes
shall be Eligible Expenses under this Article III only if that care is
for the following oral surgical procedures:
(a) Excision of tumors and cysts of the jaws, cheeks, lips,
tongue, roof and floor of the mouth.
(b) Emergency repair due to Injury to sound natural teeth. This
repair shall be made within twelve (12) months from the date
of an Accident which Accident shall have occurred while the
person was covered under this Plan.
EXH 10(o) - Page 30
<PAGE>
(c) Surgery needed to correct Accidental injuries to the jaws,
cheeks, lips, tongue, floor, and roof of the mouth when the
Injuries occurred while covered under this Plan.
(d) Excision of benign bony growths of the jaw and hard palate.
(e) External incision and drainage of cellulitis.
(f) Incision of sensory sinuses, salivary glands or ducts.
No charge shall be covered under this Article III for dental and oral
surgical procedures involving Orthodontic care of the teeth,
periodontal disease, and preparing the mouth for the fitting of or
continued use of dentures. See Article V.
3.05 Podiatry Care
-------------
One hundred percent (100%) of the Usual and Customary Charges for any
nonsurgical, surgical, or Hospital services for podiatry care performed
by a Podiatrist. Such amount shall be subject to reduction in
accordance with Appendix B if such surgical or Hospital services are
not approved by the ASO in accordance therewith.
3.06 Spinal Manipulation/Chiropractic Services
-----------------------------------------
Services for chiropractic procedures/spinal manipulation performed for
therapeutic purposes by a person acting within the scope of his
authority under local law shall be considered for Benefits on the same
basis as if such procedures had been performed by a Physician.
3.07 Preventative Care
-----------------
Covered Expenses shall be payable for preventive care for Routine
Physical Examinations, routine mammograms, and routine pap smears as
follows:
(a) Charges for Routine Adult Physical Examinations: Routine
Physical Examinations for adults include care by a Physician
that is not for an Injury or Illness. It includes charges for
related x-rays and laboratory tests. Maximum Benefits under
this Section 3.08 are limited to payment for one Routine
Physical Examination each Calendar Year.
(i) Routine Physical Examinations including Physician's
charges, chest x-rays, standard EKG, full blood
analysis, and sigmoidoscopy for those age forty (40)
or over;
(ii) Routine mammograms
(A) one time initial (baseline) mammogram for
women between the ages of thirty two (32) and
thirty nine (39);
EXH 10(o) - Page 31
<PAGE>
(B) a mammogram every two (2) years for women
between the ages of forth (40) and forty nine
(49); and
(C) an annual mammogram for women age fifty (50)
and over.
(iii) Routine pap smears
(A) This Plan shall pay one hundred percent (100%)
of the Usual and Customary Charges for one (1)
routine pap smear including the office visit
per Calendar Year.
(B) Visits for routine PAP smears are not subject
to precertification procedures described in
Appendix B.
(b) Charges for Well-Child Care:
One hundred percent (100%) of the Usual and Customary Charges for
Well-Child Care shall be Eligible Expenses for the following services:
(i) Routine Physical Examination, developmental
assessment, history, sensory screening and
appropriate immunization and laboratory tests from
the moment of birth up to the sixth (6th) birthday.
(ii) Services must be supervised by a Physician, and are
limited to the following intervals:
(A) Birth, 1 week, and 2 weeks;
(B) 2, 4, 6, 9, 12, 15, and 18 months; and
(C) Once each year from age 2 to age 6.
(iii) Expenses include:
(A) Routine immunizations, injections, and
inoculations to age 6;
(B) A complete DPT (diphtheria pertussis) series;
(C) A TB (tuberculosis) test as deemed necessary
by the Physician;
(D) HIB vaccination;
(E) One hemoglobin blood test at each visit;
(F) One urinalysis test at each visit; and
(G) A complete polio series.
EXH 10(o) - Page 32
<PAGE>
3.08 Transplant Coverage Limits
--------------------------
This Plan shall pay one hundred percent (100%) of the Usual and
Customary Charges for Medically Necessary organ and tissue transplants,
but not in excess of 100% of the Usual and Customary Charges for such
transplants by a transplant facility certified by the ASO. The ASO
should be contacted via a toll-free number for a list of such certified
facilities.
Charges otherwise covered under this Plan that are Incurred for the
care and treatment due to an organ or tissue transplant are subject to
the following limits:
(a) The transplant shall be performed to replace an organ or
tissue of the covered Person. However, coverage is provided
only for the following Medically Necessary organ and tissue
transplants and only if the transplant program which requires
these services has been approved by the Plan Administrator and
ASO prior to the transplant procedure being performed.
(i) Bone Marrow Transplants
(ii) Heart Transplants
(iii) Kidney Transplants
(iv) Liver Transplants
(v) Heart/Lung Transplants
(b) Benefits for the covered transplant service shall be paid only
if the Covered Person has been covered under this Plan for
Medical Benefits for the immediately preceding twelve (12)
consecutive months.
(c) For transplant services to be covered they shall be provided
during the transplant Benefit Period which is a period of time
which starts five (5) days prior to the day the Covered Person
receives the transplant and ends twelve (12) months after the
date the transplant procedure is performed. A new transplant
Benefit Period starts only when the next transplant occurs six
(6) months after the previous transplant was performed.
(d) Transplant center services are covered provided the Facility
is approved by the Plan Administrator and
(i) has consistent, fair and practical criteria for
selecting patients for transplants;
(ii) has a written agreement with an organization that is
legally authorized to obtain donor organs; and
EXH 10(o) - Page 33
<PAGE>
(iii) complies with all federal and state laws and
regulations that apply to transplants covered under
this Plan.
(e) Charges for legally obtaining human donor organs from within
the United States or Canada shall be Eligible Expenses under
this Plan when the recipient is a Covered Person and the organ
is used for approved covered transplant services. When the
donor has medical coverage, his plan shall be the primary
payor. The Benefits under this Plan shall be reduced by those
payable under the donor's plan. Donor charges include those
for:
(i) evaluating the organ or tissue;
(ii) removing the organ or tissue from the donor; and
(iii) transportation of the organ or tissue from within the
United States or Canada to the place where the
transplant is to take place within the United States.
(f) This Plan shall pay for donor's fees.
(g) Coverage of reasonable travel and temporary lodging costs to a
designated Facility is limited to the following:
(i) Pre-approved transportation for the recipient and one
(1) person accompanying the recipient to and from the
Facility if the patient lives at least one hundred
(100) miles from the designated Facility. If the
recipient has not reached his or her eighteenth
(18th) birthday at the time of the transplant
procedure, pre-approved transportation for two (2)
individuals accompanying the recipient are covered.
(ii) Up to Two Hundred Fifty Dollars ($250.00) per day for
pre-approved lodging and meals for the person
accompanying the recipient. If the recipient has not
reached his or her eighteenth (18th) birthday at the
time of the transplant procedure, pre-approved
lodging and meals for two (2) individuals
accompanying the recipient are covered up to a total
Benefit of Four Hundred Dollars ($400.00) per day.
3.9 Exclusions and Limitations for Organ Transplants
------------------------------------------------
In addition to the limitations and exclusions contained in this Section
3.09 and in Section 3.13, this Plan does not provide Benefits relating
to an organ transplant for services, supplies or charges:
(a) which are not Medically Necessary;
(b) which are not furnished through a transplant program approved
by this Plan;
EXH 10(o) - Page 34
<PAGE>
(c) which are not furnished by or under the regulations of a
transplant center approved by this Plan;
(d) which are not provided during a transplant Benefit Period;
(e) which are not furnished by or under the supervision of a
transplant center other than the transplant center where the
transplant was performed;
(f) for other than legally obtained organs;
(g) which are unrelated to an organ transplant covered by this
Plan or unrelated to the diagnosis or treatment of Illness
resulting directly from the transplant;
(h) for blood donor fees;
(i) for medications which do not require a prescription;
(j) for travel time and travel related expenses of a Provider;
(k) for any transplant when the condition arose out of or in the
course of employment;
(l) rendered for the treatment of a Mental Disorder, Chemical
Dependency, or Alcoholism, whether or not such Illness is
connected to an organ transplant condition;
(m) which are not expressly listed as an Eligible Expense; or
(n) which are not approved, prior to the service being rendered,
by the Plan Administrator and the ASO if and only to the
extent expressly provided by this Plan.
Any service not specifically excluded herein shall be an Eligible
Expense.
3.10 Coverage of Nursery Care
------------------------
Routine Nursery Care is Room and Board, and other normal care, for
which a Hospital considers an expense and charges the patient. Covered
Expenses for Nursery Care include the Usual and Customary Charge made
by the Hospital for routine Nursery Care provided while the mother is
Hospital Confinement after birth, subject to the following:
(a) This coverage is only provided if a parent is a Covered Person
who was covered under this Plan at the termination of the
Pregnancy and the Child is an eligible Dependent and is
neither injured nor ill.
EXH 10(o) - Page 35
<PAGE>
(b) The Benefit is limited to the Usual and Customary Charges made
by a Physician for the Newborn while under Hospital
Confinement as a result of the Child's birth.
3.11 Coverage of Pregnancy
---------------------
The Usual and Customary Charges for the care and treatment of Pregnancy
are covered the same as any other Illness.
3.12 Christian Science Practitioners and Nurses
------------------------------------------
Expenses for visits for healing purposes by a Christian Science
practitioner listed as such in the Christian Science Journal (current
at the time of the visits) shall be considered for Benefits, subject to
the provisions that would apply if the expenses were charged by a
Physician. Expenses for professional nursing services of a Christian
Science nurse shall be included on the same basis, subject to the
provisions that apply to expenses for other nursing services.
3.13 Medical Benefit Exclusions
--------------------------
The following shall not be considered Eligible Expenses under Article
III:
(a) Care and treatment that is not Medically Necessary or is
Experimental in nature or not an acceptable medical practice.
(b) Charges Incurred prior to the Effective Date or after coverage
is terminated.
(c) Care and treatment for which there would not have been a
charge if no coverage had been in force or the Covered Person
has no legal obligation to pay.
(d) Charges for personal comfort items such as television,
telephones, admission kits, lotion, powder, toothpaste, etc.
(e) Charges for Physicians fees for any treatment which is not
rendered by or in the physical presence of the Physician, or
not ordered by a Physician or not Medically Necessary.
(f) The part of an expense for care and treatment of an Injury or
Illness that is in excess of the Usual and Customary Charge.
(g) Care and treatment of an Injury or Illness that, in either
case, is occupational, that is, arises from any work for wage
or profit. However, an occupational Injury or Illness shall be
considered if the person is not eligible to apply for coverage
under Workers' Compensation or a like law.
EXH 10(o) - Page 36
<PAGE>
(h) Care, treatment, or supplies furnished by a program or agency
funded by any government, or any Injury or Illness while in
active military duty. This subsection does not apply to
Medicaid or where otherwise prohibited by law.
(i) For injuries sustained while committing a crime or an assault
or felony, or while participating in a riot or civil
insurrection.
(j) Any loss that is due to a declared or undeclared act of war.
(k) Any loss due to an intentionally self-inflicted Injury, while
sane or insane.
(l) Professional services performed by a person who ordinarily
resides in the Covered Person's home or is related to the
Covered Person whether the relationship is by blood or exists
in law.
(m) Care and treatment provided for cosmetic reasons. This
exclusion will not apply if the care and treatment are
Medically Necessary, and:
(i) is for repair of damage from an Accident that
occurred while the person was covered under this
Plan;
(ii) is due solely to surgical removal of all or part of
the breast tissue because of an Injury or Illness to
the breast; or
(iii) is for correction of a Congenital Anomaly in a Child
born while one of the parents was covered under this
Plan.
(n) Routine Physical Examinations, lab tests, and routine chest
x-rays beyond any such coverage allowed by this Plan.
(o) Services or supplies provided mainly as a rest cure,
maintenance, or Custodial Care or for the primary purpose of
changing or controlling one's environment.
(p) Care and treatment billed by a Hospital for non-Emergency
Admissions on a Friday or a Saturday. This subsection does not
apply if surgery is performed within twenty-four (24) hours of
admission.
(q) Charges for telephone consultations unless in lieu of patient
transport.
(r) Missed appointments or for the completion of claim forms or
claim inquiries.
(s) Drugs, vitamins, nutrients, and food supplements that are not
Prescription Drugs, even if prescribed or administered by a
Physician.
(t) Any charges Incurred by a patient while on leave of absence
from a Hospital or while confined but during which time no
treatment was rendered.
EXH 10(o) - Page 37
<PAGE>
(u) Professional services billed by a Physician or nurse who is an
employee of a Hospital or Skilled Nursing Facility and paid by
the Hospital or Facility for the service, including residents
and interns.
(v) Charges for drugs dispensed in a doctor's office or "take
home" drugs upon Hospital discharge.
(w) Professional nursing services if rendered by other than a
Registered Nurse or a Licensed Practical Nurse, unless
specifically listed as a Covered Expense elsewhere in this
Plan and any precertification requirements are fulfilled.
(x) Services of any unlicensed Provider.
(y) Services that are of the nature of educational or vocational
testing or training.
(z) Exercise programs or equipment for treatment of any condition,
unless covered as Durable Medical Equipment.
(aa) Charges Incurred for recreational activities or recreational
travel, even if prescribed by a Physician.
(bb) Chelation (metallic ion therapy).
(cc) Care and treatment for gender identity disorders and sex
transformations.
(dd) Care and treatment for reversal of surgical sterilization.
(ee) Artificial insemination or in vitro fertilization, GIFT, ZIFT,
etc., and any other fertilization surgeries.
(ff) Care and treatment of an Injury or Illness that results from
engaging in competition for which remuneration or prize money
is available to participants as the result of the competition.
(gg) Care and treatment of any Illness or Injury from any release
of nuclear energy except only when prescribed by a Physician
and used solely for medical treatment or Illness or Injury of
the Covered Person.
(hh) Except for that provided in Article IV, eye refractions, eye
glasses, contact lenses, or the fitting of them. This
exclusion does not apply to aphakic patients and soft lenses
or sclera shells intended for use as corneal bandages.
(ii) Dental care except (i) as provided in Article V and Section
3.04, and (ii) for Accidental injury to natural teeth if
initial treatment is received within 72 hours of the Accident
and on-going treatment is being rendered with
pre-determination approval by the Plan Administrator.
EXH 10(o) - Page 38
<PAGE>
(jj) The following care, treatment, or supplies for the feet:
orthopedic shoes, orthopedic prescription devices to be
attached to or placed in shoes; treatment of weak, strained,
flat, unstable or unbalanced feet, metatarsalgia, or bunions.
(kk) Swimming pools, exercising equipment, vibratory equipment,
elevators, stair lifts, blood pressure instruments,
stethoscopes, clinical thermometers, scales, elastic bandages
or stockings, wigs, devices for simulating natural female body
contours (except for post mastectomy surgery), and
non-prescription first-aid supplies.
(ll) Care and treatment for hair loss, unless due to Illness or
Disease.
(mm) Acupuncture or hypnosis, except when performed by a Physician
in lieu of anesthesia.
(nn) Charges for premarital examinations, preemployment physicals,
or insurance physicals.
(oo) Marital/family counseling.
(pp) Care and treatment of Mental Disorders beyond the Benefit
limits set forth in Section 3.14.
(qq) Hospitalization primarily for Physical Therapy or other
rehabilitative care, hospitalization primarily for x-ray,
laboratory or other diagnostic studies, except where such
services cannot be rendered safely and adequately on an
Out-Patient basis.
(rr) Charges for processing and testing autologous or homologous
blood, blood components or blood derivatives which have been
donated for own use to be reused, in excess of normal charges.
(ss) Claims filed beyond the filing limitation period.
(tt) Legal expenses.
(uu) Charges for treatment for Temporomandibular Joint Dysfunction
(TMJ) (TMJ is considered under Article V), upper and lower jaw
augmentation, or reduction procedures (orthognathic surgery).
(vv) Charges for treatment of Myofacial Pain Dysfunction (these are
considered under Article V).
(ww) Non-medical self-care, self-help training, and holistic
medicine.
(xx) Biofeedback.
EXH 10(o) - Page 39
<PAGE>
(yy) Charges which are not specified in this Plan as Eligible
Expenses.
(zz) Care, treatment, or x-ray exams for mouth conditions that are
due to periodontal or periapical disease, involve any of the
teeth or surrounding tissue or structure, or involve the
alveolar process or gingival tissue (these are considered
under Article V). This exclusion does not apply to the extent
that dental care and treatment are specifically included under
Article III.
(aaa) Expenses for the surgical removal of impacted wisdom teeth
(these are considered under Article V).
(bbb) Charges for the use of a Freestanding Birthing Center.
Any medical service not specifically excluded herein shall be
considered an Eligible Expense.
3.14 Mental Health/Substance Abuse Treatment Benefits
------------------------------------------------
Mental health and substance abuse Benefits shall be administered by the
Claims Administrator.
(a) Prior Notice: Before seeking treatment a Covered Person shall
contact the Mental Health Program Administrator. If the Mental
Health Program Administrator is not contacted prior to
treatment in nonemergency situations, Benefits shall be
reduced by twenty percent (20%).
(b) Emergency Care: If a Covered Person requires emergency mental
health hospitalization the Mental Health Program Administrator
shall be contacted immediately, and in no event, later than
forty-eight (48) hours after the Covered Person's first
emergency treatment. Failure to contact the Mental Health
Program Administrator within forty-eight (48) hours of
treatment shall cause Benefits to be reduced by twenty percent
(20%), unless it is not reasonably practicable to make such
contact within forty-eight (48) hours and such contact is made
as soon as reasonably practicable.
(c) Elective/Non-Emergency Admission: The Mental Health Program
Administrator should be contacted at least seven (7) days
prior to the elective admission.
3.15 Chemical Dependency/Substance Abuse
-----------------------------------
A Covered Person shall be entitled to up to two (2) episodes of
treatment in the Covered Person's Lifetime. Such treatment shall be
pre-approved by the Claims Administrator.
(a) The Claims Administrator should be contacted prior to any
treatment or within forty-eight (48) hours of any Emergency
Admission.
EXH 10(o) - Page 40
<PAGE>
(b) Failure to contact the Claims Administrator, as provided in
subsection (a) above, shall cause Benefits to be reduced to
eighty percent (80%) for treatment in the Covered Person's
Lifetime.
(c) With regard to Emergency Admission for Chemical Dependency,
once the Covered Person is stabilized, the Covered Person may
be required to move to a Network Hospital, if not then
admitted to a Network Hospital.
(d) Claims for treatment of Chemical Dependency/Substance Abuse
shall be submitted to the Claims Administrator.
3.16 Subrogation
-----------
Payment of Benefits is made subject to the provisions of this Section
3.16.
(a) If a Covered Person is injured and a third party may be liable
for the Covered Person's medical expenses, this Plan shall not
pay those expenses unless the Covered Person first agrees to
repay this Plan to the extent the Covered Person recovers any
amounts actually paid by this Plan from the third party.
(b) A Covered Person, by receiving payment of Benefits, agrees to
cooperate with the Plan Administrator to protect this Plan's
right to Subrogation. This shall include, but not be limited
to, the Covered Person's providing this Plan with a written
assignment of the Covered Person's right to pursue a claim
against the third party or granting this Plan a lien against
proceeds recovered from a third party. The lien may be filed
with the person whose act caused the injuries, his or her
agent, an insurer, a court having jurisdiction in the matter,
or any other person.
(c) If the Covered Person receives payment for such expenses from
the third party, by way of settlement or in satisfaction for a
judgment, this Plan must be reimbursed by the Covered Person
for all Benefits paid. The amount of such reimbursement shall
not exceed the lesser of:
(i) the amount received by the Covered Person from the
third party; or
(ii) the amount this Plan paid with respect to said
Injury.
(d) In no event shall this Plan be responsible for paying any
attorney fees the Covered Person may incur in connection with
such Subrogation right, unless this Plan agrees to pay such
expenses in writing. In no event shall this Plan's right to
recover from such third party be reduced because the Covered
Person fails to recover all that he believes to be due.
EXH 10(o) - Page 41
<PAGE>
ARTICLE IV
----------
PRESCRIPTION BENEFITS
---------------------
4.01 Prescription Drug Benefits
--------------------------
This Plan shall pay one hundred percent (100%) of the Usual and
Customary Charges of a Pharmacy for any A-rated or AB-rated generic
drug prescribed by a Physician, and, if there is no generic equivalent,
the brand name Prescription Drug available; provided however, that a
Physician may require the use of the brand name Prescription Drug if a
generic drug is available if the prescription contains the legend
"dispense as written" in the Physician's handwriting. Each Covered
Person shall be issued a Prescription Card that provides for the direct
payment to participating Pharmacies of the cost of Prescription Drugs
for such Covered Person. Benefits shall be paid directly to the
Pharmacy by the issuer of such card or reimbursed by the Employer if
not so paid.
4.02 Exclusions
----------
The following shall not be considered Covered Expenses under Article
IV:
(a) A charge excluded under Medical Plan Exclusions (see Section
3.13).
(b) A drug or medicine that can legally be bought without a
written prescription. This does not apply to injectable
insulin.
(c) Devices of any type, even though such devices may require a
prescription. These devices include (but are not limited to)
therapeutic devices, artificial appliances, braces, support
garments, or any similar device (these may be considered under
Article III).
(d) Injectables, immunization agents, biological sera, blood or
blood plasma, or medications prescribed for parenteral use or
administration.
(e) A drug or medicine labeled: "Caution - limited by federal law
to investigational use".
(f) Experimental drugs and medicines, even though a charge is made
to the Covered Person.
(g) Any charges for the administration of Prescription Drugs; and
drugs or medicines delivered or administered by the
prescriber.
(h) Any drug or medicine that is consumed or administered at the
place where it is dispensed.
EXH 10(o) - Page 42
<PAGE>
(i) A drug or medicine that is to be taken by the Covered Person,
in whole or in part, while under Hospital Confinement. This
includes being confined in any institution that has a Facility
for the dispensing of drugs and medicines on its premises.
(These are considered under Article III.)
(j) A charge for Prescription Drugs which may be properly received
without charge under local, state or federal programs.
(k) A charge for hypodermic syringes and/or needles.
(l) Charges for a prescription refill in excess of the number
specified by the Physician or any refill dispensed after one
(1) year from the order of a Physician.
Any item described in Section 4.01 and not specifically excluded herein
shall be considered an Eligible Expense under this Article IV.
EXH 10(o) - Page 43
<PAGE>
ARTICLE V
---------
DENTAL CARE BENEFITS
--------------------
5.01 Plan Limits for Dental Care
---------------------------
This Plan shall pay the Usual and Customary Charges charged by a
Dentist or other Physician for necessary care, appliances, or other
dental material listed as an Eligible Expense below.
A dental charge is Incurred on the date the service or supply for which
it is made is performed or furnished. However, there are times when one
overall charge is made for all or part of a course of treatment. In
this case, the Claims Administrator shall apportion that overall charge
to each of the separate visits or treatments. The pro rata charge shall
be considered to be Incurred as each visit or treatment is completed.
5.02 Eligible Expenses for Dental Care
---------------------------------
(a) Preventive Dental Procedures
----------------------------
(i) Routine oral exams, including the cleaning
(prophylaxis) of the teeth limited, however, to two
(2) exams per Calendar Year per Covered Person.
(ii) Four (4) bitewing x-rays per year.
(iii) One (1) fluoride treatment twice (2) per year for
Dependents.
(iv) Full mouth x-rays, once every three (3) years.
(b) Routine Dental Procedures
-------------------------
(i) Dental x-rays (videographs) not covered under
subsection 5.02(a) above, to determine required
dental treatment.
(ii) Oral Surgery, limited to the removal of teeth,
preparation of the mouth for dentures and removal of
tooth-generated cysts of less than 1/4 inch.
(iii) Periodontics (gum treatments).
(iv) Endodontics (root canals).
(v) Extractions including any anesthesia provided.
(vi) Recementing bridges, crowns, or inlays.
EXH 10(o) - Page 44
<PAGE>
(vii) Fillings, other than gold.
(viii) General anesthetics.
(ix) Antibiotic drugs.
(c) Major Dental Procedure
----------------------
(i) Gold restorations, including inlays, onlays and foil
fillings. The cost of gold restorations in excess of
the cost for amalgam, synthetic porcelain or plastic
materials shall be included only when the teeth shall
be restored with gold.
(ii) Installing crowns.
(iii) Installing precision attachments for removable
dentures.
(iv) Installing partial, full or removable dentures to
replace one (1) or more natural teeth that were
extracted while the person was covered for this
Benefit. This service also includes all adjustments
made during a six (6) month period following the
installation.
(v) Adding clasps or rests to existing partial removable
dentures.
(vi) Initially installing fixed bridgework to replace one
(1) or more natural teeth which were extracted while
the person was covered for these Benefits.
(vii) Repairing crowns, bridgework and removable dentures.
(viii) Rebasing or relining removable dentures.
(ix) Replacing an existing removable partial or full
denture or fixed bridgework; adding teeth to an
existing removable partial denture; or adding teeth
to existing bridgework to replace newly extracted
natural teeth. However, this item shall apply only if
one of the following tests is met:
(A) The replacement or addition of teeth is
required because of one or more natural
teeth being extracted after the person is
covered under these Benefits;
(B) The existing denture or bridgework was
installed at least five (5) years prior to
its replacement and cannot currently be made
serviceable; or
EXH 10(o) - Page 45
<PAGE>
(C) The existing denture is of an immediate
temporary nature. Further, replacement by
permanent dentures is required and shall
take place within twelve (12) months from
the date the temporary denture was
installed.
(d) Orthodontic Treatment and Appliances
------------------------------------
(i) Treatment to move teeth by means of appliances to
correct a handicapping malocclusion of the mouth.
These services include:
(A) This Plan shall pay one hundred percent
(100%) of the Usual and Customary Charges
for preliminary study, including x-rays,
diagnostic casts, and Treatment Plan, active
treatments, and retention appliance; and
(B) Payments for comprehensive full-banded
Orthodontic treatments. Such treatments are
paid at fifty percent (50%) of Usual and
Customary Charges and made in eighteen (18)
monthly installments. This Plan shall pay
fifty percent (50%) of the banding in the
first monthly installment. The remaining
charges shall be paid at fifty percent (50%)
in equal installments over a period of the
next seventeen (17) months.
(ii) This Plan shall not pay for any Orthodontic care
rendered prior to the Covered Person's effective
date under this Plan. This Plan shall pay for
Orthodontic care after the Covered Person's
Effective Date under this Plan if money is owed to
the Physician and the covered person is still in
treatment based on the remaining course of
treatment.
(e) Diagnosis and Non-Surgical Treatment of Temporomandibular
--------------------------------------------------------------
Joint Dysfunction and Myofacial Pain Dysfunction
This Plan shall pay one hundred percent (100%) of the Usual
and Customary Charges for treatment for a diagnosis of
Temporomandibular Joint Dysfunction and Myofacial Pain
Dysfunction.
(f) Impacted Wisdom Teeth
---------------------
This Plan shall pay one hundred percent (100%) of the Hospital
expenses and one hundred percent (100%) of the Usual and
Customary Charges for the surgical removal of impacted wisdom
teeth.
(g) Predetermination of Benefits
----------------------------
Before commencing dental treatment for which the charge is
expected to be Two Hundred Fifty Dollars ($250.00) or more, a
Covered Person may submit a predetermination of Benefits form
to the Mental Health Program Administrator.
EXH 10(o) - Page 46
<PAGE>
(i) The regular dental claim form shall be used and
completed by the Dentist itemizing all of the
recommended services, costs for each and attach all
supporting x-rays to the form. The Claims
Administrator shall notify the Dentist of the
Benefits payable under this Plan.
(ii) Any services not included in the payable expenses
reported to the Dentist by the Claims Administrator
may be resubmitted to the Plan Administrator for a
redetermination of payable expenses for the
recommended treatment. The Plan Administrator may
determine that the excess amounts shall be paid by
this Plan in his sole and absolute discretion.
(iii) If a description of the procedures to be performed,
x-rays and an estimate of the Dentist's fees are not
submitted prior to treatment, the Claims
Administrator reserves the right to make a
determination of Benefits payable taking into account
alternative procedures, services or courses of
treatment, based on accepted standards of dental
practices. If verification of the necessity of dental
services cannot reasonably be made, the Benefits
payable may be reduced.
(h) Alternative Treatment
---------------------
If a Covered Person chooses a more expensive treatment than is
needed to correct a dental problem according to accepted
standards of dental practice, the Benefit shall be based on
the cost of the treatment which provides professionally
satisfactory results at the most cost-effective level. Any
difference in cost between the professionally satisfactory
treatment and patient choice of treatment shall be paid by the
Covered Person.
5.03 Dental Benefit Exclusions
-------------------------
The following shall not be considered Covered Expenses under Article V:
(a) Services that are excluded under Section 3.14 (Medical Benefit
Exclusions).
(b) Care, treatment or supplies for which a charge was Incurred
before a person was Covered under this Plan.
(c) Charges excluded or limited by this Plan as stated in this
document.
(d) Charges Incurred for which the Covered Person has no legal
obligation to pay.
(e) Care and treatment of an Injury or Illness that, in either
case, is occupational - that is, arises from work for wage or
profit, including self-employment.
(f) Care and treatment for which there would not have been a
charge if no coverage had been in force.
EXH 10(o) - Page 47
<PAGE>
(g) Care, treatment or supplies furnished by a program or agency
funded by any government. This does not apply to Medicaid or
when otherwise prohibited by law.
(h) Care and treatment that is either Experimental or
Investigational in nature or not Medically Necessary.
(i) The part of an expense for care and treatment of an Injury or
Illness that is in excess of the Usual and Customary Charge.
(j) For Injuries sustained while committing an assault or felony
or while participating in a riot or civil insurrection.
(k) Any loss that is due to a declared or undeclared act of war.
(l) Any loss due to an intentionally self-inflicted Injury, while
sane or insane.
(m) All diagnostic and treatment services related to the treatment
of jaw joint problems including Temporomandibular Joint
Dysfunction and Myofacial Pain Dysfunction.
(n) Services that, to any extent, are payable under any medical
expense Benefits of this Plan. See Article III.
(o) Services which are not included in the list of covered dental
services.
(p) Crowns for teeth that are restorable by other means or for the
purpose of periodontal splinting.
(q) Crowns, fillings or appliances that are used to connect
(splint) teeth, changes or alters the way the teeth meet,
including altering the vertical dimension or restoring the
bite (occlusion), or are cosmetic in nature.
(r) Orthognathic surgery.
(s) Expense of denture replacement less than five (5) years after
a preceding denture replacement.
(t) Expenses Incurred for dentures during the twelve (12) month
period after the Effective Date of dental coverage, with
respect to the Covered Person, unless:
(i) Dentures are required because of the extraction of
one or more natural teeth after the Effective Date of
dental coverage; and
(ii) The insertion of an opposing denture necessitates
replacement of an existing denture, subject to the
above provisions.
EXH 10(o) - Page 48
<PAGE>
Any item or service described in Section 5.02 and not specifically
excluded herein shall be considered an Eligible Expense.
EXH 10(o) - Page 49
<PAGE>
ARTICLE VI
----------
VISION CARE BENEFITS
--------------------
6.01 Plan Limits
-----------
This Plan shall pay one hundred percent (100%) of the Usual and
Customary Charges for vision care and related services, such as eye
examinations, frames and lenses, based on the following schedule:
(a) Vision exams 100% of charges
(b) Clear Lenses (Pair)
Single vision 100% of charges
Bifocal 100% of charges
Trifocal 100% of charges
(c) Frames 100% of charges
(d) Contact Lenses
Cosmetic or medically 100% of charges
necessary (in lieu
of lenses and frame
allowance)
(e) Frequency of Service
Vision Exam once every 12 months
Lenses once every 12 months
Frames once every 24 months
Contact lenses once every 24 months
6.02 Provider Reimbursement
----------------------
Any Covered Person may visit the Optometrist of their choice for the
above vision care services. The Covered Person shall be reimbursed by
this Plan according to the limits set forth in Section 6.01.
6.03 Vision Care Limits and Exclusions
---------------------------------
This Plan shall not provide Benefits for professional services or
materials connected with:
(a) Orthoptic or vision training and any associated supplemental
testing; Plano lenses; or two pair of glasses in lieu of
bifocals;
(b) Medical or surgical treatment of the eyes (considered under
Article III);
EXH 10(o) - Page 50
<PAGE>
(c) Any eye examination or any corrective eyewear required by an
Employer as a condition of employment;
(d) Any Injury or Illness for which coverage is provided under an
Workers' Compensation or similar law, or which otherwise is
work-related;
(e) Safety goggles or sunglasses, including prescription type;
(f) Subnormal vision aids or nonprescription lenses;
(g) Charges in excess of the Usual and Customary Charge for any
care, treatment, service or supply;
(h) Any expense which is covered under another provision of this
Plan; and
(i) Experimental treatment or device.
Any item or service otherwise described in this Article VI and not
specifically excluded herein shall be considered an Eligible Expense.
EXH 10(o) - Page 51
<PAGE>
ARTICLE VII
-----------
CONTINUATION OF COVERAGE
------------------------
7.01 General
-------
Notwithstanding any provision of this Plan to the contrary, coverage
for certain Benefits under this Plan for a Covered Person may be
continued in accordance with the provisions of this Article VII. These
provisions are intended to comply with COBRA and are to be interpreted
consistent with such intent.
7.02 Continuation of Coverage
------------------------
(a) Right to Elect Continuation Coverage.
Each Qualified Beneficiary who would lose coverage under this
Plan as a result of a Qualifying Event shall be entitled to
elect, within the Election Period, Continuation Coverage under
this Plan. Except with respect to a minor Child, an election
not to receive Continuation Coverage is only binding on the
individual making the election.
(b) Special Definitions.
Solely for purposes of this Section 7.02:
(i) Continuation Coverage means coverage under this Plan
which, as of the time coverage is being provided, is
identical to the coverage provided under this Plan
immediately prior to the Qualifying Event with
respect to similarly situated Covered Persons for
whom a Qualifying Event has not occurred.
(ii) Qualified Beneficiary means, with respect to a
Covered Person, any other individual who, on the day
before the Qualifying Event for such Covered Person,
is a Covered Person under this Plan as:
(A) The Spouse of the Covered Retiree, or
(B) The Dependent Child of the Covered Retiree.
In the case of a Qualifying Event described in
Section 1.104(d), the affected Covered Retiree is
also a Qualified Beneficiary.
(iii) Election Period means the one hundred twenty (120)
day period beginning on the later of the date
coverage under this Plan would terminate by reason of
a Qualifying Event, or the date notice is provided in
accordance with subsection (e) below.
EXH 10(o) - Page 52
<PAGE>
(iv) Dependent includes a child who is born to or placed
for adoption with the Covered Retiree during the
period of continuation coverage under this Section
7.02.
(c) Period of Coverage.
(i) If Continuation Coverage is elected, coverage shall
continue from the date of the Qualifying Event and
shall end on:
(A) In the case of a loss of coverage which
occurs as a result of an event described in
Section 1.104(d), the date of death of the
Covered Retiree or, if the Covered Retiree
died prior to the loss of coverage, the date
of death of the surviving Spouse of the
deceased Covered Retiree.
(B) In the case of the Covered Retiree's death,
coverage shall end on the last day of the
36-month period that begins on the date of
the Covered Retiree's death.
(C) In the case of a loss of coverage which
occurs as a result of the Covered Retiree's
divorce or legal separation, the last day of
the 36-month period that begins on the date
of such divorce or legal separation.
(D) In the case of a loss of coverage which
occurs as a result of the loss of a child's
status as a Dependent, the last day of the
36-month period that begins on the date of
such loss of status.
(ii) Notwithstanding the foregoing, Continuation Coverage
shall cease on the earliest of the following dates:
(A) The applicable date described in subsection
7.02(c)(i),
(B) The date on which there is a failure to make
timely payment (including any minimum grace
period required by federal law) of any
premium with respect to the Qualified
Beneficiary, or
(C) The date on which the Qualified Beneficiary
(after the date he elected Continuation
Coverage),
(1) Is covered as an employee or
otherwise under any other group
health plan which does not have a
preexisting condition exclusion or
limitation provision, or
(2) Is entitled to Medicare benefits.
EXH 10(o) - Page 53
<PAGE>
(d) The premium cost payable by the Qualifying Beneficiary for any
period of Continuation Coverage under this Article VII shall
be established by the Plan Administrator and may not exceed
one hundred percent (100%) of the applicable premium cost to
this Plan for Continuation Coverage for such period for
similarly situated Covered Persons, as determined in
accordance with reasonable actuarial standards consistently
applied.
(e) The Qualified Beneficiary will have forty five (45) days after
selection of continuation coverage to submit initial payment
to this Plan for the entire period of coverage from the
Qualifying Event to the end of the month in which payment is
submitted. If payment is not received within forty five (45)
days after the date of selection, the right to continue
coverage will be lost. The Qualified Beneficiary, if he so
elects Continuation Coverage, shall make subsequent monthly
installments of such premium cost.
(f) The Plan Administrator shall provide written notice of the
rights provided by this Section 7.02.
(i) Notice shall be provided to each Covered Retiree, his
Spouse, and any other Dependent not residing with
either the covered Retiree or his Spouse, on the date
an individual commences coverage under this Plan.
(ii) Notice shall be provided to any Qualified Beneficiary
no later than fourteen (14) calendar days following
the date of a Qualifying Event resulting from the
Covered Retiree's death or the Employer instituting
proceedings under Title 11 of the United States Code.
(iii) Notice shall be provided to any Qualified Beneficiary
no later than fourteen (14) calendar days following
the time the Plan Administrator is notified by the
Covered Retiree or Qualified Beneficiary of a
Qualifying Event for which the Covered Retiree or
Qualified Beneficiary is required to notify the Plan
Administrator under subsection (iv) below.
(iv) The Covered Retiree or Qualified Beneficiary shall
notify the Plan Administrator of a Qualifying Event
resulting from the Covered Retiree's divorce or legal
separation or from a Child's losing his status as a
Dependent under this Plan. To be eligible for
Continuation Coverage, the Covered Retiree or
Qualified Beneficiary shall notify the Plan
Administrator of such Qualifying Event no later than
sixty (60) days following the date of such Qualifying
Event.
(v) The Qualified Beneficiary has 60 days to elect
continuation of coverage from the later of:
(A) the Qualifying Event, or
EXH 10(o) - Page 54
<PAGE>
(B) the date the notice of his or her right to
elect continuation of coverage is given by
this Plan, provided that the Qualified
Beneficiary has complied with the notice
requirements described above.
(vi) If continuation of coverage is not elected, coverage
will end on the date the event causing termination of
coverage occurred; provided, however, that Dependent
coverage shall continue as provided in Section 2.07
if the Dependent declines coverage under this Article
VII in accordance with the provisions of subsection
2.07(b).
EXH 10(o) - Page 55
<PAGE>
ARTICLE VIII
------------
COORDINATION OF BENEFITS
------------------------
8.01 Definitions
-----------
The payment of all Benefits under this Plan is subject to the
provisions of this Article VIII. For purposes of this Article VIII:
(a) Coordination of Benefits means that if the Covered Person is
covered under an Other Plan, as defined in subsection 8.01(b),
(or is treated under Section 8.03 as so covered), the amount
payable under this Plan, when added to the amount or value of
the benefits or services provided by all Other Plans, shall
equal the amount of the Allowed Expense which is Incurred. In
no event will the amount payable by this Plan be more than
would have been payable if there were no Other Plan.
Coordination of Benefits provisions shall be applied on a
Calendar Year basis.
(b) Other Plan means the following coverages, excluding any
coverage under (i), (ii), (iii), or (iv) below that is
attributed to coverage of a Covered Person as a "self-employed
individual" or as an "owner-employee", as such quoted terms
are defined by section 401(c) of the Internal Revenue Code:
(i) group, blanket or franchise insurance coverage,
(ii) Hospital service prepayment plan on a group basis,
medical service prepayment plan on a group basis,
group practice, or other prepayment coverage on a
group basis,
(iii) any coverage under labor management trusteed plans,
union welfare plans, employer organization plans, or
employee benefit organization plans,
(iv) any group coverage through a Health Maintenance
Organization under the Health Maintenance
Organization Act of 1973, or any state licensed
health care maintenance organization, and
(v) any coverage under Medicare or any other governmental
programs, or any coverage required or provided by any
statute, which coverage is not otherwise excluded
from the calculation of Benefits under This Plan.
Notwithstanding the foregoing, the term "Other Plan" shall not
include any individual policies or policies designed for
individual purchasers. The term "Other Plan" shall be
construed separately with respect to each policy,
EXH 10(o) - Page 56
<PAGE>
contract, or other arrangement for benefits or services and
separately with respect to that portion of any such policy,
contract, or other arrangement which reserves the right to
take the benefits or services of Other Plans into
consideration in determining its benefits and that portion
which does not.
(c) Allowed Expense means the Usual and Customary Charge for which
the claimant is entitled to payment under one or more plans.
When any Other Plan provides services rather than cash
payment, the reasonable cash value of each service shall be an
Allowed Expense.
The amount charged by the Health Care Provider to the Other
Plan for an item of health expense shall be considered as the
amount the Health Care Provider will accept as payment in full
for the item of expense. If such amount charged to the Other
Plan, which is otherwise acceptable under this subsection (c),
differs from the reported charge, Allowed Expense for the item
of health expense shall not exceed the smaller of the charges.
(d) Effect on Benefits. If a person is covered under This Plan and
under one or more Other Plans, the rules set forth in this
subsection (d) shall govern. These rules establishing the
order of benefit determination are:
(i) The benefits of any Other Plan which does not contain
provisions governing coordination of benefits with
other plans shall be determined before the Benefits
of This Plan.
(ii) The benefits of any plan which covers the person on
whose expenses claim is based as an employee shall be
determined before the benefits of a plan which covers
such person as a dependent.
(iii) Except as provided in subsection (iv), below, if the
person on whose expense claim is based is a dependent
child, the benefits of any plan which covers the
parent having the earlier birthday in the calendar
year shall be determined before the benefits of a
plan which covers the other parent; provided,
however, that if the parents of such child are
legally separated or divorced, the benefits of a plan
which covers the parent having custody of the child
shall be determined before the benefits of a plan
which covers the natural parent not having custody
unless the parent having custody has remarried. If
the parent having custody has remarried, the benefits
of a plan which covers the parent having custody of
the child shall be determined first, the benefits of
a plan which covers the stepparent shall be
determined second, and the benefits of a plan which
covers the natural parent not having custody shall be
determined third.
(iv) Notwithstanding subsection (iii) above, if a court
order has established which parent shall have
financial responsibility for a dependent child,
EXH 10(o) - Page 57
<PAGE>
the benefits of any plan which covers such parent
shall be determined first, the benefits of a plan
which covers the other natural parent shall be
determined second, and the benefits of a plan which
covers the stepparent, if any, shall be determined
third.
(v) The benefits of any plan required or provided by
statute which covers the person for any injury or
disease arising out of the ownership, maintenance or
use of a motor vehicle shall be determined before the
Benefits of This Plan.
(vi) When the rules in subsections (i) (v) above do not
establish an order of benefit determination, the
benefits of any plan which has covered the person for
whose expenses the claim is based for the longer
period of time shall be determined before the
benefits of a plan which has covered such person the
shorter period of time.
(e) Right to Information. It may be necessary for information to
be obtained or released in order to coordinate Benefit
payments with Other Plans. Claimants shall furnish all such
information to the Plan Administrator upon request.
(f) Right of Recovery and Direct Payment. This Plan has the right
to recover from persons any payments made by this Plan which
exceed those required by these provisions. This Plan also has
the right to make direct payment to persons of amounts paid by
them which should have been paid by this Plan. Such payment
shall be deemed Benefits under this Plan and shall discharge
this Plan's liability to the extent of the payment.
(g) Right to Receive and Release Necessary Information. For the
purpose of determining the applicability of and implementing
the terms of this Article VIII or any provision of similar
purpose of any Other Plan, the Plan Administrator may, without
the consent of or notice to any person, release to or obtain
from any insurance company or other organization or person any
information, with respect to any person, which the Plan
Administrator deems to be necessary for such purposes. Any
person claiming benefits under This Plan shall furnish to the
Plan Administrator such information as may be necessary to
implement this provision.
8.02 Medicare
--------
Upon a Covered Person's attainment of age 65, this Plan becomes
secondary to Medicare whether or not such Covered Person elects to
enroll in Medicare. This Plan is designed with the expectation that all
eligible persons shall enroll in Medicare Part A and Part B. Therefore,
Benefits payable under this Plan shall be limited to amounts that are
otherwise payable by this Plan in excess of those amounts that an
eligible person shall be eligible to receive from Medicare,
notwithstanding any election by the eligible person not to enroll in
Medicare.
EXH 10(o) - Page 58
<PAGE>
8.03 Mandatory Other Plan Coverage
-----------------------------
Any Covered Person who is or becomes eligible for coverage under an
Other Plan excluding Medicare shall notify the Plan Administrator of
such eligibility. The Plan Administrator may require such Covered
Person (including his Covered Dependents) to become a participant in
such Other Plan. If such a requirement is imposed, the following rules
shall apply:
(a) If such covered Person refuses to participate in such Other
Plan, Benefits under This Plan shall be limited to amounts
that otherwise would be payable under This Plan in excess of
those amounts that such a Covered Person would be eligible to
receive from such Other Plan if he had participated as of the
earliest permissible participation eligibility date
thereunder.
(b) If such a Covered Person agrees to participate in such Other
Plan, the Employer shall reimburse such Covered Person for one
hundred percent (100%) of the amount by which such Covered
Person's annual cost of coverage under such Other Plan for him
and his Covered Dependents exceeds an annual amount of five
hundred dollars ($500.00). The Employer shall pay such
reimbursement amount monthly upon receipt of documentation by
such Covered Person of his cost of coverage.
8.04 Intent
------
It is the intent of this Article VII that the aggregate amount of
Benefits paid under This Plan and all Other Plans with respect to a
Covered Person for any Covered Expense shall equal 100% of the amount
of Benefits that would have been payable under This Plan for such
Covered Expense if there had been no coverage of such Covered Person
under such Other Plan.
8.05 Dispute
-------
If there is any dispute or other disagreement between This Plan and any
Other Plan as to which plan is responsible for the payment of any
Covered Expense, or portion thereof, with respect to any Covered
Person, (a) This Plan shall pay the full amount of the such Covered
Expense, or portion thereof, that would have been payable under This
Plan if there had been no coverage of such Covered Person under such
Other Plan, and (b) This Plan shall be subrogated to such Covered
Person's rights under such Other Plan to be reimbursed for the full
amount to which such Covered Person may be entitled under such Other
Plan.
EXH 10(o) - Page 59
<PAGE>
ARTICLE IX
----------
CLAIMS PROCEDURE AND PAYMENT OF BENEFITS
----------------------------------------
9.01 Application for Benefits.
-------------------------
(a) To entitle himself to the payment of any Benefits for which he
is eligible under this Plan, a Covered Person shall comply
with such administrative rules and procedures as the Claims
Administrator may prescribe with reference to the completion
and filing of a claim application form or forms and shall
furnish such other pertinent information as the Claims
Administrator may require, together with documentary evidence
in support of his claim. A Covered Person shall also provide
the Claims Administrator with written authorization to obtain
information from his Physician pertaining to the diagnosis and
related matters.
(b) The Plan Administrator, at its own expense, shall have the
right and opportunity to require the examination of the person
whose Illness is the basis of a claim hereunder, when and so
often as it may reasonably be required during pendency of such
claim.
(c) No Benefits shall be paid for claims which are received more
than two (2) years after the expense is Incurred.
9.02 Claims Procedure
----------------
(a) The Claims Administrator shall, within a reasonable time,
consider the claim and shall issue its determination thereon
in writing. If the claim is granted, the appropriate payment
shall be made.
(b) If the claim is wholly or partially denied, the Claims
Administrator shall provide the claimant with written notice
of the denial, setting forth, in a manner calculated to be
understood by the claimant,
(i) The specific reason or reasons for the denial,
(ii) Specific references to pertinent Plan provisions on
which the denial is based,
(iii) A description of any additional material or
information necessary for the claimant to perfect the
claim and an explanation of why the material or
information is necessary, and
(iv) An explanation of this Plan's claim review procedure.
EXH 10(o) - Page 60
<PAGE>
(c) Written notice of the disposition of a claim shall be
furnished to the claimant as soon as possible, but generally
within ninety (90) days after the claim is filed. However, if
special circumstances require an extension of time for
processing, written notice of the extension indicating the
special circumstances shall be furnished to the claimant
within ninety (90) days after the claim is filed, and written
notice of the disposition of the claim shall be furnished to
the claimant within one hundred eighty (180) days after the
claim is filed. If notice of denial or of the extension of the
time for processing of a claim is not given within ninety (90)
days (or within one hundred eighty (180) days if notice of an
extension has been given), such claim shall be deemed denied.
(d) Each claimant shall have the opportunity to appeal in writing
the Claims Administrator's denial of a claim to the Plan
Administrator for a full and fair review. The claimant or his
or her duly authorized representative
(i) May request a review by filing a written application
with the Plan Administrator,
(ii) May review pertinent documents, and
(iii) May submit issues and comments in writing.
(e) A claimant may request review of a denied claim within sixty
(60) days after receipt by the claimant of written notice of
denial of his or her claim.
(f) The Plan Administrator shall adopt written procedures pursuant
to which claims shall be reviewed and may, in its discretion,
adopt different written administrative procedures for
different claims without being bound by past actions. Any
administrative procedures adopted, however, shall be designed
to afford a claimant a full and fair review of his or her
claim.
(g) Reviews shall be conducted by the review official (which may
be a person, a committee or an arbitrator) designated by the
Plan Administrator. The decision by the review official upon
review of a claim shall be made not later than thirty (30)
days after the written request for review is received by the
Plan Administrator, unless special circumstances require an
extension of time for processing, in which case a decision
shall be rendered as soon as possible, but not later ninety
(90) days after receipt of the request for review.
(h) The decision on review shall be in writing and shall include
specific reasons for the decision written in a manner
calculated to be understood by the claimant, with specific
references to the pertinent Plan provisions on which the
decision is based.
(i) Any bill, similar receipt, or other comparable documentation
related to any
EXH 10(o) - Page 61
<PAGE>
claim for Benefits that is submitted by or on behalf of a
Covered Person shall be presumed correct and shall be
determinative unless and until the Plan Administrator shows
otherwise by a clear preponderance of the evidence. In the
event that it shall ultimately be determined, in accordance
with the terms of this Plan, that the Covered Person has been
overpaid because he is not entitled to the amount of claimed
Benefits, such Covered Person shall repay to the Employer the
amount of overpayment.
(j) To the extent permitted by law, and subject to Section 9.05,
the decision of the Claims Administrator (if no review is
properly requested) or the decision of the review official, as
the case may be, shall be final and binding on all parties. No
legal action for Benefits under this Plan shall be brought
unless and until the claimant has exhausted his remedies under
this Section 9.02.
9.03 Payment of Benefits
-------------------
(a) Benefits shall be payable in either of two methods: (1) one
hundred percent (100%) of the Benefits payable shall be paid
to the Covered Person whose Illness or Injury is the basis of
his claim under this Plan, if charges made by Providers of
health services for which this Plan's Benefits are payable
have been paid in full by or on behalf of the Covered Person;
or (2) when an application for Benefits does not include
satisfactory proof that charges made by Providers of health
services for which this Plan's Benefits are payable have been
paid in full by or on behalf of the Covered Person, all or a
portion of any Benefits provided by this Plan may, at the Plan
Administrator's option, be paid directly to the provider of
health services.
(b) The Covered Person shall be solely responsible for the payment
of any expenses not covered by this Plan.
9.04 Delay in Payment
----------------
If the Plan fails to reimburse any Covered Person, or pay a Provider
directly, for the full amount of any Eligible Expense to the extent
reimbursable in accordance with Plan terms, within a forty-five (45)
day period beginning on the date that the Eligible Expense is submitted
for reimbursement, the Employer shall pay interest to the Covered
Person, calculated at the Prime Lending Rate as published in the Wall
Street Journal (or, if such rate is no longer published in the Wall
Street Journal, in such other comparable publication) on the first
business day after last day of such period, from the first day of such
period until the date that payment is actually made. This Section 9.04
is in addition to, and not in lieu of, any other rights to which a
Covered Person may have under the Plan or applicable law.
9.05 Attorneys Fees
--------------
Within ten (10) days after notice by any Covered Person that the Plan
Administrator,
EXH 10(o) - Page 62
<PAGE>
Claims Administrator, or any other person to whom any fiduciary or
administrative responsibility with respect to this Plan is allocated or
delegated has failed to comply with any provision of this Plan, the
Plan Administrator shall remedy or cure such breach. Any determination
by such a Covered Person that a breach has occurred and that adequate
remedy has not occurred shall be presumed correct and shall govern
unless the Plan Administrator shows by a clear preponderance of the
evidence that it was not a good faith reasonable determination. The
Employer shall advance to such Covered Person all reasonable attorneys'
fees and necessary costs and disbursement incurred by or on behalf of
such Covered Person in connection with or as a result of a dispute
under this Plan, subject to the obligation of the Covered Person to
repay the Employer for such advance in the event that such Covered
Person does not ultimately prevail in such dispute.
9.06 Right of Recovery
-----------------
Where Benefit payments have been paid by this Plan for Eligible
Expenses in an amount in excess of the amount of payment necessary at
that time to satisfy the intent of this Plan's provisions, this Plan or
its designated agent shall have the right to recover these payments, to
the extent of the excess from the individual to whom, or for whom, or
with respect to whom these payments have been made or from any other
person who is legally or equitably accountable to this Plan with
respect to the excess.
9.07 Assignment
----------
No Benefit payable under this Plan shall be subject in any way to
alienation, sale, transfer, assignment, pledge, attachment,
garnishment, execution, or encumbrance of any kind, and any attempt to
accomplish the same shall be void.
No Covered Person entitled to Benefits under this Plan shall have power
to transfer, assign, mortgage or otherwise encumber any interest he may
have herein, or to anticipate in any manner, by assignment, agreement
(including, but not limited to, any agreement to pay alimony, separate
maintenance, or child support, whether or not said agreement is
pursuant to, or embodied in, a court order), or otherwise, the payment
of any Benefit or any other sum herein provided for him to be made; nor
shall the interest of any Covered Person under this Plan or in any
Benefit provided hereunder be subject to attachment, garnishment,
seizure, or sequestration for the payment of any debts, judgments,
decrees, or obligations of any kind owed by such person (including, but
not limited to, any obligation to pay alimony, separate maintenance, or
child support for which said person shall be obligated by virtue of a
court order or decree of any court of any jurisdiction or by virtue of
any agreement whether or not embodied in such a court order or decree),
or be transferable by operation of law in event of bankruptcy,
insolvency or otherwise, except as provided by section 609 of ERISA or
as otherwise required by federal law.
9.08 Facility of Payment
-------------------
EXH 10(o) - Page 63
<PAGE>
If any person entitled to payments hereunder shall be determined to be
a minor or under other legal disability or otherwise incapacitated in
any way so as to be unable to manage his financial affairs, the Plan
Administrator, in its discretion, may direct that all or any portion of
the Benefit payments be made (a) to such person, (b) to such person's
legal guardian or conservator, or (c) to such person's Spouse or to any
other person. The decision of the Plan Administrator shall, in each
case, be final and binding upon all persons. Any payment made pursuant
to the power herein conferred shall operate as a complete discharge of
the obligations of this Plan under this Plan in respect hereof.
9.09 Responsibility for Payment
--------------------------
This Plan shall be liable for the payment of Benefits in accordance
with the terms of this Plan. The Benefits under this Plan shall be
payable solely by this Plan and each Covered Person who shall claim the
right to any payment under this Plan shall be entitled to look only to
this Plan for such payment.
EXH 10(o) - Page 64
<PAGE>
ARTICLE X
---------
ADMINISTRATION
--------------
10.01 Appointment of the Claims Administrator
---------------------------------------
The Plan Administrator shall appoint in writing a Claims Administrator
who shall handle claims under this Plan in accordance with its terms.
The person, persons or entity serving as Claims Administrator shall
serve at the pleasure of the Plan Administrator.
10.02 Power of the Claims Administrator
---------------------------------
The Claims Administrator shall have such powers as are necessary for
the proper handling of claims for Benefits under this Plan, including,
but not limited to, the following:
(a) To prescribe procedures to be followed by Covered Persons in
filing applications for Benefits and for furnishing evidence
necessary to establish their rights to Benefits under this
Plan,
(b) To find facts, interpret this Plan, and make reasonable
determinations as to the rights of any individual applying for
or receiving Benefits under this Plan and to notify any such
Covered Person dissatisfied with any such finding or
determination of his right to appeal such finding or
determination,
(c) To make Benefit payments directly to Covered Persons and/or
their assignees entitled to Benefits under this Plan,
(d) To obtain from the Plan Administrator or Employer, Covered
Persons and others, such information as shall be necessary for
the proper administration of claims under this Plan,
(e) To keep records regarding the administration of claims under
this Plan,
(f) To furnish to the Plan Administrator upon request such data
with respect to the administration of this Plan as is
reasonable and appropriate, and
(g) To collect, evaluate, analyze and prepare statistical and
other data with respect to the administration of this Plan.
No determination of the Claims Administrator in one case shall
necessarily create a basis for retroactive adjustment in any other
case.
10.03 Powers of Plan Administrator
----------------------------
The Plan Administrator shall have the power to find facts and interpret
this Plan and
EXH 10(o) - Page 65
<PAGE>
make reasonable determinations as to the rights of any individuals
appealing a denial of Benefits by the Claims Administrator.
10.04 Effect of Fiduciary Action
--------------------------
This Plan shall be interpreted by the Plan Administrator and all Plan
fiduciaries in accordance with the terms of this Plan and their
intended meanings. The Plan Administrator and all Plan fiduciaries
shall have the discretion to make any findings of fact needed in the
administration of this Plan, and shall have the discretion to interpret
or construe ambiguous, unclear, or implied (but omitted) terms in a
fashion they deem to be consistent with the intent of this Plan and in
their reasonable judgment. The validity of any such finding of fact,
interpretation, construction or decision may be given de novo review if
challenged in court, by arbitration, or in any other forum, but shall
be upheld unless clearly unreasonable, arbitrary, or capricious. To the
extent the Plan Administrator or any Plan fiduciary has been granted
discretionary authority under this Plan, the Plan Administrator's or
Plan fiduciary's prior exercise of such authority shall not obligate it
to exercise its authority in a like fashion thereafter. All actions
taken and all determinations made in good faith by the Plan
Administrator or by Plan fiduciaries shall be final and binding upon
all persons claiming any interest in or under this Plan.
All findings by the Plan Administrator or by Plan fiduciaries shall be
made in writing and, upon the request of any Covered Person, all such
written findings shall be delivered to any requesting Covered Person
within 30 calendar days of such request.
10.05 Proof of Coverage
-----------------
The Plan Administrator shall provide each Covered Person with written
proof of coverage hereunder (e.g., an enrollment card), and shall
maintain a toll-free telephone number through which each Covered Person
or Provider shall be able to verify coverage hereunder twenty-four (24)
hours each day, seven days a week .
EXH 10(o) - Page 66
<PAGE>
ARTICLE XI
----------
DURATION AND AMENDMENT OF THIS PLAN
-----------------------------------
11.01 Permanence of this Plan
-----------------------
This Plan shall continue in full force and effect until the death of
the last Covered Person. The Employer has established this Plan with
the bona fide intention and expectation that it shall be maintained
indefinitely.
11.02 Right to Amend or Terminate
---------------------------
(a) Covered Retirees and Eligible Retirees Listed in Part I
Appendix A. Neither the Employer nor the Plan Administrator or
any other person shall have any right or power at any time to
eliminate or reduce, in any respect, any benefit, right,
program, service, or other feature of this Plan with respect
to any person who is listed in Parts I.A., I.B., or I.C. of
Appendix A as of the Effective Date, or their Dependents,
except if and only to the extent required by applicable law to
maintain the status of the Plan as a group health plan under
the Internal Revenue Code. Similarly, the Employer shall have
no right or power at any time to terminate this Plan, in whole
or in part, with respect to any such person.
(b) Eligible Retirees Not Listed in Part I of Appendix A. The
Employer shall have the right to modify, alter, or amend, in
whole or in part, any or all of the provisions of this Plan at
any time only for the purpose of adding persons who are not
listed in Parts I.A., I.B., or I.C. of Appendix A as of the
Effective Date to this Plan. The Employer also shall have the
right at any time to terminate this Plan in part with respect
to any such person not currently listed on Appendix A as of
the Effective Date, or in whole if all persons who are listed
in Parts I.A., I.B., or I.C. of Appendix A as of the Effective
Date and their Dependents are no longer living.
(c) Interpretation. No interpretation shall have any retroactive
or prospective effect so as to deprive any Covered Person of
any Benefit then payable. Notwithstanding the foregoing, any
interpretation of this Plan may be made retroactive to the
extent necessary for this Plan to comply with any applicable
law.
(d) No Agency. No agent of the Employer is authorized to change
the form or content of this Plan in any manner or degree.
EXH 10(o) - Page 67
<PAGE>
ARTICLE XII
-----------
GENERAL PROVISIONS
------------------
12.01 Gender and Number
-----------------
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in
another gender in all cases where they would so apply, and whenever any
words are used herein in the singular or plural form, they shall be
construed as though they were also used in the other form in all cases
where they would so apply.
12.02 Action by the Plan Administrator
--------------------------------
Whenever the Plan Administrator under the terms of this Plan is
permitted or required to do or perform any act or matter or thing, it
shall be done and performed by an officer of the Employer duly
authorized by its Board of Directors.
12.03 Named Fiduciaries and Allocation of Responsibility
--------------------------------------------------
The Named Fiduciary shall have only those powers, duties,
responsibilities, and obligations as are specifically given under this
Plan. In general, the Employer, acting through its Board of Directors,
shall have the sole responsibility for funding the Benefits and other
expenses of this Plan and shall have the sole authority to appoint and
remove the Claims Administrator; except for any trusts established by
the Employer to fund this Plan, to formulate this Plan's funding policy
and method; to handle request for claims review. The Claims
Administrator shall have the responsibility for the proper handling of
the initial claims for Benefits under this Plan, which responsibility
is specifically described in this Plan. The Plan Administrator shall
have the responsibility for the administration of this Plan. Each
fiduciary may rely upon any direction, information, or action of
another fiduciary as being proper under this Plan, and is not required
to inquire into propriety of any such direction, information, or
action. It is intended that each fiduciary shall be responsible for the
proper exercise of its own powers, duties, responsibilities, and
obligations under this Plan, any person or group may serve in more than
one fiduciary capacity.
12.04 Duty to Provide Data
--------------------
(a) Every person with an interest in this Plan or claiming
Benefits under this Plan shall furnish the Plan Administrator
on a timely and accurate basis with such documents, evidence
or information as it considers necessary or desirable for the
purpose of administering this Plan. The Plan Administrator may
postpone payment of Benefits (without accrual of interest)
until such information and such documents have been furnished.
Such data includes, but is not limited to, annual
certifications of family and employment status, and address
changes.
EXH 10(o) - Page 68
<PAGE>
(b) Every person claiming a Benefit under this Plan shall give
written notice to the Plan Administrator of his or her post
office address and each change of post office address. Any
communication, statement or notice addressed to such a person
at his or her latest post office address as filed with the
Plan Administrator shall, on deposit in the United State mail
with postage prepaid, be as binding upon such person for all
purposes of this Plan as if it had been received, whether
actually received or not. If a person fails to give notice of
his or her correct address, the Plan Administrator, the
Employer and Plan fiduciaries shall not be obligated to search
for, or to ascertain, his whereabouts.
(c) If Benefits which are otherwise currently payable cannot be
paid to the person entitled to the Benefits because the
individual has failed to comply with this Section or other
Plan provisions relating to claims for Benefits, any unpaid
past due amount shall be forfeited on the individual's death
or presumed death.
12.05 Indemnification
---------------
To the extent permitted by law, the Employer shall indemnify and hold
harmless the Claims Administrator, Plan Administrator, Board of
Directors of the Employer, and any employee or officer of the Employer
to whom any fiduciary or administrative responsibility with respect to
this Plan is allocated or delegated, from and against any and all
liabilities, costs (including legal fees), and expenses Incurred by any
such person as a result of any act, or omission to act, in connection
with the performance of his duties, responsibilities, and obligations
under this Plan and under ERISA, other than such liabilities, costs,
and expenses as may result from the negligence or willful misconduct of
such person. The indemnification of the Claims Administrator shall not
be greater than any indemnification in the contract with the Claims
Administrator. The foregoing right of indemnification shall be in
addition to any other right to which any such person may be entitled as
a matter of law or otherwise. The Plan Administrator may obtain, pay
for and keep current a policy or policies of insurance, insuring the
Claims Administrator, Plan Administrator, Board of Directors of the
Employer, or any other employee or officer of the Employer who has any
fiduciary responsibility with respect to this Plan from and against any
and all liabilities, costs and expenses Incurred by any such person as
a result of any act, or omission to act, in connection with the
performance of his duties, responsibilities, and obligations under this
Plan and under ERISA.
12.06 Funding
-------
(a) The Benefits and expenses of this Plan shall be provided from
the general assets of the Employer or such other funding and
payment vehicles as may be selected by the Employer. Eligible
Retirees and Covered Persons shall not be required to
contribute to the cost of this Plan; provided, however, that a
Covered Dependent may be required to contribute as provided in
EXH 10(o) - Page 69
<PAGE>
subsection 7.02(d) if he elects continuation coverage under
Article VII, but shall not be required to contribute if
coverage continues under subsection 2.07(b).
(b) All Benefits shall be paid in such a manner that no amount
with respect thereto is includible in the gross income of the
Covered Person.
12.07 Headings
--------
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of
the provisions hereof.
12.08 Governing Instrument
--------------------
This instrument is the "Plan Document" as defined under ERISA. This
Plan shall be administered and Plan Benefits shall be payable solely in
accordance with the provisions of this instrument. In the event of any
conflict between the provisions of this instrument and any other
document, booklet, summary plan description or other materials relating
to this Plan, the provisions of this instrument shall be controlling.
12.09 Uniformity
----------
All provisions of this Plan shall be interpreted and applied in a
uniform and nondiscriminatory manner.
12.10 Severability
------------
If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not affect the remaining parts, which
shall be enforced as if the illegal or invalid provision had not been
included in this Plan.
12.11 Plan Does Not Provide Services
------------------------------
The Plan Administrator shall not be responsible for the furnishing of
Hospital or medical care nor for the quality of such care. The
providers furnishing care to a Covered Person do so as independent
contractors with respect to the Covered Person. The Plan Administrator
shall not be liable for any claim or demand on account of damages in
any manner connected with the provision of health care services.
Nothing in this Plan shall be construed as restricting or interfering
in any way with a Covered Person's right to freely choose to receive
services from a Hospital, Physician, or other Provider.
12.12 Governing Law
-------------
This Plan shall be interpreted, administered and enforced in accordance
with the Internal Revenue Code and ERISA, and the rights of
participants, beneficiaries, and all other persons shall be determined
in accordance with these laws. To the extent
EXH 10(o) - Page 70
<PAGE>
that state law is applicable, however, the laws of the State of
California shall apply.
12.13 Limitations on Rights of Participants
-------------------------------------
This Plan is a voluntary undertaking on the part of the Employer and it
is not to be construed as a contract of employment between the Employer
and any person; nor is it a consideration for, an inducement to, or a
condition of, the employment of any person. Nothing contained in this
Plan gives, or is intended to give, any person the right to be retained
in the service of his Employer, or to interfere with the right of his
Employer to discharge or otherwise terminate the employment of any
person at any time. Participation in this Plan gives no right or claim
to any Benefits hereunder beyond those expressly provided herein.
EXH 10(o) - Page 71
<PAGE>
IN WITNESS WHEREOF, Bergen Brunswig Corporation has caused this instrument to be
authorized, approved, and executed by its Secretary on this 23rd day of August,
1997.
BERGEN BRUNSWIG CORPORATION
By: /s/ Milan A Sawdei
-----------------------------
Milan A Sawdei,
Secretary
ATTEST:
(Corporate Seal) By: /s/ Carol Scherman
-----------------------------
Carol Scherman,
Executive Vice President,
Human Resources and
Plan Administrator
By: /s/ Robert E Martini
-------------------------------
Robert E Martini,
Chairman of the Board
EXH 10(o) - Page 72
<TABLE>
EXHIBIT 11
BERGEN BRUNSWIG CORPORATION
---------------------------
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1997
(in thousands except for share and per share amounts)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Years Ended
September 30,
---------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DATA AS TO EARNINGS
Net earnings applicable to common and
common equivalent shares $81,679 $73,533 $63,942
======================================
DATA AS TO NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Weighted average number of Class A shares outstanding 50,206,625 49,974,063 49,485,838
Common equivalent shares assuming issuance of shares
represented by outstanding employees' stock options:
Additional shares assumed to be issued 2,328,118 2,092,007 1,642,799
Reduction of such additional shares assuming
proceeds invested in treasury stock (at average
market prices during each year) (1,820,426) (1,742,230) (1,377,444)
--------------------------------------
Average number of common and common
equivalent shares outstanding 50,714,317 50,323,840 49,751,193
======================================
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE OUTSTANDING:
Net earnings $ 1.61 $ 1.46 $ 1.29
======================================
</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, 1997:
<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>
EXH 21 - Page 1
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 31, 1997, appearing in this
Annual Report on Form 10-K of Bergen Brunswig Corporation for the fiscal year
ended September 30, 1997.
/s/ Deloitte & Touche LLP
Costa Mesa, California
December 19, 1997
EXH 23 - Page 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF BERGEN BRUNSWIG
CORPORATION FOR THE TWELVE MONTHS PERIOD ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 54,494
<SECURITIES> 2,786
<RECEIVABLES> 801,364
<ALLOWANCES> 29,022
<INVENTORY> 1,309,359
<CURRENT-ASSETS> 2,155,475
<PP&E> 270,306
<DEPRECIATION> 131,944
<TOTAL-ASSETS> 2,707,123
<CURRENT-LIABILITIES> 1,624,306
<BONDS> 437,956
<COMMON> 83,805
0
0
<OTHER-SE> 561,056
<TOTAL-LIABILITY-AND-EQUITY> 2,707,123
<SALES> 0
<TOTAL-REVENUES> 11,660,496
<CGS> 11,006,065
<TOTAL-COSTS> 11,491,264
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,793
<INCOME-PRETAX> 138,439
<INCOME-TAX> 56,760
<INCOME-CONTINUING> 81,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81,679
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
Exhibit 99 (a)
BERGEN BRUNSWIG CORPORATION
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "safe harbor" for "forward-looking statements" (as defined in the
Act). The Form 10-K to which this exhibit is attached, the Company' s Annual
Report to Shareowners, any Form 10-Q or any Form 8-K of the Company, or any
other written or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current view (as of the
date such forward-looking statement is made) with respect to future events,
prospects, projections or financial performance. These forward-looking
statements are subject to certain uncertainties and other factors that could
cause actual results to differ materially from those made, implied or projected
in such statements. These uncertainties and other factors include, but are not
limited to, uncertainties relating to general economic conditions; the loss of
one or more key customer or supplier relationships, including pharmaceutical or
medical-surgical manufacturers for which alternative supplies may not be
available; the malfunction or failure of the Company's information systems; the
costs and difficulties related to the integration of recently acquired
businesses; changes to the presentation of financial results and position
resulting from adoption of new accounting principles or upon the advice of the
Company's independent auditors, or the staff of the Securities and Exchange
Commission; changes in the distribution or outsourcing pattern for
pharmaceutical or medical-surgical products, including any increase in direct
distribution or decrease in contract packaging by pharmaceutical manufacturers;
changes in, or failure to comply with, government regulations; the costs and
other effects of legal and administrative proceedings; competitive factors in
the Company's healthcare service businesses, including pricing pressures; the
continued financial viability and success of the Company's customers and
suppliers; technological developments and products offered by competitors;
failure to retain or continue to attract senior management or key personnel;
risks associated with international operations; including fluctuations in
currency exchange ratios; successful challenges to the validity of the Company's
patents, copyrights and/or trademarks; difficulties or delays in the
development, production and marketing of new products and services; strikes or
other labor disruptions; labor and employee benefit costs; pharmaceutical and
medical-surgical manufacturers' pricing policies and overall drug and
medical-surgical supply price inflation; changes in hospital buying groups or
hospital buying practices; and other factors referenced in the Form 10-K to
which this exhibit is attached or other filings or written or oral statements
made by or on behalf of the Company. The words "believe", "expect",
"anticipate", "project", and similar expressions identify "forward-looking
statements", which speak only as of the date the statement was made. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
EXH 99(a) - Page 1
EXHIBIT 99(b)
SPLIT DOLLAR INSURANCE PLAN
Robert E. Martini
-----------------
THIS PLAN is adopted by agreement between the Company and the owner:
DEFINITIONS:
- ------------
A. "Company": Bergen Brunswig Corporation, a New Jersey
corporation, of Orange, California.
B. "Insured": Robert E. Martini
C. "Insurer": Any life insurance company issuing a Policy.
D. "Insured's Death Benefit":The amount listed as at any given
time on Exhibit A.
E. "Plan Year": The 12 months commencing February 1, 1985, and
each consecutive 12 months thereafter.
F. "Policy": The policy or policies of insurance on the life of
the Insured issued by the Insurer and listed on Exhibit A
annexed hereto together with any supplementary contracts
issued by the Insurer in conjunction therewith.
G. "Policy Interest": The Company's Policy Interest shall be the
entire value of the Policy less:
(a) The amount of any loans taken by the Company to pay
premiums or otherwise and secured by the Policy; and
(b) The amount of the Insured's Death Benefit.
H. "Owner": The insured or, if the Insured assigns his interest
under this Plan, the assignee.
RECITALS:
- ---------
A. The Company is owner of the Policy, and the Insured is a
valuable employee of the Company. The Company wishes to
continue this employment relationship and, as an inducement
thereto, is willing to assist the Owner in the payment of
premiums on the Policy as an additional form of compensation
to the Insured as its employee.
EXH 99(b) - Page 1
<PAGE>
Because the welfare of the Company depends on the morale and
well-being of its employees generally including the Insured
specifically, the Plan is to be administered in the Insured's
best interest, but this shall not give Robert E. Martini, in
any capacity other than as the Owner, any right to enforce the
Plan.
B. To carry out the purposes of this Split Dollar Plan, the Owner
shall be owner of a portion of the Policy death benefit equal
to the Insured's Death Benefit. The existence of the Owner's
interest in the Policy shall be evidenced by filing with each
Insurer an assignment in substantially the form annexed hereto
as Exhibit B.
C. This Plan is intended to qualify as a life insurance employee
benefit plan as described in Revenue Ruling 64-328.
THEREFORE, for value received, it is agreed:
1. Premium Payments
(a) Each annual premium on the policy shall be paid as follows:
(1) The Owner with respect to any premium payable on a
Policy after it is subject to this Plan, may pay a
portion of the premium equal to the current term rate
for the Insured's age multiplied by the current
Insured's Death Benefit. Here, the "current term
rate" shall mean the lesser of the applicable
Insurer's annual term insurance rate or the rates
specified in Revenue Rulings 64-328 and 66-110.
(2) The Company shall pay all premium amounts not paid by
the Owner, and may do so either in cash or Policy
loans or other loans.
(b) The Owner's premium share shall be remitted to the Company for
transmission to the Insurer, and the Company's premium share
shall be remitted to the Insurer, both before expiration of
the grace period.
(c) Dividends on the Policy shall be applied as elected by the
Company.
(d) The Policy may, at the Company's discretion, provide for the
waiver of premium on disability. If it does so provide, the
cost thereof shall be borne by the Company.
2. Rights of Parties
(a) The Owner shall be owner of that portion of the Policy's death
benefit equal to the Insured's Death Benefit on Exhibit A,
with the right to designate beneficiaries for the portion.
EXH 99(b) - Page 2
<PAGE>
(b) The Company shall be owner of all other rights of "owner"
under the terms of the Policy including, but not limited to,
the right to designate beneficiaries, select settlement and
dividend options, borrow on the security of the Policy and to
surrender the Policy; provided that the right to surrender
shall not be exercised unless this Plan has terminated.
(c) The rights of each party may be exercised without the other
party's consent.
3. Assignments - The Owner and the Company shall have the right to assign
any part or all of their respective interests in the Policy and this
Plan to any person, entity or trust by execution of a written
assignment delivered to the other party.
4. Termination of Plan
(a) This Plan shall terminate on the first to occur of the
following:
(1) Completion of the 23rd Plan Year, January 31, 2008.
(2) The first anniversary of the date this Plan is
signed, if the Company has delivered notice of
termination to the Owner on or before that
anniversary.
(b) On any termination of this Plan, the Policy shall revert to
the exclusive ownership of the Company.
5. The Insurer - The Insurer shall be bound only by the provisions of and
endorsements on the Policy, and any payments made or actions taken by
it in accordance therewith shall fully discharge it from all claims,
suits and demands of all person whatsoever. It shall in no way be bound
by or be deemed to have notice of the provisions of this Plan.
6. Special Provision - The following provisions are part of this Plan and
are intended to meet the requirements of the Employee Retirement Income
Security Act of 1974:
(a) The named fiduciary: The secretary of the Company.
(b) The funding policy under this Plan is that all premiums on the
Policy be remitted to the Insurer when due.
(c) Direct payment by the Insurer is the basis of payment of
benefits under this Plan, with those benefits in turn being
based on the payment of premiums as provided in the Plan.
(d) For claims procedure purposes, the "Claims Manager" shall be
Gerald Gutman.
EXH 99(b) - Page 3
<PAGE>
(1) If for any reason a claim for benefits under this
Plan is denied by the Company, the Claims Manager
shall deliver to the claimant a written explanation
setting forth the specific reasons for the denial,
pertinent references to the Plan section on which the
denial is based, such other data as may be pertinent
and information on the procedures to be followed by
the claimant in obtaining a review of his claim, all
written in a manner calculated to be understood by
the claimant. For this purpose:
(A) The claimant's claim shall be deemed filed
when presented orally or in writing to the
Claims Manager.
(B) The Claims Manager's explanation shall be in
writing delivered to the claimant within 90
days of the date the claim is filed.
(2) The claimant shall have 60 days following his receipt
of the denial of the claim to file with the Claims
Manager a written request for review of the denial.
For such review, the claimant or his representative
may submit pertinent documents and written issues and
comments.
(3) The Claims Manager shall decide the issue on review
and furnish the claimant with a copy within 60 days
of receipt of the claimant's request for review of
his claim. The decision on review shall be in writing
and shall include specific reasons for the decision
written in a manner calculated to be understood by
the claimant, as well as specific references to the
pertinent Plan provisions on which the decision is
based.
If a copy of the decision is not so furnished to the
claimant within such 60 days, the claim shall be
deemed denied on review.
IN WITNESS WHEREOF the parties have signed this Plan this 22nd day of
November, 1985.
COMPANY
BERGEN BRUNSWIG CORPORATION
By: /s/ George E. Reinhardt, Jr.
--------------------------------
Title: Vice President, Finance
OWNER
/s/ Robert E. Martini
--------------------------------
Robert E. Martini
EXH 99(b) - Page 4
