SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
(Amendment No. 1, amending Items 10-13)
[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
[ ] 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
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization Identification No.)
4000 Metropolitan Drive, Orange, California 92868-3598
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 385-4000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Class A Common Stock
Par Value $1.50 per share New York Stock Exchange
6-7/8% Exchangeable Subordinated
Debentures due July 15, 2011 New York Stock Exchange
$150,000,000 7-3/8% Senior Notes due 2003 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
7% Convertible Subordinated Debentures due March 1, 2006 - Durr-Fillauer
Medical, Inc.
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. [ ]
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: None.
<PAGE>
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT
The Restated Certificate of Incorporation of Bergen Brunswig Corporation
(the "Company" or "Bergen") provides that the Board of Directors shall consist
of not more than 15 directors nor less than 9 directors, the exact number within
such limits to be fixed by the Board as provided in the By-Laws, which currently
provide for 12 directors. The directors are divided into three approximately
equivalent-sized classes, each class to serve for a period of three years on a
staggered term basis.
Information is set forth below concerning the individuals currently serving
as directors of the Company; except where otherwise indicated, such individuals
have held the occupational positions noted for at least the past five years.
Directors Whose Term Expires at the 1998 Annual Meeting
(Class I Directors)
Robert E. Martini Director since 1962.
Age 65.
Chairman of the Board (since 1992) of, and consultant (since June 1997) to,
the Company and formerly its Chief Executive Officer (1990 to January 1997) and
President (1981 to 1992). Mr. Martini is a director of Mossimo, Inc. Mr. Martini
is Chairman of the Company's Executive, Financing and Nominating Committees. Mr.
Martini is the father of Brent R. Martini, an Executive Vice President of the
Company.
John Calasibetta Director since 1962.
Age 92.
Senior Vice President of the Company.
Neil F. Dimick Director since 1995.
Age 48.
Executive Vice President and Chief Financial Officer (since 1992) of the
Company and formerly its Vice President, Finance (1991 to 1992). President of
Alternate Site Distributors, Inc., a subsidiary of the Company, since September
1996.
Donald R. Roden Director since 1995.
Age 51.
Chief Executive Officer (since January 1997) and President (since 1995) of
the Company and formerly the Chief Operating Officer (1995 to 1997) of the
Company. Prior to joining the Company in 1995, Mr. Roden was a healthcare
industry consultant (1993 to 1995) and Chief Executive, North America (1989 to
1993) of Reed Elsevier Medical (publishing). Mr. Roden is a member of the
Company's Executive, Financing and Nominating Committees.
<PAGE>
Directors Whose Term Expires at the 1999 Annual Meeting
(Class II Directors)
Jose E. Blanco, Sr. Director since 1992.
Age 71.
Chairman of the Board (since 1987) of J.M. Blanco, Inc. (wholesale
pharmaceutical distribution). Mr. Blanco is Vice Chairman of the Company's
Investment/ Retirement Plan Committee, and a member of the Audit Committee.
Charles J. Lee Director since 1972.
Age 72.
Former Managing Director, Smith Barney Inc. (investment banking) (1989 to
1996). Mr. Lee is Vice Chairman of the Company's Audit Committee and a member of
the Executive, Financing and Nominating Committees.
George R. Liddle Director since 1969.
Age 70.
Investment Adviser. Former Vice President, Kidder, Peabody & Co., Inc.
(stockbrokers), retired. Mr. Liddle is Chairman of the Company's
Investment/Retirement Plan Committee.
George E. Reinhardt, Jr. Director since 1985.
Age 68.
Formerly a consultant (1992 to 1995) to, and Senior Vice President (1991),
Chief Financial Officer (1976 to 1991) and Vice President, Finance (1981 to
1991) of, the Company. Mr. Reinhardt is a member of the Company's Executive,
Financing, Investment/Retirement Plan and Nomination Committees.
Directors Whose Term Expires at the 2000 Annual Meeting
(Class III Directors)
Rodney H. Brady Director since 1973.
Age 64.
President and Chief Executive Officer, Deseret Management Corporation
(diversified corporate holding company) since April 1996. Former President and
Chief Executive Officer, Bonneville International Corporation (broadcast
communications) (1985-1996). Mr. Brady is a director of Deseret Mutual Insurance
Company and First Security Corporation. Mr. Brady is a member of the Company's
Executive, Financing, Compensation/Stock Option and Nominating Committees.
Charles C. Edwards, M.D. Director since 1985.
Age 74.
Former President of California Healthcare Institute (nonprofit association)
(1993 to 1994). Former President and Chief Executive Officer, ScrippsHealth and
Scripps Institutions of Medicine and Science (health care) (1991 to 1993). Dr.
Edwards is a director of Molecular Biosystems, Inc.,
<PAGE>
Northern Trust Bank and IDEC Pharmaceutical Company. Dr. Edwards is Vice
Chairman of the Company's Compensation/Stock Option Committee and a member of
the Investment/Retirement Plan Committee.
James R. Mellor Director since 1979.
Age 67.
Former Chairman of the Board and Chief Executive Officer (1993-1997) and
former President and Chief Operating Officer (1991 to 1993) of General Dynamics
Corporation (diversified defense and aerospace). Mr. Mellor is a director of
General Dynamics Corporation, Aeromovel USA, Inc. and Computer Sciences
Corporation. Mr. Mellor is Chairman of the Company's Compensation/Stock Option
Committee.
Francis G. Rodgers Director since 1982.
Age 71.
Author and Lecturer. Former Vice President, Marketing, IBM (information
processing systems), retired. Mr. Rodgers is a director of Dialogic Corporation,
Mercantile Stores, Inc. and Milliken and Company. Mr. Rodgers is Chairman of the
Company's Audit Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act (the "Exchange Act")
requires the Company's directors, officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file reports
of ownership and changes in ownership of such securities with the Securities and
Exchange Commission and the New York Stock Exchange. Directors, officers and
greater than 10 percent beneficial owners are required by applicable regulations
to furnish the Company with copies of all Section 16(a) forms they file. The
Company is not aware of any beneficial owner of more than ten percent of its
registered Class A Common Stock for purposes of Section 16(a).
Based solely upon a review of the copies of the forms furnished to the
Company, the Company believes that during the 1997 fiscal year all filing
requirements applicable to its directors and officers were satisfied on a timely
basis, except that William Elliott (an executive officer of the Company) failed
to file on a timely basis a report disclosing the grant of stock options and
Brent R. Martini (an executive officer of the Company) failed to file on a
timely basis a report disclosing his beneficial ownership of shares held by a
related trust. These failures to file on a timely basis were inadvertent; the
required filings were made promptly after the failures to file on a timely basis
were noted.
ITEM 11. EXECUTIVE COMPENSATION
Director Compensation
Employee directors of the Company are not paid any fees, as
such, for service on the Board or on any Board Committee. Each non-employee
director received for fiscal 1997 an annual fee of $30,000 for Board service and
an attendance fee of $2,000 for each Board meeting attended in person and $600
for each such meeting participated in by telephone. For Committee meetings,
non-employee directors (other than the Chairmen of the Committees) received
$1,000 for each Committee meeting attended in person and $600 for each such
meeting participated in by telephone. The Chairman of each Committee who is a
non-employee director received a fee of $1,500 for each Committee meeting
attended in person and $900 for each telephone meeting of the Committee in which
he participated. A non-employee director who serves less than six months in a
fiscal year receives 50% of the annual fee, and if he serves six months or more
in a fiscal year, receives 100% of the prevailing annual fee. Under
<PAGE>
the Company's Deferred Compensation Plan, a non-employee director of the Company
may elect to defer up to 100% of these fees or any fixed amount not less than
$2,500 of such fees.
The Company has a nonqualified Capital Accumulation Plan for its
non-employee directors. The maximum benefit available to these directors is
$150,000, payable upon retirement in 120 equal consecutive monthly installments.
If the non-employee director has served for less than ten years, his benefit
upon retirement will be based upon 10% of the maximum benefit for each year of
Board service with a minimum of three years of service required for inclusion in
the plan. If a director dies before the normal retirement age of 70 and his
termination from Board service, his beneficiary will receive an amount equal to
100% of the amount the Company would have paid the director had normal
retirement age been attained.
Each non-employee director is automatically granted an option covering
3,750 shares of Common Stock under the Company's Amended and Restated 1989 Stock
Incentive Plan upon his initial election or appointment to the Board, and is
thereafter entitled to an annual grant of 2,500 shares ("Annual Grant") only if
the Company attains a ten percent or greater return on common equity in the
preceding fiscal year. During fiscal 1997, each non-employee director received
an Annual Grant of 2,500 shares.
Compensation of Executive Officers
The following table sets forth information for the fiscal years ended
September 30, 1997, 1996, and 1995, respectively, with respect to certain
compensation awarded or paid to the Company's former Chief Executive Officer,
its current Chief Executive Officer and its other four most highly compensated
executive officers during fiscal 1997 (collectively, the "Named Executive
Officers"):
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Other Securities
Annual Underlying All Other
Compen- Options/ Compen-
Name and Salary Bonus sation SARs sation(1)
Principal Position Year ($) ($) ($) (#) ($)
- ------------------ ---- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Robert E.Martini 1997(2) 412,500 200,000 270,592(3) 66,250 2,286,370(4)
Chairman 1996 560,000 502,600 108,561(3) 31,250 33,005(4)
1995 553,269 428,000 168,229(3) 19,688 36,774(4)
Donald R. Roden 1997(5) 500,000 465,700 67,694(6) 31,250 1,154
President and Chief 1996(5) 400,000 359,000 63,601(6) 118,751 --
Executive Officer 1995(5) -- -- -- -- --
Neil F. Dimick 1997 325,000 309,900 47,290(7) -- 4,750
Exec. Vice President, 1996 275,000 269,300 132,631(7) 50,001 4,571
Chief Financial Officer 1995 256,731 200,000 35,049(7) 6,563 4,500
William J. Elliott 1997 265,000 185,400 51,786(9) 11,000 3,363
Exec. Vice President 1996(8) -- -- -- 31,250 --
1995(8) -- -- -- -- --
Charles J. Carpenter 1997 225,000 200,000 15,605(10) -- 4,750
Exec. Vice President 1996 169,167 117,800 7,200 31,250 2,591
Chief Procurement 1995 150,000 30,000 5,400 18,750 4,500
Officer
Brent R. Martini 1997 225,000 186,100 22,863(11) -- 2,841
Exec. Vice President 1996 171,667 114,600 7,200 32,263 4,571
1995 152,917 76,800 5,800 18,750 4,317
</TABLE>
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(1) Reflects Company contributions under the Company's Pre-Tax Investment
Retirement Account Employer Contributions Plus Plan, unless otherwise indicated
in the following notes.
(2) Includes compensation for Mr. Martini through January 1997 as the Company's
C.E.O. and thereafter as an employee and then a consultant to the Company.
<PAGE>
(3) Includes $92,120, $80,780 and $81,900 of imputed compensation reflecting the
difference between the average market interest rate for the Company and the
interest free loan to Robert E. Martini during fiscal years 1995, 1996 and 1997,
respectively, described under Item 13. For fiscal 1997, also includes $129,167
of annuity payments made to Mr. Martini under the Bergen Capital Accumulation
Plan (the "CAP").
(4) Includes $31,774, $28,418 and $5,197 of allocated premiums paid by the
Company to a split dollar life insurance plan for Robert E. Martini during
fiscal years 1995, 1996 and 1997, respectively. For fiscal 1997, amounts also
include a lump sum payment of $1,059,610 made to Mr. Martini under the Company's
Amended and Restated Supplemental Executive Retirement Plan in connection with
the termination of Mr. Martini's participation in that plan and payments of
$1,216,813 made to Mr. Martini reflecting amounts that Mr. Martini would have
received under the CAP had he retired at age 62.
(5) Mr. Roden's employment with the Company commenced during fiscal year 1996;
accordingly, no amounts are reportable for fiscal year 1995. Mr. Roden's
compensation for fiscal 1997 includes compensation for services as C.O.O.
(through January 1997) and C.E.O. (thereafter).
(6) Includes $16,362 and $31,992 of imputed compensation reflecting the
difference between the average market interest rate for the Company and the
interest free loan to Mr. Roden for fiscal years 1996 and 1997, described under
Item 13.
(7) Includes $18,506, $16,288 and $18,281 of imputed compensation reflecting the
difference between the average market interest rate for the Company and the
interest free loan to Mr. Dimick for fiscal years 1995, 1996 and 1997,
respectively, described under Item 13.
(8) Mr. Elliott's employment with the Company commenced during fiscal year 1997;
accordingly, no compensation amounts (other than options granted immediately
prior to the commencement of active employment) are reportable for fiscal years
1996 and 1995.
(9) Includes $17,763 of imputed compensation reflecting the difference between
the average market interest rate for the Company and the interest free loan to
Mr. Elliott for fiscal year 1997, described under Item 13.
(10) Includes $4,113 of imputed compensation reflecting the difference between
the average market interest rate for the Company and the interest free loan to
Mr. Carpenter for fiscal year 1997 described under Item 13.
(11) Includes $6,169 of imputed compensation reflecting the difference between
the average market interest rate for the Company and the interest free loan to
Brent R. Martini for fiscal year 1997 described under Item 13.
Employment and Severance Arrangements
In April 1994, the Board authorized the Company to enter into written
employment agreements (the "Employment Agreements") and severance agreements
(the "Severance Agreements") with certain executive officers of the Company,
including Robert E. Martini and Mr. Dimick. Similar agreements were entered into
in October 1995 with Mr. Roden, in September 1996 with Mr. Carpenter and Brent
R. Martini, and in October 1996 with Mr. Elliott.
In connection with the Agreement and Plan of Merger, dated as of August 23,
1997, by and among the Company, Cardinal Health, Inc. ("Cardinal") and a wholly
owned subsidiary of Cardinal (the "Merger Agreement"), the Company has entered
into supplemental agreements (the "Supplemental Agreements") which terminate the
Severance Agreements and amend the Employment Agreements. Except as described
below, the Supplemental Agreements will be void in the event that the Merger
Agreement is terminated for any reason. The Company is currently proposing to
modify the Supplemental Agreements. The Company has described separately below
(i) the Employment Agreements and Severance Agreements as they existed prior to
the execution of the Supplemental Agreements and as they will exist in the event
that the Merger Agreement is terminated and (ii) the
<PAGE>
Supplemental Agreements, as executed and as proposed to be modified. For
information regarding arrangements made with Robert E. Martini after he ceased
to serve as the Company's Chief Executive Officer, see "Consulting Agreement".
Employment and Severance Agreements
Each of the Employment Agreements is for a term of three years. The
Employment Agreements automatically extend on a monthly basis so that the
outstanding term is always three years, subject to the option of either party to
terminate the automatic extension provision at any time. Pursuant to each
Employment Agreement, each Named Executive Officer is to receive his then
effective annual base compensation, a bonus that shall be equal to that paid to
other executive officers at the same level, but, regardless of what may be paid
to other executives, in any event no less than fifty percent of the average of
the Named Executive Officer's previous three annual bonuses, and other benefits
and allowances. In the event of death or disability, each Named Executive
Officer or their beneficiary, as the case may be, will receive the compensation
provided for under his Employment Agreement for the term of the Agreement,
calculated as if notice to terminate had been given 30 days prior to such event.
Pursuant to the Employment Agreements, the Company will indemnify each
Named Executive Officer with respect to any actions, claims or settlements
arising out of the performance of his duties, including the payment of all
reasonable attorneys' fees and necessary costs and expenses. In addition, the
Company will pay as incurred all reasonable attorneys' fees and necessary costs
and disbursements incurred by the Named Executive Officer in connection with any
dispute under the Employment Agreement, whether or not the Named Executive
Officer prevails.
Pursuant to the Employment Agreements, a Named Executive Officer's
employment may be terminated without a claim for damages arising against the
Company (1) upon notice by the Named Executive Officer, except for "good
reason"; (2) by mutual agreement between the Named Executive Officer and the
Company; or (3) by the Company for cause. If the Employment Agreement is
terminated by the Company for any other reason, or if the Named Executive
Officer terminates the Employment Agreement for good reason (including, but not
limited to, an adverse change in such officer's position from his position at
the time he entered into the Employment Agreement), he will be entitled to
damages equal to the present value equivalent of the compensation he would have
been paid under the Employment Agreement for the next three years, less his
earned income from other employment, if any.
The Severance Agreements with the Named Executive Officers, which provide
for benefits additional to the Employment Agreements, require payment of cash
and other benefits in the event of a voluntary or involuntary termination of
employment within three years following a Change in Control (as hereinafter
defined) of the Company. Payment under the Severance Agreements would consist of
2.99 times the average annual W-2 compensation paid by the Company for the most
recent five taxable years of the Named Executive Officer ending before the date
of the Change in Control if, following a Change in Control, such Named Executive
Officer is terminated without cause, such Named Executive Officer terminates for
any reason within 180 days after a Change in Control, or if such Named Executive
Officer terminates for good reason (including, but not limited to, an adverse
change in such officer's position from his position at the time of the Change in
Control). The Severance Agreements continue until three years and one day after
a Change in Control or until the Named Executive Officer receives the severance
payment under the Severance Agreements.
Under the Severance Agreements, a Change in Control with respect to the
Company is deemed to occur 90 days prior to (i) the acquisition by any person,
entity or group, within the meaning of Section 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") (excluding for this purpose (A) the
Company or (B) any employee benefit plan of the Company which acquires
beneficial ownership of voting securities of the Company) of 50% or more of
beneficial ownership (within Rule 13(d)-3 promulgated under the Exchange Act) of
the combined voting power of the Company's then outstanding securities; (ii) any
rolling period of two consecutive years in which individuals who at the
<PAGE>
beginning of such period constitute the Board of Directors of the Company (and
any new director whose election or nomination for election was approved by a
vote of at least 2/3 of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors; provided, however, no director shall be
considered to have been so approved if such director initially assumed office as
a result of either an actual or threatened "election contest" (as described in
Rule 14(a)-11 under the Exchange Act) or other actual or threatened solicitation
of proxies or consent by or on behalf of any person other than the Board of
Directors, including as a result of any agreement intended to avoid or settle
any such election contest or proxy contest; (iii) the approval by the Company's
shareowners of a dissolution or liquidation of the Company; (iv) the sale (or
similar transaction) or substantially all of the Company's operating assets; or
(v) a merger or consolidation, or a transaction having a similar effect, where
(A) the Company is not the survivor, (B) the majority of the Common Stock of the
Company is no longer held by the holders of Common Stock of the Company
immediately prior to the transaction, or (C) the Company's Common Stock is
converted into cash, securities or other property.
If any payment or acceleration of any benefits extended from the Company to
any Named Executive Officer upon a Change in Control would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended ("Code"), then the Named Executive Officer shall be entitled to receive
an additional "gross up bonus" in an amount necessary to provide the Named
Executive Officer with sufficient after income tax funds to fully pay all such
excise taxes on both the payment and the gross up bonus.
Pursuant to the Severance Agreement, the Company will pay as incurred all
reasonable attorneys' fees and necessary costs and disbursements incurred by the
Named Executive Officer in connection with any dispute under the Severance
Agreement, whether or not the Named Executive Officer prevails.
Except as provided in this paragraph, in the event that the Merger
Agreement is terminated for any reason, the Employment Agreements and Severance
Agreements described above will remain in effect and the Supplemental Agreements
described below will be void. However, the Forgiveness Provision of the
Supplemental Agreements described below will remain in effect regardless of
whether the Merger Agreement is terminated or the Merger is consummated.
Supplemental Agreements
In connection with the merger provided for in the Merger Agreement (the
"Merger"), Cardinal, Bergen and several senior management employees of Bergen
(including each of the Named Executive Officers other than Robert E. Martini)
(such Named Executive Officers, the "Supplemental Named Executive Officers")
entered into Supplemental Agreements to amend and supplement their Employment
Agreements and to terminate their Severance Agreements. The amendments to the
Supplemental Named Executive Officers' Employment Agreements and other changes
to the terms and conditions of employment effected by the Supplemental
Agreements are in some respects more favorable to the Supplemental Named
Executive Officers than existed under the Employment Agreements before such
amendments, and in some respects more favorable to Bergen and Cardinal. The
Supplemental Agreements will be void and terminate if the Merger is not
consummated, except as provided below.
Each of the Employment Agreements executed by the Supplemental Named
Executive Officers, as amended by the Supplemental Agreements executed by the
Supplemental Named Executive Officers, have a term that will expire on the third
anniversary of the Merger, if not terminated earlier. Each of such Employment
Agreements, as amended by such Supplemental Agreements, provides (i) for the
base salaries of the Supplemental Named Executive Officer in effect at the
effective time of the Merger (the "Effective Time") to be reviewed annually and
increased as necessary to be substantially comparable to the base salaries of
other executives of the same level of importance, responsibility and performance
within Cardinal ("Peer Company Executives"); (ii) for the equivalent of three
annual bonuses for the Supplemental Named Executive Officer over the remaining
term of the
<PAGE>
Employment Agreement, with each such bonus to be in such amount as may be
determined by Bergen in its discretion, in accordance with the criteria used by
Cardinal for Peer Company Executives; provided, however, that in no event will
such annual bonus for any year be less than 50% of the average of the two most
recent annual bonuses received by the Supplemental Named Executive Officer
before the Effective Time, and the Supplemental Named Executive Officer's target
bonus will in each case be at least equal to the Supplemental Named Executive
Officer's target bonus in effect at the Effective Time; and (iii) that following
the Effective Time, the Supplemental Named Executive Officers will be eligible
to be considered for grants of stock options pursuant to the Cardinal Equity
Incentive Plan on the standard terms and conditions applicable to option grants
thereunder to similarly situated Cardinal executives.
Pursuant to each such Employment Agreement, as amended by each such
Supplemental Agreement, if the Supplemental Named Executive Officer is
terminated by Bergen without "Cause" (as defined), or if the Supplemental Named
Executive Officer terminates his own employment for "Good Reason" (as defined),
Bergen will provide the Supplemental Named Executive Officer with the following
compensation and benefits: (i) base salary until the end of the term of the
agreement (the "Continuation Period"); (ii) annual bonus amounts during the
Continuation Period; (iii) car allowance or use of a company car and group
health benefits during the Continuation Period; and (iv) arrangements relating
to vesting and exercisability with respect to employee stock options held by the
Supplemental Named Executive Officer that remain outstanding but have not vested
and not become exercisable as of the date of such termination. In addition, such
Employment Agreements, as amended by such Supplemental Agreements, provide for
vesting and/or participation in Bergen's Retired Officers Medical Plan (the "ROM
Plan") in connection with certain terminations of employment.
All of the Supplemental Named Executive Officers have agreed in the
Supplemental Agreements that in lieu of receiving benefits under the Bergen
Capital Accumulation Plan (the "CAP") and Bergen Amended and Restated
Supplemental Executive Retirement Plan (the "SERP"), their benefits that were
fully vested under the SERP and the CAP as of the date that is ninety days
before the date of the Effective Time (the "Conversion Date"), without giving
effect to the provisions of Section 5.1(b) of the SERP, as in effect before the
amendment thereto dated as of August 23, 1997 (the "Vested Benefits"), and the
additional benefit that would have been accrued and vested for them as of the
Conversion Date pursuant to said Section 5.1(b) before such amendment (the
"Additional Vested Benefit"), will be credited to a deferral account for their
benefit, which account will earn interest at the rate of 6.25% per annum,
compounded quarterly, from the Conversion Date. Upon termination of the
Supplemental Named Executive Officer's employment, these amounts will be paid in
a single lump sum or in annual installments over a specified period of years, at
the option of the Supplemental Named Executive Officer. Notwithstanding the
foregoing, if the Supplemental Named Executive Officer's employment with Bergen
is terminated before the expiration date of such Employment Agreement, as
amended by such Supplemental Agreement, by Bergen for Cause or by the
Supplemental Named Executive Officer without Good Reason, then the Additional
Vested Benefit will not be paid as described above, but will instead be paid
without interest (i) to the Supplemental Named Executive Officer on the
Supplemental Named Executive Officer's sixty-fifth birthday or (ii) if the
Supplemental Named Executive Officer dies before the Supplemental Named
Executive Officer's sixty-fifth birthday, to the Supplemental Named Executive
Officer's designated beneficiary (or, if the Supplemental Named Executive
Officer had not designated a beneficiary, to the Supplemental Named Executive
Officer's estate) on the sixty-fifth anniversary of the Supplemental Named
Executive Officer's birth.
Pursuant to such Supplemental Agreements, effective as of the Effective
Time, Cardinal has agreed to provide certain guarantees with respect to the
obligations of Bergen under such Employment Agreements, as amended by such
Supplemental Agreements.
In addition to any other payment required pursuant to such Supplemental
Agreement or such Employment Agreement as amended by such Supplemental
Agreement, Bergen has agreed to pay each Supplemental Named Executive Officer an
amount necessary for the Supplemental Named Executive Officer, on an after-tax
basis, to pay any excise tax (including any payments made for the purpose of
grossing up for excise tax purposes) for which the Supplemental Named Executive
Officer is liable under Section 4999 of the Code.
<PAGE>
The Severance Agreements with the Supplemental Named Executive Officers,
which would have provided for certain severance benefits in addition to the
benefits under the Employment Agreements, in the event of a voluntary or
involuntary termination of employment within three years following a "Change of
Control" of Bergen (as defined in the Severance Agreements, which would include
the Merger), and for the excise tax reimbursement described above, have been
terminated under such Supplemental Agreements.
Such Supplemental Agreements also amended certain promissory notes (the
"Notes") evidencing loans to each of the Supplemental Named Executive Officers
under certain executive loan programs of the Company (See Item 13) such that, as
amended, the Merger will not be deemed to constitute a "Change of Control" (as
defined in such Notes) and the provisions of such Notes providing for
forgiveness and cancellation of such Notes upon a Change in Control shall be
null and void and of no further force or effect. Each such Supplemental
Agreements also contains a provision (the "Forgiveness Provision") that states
that if either (A) the Supplemental Named Executive Officer remains in
continuous employment with Bergen until the expiration date of the Employment
Agreement between the Supplemental Named Executive Officer and Bergen, as
amended by such Supplemental Named Executive Officer's Supplemental Agreement,
or (B) the Supplemental Named Executive Officer's employment with Bergen is
terminated before such expiration date by Bergen without Cause or by the
Supplemental Named Executive Officer with Good Reason or as a result of the
Supplemental Named Executive Officer's death or disability, then upon such
expiration date or the date of such termination, as applicable, the entire
unpaid principal balance of the loan will be automatically forgiven and canceled
with no interest due. The amendments to the Notes providing for such forgiveness
will remain in effect even if the Merger is terminated. All other provisions of
such Supplemental Agreements, including the provision canceling the Severance
Agreements, will be void if the Merger is terminated.
Pursuant to such Supplemental Agreements, each of the Supplemental Named
Executive Officers has agreed that he or she will not, without the prior written
consent of the Board of Directors of Bergen, engage in or become associated with
a "Competitive Activity" (as defined below) during the "Noncompetition Period"
(as defined below). Each Supplemental Named Executive Officer has agreed that if
the Supplemental Named Executive Officer commits any material breach of this
noncompetition covenant and fails to cure such breach within 15 days after
receiving notice from Bergen thereof, the Supplemental Named Executive Officer
will forfeit all of his or her rights to any unpaid pay or benefits pursuant to
the Supplemental Named Executive Officer's Employment Agreement, as amended by
the Supplemental Named Executive Officer's Supplemental Agreement, other than
the Supplemental Named Executive Officer's rights with respect to his benefits
under the CAP or the SERP as described above. The "Noncompetition Period" means
the period during which the Supplemental Named Executive Officer is employed by
Bergen or any of its affiliates, plus any Continuation Period. A "Competitive
Activity" means any business or other endeavor, in any county of any state of
the United States, of a kind being conducted by Bergen 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
Supplemental Named Executive Officer performed services in such business or
endeavor during the Supplemental Named Executive Officer's employment by Bergen;
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 Supplemental Named
Executive Officer begins participating in such business or endeavor. The
Supplemental Named Executive Officer shall be considered to have become
"associated with a Competitive Activity" if the Supplemental Named Executive
Officer 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 Supplemental Named Executive Officer 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 security is listed on a national securities exchange or
regularly traded in an over-the counter market.
<PAGE>
In connection with the execution of the Merger Agreement, each of the SERP,
the CAP and the Master Trust Agreement for Bergen Brunswig Corporation Executive
Deferral Plans dated as of December 27, 1994, between Bergen and Wachovia Bank
of North Carolina, N.A., has been amended effective as of August 23, 1997. Such
amendments provide that, except as set forth in the immediately following
sentence, (i) the consummation of the Merger will 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" will be null
and void and of no further effect, as if deleted. Notwithstanding the foregoing,
the consummation of the Merger will 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, each of
the Supplemental Named Executive Officers and certain other senior executive
officers of the Company), 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, each of the Supplemental Named Executive Officers
and certain other senior executive officers of the Company). As noted above,
under the Supplemental Agreements, the Supplemental Named Executive Officers are
no longer entitled to any of the benefits, rights or entitlements under the CAP
or the SERP effective as of the Conversion Date.
Consulting Agreement
In connection with the Merger Agreement, Cardinal, Bergen and Robert E.
Martini propose to enter into an amendment to an existing consulting agreement
(the "Consulting Agreement") pursuant to which Mr. Martini will continue to
serve the Company as a consultant, and will be subject to a covenant not to
compete and other covenants, in exchange for a fee of $300,000 per year and
certain continued benefits. The Consulting Agreement currently provides for a
three-year evergreen term; as amended and effective as of the date of the
Merger, the term of the Consulting Agreement will be fixed and will expire on
the third anniversary of the Merger. From and after the date of the Merger, the
benefits to be provided to Mr. Martini will consist of continued participation
in the Company's ROM Plan, and the consulting fee will continue to be $300,000
per year. In addition, in exchange for an amended noncompetition covenant
applicable through the ninth anniversary of the date of the Merger, the
promissory notes evidencing loans to Mr. Martini by the Company that are
outstanding as of the Effective Time will be amended, so that: (a) the Merger
will not be deemed to constitute a Change in Control and the provisions of such
notes providing for forgiveness and cancellation of such notes upon a Change in
Control shall be null and void and of no further force or effect; and (b) the
notes are instead automatically forgiven and canceled, as of the ninth
anniversary of the Effective Time or Mr. Martini's death, whichever occurs
first, with no interest due, and the Company will pay Mr. Martini or his estate
an additional amount to make him or his estate whole for the resulting income
taxes, in each case contingent upon Mr. Martini's compliance with the
noncompetition covenants. The Severance Agreement with Mr. Martini, which would
have provided for certain severance benefits following a Change in Control of
Bergen, will be terminated. However, Bergen's obligation under the Severance
Agreement to pay any excise tax (including excise tax on any payments made for
the purpose of grossing up for excise tax purposes) for which Mr. Martini is
liable under Section 4999 of the Code, will be continued under the amended
Consulting Agreement.
Retired Officers' Medical Plan
In addition to the above arrangements, the Company has an unfunded,
non-qualified ROM Plan available to certain officers of the Company and their
spouses, including executive officers now retired from the Company. The ROM Plan
provides for payment of the covered individual's medical, dental, vision and
prescription expenses at a level commensurate with the Company's medical benefit
plans that are in effect upon the executive officer's retirement (as defined in
the ROM Plan documents), but limited to the difference between benefits received
or potentially available from other insurance sources (including governmental
programs), if any, and the total expense actually incurred.
<PAGE>
The duration of the benefit is for the lifetime of the executive officer and the
executive officer's spouse if such officer is married. Based upon the various
eligibility criteria under the ROM Plan, three of the Named Executive Officers
(Robert E. Martini, Charles J. Carpenter and Brent R. Martini) presently are
eligible to receive benefits upon their retirement from the Company. Under the
terms of the Supplemental Agreements, the other Named Executive Officers will
become fully vested under the ROM Plan under certain circumstances, as described
above under "Employment and Severance Arrangements--Supplemental Agreements".
Stock Option Grants and Exercises
The following tables provide information with respect to stock options
granted to and exercised by the Named Executive Officers during Fiscal 1997 and
with respect to stock options held by the Named Executive Officers:
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR(1)
Individual
Grants
% of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise Grant Date
Granted Fiscal Year Price Expiration Present
Name (#)(2) 1997 ($/Share) Date Value($)
---- ------ ---- --------- ---- --------
Robert E. Martini 62,500(3) 13.38 26.00 11/07/06 602,500(4)
3,750 .80 29.15 05/22/07 41,850(4)
Donald R. Roden 31,250 6.69 26.00 11/07/06 301,250(5)
Neil F. Dimick 0 N/A N/A N/A N/A
William J. Elliott 11,000 2.35 42.00 08/24/07 189,970(6)
Charles J. Carpenter 0 N/A N/A N/A N/A
Brent R. Martini 0 N/A N/A N/A N/A
- --------------------------
(1) All option information with respect to stock options granted prior to June
2, 1997 has been adjusted retroactively to reflect a 25% stock divided effected
as of that date.
(2) All options were granted as nonstatutory stock options to purchase shares of
the Company's Class A Common Stock (the "Common Stock") at 100% of fair market
value on the date of grant, unless otherwise noted, and vest 25% one year after
the date of grant and then 25% per year thereafter.
(3) Of this amount, options covering 15,204 shares were granted as incentive
stock options.
(4) The grant date present value is based on a Black-Scholes model and assumes a
risk-free rate of return of 6.50%, an option term of ten years, a dividend yield
of 2.11% and a stock volatility of .300.
(5) The grant date present value is based on a Black-Scholes model and assumes a
risk-free rate of return of 6.50%, an option term of ten years, a dividend yield
of 2.17% and a stock volatility of .296.
(6) The grant date present value is based on a Black-Scholes model and assumes a
risk-free rate of return of 6.50%, an option term of ten years, a dividend yield
of 1.97% and a stock volatility of .332.
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Shares Number of Securities
Acquired on Underlying Unexercised Value of Unexercised
Value Options/SARs at in-the-Money Options/
Exercise Realized FY End (#) SARs at FY End($) (1)
---------- ---------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- --- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Martini 20,606 300,545 123,538 103,473 3,053,738 1,819,825
Donald R. Roden 0 - 29,686 120,315 627,045 2,330,343
Neil F. Dimick 0 - 44,652 48,663 1,101,281 1,011,122
William J. Elliott 0 - 7,812 34,438 135,694 407,118
Charles J. Carpenter 29,347 523,903 12,499 37,501 233,277 699,908
Brent R. Martini 0 0 30,580 44,526 714,911 894,817
</TABLE>
- --------------------------
(1) Pursuant to the rules promulgated by the Securities and Exchange Commission,
these values were calculated by determining the difference between the value of
the Company's stock at fiscal year end ($40.37 on September 30, 1997) and the
exercise price of the options.
Pension Table
The following table shows the estimated annual benefits payable under the
Company's non-qualified Supplemental Executive Retirement Plan ("SERP") at age
62 to persons in specified compensation and years of service classifications,
based on a joint and 75 percent survivor annuity form of retirement income. The
table also includes benefits payable under the Company's Capital Accumulation
Plan ("CAP") for executives who participate in the CAP, which was the SERP's
predecessor plan and which was frozen to all employee participants on October 7,
1987.
<TABLE>
<CAPTION>
Average Annual
Compensation Estimated Annual Retirement Benefits For
During Highest Three of Final Years of Credited Service Shown Below
Five Years Before Retirement 10 20 30 40
---------------------------- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 70,600 $124,000 $124,000 $124,000
400,000 173,100 279,800 279,800 279,800
600,000 275,700 435,700 435,700 435,700
800,000 378,200 591,500 591,500 591,500
1,000,000 484,100 750,800 750,800 750,800
</TABLE>
As of September 30, 1997, full years of actual credited service in these
plans are: Robert E. Martini - 41 years; Mr. Roden - 2 years; Mr. Dimick - 6
years; Mr. Elliott - 1 year; Mr. Carpenter - 17 years; and Brent R. Martini - 10
years.
Compensation for a particular year as used for the calculation of
retirement benefits under the SERP includes base salary received during the year
(including salary deferred under a salary reduction arrangement) and excludes
all other compensation. Benefits are reduced by the following amounts: (1) the
participant's primary insurance amount payable under the Social Security Act at
retirement age; (2) the participant's benefit under the CAP; (3) an annuitized
amount based upon an assumed level of participation in the Company's Pre-Tax
Investment Retirement Account Employer
<PAGE>
Contributions Plus Plan; and (4) any amounts owed by a participant to the
Company (except to the extent that such amount owed is under a program that
expressly provides that there will not be an offset), but only if payment of
benefits commences before a change in control (as defined by the SERP). Benefits
are payable under the SERP in the form of a joint and survivor annuity,
consisting of monthly payments to each participant for his or her life and, upon
his or her death, a specified percentage of his or her monthly benefit to his or
her surviving beneficiary for the beneficiary's remaining life. In the
alternative, a participant may elect to receive his or her benefit in a lump
sum. The Company may direct that any vested benefit of a participant be paid in
a lump sum upon the death of the participant. A $5,000 funeral benefit is
available to a participant's estate, offset by any funeral benefit paid under
the CAP. Generally, the CAP benefit is a monthly retirement benefit paid over a
specified number of months that, at the election of a participant, may be paid
in a lump sum. Subject to the provisions of the Supplemental Agreements
described above, upon a change in control (as defined in the CAP and SERP),
certain senior executive officers' benefits payable under the SERP would be
accelerated such that their credited years of service in these plans would be as
if they had attained the normal retirement age. In addition, a master trust (the
assets of which are subject to the claims of the Company's general creditors)
for certain executive officer deferral plans has been established to preserve
these and certain other executive benefits.
Compensation Committee Interlocks and Insider Participation
The following persons served on the Company's Compensation/Stock Option
Committee during the fiscal year ended September 30, 1997: Francis G. Rodgers,
James R. Mellor, Charles C. Edwards, Jose E. Blanco, Sr. and Rodney H. Brady.
None of the persons named was an officer or employee of the Company or any of
its subsidiaries during the current fiscal year or during the fiscal year ended
September 30, 1997. With the exception of Mr. Brady, none of the persons named
is a former officer of the Company or any of its subsidiaries; Mr. Brady was an
officer of the Company and its subsidiaries more than ten years ago.
For information regarding indemnification arrangements applicable to the
Company's directors, see Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists the beneficial ownership of each person or group
who owns, to the Company's knowledge, more than five percent of its outstanding
Common Stock, based on the number of shares of Common Stock outstanding as of
January 20, 1998:
<TABLE>
<CAPTION>
Amount and
Name and Nature of Percent of
Address of Beneficial Outstanding
Beneficial Owner Title of Class Ownership Shares
<S> <C> <C> <C>
FMR Corp. (including subsidiaries) Common Stock 3,742,862(1) 7.4
82 Devonshire Street
Boston, Massachusetts 02109
Wellington Management Company, LLP Common Stock 2,792,647(2) 5.5
75 State Street
Boston, Massachusetts 02109
Robert E. Martini Common Stock 2,736,023(3)(4) 5.4
400 Metropolitan Drive
Orange, California 92868
<PAGE>
Cardinal Health, Inc. ("Cardinal")(5) Common Stock 10,028,163 19.9
5555 Glendon Court
Dublin, Ohio 43016
</TABLE>
- --------------------------
(1) This information was provided to the Company by FMR Corp. ("FMR") as of
February 14, 1997 in FMR's capacity as an investment advisor to various
registered investment companies and other funds and as a trustee or managing
agent for various private investment accounts. According to a Schedule 13G,
dated February 14, 1997, as filed with the Securities and Exchange Commission,
FMR had sole voting power over 675,575 shares and sole dispositive power over
3,742,862 shares.
(2) This information was provided to the Company by Wellington Management
Company, LLP ("WMC") as of January 24, 1997. WMC has advised the Company that as
of such date, WMC is an investment advisor registered with the Securities and
Exchange Commission under the Investment Advisors Act of 1940, as amended, and
that as of January 24, 1997, in its capacity as investment advisor, WMC may be
deemed to have beneficial ownership of the number of shares indicated, which
shares are owned by numerous investment advisory clients, none of which is known
to have such interest with respect to more than five percent of the Common
Stock. WMC has advised the Company that as of such date, WMC had shared voting
power over 2,213,885 shares and shared dispositive power over 2,792,647 shares.
(3) Except as indicated otherwise by the following note, shares shown
beneficially owned are those to which Mr. Martini may have sole voting and
dispositive power.
(4) Includes 155,827 shares which, as of January 20, 1998, may be acquired
within sixty days pursuant to the exercise of stock options and 37,406 shares
beneficially owned by Mr. Martini for which he does not have voting or
dispositive power.
(5) Pursuant to a stock option agreement, dated as of August 23, 1997, between
Cardinal and the Company (the "Stock Option Agreement") and in connection with
the execution of the Merger Agreement, the Company granted Cardinal an
irrevocable option (the "Option") to purchase from the Company, under certain
circumstances, up to 10,028,163 authorized and unissued shares of the Company's
Common Stock, at a price of $48.29 per share, payable in cash. In the event that
any additional shares of the Company's Common Stock are issued after the date of
the Stock Option Agreement (other than under certain circumstances set forth in
the Stock Option Agreement), the number of shares of the Company's Common Stock
that may be purchased under the Option will be adjusted so that, after such
issuance, it equals at least 19.9% of the number of shares of the Company's
Common Stock then issued and outstanding (without considering any shares subject
to or issued pursuant to the Option). Cardinal does not have the right to
acquire any shares of the Company's Common Stock under the Option unless certain
events specified in the Stock Option Agreement occur. As of January 20, 1998,
the Option was not exercisable.
The following table sets forth certain information regarding the ownership
of the Company's Common Stock, as of January 20, 1998, by: (a) each director;
(b) each of the Named Executive Officers ; and (c) all directors and executive
officers as a group:
<PAGE>
Aggregate Number
of Shares
Beneficially Percent of
Owned (1)(2) Outstanding Shares
Jose E. Blanco, Sr. 10,856 *
Rodney H. Brady(3) 56,739 *
John Calasibetta(4) 232,387 *
Charles J. Carpenter 27,187 *
Neil F. Dimick 64,109 *
Charles C. Edwards, M.D. 16,267 *
William J. Elliott 7,812 *
Charles J. Lee 20,608 *
George R. Liddle(5) 39,968 *
Brent R. Martini(6) 280,366 *
Robert E. Martini(7) 2,736,023 5.4
James R. Mellor 19,168 *
George E. Reinhardt, Jr. 109,838 *
Donald R. Roden 71,873 *
Francis G. Rodgers 19,008 *
All directors and executive officers as a group
including those persons named above
(20 persons) 3,882,901 7.7
- ----------------------------
* Denotes ownership of less than 1% of the outstanding shares of Common Stock.
(1) Information as to beneficial ownership by the directors and executive
officers named above has been furnished to the Company by such individuals.
Except as indicated otherwise in the footnotes, shares shown as beneficially
owned are those to which the individual has sole voting and dispositive power.
Such shares, where applicable, may be subject to community property laws and
related status under which a spouse may be entitled to share in the management
of the community property, which may include the right to vote or dispose of the
shares.
(2) Includes the number of shares that could be purchased by exercise of options
exercisable as of January 20, 1998 or within 60 days thereafter under the
Company's stock option or stock incentive plans, as follows: Jose E. Blanco,
Sr., 10,856 shares; Rodney H. Brady, 14,796 shares; Neil F. Dimick, 58,859
shares; Dr. Charles C. Edwards, 13,155 shares: Charles J. Lee, 14,796 shares;
George R. Liddle, 9,873 shares; Robert E. Martini, 155,827 shares; James R.
Mellor, 14,796 shares; George Reinhardt, Jr., 10,856 shares; Donald R. Roden,
59,373 shares; Francis G. Rodgers, 14,796 shares; William J. Elliott, 7,812
shares; Charles J. Carpenter, 17,187 shares; Brent R. Martini, 40,650 shares;
and all directors and executors as a group, including the persons identified
herein (20 persons), 600,498 shares.
(3) Includes 2,313 shares held by two sons living at home and 31,704 shares held
in trust by Mr. Brady as trustee for his own benefit.
(4) Held in trust by Mr. Calasibetta for his own benefit.
(5) Includes 29,218 shares held by Mr. Liddle as co-trustee for the benefit of
Mr. Liddle and his wife.
(6) Includes 227,204 shares held in trust for Brent R. Martini's benefit.
(7) Includes 37,406 shares beneficially owned by Robert E. Martini for which he
does not have voting and dispositive power.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
In April 1990, the Board approved an unfunded deferred compensation loan
program available to the executive officers of the Company (the "Executive Loan
Program") for the purpose of providing them with an incentive to remain with the
Company. Under this program, loans are available to all executive officers of
the Company, except those who are also members of the Board. Each outstanding
loan matures upon the officer's termination of employment unless extended by the
Board and is evidenced by a secured promissory note in the principal amount of
the loan which bears no interest. An executive officer may borrow up to 125% of
his or her annual salary in effect upon the date of any request. The value of
collateral securing the loan must equal at least 125% of the principal loan
amount. Although no interest is charged by the Company to the employee, the
employee is deemed by the Internal Revenue Service to have compensation in the
amount of interest calculated according to a formula prescribed by the Internal
Revenue Service. The employee is also deemed to have paid interest in a like
amount to the Company. The Company has the right at any time to amend, modify or
terminate this program but is limited in terminating or modifying outstanding
loans.
In addition to the above loans, the Board has approved making loans to
other key employees under terms similar to the Executive Loan Program. The
principal amount of these loans outstanding as of November 30, 1997 to Robert E.
Martini (an executive officer and director of the Company) was $1,400,000. The
loans to Donald R. Roden and Neil F. Dimick (executive officers and directors of
the Company) and to William J. Elliott, Charles J. Carpenter and Brent R.
Martini (executive officers of the Company) were made pursuant to the Executive
Loan Program and were in the amounts of $625,000, $406,250, $331,250, $281,250
and $281,250, respectively, as of November 30, 1997. In addition, Mr. Elliott
received a relocation loan in the amount of $100,000 during fiscal 1997. Such
amounts also represent the largest aggregate amount of each executive officer's
indebtedness during the Company's last fiscal year.
The Supplemental Agreements entered into by the Company with the
Supplemental Named Executive Officers and certain other executive officers amend
the promissory notes reflecting the above-mentioned executive loans such that if
either (A) the applicable executive officer remains in continuous employment
with the Company until the expiration date of the Employment Agreement between
such executive officer and the Company, as amended by such executive officer's
Supplemental Agreement, or (B) such executive officer's employment with the
Company is terminated before such expiration date by the Company without Cause
or by such executive officer with Good Reason or as a result of such executive
officer's death or disability, then upon such expiration date or the date of
such termination, as applicable, the entire unpaid principal balance of the loan
will be automatically forgiven and canceled with no interest due. See Item 11,
"Executive Compensation - Employment and Severance Arrangements". For
information regarding the forgiveness of loans made to Robert E. Martini, see
Item 11, "Executive Compensation - Consulting Agreement".
The Company entered into a life insurance plan for Robert E. Martini in
1985. Under this insurance plan, the Company pays the premiums on certain life
insurance policies which provide him (or his assignees) with a death benefit of
$1,400,000 and which may provide certain alternative benefits in the event of a
lifetime surrender of the policy. The Company expects to maintain this policy in
full force until Mr. Martini's seventy-fifth birthday, whether he is employed by
the Company or has retired.
Indemnification of Directors and Officers
Under Article VII of the Company's Restated Certificate of Incorporation,
every person who is or was a director, officer, employee or agent of the Company
and the legal representative of such a person is entitled to receive
indemnification from the Company to the fullest extent permitted by law. Under
New Jersey law, directors and officers may be indemnified in certain situations,
subject to the
<PAGE>
Company's having taken certain actions and the directors and officers having met
certain specified standards of conduct. In 1986, the Company entered into
individual agreements (collectively, the "Indemnity Agreement") to indemnify
each of its directors against liabilities and defense costs to the extent that
such directors would have been insured under the Company's director and officer
liability insurance policies which were in effect on December 31, 1984 (the
"1984 Policy"). The Company believes that the coverage addresses liabilities
arising under ERISA, securities and antitrust laws. The obligation of the
Company to indemnify a director under the Indemnity Agreement is limited to $30
million maximum from the Company if the director is otherwise entitled to
statutory indemnification. The Indemnity Agreement was ratified by the Company's
shareowners at the December 1986 Annual Meeting.
<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 Amendment No. 1 to its
Annual Report on Form 10-K for the year ended September 30, 1997 to be signed on
its behalf by the undersigned, thereunto duly authorized.
BERGEN BRUNSWIG CORPORATION
By/s/Donald R. Roden
January 27, 1998 Donald R. Roden
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Amendment No. 1 to the Registrant's Annual Report on Form 10-K for the year
ended September 30, 1997 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 and January 27, 1998
________________________ Director
Robert E. Martin
/s/ Donald R. Roden President and Chief January 27, 1998
________________________ Executive Officer
Donald R. Roden and Director (Principal
Executive Officer)
/s/Neil F. Dimick* Executive Vice President, January 27, 1998
________________________ Chief Financial Officer
Neil F. Dimick and Director
(Principal Financial Officer and
Principal Accounting Officer)
/s/John Calasibetta* Senior Vice President January 27, 1998
__________________________ and Director
John Calasibetta
/s/Jose E. Blanco, Sr.* Director January 27, 1998
__________________________
Jose E. Blanco
/s/Rodney H. Brady* Director January 27, 1998
Rodney H. Brady
/s/Charles C. Edwards, M.D.* Director January 27, 1998
__________________________
Charles c. Edwards
/s/Charles J. Lee* Director January 27, 1998
Charles J. Lee
/s/George R. Liddle* Director January 27, 1998
__________________________
George R. Liddle
/s/James R. Mellor* Director January 27, 1998
__________________________
James R. Mellor
/s/George E. Reinhardt, Jr.* Director January 27, 1998
_____________________________
George E. Reinhardt, Jr.
/s/Francis G. Rodgers* Director January 27, 1998
_____________________________
Francis G. Rodgers
*By: /s/Donald R. Roden
Donald R. Roden
Attorney-in-fact
