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 is described in Item 3 - Legal Proceedings and Exhibit 99(a) to this Annual Report.

Bergen Brunswig Corporation, a New Jersey corporation formed in 1956, and its subsidiaries (collectively, the "Company") is a diversified drug and health care distribution organization. The Company is one of the nation's largest wholesalers of pharmaceuticals, medical-surgical supplies, and specialty healthcare products to the managed care and retail pharmacy markets, and also distributes pharmaceuticals to long-term care and seriously ill patients. The Company provides product distribution, logistics, pharmacy management programs, consulting services, and Internet fulfillment services designed to reduce costs and improve patient outcomes across the entire healthcare spectrum.

The Company has acquired a number of businesses during the past three fiscal years. Following is a summary of such acquisitions, which are more fully described under the caption "Business Acquisitions" in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and in Note 5 of Notes to Consolidated Financial Statements appearing in Part II of this Annual Report:

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 called for the Company to become a wholly-owned subsidiary of Cardinal and for shareowners of the Company to receive Cardinal Common Shares in exchange for outstanding shares of the Company's Common Stock. On July 31, 1998, the United States District Court for the District of Columbia granted the request of the Federal Trade Commission for a preliminary injunction to halt the proposed merger. On August 7, 1998, the Company and Cardinal jointly terminated the merger agreement.

On October 14, 1999, the Company announced that it would not meet analysts' consensus earnings estimates for its fourth quarter and fiscal year ended September 30, 1999. On November 4, 1999, the Company reported fiscal 1999 earnings which were within the revised range. Lower than expected results at the Company's PharMerica, Inc., and Stadtlander Operating Company, LLC subsidiaries, along with a higher LIFO reserve provision for Bergen Brunswig Drug Company, were the principal causes of the earnings shortfall. In addition, the Company recorded an aggregate $53.7 million special provision for doubtful receivables at PharMerica and Stadtlander, primarily related to pre-acquisition receivables and the adverse effect of the Medicare Prospective Payment System on PharMerica's customer base. See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

The Company is organized based upon the products and services it provides to its customers. The Company's operating businesses has been aggregated into three reportable segments: Pharmaceutical Distribution, Pharmaceutical Services, and Other Businesses. See Note 13 of Notes to Consolidated Financial Statements appearing in Part II of this Annual Report.

The Pharmaceutical Distribution segment includes Bergen Brunswig Drug Company, ASD Specialty Healthcare and a small repackaging entity.

Bergen Brunswig Drug Company ("BBDC") is one of the largest national distributors of products sold or used by institutional (hospital) and retail pharmacies. BBDC distributes a full line of products, including pharmaceuticals, proprietary medicines, cosmetics, toiletries, personal health products, sundries, and home healthcare supplies and equipment from 33 locations in 24 states and Puerto Rico. These products are sold to 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, Puerto Rico and Guam.

BBDC has been an innovator in the development and utilization of computer-based retail order entry systems and of electronic data interchange ("EDI") systems including computer-to-computer ordering systems with suppliers. During fiscal 1999, substantially all of BBDC'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 BBDC are realized through increased productivity. BBDC is expanding its electronic interface with its suppliers and now electronically processes a substantial portion of its purchase orders, invoices and payments. BBDC has eight regional distribution centers ("RDCs") among its locations. RDCs help improve customer service levels because a wider product selection is more readily available. These facilities serviced 52% of BBDC's sales volume in fiscal 1999.

In June 1996, BBDC introduced its Generic Purchasing Program ("GPP"). Designed to reduce 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 BBDC's customers.

ASD Specialty Healthcare ("ASD") was established during fiscal 1994 to respond to the rapid growth in the alternate site business. ASD is a leading supplier of pharmaceuticals and other products and services to physicians in the oncology, plasma, nephrology, vaccine and other specialty healthcare markets.

BBDC and ASD have developed and implemented industry-leading Internet strategies. BBDC established a new website, myGNP.com, to strengthen branding opportunities and provide an Internet presence to its independent retail customers. BBDC operates an Internet fulfillment center for over-the-counter drugs, health and beauty aids, and other non-prescription products in Louisville, Kentucky. The fulfillment center currently has four e-commerce customers which are generating approximately 75,000 orders per month. ASD established the pharmaceutical industry's first Internet auction site, Pharmabid.com, through which physicians and other licensed healthcare providers can bid for biological plasma and other short-dated products at competitive market prices.

PharMerica is a leading provider of institutional pharmacy services to the elderly, chronically ill and disabled in long-term care and alternate site settings, including skilled nursing facilities, assisted living facilities, specialty hospitals, residential living communities and the home. PharMerica also provides mail order pharmacy services to workers' compensation patients and the catastrophically ill. Currently, PharMerica serves approximately 339,000 long-term care patients and 110,000 workers' compensation patients.

PharMerica's institutional pharmacy business involves the purchase of bulk quantities of prescription and nonprescription pharmaceuticals, principally from BBDC, and the distribution of those products to residents in long-term care facilities. Unlike hospitals, most long-term care facilities do not have onsite pharmacies to dispense prescription drugs, but depend instead on institutional pharmacies such as PharMerica to provide the necessary pharmacy products and services and to play an integral role in monitoring patient medication. PharMerica's pharmacies dispense pharmaceuticals in patient-specific packaging in accordance with physician orders. In addition, PharMerica provides infusion therapy services and Medicare Part B products, as well as formulary management and other pharmacy consulting services.

PharMerica's network of institutional pharmacies covers a geographic area that includes over 85% of the nation's long-term care beds. Each PharMerica pharmacy typically serves customers within a 150-mile radius.

In its mail order business, PharMerica's workers' compensation services include: home delivery of prescription drugs, medical supplies and equipment; an array of computer software solutions to reduce the payor's administrative costs; and an on-line retail prescription drug card service which allows patients to obtain prescription drugs from a national network of over 45,000 retail pharmacies.

Stadtlander is the nation's leading provider of disease-specific pharmaceutical care to people living with challenging health conditions such as HIV/AIDS, organ transplant, serious mental illness, and infertility. Stadtlander is also the nation's leading provider of pharmaceutical care to the privatized corrections market. Currently, Stadtlander serves approximately 45,000 patients and 240,000 prison inmates primarily within the privatized corrections market.

Stadtlander provides its distribution products and services from its principal facility in Pittsburgh, Pennsylvania and 20 regional pharmacies nationwide.

The Other Businesses segment includes Bergen Brunswig Medical Company ("BBMC"), Integrated Commercialization Solutions and The Lash Group ("ICS/Lash"), and Choice Systems, Inc. ("Choice").

BBMC distributes a variety of medical and surgical products to individual hospitals and alternate site healthcare providers through distribution centers located in every region of the United States except the northeast. BBMC serves hospital customers and alternate site customers in 45 states and the District of Columbia. Alternate site customers include outpatient clinics, nursing homes, surgery centers, dialysis and oncology centers, emergency centers and laboratories.

ICS/Lash, through ICS, provides distribution, accounting, marketing, education and other outsourcing services for pharmaceutical manufacturers. Through The Lash Group, it provides consulting and management of reimbursement and patient-assistance programs.

Choice develops and markets inventory management systems and related software for hospitals and other healthcare providers.

BBDC, ASD and BBMC, which represent some of the nation's largest pharmaceutical and medical-surgical supplies distributors measured by sales, face intense competition from other national pharmaceutical and medical-surgical supplies distributors, as well as regional and local full-line and short-line distributors, direct selling manufacturers and specialty distributors. The principal competitive factors are service and price. Competition continues to drive down the gross profit markup percentage, thereby lowering distributors' gross profit margins.

The institutional pharmacy market is fragmented and competition varies significantly among local geographic markets. PharMerica's competitors include independent retail pharmacies, retail pharmacy chains, long-term care company-owned captive pharmacies and national institutional pharmacies. Management believes that the competitive factors most important in PharMerica's lines of business are quality and range of service offered, competitive prices, reputation with referral sources, ease of doing business with healthcare providers, and the ability to develop and maintain referral sources. One of PharMerica's present competitors is larger than PharMerica. In addition, there are relatively few barriers to entry in PharMerica's local markets. In its mail order pharmacy business, PharMerica primarily competes with local retail pharmacies and medical equipment supply companies, and competes primarily on the basis of the effectiveness of its cost containment services.

Stadtlander is the nation's largest entity providing specialized pharmaceutical services for home delivery and the privatized corrections market. Stadtlander competes with other specialty retail pharmacies and smaller specialty pharmaceutical distributors; in the privatized corrections market, it also competes with company-owned and government operated captive pharmacies.

As of November 30, 1999, the Company employed approximately 13,000 people. The Company considers its relationship with its employees and the unions representing certain of its employees to be satisfactory.

Certain pharmaceutical products and medical supplies sold by the Company are subject to federal and state statutes and regulations governing the sale, marketing, packaging and distribution of prescription drugs, including controlled substances, and medical devices. Furthermore, the Company (particularly in its PharMerica and Stadtlander operations) and/or its customers are subject to extensive licensing requirements and comprehensive regulation governing various aspects of the healthcare delivery system, including the so called "fraud and abuse" laws. The fraud and abuse laws preclude (a) persons from soliciting, offering, receiving or paying any remuneration in order to induce the referral of a patient for treatment or for inducing the ordering or purchasing of items or services that are in any way paid for by Medicare or Medicaid and (b) physicians from making referrals to certain entities with which they have a financial relationship. The fraud and abuse laws and regulations are broad in scope and are subject to frequent modification and varied interpretation. Significant criminal, civil and administrative sanctions may be imposed for violation of these laws and regulations.

As part of various changes made in Medicare, in 1997 the United States Congress established the Prospective Payment System ("PPS") for Medicare patients in skilled nursing facilities under which such facilities are paid a federal daily rate for virtually all covered skilled nursing facility services. Under the PPS, PharMerica's skilled nursing facility customers are no longer able to pass through their costs for certain products and services provided by PharMerica. Instead, PharMerica's customers receive a federal daily rate to cover the costs of all eligible goods and services provided to Medicare patients, which may include certain pharmaceutical and other goods and services provided by PharMerica that were previously reimbursed separately under Medicare. Since the amount of skilled nursing facility Medicare reimbursement is limited by the PPS, facility customers now have an increased incentive to negotiate with PharMerica to minimize the costs of providing goods and services to patients covered under Medicare. PharMerica continues to bill skilled nursing facilities on a negotiated fee schedule. Implementation of PPS has had a material adverse effect on the business, financial condition and results of operations of PharMerica.

As a result of a wide variety of political, economic and regulatory influences, the healthcare delivery industry in the United States is under intensive scrutiny and subject to fundamental changes. A variety of new approaches have been proposed, including mandated basic healthcare benefits and controls on healthcare spending through limitations on the growth of private health insurance premiums and Medicare and Medicaid spending. The Company anticipates that Congress and state legislatures will continue to review and assess alternative healthcare delivery systems and payment methods and that public debate with respect to these issues will likely continue in the future. Because of uncertainty regarding the ultimate features of reform initiatives and their enactment and implementation, the Company cannot predict which, if any, of such reform proposals will be adopted, when they may be adopted, or what impact they may have on the Company.

While the Company's operations may show quarterly fluctuations, the Company does not consider its business to be seasonal in nature.

Although the Company's computer service operations expend time and effort on the development and marketing of computer software used in support of services offered by the Company for its customers, 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. The Company has assessed its computer systems and has determined that they are "Year 2000" compliant. For a detailed discussion of the Company's Year 2000 compliance, see Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in Part II of this Annual Report.

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, 1999, the Pharmaceutical Distribution segment operations were located in 36 leased and 15 owned locations ranging in size from approximately 5,800 to 231,500 square feet and have a combined area of approximately 3,744,000 square feet. The lease expiration dates of the leased facilities range from fiscal 2000 to fiscal 2008.

As of November 30, 1999, the Pharmaceutical Services segment operations were located in 206 leased locations ranging in size from approximately 200 to 89,300 square feet and have a combined area of approximately 1,477,000 square feet. The lease expiration dates of the leased facilities range from fiscal 2000 through fiscal 2010.

As of November 30, 1999, the Other Businesses segment operations were located in 39 leased and 5 owned locations ranging in size from approximately 2,000 to 188,000 square feet and have a combined area of approximately 2,017,000 square feet. The lease expiration dates of the leased facilities range from fiscal 2000 to fiscal 2010.

The Company owns and leases an aggregate of approximately 295,000 square feet of general and executive offices in Orange, California. The leased facility is subject to a lease that expires in fiscal 2004. The owned facility was purchased in October 1999.

The combined area of the Company's leased and owned facilities was approximately 5,130,000 and 2,403,000 square feet, respectively, as of November 30, 1999.

For additional information regarding the Company's lease obligations, see Note 7 of Notes to Consolidated Financial Statements in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report.

There have been no new material developments in the legal proceedings as previously reported in Part I, Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1998 filed with the Securities and Exchange Commission on December 29, 1998, except as otherwise set forth below.

Section 1.

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 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 June 25, 1999, the Alabama Supreme Court held that plaintiffs' claims are not valid under the Alabama antitrust statute. On November 29, 1999 the trial court dismissed the entire action in accordance with the mandate of the Alabama Supreme Court. Similar actions were also filed against the Company and other wholesalers and manufacturers in Mississippi, Montgomery Drug v. UpJohn, et. al., No. 97-0103, and in Tennessee, Graves v. Abbott, et. al., No. 25,109-II. The various state actions have not yet been set for trial.

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 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. In 1996, the class plaintiffs filed a motion for 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 approval for the settlement. In 1998, an additional four of the manufacturer defendants settled. The effect of the settlements on 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 or any additional amounts to be paid by the manufacturer defendants.

In September 1998, a jury trial of this action commenced in Federal Court. On November 30, 1998, the Court granted all remaining defendants a directed verdict, dismissing all class claims against the Company and other defendants. On July 13, 1999, the Court of Appeals for the Seventh Circuit affirmed the dismissal of the Company and the other wholesaler defendants from the class action litigation. Plaintiffs petition for rehearing on this issue was denied on August 9, 1999. On November 5, 1999 plaintiffs filed a petition for writ of certiorari in the United States Supreme Court. Opposition is due January 19, 2000.

In addition to the above-mentioned Federal class action and state court actions, the Company and other wholesale defendants have been added as defendants in a series of related antitrust lawsuits brought by certain independent pharmacies who have opted out of the class action cases and by certain chain drug and grocery stores. After a successful motion by the Company and other wholesalers, the damage period in these cases has been limited to October 1993 to the present. These lawsuits are also covered by the sharing agreement described above. Plaintiffs in these suits have requested remand to various federal courts nationwide for purposes of trial. A decision on the remand motion is pending, and no trial dates have been set.

In November 1995, in the U.S. District Court, Northern District of Illinois, Abbott Laboratories ("Abbott") 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. In October 1998, Abbott amended its complaint to allege spoliation of evidence and to request punitive damages in excess of $30 million. The Company has filed various counterclaims and has asked for damages according to proof at trial. On October 19, 1999, Abbott and the Company (along with Bergen Brunswig Drug Company, Durr-Fillauer Medical, Inc., and Durr Drug Company, all affiliates of the Company) executed a Mutual Release of Claims and Settlement Agreement which required in exchange of general releases the Company to pay an immaterial sum to Abbott but also Abbott and the Company have agreed to future and mutually beneficial opportunities.

A United States federal investigation of Stadtlander with respect to possible violations of the Medicare provisions of the Social Security Act is being conducted. The activities under investigation predated the ownership of Stadtlander by Counsel Corporation, the entity that sold Stadtlander to the Company. The Company has been advised that while owned by Counsel Corporation, Stadtlander cooperated fully with the authorities investigating this matter.

Stadtlander has also been named as a defendant in legal proceedings commenced in the U.S. District Court, Northern District of Texas, Dallas Division, asserting, among other things, that by entering into a transaction with a third-party, Stadtlander interfered with the plaintiff's relationship with that third-party. This proceeding is in a preliminary stage. In addition, Stadtlander is a 49% equity owner of a limited liability company formed for the purpose, among other things, of operating a specialty pharmacy business to provide services to patients diagnosed with a serious mental illness. This limited liability company is governed by an operating agreement that contains, among other things, a covenant prohibiting the members from participating in certain competing activities. In April 1999, the other member of the limited liability company brought suit in California Superior Court, San Diego County, seeking, among other things, to enjoin the PharMerica merger and to recover general, special and punitive damages from the Company. The court refused to enjoin the merger; the plaintiff's demand for damages has not yet been resolved and is in the discovery stages. Counsel Corporation has agreed to provide certain indemnification to the Company with respect to the proceedings referred to in this paragraph and the immediately preceding paragraph.

In November 1998 and February 1999, two putative securities class actions were filed against PharMerica and certain individuals in the United States District Court for the Middle District of Florida. The proposed classes consist of all persons who purchased or acquired stock of PharMerica between January 7, 1998 and July 24, 1998. The complaints seek monetary damages but do not specify an amount. In general, the complaints allege that the defendants made material omissions by withholding from the market information related to the costs associated with certain acquisitions. The complaints allege claims under Section 10(b) and 20(a) of the Securities Exchange Act of 1934. A motion to dismiss both actions was filed on March 2, 1999, and the motion is currently under review.

PharMerica is also subject to investigations, claims and suits arising out of its institutional pharmacy business, including matters relating to the repayment of monies paid to PharMerica under Medicare or Medicaid. Prior to the acquisition of PharMerica by the Company, the United States Department of Health and Human Services ("HHS"), during the course of a Medicare Audit of various nursing homes, requested PharMerica to produce records related to intravenous pharmaceuticals provided to particular nursing homes in 1997 and 1998. PharMerica cooperated with the audit and complied with the request. Subsequently, PharMerica learned that HHS auditors alleged that during the 1997-98 time frame, certain nursing homes, primarily operating in Texas, improperly billed Medicare for intravenous pharmaceuticals and related services. The government has been made aware that PharMerica did not bill the Medicare program for the goods and services it sold to nursing homes. The government has not revealed the extent of any investigation that may be ongoing against PharMerica or entities that, unlike PharMerica, billed Medicare, or any legal basis upon which to seek reimbursement from PharMerica for overpayments the government alleges the Medicare program made to customers of PharMerica.

On or about March 2, 1999, the Company was served with a Summons and Complaint filed by the Office of the State's Attorney General on behalf of the People of the State of California alleging that the Company and twenty-two other defendants engaged in the manufacture, distribution and/or selling of coal tar products to consumers within the State of California and that these activities constituted a violation of California's Safe Drinking Water and Toxic Enforcement Act of 1986 and Unfair Competition Act. In addition, on or about March 20, 1999, the Company was served with a Summons and First Amended Complaint filed by Perry Gottesfeld alleging that the Company and sixteen other defendants engaged in various activities that violated the Acts cited by the State's Attorney General in the Complaint referenced above. The Company, through its counsel, has been in negotiations with both these plaintiffs. Responsive pleadings were filed in April 1999 and the parties are conducting discovery.

On or about March 5, 1999, the Company was notified that it was a possible potentially responsible party ("PRP") in connection with the Butterworth Landfill Superfund Site located in Grand Rapids, Michigan (the "Butterworth Site") and that the U.S. Environmental Protection Agency ("EPA") had entered into a Consent Decree with five principal PRPs (not including the Company) to spend $9.6 million on immediate responsive activities at the Butterworth Site, including remedial investigation and feasibility studies. In addition and pursuant to Section 107 of the CERCLA, the U.S. Department of Interior has asserted a claim for damages caused to natural resources ("NRD Liability"). The present value of the expected remedial action at the Butterworth Site over the next thirty (30) years is in excess of $20 million. The Company was offered a settlement by the EPA whereby the Company would pay approximately $53,000 (the "Settlement Amount") in exchange for statutory contribution protection and a covenant not to sue in a Court-entered decree. The Company has tendered the Settlement Amount. The decree is expected to be entered in calendar year 2000. At that time all EPA claims and NRD Liability against the Company will be released and any future contribution or cost recovery actions by other PRPs against the Company will be barred.

In addition to the Butterworth Site Claim, the EPA made a demand that the Company pay (by March 12, 1999), approximately $168,000 to settle the Company's alleged liability for waste material disposed of at the Casmalia Disposal Site in Santa Barbara County, California (the "Casmalia Site"). The present value of the expected remedial action at the Casmalia Site is $399 million. The EPA designated the Company a de minimis waste generator and offered what it termed a de minimis settlement. The Company declined the EPA's offer and believes that it may be afforded an opportunity to reduce its costs of settlement. Of course, there is no assurance that the Company will be successful in reducing its cost in settling this matter or that the EPA will continue to be interested in settling with the Company for the amount previously offered.

Although the amount of liability at September 30, 1999 with respect to the referenced proceedings in Section 1 above cannot be ascertained, in the opinion of the management, any resulting liability will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

On October 14, 1999, the Company and certain of its subsidiaries commenced an action in the Los Angeles County Superior Court of the State of California against Counsel Corporation, Stadt Holdings, Inc., and certain of their officers and directors (the "Counsel defendants") in connection with the Company's acquisition of Stadtlander Drug Co., Inc. and its subsidiaries ("Stadtlander") on January 21, 1999. In the Counsel action, the Company alleges that the defendants devised and perpetrated a joint venture scheme with the common purpose of selling Stadtlander at a grossly inflated price. The Company contends that, by means of fraudulent adjusted journal entries and related misrepresentations and omissions, the Counsel defendants provided inaccurate financial statements and other false and misleading information to the Company in order to fraudulently induce it to consummate the Stadtlander acquisition for an excessive sales price.

In its complaint, the Company asserts causes of action against the defendants under California's securities and unfair competition laws, as well as common law and statutory claims for fraud. The Company requests the imposition of a constructive trust, an accounting, restitution and disgorgement of the defendants' ill-gotten profits and other damages, as well as other relief permitted under law, in addition to pre-judgment and post-judgment interest, costs and attorneys' fees.

Certain of the defendants have made a motion to compel arbitration of the Company's claims against them. The Company has opposed the defendants' motion. The hearing on the motion is scheduled in January 2000. Apart from that motion, no other motions have been filed or served by any party to date. No discovery has been commenced by any party to date. No status conference has been noticed or conducted to date. No trial date has been set.

The Company believes its claims against the Counsel defendants have substantial merit, and intends to prosecute its claims vigorously against the Counsel defendants. However, due to the incipient stage of the litigation, its ongoing status, and the necessary uncertainties involved in all litigation, the Company does not believe it is feasible at this time to assess the likely outcome of the litigation, the timing of its resolution, or its ultimate impact, if any, on the Company's financial condition, results of operations and cash flows.

Following the Company's October 14, 1999 announcement that it would not meet analysts' consensus earnings estimates for its fourth quarter and fiscal year ended September 30, 1999, due to, in part, lower than expected results at Stadtlander and PharMerica, and following the Company's disclosures, in its complaint against the Counsel defendants, reported by the press on October 15, 1999, regarding the accounting irregularities involved in the Stadtlander acquisition, 10 purported shareholder class action lawsuits were commenced against the Company and certain of its officers and directors in federal court in California (the "Bergen securities cases").

The Bergen securities cases are purportedly brought on behalf of a class of the Company's shareholders who purchased or otherwise acquired Bergen's common stock from March 16, 1999 through October 14, 1999, and were allegedly damaged thereby. Some of the cases include two further sub-classes of persons who purchased or otherwise acquired the Company's common stock in connection with its acquisition of its wholly-owned subsidiary, PharMerica, Inc. ("PharMerica"), and of persons who were holders of record of PharMerica stock as of March 12, 1999, and were thereby entitled to vote, pursuant to the Company's Proxy Statement/Prospectus issued in connection with the PharMerica merger. The purported classes in a few of the cases may also consist of persons who purchased or otherwise acquired Bergen securities from September 9, 1998, through October 14, 1999.

The Bergen securities cases assert, among other things, various similar claims under sections 11, 12 and 15 of the Securities Act 1933 and sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934, and Rules 10b-5 and 14a-9 thereunder. In general, the Bergen securities cases allege that the Company and certain of its officers and directors made material omissions and unspecified misrepresentations in their PharMerica Proxy Statement/Prospectus, and in other public statements prior to October 14, 1999 (the end of the purported class period), by failing to disclose accounting irregularities and other fraudulent manipulations of Stadtlander's books and records which, they allege, would likely have had an material impact on the value of the Company's stock.

In addition to the Bergen securities cases, two separate lawsuits alleging violations of certain federal securities have been commenced in federal court in California, and another lawsuit has been commenced in federal court in Delaware, that name as defendants, along with the Company and certain of its officers and directors, Bergen Capital Trust I (the "Trust"), a wholly-owned subsidiary of the Company, as well as various investment banks (the "Trust securities cases").

The Trust securities cases are purportedly brought on behalf of a class of persons who purchased shares of the Trust's Preferred Securities pursuant to the May 26, 1999 offering of such securities, including, in two of the cases, persons who thereafter acquired any such Preferred Securities on the open market prior to October 14, 1999.

The Trust securities cases assert, among other things, claims under sections 11, 12 and 15 of the Securities Act of 1933, including, in two of the cases, among other things, claims under sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. In general, the Trust securities cases contend that the Trust and the Company failed to fulfill a purported duty to disclose in the Company's 1999 Registration Statement, and in related offering materials with respect to the issuance of the Trust's Preferred Securities, that the financial data provided by the Company was supposedly unreliable because Stadtlander was suffering from accounting irregularities as a result of the fraud of the Counsel defendants.

The Plaintiffs in the Bergen securities cases and the Trust securities cases seek damages in an unspecified amount, and/or rescission, as well as pre-judgment and post-judgment interest, costs and attorneys' fees. The plaintiffs in the Bergen securities cases have jointly moved to consolidate their cases into a single action in the Southern Division of the United States District Court for the Central District of California, and for appointment of "lead plaintiffs" in the United States District Court for the District of Delaware, under the Private Securities Litigation Reform Act of 1995. At this juncture, based upon current information, the Company anticipates that these motions will be granted, and that it will not be required to respond to any of the actions until after the filing of an amended consolidated complaint. No discovery has been commenced by any party to date. No status conferences have been noticed or conducted to date in any of the actions. No trial dates have been set in any of the actions.

The Company intends to vigorously defend against the claims asserted in the various purported shareholder class action lawsuits.

The proceedings referenced in Section 2 are in their early stages and little or no discovery has been completed. The Company does not believe it is currently feasible to predict or determine the outcome or resolution of these proceedings, or to estimate the amounts of, or potential range of, loss with respect to these proceedings.

			Years Ended September 30,							% Change
Dollars in millions				1999		1998		1997		1999		1998
Revenues excluding bulk shipments			$	17,244.9	$	13,720.0	$	11,659.1		26	%	18	%
Bulk shipments				4,000.6		3,401.7		2,837.7		18		20
	Total net sales and other revenues		$	21,245.5	$	17,121.7	$	14,496.8		24		18
Gross profit			$	1,099.5	$	750.3	$	654.4		47		15
Operating expenses excluding
	special items			837.7		534.2		479.4		57		11
Operating earnings before
	special items			261.8		216.1		175.0		21		23
Special items:
	Special receivables provision			53.7		-		-		-		-
	Special charges			-		110.2		5.8		-		-
	Operating earnings		$	208.1	$	105.9	$	169.2		97	%	(37	)%
Percentage of revenues excluding
	bulk shipments:
	Gross profit			6.38	%	5.47	%	5.61	%
	Operating expenses, excluding
		special items		4.86	%	3.89	%	4.11	%
	Operating earnings before
		special items		1.52	%	1.58	%	1.50	%
	Operating earnings			1.21	%	0.77	%	1.45	%
Percentage of revenues excluding
	PharMerica and Stadtlander
	in fiscal 1999:
	Gross profit			5.08	%	5.47	%	5.61	%
	Operating expenses, excluding
		special items		3.54	%	3.89	%	4.11	%
	Operating earnings before
		special items		1.54	%	1.58	%	1.50	%
	Operating earnings			1.54	%	0.77	%	1.45	%

Dollars in millions
				Revenue Excluding Bulk Shipments							Growth Rate
Years Ended September 30,					1999		1998		1997		1999		1998
Pharmaceutical Distribution				$	15,902.7	$	12,936.3	$	10,906.4		23	%	19	%
Pharmaceutical Services					866.6		0.9		-
Other Businesses					892.7		781.3		751.5		14		4
Corporate					0.7		1.5		1.2
Intersegment Eliminations					(417.8	)	-		-
	Total			$	17,244.9	$	13,720.0	$	11,659.1		26	%	18	%
				Operating Earnings							Growth Rate
Years Ended September 30,					1999		1998		1997		1999		1998
FIFO basis, excluding special items:
	Pharmaceutical Distribution			$	326.0	$	264.1	$	198.2		23	%	33	%
	Pharmaceutical Services				0.6		(0.3	)	-		-		-
	Other Businesses				6.2		6.0		12.8		3		(53	)
	Corporate				(52.5	)	(58.6	)	(43.7	)	-		-
	Total, FIFO basis excluding
		special items			280.3		211.2		167.3		33	%	26	%
LIFO (charges) credits					(18.5	)	4.9		7.7
Special items					(53.7	)	(110.2	)	(5.8	)
	Total, LIFO basis including
		special items		$	208.1	$	105.9	$	169.2		97	%	(37	)%
Operating earnings as a
	percentage of revenue
	excluding bulk shipments:
		Pharmaceutical Distribution			2.05	%	2.04	%	1.82	%
		Pharmaceutical Services			0.07	%	(33.33	)%	-	%
		Other Businesses			0.69	%	0.77	%	1.70	%
		Total, FIFO basis excluding
			special items		1.63	%	1.54	%	1.43	%
		Total, LIFO basis including
			special items		1.21	%	0.77	%	1.45	%

Dollars in millions
		Years Ended September 30,
			1999		1998		1997
Net interest expense (pre-tax)		$	74.1	$	40.0	$	30.8
Distributions on preferred securities of subsidiary
	trust ($8.1 pre-tax less $3.2 tax benefit)	$	4.9	$	-	$	-

	September 30,
	1999	1998	1997
Debt, net of cash	43%	34%	36%
Equity, including the Preferred Securities	57%	57%	61%