<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-44577
[LETTERHEAD OF CARDINAL HEALTH]
- --------------------------------------------------------------------------------
January 21, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Cardinal Health, Inc. ("Cardinal") to be held at Cardinal's corporate offices at
5555 Glendon Court, Dublin, Ohio, on Friday, February 20, 1998, at 1:00 p.m.,
local time.
At the Special Meeting you will be asked to vote on a proposal (the
"Cardinal Merger Proposal") to approve, authorize and adopt an Agreement and
Plan of Merger, dated as of August 23, 1997 (the "Merger Agreement"), providing
for the merger (the "Merger") of a wholly owned subsidiary of Cardinal with and
into Bergen Brunswig Corporation ("Bergen"). Upon consummation of the Merger,
Bergen will become a wholly owned subsidiary of Cardinal, and Bergen
shareholders will be entitled to receive 0.775 of a Cardinal common share for
each share of Bergen common stock held by them (the "Exchange Ratio"). In
connection with the Merger, you will also be asked to vote on proposals to
approve, authorize and adopt amendments to the Articles of Incorporation of
Cardinal, as amended and restated, to increase the number of Cardinal common
shares authorized and to change the corporate name of Cardinal to "Cardinal
Bergen Health, Inc." (the "Articles Amendments"), such name change being subject
to the consummation of the Merger. Consummation of the Merger is conditioned
upon approval and adoption of the Merger Agreement and the amendment to the
Articles of Incorporation of Cardinal to increase the number of Cardinal common
shares authorized. As a result of the Merger and the transactions contemplated
by the Merger Agreement, it is currently contemplated that Cardinal will issue
approximately 42 million additional Cardinal common shares in connection with
the Merger, including the assumption of outstanding Bergen stock options.
ADDITIONAL INFORMATION REGARDING THE MERGER AND THE MERGER AGREEMENT IS SET
FORTH IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES
THERETO, WHICH YOU ARE URGED TO READ CAREFULLY IN THEIR ENTIRETY.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS AND CONDITIONS
OF THE PROPOSED MERGER AND HAS DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY (INCLUDING THE ARTICLES AMENDMENTS)
ARE FAIR TO, AND IN THE BEST INTERESTS OF, CARDINAL AND ITS SHAREHOLDERS.
ACCORDINGLY, YOUR BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE APPROVAL AND ADOPTION OF THE ARTICLES
AMENDMENTS.
Approval and adoption of each of the Cardinal Merger Proposal and the
Articles Amendments require the affirmative vote of the holders of a majority of
the Cardinal Common Shares outstanding and entitled to vote thereon.
In view of the importance of the action to be taken at this important
Special Meeting of Cardinal Shareholders, we urge you to review carefully the
accompanying Notice of Special Meeting of Shareholders and the Joint Proxy
Statement/Prospectus, including the annexes thereto, which also include
information on Cardinal and Bergen. Whether or not you expect to attend the
Special Meeting, please complete, sign and date the enclosed proxy and return it
as promptly as possible.
Very truly yours,
/s/ Robert D. Walter
ROBERT D. WALTER
Chairman
<PAGE> 2
CARDINAL HEALTH, INC.
5555 GLENDON COURT
DUBLIN, OHIO 43016
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 20, 1998
------------------------
To the Shareholders of Cardinal Health, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Cardinal Health, Inc., an Ohio corporation ("Cardinal"), will be
held at Cardinal's corporate offices at 5555 Glendon Court, Dublin, Ohio on
Friday, February 20, 1998, at 1:00 p.m., local time, for the following purposes:
1. To consider and vote on a proposal (the "Cardinal Merger Proposal")
to approve, authorize and adopt the Agreement and Plan of Merger, dated as
of August 23, 1997 (the "Merger Agreement"), by and among Cardinal, Bruin
Merger Corp., a New Jersey corporation and a wholly owned subsidiary of
Cardinal ("Subcorp"), and Bergen Brunswig Corporation, a New Jersey
corporation ("Bergen"), pursuant to which, among other things, (i) Subcorp
will be merged with and into Bergen with the result that Bergen will become
a wholly owned subsidiary of Cardinal, and (ii) each outstanding share
(other than shares held in the treasury of Bergen, which will be canceled)
of Bergen Class A common stock, par value $1.50 per share, will be
converted into 0.775 of a Cardinal common share, without par value
("Cardinal Common Shares"). A copy of the Merger Agreement is attached as
Annex A to the accompanying Joint Proxy Statement/Prospectus.
2. To consider and vote on a proposal (the "Authorized Shares
Proposal") to approve, authorize and adopt an amendment to the Articles of
Incorporation of Cardinal, as amended and restated to date (the "Cardinal
Articles"), to increase the number of authorized Cardinal Common Shares
from 150,000,000 to 300,000,000. The Authorized Shares Proposal will be
presented at the Special Meeting and will be adopted if approved whether or
not the Cardinal Merger Proposal is approved, but its adoption is a
condition to consummation of the Merger. This proposed amendment to the
Cardinal Articles is included in the resolution attached to the Joint Proxy
Statement/Prospectus as Annex C.
3. If the Cardinal Merger Proposal is approved, to consider and vote
upon a proposal (the "Name Change Proposal") to approve, authorize and
adopt an amendment to the Cardinal Articles to change Cardinal's name from
"Cardinal Health, Inc." to "Cardinal Bergen Health, Inc." Adoption of the
Name Change Proposal is not a condition to the Merger, but the Name Change
Proposal will not be adopted unless and until the Merger is consummated.
This proposed amendment to the Cardinal Articles is included in the
resolution attached to the Joint Proxy Statement/Prospectus as Annex C.
4. To adjourn the Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient votes at
the time of the Special Meeting to approve either the Cardinal Merger
Proposal or the Authorized Shares Proposal (the "Adjournment Proposal").
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 20, 1998,
as the record date for the determination of the holders of Cardinal Common
Shares entitled to notice of, and to vote at, the meeting and adjournments or
postponements thereof. Each of the Cardinal Merger Proposal, the Authorized
Shares Proposal and the Name Change Proposal requires the affirmative vote of
the holders of a majority of the Cardinal Common Shares outstanding and entitled
to vote thereon. The Adjournment Proposal requires the affirmative vote of the
holders of a majority of the Cardinal Common Shares entitled to vote and present
in person or represented by proxy at the Special Meeting. Under certain
circumstances, the Merger Agreement may be terminated prior to the time the
Merger becomes effective, whether before or after approval and
<PAGE> 3
adoption of the Merger Agreement by Cardinal shareholders. Cardinal shareholders
will be entitled to dissenters' appraisal rights under Ohio law in connection
with the Merger.
Information regarding the Merger and related matters is contained in the
accompanying Joint Proxy Statement/Prospectus and the annexes thereto, which are
incorporated by reference herein and form a part of this Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IT IS
IMPORTANT THAT YOUR INTERESTS BE REPRESENTED AT THE MEETING. YOU MAY REVOKE YOUR
PROXY BY (I) FILING WITH THE SECRETARY OF CARDINAL AT OR BEFORE THE TAKING OF
THE VOTE AT THE MEETING A NOTICE OF REVOCATION BEARING A LATER DATE THAN THE
PROXY OR A LATER-DATED PROXY RELATING TO THE SAME SHARES, (II) GIVING NOTICE OF
REVOCATION IN OPEN MEETING OR (III) ATTENDING THE MEETING AND VOTING IN PERSON.
THE BOARD OF DIRECTORS OF CARDINAL HAS DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN
THE BEST INTERESTS OF, CARDINAL AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD
RECOMMENDS THAT YOU VOTE FOR THE APPROVAL AND ADOPTION OF EACH OF THE CARDINAL
MERGER PROPOSAL, THE AUTHORIZED SHARES PROPOSAL, THE NAME CHANGE PROPOSAL AND
THE ADJOURNMENT PROPOSAL.
By Order of the Board of Directors
/s/ George H. Bennett, Jr.
GEORGE H. BENNETT, JR.
Secretary
Dublin, Ohio
January 21, 1998
<PAGE> 4
[BERGEN LOGO]
- --------------------------------------------------------------------------------
4000 Metropolitan Drive, Orange, California 92868 (714) 385-4000
January 21, 1998
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Bergen Brunswig Corporation ("Bergen") to be held at Bergen's corporate
headquarters at 4000 Metropolitan Drive, Orange, California, on Friday, February
20, 1998, at 10:00 a.m., local time.
At the Special Meeting you will be asked to vote on a proposal to approve
and adopt an Agreement and Plan of Merger, dated as of August 23, 1997 (the
"Merger Agreement"), providing for the merger (the "Merger") of a wholly owned
subsidiary of Cardinal Health, Inc. ("Cardinal") with and into Bergen. Upon
consummation of the Merger, Bergen will become a wholly owned subsidiary of
Cardinal, and Bergen shareholders will be entitled to receive 0.775 of a
Cardinal common share for each share of Bergen common stock held by them (the
"Exchange Ratio").
ADDITIONAL INFORMATION REGARDING THE MERGER AND THE MERGER AGREEMENT IS SET
FORTH IN THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AND THE ANNEXES
THERETO, WHICH YOU ARE URGED TO READ CAREFULLY IN THEIR ENTIRETY. A COPY OF THE
MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS.
The Board of Directors of Bergen has carefully considered the terms and
conditions of the proposed Merger. In addition, in connection with its approval
of the transaction with Cardinal, the Board of Directors of Bergen has received
a written opinion from its financial advisor, Merrill Lynch, Pierce, Fenner &
Smith ("Merrill Lynch"), to the effect that the Exchange Ratio is fair, from a
financial point of view, to the holders of Bergen common stock. A copy of
Merrill Lynch's written opinion, which sets forth a description of the
assumptions made, matters considered and limits of its review, is attached to
the accompanying Joint Proxy Statement/Prospectus as Annex B and Bergen
shareholders are urged to read carefully the opinion in its entirety.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST
INTERESTS OF, BERGEN AND THE BERGEN SHAREHOLDERS. ACCORDINGLY, THE BOARD
RECOMMENDS THAT BERGEN SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT.
Approval of the Merger Agreement and the Merger requires the affirmative
vote of a majority of the votes cast by the holders of the shares of Bergen
common stock entitled to vote and voting at the meeting. As of January 20, 1998,
the executive officers and directors of Bergen, other than the Chairman, may be
deemed to be beneficial owners of approximately 2.3% of the outstanding Bergen
common stock and each such person has advised Bergen that such person intends to
vote in favor of the Merger. In addition, as further described in the Joint
Proxy Statement/Prospectus, the Chairman has agreed to vote or direct the vote
of all Bergen common stock over which he has voting power or control in favor of
the Merger Agreement and the Merger (as of January 20, 1998, he beneficially
owned approximately 5.4% of the outstanding Bergen common stock).
In view of the significance of the action to be taken at this important
Special Meeting of Bergen shareholders, we urge you to review carefully the
accompanying Notice of Special Meeting of Shareholders and the Joint Proxy
Statement/Prospectus, including the annexes thereto, which also include
information on Cardinal and Bergen. Whether or not you expect to attend the
Special Meeting, please complete, sign and date the enclosed proxy and return it
as promptly as possible.
<TABLE>
<S> <C>
Sincerely,
/s/ Robert E. Martini /s/ Donald R. Roden
ROBERT E. MARTINI DONALD R. RODEN
Chairman President and Chief Executive Officer
</TABLE>
<PAGE> 5
BERGEN BRUNSWIG CORPORATION
4000 METROPOLITAN DRIVE
ORANGE, CALIFORNIA 92868
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 20, 1998
------------------------
To the Shareholders of Bergen Brunswig Corporation:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Bergen Brunswig Corporation, a New Jersey corporation ("Bergen"),
will be held at Bergen's corporate headquarters at 4000 Metropolitan Drive,
Orange, California, on Friday, February 20, 1998 at 10:00 a.m., local time, for
the following purposes:
1. To consider and vote on a proposal (the "Bergen Merger Proposal")
to approve and adopt the Agreement and Plan of Merger, dated as of August
23, 1997 (the "Merger Agreement"), by and among Bergen, Cardinal Health,
Inc., an Ohio corporation ("Cardinal"), and Bruin Merger Corp., a New
Jersey corporation and a wholly owned subsidiary of Cardinal ("Subcorp"),
pursuant to which, among other things, (i) Subcorp will be merged with and
into Bergen with the result that Bergen will become a wholly owned
subsidiary of Cardinal, and (ii) each outstanding share (other than shares
held in the treasury of Bergen, if any, which will be canceled) of Bergen
Class A common stock, par value $1.50 per share ("Bergen Common Stock"),
will be converted into 0.775 of a Cardinal common share, without par value.
2. To adjourn the Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient votes at
the time of the Special Meeting to approve the foregoing proposal (the
"Adjournment Proposal").
3. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on January 20, 1998,
as the record date for the determination of the holders of Bergen Common Stock
entitled to notice of, and to vote at, the Special Meeting and any adjournments
or postponements thereof. Each of the Bergen Merger Proposal and the Adjournment
Proposal requires the affirmative vote of a majority of the votes cast by the
holders of the shares of Bergen Common Stock entitled to vote and voting at the
Special Meeting. The executive officers and directors of Bergen who beneficially
own approximately 7.7% of the outstanding Bergen Common Stock have either agreed
or expressed an intention to vote in favor of the Bergen Merger Proposal and the
Adjournment Proposal. Under certain circumstances, the Merger Agreement may be
terminated prior to the time the Merger becomes effective, whether before or
after approval and adoption of the Merger Agreement by Bergen shareholders.
Bergen shareholders will not be entitled to dissenters' appraisal rights under
New Jersey law or any other statute in connection with the Merger.
Information regarding the Merger and related matters is contained in the
accompanying Joint Proxy Statement/Prospectus and the annexes thereto, which
form a part of this Notice.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. IT IS IMPORTANT THAT YOUR INTERESTS BE REPRESENTED AT THE SPECIAL
MEETING. YOU MAY REVOKE YOUR PROXY BY (I) FILING WITH THE SECRETARY OF BERGEN AT
OR BEFORE THE TAKING OF THE VOTE AT THE MEETING A WRITTEN NOTICE OF REVOCATION
BEARING A LATER DATE THAN THE DATE OF THE PROXY OR A LATER-DATED PROXY RELATING
TO THE SAME SHARES OR (II) ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
THE BOARD OF DIRECTORS OF BERGEN HAS DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN
THE BEST INTERESTS OF, BERGEN AND THE BERGEN SHAREHOLDERS. ACCORDINGLY, THE
BERGEN BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE BERGEN MERGER
PROPOSAL AND THE ADJOURNMENT PROPOSAL.
By Order of the Board of Directors
/s/ Milan A. Sawdei
MILAN A. SAWDEI
Secretary
Orange, California
January 21, 1998
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
<PAGE> 6
[BERGEN LOGO]
[CARDINAL LOGO]
CARDINAL HEALTH, INC.
AND
BERGEN BRUNSWIG CORPORATION
JOINT PROXY STATEMENT
------------------------
CARDINAL HEALTH, INC.
PROSPECTUS
------------------------
This Joint Proxy Statement/Prospectus is being furnished to holders of
common shares, without par value ("Cardinal Common Shares"), of Cardinal Health,
Inc., an Ohio corporation ("Cardinal"), in connection with the solicitation of
proxies by the Board of Directors of Cardinal (the "Cardinal Board") for use at
the Special Meeting of Cardinal Shareholders to be held on Friday, February 20,
1998, at Cardinal's corporate offices at 5555 Glendon Court, Dublin, Ohio,
commencing at 1:00 p.m., local time, and at any adjournment or postponement
thereof (the "Cardinal Special Meeting").
This Joint Proxy Statement/Prospectus is also being furnished to holders of
shares of Class A common stock, $1.50 par value per share ("Bergen Common
Stock"), of Bergen Brunswig Corporation, a New Jersey corporation ("Bergen"), in
connection with the solicitation of proxies by the Board of Directors of Bergen
(the "Bergen Board") for use at the Special Meeting of Bergen Shareholders to be
held on Friday, February 20, 1998, at Bergen's corporate headquarters at 4000
Metropolitan Drive, Orange, California, commencing at 10:00 a.m., local time,
and at any adjournment or postponement thereof (the "Bergen Special Meeting").
At the Cardinal Special Meeting and the Bergen Special Meeting, holders of
Cardinal Common Shares ("Cardinal Shareholders") and holders of Bergen Common
Stock ("Bergen Shareholders") as of the close of business on the Cardinal Record
Date and Bergen Record Date (each as hereinafter defined), respectively, will be
asked to consider and vote on proposals relating to the Agreement and Plan of
Merger, dated as of August 23, 1997 (together with the exhibits and schedules
thereto, the "Merger Agreement"), providing for the merger (the "Merger") of
Bruin Merger Corp. ("Subcorp"), a New Jersey corporation and a wholly owned
subsidiary of Cardinal, with and into Bergen. The Merger will be consummated on
the terms and subject to the conditions set forth in the Merger Agreement, as a
result of which (i) Bergen will become a wholly owned subsidiary of Cardinal and
(ii) Bergen Shareholders will be entitled to 0.775 of a Cardinal Common Share
for each outstanding share of Bergen Common Stock held by them (with cash in
lieu of fractional shares) (the "Exchange Ratio"). See "The Merger
Agreement -- Merger Consideration." At the Cardinal Special Meeting, Cardinal
Shareholders also will be asked to consider and vote on proposals to approve,
authorize and adopt amendments to the Articles of Incorporation of Cardinal, as
amended and restated to date (the "Cardinal Articles"), to increase the number
of authorized Cardinal Common Shares from 150,000,000 to 300,000,000 (the
adoption of which amendment is a condition to, but not dependent on, the
consummation of the Merger), to change Cardinal's name from "Cardinal Health,
Inc." to "Cardinal Bergen Health, Inc." (the adoption of which amendment is not
a condition to, but is conditioned upon, the consummation of the Merger), to
adjourn the Cardinal Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient votes at the
time of the Cardinal Special Meeting to approve the Merger and the other
proposals presented at the Cardinal Special Meeting. At the Bergen Special
Meeting, Bergen Shareholders also will be asked to consider and vote on a
proposal for the adjournment of the Bergen Special Meeting, if necessary, to
permit further solicitation of proxies in the event that there are not
sufficient votes at the time of the Bergen Special Meeting to approve the
Merger. Under certain circumstances, the Merger Agreement may be terminated
prior to the time the Merger becomes effective, whether before or after approval
and adoption of the Merger Agreement by Bergen Shareholders and Cardinal
Shareholders.
This Joint Proxy Statement/Prospectus also constitutes the Prospectus of
Cardinal with respect to the Cardinal Common Shares to be issued by Cardinal in
the Merger described herein in exchange for the outstanding shares of Bergen
Common Stock. Cardinal Common Shares are quoted on the New York Stock Exchange
(the "NYSE") under the symbol "CAH." On January 20, 1998, the closing price of
Cardinal Common Shares on the NYSE Composite Tape was $71.50. Bergen Common
Stock is quoted on the NYSE under the symbol "BBC." On January 20, 1998, the
last sale price of Bergen Common Stock on the NYSE Composite Tape was $41.00.
Cardinal Shareholders and Bergen Shareholders should obtain current quotes for
the Cardinal Common Shares and Bergen Common Stock.
SEE "RISK FACTORS" ON PAGE 22 FOR A DISCUSSION OF CERTAIN MATTERS THAT
SHOULD BE CONSIDERED BY CARDINAL SHAREHOLDERS AND BERGEN SHAREHOLDERS IN
CONNECTION WITH THE MERGER.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
All information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus with respect to Cardinal has been supplied by Cardinal. All
information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus with respect to Bergen has been supplied by Bergen.
This Joint Proxy Statement/Prospectus, the Letter to Cardinal Shareholders,
the Notice of the Cardinal Special Meeting and the form of proxy for use at the
Cardinal Special Meeting are first being mailed to Cardinal Shareholders on or
about January 22, 1998. This Joint Proxy Statement/Prospectus, the Letter to
Bergen Shareholders, the Notice of the Bergen Special Meeting and the form of
proxy for use at the Bergen Special Meeting are first being mailed to Bergen
Shareholders on or about January 22, 1998. Any shareholder who has given his,
her or its proxy may revoke it at any time prior to its use. See "The Special
Meetings -- Voting of Proxies."
------------------------
The date of this Joint Proxy Statement/Prospectus is January 21, 1998.
<PAGE> 7
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
IN WHICH OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF CARDINAL COMMON SHARES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF CARDINAL OR BERGEN SINCE THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE HEREIN IS CORRECT AS OF ANY TIME AFTER THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS.
FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus includes and incorporates by
reference forward-looking statements based on current plans and expectations of
Bergen, Cardinal and Subcorp, relating to, among other matters, analyses of
value, including an opinion from an independent financial advisor to Bergen's
Board of Directors as to the fairness from a financial point of view of the
Exchange Ratio to Bergen Shareholders in the Merger, forecasts of future
results, and estimates of amounts (including Merger-related expenses) that are
not yet determinable. Such forward-looking statements are contained in the
sections entitled "Summary," "Risk Factors," "The Merger," "Certain Federal
Income Tax Consequences," "The Companies," "Unaudited Pro Forma Combined
Financial Information" and other sections of this Joint Proxy
Statement/Prospectus. Such statements involve risks and uncertainties which may
cause actual future activities and results of operations to be materially
different from that suggested in this Joint Proxy Statement/Prospectus,
including, among others, fluctuations in Bergen's and Cardinal's quarterly
operating results, Bergen's and Cardinal's dependence on their current
management, potential conflicts of interests of certain persons, competition in
the pharmaceutical distribution industry and ability to achieve synergies, as
well as other factors described elsewhere in this Joint Proxy
Statement/Prospectus. The most significant of such risks, uncertainties and
other factors are described in Exhibit 99.01 to the 1997 Cardinal Form 10-K (as
defined below) and Exhibit 99(a) to the 1997 Bergen Form 10-K (as defined
below).
AVAILABLE INFORMATION
Each of Cardinal and Bergen is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements, and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information filed by either Cardinal or Bergen with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at its principal office at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the following Regional Offices of the
Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10048, and Chicago Regional Office, Citicorp Center, 500 West
Madison, Suite 1400, Chicago, Illinois 60661. Copies of such material can also
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates, or, with respect to
certain of such material, through the Commission's World Wide Web site
(http://www.sec.gov). The Cardinal Common Shares and the Bergen Common Stock are
listed on the NYSE, and such reports, proxy statements and other information
concerning Cardinal or Bergen are available for inspection and copying at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
Cardinal has filed with the Commission a Registration Statement on Form S-4
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Cardinal Common Shares to be issued in the Merger (the
"Registration Statement"). This Joint Proxy Statement/Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to Cardinal, Bergen and the
securities offered hereby. Statements
ii
<PAGE> 8
contained herein concerning the provisions of any document are necessarily
summaries of such documents and not complete, and, in each instance, reference
is made to the copy of such document attached hereto or filed as an exhibit to
the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
CARDINAL SHAREHOLDERS AND BERGEN SHAREHOLDERS WHO HAVE ANY QUESTIONS ABOUT
EXECUTING, CHANGING OR REVOKING A PROXY, SHOULD CONTACT THE FOLLOWING:
<TABLE>
<CAPTION>
CARDINAL SHAREHOLDERS BERGEN SHAREHOLDERS
- ----------------------------------- -----------------------------------
<S> <C>
MORROW & CO., INC. MORROW & CO., INC.
909 THIRD AVENUE 909 THIRD AVENUE
20TH FLOOR 20TH FLOOR
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(800) 662-5200 (800) 662-5200
</TABLE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Cardinal with the Commission pursuant to
the Exchange Act (Commission File No. 0-12591) are hereby incorporated by
reference in this Joint Proxy Statement/Prospectus:
1. The description of Cardinal Common Shares contained in Cardinal's
Registration Statement on Form 8-A dated August 19, 1994, and any amendment
or report filed for the purpose of updating such description;
2. Cardinal's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997, filed with the Commission on September 29, 1997, as amended
by Form 10-K/A (Amendment No. 1) filed with the Commission on January 7,
1998 (the "1997 Cardinal Form 10-K");
3. Cardinal's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997, filed with the Commission on November 14, 1997,
as amended by Form 10-Q/A (Amendment No. 1) filed with the Commission on
January 7, 1998 (the "September 1997 Cardinal Form 10-Q");
4. The information contained in Cardinal's Proxy Statement dated
October 13, 1997 for its Annual Meeting of Shareholders held on November 5,
1997 that has been incorporated by reference in the 1997 Cardinal Form 10-K
and was filed with the Commission on Schedule 14A on October 14, 1997;
5. Cardinal's Current Report on Form 8-K dated August 23, 1997 (as
amended by Form 8-K/A (Amendment No. 1) filed with the Commission on August
27, 1997); and
6. The financial statements for MediQual Systems, Inc. included in the
proxy statement/prospectus filed as part of Amendment No. 2 to Cardinal's
Registration Statement on Form S-4 (Registration No. 333-30889), filed with
the Commission on January 9, 1998.
The following documents filed by Bergen with the Commission pursuant to the
Exchange Act (Commission File No. 1-5110) are hereby incorporated by reference
in this Joint Proxy Statement/Prospectus:
1. The description of Bergen Common Stock contained in Bergen's
Registration Statement on Form 8-A filed with the Commission on October 20,
1993, and any amendment or report filed for the purpose of updating such
description;
2. The description of Bergen Preferred Share Purchase Rights (the
"Rights") contained in Bergen's Registration Statement on Form 8-A filed
with the Commission on February 14, 1994, and any amendment or report filed
for the purpose of updating such description;
3. Bergen's Annual Report on Form 10-K for the fiscal year ended
September 30, 1997, filed with the Commission on December 24, 1997 (the
"1997 Bergen Form 10-K"); and
iii
<PAGE> 9
4. Bergen's Proxy Statement dated April 30, 1997 for its Annual
Meeting of Shareholders held on May 23, 1997 that was filed with the
Commission on Schedule 14A on April 30, 1997.
All reports and other documents filed with the Commission by Cardinal or
Bergen pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Joint Proxy Statement/Prospectus and prior to the Cardinal
Special Meeting and the Bergen Special Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
dates of filing of such reports and other documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for all purposes to the
extent that a statement contained herein or in any other subsequently filed
document that is also incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Joint Proxy Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WITH RESPECT TO CARDINAL AND BERGEN THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. COPIES OF THESE DOCUMENTS (NOT INCLUDING EXHIBITS TO SUCH DOCUMENTS
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH
DOCUMENTS OR HEREIN) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS
JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED UPON WRITTEN OR ORAL REQUEST TO
THE FOLLOWING:
<TABLE>
<CAPTION>
CARDINAL DOCUMENTS BERGEN DOCUMENTS
- ----------------------------------- -----------------------------------
<S> <C>
CARDINAL HEALTH, INC. BERGEN BRUNSWIG CORPORATION
5555 GLENDON COURT 4000 METROPOLITAN DRIVE
DUBLIN, OHIO 43016 ORANGE, CALIFORNIA 92868
ATTENTION: DAVID BEARMAN ATTENTION: LISA RIORDAN
EXECUTIVE VICE PRESIDENT DIRECTOR, INVESTOR
AND CHIEF FINANCIAL OFFICER RELATIONS & PUBLIC
RELATIONS
TELEPHONE: (614) 717-5000 TELEPHONE: (714) 385-4000
</TABLE>
IN ORDER TO ENSURE TIMELY DELIVERY, ANY REQUEST FOR DOCUMENTS SHOULD BE
MADE BY FEBRUARY 12, 1998.
iv
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS....................... i
FORWARD-LOOKING STATEMENTS....... ii
AVAILABLE INFORMATION............ ii
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE......... iii
INDEX OF DEFINED TERMS........... vii
SUMMARY.......................... 1
RISK FACTORS..................... 22
Fixed Exchange Ratio Despite
Change in Relative Stock
Prices...................... 22
Uncertainties in Integrating
Business Operations......... 22
Risks Generally Associated with
Acquisitions................ 22
Interests of Certain Persons in
the Merger.................. 22
THE SPECIAL MEETINGS............. 23
General........................ 23
Matters to Be Considered at the
Special Meetings............ 23
Record Date; Vote Required;
Voting at the Meetings...... 24
Voting of Proxies.............. 25
Solicitation of Proxies........ 26
Recommendations of the Boards
of Directors................ 26
Appraisal Rights............... 26
THE MERGER....................... 27
Background of the Merger....... 27
Reasons for the Merger;
Recommendations of the
Boards of Directors......... 29
Opinion of Bergen's Financial
Advisor..................... 32
Interests of Certain Persons in
the Merger.................. 35
Accounting Treatment........... 39
Regulatory Approvals........... 40
Federal Securities Law
Consequences................ 41
Stock Option Agreement......... 41
Support/Voting Agreement....... 43
Bergen Rights Agreement
Amendment................... 44
THE MERGER AGREEMENT............. 44
The Merger..................... 44
Merger Consideration........... 45
Exchange Procedures............ 45
Representations and
Warranties.................. 46
Covenants...................... 47
No Negotiations or
Solicitations............... 54
Conditions..................... 56
Bergen Stock Options........... 58
Employee Benefits.............. 59
Termination; Effect of
Termination................. 59
Amendment and Waiver........... 61
Expenses....................... 61
RIGHTS OF DISSENTING
SHAREHOLDERS................... 62
Cardinal Shareholders.......... 62
Bergen Shareholders............ 64
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES................... 64
THE COMPANIES.................... 65
Business of Bergen............. 65
Business of Cardinal........... 66
Subcorp........................ 67
UNAUDITED PRO FORMA COMBINED
FINANCIAL INFORMATION.......... 68
UNAUDITED PRO FORMA COMBINED
BALANCE SHEET.................. 69
UNAUDITED PRO FORMA COMBINED
STATEMENTS OF EARNINGS......... 70
COMPARISON OF SHAREHOLDER
RIGHTS......................... 77
Amendment of Charter
Documents................... 77
Amendment and Repeal of Bylaws
and Regulations............. 77
Removal of Directors........... 78
Vacancies on the Board......... 78
Right to Call Special Meetings
of Shareholders............. 78
</TABLE>
v
<PAGE> 11
<TABLE>
<S> <C>
Shareholder Action Without a
Meeting..................... 79
Cumulative Voting.............. 79
Mergers, Acquisitions and
Certain Other
Transactions................ 79
Provisions Affecting Control
Share Acquisitions and
Business Combinations....... 80
Rights of Dissenting
Shareholders................ 81
Dividends...................... 81
Preemptive Rights of
Shareholders................ 82
Director and Officer Liability
and Indemnification......... 82
Rights Agreement............... 84
DESCRIPTION OF CARDINAL CAPITAL
STOCK.......................... 86
OTHER ACTION TO BE TAKEN AT THE
BERGEN SPECIAL MEETING......... 87
Bergen Adjournment Proposal.... 87
OTHER ACTION TO BE TAKEN AT THE
CARDINAL SPECIAL MEETING....... 88
Authorized Shares Proposal..... 88
Name Change Proposal........... 89
Cardinal Adjournment
Proposal.................... 89
LEGAL MATTERS.................... 90
EXPERTS.......................... 90
OTHER MATTERS.................... 91
SHAREHOLDER PROPOSALS............ 91
Agreement and Plan of Merger,
dated August 23, 1997, by and
among Cardinal Health, Inc.,
Bruin Merger Corp. and Bergen
Brunswig Corporation........... Annex A
Opinion of Merrill Lynch, Pierce,
Fenner & Smith, dated August
23, 1997....................... Annex B
Form of Amendments to the Amended
and Restated Articles of
Incorporation of Cardinal
Health, Inc., as amended....... Annex C
Section 1701.85 of the Ohio
Revised Code................... Annex D
</TABLE>
vi
<PAGE> 12
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
1997 Bergen Form 10-K.................. iii
1997 Cardinal Form 10-K................ iii
Acquiring Person....................... 84
Acquisition Agreement.................. 55
Additional Vested Benefit.............. 37
Affiliate Letters...................... 40
Affiliated Companies................... 38
Antitrust Division..................... 12
Antitrust Laws......................... 48
APB No. 16............................. 49
ASD.................................... 66
Attributable Change.................... 47
Authorized Shares Proposal............. 3
Base Case Synergies.................... 33
Bergen................................. i
Bergen Adjournment Proposal............ 1
Bergen Board........................... i
Bergen Bylaws.......................... 14
Bergen Certificate..................... 14
Bergen Common Stock.................... i
Bergen Merger Proposal................. 1
Bergen Option.......................... 5
Bergen Record Date..................... 2
Bergen Shareholders.................... i
Bergen Special Meeting................. i
Business Combination................... 60
CAP.................................... 36
Cardinal............................... i
Cardinal Adjournment Proposal.......... 3
Cardinal Articles...................... i
Cardinal Board......................... i
Cardinal Common Shares................. i
Cardinal Demand........................ 62
Cardinal Exchange Option............... 5
Cardinal Merger Proposal............... 3
Cardinal Record Date................... 3
Cardinal Regulations................... 14
Cardinal Repurchase Period............. 42
Cardinal Shareholders.................. i
Cardinal Special Meeting............... i
Certificates........................... 45
Closing Date........................... 5
Code................................... 5
Commission............................. ii
Common Pleas Court..................... 63
Competing Transaction.................. 13
Competitive Activity................... 37
Consulting Agreement................... 39
Continuation Period.................... 36
Continuing Directors................... 85
Contributed Synergies.................. 34
control share acquisition.............. 80
Conversion Date........................ 37
corporate agents....................... 82
Costs.................................. 60
Dissenter's Cardinal Shares............ 62
Dissenting Cardinal Shareholder........ 62
Distribution Date...................... 84
Distribution Group..................... 33
Drug Company........................... 65
Effective Time......................... 5
Employment Agreements.................. 36
EBIT................................... 34
EBITDA................................. 34
EPS.................................... 34
Exchange Act........................... ii
Exchange Ratio......................... i
Flip-In Events......................... 85
Forgiveness Provision.................. 37
FTC.................................... 11
HSR Act................................ 6
HSR Authority.......................... 60
IntePlex............................... 66
interested stockholder................. 80
IVAX................................... 27
Joint Proxy Statement/Prospectus....... 1
Junior Preferred Stock................. 84
Lowenstein, Sandler.................... 14
LTM.................................... 33
Market/Tender Offer Price.............. 42
</TABLE>
vii
<PAGE> 13
<TABLE>
<S> <C>
Material Adverse Effect................ 46
Medical................................ 66
MediQual............................... 17
MediQual Merger........................ 17
Merger................................. i
Merger Agreement....................... i
Merger Expenses........................ 17
Merrill Lynch Opinion.................. 11
MSI.................................... 16
MSI Merger............................. 16
NAAGVPC................................ 12
Name Change Proposal................... 3
New Jersey Law......................... 77
New Jersey Shareholders' Protection
Act.................................. 80
Non-Attributable Change................ 47
Non-Recurring Non-Attributable
Change............................... 47
Noncompetition Period.................. 37
Notes.................................. 37
NYSE................................... i
Ohio Law............................... 77
Option................................. 12
Owen................................... 16
Owen Merger............................ 16
P/E.................................... 33
P/E to Growth.......................... 33
PCI.................................... 16
PCI Merger............................. 16
Peer Company Executives................ 36
Per Share Repurchase Price............. 42
Permitted Change....................... 47
Preferred Shares....................... 86
Purchase Event......................... 42
Purchase Price......................... 84
Pyxis.................................. 16
Pyxis Merger........................... 16
resident domestic corporation.......... 80
Registration Statement................. ii
Rights................................. iii
Rights Agent........................... 13
Rights Agreement....................... 13
Rights Agreement Amendment............. 13
ROM Plan............................... 36
Securities Act......................... ii
September 1997 Cardinal Form 10-Q...... iii
SERP................................... 37
Severance Agreements................... 36
Stock Acquisition Date................. 84
Stock Option Agreement................. 12
Subcorp................................ i
Supplemental Agreements................ 36
Support/Voting Agreement............... 13
Supporting Shareholder Shares.......... 43
Surviving Corporation.................. 11
Termination Fee........................ 60
Tier 1 Executives...................... 36
Tier 2 Employment Agreements........... 38
Tier 2 Executives...................... 38
Tier 2 Supplemental Agreements......... 38
Triggering Events...................... 85
Unit................................... 84
Vested Benefits........................ 37
Whitmire............................... 16
Whitmire Merger........................ 16
</TABLE>
viii
<PAGE> 14
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/ Prospectus and the Annexes hereto (the "Joint Proxy
Statement/Prospectus"). This summary is not intended to be complete and is
qualified in its entirety by the more detailed information and financial
statements appearing elsewhere or incorporated by reference in this Joint Proxy
Statement/Prospectus. Cardinal Shareholders and Bergen Shareholders are urged to
read and consider carefully all of the information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus, including the Annexes.
THE COMPANIES
BERGEN
Bergen is a diversified drug and health care distribution organization and
is one of the nation's leading suppliers of healthcare products and services to
the managed care and retail pharmacy markets. Bergen offers innovative logistics
management programs to all healthcare venues that help its customers grow
efficiently, improve their cost effectiveness and further support their focus on
patient/consumer care. The principal executive offices of Bergen are located at
4000 Metropolitan Drive, Orange, California 92868, and its telephone number is
(714) 385-4000. See "The Companies -- Business of Bergen."
CARDINAL AND SUBCORP
Cardinal is a leading health care service provider which offers an array of
value-added pharmaceutical distribution services to a broad base of customers.
It is one of the nation's largest wholesale distributors of pharmaceutical and
related health care products to independent and chain drug stores, hospitals,
alternate care centers and the pharmacy departments of supermarkets and mass
merchandisers located throughout the continental United States. Cardinal also
provides a variety of related healthcare service offerings, including pharmacy
automation, pharmacy management and information services, retail pharmacy
franchising, and integrated packaging services for pharmaceutical manufacturers.
Subcorp is a newly formed, wholly owned subsidiary of Cardinal formed for
the purpose of effecting the Merger.
The principal executive offices of Cardinal and Subcorp are located at 5555
Glendon Court, Dublin, Ohio 43016, and their telephone number is (614) 717-5000.
See "The Companies -- Business of Cardinal."
THE SPECIAL MEETINGS
BERGEN SPECIAL MEETING
Date, Time and Place of Bergen Special Meeting. The Bergen Special Meeting
will be held at Bergen's corporate headquarters at 4000 Metropolitan Drive,
Orange, California, on Friday, February 20, 1998, at 10:00 a.m., local time, for
the following purposes:
1. To consider and vote on a proposal (the "Bergen Merger Proposal")
to approve and adopt the Merger Agreement, pursuant to which, among other
things, (i) Subcorp will be merged with and into Bergen with the result
that Bergen will become a wholly owned subsidiary of Cardinal, and (ii)
each outstanding share (other than shares held in the treasury of Bergen,
if any, which will be canceled) of Bergen Common Stock will be converted
into 0.775 of a Cardinal Common Share. The Merger Agreement is attached to
this Joint Proxy Statement/Prospectus as Annex A.
2. To adjourn the Bergen Special Meeting, if necessary, to permit
further solicitation of proxies in the event that there are not sufficient
votes at the time of the Bergen Special Meeting to approve the foregoing
proposal (the "Bergen Adjournment Proposal").
3. Such other matters as may properly come before the Bergen Special
Meeting.
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<PAGE> 15
Record Date; Required Vote. Only Bergen Shareholders of record at the
close of business on January 20, 1998 (the "Bergen Record Date"), will be
entitled to notice of and to vote at the Bergen Special Meeting. On the Bergen
Record Date, there were 50,428,925 shares of Bergen Common Stock outstanding
held by approximately 2,270 holders of record. Each of the Bergen Merger
Proposal and the Bergen Adjournment Proposal requires the affirmative vote of a
majority of the votes cast by the holders of the shares of Bergen Common Stock
entitled to vote and voting at the Bergen Special Meeting. See "The Special
Meetings -- Record Date; Vote Required; Voting at the Meetings -- Bergen."
If, in a proxy submitted on behalf of a Bergen Shareholder by a person
acting solely in a representative capacity, the proxy is marked clearly to
indicate that the shares represented thereby are not being voted with respect to
the Bergen Merger Proposal or the Bergen Adjournment Proposal, then such proxy
will be counted as present for the purpose of establishing a quorum at the
Bergen Special Meeting, and, because such proposal requires the affirmative vote
of a majority of the votes cast, such "non-votes" will have no effect with
respect to such proposal. Additionally, proxies submitted abstaining with
respect to the Bergen Merger Proposal or the Bergen Adjournment Proposal will be
counted as present for the purpose of establishing a quorum at the Bergen
Special Meeting, and such abstentions will have no effect on such proposals.
In the event that Bergen has the right to terminate the Merger Agreement
for any reason, the Bergen Board may, in the exercise of its fiduciary duty,
make determinations (i) whether to terminate the Merger Agreement or to waive
the condition that gives rise to such right to terminate the Merger Agreement
and proceed to the consummation of the Merger, and (ii) if it determines to
waive the condition giving rise to such right to terminate and proceed to the
consummation of the Merger, whether or not to resolicit the approval of the
Bergen Merger Proposal. See "The Merger Agreement -- Termination; Effect of
Termination."
Bergen Common Stock Owned by Directors and Executive Officers of
Bergen. As of the Bergen Record Date, the directors and executive officers of
Bergen, other than the Chairman, may be deemed to be beneficial owners of
approximately 2.3% of the outstanding Bergen Common Stock and each such person
has advised Bergen that such person intends to vote in favor of the Bergen
Merger Proposal and the Bergen Adjournment Proposal. In addition, Robert E.
Martini, Chairman of Bergen, who as of the Bergen Record Date beneficially owned
in the aggregate approximately 5.4% of the outstanding Bergen Common Stock, has
agreed to vote or direct the vote of all Bergen Common Stock over which he has
voting power or control in favor of the Bergen Merger Proposal. See "The Special
Meetings -- Record Date; Vote Required; Voting at the Meetings -- Bergen" and
"The Merger -- Support/Voting Agreement."
Proxies. All shares of Bergen Common Stock that are entitled to vote and
are represented at the Bergen Special Meeting by properly executed proxies
received prior to the vote at the Bergen Special Meeting, and not duly and
timely revoked, will be voted at the Bergen Special Meeting in accordance with
the instructions indicated thereon. If no instructions are indicated, such
proxies will be voted FOR the Bergen Merger Proposal and the Bergen Adjournment
Proposal.
If any other matters incidental to the Merger are properly presented for
consideration at the Bergen Special Meeting (or any adjournments or
postponements thereof), the persons named in the enclosed form of proxy and
voting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
Revocability of Proxies. Any proxy given pursuant to this solicitation may
be revoked by (i) filing (including by telegram or telecopy) with the Secretary
of Bergen, before the taking of the vote at the Bergen Special Meeting, a
written notice of revocation bearing a later date than the date of the proxy,
(ii) duly executing a later-dated proxy relating to the same shares and causing
such later-dated proxy to be voted at the Bergen Special Meeting or (iii)
attending the Bergen Special Meeting and voting in person. Bergen Shareholders
who require assistance in changing or revoking a proxy should contact Bergen's
proxy solicitor, Morrow & Co., Inc., by mail at 909 Third Avenue, 20th Floor,
New York, New York, 10022 or by telephone at (800) 662-5200.
2
<PAGE> 16
Appraisal Rights. Bergen Shareholders will not be entitled to any
appraisal rights in connection with the Merger. See "Rights of Dissenting
Shareholders -- Bergen Shareholders" and "Comparison of Shareholder
Rights -- Rights of Dissenting Shareholders."
Recommendation of the Board of Directors. THE BOARD OF DIRECTORS OF BERGEN
HAS DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, BERGEN AND THE
BERGEN SHAREHOLDERS. ACCORDINGLY, THE BERGEN BOARD OF DIRECTORS RECOMMENDS THAT
BERGEN SHAREHOLDERS VOTE FOR THE BERGEN MERGER PROPOSAL AND THE BERGEN
ADJOURNMENT PROPOSAL.
CARDINAL SPECIAL MEETING
Date, Time and Place of Cardinal Special Meeting. The Cardinal Special
Meeting will be held at Cardinal's corporate offices at 5555 Glendon Court,
Dublin, Ohio 43016, on Friday, February 20, 1998, at 1:00 p.m., local time, for
the following purposes:
1. To consider and vote on a proposal (the "Cardinal Merger Proposal")
to approve, authorize and adopt the Merger Agreement which provides, among
other things, that (i) Subcorp will be merged with and into Bergen with the
result that Bergen will become a wholly owned subsidiary of Cardinal, and
(ii) each outstanding share (other than shares held in the treasury of
Bergen, which will be canceled) of Bergen Common Stock will be converted
into 0.775 of a Cardinal Common Share. The Merger Agreement is attached to
this Joint Proxy Statement/Prospectus as Annex A.
2. To consider and vote on a proposal (the "Authorized Shares
Proposal") to approve, authorize and adopt an amendment to Article Fourth
of the Cardinal Articles to increase the number of Cardinal Common Shares
authorized from 150,000,000 to 300,000,000 shares. The Authorized Shares
Proposal will be presented at the Cardinal Special Meeting and will be
adopted if approved whether or not the Cardinal Merger Proposal is
approved, but its adoption is a condition to consummation of the Merger.
This proposed amendment to the Cardinal Articles is included in the
resolution attached to this Joint Proxy Statement/Prospectus as Annex C.
3. If the Cardinal Merger Proposal is approved, to consider and vote
upon a proposal (the "Name Change Proposal") to approve, authorize and
adopt an amendment to Article First of the Cardinal Articles to change
Cardinal's name from "Cardinal Health, Inc." to "Cardinal Bergen Health,
Inc." Adoption of the Name Change Proposal is not a condition to the
Merger, but the Name Change Proposal will not be adopted unless and until
the Merger is consummated. This proposed amendment to the Cardinal Articles
is included in the resolution attached to this Joint Proxy
Statement/Prospectus as Annex C.
4. To adjourn the Cardinal Special Meeting, if necessary, to permit
further solicitation of proxies in the event that there are not sufficient
votes at the time of the Cardinal Special Meeting to approve either the
Cardinal Merger Proposal or the Authorized Shares Proposal (the "Cardinal
Adjournment Proposal").
5. Such other matters as may properly come before the Cardinal Special
Meeting.
Record Date; Required Vote. Only Cardinal Shareholders of record at the
close of business on January 20, 1998 (the "Cardinal Record Date"), will be
entitled to notice of and to vote at the Cardinal Special Meeting. On the
Cardinal Record Date, there were 109,634,461 Cardinal Common Shares outstanding
held by approximately 2,570 holders of record. Each of the Cardinal Merger
Proposal, the Authorized Shares Proposal and the Name Change Proposal requires
the affirmative vote of the holders of a majority of the Cardinal Common Shares
outstanding and entitled to vote thereon. The Adjournment Proposal requires the
affirmative vote of the holders of a majority of the Cardinal Common Shares
entitled to vote and present in person or represented by proxy at the Cardinal
Special Meeting. See "The Special Meetings -- Record Date; Vote Required; Voting
at the Meetings -- Cardinal."
3
<PAGE> 17
If, in a proxy submitted on behalf of a Cardinal Shareholder by a person
acting solely in a representative capacity, the proxy is marked clearly to
indicate that the shares represented thereby are not being voted with respect to
any of the Cardinal Merger Proposal, the Authorized Shares Proposal, the Name
Change Proposal or the Cardinal Adjournment Proposal, then such proxy will be
counted as present for the purpose of establishing a quorum at the Cardinal
Special Meeting, and, because such proposal requires the affirmative vote of the
holders of a majority of the Cardinal Common Shares outstanding (or in the case
of the Cardinal Adjournment Proposal, a majority of the Cardinal Common Shares
entitled to vote and present in person or represented by proxy at the Cardinal
Special Meeting), such "non-votes" will have the effect of a negative vote with
respect to such proposal. Additionally, proxies submitted abstaining with
respect to any of the Cardinal Merger Proposal, the Authorized Shares Proposal,
the Name Change Proposal or the Cardinal Adjournment Proposal will be counted as
present for the purpose of establishing a quorum at the Cardinal Special
Meeting, and such abstentions will have the effect of a vote against such
proposal.
In the event that Cardinal has the right to terminate the Merger Agreement
for any reason, the Cardinal Board may, in the exercise of its fiduciary duty,
make determinations (i) whether to terminate the Merger Agreement or to waive
the condition that gives rise to such right to terminate the Merger Agreement
and proceed to the consummation of the Merger, and (ii) if it determines to
waive the condition giving rise to such right to terminate and proceed to the
consummation of the Merger, whether or not to resolicit the approval of the
Cardinal Merger Proposal and the Name Change Proposal. See "The Merger
Agreement -- Termination; Effect of Termination."
Cardinal Common Shares Owned by Directors and Executive Officers of
Cardinal. As of the Cardinal Record Date, the directors and executive officers
of Cardinal and certain of their affiliates may be deemed to be beneficial
owners of approximately 6% of the outstanding Cardinal Common Shares and each
such person has advised Cardinal that he, she or it intends to vote in favor of
each of the Cardinal Merger Proposal, the Authorized Shares Proposal, the Name
Change Proposal and the Cardinal Adjournment Proposal. See "The Special
Meetings -- Record Date; Vote Required; Voting at the Meetings -- Cardinal."
Proxies. All Cardinal Common Shares that are entitled to vote and are
represented at the Cardinal Special Meeting by properly executed proxies
received prior to the vote at the Cardinal Special Meeting, and not duly and
timely revoked, will be voted at the Cardinal Special Meeting in accordance with
the instructions indicated thereon. If no instructions are indicated, such
proxies will be voted FOR each of the Cardinal Merger Proposal, the Authorized
Shares Proposal, the Name Change Proposal and the Cardinal Adjournment Proposal.
If any other matters incidental to the Merger are properly presented for
consideration at the Cardinal Special Meeting (or any adjournments or
postponements thereof), the persons named in the enclosed form of proxy and
voting thereunder will have discretion to vote on such matters in accordance
with their best judgment.
Revocability of Proxies. Any proxy given pursuant to this solicitation may
be revoked by (i) filing (including by telegram or telecopy) with the Secretary
of Cardinal, before the taking of the vote at the Cardinal Special Meeting, a
written notice of revocation bearing a later date than the date of the proxy or
by giving notice of revocation in open meeting, (ii) duly executing a
later-dated proxy relating to the same shares and delivering (including by
telegram or telecopy) it to the Secretary of Cardinal before the taking of the
vote at the Cardinal Special Meeting or (iii) attending the Cardinal Special
Meeting and voting in person. Cardinal Shareholders who require assistance in
changing or revoking a proxy should contact Cardinal's proxy solicitor, Morrow &
Co., Inc., by mail at 909 Third Avenue, 20th Floor, New York, New York 10022, or
by telephone at (800) 662-5200.
Appraisal Rights. Cardinal Shareholders will be entitled to dissenters'
appraisal rights in connection with the Merger. See "Rights of Dissenting
Shareholders -- Cardinal Shareholders" and "Comparison of Shareholder
Rights -- Rights of Dissenting Shareholders."
Recommendation of the Board of Directors. THE BOARD OF DIRECTORS OF
CARDINAL HAS DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE
TRANSACTIONS
4
<PAGE> 18
CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, CARDINAL AND THE
CARDINAL SHAREHOLDERS. ACCORDINGLY, THE CARDINAL BOARD OF DIRECTORS RECOMMENDS
THAT CARDINAL SHAREHOLDERS VOTE FOR THE APPROVAL OF THE CARDINAL MERGER PROPOSAL
AND FOR THE APPROVAL AND ADOPTION OF THE NAME CHANGE PROPOSAL (SUBJECT TO
CONSUMMATION OF THE MERGER), THE AUTHORIZED SHARES PROPOSAL AND THE CARDINAL
ADJOURNMENT PROPOSAL.
THE MERGER
GENERAL; EXCHANGE RATIO
Pursuant to the Merger Agreement, each share of Bergen Common Stock issued
and outstanding immediately prior to the Effective Time (as hereinafter
defined), other than shares held in the treasury of Bergen, if any, which will
be canceled, will be converted into and represent 0.775 of a Cardinal Common
Share.
BERGEN OPTIONS
At the Effective Time, each unexpired and unexercised option to purchase
shares of Bergen Common Stock in effect on the date of the Merger Agreement
which has been issued by Bergen (each, a "Bergen Option") will be automatically
converted into an option (a "Cardinal Exchange Option") to purchase that number
of Cardinal Common Shares equal to the number of shares of Bergen Common Stock
issuable immediately prior to the Effective Time upon exercise of the Bergen
Option (without regard to actual restrictions on exercisability) multiplied by
the Exchange Ratio, with an exercise price per share equal to the exercise price
per share which existed under the corresponding Bergen Option divided by the
Exchange Ratio, and with other terms and conditions that are the same as the
terms and conditions of such Bergen Option immediately before the Effective
Time; provided that with respect to any Bergen Option that is an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), the foregoing conversion will be carried out in a
manner satisfying the requirements of Section 424(a) of the Code. As of the
Bergen Record Date, 2,836,363 shares of Bergen Common Stock were issuable upon
the exercise of outstanding Bergen Options, which options, if not exercised or
canceled prior to the Effective Time, will be converted to become approximately
2,198,181 Cardinal Exchange Options at the Effective Time. The weighted average
exercise price per share of all Bergen Options outstanding as of the Bergen
Record Date is $23.26 per share. Following the Merger and based on an Exchange
Ratio of 0.775 and the Bergen Options outstanding as of the Bergen Record Date,
the weighted average exercise price per share of Cardinal Exchange Options will
be approximately $30.01 per share. Substantially all of the executive officers
and directors of Bergen currently hold Bergen Options which will become Cardinal
Exchange Options. See "The Merger -- Interests of Certain Persons in the
Merger -- Bergen Options" and "The Merger Agreement -- Bergen Stock Options."
EFFECTIVE TIME OF THE MERGER; CLOSING DATE
The Merger will become effective (the "Effective Time") when a certificate
of merger is filed with the New Jersey Secretary of State or at such later time
as is specified in the certificate of merger. This filing will be made on a date
(the "Closing Date") specified by Cardinal and Bergen, which date will be as
soon as practicable, but in any event within ten business days, following the
date upon which all conditions set forth in the Merger Agreement have been
satisfied or waived, as the case may be, or such other time as Cardinal and
Bergen may mutually agree. See "The Merger Agreement -- Conditions."
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to, among other things, (i) the
approval by Bergen Shareholders of the Bergen Merger Proposal and by Cardinal
Shareholders of the Cardinal Merger Proposal; (ii) the approval by Cardinal
Shareholders of an amendment to the Cardinal Articles to increase the number of
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<PAGE> 19
authorized Cardinal Common Shares; (iii) the expiration or termination of any
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"); (iv) the absence of any provision of
any applicable law or regulation and the absence of any judgment, injunction,
order or decree prohibiting or enjoining the consummation of the Merger; (v) the
absence of any pending action by any governmental authority seeking to prevent
the Merger, prohibit or limit the ownership or operation by Cardinal, Bergen or
their respective subsidiaries of any material portion of the business or assets
of Cardinal, Bergen or their respective subsidiaries, compel Cardinal, Bergen or
their respective subsidiaries to dispose of or hold separate any material
portion of the business or assets of Cardinal, Bergen or their respective
subsidiaries, impose limitations on the ability of Cardinal to acquire, own or
hold the capital stock of Bergen as the surviving corporation in the Merger, or
prohibit Cardinal from effectively controlling in any material respect the
business or operations of Cardinal; (vi) the declaration by the Commission of
the effectiveness of the Registration Statement filed in connection with this
Joint Proxy Statement/Prospectus, and, at the Effective Time, the absence of any
stop order or similar restraining order threatened or entered by the Commission
or any state securities administrator; (vii) the receipt by Bergen of a legal
opinion to the effect that the Merger will qualify as a tax-free reorganization
for federal income tax purposes; (viii) the approval for listing on the NYSE of
the Cardinal Common Shares to be issued in the Merger; and (ix) the receipt by
Cardinal of a letter, in form and substance reasonably satisfactory to Cardinal
and Bergen, from Deloitte & Touche LLP with respect to the qualification of the
Merger as a pooling-of-interests for accounting and financial reporting
purposes.
In addition, consummation of the Merger by any party to the Merger
Agreement is conditioned upon (i) each of the representations and warranties of
the other party (a) which is qualified by materiality or contains references to
Material Adverse Effect (as hereinafter defined) being true and correct in all
respects on the date of the Merger Agreement and on and as of the Closing Date
as though made on and as of the Closing Date (except for such representations
and warranties made as of a specified date, the accuracy of which will be
determined as of the specified date), subject to certain qualifications as set
forth in the Merger Agreement and described below; and (b) which is not
qualified by materiality and does not contain any reference to Material Adverse
Effect being true and correct in all material respects on the date of the Merger
Agreement and on and as of the Closing Date as though made on and as of the
Closing Date (except for such representations and warranties made as of a
specified date, the accuracy of which will be determined as of the specified
date); (ii) the representations and warranties of the other party being true and
correct in all respects on the date of the Merger Agreement and on and as of the
Closing Date as though made on and as of the Closing Date (except for such
representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), except where any such
failure of the representations and warranties in the aggregate to be true and
correct in all respects would not have a Material Adverse Effect on such other
party (disregarding, for purposes of this provision, the Material Adverse Effect
qualification in any single representation and warranty), subject to certain
qualifications as set forth in the Merger Agreement and described below; (iii)
the other party having performed in all material respects each obligation and
agreement and having complied in all material respects with each covenant to be
performed and complied with by it under the Merger Agreement at or prior to the
Effective Time, except, in all such cases, for acts and omissions of such party
which, in the aggregate, do not have a Material Adverse Effect on such other
party; (iv) the absence of any pending action which is reasonably likely to have
a Material Adverse Effect on the other party; and (v) since the date of the
Merger Agreement, the absence of any change in the assets, liabilities, results
of operations or financial condition of the other party which would constitute a
Material Adverse Effect on such other party (subject to certain qualifications
set forth in the Merger Agreement) or any event, occurrence or development which
would have a material adverse effect on the ability of such other party to
consummate the transactions contemplated by the Merger Agreement.
Cardinal's obligation to consummate the Merger is also subject to the
conditions that there shall not have been a material breach of the Stock Option
Agreement (as defined below) and that certain supplemental agreements between
Bergen and certain specified employees of Bergen (as described below) shall be
in full force and effect and shall not have been terminated.
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<PAGE> 20
See "The Merger -- Accounting Treatment," "-- Interests of Certain Persons
in the Merger," and "-- Regulatory Approvals" and "The Merger
Agreement -- Representations and Warranties," "-- Covenants" and
"-- Conditions."
TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval and adoption of the Merger Agreement by
Bergen Shareholders and Cardinal Shareholders, by mutual consent of Cardinal and
Bergen, or by either Cardinal or Bergen (a) if any law or regulation makes
consummation of the Merger illegal or otherwise prohibited, or if any final and
nonappealable judgment, injunction, order or decree of a court or other
competent governmental authority enjoins Cardinal or Bergen from consummating
the Merger; (b) if the Merger has not been consummated before April 30, 1998
(provided that the party terminating the Merger Agreement did not cause a delay
as a result of a failure to perform any material covenant under the Merger
Agreement); (c) if at the Bergen Special Meeting the requisite vote of the
Bergen Shareholders to approve the Merger and the transactions contemplated by
the Merger Agreement has not been obtained; (d) if the authorization of the
Cardinal Shareholders with respect to the issuance of Cardinal Common Shares in
the Merger or the increase in the number of authorized Cardinal Common Shares
have not been obtained by reason of the failure to obtain the required vote at a
meeting held for such purpose; (e) if (i) there has been a material breach by
the other party of any of its representations, warranties, covenants or
agreements contained in the Merger Agreement, which breach would result in the
failure to satisfy one or more of the conditions to the Merger with respect to
representations, warranties, covenants and agreements or would result in a
material adverse effect on the ability of Cardinal and/or Bergen to consummate
the transactions contemplated by the Merger Agreement, and such breach shall not
have been cured within 30 days after notice thereof shall have been received by
the party alleged to be in breach; or (ii) the condition to the Merger with
respect to the absence of certain changes is not satisfied; or (f) on one
business day's prior notice if either party has received any communication from
the FTC or the Antitrust Division (each as hereinafter defined) indicating that
such entity has authorized the institution of litigation challenging the
transactions contemplated by the Merger Agreement under the Antitrust Laws (as
hereinafter defined), which litigation will include a motion seeking an order or
injunction prohibiting the consummation of any of the transactions contemplated
by the Merger Agreement; provided, however, that the right to terminate the
Merger Agreement pursuant to this particular provision will only be exercisable
within 10 business days after the receipt by either party of the first such
communication.
In addition, the Merger Agreement may be terminated by Cardinal (a) if the
Board of Directors of Bergen withdraws, modifies or changes the Bergen Board's
recommendation in favor of the Merger in a manner adverse to Cardinal, or if the
Board of Directors of Bergen has refused to affirm such recommendation as
reasonably requested by Cardinal; (b) if Bergen has breached in any material
respect any of its obligations under the Stock Option Agreement or if Mr. Robert
E. Martini has breached in any material respect any of his obligations under the
Support/Voting Agreement (as hereinafter defined) with Cardinal; and (c) if at
any time the representations and warranties of Bergen to the effect that neither
Bergen nor any of its affiliates has taken or agreed to take any action that
would prevent Cardinal from accounting for the Merger as a pooling-of-interests
for accounting and financial reporting purposes shall not be true and correct
and Cardinal has been advised that Deloitte & Touche LLP will not confirm in
writing as of the Effective Time that the Merger will qualify as a
pooling-of-interests for accounting and financial reporting purposes.
Bergen may also terminate the Merger Agreement (a) pursuant to Section
5.3(e) of the Merger Agreement (relating to a Competing Transaction (as defined
below)); or (b) if at any time the representations and warranties of Cardinal to
the effect that neither Cardinal nor any of its affiliates has taken or agreed
to take any action that would prevent Cardinal from accounting for the Merger as
a pooling-of-interests for accounting and financial reporting purposes shall not
be true and correct and Cardinal has been advised that Deloitte & Touche LLP
will not confirm in writing as of the Effective Time that the Merger will
qualify as a pooling-of-interests for accounting and financial reporting
purposes.
In the event that either Bergen or Cardinal has the right to terminate the
Merger Agreement pursuant to any of the foregoing, each of the Bergen Board and
the Cardinal Board may have to make determinations
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<PAGE> 21
whether or not to terminate the Merger Agreement or waive the condition giving
rise to such right to terminate and proceed to the consummation of the Merger,
and (in the event of any such waiver of a condition giving rise to such right to
terminate) whether or not to resolicit the approval and adoption of the Merger
Agreement and the authorization of the Merger and the other transactions
contemplated thereby by the Bergen Shareholders or the Cardinal Shareholders, as
the case may be. See "The Merger Agreement -- Termination; Effect of
Termination."
EFFECT OF TERMINATION
The Merger Agreement provides that if the Merger Agreement is terminated
and it is judicially determined that termination was caused by an intentional
breach of the Merger Agreement, in addition to any other remedies available, the
breaching party shall indemnify and hold harmless the other parties thereto for
their respective costs, fees and expenses of their counsel, accountants,
financial advisors and other experts and advisors as well as fees and expenses
incident to negotiation, preparation and execution of the Merger Agreement and
related documentation and shareholders' meetings and consents.
Under circumstances described in detail below (see "The Merger
Agreement -- Termination; Effect of Termination"), if Bergen terminates the
Merger Agreement, Bergen will pay to Cardinal in cash an amount up to but not
greater than $12 million in the aggregate in reimbursement for Cardinal's
expenses and a termination fee in an amount equal to $75 million.
Pursuant to the Merger Agreement, in the event that the Board of Directors
of Cardinal withdraws or changes in a manner adverse to Bergen its
recommendation of the Merger Agreement, and the Merger Agreement is terminated
in accordance with the terms of the Merger Agreement as a result thereof, then
Cardinal will pay to Bergen in cash, as liquidated damages in reimbursement for
Bergen's expenses, an amount of cash equal to the aggregate amount of Bergen's
costs up to but not greater than $12 million in the aggregate and an additional
amount equal to $75 million.
In addition, under certain circumstances involving a termination of the
Merger Agreement by either Cardinal or Bergen (as described below), one party
will pay in cash, as liquidated damages, to the other party an amount equal to
$50 million or $75 million, as applicable. See "The Merger
Agreement -- Termination; Effect of Termination."
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling-of-interests for accounting
and financial reporting purposes. Consummation of the Merger is conditioned on,
among other matters, Cardinal's receipt of a letter, in form and substance
reasonably satisfactory to Cardinal and Bergen, from Deloitte & Touche LLP to
the effect that the Merger will qualify as a pooling-of-interests. See "The
Merger -- Accounting Treatment."
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Bergen. The Bergen Board of Directors, in the course of reaching its
decision to approve the Merger Agreement and the transactions contemplated
thereby, consulted with Bergen's legal and financial advisors as well as with
Bergen's management and considered a number of factors, including the following
material factors (the order does not necessarily reflect the relative
significance):
- The fact that the per share consideration to be received by Bergen
Shareholders in the Merger represents a premium of approximately 61% over
the closing price of Bergen's common stock on the last trading day prior
to the announcement of the signing of the Merger Agreement (based upon
the Cardinal Common Share price on such date);
- The potential enhancements in earnings that could be achieved by:
- Consolidating the combined companies' 57 distribution centers (many of
which are not automated) into a smaller number of fully automated,
high volume state-of-the-art distribution
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<PAGE> 22
centers that will be able to attain greater economies of scale and
lower transportation costs than non-automated centers;
- Centralizing management and administrative functions, thereby reducing
general administrative expenses; and
- Employing Cardinal's purchasing practices to reduce product
procurement costs;
- The ability to leverage such enhanced profitability, given the historic
growth in Cardinal's price earnings ratio and the opportunity to
associate Cardinal's price earnings ratio with the increased earnings
potential of the combined company;
- The opportunity to achieve enhanced purchasing power through the combined
company's expanded customer base, enabling management to negotiate
greater price discounts for the combined company's customers;
- The opportunity to combine the two companies' product lines, enabling
Cardinal's customers to benefit from Bergen's medical and surgical supply
product offerings, enabling Bergen's customers to benefit from Cardinal's
diverse healthcare service offerings and improving one-stop shopping
opportunities for the customers of both companies;
- The opportunity to improve customer service by implementing the best
practices of each company in a variety of service-oriented aspects of the
combined companies' business;
- The demonstrated ability of the managements of Cardinal and Bergen to
understand, and carve out a profitable niche in, the rapidly changing
healthcare industry;
- The opportunity of Bergen Shareholders to continue as shareholders of a
combined organization with greater financial and market strength than
Bergen on a stand-alone basis, and having strategic goals and an
operating philosophy similar to and compatible with those of Bergen,
stressing growth within the healthcare industry;
- The presentations of Merrill Lynch and the opinion of Merrill Lynch that,
as of the date thereof and based upon and subject to the factors and
assumptions set forth therein, the Exchange Ratio is fair to Bergen
Shareholders from a financial point of view.
- The assessment of Bergen's strategic alternatives to the Merger;
- The terms and conditions of the Merger Agreement and the Stock Option
Agreement; and
- The fact that the Merger is expected to be a tax-free transaction to
Bergen Shareholders and that it is expected to qualify as a
pooling-of-interests transaction for accounting and financial reporting
purposes.
The Bergen Board also considered a number of potential risks and
disadvantages relating to the Merger, including the following material risks and
disadvantages (the order does not necessarily reflect the relative
significance):
- the difficulty and management distraction inherent in integrating two
large and geographically dispersed operations and the risk that the
synergies and benefits sought in the Merger might not be fully achieved;
- the risk that the Merger would not be consummated;
- the substantial expenses expected to be incurred by Bergen and Cardinal
in connection with the Merger; and
- the anticipated reduction in the dividend rate and book value per share
associated with the Cardinal Common Shares to be received by Bergen
Shareholders upon consummation of the Merger.
The Bergen Board believed that these potential risks and disadvantages were
greatly outweighed by the potential benefits anticipated to be realized from the
Merger.
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<PAGE> 23
The foregoing discussion of the material factors and potential material
risks and disadvantages considered by the Bergen Board is not intended to be
exhaustive. In view of the wide variety of factors, risks and disadvantages
considered in connection with its evaluation of the Merger, the Bergen Board did
not find it practicable to, and did not, quantify or assign any relative or
specific weights to the foregoing matters, and individual directors may have
deemed different matters more significant than others. See "The Merger --
Reasons for the Merger; Recommendations of the Boards of Directors -- Bergen."
THE BOARD OF DIRECTORS OF BERGEN HAS DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN
THE BEST INTERESTS OF, BERGEN AND THE BERGEN SHAREHOLDERS. ACCORDINGLY, THE
BERGEN BOARD OF DIRECTORS RECOMMENDS THAT BERGEN SHAREHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE BERGEN MERGER PROPOSAL AND THE BERGEN ADJOURNMENT
PROPOSAL.
Cardinal. In the course of reaching its decision to approve the Merger
Agreement and each of the transactions contemplated thereby, the Board of
Directors of Cardinal consulted with Cardinal's legal advisors as well as with
Cardinal's management, and considered a number of factors, including the
following material factors (the order does not necessarily reflect the relative
significance):
- management's expectation that efficiencies from the proposed merger would
have an accretive effect on the earnings of the combined company;
- the opportunity to reduce marginal operating costs for the combined
company below levels which either party could achieve independently,
enabling it to share these savings in the form of lower prices and
enhanced services to its customers, while maintaining an acceptable level
of profitability;
- the creation of a network of high-volume, state-of-the-art distribution
centers in geographic areas which today are serviced by lower volume,
less efficient distribution centers;
- the opportunity to build more effective pharmaceutical purchasing
alliances with a larger customer base, making the combined company a more
attractive trading partner to pharmaceutical manufacturers and enabling
it to negotiate more favorable merchandising programs and price discounts
on behalf of its customers;
- the complementary nature of Cardinal's broader service offerings and
Bergen's broader product offerings, enabling the combined company to
offer a broader choice to its customers;
- the addition of Bergen's seasoned management team;
- the opportunity to achieve the benefits of scale and leverage with
respect to investments in new technology, systems and services, which is
expected to enhance the combined company's software systems and
substantially increase its customer efficiencies in the areas of
order-entry and inventory management systems; and
- that it is a condition to the consummation of the Merger that the Merger
be treated as a pooling-of-interests for financial reporting and
accounting purposes, therefore adding no goodwill to Cardinal's balance
sheet.
Although Cardinal's Board has determined that the Merger is fair to, and in
the best interests of, Cardinal Shareholders, all business combinations,
including the Merger, also include disadvantages. With respect to the Merger,
material disadvantages to Cardinal Shareholders identified by the Cardinal Board
and management include (the order does not necessarily reflect the relative
significance):
- the significant time and expense required to obtain necessary regulatory
approval and complete the Merger, with no assurance that the Merger will
be completed;
- the difficulties inherent in combining and integrating the two companies;
and
- the distraction caused by a transaction of this magnitude and the
attendant lost opportunities resulting from management's focus on
completing the Merger and integrating Cardinal's and Bergen's businesses.
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<PAGE> 24
The foregoing discussion of the material factors considered by the Cardinal
Board is not intended to be exhaustive. In view of the wide variety of factors
and risks considered in connection with its evaluation of the Merger, the
Cardinal Board did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative or specific weights to the specific factors
considered in reaching its determinations. In addition, individual directors may
have given different weights to different factors. See "The Merger -- Reasons
for the Merger; Recommendations of the Boards of Directors -- Cardinal."
THE BOARD OF DIRECTORS OF CARDINAL HAS DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN
THE BEST INTERESTS OF, CARDINAL AND THE CARDINAL SHAREHOLDERS. ACCORDINGLY, THE
CARDINAL BOARD OF DIRECTORS RECOMMENDS THAT CARDINAL SHAREHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF EACH OF THE CARDINAL MERGER PROPOSAL, THE NAME CHANGE
PROPOSAL (SUBJECT TO CONSUMMATION OF THE MERGER), THE AUTHORIZED SHARES PROPOSAL
AND THE CARDINAL ADJOURNMENT PROPOSAL.
OPINION OF BERGEN'S FINANCIAL ADVISOR
On August 23, 1997, Merrill Lynch delivered to the Bergen Board its written
opinion (the "Merrill Lynch Opinion") relating to the fairness, from a financial
point of view, to the holders of Bergen Common Stock (other than Cardinal and
its affiliates) of the Exchange Ratio. A copy of the Merrill Lynch Opinion,
which sets forth a description of the assumptions made, matters considered and
limits of its review, is attached to this Joint Proxy Statement/Prospectus as
Annex B and Bergen Shareholders are urged to read carefully the opinion in its
entirety. See "The Merger -- Opinion of Bergen's Financial Advisor."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of Bergen's Board of Directors with
respect to the Merger Agreement, Bergen Shareholders should be aware that
certain officers and directors of Bergen (or their affiliates) have interests in
the Merger that are different from and in addition to the interests of Bergen
Shareholders generally. These interests include, but are not limited to, the
fact that (i) each of the executive officers and directors of Bergen currently
holds Bergen Options, which will be converted into Cardinal Exchange Options in
the Merger based on the Exchange Ratio which applies to the Bergen Common Stock;
(ii) Bergen and Cardinal have executed supplemental agreements to existing
employment agreements Bergen had with eight key employees of Bergen or its
subsidiaries; (iii) Bergen and Cardinal have proposed certain modifications to
those supplemental agreements; (iv) Bergen and Cardinal have proposed entering
into similar supplemental agreements with three other key employees of Bergen
and its subsidiaries, one new employment agreement with another employee of a
Bergen subsidiary and an amendment to a consulting agreement with Robert E.
Martini (Bergen's Chairman); (v) Robert E. Martini, Donald R. Roden (Bergen's
President and Chief Executive Officer) and two other Bergen directors designated
by Robert E. Martini will become directors of Cardinal upon consummation of the
Merger; (vi) Robert E. Martini will become Chairman of the Board of Cardinal;
(vii) Messrs. Martini and Roden will become members of Cardinal's six-member
Executive Committee; and (viii) Cardinal has agreed, from and after the
Effective Time, to cause Bergen, as the surviving corporation (the "Surviving
Corporation"), to indemnify present and former officers and directors of Bergen
and to perform under indemnification agreements currently in effect between
Bergen and certain of its officers and directors, and has agreed to use all
reasonable efforts to cause the Surviving Corporation to maintain in effect for
six years after the Effective Time policies of directors' and officers'
liability insurance with substantially the same coverage and containing
substantially similar terms and conditions as Bergen's current policies, in each
case in respect of acts, omissions or matters occurring prior to the Effective
Time and subject to certain limitations. The Board of Directors of Bergen was
aware of these interests and took these interests into account in approving the
Merger Agreement and the transactions contemplated thereby. See "The
Merger -- Interests of Certain Persons in the Merger" and "-- Support/Voting
Agreement."
REGULATORY APPROVALS
Under the HSR Act and the rules that have been promulgated thereunder by
the Federal Trade Commission (the "FTC"), the Merger may not be consummated
unless certain filings have been submitted to
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<PAGE> 25
the Antitrust Division of the United States Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. On August 25, 1997, Cardinal and Bergen submitted the required
filings to the FTC and the Antitrust Division. On September 25, 1997, the
parties received second requests from the FTC for additional information and
documents, and the parties substantially complied with such requests on November
28, 1997. Pursuant to the HSR Act, the waiting period with respect to the Merger
would have expired on December 13, 1997. In order to permit the FTC time to
complete its review of the Merger, Cardinal and Bergen each agreed to an
extension of the waiting periods and to give the FTC and the Antitrust Division
notice prior to consummation of the Merger.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the consummation of the Merger, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the consummation of the Merger
or seeking the divestiture of substantial assets of Bergen or Cardinal. Private
parties and state attorneys general may also bring actions under the antitrust
laws under certain circumstances. In response to a request from certain states
which are members of the National Association of Attorneys General Voluntary
Premerger Compact (the "NAAGVPC"), Cardinal and Bergen each waived certain
confidentiality protections under the HSR Act solely for the purpose of
facilitating confidential communications between the Federal Trade Commission
and the member states of the NAAGVPC. Bergen and Cardinal believe that the
consummation of the Merger will not violate the antitrust laws. There can be no
assurance, however, that a challenge to the Merger on antitrust grounds will not
be made, or, if such a challenge is made, what the result will be.
Other than as described in this Joint Proxy Statement/Prospectus,
consummation of the Merger does not require the approval of any Federal or state
agency. Certain state and Federal filings will be required in connection with
consummation of the Merger.
EXCHANGE PROCEDURES
If the Merger is consummated, as soon as practicable after the Effective
Time, a letter of transmittal will be mailed or delivered to each Bergen
Shareholder to be used in forwarding certificates evidencing such holder's
shares of Bergen Common Stock for surrender and exchange for certificates
evidencing Cardinal Common Shares to which such holder has become entitled and,
if applicable, cash in lieu of fractional Cardinal Common Shares. After receipt
of such letter of transmittal, each holder of certificates formerly representing
shares of Bergen Common Stock should surrender such certificates to ChaseMellon
Shareholder Services LLC, the exchange agent for the Merger, pursuant to and in
accordance with the instructions accompanying such letter of transmittal, and
each holder will receive in exchange therefor certificates evidencing the whole
number of Cardinal Common Shares to which he is entitled and any cash which may
be payable in lieu of fractional Cardinal Common Shares. See "The Merger
Agreement -- Merger Consideration." Such letter of transmittal will be
accompanied by instructions specifying other details of the exchange. BERGEN
SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER
OF TRANSMITTAL.
STOCK OPTION AGREEMENT
In connection with the execution of the Merger Agreement, Cardinal and
Bergen entered into a Stock Option Agreement, dated August 23, 1997 (the "Stock
Option Agreement"), pursuant to which Bergen granted to Cardinal an irrevocable
option (the "Option") to purchase up to 10,028,163 shares of Bergen Common Stock
(representing 19.9% of the outstanding shares of Bergen Common Stock as of July
31, 1997, which number may be increased to up to 19.9% of the outstanding shares
of Bergen Common Stock at any time) at an exercise price per share of $48.29.
The Option is exercisable upon the occurrence of certain events and provides
Cardinal the right to require Bergen to, or permits Bergen at its election to,
under certain circumstances, purchase for cash the unexercised portion of the
Option and all shares of Bergen Common Stock purchased pursuant to the Option.
The Option, which Cardinal required that Bergen grant as a condition to
Cardinal's entering into the Merger Agreement, may increase the likelihood of
consummation of the Merger. See "The Merger -- Stock Option Agreement."
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SUPPORT/VOTING AGREEMENT
Concurrently with the execution of the Merger Agreement, Mr. Robert E.
Martini, Chairman of Bergen, who as of the Bergen Record Date beneficially owned
in the aggregate approximately 5.4% of the outstanding Bergen Common Stock,
executed a Support/Voting Agreement with Cardinal (the "Support/Voting
Agreement") pursuant to which he agreed, among other things, to vote or direct
the vote of all shares of Bergen Common Stock beneficially owned by him, or over
which he has voting power or control, directly or indirectly, to approve the
Merger and the Merger Agreement and the transactions contemplated thereby and
not to vote for any Competing Transaction. Mr. Martini also agreed, among other
things, to not and to not permit any company, trust or other entity controlled
by him to, (i) contract to sell, sell or otherwise transfer or dispose of any
shares of Bergen Common Stock, other than pursuant to the Merger or to the
extent contractually required, without Cardinal's prior written consent or (ii)
solicit, initiate, encourage or facilitate, or furnish or disclose non-public
information in furtherance of, any inquiries or the making of any proposal with
respect to any recapitalization, merger, consolidation or other business
combination involving Bergen, or acquisition of any capital stock from Bergen
(other than upon exercise of outstanding Bergen Options and other than to the
extent specifically permitted pursuant to the Merger Agreement), or acquisition
of 15% or more of the assets of Bergen and its subsidiaries, taken as a whole,
or any acquisition by Bergen of any material assets or capital stock of any
other person (other than to the extent specifically permitted pursuant to the
Merger Agreement), or any combination of the foregoing (a "Competing
Transaction"), or negotiate, explore or otherwise engage in discussions with any
person (other than Cardinal, Subcorp or their respective directors, officers,
employees, agents and representatives) with respect to any Competing Transaction
or enter into any agreement, arrangement, or understanding with respect to any
Competing Transaction or agree to or otherwise assist in the effectuation of any
Competing Transaction; provided, however, that nothing in the Support/Voting
Agreement prevents Mr. Martini from taking any action or omitting to take any
action as a member of the Board of Directors of Bergen necessary so as not to
violate his fiduciary obligations as a director of Bergen. The Support/Voting
Agreement may be terminated at the option of any party thereto at any time after
the earlier of (i) the termination of the Merger Agreement and (ii) the
Effective Time. See "The Merger -- Support/Voting Agreement."
BERGEN RIGHTS AGREEMENT AMENDMENT
In connection with the execution of the Merger Agreement, Bergen and
ChaseMellon Shareholder Services, LLC, as rights agent (the "Rights Agent"),
executed the Second Amendment to Rights Agreement, dated as of August 21, 1997
(the "Rights Agreement Amendment"), amending the Rights Agreement, dated as of
February 7, 1997, as amended by Amendment No. 1 dated as of November 10, 1996
(the "Rights Agreement"), between Bergen and the Rights Agent, so as to provide
that none of Cardinal and its affiliates will become an "Acquiring Person" and
that no "Stock Acquisition Date" or "Distribution Date" (as such terms are
defined in the Rights Agreement) will occur as a result of the execution of the
Merger Agreement or the Stock Option Agreement or the consummation of the Merger
or the acquisition or transfer of shares of Bergen Common Stock by Cardinal
pursuant to the Stock Option Agreement. Bergen also represented and warranted
under the Merger Agreement that the Rights Agreement will remain so amended and
that no replacement plan will be adopted. Further, Bergen has agreed under the
Merger Agreement that, during the period from the date thereof to the Effective
Time, Bergen will not, without the prior written consent of Cardinal, take any
action that could result in the representations and warranties of Bergen with
respect to the Rights Agreement Amendment becoming false or inaccurate. See "The
Merger -- Bergen Rights Agreement Amendment" and "Comparison of Shareholder
Rights -- Rights Agreement."
RISK FACTORS
Cardinal Shareholders and Bergen Shareholders should consider carefully the
factors discussed under "Risk Factors" and elsewhere in this Joint Proxy
Statement/Prospectus in evaluating the proposed Merger and the transactions
contemplated thereby. These risks include the fact that the Exchange Ratio is
fixed, uncertainties in integrating the business operations of Cardinal and
Bergen, risks relating to future acquisitions and the interests of certain
Bergen directors and executive officers in the Merger.
13
<PAGE> 27
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Bergen has received an opinion from Lowenstein, Sandler, Kohl, Fisher &
Boylan, P.A. ("Lowenstein, Sandler") to the effect that if the Merger is
consummated in accordance with the terms of the Merger Agreement, no gain or
loss will be recognized by Bergen or the Bergen Shareholders (except to the
extent such holders receive cash in lieu of fractional Cardinal Common Shares)
for federal income tax purposes. This opinion is based upon and is subject to,
among other things, customary representations made to Lowenstein, Sandler. See
"Certain Federal Income Tax Consequences."
COMPARISON OF SHAREHOLDER RIGHTS
As a result of the Merger, shares of Bergen Common Stock, which are
governed by New Jersey Law (as hereinafter defined) and Bergen's Amended and
Restated Certificate of Incorporation (the "Bergen Certificate") and Amended and
Restated Bylaws (the "Bergen Bylaws"), will be converted into the right to
receive Cardinal Common Shares, which are governed by Ohio Law (as hereinafter
defined), the Cardinal Articles and Cardinal's Restated Code of Regulations, as
amended (the "Cardinal Regulations"). There are differences between the rights
of Bergen Shareholders and the rights of Cardinal Shareholders. These
differences result from differences between New Jersey Law and Ohio Law, and
differences between the governing instruments of Bergen and Cardinal. For a
discussion of the various differences between the rights of Bergen Shareholders
and Cardinal Shareholders, see "Comparison of Shareholder Rights."
14
<PAGE> 28
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
BERGEN SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary historical financial information of Bergen set forth below has
been derived from and should be read in conjunction with the 1997 Bergen Form
10-K and other financial information of Bergen incorporated by reference in this
Joint Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED(1)
-------------------------------------------------------------------
SEPTEMBER 30,
AUGUST 31, ----------------------------------------------------
1993 1994(3) 1995 1996 1997
---------- ---------- ---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
Net sales and other revenues.............. $6,823,552 $7,483,801 $8,447,607 $9,942,697 $11,660,496
Earnings from continuing operations....... 28,607(4) 56,120(5) 63,942 73,533 81,679(6)
Earnings from continuing operations per
common and common equivalent share
(fully diluted)(2)...................... $ 0.60(4) $ 1.16(5) $ 1.29 $ 1.46 $ 1.61(6)
Cash dividends declared per share(2):
Class A Common.......................... 0.305 0.350 0.379 0.384 0.432
Class B Common.......................... 2.904 1.597 -- -- --
BALANCE SHEET DATA:
Book value per common share(2)............ 8.74 9.93 10.43 11.56 12.79
Total assets.............................. 1,772,337 1,995,057 2,405,530 2,489,826 2,707,123
Working capital........................... 186,072 254,256 515,475 440,624 531,169
Long-term obligations, less current
portion................................. 309,781 342,094 557,771 419,275 437,956
Shareholders' equity...................... 417,800 461,851 519,349 578,966 644,861
</TABLE>
- ---------------
(1) Amounts include the following businesses acquired by purchase since the
respective acquisition dates: substantially all of the net assets of
Oncology Supply Company on August 7, 1996; Colonial Healthcare Supply Co. on
August 2, 1995; Biddle & Crowther Company on January 10, 1995; substantially
all of the net assets of Professional Medical Supply Co. on August 31, 1994;
Southeastern Hospital Supply Corporation on April 29, 1994; Healthcare
Distributors of Indiana, Inc. on January 29, 1993; Dr. T.C. Smith Company on
November 18, 1992; and Durr-Fillauer Medical, Inc. and subsidiaries on
September 18, 1992.
(2) Gives effect to the five-for-four stock split paid June 2, 1997 and the 5%
stock dividend paid March 1, 1995. On February 24, 1994, each outstanding
share of Class B Common Stock of Bergen was converted into 9.5285 shares of
Bergen Common Stock and all shares of Class B Common Stock of Bergen were
subsequently canceled.
(3) Reflects a change in Bergen's fiscal year from a twelve-month period ending
August 31 to a twelve-month period ending September 30. Operating results
for the twelve months ended September 30, 1994 exclude the one-month period
ended September 30, 1993. Net sales and other revenues and earnings from
continuing operations for the one-month period ended September 30, 1993 were
$598.1 million and $1.5 million, respectively.
(4) Includes provision for probable losses recorded in connection with credit
extended to certain customers of $8.0 million ($5.1 million, net of tax) or
$0.08 per share.
(5) Includes gain recognized from the sale of investment securities of $5.1
million ($2.9 million, net of tax) or $0.06 per share. Also includes a
provision for an earthquake-related charge of $1.4 million ($0.8 million,
net of tax) or $0.02 per share.
(6) Includes provision for merger-related expenses of $5.8 million ($3.4
million, net of tax) or $0.07 per share, relating to the terminated merger
with IVAX Corporation.
15
<PAGE> 29
CARDINAL SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary historical financial information of Cardinal set forth below
has been derived from and should be read in conjunction with the 1997 Cardinal
Form 10-K and other financial information of Cardinal incorporated by reference
in this Joint Proxy Statement/Prospectus. See "Incorporation of Certain
Documents by Reference."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1)(2) THREE MONTHS ENDED
--------------------------------------------------------------- SEPTEMBER 30,(1)(3)
MARCH 31, JUNE 30, JUNE 30, JUNE 30, JUNE 30, -----------------------
1993 1994 1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
Net revenues.......................... $5,102,513 $6,374,734 $8,472,302 $9,407,591 $10,968,042 $2,535,476 $2,869,971
Earnings available for Common Shares
before cumulative effect of change
in accounting principle............. 73,124 88,884 146,587 127,240 184,599 39,326 54,040
Earnings per Common Share before
cumulative effect of change in
accounting principle(4):
Primary........................... $ 0.83 $ 0.91 $ 1.41 $ 1.20 $ 1.69 $ 0.37 $ 0.49
Fully diluted..................... 0.80 0.90 1.40 1.19 1.69 0.37 0.49
Cash dividends declared per Common
Share(4)............................ $ 0.05 $ 0.07 $ 0.08 $ 0.08 $ 0.095 $ 0.02 $ 0.025
BALANCE SHEET DATA:
Total assets.......................... $1,411,323 $1,789,455 $2,363,752 $2,959,401 $ 3,091,750 $2,979,124 $3,259,489
Long-term obligations, less current
portion............................. 305,337 247,715 267,677 320,327 277,766 263,655 277,882
Redeemable preferred stock............ 20,400 -- -- -- -- -- --
Shareholders' equity.................. 444,291 617,464 866,474 1,095,225 1,334,730 1,101,304 1,397,493
</TABLE>
- ---------------
(1) Amounts reflect business combinations in fiscal 1994, 1995, 1996 and 1997.
The most significant of these business combinations have been accounted for
as poolings-of-interests transactions and, accordingly, prior period amounts
have been restated to retroactively reflect all such material combinations.
For those business combinations which were accounted for as purchase
transactions, the pro forma effect as if these transactions had occurred at
the beginning of the respective periods would not have been significantly
different.
(2) The Summary results for fiscal 1993, 1994, 1996 and 1997 include the impact
of certain merger-related costs and restructuring charges as follows: In
fiscal 1997, Cardinal recorded merger-related costs associated with the
business combinations with PCI Services, Inc. ("PCI") in October 1996 (the
"PCI Merger") and Owen Healthcare, Inc. ("Owen") in March 1997 (the "Owen
Merger") ($46.2 million) and additional integration costs related to the
mergers with Pyxis Corporation ("Pyxis") in May 1996 (the "Pyxis Merger")
and Medicine Shoppe International, Inc. ("MSI") in November 1995 (the "MSI
Merger") ($4.7 million). In fiscal 1996, Cardinal recorded merger-related
costs of approximately $49.2 million ($36.9 million, net of tax) in
connection with the MSI and Pyxis mergers. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 2 of
"Notes to Consolidated Financial Statements" in the 1997 Cardinal Form 10-K,
incorporated by reference in this Joint Proxy Statement/Prospectus, for
analysis of the impact of these merger-related costs. In fiscal 1994,
Cardinal recorded merger-related costs of approximately $35.9 million ($28.2
million, net of tax) in connection with the business combination of Cardinal
and Whitmire Distribution Corporation ("Whitmire") in February 1994 (the
"Whitmire Merger"). During fiscal 1993, Cardinal received a termination fee
of approximately $13.5 million, resulting from the termination by
Durr-Fillauer Medical, Inc. of its agreement to merge with Cardinal. During
fiscal 1993, Cardinal also recorded charges totaling approximately $13.7
million, primarily related to the closing of certain non-core operations and
the restructuring of certain distribution operations. In addition, the
modifications of the terms of certain Whitmire stock options in fiscal 1993
resulted in a one-time stock option compensation charge of approximately
$5.2 million.
(3) The Summary results for the three months ended September 30, 1996 and 1997
include costs related to integrating the operations of the merged companies
as a result of the various mergers effected in fiscal 1996 and 1997. These
costs totaled approximately $0.2 million ($0.1 million, net of tax) and $2.2
million ($1.3 million, net of tax) for the three months ended September 30,
1996 and 1997, respectively. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 2 of "Notes to
Consolidated Financial Statements" in the September 1997 Cardinal Form 10-Q,
incorporated by reference in this Joint Proxy Statement/Prospectus, for
analysis of the impact of these merger-related costs.
(4) Earnings and cash dividends per share have been adjusted to give retroactive
effect for stock splits, including the three-for-two split paid on December
16, 1996.
16
<PAGE> 30
UNAUDITED PRO FORMA COMBINED SUMMARY FINANCIAL INFORMATION
The impact of Cardinal's proposed merger (the "MediQual Merger") with
MediQual Systems, Inc. ("MediQual") on a historical basis is not significant and
prior period financial statements will not be restated upon consummation of the
MediQual Merger. See "The Companies -- Business of Cardinal." Upon consummation
of the Merger, prior period financial statements will be restated for the
historical results of MediQual and Bergen (assuming that the MediQual Merger is
consummated prior to the Merger).
Cardinal's historical fiscal year ends on June 30, MediQual's historical
fiscal year ends on December 31, and Bergen's historical fiscal year ends on
September 30. For purposes of combining MediQual's and Bergen's historical
financial information with Cardinal's in the pro forma combined statements of
earnings herein, the financial information of Cardinal for the fiscal years
ended June 30, 1997, 1996 and 1995 have been combined with MediQual's financial
information for the twelve months ended June 30, 1997 and fiscal years ended
December 31, 1996 and 1995, and Bergen's financial information for the fiscal
years ended September 30, 1997, 1996 and 1995, respectively. Cardinal's
financial information for the three months ended September 30, 1997 and 1996
have been combined with MediQual's financial information for the three months
ended September 30, 1997 and 1996 and Bergen's financial information for the
three months ended September 30, 1997 and December 31, 1996, respectively. As a
result, the financial results of MediQual for the six months ended December 31,
1996 are included in the pro forma data for both fiscal years ended June 30,
1997 and 1996. MediQual's net revenues and net earnings for the six months ended
December 31, 1996 were approximately $5.3 million and $.9 million, respectively.
In addition, the financial results of Bergen for the quarter ended September 30,
1997 are included in the pro forma data for both the fiscal year ended June 30,
1997 and the three months ended September 30, 1997. Bergen's net revenues and
net earnings for the three months ended September 30, 1997 were approximately
$3.0 billion and $20.8 million, respectively. The pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
MediQual Merger or the Merger had been consummated at such time, nor is it
necessarily indicative of future operating results or financial position. The
unaudited pro forma combined summary financial information should be read in
conjunction with the "Unaudited Pro Forma Combined Financial Information"
included elsewhere in this Joint Proxy Statement/Prospectus. The unaudited pro
forma combined summary financial information does not reflect any adjustments to
conform accounting practices or to reflect any cost savings or other synergies
anticipated as a result of the Merger or any merger-related expenses (the
"Merger Expenses"), as discussed in Note 2 to the "Unaudited Pro Forma Combined
Financial Information" below and in Note 6 below.
17
<PAGE> 31
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(1) THREE MONTHS ENDED
----------------------------------------- ------------------------------
JUNE 30, JUNE 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1996(2) 1997(2) 1996(2) 1997(2)
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
Net revenues................ $16,930,883 $19,361,290 $22,639,784 $ 5,360,478 $ 5,893,362
Net earnings, excluding
estimated merger
expenses.................. 209,067 203,072 268,666 58,250 76,003
Earnings per Common Share
excluding estimated merger
expenses(3)(4):
Primary................... $ 1.46 $ 1.39 $ 1.80 $ 0.40 $ 0.50
Fully diluted............. 1.45 1.39 1.80 0.40 0.50
Cash dividends declared per
Common Share(5):.......... $ 0.08 $ 0.08 $ 0.095 $ 0.02 $ 0.025
BALANCE SHEET DATA:
Total assets................ $ 5,973,732
Long-term obligations, less
current portion........... 696,059
Shareholders' equity(6)..... 2,047,342
</TABLE>
- ---------------
(1) Amounts reflect business combinations in fiscal 1995, 1996 and 1997.
(2) Amounts include the effect of merger-related costs recorded by Cardinal in
the fiscal years ended June 30, 1996 and 1997 and the three-month periods
ended September 30, 1996 and 1997 as discussed in Notes 2 and 3 of
"-- Summary Historical and Unaudited Pro Forma Financial
Information -- Cardinal Summary Historical Financial Information" and by
Bergen in the fiscal year ended September 30, 1997 as discussed in Note 6 of
"-- Summary Historical and Unaudited Pro Forma Financial
Information -- Bergen Summary Historical Financial Information." The impact
of the merger-related costs is to reduce pro forma earnings available for
Common Shares by $36.9 million and $40.0 million in fiscal 1996 and 1997,
respectively, and to reduce pro forma net earnings by $0.1 million and $1.3
million for the three-month periods ended September 30, 1996 and 1997,
respectively. The impact was also to reduce pro forma fully diluted earnings
per Cardinal Common Share by $.25, $.27 and $.01 in fiscal 1996 and 1997,
and the three months ended September 30, 1997, respectively.
(3) Earnings per Common Share have been adjusted to give retroactive effect for
stock splits, including the three-for-two stock split paid by Cardinal in
December 1996.
(4) Earnings per Common Share amounts assume the conversion of each share of
Bergen Common Stock into 0.775 Cardinal Common Shares, based on the Exchange
Ratio. See "The Merger Agreement -- Merger Consideration."
(5) Cash dividends declared per Common Share represent the historical dividends
of Cardinal for all periods presented and exclude all dividends paid by
entities with which Cardinal has merged. Cash dividends declared per Common
Share have been adjusted to give retroactive effect to the three-for-two
stock split paid by Cardinal in December 1996.
(6) Amount does not reflect the pro forma effect of Merger Expenses. Cardinal
and MediQual will incur transaction and other costs as a result of the
MediQual Merger. The amount of this charge is not expected to be significant
and will be charged to expense in the period in which the MediQual Merger is
consummated, or in subsequent periods, when incurred.
In connection with the Merger, the companies expect to incur investment
banking, legal, accounting, and other related transaction costs and fees.
Additionally, the companies expect to incur other merger-related costs
associated with the integration of the separate companies and institution of
efficiencies anticipated as a result of the Merger. Based on information
currently available, the total amount of merger-related charges to be
recognized in connection with the Merger is estimated to be between $100 and
$130 million, after tax. These merger-related expenses will be charged to
expense in the period in which the Merger is consummated, or in subsequent
periods, when incurred. Since the Merger has not yet been consummated, the
merger expenses can only be estimated at this time, and are subject to
revision as further information becomes available.
The accounting policies of Cardinal, MediQual and Bergen are currently being
studied from a conformity perspective. The impact of conforming accounting
policies (if any) is not presently estimable. If conforming adjustments are
required, they will be recorded as part of the restatement of prior periods
as required by the pooling-of-interests accounting method.
18
<PAGE> 32
COMPARATIVE PER SHARE DATA
Set forth below are earnings, cash dividends declared and book value per
share data for Cardinal and Bergen on both historical and pro forma combined
bases and on a per share equivalent pro forma basis for Bergen. Pro forma
combined earnings per share are derived from the Unaudited Pro Forma Combined
Financial Information presented elsewhere in this Joint Proxy
Statement/Prospectus, which gives effect to the Merger under the pooling-
of-interests accounting method, including the restatement for the historical
results of MediQual which will occur upon consummation of the Merger (assuming
that the MediQual Merger is consummated prior thereto). Pro forma combined cash
dividends declared per share reflect Cardinal cash dividends per share declared
in the periods indicated and exclude all dividends paid by all entities with
which Cardinal has merged. Book value per share for the pro forma combined
presentation is based upon outstanding Cardinal Common Shares, adjusted to
include Cardinal Common Shares to be issued in the Merger for outstanding shares
of Bergen Common Stock at the Effective Time. The per share equivalent pro forma
combined data for shares of Bergen Common Stock is based on the assumed
conversion of each share of Bergen Common Stock into 0.775 Cardinal Common
Shares based upon the Exchange Ratio. See "The Merger Agreement -- Merger
Consideration." The information set forth below should be read in conjunction
with the respective audited and unaudited financial statements of Cardinal and
Bergen incorporated by reference in this Joint Proxy Statement/Prospectus and
the "Unaudited Pro Forma Combined Financial Information" and the notes thereto
presented elsewhere herein. See "Incorporation of Certain Documents by
Reference."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30,
--------------------------
1995 1996 1997
----- ----- ------
<S> <C> <C> <C> <C> <C>
BERGEN -- HISTORICAL(1)(2)
Earnings per share:
Fully diluted.............................. $1.29 $1.46 $ 1.61
Cash dividends declared per share............... 0.379 0.384 0.432
Book value per share............................ 12.79
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED
JUNE 30, SEPTEMBER 30,
-------------------------- -----------------
1995 1996 1997 1996 1997
----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
CARDINAL -- HISTORICAL(2)
Earnings per Common Share:
Primary.................................... $1.41 $1.20 $ 1.69 $ 0.37 $ 0.49
Fully diluted.............................. 1.40 1.19 1.69 0.37 0.49
Cash dividends declared per Common Share........ 0.08 0.08 0.095 0.02 0.025
Book value per share............................ 12.26 12.79
CARDINAL AND BERGEN -- PRO FORMA
COMBINED(2)(3)(4):
Earnings per Common Share, excluding estimated
Merger Expenses:
Primary.................................... $1.46 $1.39 $ 1.80 $ 0.40 $ 0.50
Fully diluted.............................. 1.45 1.39 1.80 0.40 0.50
Cash dividends declared per Common Share(5)..... 0.08 0.08 0.095 0.02 0.025
Book value per share(3)......................... 13.36 13.75
EQUIVALENT PRO FORMA COMBINED PER BERGEN
SHARE(2)(3)(4):
Earnings per Common Share, excluding estimated
Merger Expenses:
Primary.................................... $1.13 $1.08 $ 1.40 $ 0.31 $ 0.39
Fully diluted.............................. 1.12 1.08 1.40 0.31 0.39
Cash dividends declared per Common Share(5)..... 0.06 0.06 0.07 0.016 0.02
Book value per share(3)......................... 10.35 10.66
</TABLE>
- ---------------
(1) Earnings per Common Share and cash dividends declared per Common Share have
been adjusted to give retroactive effect to a five-for-four stock split paid
by Bergen in June 1997 and a 5% stock dividend paid by Bergen in March 1995.
(2) Bergen's Historical Earnings per Common Share, Cardinal's Historical
Earnings per Common Share, the Pro Forma Combined Earnings per Common Share
and the Equivalent Pro Forma Combined Earnings Per Common Share reflect the
effect of merger-related costs recorded by Cardinal in the fiscal years
ended June 30, 1996 and 1997 and the three months ended September 30, 1996
19
<PAGE> 33
and 1997, and Bergen in the fiscal year ended September 30, 1997. See a
discussion of these items in Notes 2 and 3 of "Summary -- Summary Historical
and Unaudited Pro Forma Financial Information -- Cardinal Summary Historical
Financial Information," Note 6 of "Summary -- Summary Historical and
Unaudited Pro Forma Financial Information -- Bergen Summary Historical
Financial Information" and Note 2 of "Summary -- Summary Historical and
Unaudited Pro Forma Financial Information -- Unaudited Pro Forma Combined
Summary Financial Information." The effect of such merger-related costs is
to reduce the Equivalent Pro Forma Combined Per Bergen Share, fully diluted
Earnings Per Common Share by $.19 and $.21 in fiscal 1996 and 1997,
respectively. There is no measurable impact for the three months ended
September 30, 1996 and 1997.
(3) The pro forma combined and the equivalent pro forma combined information
(excluding the book value per share information) presents the combination of
Cardinal for the fiscal years ended June 30, 1995, June 30, 1996 and June
30, 1997 combined with Bergen for the fiscal years ending September 30,
1995, September 30, 1996 and September 30, 1997, respectively. The book
value per share information as of June 30, 1997 is calculated based on the
Cardinal balance sheet as of June 30, 1997 and Bergen's balance sheet as of
September 30, 1997. The book value per share information as of September 30,
1997 is calculated based on the Cardinal and Bergen balance sheets as of
September 30, 1997
(4) In connection with the Merger, the companies expect to incur investment
banking, legal, accounting, and other related transaction costs and fees.
Additionally, the companies expect to incur other merger-related costs
associated with the integration of the separate companies and institution of
efficiencies anticipated as a result of the Merger. Based on information
currently available, the total amount of merger-related charges to be
recognized in connection with the Merger is estimated to be between $100 and
$130 million, after tax. These merger-related expenses will be charged to
expense in the period in which the Merger is consummated, or in subsequent
periods, when incurred. Since the Merger has not yet been consummated, the
merger expenses can only be estimated at this time, and are subject to
revision as further information becomes available.
The accounting policies of Cardinal, MediQual and Bergen are currently being
studied from a conformity perspective. The impact of conforming accounting
policies (if any) is not presently estimable. If conforming adjustments are
required, they will be recorded as part of the restatement of prior periods
as required by the pooling-of-interests accounting method.
(5) Pro Forma Combined Cash Dividends declared per Common Share represent the
historical dividends of Cardinal for all periods presented and exclude all
dividends paid by entities with which Cardinal has merged. Pro Forma
Combined Cash Dividends declared per Common Share have been adjusted to give
retroactive effect to a three-for-two stock split paid by Cardinal in
December 1996.
20
<PAGE> 34
MARKET PRICE AND DIVIDEND DATA
The following table reflects (i) the range of the reported high and low
closing sale prices of Cardinal Common Shares on the NYSE Composite Tape and the
per share dividends paid thereon and (ii) the range of the reported high and low
closing sale prices of Bergen Common Stock on the NYSE Composite Tape and the
per share dividends paid thereon, in each case for the calendar quarters
indicated. The information in the table has been adjusted to reflect
retroactively all applicable stock splits.
<TABLE>
<CAPTION>
CARDINAL BERGEN
COMMON SHARES COMMON STOCK
------------------------------- -------------------------------
CALENDAR YEAR HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
- ---------------------------------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1995:
First quarter................... $33.92 $29.50 $ 0.02 $23.10 $15.62 $ 0.096
Second quarter.................. 31.67 28.17 0.02 22.10 17.10 0.096
Third quarter................... 37.67 29.17 0.02 19.20 15.70 0.096
Fourth quarter.................. 38.58 34.08 0.02 20.70 16.40 0.096
1996:
First quarter................... $42.83 $35.00 $ 0.02 $21.60 $19.30 $ 0.096
Second quarter.................. 50.17 40.17 0.02 22.70 20.50 0.096
Third quarter................... 55.08 44.67 0.02 26.20 19.90 0.096
Fourth quarter.................. 58.38 51.92 0.02 26.20 21.10 0.096
1997:
First quarter................... $64.13 $54.38 $ 0.025 $26.30 $22.30 $ 0.096
Second quarter.................. 62.00 51.63 0.025 30.87 22.80 0.12
Third quarter................... 71.06 54.63 0.025 45.69 28.00 0.12
Fourth quarter.................. 77.81 70.00 0.025 45.25 37.69 0.12
1998:
First quarter
(through January 20, 1998)... $77.75 $70.94 $ 0.025 $42.94 $38.44 $ --
</TABLE>
On August 22, 1997, the last full trading day prior to the execution,
delivery and public announcement of the Merger Agreement, the closing price of
the Cardinal Common Shares was $62.313 per share and the closing price of the
Bergen Common Stock was $29.937 per share, as reported on the NYSE Composite
Tape. The value of Bergen Common Stock at August 22, 1997, on an equivalent per
share basis, was $48.29 (based on an Exchange Ratio of 0.775). On January 20,
1998, the most recent practicable date prior to the mailing of this Joint Proxy
Statement/Prospectus, the last sale prices of Cardinal Common Shares and Bergen
Common Stock were $71.50 per share and $41.00 per share, respectively, as
reported on the NYSE Composite Tape. Cardinal Shareholders and Bergen
Shareholders are encouraged to obtain current market quotations for Cardinal
Common Shares and Bergen Common Stock.
Cardinal has applied for the listing of the Cardinal Common Shares to be
issued in the Merger on the NYSE.
On November 5, 1997, Cardinal's Board of Directors declared a dividend on
Cardinal Common Shares of $0.025 per share, payable on January 15, 1998 to
holders of record on January 1, 1998. Cardinal anticipates that it will continue
to pay quarterly cash dividends. However, the timing and amount of any future
dividends remain within the discretion of the Cardinal Board of Directors and
will depend on Cardinal's future earnings, financial condition, capital
requirements and other factors.
On November 14, 1997, Bergen's Board of Directors declared a dividend on
shares of Bergen Common Stock of $.12 per share, paid on December 8, 1997 to
holders of record on November 24, 1997. Bergen anticipates that it will continue
to pay quarterly cash dividends. However, the timing and amount of any future
dividends remain within the discretion of the Bergen Board of Directors and will
depend on Bergen's future earnings, financial condition, capital requirements
and other factors. Pursuant to the Merger Agreement, Bergen has agreed that,
during the period from the date of the Merger Agreement to the Effective Time,
Bergen will not make, declare or pay any dividend or distribution on the Bergen
Common Stock other than regular quarterly dividends on Bergen Common Stock of
$0.12 per share with record and payment dates consistent with past practice.
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RISK FACTORS
In considering whether to vote in favor of the Cardinal Merger Proposal or
the Bergen Merger Proposal, as the case may be, the Cardinal Shareholders and
Bergen Shareholders should consider, in conjunction with the other information
included or incorporated by reference in this Joint Proxy Statement/Prospectus,
the following matters (which Cardinal and Bergen are not able to quantify):
FIXED EXCHANGE RATIO DESPITE CHANGE IN RELATIVE STOCK PRICES
The Exchange Ratio is a fixed ratio and will not be adjusted in the event
of any increase or decrease in the price of either Cardinal Common Shares or
Bergen Common Stock. The price of Cardinal Common Shares at the Effective Time
may be higher or lower than its price at the date of this Joint Proxy
Statement/Prospectus or at the date of the Cardinal Special Meeting or the
Bergen Special Meeting. Such variations may be the result of changes in the
business, operations or prospects of Cardinal or Bergen, market assessments of
the likelihood that the Merger will be consummated and the timing thereof,
regulatory considerations, general market and economic conditions or other
factors. Most of such factors are beyond the control of Cardinal or Bergen.
Because the Effective Time will occur subsequent to the Cardinal Special Meeting
and the Bergen Special Meeting, there can be no assurance that the price of
Cardinal Common Shares on the date of the special meetings will be indicative of
its price at the Effective Time. Cardinal Shareholders and Bergen Shareholders
are urged to obtain current market quotations for Cardinal Common Shares and
Bergen Common Stock.
UNCERTAINTIES IN INTEGRATING BUSINESS OPERATIONS
In determining that the Merger is in the best interests of Cardinal or
Bergen, as the case may be, each of the Cardinal Board and the Bergen Board
considered the potential complementary effects of combining the respective
companies' assets, personnel and operational expertise. The integration of
businesses, however, involves a number of special risks, including the diversion
of management's attention from regular business concerns to the assimilation of
the combined operations, difficulties in the integration of operations and
systems, delays or difficulties in opening and operating larger distribution
centers in an integrated distribution network, the assimilation and retention of
the personnel of the acquired company, challenges in retaining the customers of
the combined businesses and potential adverse short-term effects on operating
results.
RISKS GENERALLY ASSOCIATED WITH ACQUISITIONS
An important element of Cardinal's growth strategy is the pursuit of
strategic acquisitions that either expand or complement its business, and
Cardinal routinely reviews such potential acquisition opportunities.
Acquisitions involve a number of special risks, including the risks pertaining
to integration of the business acquired that are noted above under
"-- Uncertainties in Integrating Business Operations." In addition, Cardinal may
incur debt to finance future acquisitions, and Cardinal may issue securities in
connection with future acquisitions which may have a dilutive effect on current
and future Cardinal Shareholders. The inability of Cardinal to successfully
complete and integrate strategic acquisitions in a timely manner could adversely
impact Cardinal's growth strategy.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Merger by the Bergen Board, the
Cardinal Shareholders and the Bergen Shareholders should be aware that certain
directors and executive officers of Bergen may be deemed to have conflicts of
interest with respect to the Merger in that, pursuant to the Merger Agreement,
and, in the case of certain executives, pursuant to new employment arrangements
entered into with Cardinal and Bergen concurrently with or subsequent to the
execution of the Merger Agreement, they will have positions with Cardinal or
Bergen after the Effective Time. In addition, certain executives of Bergen have
employment agreements pursuant to which they may receive benefits after the
Merger. Such interests, together with other relevant factors, were considered by
the Bergen Board in recommending the Merger to the Bergen Shareholders and
approving the Merger Agreement. See "The Merger -- Interests of Certain Persons
in the Merger."
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<PAGE> 36
THE SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to Cardinal
Shareholders in connection with the solicitation of proxies by the Board of
Directors of Cardinal for use at the Cardinal Special Meeting to be held on
Friday, February 20, 1998, at Cardinal's corporate offices at 5555 Glendon
Court, Dublin, Ohio 43016, commencing at 1:00 p.m., local time, and at any
adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus is also being furnished to Bergen
Shareholders in connection with the solicitation of proxies by the Board of
Directors of Bergen for use at the Bergen Special Meeting to be held on Friday,
February 20, 1998, at Bergen's corporate headquarters at 4000 Metropolitan
Drive, Orange, California, commencing at 10:00 a.m., local time, and at any
adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus, the Letter to Cardinal Shareholders,
the Notice of the Cardinal Special Meeting and the form of proxy for use at the
Cardinal Special Meeting are first being mailed to Cardinal Shareholders on or
about January 22, 1998. This Joint Proxy Statement/Prospectus, the Letter to
Bergen Shareholders, the Notice of the Bergen Special Meeting and the form of
proxy for use at the Bergen Special Meeting are first being mailed to Bergen
Shareholders on or about January 22, 1998.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
Bergen Special Meeting. At the Bergen Special Meeting, Bergen Shareholders
will consider and vote on:
1. The Bergen Merger Proposal, which is a proposal to approve and
adopt the Merger Agreement, pursuant to which, among other things, (i)
Subcorp will be merged with and into Bergen with the result that Bergen
will become a wholly owned subsidiary of Cardinal, and (ii) each
outstanding share (other than shares held in the treasury of Bergen, if
any, which will be canceled) of Bergen Common Stock will be converted into
0.775 of a Cardinal Common Share. A copy of the Merger Agreement is
attached as Annex A to this Joint Proxy Statement/Prospectus.
2. The Bergen Adjournment Proposal, which is a proposal for the
adjournment of the Bergen Special Meeting, if necessary, to permit further
solicitation of proxies in the event that there are not sufficient votes at
the time of the Bergen Special Meeting to approve the foregoing proposal.
3. Such other business as may properly come before the Bergen Special
Meeting.
Cardinal Special Meeting. At the Cardinal Special Meeting, Cardinal
Shareholders will consider and vote on:
1. The Cardinal Merger Proposal, which is a proposal to approve,
authorize and adopt the Merger Agreement pursuant to which, among other
things, (i) Subcorp will be merged with and into Bergen with the result
that Bergen will become a wholly owned subsidiary of Cardinal, and (ii)
each outstanding share (other than shares held in the treasury of Bergen,
if any, which will be canceled) of Bergen Common Stock will be converted
into 0.775 of a Cardinal Common Share. A copy of the Merger Agreement is
attached as Annex A to this Joint Proxy Statement/Prospectus.
2. The Authorized Shares Proposal, which is a proposal to approve,
authorize and adopt an amendment to the Cardinal Articles to increase the
number of Cardinal Common Shares authorized from 150,000,000 to 300,000,000
shares. The Authorized Shares Proposal will be presented at the Cardinal
Special Meeting and will be adopted if approved whether or not the Cardinal
Merger Proposal is approved, but its adoption is a condition to
consummation of the Merger. This proposed amendment to the Cardinal
Articles is included in the resolution attached to this Joint Proxy
Statement/Prospectus as Annex C.
3. The Name Change Proposal, if the Cardinal Merger Proposal is
approved, which is a proposal to approve, authorize and adopt an amendment
to the Cardinal Articles to change Cardinal's name from "Cardinal Health,
Inc." to "Cardinal Bergen Health, Inc.", subject to consummation of the
Merger.
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<PAGE> 37
Adoption of the Name Change Proposal is not a condition to the Merger, but
the Name Change Proposal will not be adopted unless and until the Merger is
consummated. This proposed amendment to the Cardinal Articles is included
in the resolution attached to this Joint Proxy Statement/Prospectus as
Annex C.
4. The Cardinal Adjournment Proposal, which is a proposal for the
adjournment of the Cardinal Special Meeting, if necessary, to permit
further solicitation of proxies in the event that there are not sufficient
votes at the time of the Cardinal Special Meeting to approve either the
Cardinal Merger Proposal or the Authorized Shares Proposal.
5. Such other business as may properly come before the Cardinal
Special Meeting.
RECORD DATE; VOTE REQUIRED; VOTING AT THE MEETINGS
Cardinal. The Board of Directors of Cardinal has fixed January 20, 1998 as
the Cardinal Record Date for determination of Cardinal Shareholders entitled to
notice of and to vote at the Cardinal Special Meeting. Accordingly, only holders
of Cardinal Common Shares of record at the close of business on the Cardinal
Record Date, will be entitled to notice of and to vote at the Cardinal Special
Meeting. Each holder of record of Cardinal Common Shares on the Cardinal Record
Date is entitled to cast one vote per share, exercisable in person or by a
properly executed proxy, at the Cardinal Special Meeting. As of the Cardinal
Record Date, there were 109,634,461 Cardinal Common Shares outstanding and
entitled to vote which were held by approximately 2,570 holders of record.
Pursuant to the Cardinal Articles, the Cardinal Regulations and applicable
law, (i) the affirmative vote of the holders of a majority of the Cardinal
Common Shares outstanding and entitled to vote thereon is required to approve,
authorize and adopt each of the Cardinal Merger Proposal, the Name Change
Proposal and the Authorized Shares Proposal, and (ii) the affirmative vote of a
majority of the Cardinal Common Shares entitled to vote and present in person or
represented by proxy at the Cardinal Special Meeting is required to approve the
Cardinal Adjournment Proposal. As of the Cardinal Record Date, the directors and
executive officers of Cardinal and certain of their affiliates may be deemed to
be beneficial owners of approximately 6% of the outstanding Cardinal Common
Shares and each such person has advised Cardinal that such person intends to
vote in favor of the Merger Proposal, the Authorized Shares Proposal, the Name
Change Proposal and the Cardinal Adjournment Proposal.
In the event that Cardinal has the right to terminate the Merger Agreement
for any reason, the Cardinal Board may, in the exercise of its fiduciary duty,
make determinations (i) whether to terminate the Merger Agreement or to waive
the condition that gives rise to such right to terminate the Merger Agreement
and proceed to the consummation of the Merger, and (ii) if it determines to
waive the condition giving rise to such right to terminate and proceed to the
consummation of the Merger, whether or not to resolicit the approval of the
Cardinal Merger Proposal and the Name Change Proposal. See "The Merger
Agreement -- Termination; Effect of Termination."
Bergen. The Board of Directors of Bergen has fixed January 20, 1998 as the
Bergen Record Date for determination of Bergen Shareholders entitled to notice
of and to vote at the Bergen Special Meeting. Accordingly, only holders of
Bergen Common Stock of record at the close of business on the Bergen Record
Date, will be entitled to notice of and to vote at the Bergen Special Meeting.
Each holder of record of Bergen Common Stock on the Bergen Record Date is
entitled to cast one vote per share, exercisable in person or by a properly
executed proxy, at the Bergen Special Meeting. As of the Bergen Record Date,
there were 50,428,925 shares of Bergen Common Stock outstanding and entitled to
vote which were held by approximately 2,270 holders of record.
Pursuant to the Bergen Certificate, the Bergen Bylaws and applicable law,
the affirmative vote of a majority of the votes cast by the holders of shares of
Bergen Common Stock entitled to vote and voting thereon is required to approve
and adopt the Bergen Merger Proposal and to approve the Bergen Adjournment
Proposal. As of the Bergen Record Date, the directors and executive officers of
Bergen (other than its Chairman) may be deemed to be beneficial owners of 2.3%
of the outstanding shares of Bergen Common Stock and each such person has
advised Bergen that such person intends to vote in favor of the Bergen Merger
Proposal and the Bergen Adjournment Proposal. In addition, Mr. Robert E.
Martini, who as of the Bergen
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Record Date beneficially owned in the aggregate approximately 5.4% of the
outstanding Bergen Common Stock, has agreed to vote or direct the vote of all
Bergen Common Stock over which he has voting power or control in favor of the
Bergen Merger Proposal.
In the event that Bergen has the right to terminate the Merger Agreement
for any reason, the Bergen Board may, in the exercise of its fiduciary duty,
make determinations (i) whether to terminate the Merger Agreement or to waive
the condition that gives rise to such right to terminate the Merger Agreement
and proceed to the consummation of the Merger, and (ii) if it determines to
waive the condition giving rise to such right to terminate and proceed to the
consummation of the Merger, whether or not to resolicit the approval of the
Bergen Merger Proposal. See "The Merger Agreement -- Termination; Effect of
Termination."
VOTING OF PROXIES
All Cardinal Shareholders and Bergen Shareholders who are entitled to vote
and are represented at the Cardinal Special Meeting (in the case of Cardinal
Shareholders) or at the Bergen Special Meeting (in the case of Bergen
Shareholders) by properly executed proxies received prior to or at such meeting
and not revoked will be voted at such meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted, in the case of Bergen Shareholders, FOR approval and
adoption of the Bergen Merger Proposal and the Bergen Adjournment Proposal or,
in the case of Cardinal Shareholders, FOR approval and adoption of each of the
Cardinal Merger Proposal, the Name Change Proposal (subject to consummation of
the Merger), the Authorized Shares Proposal and the Cardinal Adjournment
Proposal.
If any other matters are properly presented at the Cardinal Special Meeting
(in the case of Cardinal Shareholders) or at the Bergen Special Meeting (in the
case of Bergen Shareholders) for consideration, the persons named in the
enclosed form of proxy, and acting thereunder, will have discretion to vote on
such matters in accordance with their best judgment (unless authorization to use
such discretion is withheld). Neither Cardinal nor Bergen is aware of any
matters expected to be presented at its respective meetings other than as
described in its respective Notices of Special Meeting.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
(including by telegram or telecopy) with the Secretary of Cardinal or the
Secretary of Bergen, as the case may be, before the taking of the vote at the
relevant meeting, a written notice of revocation bearing a later date than the
date of the proxy or in the case of Cardinal by giving notice of revocation in
open meeting, (ii) in the case of Cardinal, duly executing a later-dated proxy
relating to the same shares and delivering (including by telegram or telecopy)
it to the Secretary of Cardinal before the taking of the vote at the Cardinal
Special Meeting, and in the case of Bergen, duly executing a later-dated proxy
relating to the same shares and causing such later-dated proxy to be voted at
the Bergen Special Meeting, or (iii) attending the relevant meeting and voting
in person. In order to vote in person at either the Cardinal Special Meeting or
the Bergen Special Meeting, Cardinal Shareholders and Bergen Shareholders must
attend the relevant meeting and cast their votes in accordance with the voting
procedures established for such meeting. Attendance at a meeting will not in and
of itself constitute a revocation of a proxy. Any written notice of revocation
or subsequent proxy must be sent so as to be delivered at or before the taking
of the vote at the meeting as follows:
(i) in the case of Cardinal Shareholders, to Cardinal Health, Inc.,
5555 Glendon Court, Dublin, Ohio 43016, Telecopy: (614) 717-8919,
Attention: Secretary; and
(ii) in the case of Bergen Shareholders, to Bergen Brunswig
Corporation, 4000 Metropolitan Drive, Orange, California 92868, Telecopy:
(714) 978-1148, Attention: Secretary.
Cardinal Shareholders and Bergen Shareholders who require assistance in
changing or revoking a proxy should contact Morrow & Co., Inc. at the address or
phone number provided in this Joint Proxy Statement/Prospectus under the caption
"Available Information."
Pursuant to the Cardinal Articles and applicable law, broker non-votes and
abstaining votes will not be counted in favor of any of the Cardinal Merger
Proposal, the Authorized Shares Proposal, the Name Change Proposal or the
Cardinal Adjournment Proposal and will not be treated as votes cast on such
proposals. Since
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<PAGE> 39
each of the Cardinal Merger Proposal, the Authorized Shares Proposal and the
Name Change Proposal requires the affirmative vote of a majority of the
outstanding Cardinal Common Shares, abstentions and broker non-votes will have
the same effect as votes against each such proposal. Since the Cardinal
Adjournment Proposal requires the affirmative vote of a majority of the votes
cast by holders of Cardinal Common Shares entitled to vote and present in person
or represented by proxy at the Cardinal Special Meeting, abstentions and broker
non-votes will have the same effect as votes against the Cardinal Adjournment
Proposal.
Pursuant to the Bergen Certificate and applicable law, broker non-votes and
abstaining votes will not be counted in favor of the Bergen Merger Proposal or
the Bergen Adjournment Proposal and will not be treated as votes cast with
respect to such proposals. Since the Bergen Merger Proposal and the Bergen
Adjournment Proposal require the affirmative vote of a majority of the votes
cast by the holders of shares of Bergen Common Stock entitled to vote and voting
at the Bergen Special Meeting, abstentions and broker non-votes will have no
effect with respect to the Bergen Merger Proposal or the Bergen Adjournment
Proposal, provided that a quorum (including such abstentions and broker
non-votes) is present.
SOLICITATION OF PROXIES
The expenses of the respective solicitations for the Cardinal and Bergen
Special Meetings will be borne by Cardinal and Bergen, subject to each party's
obligation to reimburse the other for its expenses under certain circumstances
and subject to the parties' obligations to share the costs of filing, printing
and mailing this Joint Proxy Statement/Prospectus. See "The Merger
Agreement -- Termination; Effect of Termination," and "-- Amendment and Waiver."
In addition to solicitation by mail, proxies may be solicited by directors,
officers and employees of Cardinal and Bergen in person or by telephone,
telegram or other means of communication. These persons will receive no
additional compensation for solicitation of proxies, but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. Cardinal
has retained Morrow & Co., Inc. at an estimated cost of $7,500, plus
reimbursement of expenses, to assist in its solicitation of proxies from
brokers, nominees, institutions and individuals. Bergen has retained Morrow &
Co., Inc. at an estimated cost of $7,500, plus reimbursement of expenses, to
assist in its solicitation of proxies from brokers, nominees, institutions and
individuals. Arrangements will also be made by Cardinal and Bergen with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and Cardinal and Bergen will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection therewith.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Cardinal. The Board of Directors of Cardinal has determined that the terms
of the Merger Agreement and the transactions contemplated thereby (including the
Name Change Proposal (subject to consummation of the Merger) and the Authorized
Shares Proposal) are fair to, and in the best interests of, Cardinal and the
Cardinal Shareholders. Accordingly, the Cardinal Board of Directors recommends
that Cardinal Shareholders vote FOR the approval and adoption of each of the
Cardinal Merger Proposal, the Name Change Proposal (subject to consummation of
the Merger), the Authorized Shares Proposal and the Cardinal Adjournment
Proposal.
Bergen. The Board of Directors of Bergen has determined that the terms of
the Merger Agreement and the transactions contemplated thereby are fair to, and
in the best interests of, Bergen and the Bergen Shareholders. Accordingly, the
Bergen Board of Directors recommends that Bergen Shareholders vote FOR the
approval and adoption of the Bergen Merger Proposal and the Bergen Adjournment
Proposal.
APPRAISAL RIGHTS
Cardinal Shareholders. Pursuant to Section 1701.84 of the Ohio Revised
Code, Cardinal Shareholders at the record date for the Cardinal Special Meeting
who follow certain statutory procedures set forth in Section 1701.85 of the Ohio
Revised Code have the right to demand payment of the "fair cash value" of their
Cardinal Common Shares if the Merger is consummated. See "Rights of Dissenting
Shareholders -- Cardinal Shareholders." Section 1701.85 of the Ohio Revised Code
is set forth in Annex D to this Joint Proxy Statement/Prospectus.
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<PAGE> 40
Bergen Shareholders. Bergen Shareholders will not be entitled to any
appraisal rights under New Jersey law or any other statute in connection with
the Merger. See "Rights of Dissenting Shareholders -- Bergen Shareholders."
THE MERGER
BACKGROUND OF THE MERGER
As part of their respective current strategies, each of Cardinal and Bergen
continually maintains a variety of contacts with potential candidates for
combination within the drug distribution industry and other segments of the
health services and healthcare industry generally. In recent years, from time to
time, representatives of Cardinal have attempted to initiate discussions with
Bergen regarding the possibility of a potential business combination between
Cardinal and Bergen. In the spring of 1997, following Cardinal's acquisition of
Owen and Bergen's termination of its merger agreement with IVAX Corporation
("IVAX"), each of Cardinal and Bergen reviewed possible candidates for business
combinations, including potential combinations with other companies in the drug
distribution industry.
In the second week of June 1997, Cardinal Chairman, Robert D. Walter,
telephoned Donald R. Roden, President and Chief Executive Officer of Bergen,
regarding the possibility of a potential business combination between Cardinal
and Bergen. Shortly after this discussion, Mr. Walter and Brendan A. Ford,
Senior Vice President-Corporate Development of Cardinal, met with Robert E.
Martini, Chairman of Bergen, and Mr. Roden to further discuss the possibility of
a potential business combination. These preliminary discussions included an
examination of the strategic implications of such a business combination and
respective business and management philosophies and goals and a preliminary
review of the opportunities such a business combination would afford the
combined companies and their respective customers. In addition, Cardinal and
Bergen each separately began to identify the potential efficiencies and cost
savings that could be achieved through a combination of Cardinal's and Bergen's
drug distribution businesses. The parties also discussed certain potential
challenges associated with such a combination, including integration of the two
management teams, retaining and motivating key personnel, explaining to
customers the benefits of such a combination, identifying and implementing best
practices of the two companies, combining management information systems and
distribution centers and effectively managing the significantly larger
organization and business operations that would result from a combination of the
two companies. These discussions continued in person and by telephone throughout
the remainder of June, July and August and involved senior executives at each of
Cardinal and Bergen as well as legal representatives and Bergen's financial
advisor. In late July, Bergen retained Merrill Lynch, its financial advisor, to
begin assisting Bergen in its evaluation of a possible business combination with
Cardinal.
In early July 1997, Cardinal and Bergen began to have more extensive
discussions regarding the potential fit between the two companies and set a
proposed schedule to conduct certain due diligence in advance of any substantive
discussions regarding a potential exchange ratio. Beginning in mid-June and
continuing through the execution of the Merger Agreement in late August,
representatives of Cardinal and Bergen management, as well as their legal
advisors, and Bergen's financial advisor, began addressing potential legal and
financial issues that could arise from a business combination involving Cardinal
and Bergen. In addition, each of Cardinal and Bergen continued their extensive
examination of potential efficiencies, synergies and cost savings that could
result from a combination of the two companies.
In the latter part of June and early July, senior executives of Cardinal
and Bergen met on several occasions to discuss further the possibility of a
business combination and begin the process of organizing and undertaking
comprehensive financial, legal and operational due diligence of each of the
companies. On July 9, 1997, a special meeting of the Cardinal Board was held at
which the potential for a business combination between Cardinal and Bergen was
discussed. At this meeting, Cardinal's senior management and its legal advisors
provided the Cardinal Board with an overview of Bergen and its operations and
outlined the preliminary structure of a possible business combination then being
discussed by the companies, as well as certain legal issues that would be
involved in any such transaction. During June and July, Bergen's Executive
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<PAGE> 41
Committee and Board conducted a total of eight meetings at which Bergen's Board
members, management and advisors reviewed, among other matters, the due
diligence information collected with respect to Cardinal, the synergies and
savings achievable from the proposed combination, Bergen's strategic
alternatives, the anticipated exchange ratio, the long-term potential for the
stock of the combined company and the status of negotiations.
On July 23, 1997, Bergen and Cardinal executed a mutual confidentiality
agreement. Beginning in late July, extensive comprehensive financial, legal and
operational due diligence was conducted by each of Cardinal and Bergen and their
representatives. This due diligence continued through August until execution of
the definitive Merger Agreement and related documentation on August 23, 1997.
Beginning in early August, Cardinal and Bergen began negotiating the terms of a
definitive merger agreement, as well as a draft stock option agreement and
support/voting agreement that Cardinal indicated were requirements for any
transaction between the parties. During this period, there were a series of
discussions among Mr. Walter, Mr. Roden and Mr. Martini concerning, among other
matters, an appropriate exchange ratio for a possible business combination. In
addition, the parties and their representatives conducted their due diligence
and negotiated the terms of such a business combination.
On August 12 and 13, 1997, respectively, a special meeting of the Bergen
Board and a regularly scheduled quarterly meeting of the Cardinal Board were
held at which the status of the negotiations regarding a potential business
combination between Cardinal and Bergen was discussed and the Boards authorized
their respective management teams and representatives to continue discussions
concerning a possible business combination. At the Bergen Board meeting,
representatives of Merrill Lynch presented their analyses of the financial
aspects of the proposed transaction and Bergen's legal advisors reviewed various
legal issues as well as business issues that were being negotiated between
Cardinal and Bergen.
Beginning in the third week of August, certain senior executives of
Cardinal and Bergen contacted on a confidential basis a limited number of senior
executives of certain selected Cardinal and/or Bergen customers and customer
representatives to discuss with them generally the concept of a possible
business combination between Cardinal and Bergen. On August 20, 1997, a special
meeting of the Cardinal Board was held to consider the terms of a possible
transaction which were still under negotiation. At that meeting, the Cardinal
Board discussed in detail the terms of a possible transaction and delegated to
the executive committee of the Cardinal Board the authority to approve the
exchange ratio and other terms of the transaction, as well as the final
documentation. On August 21, 1997, in a special meeting of the executive
committee of the Cardinal Board, the executive committee received an update from
Cardinal management and Cardinal's legal representatives and approved a proposed
exchange ratio and other terms of the merger and related transactions subject to
the finalization of the remaining documentation. The Cardinal Board determined
that the terms of the Merger Agreement and the transactions contemplated thereby
are fair to, and in the best interests of, Cardinal and the Cardinal
Shareholders and resolved to recommend that the Cardinal Shareholders vote for
the approval and adoption of the Merger Agreement, the Authorized Shares
Proposal and the Name Change Proposal (subject to consummation of the Merger),
at a special meeting of Cardinal Shareholders to be held for such purpose.
At a special meeting on August 20, 1997, the Bergen Board received a report
from management regarding the status of negotiations on the Merger Agreement and
related agreements and on the issues subject to further negotiation between the
parties. No formal action was taken, however, other than to schedule a
subsequent meeting to discuss the Merger. At a special meeting held on August
23, 1997, the Bergen Board received detailed reports of the status of the
continuing negotiations with Cardinal and the terms and provisions of the Merger
Agreement, the Stock Option Agreement and the Support/Voting Agreement as
negotiated by Bergen's representatives, including the Exchange Ratio. At that
special meeting, Bergen's Board, after receiving presentations from Bergen's
financial and legal advisors, received the Merrill Lynch Opinion that the
Exchange Ratio was fair, from a financial point of view, to the Bergen
Shareholders. The Bergen Board then determined that the terms of the Merger
Agreement and the transactions contemplated thereby were fair to, and in the
best interests of, Bergen and the Bergen Shareholders, and accordingly, the
Bergen Board unanimously approved the Rights Agreement Amendment, the Merger
Agreement, the Stock Option Agreement and the Support/Voting Agreement and
resolved to recommend that the Bergen
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Shareholders vote for the approval and adoption of the Merger Agreement at a
special meeting of Bergen Shareholders to be held for that purpose. See
"-- Reasons for the Merger; Recommendations of the Boards of
Directors -- Bergen."
Later on August 23, 1997, the Merger Agreement, the Stock Option Agreement
and the Support/Voting Agreement were executed. On such date, certain amendments
to Bergen benefit plans were executed as well as amendments to existing
employment arrangements with a number of Bergen senior executives. See
"-- Interests of Certain Persons in the Merger." On August 24, 1997, the parties
issued a joint press release announcing the Merger. In addition, prior to the
execution of the Merger Agreement and the Stock Option Agreement, Bergen and the
Rights Agent entered into the Rights Agreement Amendment.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Bergen. The Bergen Board of Directors, in the course of reaching its
decision to approve the Merger Agreement and the transactions contemplated
thereby, consulted with Bergen's legal and financial advisors as well as with
Bergen's management and considered a number of factors, including the following
material factors (the order does not necessarily reflect the relative
significance):
(i) The fact that the per share consideration to be received by Bergen
Shareholders in the Merger represents a premium of approximately 61% over
the closing price of the Bergen Common Stock on the last trading day prior
to the announcement of the signing of the Merger Agreement (based upon the
Cardinal Common Share price on such date);
(ii) The potential enhancements in earnings that could be achieved by:
- Consolidating the combined companies' 57 distribution centers (many
of which are not automated) into a smaller number of fully
automated, high volume state-of-the-art distribution centers that
will be able to attain greater economies of scale and lower
transportation costs than non-automated centers;
- Centralizing management and administrative functions, thereby
reducing general administrative expenses; and
- Employing Cardinal's purchasing practices to reduce product
procurement costs;
(iii) The ability to leverage such enhanced profitability, given the
historic growth in Cardinal's price earnings ratio and the opportunity to
associate Cardinal's price earnings ratio with the increased earnings
potential of the combined company;
(iv) The opportunity to achieve enhanced purchasing power through the
combined company's expanded customer base, enabling management to negotiate
greater price discounts for the combined company's customers;
(v) The opportunity to combine the two companies' product lines,
enabling Cardinal's customers to benefit from Bergen's medical and surgical
supply product offerings, enabling Bergen's customers to benefit from
Cardinal's diverse healthcare service offerings and improving one-stop
shopping opportunities for the customers of both companies;
(vi) The opportunity to improve customer service by implementing the
best practices of each company in a variety of service-oriented aspects of
the combined companies' business;
(vii) The demonstrated ability of the managements of Cardinal and
Bergen to understand, and carve out a profitable niche in, the rapidly
changing healthcare industry;
(viii) The opportunity of Bergen Shareholders to continue as
shareholders of a combined organization with greater financial and market
strength than Bergen on a stand-alone basis, and having strategic goals and
an operating philosophy similar to and compatible with those of Bergen,
stressing growth within the healthcare industry;
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(ix) The presentations of Merrill Lynch and the Merrill Lynch Opinion
that, as of the date thereof and based upon and subject to the factors and
assumptions set forth therein, the Exchange Ratio is fair to Bergen
Shareholders from a financial point of view. See "-- Opinion of Bergen's
Financial Advisor." The Merrill Lynch Opinion, which is subject to certain
limitations, qualifications and assumptions, is included as Annex B to this
Joint Proxy Statement/Prospectus and should be read in its entirety;
(x) The assessment of Bergen's strategic alternatives to the Merger,
including remaining an independent public company, continuing its pursuit
of acquisitions or merging or consolidating with a party or parties other
than Cardinal;
(xi) The terms and conditions of the Merger Agreement and the Stock
Option Agreement, including in particular the "no-solicitation" and
fiduciary responsibility provisions of the Merger Agreement, the fees and
expense reimbursement payable, in certain circumstances, to Cardinal, and
in other circumstances, to Bergen, the termination sections of the Merger
Agreement, the provisions relating to Bergen's ability to continue to
operate its business during the period between the execution of the Merger
Agreement and Closing (see "The Merger Agreement -- Termination; Effect of
Termination"), the conditions to closing and the representations and
warranties of each of the parties in the Merger Agreement;
(xii) The fact that the Merger is expected to be a tax-free
transaction to Bergen Shareholders and that it is expected to qualify as a
pooling-of-interests transaction for accounting and financial reporting
purposes; and
(xiii) The Board considered Bergen's employment contracts with certain
executive officers which provide for certain payments in the event such
employees leave Bergen following a change in control. See "-- Interests of
Certain Persons in the Merger." The Bergen Board considered the agreement
of such executives to enter into employment arrangements with the Surviving
Corporation, effective upon consummation of the Merger, and the particular
terms thereof.
The Bergen Board also considered a number of potential risks and
disadvantages relating to the Merger, including the following material risks and
disadvantages (the order does not necessarily reflect the relative
significance): (i) the difficulty and management distraction inherent in
integrating two large and geographically dispersed operations and the risk that
the synergies and benefits sought in the Merger might not be fully achieved;
(ii) the risk that the Merger would not be consummated; (iii) the substantial
expenses expected to be incurred by Bergen and Cardinal in connection with the
Merger; and (iv) the anticipated reduction in the dividend rate and book value
per share associated with the Cardinal Common Shares to be received by Bergen
Shareholders upon consummation of the Merger (see "Comparative Per Share Data").
Other than these risks and disadvantages which the Bergen Board considered in
its decision to enter into the Merger Agreement, the Bergen Board did not
identify any other particular material risks or material adverse effects on
Bergen Shareholders. The Bergen Board believed that these potential risks and
disadvantages were greatly outweighed by the potential benefits anticipated to
be realized from the Merger.
The foregoing discussion of the material factors and potential material
risks and disadvantages considered by the Bergen Board is not intended to be
exhaustive. In view of the wide variety of factors, risks and disadvantages
considered in connection with its evaluation of the Merger, the Bergen Board did
not find it practicable to, and did not, quantify or assign any relative or
specific weights to the foregoing matters, and individual directors may have
deemed different matters more significant than others.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF DIRECTORS OF BERGEN HAS
DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, BERGEN AND THE
BERGEN SHAREHOLDERS. ACCORDINGLY, THE BERGEN BOARD OF DIRECTORS RECOMMENDS THAT
BERGEN SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF THE BERGEN MERGER
PROPOSAL AND THE BERGEN ADJOURNMENT PROPOSAL.
Cardinal. In the course of reaching its decision to approve the Merger
Agreement and each of the transactions contemplated thereby, the Board of
Directors of Cardinal consulted with Cardinal's legal advisors
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<PAGE> 44
as well as with Cardinal's management, and considered a number of factors,
including the following material factors(the order does not necessarily reflect
the relative significance):
(i) management's expectation that efficiencies from the proposed
merger would have an accretive effect on the earnings of the combined
company, as compared to Cardinal's stand-alone earnings expectations,
resulting in the creation of significant value for Cardinal's shareholders;
(ii) the opportunity to reduce marginal operating costs for the
combined company below levels which either party could achieve
independently, enabling it to share these savings in the form of lower
prices and enhanced services to its customers, while maintaining an
acceptable level of profitability;
(iii) the creation of a network of high-volume, state-of-the-art
distribution centers in geographic areas which today are serviced by lower
volume, less efficient distribution centers;
(iv) the opportunity to build more effective pharmaceutical purchasing
alliances with a larger customer base, making the combined company a more
attractive trading partner to pharmaceutical manufacturers and enabling it
to negotiate more favorable merchandising programs and price discounts on
behalf of its customers;
(v) the complementary nature of Cardinal's broader service offerings
(such as pharmacy automation, pharmacy management, and specialty packaging)
and Bergen's broader product offerings (such as medical-surgical supplies),
enabling the combined company to offer a broader choice to its customers
and accelerating the number of meaningful opportunities to cross-sell these
ancillary products and services;
(vi) the addition of Bergen's seasoned management team; and
(vii) the opportunity to achieve the benefits of scale and leverage
with respect to investments in new technology, systems and services, which
is expected to enhance the combined company's software systems and
substantially increase its customer efficiencies in the areas of
order-entry and inventory management systems.
The Cardinal Board also considered the fact that it is a condition to the
consummation of the Merger that the Merger be treated as a pooling-of-interests
for financial reporting and accounting purposes, therefore adding no goodwill to
Cardinal's balance sheet.
Although the Cardinal Board has determined that the Merger is fair to, and
in the best interests of, Cardinal Shareholders, all business combinations,
including the Merger, also include disadvantages. With respect to the Merger,
material disadvantages to Cardinal Shareholders identified by the Cardinal Board
and management include (the order does not necessarily reflect the relative
significance): (i) the significant time and expense required to obtain necessary
regulatory approval and complete the Merger, with no assurance that the Merger
will be completed; (ii) the difficulties inherent in combining and integrating
the two companies, including management teams, information systems, customer
programs, and other programs, systems and services; and (iii) the distraction
caused by a transaction of this magnitude and the attendant lost opportunities
resulting from management's focus on completing the Merger and integrating
Cardinal's and Bergen's businesses. Other than these disadvantages which the
Cardinal Board considered in its decision to enter into the Merger Agreement,
the Cardinal Board did not identify any other particular material risks or
material adverse effects on Cardinal Shareholders. The Cardinal Board believed
that these risks were greatly outweighed by the potential benefits anticipated
to be realized from the Merger.
The foregoing discussion of the material factors considered by the Cardinal
Board is not intended to be exhaustive. In view of the wide variety of factors
considered in connection with its evaluation of the Merger, the Cardinal Board
did not find it practicable to, and did not, quantify or otherwise attempt to
assign relative weights to the specific factors considered in reaching its
determinations. In addition, individual directors may have given different
weights to different factors.
FOR THE REASONS DISCUSSED ABOVE, THE BOARD OF DIRECTORS OF CARDINAL HAS
DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, CARDINAL
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<PAGE> 45
AND THE CARDINAL SHAREHOLDERS. ACCORDINGLY, THE CARDINAL BOARD OF DIRECTORS
RECOMMENDS THAT CARDINAL SHAREHOLDERS VOTE FOR THE APPROVAL AND ADOPTION OF EACH
OF THE CARDINAL MERGER PROPOSAL, THE NAME CHANGE PROPOSAL (SUBJECT TO
CONSUMMATION OF THE MERGER), THE AUTHORIZED SHARES PROPOSAL AND THE CARDINAL
ADJOURNMENT PROPOSAL.
OPINION OF BERGEN'S FINANCIAL ADVISOR
Bergen retained Merrill Lynch to act as its exclusive financial advisor in
connection with a possible business combination. On August 12, 1997, Merrill
Lynch reported to the Board its preliminary analyses of the Merger. On August
23, 1997, Merrill Lynch rendered to the Bergen Board the Merrill Lynch Opinion
that, as of such date and based upon and subject to the factors and assumptions
set forth therein, the Exchange Ratio was fair from a financial point of view to
the holders of shares of Bergen Common Stock, other than Cardinal and its
affiliates.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE
REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX B TO THIS JOINT PROXY
STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE
MERRILL LYNCH OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. BERGEN
SHAREHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY. THE MERRILL LYNCH
OPINION WAS PROVIDED TO THE BERGEN BOARD FOR ITS INFORMATION AND IS DIRECTED
ONLY TO THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE EXCHANGE RATIO TO THE
HOLDERS OF BERGEN COMMON STOCK, DOES NOT ADDRESS THE MERITS OF THE UNDERLYING
DECISION BY BERGEN TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY BERGEN SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE
ON THE PROPOSED MERGER.
The Exchange Ratio was determined through negotiations between Cardinal and
Bergen and was approved by the Bergen Board. Merrill Lynch provided advice to
Bergen during the course of such negotiations.
The summary set forth below does not purport to be a complete description
of the analyses underlying the Merrill Lynch Opinion or the presentations made
by Merrill Lynch to the Bergen Board. The preparation of a fairness opinion is a
complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial analysis or summary description. In arriving
at its opinion, Merrill Lynch did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly, Merrill
Lynch believes that its analyses must be considered as a whole and that
selecting portions of its analyses, without considering all analyses, would
create an incomplete view of the process underlying its opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Bergen or Cardinal. Any estimates contained in the analyses performed by
Merrill Lynch are not necessarily indicative of actual values or future results,
which may be significantly more or less favorable than suggested by such
analyses. Additionally, estimates of the value of businesses or securities do
not purport to be appraisals or to reflect the prices at which such businesses
or securities might actually be sold. Accordingly, such analyses and estimates
are inherently subject to substantial uncertainty. In addition, as described
above, the Merrill Lynch Opinion was among several factors taken into
consideration by the Bergen Board in making its determination to approve the
Merger Agreement and the Merger. Consequently, the analyses performed by Merrill
Lynch described below should not be viewed as determinative of the decision of
the Bergen Board or Bergen's management with respect to the fairness of the
Exchange Ratio.
In arriving at its opinion, Merrill Lynch, among other things, (i) reviewed
certain publicly available business and financial information relating to Bergen
and Cardinal which Merrill Lynch deemed to be relevant, (ii) reviewed certain
information, including financial forecast information from certain publicly
available analysts' forecasts with respect to Bergen and Cardinal, identified
and reviewed by Bergen and
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<PAGE> 46
Cardinal, respectively, and provided to Merrill Lynch as reasonable forecasts
appropriate for use in rendering its opinion, relating to the business,
earnings, cash flow, assets, liabilities and prospects of Bergen and Cardinal,
as well as the amount and timing of the cost savings and related expenses and
synergies expected to result from the Merger (the "Base Case Synergies"),
furnished to Merrill Lynch by Bergen, (iii) conducted discussions with members
of senior management of Bergen and Cardinal concerning the matters described in
clauses (i) and (ii) above, as well as their respective businesses and prospects
before and after giving effect to the Merger, and the Base Case Synergies, (iv)
reviewed the market prices and valuation multiples for Bergen Common Stock and
Cardinal Common Shares and compared them with those of certain publicly traded
companies which Merrill Lynch deemed to be relevant, (v) reviewed the results of
operations of Bergen and Cardinal and compared them with those of certain
publicly traded companies which Merrill Lynch deemed to be relevant, (vi)
compared the proposed financial terms of the Merger with the financial terms of
certain other transactions which Merrill Lynch deemed to be relevant, (vii)
reviewed the potential pro forma impact of the Merger, before and after giving
effect to the Base Case Synergies, (viii) reviewed the Merger Agreement and (ix)
reviewed such other financial studies and analyses and took into account such
other matters as Merrill Lynch deemed necessary, including Merrill Lynch's
assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available, and Merrill Lynch did not assume any responsibility for independently
verifying such information and Merrill Lynch has not undertaken an independent
evaluation or appraisal of any of the assets or liabilities of Bergen or
Cardinal or been furnished with any such evaluation or appraisal. In addition,
Merrill Lynch did not assume any obligation to conduct any physical inspection
of the properties or facilities of Bergen or Cardinal. With respect to the
financial forecast information and the Base Case Synergies furnished to or
discussed with Merrill Lynch by Bergen or Cardinal, Merrill Lynch assumed that
they have been reasonably prepared or reviewed and reflect the best currently
available estimates and judgment of Bergen's or Cardinal's management as to the
expected future financial performance of, or expenses or benefits to, Bergen or
Cardinal, as the case may be, and the Base Case Synergies. Merrill Lynch also
assumed that the Merger will be accounted for as a pooling-of-interests under
generally accepted accounting principles and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they existed on, and could be evaluated as of, the date of
such opinion. Merrill Lynch assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger. In connection with the
preparation of its opinion, Merrill Lynch was not authorized by Bergen or the
Bergen Board to solicit, nor did Merrill Lynch solicit, third-party indications
of interest for the acquisition of all or any part of Bergen.
The following is a brief summary of the material analyses presented by
Merrill Lynch to the Bergen Board in connection with the rendering of the
Merrill Lynch Opinion.
Historical Stock Price Analysis. Merrill Lynch analyzed the high and low
stock prices of Bergen for the 52 weeks ending August 8, 1997, which were $31.00
and $20.69, respectively. The current price as of August 8, 1997 of $29.19 was
94.2% of the 52 week high of $31.00.
Comparable Public Companies Analysis. Merrill Lynch compared the trading
multiples for Bergen to corresponding multiples of a selected group of drug
distribution companies consisting of AmeriSource Health Corporation, Cardinal
Health, Inc., Bindley Western Industries, Inc. and McKesson Corporation (the
"Distribution Group"). Bergen's price to earnings ("P/E") ratios for the last
twelve months ("LTM"), calendar year 1997 and calendar year 1998 were 17.9x,
16.7x and 14.3x, respectively. The mean P/E ratios for the Distribution Group
were 24.6x, 22.1x and 18.3x, respectively. Bergen's P/E to five year estimated
future growth rate ("P/E to Growth") ratios for the LTM, calendar year 1997 and
calendar year 1998 were 116.0%, 107.9% and 92.4%, respectively. The mean P/E to
Growth ratios for the Distribution Group were 149.6%, 133.9% and 111.5%,
respectively. This analysis resulted in a valuation range from $33.00 to $38.00
per share.
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No company used in the above analysis as a comparison is identical to
Bergen. Accordingly, an analysis of the results of the foregoing necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value of Bergen and the companies to which it is
compared.
Comparable Transaction Analysis. Merrill Lynch compared the transaction
multiples for the Bergen transaction with multiples from comparable deals. The
implied offer price as a multiple of LTM earnings per share ("EPS") multiple was
27.7x compared to the mean multiple for comparable transactions of 23.0x. The
transaction value as a multiple of LTM revenues, LTM earnings before income tax,
depreciation and amortization ("EBITDA") and LTM earnings before income tax
("EBIT") were .24x, 13.0x and 16.0x, respectively, as compared to the mean
multiples for comparable transactions of .25x, 10.4x and 12.6x, respectively.
This analysis resulted in a valuation range of $32.00 to $37.00 per share.
No company or transaction used in the above analysis as a comparison is
identical to Bergen or the Merger, respectively. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the companies and other factors that could affect the public trading value of
Bergen and the companies to which it is compared.
Discounted Cash Flow Analysis. Merrill Lynch calculated, using a
discounted cash flow methodology, a range of implied per share values for Bergen
based on publicly available analyst projections for the years 1998 to 2002 and a
range of 2002 terminal EBITDA multiples of 9.0x to 10.0x and a range of discount
rates from 10.0% to 12.0%. The range of implied per share values for Bergen
resulting from this analysis was $34.94 to $43.17.
Historical Exchange Ratio Analysis. Merrill Lynch compared the Exchange
Ratio to the relative daily closing stock prices of Bergen and Cardinal from
July 30, 1994 to August 8, 1997. The mean historical implied exchange ratio
calculated as of August 8, 1997 for (i) the previous three-year period was
0.497, (ii) the previous two-year period was 0.472, (iii) the previous one-year
period was 0.445 and (iv) the previous six-month period was 0.452.
Relative Contribution Analysis. Merrill Lynch compared the pro forma
relative equity interests (based on the Exchange Ratio) of 26.8% for the
shareholders of Bergen and 73.2% for the shareholders of Cardinal to the pro
forma relative contributions of each of Bergen and Cardinal to the net income of
the combined company, Cardinal Bergen Health, Inc., for the years 1998 through
2000, assuming no synergies. The calculations indicated that Bergen's
contributions to the pro forma net income of Cardinal Bergen Health, Inc. would
be 26.4%, 25.3% and 23.8% for the years 1998, 1999 and 2000, respectively. The
implied exchange ratios with corresponding levels of Bergen ownership were .759,
.718 and .663 for 1998, 1999 and 2000, respectively. For analytical purposes,
Merrill Lynch also calculated the amount of synergies for which Cardinal will
effectively be paying Bergen (the "Contributed Synergies"), in order to
reconcile the pro forma ownership structure with the relative contribution
analysis. Merrill Lynch calculated the Contributed Synergies to be $3.3 million
in 1998, $15.2 million in 1999 and $37.7 million in 2000, which represent 16.4%,
30.6% and 37.7% of the Base Case Synergies, respectively.
Relative Discounted Cash Flow Analysis. Using a relative discounted cash
flow methodology, Merrill Lynch also calculated a range of implied
Bergen/Cardinal exchange ratios based on publicly available analyst projections
for the years 1998 to 2002 and the following ranges of 2002 terminal EBITDA
multiples and ranges of relative discounted rates: (i) for Bergen, a range of
2002 terminal EBITDA multiples of 9.0x to 10.0x and a range of discount rates
from 10.0% to 12.0% and (ii) for Cardinal, a range of 2002 EBITDA multiples form
10.0x to 11.0x and a range of discount rates from 10.0% to 12.0%. The implied
Bergen/Cardinal exchange ratios resulting from the Relative Discounted Cash Flow
Analysis ranged from 0.551 to 0.570.
Pro Forma Analysis. Merrill Lynch analyzed the impact of the Merger for
shareholders of Bergen and Cardinal on the pro forma fully diluted EPS, based on
publicly available analyst projections and synergies ranging from $0 to $20
million, $0 to $50 million and $0 to $100 million for the fiscal years ending on
June 30,
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1998, 1999 and 2000, respectively. This analysis indicated that, for the Bergen
shareholders, the Merger would result in ranges of EPS accretion of 0.2% to 3.5%
in 1998, 5.3% to 12.4% in 1999 and 12.4% to 24.8% in 2000. For the Cardinal
shareholders, the Merger would result in ranges of EPS accretion/(dilution) of
(1.0%) to 2.3% in 1998, (1.7%) to 4.9% in 1999 and (3.5%) to 7.1% in 2000.
Pursuant to a letter agreement between Bergen and Merrill Lynch, Bergen
agreed to pay Merrill Lynch (i) a fee of $1,000,000 contingent and payable upon
the execution of the Merger Agreement, (ii) a fee of $6,000,000 payable upon the
closing of the Merger or certain other comparable transactions involving Bergen
and Cardinal, provided that any fee paid pursuant to this clause (ii) will be
reduced by (A) the portion of any fee paid to Merrill Lynch pursuant to clause
(i) and (B) any amounts reimbursed to Merrill Lynch for its out-of-pocket
expenses. Pursuant to such letter agreement, Bergen also agreed that in certain
circumstances in which there is a Competing Transaction, Bergen and Merrill
Lynch will mutually agree on fees to be paid by Bergen. Additionally, Bergen
agreed to reimburse Merrill Lynch for certain reasonable out-of-pocket expenses,
including certain reasonable fees and disbursements of its legal counsel. Bergen
has also agreed to indemnify Merrill Lynch and certain related persons for
certain liabilities related to or arising out of its engagement, including
liabilities under the federal securities laws.
Bergen retained Merrill Lynch based upon Merrill Lynch's experience and
expertise. Merrill Lynch is an internationally recognized investment banking and
advisory firm. Merrill Lynch, as part of its investment banking business, is
continuously engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
Merrill Lynch has, in the past, provided financial advisory and financing
services to Bergen and may provide such services to the combined companies
following the Merger and/or their affiliates and may receive fees for the
rendering of such services. In the ordinary course of its business, Merrill
Lynch and its affiliates may actively trade the debt and equity securities of
Bergen for their own account and for the accounts of customers and, may at any
time hold a long or short position in such securities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Bergen Board with respect to the
Merger Agreement, Bergen Shareholders should be aware that certain officers and
directors of Bergen (or their affiliates) have interests in the Merger that are
different from and in addition to the interests of Bergen Shareholders
generally. The Board of Directors of Bergen was aware of these interests and
took these interests into account in approving the Merger Agreement and the
transactions contemplated thereby.
Bergen Options. Prior to the Effective Time, Cardinal and Bergen will take
all such actions as may be necessary to cause each unexpired and unexercised
Bergen Option outstanding on the date of the Merger Agreement granted by Bergen
to be automatically converted at the Effective Time into a Cardinal Exchange
Option to purchase that number of Cardinal Common Shares equal to the number of
shares of Bergen Common Stock issuable immediately prior to the Effective Time
upon exercise of the Bergen Option (without regard to actual restrictions on
exercisability) multiplied by the Exchange Ratio, with an exercise price per
share equal to the exercise price per share which existed under the
corresponding Bergen Option divided by the Exchange Ratio, and with other terms
and conditions that are the same as the terms and conditions of such Bergen
Option immediately before the Effective Time; provided that with respect to any
Bergen Option that is an "incentive stock option" within the meaning of Section
422 of the Code, the foregoing conversion will be carried out in a manner
satisfying the requirements of Section 424(a) of the Code. As of the Bergen
Record Date, 2,836,363 shares of Bergen Common Stock were issuable upon the
exercise of outstanding Bergen Options, which options, based on an Exchange
Ratio of 0.775, will be converted to become approximately 2,198,181 Cardinal
Exchange Options at the Effective Time. The weighted average exercise price per
share of all Bergen Options outstanding as of the Bergen Record Date is $23.26
per share. Following the Merger and based on an Exchange Ratio of 0.775, the
weighted average exercise price per share of Cardinal Exchange Options will be
approximately $30.01 per share. Assuming that such Bergen Options remain
outstanding until the Effective Time and that all Cardinal Exchange Options are
exercised immedi-
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ately after the Effective Time and based on an Exchange Ratio of 0.775, the
holders thereof would hold approximately 1.5% of all Cardinal Common Shares
issued and outstanding immediately after the Effective Time (without including
any Cardinal Common Shares otherwise held by such holders and excluding Cardinal
Common Shares to be issued pursuant to the MediQual Merger). Substantially all
of the executive officers and directors of Bergen currently hold Bergen Options
which will become Cardinal Exchange Options.
Cardinal has agreed under the Merger Agreement to file with the Commission,
within 15 business days after the Closing Date, a registration statement on Form
S-8 or other appropriate form under the Securities Act to register the Cardinal
Common Shares issuable upon exercise of the Cardinal Exchange Options and to use
its reasonable efforts to cause such registration statement to remain effective
until the exercise or expiration of such options.
Supplemental Agreements. In connection with the Merger, Cardinal, Bergen
and eight senior management employees of Bergen (the "Tier 1 Executives")
entered into supplemental agreements (the "Supplemental Agreements") to amend
and supplement employment agreements (as in effect prior to the amendment
thereof, the "Employment Agreements") and to terminate certain severance
agreements (as in effect prior to the termination thereof, the "Severance
Agreements") between Bergen and such persons. The Tier 1 Executives consist of
Linda M. Burkett, Charles J. Carpenter, Neil F. Dimick, William A. Elliott,
Brent R. Martini, Donald R. Roden, Milan A. Sawdei and Carol E. Scherman. Each
of the Supplemental Agreements provides for amendments to the Tier 1 Executive's
Employment Agreement and for other changes to the terms and conditions of the
Executive's employment, in some respects more favorable to the Executive 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 ab initio if the Merger is not consummated, except as
provided below.
Each of the Tier 1 Executives' Employment Agreements, as amended by their
Supplemental Agreements, has 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 Tier 1 Executive in effect at 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 Tier 1 Executive over the remaining term of the
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 Tier 1 Executive before the Effective
Time, and the Tier 1 Executive's target bonus will in each case be at least
equal to the Tier 1 Executive's target bonus in effect at the Effective Time;
and (iii) that following the Effective Time, the Tier 1 Executive 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 such Supplemental
Agreement, if the Tier 1 Executive is terminated by Bergen without "Cause" (as
defined), or if the Tier 1 Executive terminates his or her own employment for
"Good Reason" (as defined), Bergen will provide the Tier 1 Executive 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
Tier 1 Executive that remain outstanding but have not vested and not become
exercisable as of the date of such termination. In addition, the Employment
Agreements, as amended by such Supplemental Agreements, provide for vesting
and/or participation by the Executives in Bergen's Retired Officers Medical Plan
(the "ROM Plan") in connection with certain terminations of employment.
All of the Tier 1 Executives 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
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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
Conversation 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 Tier 1
Executive'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 Tier
1 Executive. Notwithstanding the foregoing, if the Tier 1 Executive'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 Tier 1 Executive 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 Tier 1 Executive on the Tier 1 Executive's 65th birthday or (ii) if
the Tier 1 Executive dies before the Tier 1 Executive's 65th birthday, to the
Tier 1 Executive's designated beneficiary (or, if the Tier 1 Executive had not
designated a beneficiary, to the Tier 1 Executive's estate) on the 65th
anniversary of the Tier 1 Executive'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 Tier 1 Executive an amount necessary
for the Tier 1 Executive, 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 Tier 1 Executive is liable under Section 4999 of the
Code.
The Severance Agreements with the Tier 1 Executives, 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), have been
terminated under such Supplemental Agreements.
Such Supplemental Agreements also amended certain promissory notes (the
"Notes") evidencing loans to each of the Tier 1 Executives 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
Agreement also contains a provision (the "Forgiveness Provision") that states
that if either (A) the Tier 1 Executive remains in continuous employment with
Bergen until the expiration date of the Tier 1 Executive's Employment Agreement,
as amended by such Tier 1 Executive's Supplemental Agreement, or (B) the Tier 1
Executive's employment with Bergen is terminated before such expiration date by
Bergen without Cause or by the Tier 1 Executive with Good Reason or as a result
of the Tier 1 Executive'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.
Pursuant to such Supplemental Agreements, each of the Tier 1 Executives 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 Tier 1 Executive has agreed that if the Tier 1 Executive commits
any material breach of this noncompetition covenant and fails to cure such
breach within 15 days after receiving notice from Bergen thereof, the Tier 1
Executive will forfeit all of his or her rights to any unpaid pay or benefits
pursuant to his or her Employment Agreement, as amended by the Supplemental
Agreement, other than the Tier 1 Executive's rights with respect to his or her
benefits under the CAP or the SERP as described above. The "Noncompetition
Period" means the period during which the Tier 1 Executive 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
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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 Tier 1 Executive performed services in such business or endeavor
during the Tier 1 Executive'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 Tier 1 Executive begins participating in
such business or endeavor. The Tier 1 Executive shall be considered to have
become "associated with a Competitive Activity" if the Tier 1 Executive becomes
directly or indirectly involved as an owner, principal, employee, officer,
director, independent contractor, representative, stockholder, financial backer,
agent, partner, advisor, lender, or in any other individual or representative
capacity with any individual, partnership, corporation or other organization
that is engaged in a Competitive Activity. Notwithstanding the foregoing, the
Tier 1 Executive may make and retain investments during the Noncompetition
Period in less than four and nine-tenths percent (4.9%) of the equity of any
entity engaged in a Competitive Activity, if such equity security is listed on a
national securities exchange or regularly traded in an over-the-counter market.
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 Tier 1 Executives), 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" (as those terms are defined in the CAP, as similarly amended to
exclude from participation, contingent upon consummation of the Merger, each of
the Tier 1 Executives). As noted above, under the Supplemental Agreements, the
Tier 1 Executives are no longer entitled to any of the benefits, rights or
entitlements under the CAP or the SERP effective as of the Conversion Date.
Bergen and Cardinal have proposed entering into supplemental agreements
(the "Tier 2 Supplemental Agreements") with three other senior management
employees of Bergen (William G. Allen, Larry E. Burch and David W. Neu,
collectively referred to as the "Tier 2 Executives") in order to amend their
existing employment agreements (the "Tier 2 Employment Agreements"). It has been
proposed by Bergen and Cardinal that the Tier 2 Supplemental Agreements amend
the Tier 2 Employment Agreements in substantially the same manner as the Tier 1
Executives' Supplemental Agreements amend the Tier 1 Executives' Employment
Agreements except as follows: (i) the Tier 2 Employment Agreements would be for
terms of two years after the Effective Time (if not terminated earlier) and
would assure the Tier 2 Executives' the equivalent of two, rather than three,
annual bonuses; (ii) the Tier 2 Employment Agreements would provide no
assurances regarding Bergen's ROM Plan; and (iii) in lieu of the SERP and CAP
arrangements made for the Tier 1 Executives, the Tier 2 Employment Agreements
would provide that Messrs. Allen and Neu will continue to accrue benefits under
the SERP and, if either of such person's employment with Bergen is terminated by
Bergen without Cause (during the term or after the expiration date of his Tier 2
Employment Agreement, as amended by his Tier 2 Supplemental Agreement) or by
such Tier 2 Executive for Good Reason (during the term or after the expiration
date of his Tier 2 Employment Agreement, as amended by his Tier 2 Supplemental
Agreement), then all benefits to which he is entitled under the SERP as a key
management employee will be considered to have been accrued as if he had
achieved the maximum number of "points" under the SERP and will be paid to him
upon such termination in accordance with the term of the SERP. Bergen and
Cardinal have also proposed entering into a two-year employment agreement with
Ralph Williamson, a senior management employee of Bergen who previously was not
subject to an employment agreement with Bergen. Finally, Bergen and Cardinal
have proposed amending the Supplemental Agreements with the Tier 1 Executives,
primarily to clarify certain contract matters (among other things, to provide
for the pro-ration of bonus amounts for periods of less than twelve months in
duration) and to assure the Tier 1
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Executives that the Forgiveness Provision will apply even in the event that the
Merger Agreement is terminated.
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 that are outstanding as of the
Transaction Date under the Company's Executive Loan Program 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 Transaction Date or Mr. Martini's death, whichever
first occurs, 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 and self-employment 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, has been 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, has been continued under
the amended Consulting Agreement.
Indemnification; Insurance. In the Merger Agreement, Cardinal has agreed
that, from and after the Effective Time, it will cause the Surviving Corporation
(including, to the extent required, providing sufficient funding) to (i)
indemnify and hold harmless the present and former officers and directors of
Bergen in respect of acts or omissions occurring prior to the Effective Time to
the extent provided under the Bergen Certificate and Bergen Bylaws in effect on
the date of the Merger Agreement and (ii) perform and fulfill all of its
obligations under the indemnification agreements between Bergen and certain
officers and directors of Bergen in effect as of the date of the Merger
Agreement.
Cardinal has also agreed to collaborate with Bergen in good faith to use
all reasonable efforts to cause the Surviving Corporation to obtain and maintain
in effect for six years after the Effective Time policies of directors' and
officers' liability insurance at no cost to the beneficiaries thereof with
substantially the same coverage and containing substantially similar terms and
conditions as the current policies of directors' and officers' liability
insurance maintained by Bergen with respect to acts or omissions occurring prior
to the Effective Time; provided, however, that the Surviving Corporation will
not be required to pay an aggregate premium for such insurance coverage in
excess of 325% of the last annual premium paid prior to the date of the Merger
Agreement.
See "-- Support/Voting Agreement."
Other. Cardinal and Bergen have also agreed, pursuant to the Merger
Agreement, that (i) Robert E. Martini (Bergen's Chairman), Donald R. Roden
(Bergen's President and Chief Executive Officer) and two other Bergen directors
designated by Robert E. Martini will become directors of Cardinal upon
consummation of the Merger, (ii) Robert E. Martini will become Chairman of the
Board of Cardinal; and (iii) Messrs. Martini and Roden will become members of
Cardinal's six-member Executive Committee.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling-of-interests for accounting
and financial reporting purposes. Consummation of the Merger is conditioned on
Cardinal's receipt of a letter, in form and substance
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reasonably satisfactory to Cardinal and Bergen, from Deloitte & Touche LLP,
independent auditors of Cardinal and Bergen, dated the date of the Effective
Time, to the effect that the Merger will qualify as a pooling-of-interests for
accounting and financial reporting purposes. In addition, the Merger Agreement
may be terminated by either party if (i) at any time the other party or any of
its affiliates has taken or agreed to take any action that (without giving
effect to any action taken or agreed to be taken by the terminating party or any
of its affiliates) would, or any of the transactions contemplated by the Merger
Agreement would, prevent Cardinal from accounting for the Merger as a
pooling-of-interests for accounting and financial reporting purposes and (ii)
Cardinal has been advised that Deloitte & Touche LLP will not render to Cardinal
the letter referred to above.
Under the pooling-of-interests method of accounting, the recorded assets
and liabilities of Cardinal and Bergen will be carried forward to the combined
company at their historical recorded amounts, income of the combined company
will include income of Bergen and Cardinal for the entire fiscal year in which
the combination occurs, and the reported income of the separate companies for
previous periods will be combined and restated as income of the combined
company. See "The Merger Agreement -- Conditions" and "Unaudited Pro Forma
Combined Financial Information."
It is a condition to the Merger that Bergen obtain written undertakings
("Affiliate Letters") at least 30 days prior to the Bergen Special Meeting from
each person who may be at the Effective Time or was on the date of the Merger
Agreement an "affiliate" of Bergen for purposes of Rule 145 under the Securities
Act to the effect that, among other things, such person will not sell, transfer
or otherwise dispose of, or direct or cause the sale, transfer or other
disposition of, any shares of Bergen Common Stock or Cardinal Common Shares or
Bergen Options beneficially owned by such person during the 30 days prior to the
Effective Time and will not sell, transfer or otherwise dispose of, or direct or
cause the sale, transfer or other disposition of, any Cardinal Common Shares or
Cardinal Exchange Options (or Cardinal Common Shares issuable upon exercise
thereof) beneficially owned by such person as a result of the Merger or
otherwise until after such time as Cardinal shall have publicly released a
report in the form of a quarterly earnings report, registration statement filed
with the Commission, a report filed with the Commission or any other public
filing, statement or announcement which includes the combined financial results
of Cardinal and Bergen for a period of at least 30 days of combined operations
of Cardinal and Bergen following the Effective Time. See "The Merger
Agreement -- Conditions."
REGULATORY APPROVALS
Under the HSR Act and the rules that have been promulgated thereunder by
the FTC, the Merger may not be consummated unless certain filings have been
submitted to the Antitrust Division and the FTC and certain waiting period
requirements have been satisfied. On August 25, 1997, Cardinal and Bergen
submitted the required filings to the FTC and the Antitrust Division. On
September 25, 1997, the parties received second requests from the FTC for
additional information and documents, and the parties substantially complied
with such requests on November 28, 1997. Pursuant to the HSR Act, the waiting
period with respect to the Merger would have expired on December 13, 1997. In
order to permit the FTC time to complete its review of the Merger, Cardinal and
Bergen each agreed to an extension of the waiting periods and to give the FTC
and the Antitrust Division notice prior to consummation of the Merger.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Merger. At any time before or
after the consummation of the Merger, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable in
the public interest, including seeking to enjoin the consummation of the Merger
or seeking the divestiture of substantial assets of Bergen or Cardinal. Private
parties and state attorneys general may also bring actions under the antitrust
laws under certain circumstances. In response to a request from certain states
which are members of the NAAGVPC, Cardinal and Bergen each waived certain
confidentiality protections under the HSR Act solely for the purpose of
facilitating confidential communications between the FTC and the member states
of the NAAGVPC. Bergen and Cardinal believe that the consummation of the Merger
will not violate the antitrust laws. There can be no assurance, however, that a
challenge to the Merger on antitrust grounds will not be made, or, if such a
challenge is made, what the result will be.
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For a description of Cardinal's and Bergen's obligations with respect to
regulatory approvals, see "The Merger Agreement -- Covenants" and for a
description of the related circumstances under which Cardinal or Bergen may
terminate the Merger Agreement, see "The Merger Agreement -- Termination; Effect
of Termination."
Other than as described in this Joint Proxy Statement/Prospectus,
consummation of the Merger does not require the approval of any Federal or state
agency. Certain state and Federal filings will be required in connection with
consummation of the Merger.
FEDERAL SECURITIES LAW CONSEQUENCES
All Cardinal Common Shares issued in connection with the Merger will be
freely transferable, except that any Cardinal Common Shares received by persons
who are deemed to be "affiliates" (as such term is defined under the Securities
Act) of Cardinal or Bergen prior to the Merger may be sold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act with respect to affiliates of Cardinal or Bergen, or Rule 144 under the
Securities Act with respect to persons who are or become affiliates of Cardinal,
or as otherwise permitted under the Securities Act. Persons who may be deemed to
be affiliates of Cardinal or Bergen generally include individuals or entities
that control, are controlled by or are under common control with Cardinal or
Bergen and generally include the executive officers and directors as well as
principal shareholders of Cardinal or Bergen.
Affiliates may not sell their Cardinal Common Shares acquired in connection
with the Merger, except pursuant to an effective registration under the
Securities Act covering such shares or in compliance with Rule 145 under the
Securities Act (or Rule 144 under the Securities Act in the case of persons who
become affiliates of Cardinal) or another applicable exemption from the
registration requirements of the Securities Act. In general, Rule 145 under the
Securities Act provides that, for one year following the Effective Time, an
affiliate (together with certain related persons) would be entitled to sell
Cardinal Common Shares acquired in connection with the Merger only through
unsolicited "broker transactions" or in transactions directly with a "market
maker," as such terms are defined in Rule 144 under the Securities Act.
Additionally, the number of shares to be sold by an affiliate (together with
certain related persons and certain persons acting in concert) within any
three-month period for purposes of Rule 145 under the Securities Act may not
exceed the greater of 1% of the outstanding Cardinal Common Shares or the
average weekly trading volume of such shares during the four calendar weeks
preceding such sale. Rule 145 under the Securities Act will remain available to
affiliates if Cardinal remains current with its informational filings with the
Commission under the Exchange Act. One year after the Effective Time, an
affiliate will be able to sell such Cardinal Common Shares without being subject
to such manner of sale or volume limitations provided that Cardinal is current
with its Exchange Act informational filings and such affiliate is not then an
affiliate of Cardinal. Two years after the Effective Time, an affiliate will be
able to sell such Cardinal Common Shares without any restrictions so long as
such affiliate had not been an affiliate of Cardinal for at least three months
prior to the date of such sale. See "-- Accounting Treatment."
Pursuant to the Affiliate Letters, Cardinal has agreed that, for so long as
any affiliate that is party to an Affiliate Letter holds any Cardinal Common
Shares as to which such affiliate is subject to the limitations of Rule 145,
Cardinal will use its reasonable efforts to file all reports required to be
filed by it pursuant to the Exchange Act and the rules and regulations
thereunder so as to satisfy the requirements of paragraph (c) of Rule 144 under
the Securities Act that there be available current public information with
respect to Cardinal, and to that extent to make available to such affiliate the
exemption afforded by Rule 145 with respect to the sale, transfer or other
disposition of the Cardinal Common Shares. See "-- Accounting Treatment."
STOCK OPTION AGREEMENT
In connection with the execution of the Merger Agreement, Cardinal and
Bergen entered into the Stock Option Agreement pursuant to which Bergen granted
to Cardinal an irrevocable Option to purchase up to 10,028,163 shares of Bergen
Common Stock (representing 19.9% of the outstanding shares of Bergen Common
Stock as of July 31, 1997, which number may be increased up to 19.9% of the
outstanding shares of
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Bergen Common Stock at any time) at an exercise price per share of $48.29.
Cardinal may exercise the Option, in whole or in part, at any time or from time
to time following the occurrence of certain "Purchase Events" which are
described below. No Purchase Event has occurred as of the date of this Joint
Proxy Statement/Prospectus.
The Option terminates upon the earliest to occur of:
(i) the Effective Time of the Merger;
(ii) 5:00 p.m. New York City time, on the date which is 180 days
following the occurrence of a Purchase Event; and
(iii) (x) the termination of the Merger Agreement in accordance with
its terms (other than (A) pursuant to Section 7.1(g) thereof (which relates
to a Competing Transaction) or (B) pursuant to Section 7.1(e) thereof if at
the Bergen Special Meeting the requisite vote of the Bergen Shareholders to
approve the Merger and the other transactions contemplated by the Merger
Agreement shall not have been obtained, and at the time of such failure by
Bergen Shareholders to so approve the Merger there is a publicly announced
or disclosed Competing Transaction with respect to Bergen) prior to the
occurrence of a Purchase Event, or (y) 5:00 p.m. New York City time, on the
date which is one year following the termination of the Merger Agreement
pursuant to Section 7.1(e) thereof if no Purchase Event has occurred
pursuant to clause (ii) below.
Notwithstanding the foregoing, if the Option cannot be exercised before its
date of termination as a result of any injunction, order or similar restraint
issued by a court of competent jurisdiction, the Option shall expire on the 10th
business day after such injunction, order or restraint shall have been dissolved
or when such injunction, order or restraint shall have become permanent and no
longer subject to appeal, as the case may be, but in no event later than 18
months after the occurrence of a Purchase Event.
Under the Stock Option Agreement, a "Purchase Event" is defined as the
occurrence of any of the following:
(i) the Board of Directors of Bergen shall have withdrawn, modified or
changed the Bergen Board's recommendation in a manner adverse to Cardinal,
or if the Board of Directors of Bergen shall have refused to affirm such
recommendation as promptly as practicable (but in any case within 10
business days) after receipt of any written request from Cardinal which
request was made on a reasonable basis;
(ii) if at the Bergen Special Meeting the requisite vote of the Bergen
Shareholders to approve the Merger and the other transactions contemplated
by the Merger Agreement shall not have been obtained, and at the time of
such failure by Bergen Shareholders to so approve the Merger there is a
publicly announced or disclosed Competing Transaction with respect to
Bergen involving a third party and within 12 months after termination of
the Merger Agreement, Bergen shall enter into a letter of intent,
agreement-in-principle, business combination or merger agreement or other
similar agreement for a Competing Transaction or a Competing Transaction is
consummated, in each case with such third party or a national or
international wholesale pharmaceutical distributor or any of their
respective affiliates;
(iii) if Bergen shall have breached in any material respect any of its
obligations under the Stock Option Agreement; or
(iv) the Merger Agreement shall have been terminated by Bergen
pursuant to Sections 5.3(e) and 7.1(g) of the Merger Agreement (which
relates to a Competing Transaction).
At the request of Cardinal at any time commencing upon the occurrence of a
Purchase Event and ending 180 days immediately thereafter (the "Cardinal
Repurchase Period"), Bergen (or any successor entity thereof) is required to
repurchase the Option from Cardinal together with all (but not less than all)
shares of Bergen Common Stock purchased by Cardinal pursuant thereto with
respect to which Cardinal then has beneficial ownership, at a price (when
calculated on a per share basis, the "Per Share Repurchase Price"), payable in
cash, equal to the sum of: (i) the difference between (A) the "Market/Tender
Offer Price" for shares of Bergen Common Stock (defined as the higher of (x) the
highest price per share at which a tender or
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exchange offer has been made for shares of Bergen Common Stock or (y) the
highest closing price per share of Bergen Common Stock reported by the NYSE
Composite Tape for any day within that portion of the Cardinal Repurchase Period
which precedes the date Cardinal gives notice of the required repurchase) and
(B) the exercise price, as adjusted pursuant to the Stock Option Agreement,
multiplied by the number of shares of Bergen Common Stock with respect to which
the Option has not been exercised, but only if such Market/Tender Offer Price is
greater than such exercise price; (ii) the exercise price paid by Cardinal for
any shares of Bergen Common Stock acquired pursuant to the Option; and (iii) the
difference between the Market/Tender Offer Price and the exercise price paid by
Cardinal for any shares of Bergen Common Stock purchased pursuant to the
exercise of the Option, multiplied by the number of shares so purchased, but
only if such Market/Tender Offer Price is greater than such exercise price.
Except to the extent that Cardinal shall have previously exercised its
rights described in the preceding paragraph, at the request of Bergen during the
six-month period commencing 180 days following the first occurrence of a
Purchase Event, Bergen may repurchase from Cardinal, and Cardinal is required to
sell to Bergen, all (but not less than all) of the Bergen Common Stock acquired
by Cardinal pursuant to the Option and with respect to which Cardinal has
beneficial ownership at the time of such repurchase at a price per share equal
to the greater of (i) 110% of the Market/Tender Offer Price per share
(calculated in the manner described above but utilizing the period beginning on
the occurrence of a Purchase Event and ending on the date Bergen exercises its
repurchase right), (ii) the Per Share Repurchase Price or (iii) the sum of (A)
the aggregate purchase price of the shares so repurchased plus (B) interest on
the aggregate purchase price paid for the shares so repurchased from the date of
purchase by Cardinal to the date of repurchase at the highest rate of interest
announced by Bank One, Columbus, NA as its prime or base lending or reference
rate during such period, less any dividends received on the shares so
repurchased, which sum shall be divided by the number of shares of Bergen Common
Stock to be repurchased by Bergen.
Pursuant to the Stock Option Agreement, at any time after a Purchase Event,
Bergen will be obligated, under certain circumstances, to file a registration
statement under the Securities Act if necessary in order to permit the sale or
other disposition of the shares of Bergen Common Stock that have been acquired
upon exercise of the Option. Bergen is not required to file more than two such
registration statements under the Stock Option Agreement.
The foregoing is a summary of the material provisions of the Stock Option
Agreement, a copy of which is filed as an exhibit to the Registration Statement.
See "Available Information." This summary is qualified in its entirety by
reference to the Stock Option Agreement which is incorporated herein by this
reference.
SUPPORT/VOTING AGREEMENT
Concurrently with the execution of the Merger Agreement, Cardinal and Mr.
Robert E. Martini executed a Support/Voting Agreement pursuant to which Mr.
Martini agreed that, among other things, he (i) will not, and will not permit
any company, trust or other entity controlled by him to, contract to sell, sell
or otherwise transfer or dispose of any of the shares of the capital stock of
Bergen of which he is the record or beneficial owner ("Supporting Shareholder
Shares") or any interest therein or securities convertible thereinto or any
voting rights with respect thereto, other than (x) pursuant to the Merger, (y)
with Cardinal's prior written consent, or (z) to the extent contractually
required; (ii) will not, and will not permit any such company, trust or other
entity to, directly or indirectly (including through its officers, directors,
employees, or other representatives), solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to any Competing
Transaction, or negotiate, explore or otherwise engage in discussions with any
person (other than Cardinal, Subcorp or their respective directors, officers,
employees, agents and representatives) with respect to any Competing Transaction
or enter into any agreement, arrangement, or understanding with respect to any
Competing Transaction or agree to or otherwise assist in the effectuation of any
Competing Transaction; provided, however, that nothing in such Support/Voting
Agreement prevents Mr. Martini from taking any action or omitting to take any
action as a member of the Board of Directors of Bergen necessary so as not to
violate his fiduciary obligations as a Director; and (iii) will vote all of such
Supporting Shareholder Shares beneficially owned by him, or over which he has
voting power or control, directly or indirectly (including any Bergen Common
Stock acquired
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after the date of the Support/Voting Agreement), at the record date for any
meeting of shareholders of Bergen called to consider and vote to approve the
Merger and the Merger Agreement and/or the transactions contemplated thereby, in
favor thereof and will not vote such Supporting Shareholder Shares in favor of
any Competing Transaction. The Support/Voting Agreement may be terminated at the
option of any party thereto at any time after the earlier of (i) termination of
the Merger Agreement and (ii) the Effective Time.
The number of shares of Bergen Common Stock beneficially owned by Mr.
Martini or over which he had voting control as of the Bergen Record Date is
2,736,023 shares (including 155,827 shares subject to options exercisable within
60 days of the Bergen Record Date).
The foregoing is a summary of the material provisions of the Support/Voting
Agreement, a copy of which is filed as an exhibit to the Registration Statement.
See "Available Information." This summary is qualified in its entirety by
reference to the Support/Voting Agreement which is incorporated herein by this
reference.
BERGEN RIGHTS AGREEMENT AMENDMENT
In connection with the execution of the Merger Agreement, Bergen and the
Rights Agent executed the Second Amendment to Rights Agreement, dated as of
August 21, 1997, amending the Rights Agreement so as to provide that none of
Cardinal and its affiliates will become an "Acquiring Person" and that no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Agreement) will occur as a result of the execution of the Merger
Agreement or the Stock Option Agreement or the consummation of the Merger or the
acquisition or transfer of shares of Bergen Common Stock by Cardinal pursuant to
the Stock Option Agreement. Bergen also represented and warranted under the
Merger Agreement that the Rights Agreement will remain so amended and that no
replacement plan will be adopted. Further, Bergen has agreed under the Merger
Agreement that, during the period from the date thereof to the Effective Time,
Bergen will not, without the prior written consent of Cardinal, take any action
that could result in the representations and warranties set forth above becoming
false or inaccurate. See "Comparison of Shareholder Rights -- Right Agreement."
The foregoing is a summary of the material provisions of the Rights
Agreement Amendment, a copy of which is filed as an exhibit to the Registration
Statement. See "Available Information." This summary is qualified in its
entirety by reference to the Rights Agreement Amendment which is incorporated
herein by this reference.
THE MERGER AGREEMENT
The following is a summary of material provisions of the Merger Agreement,
a copy of which is attached as Annex A to this Joint Proxy Statement/Prospectus.
This summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by this reference.
THE MERGER
The Merger Agreement provides that Subcorp will be merged with and into
Bergen with the result that Bergen as the Surviving Corporation becomes a wholly
owned subsidiary of Cardinal, subject to the requisite approvals of Cardinal
Shareholders and Bergen Shareholders and the satisfaction or waiver of the other
conditions to the Merger. The Merger will become effective at the Effective Time
upon the filing of a duly executed certificate of merger with the New Jersey
Secretary of State or at such later time as shall be specified in the
certificate of merger. This filing is to be made on the Closing Date specified
by Cardinal and Bergen, which date will be as soon as possible, but in any event
within ten business days, following the date upon which all conditions set forth
in the Merger Agreement have been satisfied or waived, as the case may be, or
such other time as the parties may mutually agree. It is currently anticipated
that the Effective Time will occur shortly after the later of the date of the
Bergen Special Meeting and the date of the Cardinal Special Meeting assuming the
Merger Agreement and the Merger are approved at such meetings and all other
conditions to the Merger have been satisfied or waived.
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MERGER CONSIDERATION
Exchange Ratio. Upon consummation of the Merger pursuant to the Merger
Agreement, each share of Bergen Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares held in the treasury of Bergen,
if any, which will be canceled) will be converted into and represent 0.775 of a
Cardinal Common Share.
Fractional Shares. No certificates for fractional Cardinal Common Shares
will be issued in the Merger, and to the extent that an outstanding share of
Bergen Common Stock would otherwise have become a fractional Cardinal Common
Share, the holder thereof, upon presentation of such fractional interest
represented by an appropriate certificate of Bergen Common Stock to the exchange
agent designated by Cardinal as described under "Exchange Procedures" below,
will be entitled to receive a cash payment therefor in an amount equal to the
value (determined with reference to the closing price of Cardinal Common Shares
on the NYSE Composite Tape on the last full trading day immediately prior to the
Effective Time) of such fractional interest.
Conversion of Subcorp Common Stock. Each share of common stock, $0.01 par
value per share, of Subcorp issued and outstanding immediately prior to the
Effective Time will be converted into one share of common stock, $0.01 par value
per share, of Bergen as the Surviving Corporation. Such newly issued shares will
thereupon constitute all of the issued and outstanding capital stock of the
Surviving Corporation.
EXCHANGE PROCEDURES
HOLDERS OF BERGEN COMMON STOCK SHOULD NOT SEND IN THEIR BERGEN
STOCK CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
As soon as practicable after the Effective Time, instructions for effecting
the surrender of certificates and a letter of transmittal will be mailed to each
holder of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of Bergen
Common Stock whose shares were converted into the right to receive Cardinal
Common Shares. This letter of transmittal must be used in forwarding
Certificates for surrender in exchange for certificates evidencing Cardinal
Common Shares to which a holder of shares of Bergen Common Stock prior to the
Effective Time has become entitled and, if applicable, cash in lieu of any
fractional Cardinal Common Share. After receipt of such letter of transmittal,
each holder of Certificates should surrender such Certificates to ChaseMellon
Shareholder Services LLC, the exchange agent for the Merger, pursuant to and in
accordance with the instructions accompanying such letter of transmittal, and
each such holder will receive in exchange therefor a certificate evidencing the
whole number of Cardinal Common Shares to which he is entitled and a check
representing the amount of cash payable in lieu of any fractional Cardinal
Common Share, if any, and unpaid dividends and distributions, if any, which such
holder has the right to receive pursuant to the Merger Agreement, after giving
effect to any required withholding tax. No interest will be paid or accrued on
the cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, payable to holders of Certificates. Certificates
surrendered for exchange by any person constituting an "affiliate" of Bergen for
purposes of Rule 145(c) under the Securities Act shall not be exchanged until
Cardinal has received written undertakings from such person as prescribed under
the Merger Agreement.
After the Effective Time, each Certificate, until so surrendered and
exchanged, will be deemed, for all purposes, to represent only the right to
receive upon surrender a certificate representing Cardinal Common Shares and
cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, as provided above. The holder of such unexchanged
Certificates will not be entitled to receive any dividends or other
distributions declared or made by Cardinal having a record date after the
Effective Time until the Certificate is surrendered. Subject to applicable laws,
upon surrender of such unexchanged Certificates, such dividends and
distributions, if any, will be paid without interest and less the amount of any
withholding taxes which may be required thereon.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations, warranties and
covenants of Cardinal and Bergen. The representations and warranties made by the
parties in the Merger Agreement will not survive the Effective Time, although it
is a condition of each party's obligations under the Merger Agreement that:
(i) Each of the representations and warranties of the other party:
(a) which is qualified by materiality or contains references to
Material Adverse Effect will be true and correct in all respects on the
date of the Merger Agreement and on and as of the Closing Date as though
made on and as of the Closing Date (except for such representations and
warranties made as of a specified date, the accuracy of which will be
determined as of the specified date); provided, however, that
(x) with respect to any Non-Recurring Non-Attributable Change
(as hereinafter defined), the aggregate amount excluded from the
determination of whether there has been a Material Adverse Effect on
such other party from all such Non-Recurring Non-Attributable Changes
applied to all of the representations and warranties of such other
party will not exceed $30 million (without giving effect to any tax
consequences), and
(y) solely for purposes of Section 7.1(j)(iii) of the Merger
Agreement, Attributable Changes (as hereinafter defined) with respect
to such other party may be considered in determining whether there
has been any Material Adverse Effect on such other party; and
(b) which is not qualified by materiality and does not contain any
reference to Material Adverse Effect will be true and correct in all
material respects on the date of the Merger Agreement and on and as of
the Closing Date as though made on and as of the Closing Date (except
for such representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date); and
(ii) The other party's representations and warranties will be true and
correct in all respects on the date of the Merger Agreement and on and as
of the Closing Date as though made on and as of the Closing Date (except
for such representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date), except
where any such failure of the representations and warranties in the
aggregate to be true and correct in all respects would not have a Material
Adverse Effect on such other party (disregarding, for purposes of this
provision, the Material Adverse Effect qualification in any single
representation and warranty); provided, however, that, solely for purposes
of Section 7.1(j)(iii) of the Merger Agreement, Attributable Changes with
respect to such other party may be considered in determining whether there
has been any Material Adverse Effect on such other party.
Pursuant to Section 7.1(j)(iii) of the Merger Agreement, each of Cardinal
and Bergen has the right to terminate the Merger Agreement if the condition with
respect to the representations and warranties of the other party is not
satisfied solely because the proviso regarding Attributable Changes is
considered; provided that the terminating party pays to the other party a sum of
$75 million upon such termination.
For purposes of the Merger Agreement, a "Material Adverse Effect" with
respect to any party will be deemed to occur if any event, change or effect,
individually or in the aggregate with such other events, changes or effects, has
occurred which has a material adverse effect on the assets (including intangible
assets), liabilities (contingent or otherwise), results of operations or
financial condition of such party and its subsidiaries taken as a whole;
provided, however, that a Material Adverse Effect with respect to any party will
not include:
(i) any change in or effect upon the assets (including intangible
assets), liabilities (contingent or otherwise), financial condition, or
results of operations of such party or any of its subsidiaries directly or
indirectly arising out of or attributable to any decrease in the market
price of Cardinal Common Shares in the case of Cardinal or Bergen Common
Stock in the case of Bergen (but in either case not any change or effect
underlying such decrease to the extent such change or effect would
otherwise constitute a Material Adverse Effect on such party),
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(ii) any change in or effect upon the assets (including intangible
assets), liabilities (contingent or otherwise), financial condition, or
results of operations of such party or any of its subsidiaries directly or
indirectly arising out of or attributable to conditions, events, or
circumstances generally affecting the industries in which Cardinal (and its
subsidiaries) and Bergen (and its subsidiaries) operate,
(iii) except to the extent provided in Section 7.1(j)(iii) of the
Merger Agreement, Attributable Changes,
(iv) (A) a maximum of $30 million in the aggregate (determined without
giving effect to any tax consequences) of Non-Recurring Non-Attributable
Changes in determining whether the conditions set forth in Sections 6.3(d)
or 6.2(f) of the Merger Agreement (relating to absence of certain changes)
have been satisfied, and (B) in considering the accuracy of an individual
representation and warranty, such $30 million may be allocated among the
various representations and warranties so long as the aggregate amount does
not exceed $30 million (determined without giving effect to any tax
consequences), or
(v) any change in or effect upon the assets (including intangible
assets), liabilities (contingent or otherwise), financial condition, or
results of operations of such party or any of its subsidiaries directly
attributable to a Permitted Change (as hereinafter defined).
For the purposes of the Merger Agreement, a "Permitted Change" with respect
to any party means any change specifically contemplated by the provisions of the
Merger Agreement; an "Attributable Change" with respect to any party means any
change in or effect upon the assets (including intangible assets), liabilities
(contingent or otherwise), financial condition, or results of operations of such
party or any of its subsidiaries directly or indirectly arising out of or
attributable to the loss by such party (and its subsidiaries) of any of its
customers (including business of such customers), suppliers or employees
(including, without limitation, any financial consequence of such loss of
customers (including business of such customers), suppliers or employees) due
primarily to the transactions contemplated by the Merger Agreement or the public
announcement of the Merger Agreement, in each case arising after the date of the
Merger Agreement; a "Non-Attributable Change" with respect to any party means
any change in or effect upon the assets (including intangible assets),
liabilities (contingent or otherwise), financial condition, or results of
operations of such party or any of its subsidiaries that is not an Attributable
Change, in each case arising after the date of the Merger Agreement; and a
"Non-Recurring Non-Attributable Change" with respect to any party means any
Non-Attributable Change that is a change in or effect upon the results of
operations of such party directly attributable to any non-recurring event,
occurrence or development that would not materially impact the continuing
operations of such party.
COVENANTS
Mutual Covenants. Pursuant to the Merger Agreement, each of Cardinal and
Bergen has agreed that:
(a) each party will (A) make or cause to be made the filings required
of such party or any of its subsidiaries or affiliates under the HSR Act
with respect to the transactions contemplated by the Merger Agreement
(which filings required to date have been made), (B) comply at the earliest
practicable date with any request under the HSR Act for additional
information, documents, or other materials received by such party or any of
its subsidiaries from the FTC or the Antitrust Division or any other
governmental authority in respect of such filings or such transactions, and
(C) cooperate with the other party in connection with any such filing
(including, with respect to the party making a filing, providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, to accept all reasonable additions, deletions or changes
suggested in connection therewith) and in connection with resolving any
investigation or other inquiry of any such agency or other governmental
authority under any Antitrust Laws with respect to any such filing or any
such transaction. Each of Cardinal and Bergen has agreed that it: will use
all reasonable efforts to furnish to each other all information required
for any application or other filing to be made pursuant to any applicable
law in connection with the Merger and the other transactions contemplated
by the Merger Agreement; will promptly inform the other party of any
communication with, and any proposed understanding, undertaking, or
agreement with, any governmental authority regarding any such filings or
any such transaction; will not independently
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participate in any formal meeting with any governmental authority in
respect of any such filings, investigation, or other inquiry without giving
the other party prior notice of the meeting and, to the extent permitted by
such governmental authority, the opportunity to attend and/or participate;
and will consult and cooperate with one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments,
opinions and proposals made or submitted by or on behalf of either party in
connection with proceedings under or relating to the HSR Act or other
Antitrust Laws;
(b) each party will use all reasonable efforts to resolve such
objections, if any, as may be asserted by any governmental authority with
respect to the transactions contemplated by the Merger Agreement under the
HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the
Federal Trade Commission Act, as amended, and any other federal, state or
foreign statutes, rules, regulations, orders, decrees, administrative or
judicial doctrines or other laws that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or
restraint of trade (collectively, "Antitrust Laws"). In connection
therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by the Merger Agreement as violative of any Antitrust Law,
each of Cardinal and Bergen will cooperate and use all reasonable efforts
vigorously to contest and resist any such action or proceeding, including
any legislative, administrative or judicial action, and to have vacated,
lifted, reversed, or overturned any decree, judgment, injunction or other
order whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents, or restricts consummation of the Merger or any
other transactions contemplated by the Merger Agreement, including, without
limitation, by vigorously pursuing all available avenues of administrative
and judicial appeal and all available legislative action, unless by mutual
agreement Cardinal and Bergen decide that litigation is not in their
respective best interests. Notwithstanding the foregoing or any other
provision of the Merger Agreement, the foregoing shall not limit a party's
right to terminate the Merger Agreement pursuant to its terms, so long as
such party has up to then complied in all material respects with its
obligations set forth in this paragraph. Each of Cardinal and Bergen will
use all reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under the HSR Act or other Antitrust
Laws with respect to such transactions as promptly as possible after the
execution of the Merger Agreement; and
(c) each party will use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the
Merger Agreement, including (A) the obtaining of all other necessary
actions or nonactions, waivers, consents, licenses, permits,
authorizations, orders and approvals from Governmental Authorities and the
making of all other necessary registrations and filings (including filings
under the New Jersey Industrial Site Recovery Act, if applicable, and other
filings with Governmental Authorities, if any), (B) the obtaining of all
consents, approvals or waivers from third parties related to or required in
connection with the Merger that are necessary to consummate the Merger and
the transactions contemplated by the Merger Agreement or required to
prevent a Material Adverse Effect on Cardinal or Bergen from occurring
prior to or after the Effective Time, (C) the preparation of this Joint
Proxy Statement/Prospectus and the Registration Statement, (D) the taking
of all action necessary to ensure that it is a "poolable entity" eligible
to participate in a transaction to be accounted for as a
pooling-of-interests for financial reporting purposes and to ensure that
the Merger constitutes a tax-free reorganization within the meaning of
Section 368(a)(1)(A) of the Code, and (E) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, the Merger
Agreement.
Notwithstanding anything to the contrary, neither Cardinal nor Bergen will
be required under the Merger Agreement to hold separate (including by trust or
otherwise) or divest any of their respective businesses or assets, provided,
however, that unless Cardinal and Bergen otherwise agree, if required to avoid
an HSR Authority (as hereinafter defined) instituting an action challenging the
transactions under the Merger Agreement under the Antitrust Laws and seeking to
enjoin or prohibit the consummation of any of the transactions contemplated by
the Merger Agreement, Cardinal will and, at the direction of Cardinal, Bergen
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will, hold separate (including by trust or otherwise) or divest any of their
respective businesses or assets, or take or agree to take any action or agree to
any limitation required to avoid an HSR Authority instituting an action
challenging the transactions under the Merger Agreement under the Antitrust Laws
and seeking to enjoin or prohibit the consummation of any of the transactions
contemplated by the Merger Agreement unless such action would reasonably be
expected to have a material adverse effect on the assets, liabilities, results
of operations or financial condition of Cardinal combined with the Surviving
Corporation after the Effective Time, or would reasonably be expected to
substantially impair the overall benefits expected, as of the date of the Merger
Agreement, to be realized from consummation of the Merger. Notwithstanding any
of the foregoing, neither party will be required to (i) waive any of the
conditions to the Merger as they apply to such party, or (ii) divest any of
their respective businesses or assets if the divestitures would be required to
be consummated prior to the Effective Time.
Cardinal and Bergen further agreed in the Merger Agreement that:
(a) each party will not, and will not permit any of its subsidiaries
to, take any actions which would, or would be reasonably likely to, prevent
Cardinal from accounting, and will use its best efforts to allow Cardinal
to account, for the Merger in accordance with the pooling-of-interests
method of accounting under the requirements of Opinion No. 16 "Business
Combinations" of the Accounting Principles Board of the American Institute
of Certified Public Accountants, as amended by applicable pronouncements by
the Financial Accounting Standards Board, and all related published rules,
regulations and policies of the Commission ("APB No. 16");
(b) each party will use its best efforts to cause the Merger to
constitute a tax-free "reorganization" under Section 368(a) of the Code and
to cooperate with one another in obtaining an opinion from Lowenstein,
Sandler, counsel to Bergen, to such effect; and
(c) unless otherwise required by applicable laws or requirements of
the NYSE (and in that event only if time does not permit), they will
consult with each other before issuing any press release with respect to
the Merger and will not issue any such press release prior to such
consultation.
Covenants of Cardinal. Cardinal covenanted in the Merger Agreement:
(a) to take all action in accordance with the federal securities laws,
the Ohio Law and the Cardinal Articles and Cardinal Regulations necessary
to obtain the consent and approval of Cardinal Shareholders with respect to
the authorization of the issuance of Cardinal Common Shares in the Merger,
the approval and adoption of the Name Change Proposal (subject to
consummation of the Merger) and the Authorized Shares Proposal and the
transactions contemplated by the Merger Agreement;
(b) to prepare and file this Joint Proxy Statement/Prospectus with the
Commission on a confidential basis as soon as is reasonably practicable, to
prepare and file the Registration Statement with the Commission as soon as
is reasonably practicable following clearance of this Joint Proxy
Statement/Prospectus by the Commission and use all reasonable efforts to
have the Registration Statement declared effective by the Commission as
promptly as practicable, to maintain the effectiveness of the Registration
Statement through the Effective Time, to take such other reasonable actions
(other than qualifying to do business in any jurisdiction in which it is
not so qualified) required to be taken under any applicable state
securities laws in connection with the issuance of Cardinal Common Shares
in the Merger and to use all reasonable efforts to mail at the earliest
practicable date to Cardinal Shareholders this Joint Proxy
Statement/Prospectus, which shall include all information required under
applicable law to be furnished to Cardinal Shareholders in connection with
the Merger and the transactions contemplated thereby;
(c) during the period from the date of the Merger Agreement to the
Effective Time, to use its reasonable efforts to maintain and preserve its
business organization and to retain the services of its officers and key
employees and maintain relationships with customers, suppliers and other
third parties to
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the end that their goodwill and ongoing business shall not be impaired in
any material respect and not to, and not to cause or permit any of its
subsidiaries to:
(i) change any method or principle of accounting in a manner that
is inconsistent with past practice except to the extent required by
generally accepted accounting principles;
(ii) take any action that could likely result in its
representations and warranties set forth in the Merger Agreement
becoming false or inaccurate in any material respect;
(iii) make any changes in the Cardinal Articles that would
adversely affect in any material respect the rights and preferences of
the holders of Cardinal Common Shares or make any changes in the Amended
and Restated Certificate of Incorporation of Subcorp;
(iv) acquire a material amount of assets or capital stock of any
other person if such acquisition would materially and adversely affect
the ability of the condition that any applicable waiting periods under
the HSR Act relating to the Merger having been expired or terminated to
be satisfied on or prior to April 30, 1998 (and, in any case, Cardinal
agreed to give Bergen reasonable prior notice of any acquisition of a
material amount of assets or capital stock of any other person); or
(v) agree in writing or otherwise to take any of the foregoing
actions;
(d) from and after the Effective Time, to cause the Surviving
Corporation (including, to the extent required, providing sufficient
funding) to (i) indemnify, defend and hold harmless the present and former
officers and directors of Bergen in respect of acts or omissions occurring
prior to the Effective Time to the fullest extent permitted under the
Bergen Certificate, Bergen Bylaws and the indemnification agreements
between Bergen and certain of its officers and directors in effect as of
the date of the Merger Agreement and (ii) use all reasonable efforts to
cause the Surviving Corporation or Cardinal to obtain and maintain in
effect for a period of six years after the Effective Time policies of
directors' and officers' liability insurance at no cost to the
beneficiaries thereof with respect to acts or omissions occurring prior to
the Effective Time with substantially the same coverage and containing
substantially similar terms and conditions as existing policies (provided,
that neither the Surviving Corporation nor Cardinal shall be required to
pay an aggregate premium for such insurance coverage in excess of 325% of
the last annual premium paid prior to the date of the Merger Agreement);
(e) from and after the Effective Time to (i) provide to the directors
of Bergen who become directors of Cardinal directors' and officers'
liability insurance on the same basis and to the same extent as that, if
any, provided to other directors of Cardinal, and (ii) enter into
indemnification agreements with the directors of Bergen who become
directors of Cardinal on terms entered into with other directors of
Cardinal generally;
(f) from and after the Effective Time, to treat all service with
Bergen and its subsidiaries by employees of Bergen and its subsidiaries as
of the Effective Time for all purposes as service with Cardinal (except to
the extent such treatment would result in duplicative accrual on or after
the Closing Date of benefits for the same period of service), and, with
respect to any medical or dental benefit plan in which such employees
participate after the Effective Time, to waive or cause to be waived any
pre-existing condition exclusions and actively-at-work requirements and to
provide that any covered expenses incurred on or before the Effective Time
by such employees or a covered dependent thereof will be taken into account
for purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions after the Effective Time to the same extent as
such expenses are taken into account for the benefit of similarly situated
employees of Cardinal;
(g) to use its reasonable efforts to cause the Cardinal Common Shares
issuable pursuant to the Merger to be approved for listing on the NYSE
prior to the Effective Time;
(h) to permit, subject to Bergen's compliance with the terms of a
confidentiality agreement in effect among the parties, representatives of
Bergen to have appropriate access at all reasonable times to Cardinal's
premises, properties, books, records, contracts, documents, customers and
suppliers;
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(i) to cause each such person who may be at the Effective Time or was
on the date of the Merger Agreement an "affiliate" of Cardinal for purposes
of applicable accounting releases of the Commission with respect to
pooling-of-interests accounting treatment, to execute and deliver to Bergen
no less than 30 days prior to the date of the Cardinal Special Meeting,
certain written undertakings with respect thereto; and
(j) to give prompt notice to Bergen of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any Cardinal or Subcorp representation or warranty contained in the
Merger Agreement to be untrue or inaccurate at or prior to the Effective
Time in any material respect and (ii) any material failure of Cardinal to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it under the Merger Agreement.
In addition, under the Merger Agreement, Cardinal has agreed that the Board
of Directors of Cardinal will take all action necessary immediately following
the Effective Time to elect each of Robert E. Martini and Donald R. Roden and
two other persons from the Board of Directors of Bergen as of the date of the
Merger Agreement (designated by Robert E. Martini and reasonably acceptable to
Cardinal) as a director of Cardinal (with Messrs. Robert E. Martini and Donald
R. Roden being assigned to the class of directors whose term of office expires
at Cardinal's third annual meeting of shareholders after the Effective Time and
second annual meeting of shareholders after the Effective Time, respectively,
and the other two persons being assigned to the class or classes of directors
with a vacancy (other than those vacancies to be filled by Robert E. Martini and
Donald R. Roden) and with the longest term of office available) effective as of
the Effective Time, for a term expiring at Cardinal's next annual meeting of
shareholders following the Effective Time at which the term of the class to
which such director belongs expires, subject to being renominated as a director
at the discretion of the Cardinal Board. In addition, the Cardinal Board will
take all action necessary immediately following the Effective Time to (i) elect
Robert E. Martini as the Chairman of the Board of Cardinal; (ii) elect Robert D.
Walter as the Chairman of the Executive Committee of the Board of Directors of
Cardinal; (iii) reformulate the Executive Committee of the Cardinal Board of
Directors by appointing each of Robert D. Walter, Robert E. Martini, Donald R.
Roden and three other members designated by Robert D. Walter to the Executive
Committee of the Board of Directors of Cardinal; and (iv) elect Donald R. Roden
as Co-President of Cardinal, effective as of the Effective Time, to hold such
offices until his successor is elected and qualified, subject to being reelected
or reappointed to such positions at the discretion of Cardinal's Board of
Directors.
Cardinal also has agreed under the Merger Agreement to amend the Cardinal
Articles as soon as practicable following the Effective Time to change its
corporate name to "Cardinal Bergen Health, Inc." subject to approval of the
Cardinal Shareholders at the Cardinal Special Meeting of the Name Change
Proposal.
Covenants of Bergen. Bergen covenants in the Merger Agreement:
(a) to take all action in accordance with the federal securities laws,
New Jersey Law and the Bergen Certificate and Bergen Bylaws necessary to
obtain the consent and approval of Bergen Shareholders with respect to the
Merger, the Merger Agreement and the transactions contemplated thereby;
(b) (i) to promptly furnish Cardinal with all information concerning
Bergen as may be required for inclusion in the Registration Statement, (ii)
to cooperate with Cardinal in the preparation of the Registration Statement
in a timely fashion and use all reasonable efforts to assist Cardinal in
having the Registration Statement declared effective by the Commission as
promptly as practicable, (iii) if at any time prior to the Effective Time,
any information pertaining to Bergen contained in or omitted from the
Registration Statement makes such statements contained in the Registration
Statement false or misleading, to promptly so inform Cardinal and provide
Cardinal with the information necessary to make statements contained
therein not false and misleading, (iv) to use all reasonable efforts to
cooperate with Cardinal in the preparation and filing of this Joint Proxy
Statement/Prospectus with the Commission, and (v) to use all reasonable
efforts to mail at the earliest practicable date to Bergen Shareholders
this Joint Proxy Statement/Prospectus, which shall include all information
required under applicable law to be furnished to Bergen Shareholders in
connection with the Merger and the transactions contemplated thereby;
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(c) during the period from the date of the Merger Agreement to the
Effective Time, to conduct its operations in the ordinary course except as
expressly contemplated by the Merger Agreement and the transactions
contemplated thereby and use its reasonable efforts to maintain and
preserve its business organization and its material rights and franchises
and to retain the services of its officers and key employees and maintain
relationships with customers, suppliers, lessees, licensees and other third
parties to the end that their goodwill and ongoing business shall not be
impaired in any material respect;
(d) to cause each such person who may be at the Effective Time or was
on the date of the Merger Agreement an "affiliate" of Bergen for purposes
of Rule 145 under the Securities Act, to execute and deliver to Cardinal no
less than 30 days prior to the date of the Bergen Special Meeting, the
written undertakings set forth in an exhibit to the Merger Agreement, and
no less than 45 days prior to the date of the Bergen Special Meeting to
provide, with the advice of outside counsel, Cardinal with a letter
(reasonably satisfactory to counsel to Cardinal) specifying all of the
persons or entities who may be deemed to be "affiliates" of Bergen as
provided above;
(e) to permit, subject to Cardinal's compliance with the terms of a
confidentiality agreement in effect among the parties, representatives of
Cardinal to have appropriate access at all reasonable times to Bergen's
premises, properties, books, records, contracts, documents, customers and
suppliers;
(f) to give prompt notice to Cardinal of (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would
cause any Bergen representation or warranty contained in the Merger
Agreement to be untrue or inaccurate at or prior to the Effective Time in
any material respect and (ii) any material failure of Bergen to comply with
or satisfy any covenant, condition or agreement to be complied with or
satisfied by it thereunder;
(g) to consult with Cardinal prior to making publicly available its
financial results for any period after the date of the Merger Agreement and
prior to filing any documents required to be filed by it with the
Commission under the Exchange Act or the Securities Act after the date of
the Merger Agreement; and
(h) to use its reasonable efforts to cause certain of its employees to
execute and deliver a Supplemental Agreement with Bergen and Cardinal to
amend and supplement the Employee Agreements between such employees and
Bergen in effect as of the date of the Merger Agreement.
Bergen also covenants in the Merger Agreement that, during the period from
the date of the Merger Agreement to the Effective Time, Bergen will not, except
as otherwise expressly contemplated by the Merger Agreement and the transactions
contemplated thereby or as set forth therein (including the schedules thereto),
without the prior written consent of Cardinal:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock, (B)
make, declare or pay any dividend (other than regular quarterly dividends
on Bergen Common Stock of $0.12 per share with record and payment dates
consistent with past practice) or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its capital stock, (C) grant any person any right or option
to acquire any shares of its capital stock (except that Bergen may grant
options with a fair market value exercise price to purchase up to 1% of the
number of shares of Bergen Common Stock outstanding as of the date of the
Merger Agreement to employees of Bergen in the ordinary course consistent
with prior practice or in connection with acquisitions of assets or capital
stock permitted pursuant to clause (v) below), (D) issue, deliver or sell
or agree to issue, deliver or sell any additional shares of its capital
stock or any securities or obligations convertible into or exchangeable or
exercisable for any shares of its capital stock or such securities (except
pursuant to the exercise of outstanding options to purchase Bergen Common
Stock), or (E) enter into any agreement, understanding or arrangement with
respect to the sale or voting of its capital stock;
(ii) sell, transfer, lease, pledge, mortgage, encumber or otherwise
dispose of any of its property or assets other than in the ordinary course
of business;
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(iii) make or propose any changes in the Bergen Certificate or Bergen
Bylaws;
(iv) merge or consolidate with any other person other than as
permitted by the Merger Agreement;
(v) acquire for cash a material amount of assets or capital stock of
any other person valued, giving effect to assumed indebtedness, at more
than $50 million per transaction and $100 million in the aggregate (and, in
each case, Bergen must give Cardinal reasonable prior notice of any such
acquisition or agreement to make such an acquisition), provided, that to
the extent Cardinal consents to any such acquisition, such acquisition will
not be taken into account in computing the dollar limitations in this
clause (v), and provided further, that Bergen will not make any acquisition
if such acquisition would materially and adversely affect the ability of
the condition that any applicable waiting periods under the HSR Act
relating to the Merger having been expired or terminated to be satisfied on
or prior to April 30, 1998;
(vi) amend or modify, or propose to amend or modify, the Bergen Rights
Agreement, as amended as of the date of the Merger Agreement;
(vii) except pursuant to existing credit arrangements, incur, create,
assume or otherwise become liable for any indebtedness for borrowed money
or assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity, other than in the ordinary course of business,
consistent with past practice or in connection with a refinancing of
existing indebtedness (which refinancing shall not increase the aggregate
amount of indebtedness permitted to be outstanding thereunder and shall not
include any covenants that shall be more burdensome to Bergen in any
material respect or increase costs to the Surviving Corporation after the
Effective Time in any material respect);
(viii) create any subsidiaries other than in connection with
acquisitions of assets or capital stock permitted pursuant to clause (v) of
this paragraph;
(ix) enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee other than in the ordinary course of business
consistent with past practice (except for change-of-control severance
agreements that in all cases shall require the prior written consent of
Cardinal), or otherwise increase the compensation or benefits provided to
any officer, director, consultant or employee except as may be required by
applicable law or in the ordinary course of business consistent with past
practice, provided, however, that Bergen may implement a stay-bonus program
providing for bonuses in an aggregate amount, together with any severance
benefits payable to Bergen employees in such program or otherwise, not to
exceed $13.75 million for employees of Bergen (other than certain key
management employees of Bergen as specified in the Merger Agreement) and
will consult with, but need not have the approval of, Cardinal prior to
implementing any such plans;
(x) enter into, adopt or amend any employee benefit or similar plan
except as may be required by applicable law;
(xi) change any method or principle of accounting in a manner that is
inconsistent with past practice except to the extent required by generally
accepted accounting principles;
(xii) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any contract set forth in the
Merger Agreement or any other material contract to which Bergen is a party
or any confidentiality agreement to which Bergen is a party other than with
respect to modifications or amendments to, terminations of, waivers or
releases under, or assignments of (A) material contracts with customers or
suppliers entered into in the ordinary course of business, (B) contracts
relating to existing indebtedness which may be refinanced in compliance
with Section 5.3(c)(vii) of the Merger Agreement, (C) contracts relating to
the incurrence of or commitment to any capital expenditures up to $1
million individually or $5 million in the aggregate or as set forth in a
budget delivered to Cardinal, or (D) without the prior written consent of
Cardinal (which consent shall
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not be unreasonably withheld) any other material contract to which Bergen
is a party or any confidentiality agreement to which Bergen is a party;
(xiii) enter into any confidentiality agreements or arrangements other
than in the ordinary course of business consistent with past practice;
(xiv) incur or commit to any capital expenditures, individually or in
the aggregate, in excess of 120% of the amount set forth in Bergen's
capital expenditure budget;
(xv) make any payments in respect of policies of directors' and
officers' liability insurance (premiums or otherwise) other than amounts
paid pursuant to current policies or any policies replacing such policies
not in excess of 200% of the last annual premium paid prior to the date of
the Merger Agreement;
(xvi) take any action to exempt or make not subject to (a) the
provisions of New Jersey Law or (b) any other state takeover law or state
law that purports to limit or restrict business combinations or the ability
to acquire or vote shares, any person or entity (other than Cardinal or its
subsidiaries) or any action taken thereby, which person, entity or action
would have otherwise been subject to the restrictive provisions thereof and
not exempt therefrom;
(xvii) take any action that will likely result in the representations
and warranties of Bergen set forth in the Merger Agreement becoming false
or inaccurate in any material respect;
(xviii) enter into or carry out any other transaction other than in
the ordinary and usual course of business or other than as permitted
pursuant to the other clauses in this paragraph;
(xix) permit or cause any subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing; or
(xx) agree in writing or otherwise to take any of the foregoing
actions.
NO NEGOTIATIONS OR SOLICITATIONS
Pursuant to the Merger Agreement, Bergen agreed that, during the term of
the Merger Agreement, it will not, and will not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to, solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
Competing Transaction, or negotiate, explore or otherwise engage in discussions
with any person (other than Cardinal, Subcorp or their respective directors,
officers, employees, agents and representatives) with respect to any Competing
Transaction or enter into any agreement, arrangement or understanding requiring
it to abandon, terminate or fail to consummate the Merger or any other
transactions contemplated by the Merger Agreement; provided that, at any time
prior to the approval of the Merger by the Bergen Shareholders, Bergen may
furnish information to, and negotiate or otherwise engage in discussions with,
any party who delivers a written proposal for a Competing Transaction which was
not solicited or encouraged after the date of the Merger Agreement if and so
long as the Board of Directors of Bergen determines in good faith by a majority
vote, after consultation with and receipt of advice from its outside legal
counsel, that failing to take such action would constitute a breach of the
fiduciary duties of the Board of Directors of Bergen under applicable law and
determines that such a proposal is, after consulting with Merrill Lynch (or any
other nationally recognized investment banking firm), more favorable to Bergen's
Shareholders from a financial point of view than the transactions contemplated
by the Merger Agreement (including any adjustment to the terms and conditions
proposed by Cardinal in response to such Competing Transaction), and Bergen will
immediately advise Cardinal, in writing, if the Board of Directors of Bergen
shall make any such determination as to any Competing Transaction. Further,
pursuant to the Merger Agreement, Bergen agreed to immediately cease all
existing activities, discussions and negotiations with any parties conducted
prior to the date of the Merger Agreement with respect to any of the foregoing.
Notwithstanding the foregoing, in the event that prior to the approval of
the Merger by the Bergen Shareholders the Board of Directors of Bergen
determines in good faith by a majority vote, after consultation
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with and receipt of advice from outside legal counsel, that failure to do so
would constitute a breach of the fiduciary duties of the Bergen Board of
Directors under applicable law, the Board of Directors of Bergen may (subject to
this and the following sentences) withdraw, modify or change, in a manner
adverse to Cardinal, its recommendation in favor of the Merger and, to the
extent applicable, comply with Rule 14e-2 promulgated under the Exchange Act
with respect to a Competing Transaction by disclosing such withdrawn, modified
or changed recommendation in connection with a tender or exchange offer for
Bergen securities, provided that it uses all reasonable efforts to give Cardinal
two days prior written notice of its intention to do so (provided that the
foregoing shall in no way limit or otherwise affect Cardinal's right to
terminate the Merger Agreement pursuant to Section 7.1(d) thereof). Bergen has
agreed that the Bergen Board of Directors will not, in connection with any such
withdrawal, modification or change of the Bergen Board's recommendation, take
any action to change the approval of the Board of Directors of Bergen for
purposes of causing any state takeover statute or other state law to be
inapplicable to the transactions contemplated by the Merger Agreement, including
the Merger, the Stock Option Agreement or the Support/Voting Agreement. Further,
Bergen has agreed that from and after the execution of the Agreement, Bergen
will immediately advise Cardinal in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals relating
to a Competing Transaction (including the specific terms thereof and the
identity of the other party or parties involved) and furnish to Cardinal within
24 hours of such receipt an accurate description of all material terms
(including any changes or adjustments to such terms as a result of negotiations
or otherwise) of any such written proposal in addition to any information
provided to any third party relating thereto.
If prior to the approval of the Merger by the Bergen Shareholders, the
Board of Directors of Bergen shall determine in good faith, after consultation
with its financial and legal advisors, with respect to any written proposal from
a third party for a Competing Transaction received after the date of the Merger
Agreement that was not solicited or encouraged by Bergen or any of its
subsidiaries or affiliates in violation of the Merger Agreement that failure to
enter into such Competing Transaction would constitute a breach of the fiduciary
duties of the Board of Directors of Bergen under applicable law and that such
Competing Transaction is more favorable to the Bergen Shareholders from a
financial point of view than the transactions contemplated by the Merger
Agreement (including any adjustment to the terms and conditions of such
transaction proposed in writing by Cardinal in response to such Competing
Transaction) and is in the best interest of the Bergen Shareholders and Bergen
has received (x) the advice of its outside legal counsel as to whether failure
to enter into such a Competing Transaction would constitute a breach of the
Board of Directors' fiduciary duties under applicable law and (y) an opinion (a
copy of which, if delivered in writing, has been delivered to Cardinal) from
Merrill Lynch (or any other nationally recognized investment banking firm) that
the Competing Transaction is more favorable from a financial point of view to
the Bergen Shareholders than the transactions contemplated by the Merger
Agreement (including any adjustment to the terms and conditions of such
transaction proposed in writing by Cardinal), Bergen may terminate the Merger
Agreement and enter into a letter of intent, agreement-in-principle, acquisition
agreement or other similar agreement (each, an "Acquisition Agreement") with
respect to such Competing Transaction; provided that, prior to any such
termination, (i) Bergen has provided Cardinal written notice that it intends to
terminate the Merger Agreement pursuant to this particular provision,
identifying the Competing Transaction then determined to be more favorable and
the parties thereto and delivering an accurate description of all material terms
(including any changes or adjustments to such terms as a result of negotiations
or otherwise) of the Acquisition Agreement to be entered into for such Competing
Transaction, and (ii) at least three full business days after Bergen has
provided the notice referred to in clause (i) above (provided that the advice
and opinion referred to in clauses (x) and (y) above will continue in effect
without revocation, revision or modification), Bergen delivers to Cardinal (A) a
written notice of termination of the Merger Agreement pursuant to Section 5.3(e)
of the Merger Agreement, (B) a check in the amount of Cardinal's Costs (as
hereinafter defined) as the same may have been estimated by Cardinal in good
faith prior to the date of such delivery (subject to an adjustment payment
between the parties upon Cardinal's definitive determination of such Costs),
plus the amount of the Termination Fee (as hereinafter defined), (C) a written
acknowledgment from Bergen that (x) the termination of the Merger Agreement and
the entry into the Acquisition Agreement for the Competing Transaction will be a
"Purchase Event" as defined in the Stock Option Agreement and (y) the Stock
Option Agreement shall be honored in accordance with its terms and (D) a written
acknowledgment from each other
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party to such Competing Transaction that it is aware of the substance of
Bergen's acknowledgment under clause (C) above and waives any right it may have
to contest the matters thus acknowledged by Bergen.
CONDITIONS
Mutual Conditions. The obligations of Cardinal and Bergen to consummate
the Merger are subject to fulfillment of the following conditions, among others:
(i) the Bergen Merger Proposal shall have been approved and adopted by
the Bergen Shareholders in the manner required by any applicable law;
(ii) the Cardinal Merger Proposal and the Authorized Shares Proposal
shall have been approved and adopted by the Cardinal Shareholders in the
manner required by any applicable law;
(iii) any applicable waiting periods under the HSR Act relating to the
Merger and the other transactions contemplated by the Merger Agreement
shall have expired or been terminated;
(iv) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of
the Merger or the other transactions contemplated by the Merger Agreement;
(v) there shall not be pending any action by any governmental
authority (a) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
the Merger Agreement, (b) except to the extent consistent with the
obligations of Bergen and Cardinal under a section of the Merger Agreement
relating to cooperation, antitrust and regulatory matters (Section 5.1(a)),
seeking to prohibit or limit the ownership or operation by Cardinal, Bergen
or any of their respective subsidiaries of, or to compel Cardinal, Bergen
or any of their respective subsidiaries to dispose of or hold separate, any
material portion of the business or assets of Cardinal, Bergen or any of
their respective subsidiaries, as a result of the Merger or any of the
other transactions contemplated by the Merger Agreement, (c) seeking to
impose limitations on the ability of Cardinal to acquire or hold, or
exercise full rights of ownership of, any shares of capital stock of the
Surviving Corporation, including the right to vote such capital stock on
all matters properly presented to the shareholders of the Surviving
Corporation or (d) seeking to prohibit Cardinal or any subsidiary of
Cardinal from effectively controlling in any material respect the business
or operations of Cardinal or the subsidiaries of Cardinal;
(vi) the Commission shall have declared the Registration Statement
effective under the Securities Act, and no stop order or similar
restraining order suspending the effectiveness of the Registration
Statement shall be in effect and no proceedings for such purpose shall be
pending before or threatened by the Commission or any state securities
administrator;
(vii) the Cardinal Common Shares to be issued in the Merger shall have
been approved for listing on the NYSE, subject to official notice of
issuance; and
(viii) Cardinal shall have received a letter, in form and substance
reasonably satisfactory to Cardinal and Bergen, from Deloitte & Touche LLP
dated the date of the Effective Time stating that they concur with the
conclusion of Cardinal's management that the Merger will qualify as a
transaction to be accounted for by Cardinal in accordance with the
pooling-of-interests method of accounting under the requirements of APB No.
16.
Conditions to Bergen's Obligations to Consummate the Merger. The
obligations of Bergen to consummate the Merger and the transactions contemplated
by the Merger Agreement are further subject to the receipt of certain closing
certificates and fulfillment of the following conditions:
(i) each of the representations and warranties of each of Cardinal and
Subcorp set forth in the Merger Agreement (a) which is qualified by
materiality or contains references to Material Adverse Effect shall be true
and correct in all respects on the date of the Merger Agreement and on and
as of the Closing Date as though made on and as of the Closing Date (except
for such representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date);
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provided, however, that (x) with respect to any Non-Recurring
Non-Attributable Change, the aggregate amount excluded from the
determination of whether there has been a Material Adverse Effect on
Cardinal from all such Non-Recurring Non-Attributable Changes applied to
all of the representations and warranties of Cardinal shall not exceed $30
million (without giving effect to any tax consequences), and (y) solely for
purposes of the termination right under Section 7.1(j)(iii) of the Merger
Agreement, Attributable Changes with respect to Cardinal may be considered
in determining whether there has been any Material Adverse Effect on
Cardinal; and (b) which is not qualified by materiality and does not
contain any reference to Material Adverse Effect shall be true and correct
in all material respects on the date of the Merger Agreement and on and as
of the Closing Date as though made on and as of the Closing Date (except
for such representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date);
(ii) the representations and warranties of each of Cardinal and
Subcorp set forth in the Merger Agreement shall be true and correct in all
respects on the date of the Merger Agreement and on and as of the Closing
Date as though made on and as of the Closing Date (except for such
representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), except where any such
failure of the representations and warranties in the aggregate to be true
and correct in all respects would not have a Material Adverse Effect on
Cardinal (disregarding, for purposes of this provision, the Material
Adverse Effect qualification in any single representation and warranty);
provided, however, that, solely for purposes of the termination right under
Section 7.1(j)(iii) of the Merger Agreement, Attributable Changes with
respect to Cardinal may be considered in determining whether there has been
any Material Adverse Effect on Cardinal;
(iii) each of Cardinal and Subcorp shall have performed in all
material respects each obligation and agreement and shall have complied in
all material respects with each covenant to be performed and complied with
by it under the Merger Agreement at or prior to the Effective Time, except,
in all such cases, for acts and omissions of Cardinal which, in the
aggregate, do not have a Material Adverse Effect on Cardinal;
(iv) Bergen shall have received the opinion of Lowenstein, Sandler,
dated on or prior to the effective date of the Registration Statement, to
the effect that (a) the Merger will constitute a reorganization under
section 368(a) of the Code, (b) Bergen, Cardinal and Subcorp will each be a
party to that reorganization, and (c) no gain or loss will be recognized by
the shareholders of Bergen upon the receipt of Cardinal Common Shares in
exchange for shares of Bergen Common Stock pursuant to the Merger except
with respect to cash received in lieu of fractional share interests in
Cardinal Common Shares;
(v) there shall not be pending any action which is reasonably likely
to have a Material Adverse Effect on Cardinal; and
(vi) since the date of the Merger Agreement, there shall not have been
any change in the assets, liabilities, results of operations or financial
condition of Cardinal which would constitute a Material Adverse Effect on
Cardinal or any event, occurrence or development which would have a
material adverse effect on the ability of Cardinal to consummate the
transactions contemplated by the Merger Agreement; provided, however, that
solely for purposes of the termination right under Section 7.1(j)(iii) of
the Merger Agreement, Attributable Changes with respect to Cardinal may be
considered in determining whether there has been any such material adverse
change that would constitute a Material Adverse Effect on Cardinal.
Conditions to the Obligations of Cardinal to Consummate the Merger. The
obligations of Cardinal to consummate the Merger and the other transactions
contemplated by the Merger Agreement are further subject to the receipt of
certain closing certificates and fulfillment of the following conditions:
(i) each of the representations and warranties of Bergen set forth in
the Merger Agreement: (a) which is qualified by materiality or contains
references to Material Adverse Effect shall be true and correct in all
respects on the date of the Merger Agreement and on and as of the Closing
Date as though
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made on and as of the Closing Date (except for such representations and
warranties made as of a specified date, the accuracy of which will be
determined as of the specified date); provided, however, that (x) with
respect to any Non-Recurring Non-Attributable Change, the aggregate amount
excluded from the determination of whether there has been a Material
Adverse Effect on Bergen from all such Non-Recurring Non-Attributable
Changes applied to all of the representations and warranties of Bergen
shall not exceed $30 million (without giving effect to any tax
consequences), and (y) solely for purposes of the termination right under
Section 7.1(j)(iii) of the Merger Agreement, Attributable Changes with
respect to Bergen may be considered in determining whether there has been
any Material Adverse Effect on Bergen; and (b) which is not qualified by
materiality and does not contain any reference to Material Adverse Effect
shall be true and correct in all material respects on the date of the
Merger Agreement and on and as of the Closing Date as though made on and as
of the Closing Date (except for such representations and warranties made as
of a specified date, the accuracy of which will be determined as of the
specified date);
(ii) the representations and warranties of Bergen set forth in the
Merger Agreement shall be true and correct in all respects on the date of
the Merger Agreement and on and as of the Closing Date as though made on
and as of the Closing Date (except for such representations and warranties
made as of a specified date, the accuracy of which will be determined as of
the specified date), except where any such failure of the representations
and warranties in the aggregate to be true and correct in all respects
would not have a Material Adverse Effect on Bergen (disregarding, for
purposes of this provision, the Material Adverse Effect qualification in
any single representation and warranty); provided, however, that, solely
for purposes of the termination right under Section 7.1(j)(iii) of the
Merger Agreement, Attributable Changes with respect to Bergen may be
considered in determining whether there has been any Material Adverse
Effect on Bergen;
(iii) Bergen shall have performed in all material respects each
obligation and agreement and shall have complied in all material respects
with each covenant to be performed and complied with by it under the Merger
Agreement at or prior to the Effective Time, except, in all such cases, for
acts and omissions of Bergen which, in the aggregate, do not have a
Material Adverse Effect on Bergen;
(iv) since the date of the Merger Agreement, there shall not have been
any change in the assets, liabilities, results of operations or financial
condition of Bergen which would constitute a Material Adverse Effect on
Bergen or any event, occurrence or development which would have a material
adverse effect on the ability of Bergen to consummate the transactions
contemplated by the Merger Agreement; provided, however, that solely for
purposes of the termination right under Section 7.1(j)(iii) of the Merger
Agreement, Attributable Changes with respect to Bergen may be considered in
determining whether there has been any such material adverse change that
would constitute a Material Adverse Effect on Bergen;
(v) there shall not have been a material breach of the Stock Option
Agreement;
(vi) there shall not be pending any action which is reasonably likely
to have a Material Adverse Effect on Bergen; and
(vii) the Supplemental Agreements between Bergen and certain specified
employees of Bergen, each as in effect as of the date of the Merger
Agreement, shall be in full force and effect and shall not have been
terminated; provided, however, that it is understood that this condition
shall not fail to be satisfied with respect to any such person who is no
longer employed by Bergen so long as Bergen shall not have modified,
amended or terminated, granted any waiver or release under, or assigned any
material rights or claims under the Supplemental Agreement with such former
employee other than in accordance with its terms.
BERGEN STOCK OPTIONS
Cardinal and Bergen covenant in the Merger Agreement to cause unexpired and
unexercised Bergen Options granted by Bergen to be automatically converted at
the Effective Time into Cardinal Exchange Options. See "The Merger -- Interests
of Certain Persons in the Merger -- Bergen Options." Cardinal further
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covenants to file with the Commission, within 15 business days after the Closing
Date, a registration statement on Form S-8 or other appropriate form under the
Securities Act to register the Cardinal Common Shares issuable upon exercise of
the Cardinal Exchange Options and to use its reasonable efforts to cause such
registration statement to remain effective until the exercise or expiration of
such options.
EMPLOYEE BENEFITS
Cardinal has agreed that, from and after the Effective Time, it will treat
all service by employees of Bergen as of the Effective Time with Bergen for all
purposes as service with Cardinal (except to the extent such treatment would
result in duplicative accrual on or after the Closing Date of benefits for the
same period of service), and, with respect to any medical or dental benefit plan
in which such employees participate after the Effective Time, to waive or cause
to be waived any pre-existing condition exclusions and actively-at-work
requirements and to provide that any covered expenses incurred on or before the
Effective Time by such employees or a covered dependent thereof will be taken
into account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Effective Time to the same extent as
such expenses are taken into account for the benefit of similarly situated
employees of Cardinal.
TERMINATION; EFFECT OF TERMINATION
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval and adoption of the Merger Agreement by
Bergen Shareholders and Cardinal Shareholders (a) by mutual consent of Cardinal
and Bergen; (b) by either Cardinal or Bergen if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited, or if any judgment, injunction, order or decree of a court or other
competent governmental authority enjoining Cardinal or Bergen from consummating
the Merger shall have been entered and such judgment, injunction, order or
decree shall have become final and nonappealable; (c) by either Cardinal or
Bergen if the Merger shall not have been consummated before April 30, 1998,
provided, however, that the right to terminate the Merger Agreement under this
clause (c) shall not be available to any party whose failure or whose
affiliate's failure to perform any material covenant or obligation under the
Merger Agreement has been the cause of or resulted in the failure of the Merger
to occur on or before such date; (d) by Cardinal if the Board of Directors of
Bergen shall withdraw, modify or change the Bergen Board's recommendation in
favor of the Merger in a manner adverse to Cardinal, or if the Board of
Directors of Bergen shall have refused to affirm such recommendation as promptly
as practicable (but in any case within ten business days) after receipt of any
written request from Cardinal which request was made on a reasonable basis; (e)
by Cardinal or Bergen if at the Bergen Special Meeting the requisite vote of the
Bergen Shareholders to approve the Merger and the transactions contemplated by
the Merger Agreement shall not have been obtained; (f) by Cardinal or Bergen if
the authorization of the Cardinal Shareholders with respect to the issuance of
Cardinal Common Shares in the Merger or the increase in the number of authorized
Cardinal Common Shares shall not have been obtained by reason of the failure to
obtain the required vote at a meeting held for such purpose; (g) by Bergen,
pursuant to Section 5.3(e) of the Merger Agreement (relating to a Competing
Transaction); (h) by Cardinal if Bergen shall have breached in any material
respect any of its obligations under the Stock Option Agreement or if Mr. Robert
E. Martini shall have breached in any material respect any of his obligations
under the Support/Voting Agreement with Cardinal; (i) by Cardinal if at any time
the representations and warranties of Bergen to the effect that neither Bergen
nor any of its affiliates has taken or agreed to take any action that (without
giving effect to any actions taken or agreed to be taken by Cardinal or any of
its affiliates) would prevent Cardinal from accounting for the business
combination to be effected by the Merger as a pooling-of-interests for
accounting and financial reporting purposes shall not be true and correct and
Cardinal shall have been advised that Deloitte & Touche LLP will not confirm in
writing at the Effective Time that the Merger will qualify as a
pooling-of-interests for accounting and financial reporting purposes; (j) by
Cardinal or Bergen if (i) there shall have been a material breach by the other
of any of its representations, warranties, covenants or agreements contained in
the Merger Agreement, which breach would result in the failure to satisfy one or
more of the conditions with respect to representations, warranties, covenants
and agreements set forth in Section 6.2(a) or 6.2(b) of the Merger Agreement (in
the case of a breach by Cardinal) or Section 6.3(a) or 6.3(b) of the Merger
Agreement (in the case of a breach by Bergen) or would result in a material
adverse effect on the ability of Cardinal and/or Bergen to consummate the
transactions contemplated by the Merger
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Agreement, and such breach shall not have been cured within 30 days after notice
thereof shall have been received by the party alleged to be in breach; or (ii)
the condition set forth in Section 6.3(d) (in the case of a termination by
Cardinal) or Section 6.2(f) (in the case of a termination by Bergen) of the
Merger Agreement with respect to the absence of certain changes is not
satisfied; or (iii) the condition set forth in Sections 6.3(a) or 6.3(d) (in the
case of a termination by Cardinal) or Sections 6.2(a) or 6.2(f) (in the case of
a termination by Bergen) of the Merger Agreement is not satisfied solely because
the proviso regarding Attributable Changes in such section is considered in
determining whether any such condition has been satisfied, provided, that the
terminating party pays the other party the sum of $75 million upon such
termination; (k) by Bergen if at any time the representations and warranties of
Cardinal to the effect that neither Cardinal nor any of its affiliates has taken
or agreed to take any action that (without giving effect to any actions taken or
agreed to be taken by Bergen or any of its affiliates) would prevent Cardinal
from accounting for the business combination to be effected by the Merger as a
pooling-of-interests for accounting and financial reporting purposes shall not
be true and correct and Cardinal shall have been advised that Deloitte & Touche
LLP will not confirm in writing at the Effective Time that the Merger will
qualify as a pooling-of-interests for accounting and financial reporting
purposes; or (l) by Cardinal or Bergen on one business day's prior notice if
either party has received any communication from the FTC or the Antitrust
Division (each an "HSR Authority") (such communication to be confirmed to the
other party by the Bureau Director of the FTC or such Director's delegate or an
Assistant Attorney General or the latter's delegate) indicating that an HSR
Authority has authorized the institution of litigation challenging the
transactions contemplated by the Merger Agreement under the Antitrust Laws,
which litigation will include a motion seeking an order or injunction
prohibiting the consummation of any of the transactions contemplated by the
Merger Agreement; provided, however, that the right to terminate the Merger
Agreement pursuant to this particular provision shall only be exercisable within
ten business days after the receipt by either party of the first such
communication from an HSR Authority.
The Merger Agreement provides that if the Merger Agreement is terminated
and it is judicially determined that termination was caused by an intentional
breach of the Merger Agreement, in addition to any other remedies available, the
breaching party shall indemnify and hold harmless the other parties thereto for
their respective costs, fees and expenses of their counsel, accountants,
financial advisors and other experts and advisors as well as fees and expenses
incident to negotiation, preparation and execution of the Merger Agreement and
related documentation and shareholders' meetings and consents ("Costs").
If (i) Bergen terminates the Merger Agreement pursuant to Sections 5.3(e)
and 7.1(g) thereof; (ii) Cardinal terminates the Merger Agreement pursuant to
Section 7.1(d) or 7.1(h) thereof; or (iii) (A) Cardinal or Bergen terminates the
Merger Agreement pursuant to Section 7.1(e) thereof, (B) at the time of such
failure by Bergen Shareholders to so approve the Merger Agreement there is a
publicly announced or disclosed Competing Transaction with respect to Bergen
involving a third party, and (C) within 12 months after such termination, Bergen
shall enter into an Acquisition Agreement for a Business Combination (as
hereinafter defined) or consummates a Business Combination; then, (X) in the
case of a termination by Cardinal, within three business days following any such
termination, (Y) in the case of a termination by Bergen as described in clause
(i) above, concurrently with such termination, or (Z) in the case of a
termination by Bergen as described in clause (iii) above where a Competing
Transaction has been publicly announced or publicly disclosed prior to the
Bergen Special Meeting, prior to the earlier consummation of a Business
Combination or execution of a definitive agreement with respect thereto, Bergen
will pay to Cardinal in cash by wire transfer in immediately available funds to
an account designated by Cardinal (i) in reimbursement for Cardinal's expenses
an amount in cash equal to the aggregate amount of Cardinal's Costs incurred in
connection with pursuing the transactions contemplated by the Merger Agreement,
including, without limitation, legal, accounting and investment banking fees, up
to but not in excess of an amount equal to $12 million in the aggregate and (ii)
a termination fee in an amount equal to $75 million (such amounts collectively,
the "Termination Fee"). For the purposes of this provision of the Merger
Agreement, "Business Combination" means (i) a merger, consolidation, share
exchange, business combination or similar transaction involving Bergen as a
result of which the Bergen Shareholders prior to such transaction in the
aggregate cease to own at least 85% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof), (ii) a sale, lease, exchange, transfer or other disposition of more
than 15% of
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the assets of Bergen and its subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or (iii) the acquisition, by a
person (other than Cardinal or any affiliate thereof) or group (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of beneficial ownership (as defined in Rule 13d-3 under the Exchange
Act) of more than 15% of the Bergen Common Stock whether by tender or exchange
offer or otherwise.
Pursuant to the Merger Agreement, in the event that the Board of Directors
of Cardinal withdraws or changes in a manner adverse to Bergen its
recommendation of the Merger Agreement, and the Merger Agreement is terminated
in accordance with the terms hereof as a result thereof, then within three days
after delivery of notice of such termination by Bergen to Cardinal, Cardinal
will pay to Bergen in cash by wire transfer of immediately available funds to an
account designated by Bergen, as liquidated damages (i) in reimbursement for
Bergen's expenses, an amount of cash equal to the aggregate amount of Bergen's
Costs up to but not in excess of $12 million in the aggregate, and (ii) the
amount of $75 million.
In the event that the Merger Agreement is terminated by Cardinal or Bergen
pursuant to Section 7.1(j) thereof (relating to a material breach by the other
of any of its representations, warranties, covenants or agreements contained in
the Merger Agreement) as a result of the failure of the other party or its
affiliates to perform its material covenants and obligations under Section
5.1(a)(i) or 5.1(a)(ii) thereof (relating to HSR Act matters), then within three
days after such termination, the breaching party will pay to the terminating
party in cash by wire transfer of immediately available funds to an account
designated by the terminating party, as liquidated damages, the amount of $50
million.
In the event that the Merger Agreement is terminated by Cardinal or Bergen
pursuant to Section 7.1(j)(iii) thereof as a result, in whole or in part, of an
Attributable Change with respect to the other party, then contemporaneously with
such termination, the terminating party will pay in cash by wire transfer of
immediately available funds to an account designated by the other party as
liquidated damages the amount of $75 million.
In the event that either Bergen or Cardinal gains the right to terminate
the Merger Agreement for any reason, the Bergen Board or the Cardinal Board, as
the case may be, may, in the exercise of its fiduciary duty, make determinations
(i) whether to terminate the Merger Agreement or to waive the condition that
gives rise to such right to terminate the Merger Agreement and proceed to the
consummation of the Merger, and (ii) if it determines to waive the condition
giving rise to such right to terminate and proceed to the consummation of the
Merger, whether or not to resolicit the approval of the Bergen Merger Proposal
(in the case of Bergen) or the Cardinal Merger Proposal and the Name Change
Proposal (in the case of Cardinal).
AMENDMENT AND WAIVER
The Merger Agreement may be amended in writing by the parties thereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval and adoption of the Merger Proposal by Cardinal
Shareholders and Bergen Shareholders, but after each such approval, no amendment
shall be made which by law requires further approval by the Cardinal
Shareholders or Bergen Shareholders, as the case may be, without such further
approval.
At any time prior to the Effective Time, Cardinal (with respect to Bergen)
or Bergen (with respect to Cardinal and Subcorp) by action taken or authorized
by their respective Boards of Directors may, to the extent legally allowed, (i)
extend the time for performance of any of the obligations or other acts of such
party, (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or any document delivered pursuant thereto,
and (iii) waive compliance with any of the agreements or conditions contained
therein, provided such waiver or extension is set forth in a written instrument
signed on behalf of such party.
EXPENSES
The Merger Agreement provides that Bergen and Cardinal will share equally
the costs of filing and printing the Registration Statement and the costs of
printing and mailing this Joint Proxy Statement/Prospectus. Except as otherwise
provided in the Merger Agreement and the Stock Option Agreement
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(as described above), Cardinal and Bergen will pay their own costs and expenses
associated with the transactions contemplated by the Merger Agreement.
RIGHTS OF DISSENTING SHAREHOLDERS
CARDINAL SHAREHOLDERS
Section 1701.84 of the Ohio Revised Code provides that all Cardinal
Shareholders entitled to vote on the Cardinal Merger Proposal may exercise
dissenters' rights with respect to the Merger. The following is a summary of the
principal steps a Cardinal Shareholder must take to perfect dissenters' rights
under Section 1701.85 of the Ohio Revised Code. This summary does not purport to
be complete and is qualified in its entirety by reference to Section 1701.85 of
the Code, a copy of which is attached as Annex D to this Joint Proxy
Statement/Prospectus. Any Cardinal Shareholder contemplating the exercise of
dissenters' rights is urged to review carefully such provisions and to consult
an attorney, since dissenters' rights will be lost if the procedural
requirements under Section 1701.85 of the Ohio Revised Code are not fully and
precisely satisfied. To perfect dissenters' rights, a Cardinal Shareholder must
satisfy each of the following conditions:
1. No Vote in Favor of the Cardinal Merger Proposal. Cardinal Common
Shares ("Dissenter's Cardinal Shares") held by the dissenting Cardinal
Shareholder (the "Dissenting Cardinal Shareholder") must not be voted at
the Cardinal Special Meeting in favor of the Cardinal Merger Proposal. See
"The Special Meetings -- Matters to Be Considered at the Special Meetings."
This requirement will be satisfied if a proxy is signed and returned with
instructions to vote against the Cardinal Merger Proposal or to abstain
from such vote, if no proxy is returned and no vote is cast at the Cardinal
Special Meeting in favor of the Cardinal Merger Proposal, or if the
Dissenting Cardinal Shareholder revokes a proxy, and thereafter abstains
from voting with respect to the Cardinal Merger Proposal or votes against
the Cardinal Merger Proposal at the Cardinal Special Meeting. A vote in
favor of the Cardinal Merger Proposal at the Cardinal Special Meeting
constitutes a waiver of dissenters' rights. A proxy that is returned signed
but on which no voting preference is indicated will be voted in favor of
the Cardinal Merger Proposal and will constitute a waiver of dissenters'
rights. A Dissenting Cardinal Shareholder may revoke his proxy at any time
before its exercise by filing with Cardinal an instrument revoking it or a
duly executed proxy bearing a later date, or by attending and giving notice
of the revocation of the proxy in open meeting (although attendance at the
Cardinal Special Meeting will not in and of itself constitute revocation of
a proxy). See "The Special Meetings -- Voting of Proxies."
2. Filing Written Demand. Not later than ten days after the taking of
the vote on the Cardinal Merger Proposal, a Dissenting Cardinal Shareholder
must deliver to Cardinal a written demand (the "Cardinal Demand") for
payment of the fair cash value of the Dissenter's Cardinal Shares. The
Cardinal Demand should be delivered to Cardinal at 5555 Glendon Court,
Dublin, Ohio 43016, Attention: Secretary. It is recommended, although not
required, that the Cardinal Demand be sent by registered or certified mail,
return receipt requested. Voting against the Cardinal Merger Proposal will
not itself constitute a demand. Cardinal will not send any further notice
to Cardinal Shareholders as to the date on which such ten-day period
expires.
The Cardinal Demand must identify the name and address of the holder
of record of the Dissenter's Cardinal Shares, the number of Dissenter's
Cardinal Shares and the amount claimed as the fair cash value thereof. A
beneficial owner must, in all cases, have the record holder submit the
Cardinal Demand in respect of the Dissenter's Cardinal Shares. The Cardinal
Demand must be signed by the shareholder of record (or by the duly
authorized representative of the shareholder) exactly as the shareholder's
name appears on the shareholder records of Cardinal. A Cardinal Demand with
respect to shares owned jointly by more than one person must identify and
be signed by all of the holders of record. Any person signing a Cardinal
Demand on behalf of a partnership or corporation or in any other
representative capacity (such as an attorney-in-fact, executor,
administrator, trustee or guardian) must indicate the nature of the
representative capacity and, if requested, must furnish written proof of
this capacity and his authority to sign the demand.
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Because only shareholders of record on the Cardinal Record Date may
exercise dissenters' rights, any person who beneficially owns shares that
are held of record by a broker, fiduciary, nominee, or other holder and who
wishes to exercise dissenters' rights must instruct the record holder of
the shares to satisfy the conditions outlined above. If a record holder
does not satisfy, in a timely manner, all of the conditions outlined in
this section entitled "Rights of Dissenting Shareholders," the dissenters'
rights for all of the shares held by that shareholder will be lost.
From the time the Cardinal Demand is given until either the
termination of the rights and obligations arising from such Cardinal Demand
or the purchase of the Dissenter's Cardinal Shares related thereto by
Cardinal, all rights accruing to the holder of the Dissenter's Cardinal
Shares, including voting and dividend or distribution rights, will be
suspended. If any dividend or distribution is paid on Cardinal Common
Shares during the suspension, an amount equal to the dividend or
distribution which would have been payable on the Dissenter's Cardinal
Shares, but for such suspension, shall be paid to the holder of record of
the Dissenter's Cardinal Shares as a credit upon the fair cash value of the
Dissenter's Cardinal Shares. If the right to receive the fair cash value is
terminated otherwise than by the purchase of the Dissenter's Cardinal
Shares by Cardinal, all rights will be restored to the Dissenting Cardinal
Shareholder and any distribution that would have been made to the holder of
record of the Dissenter's Cardinal Shares, but for the suspension, will be
made at the time of the termination.
3. Petitions to Be Filed in Court. Within three months after the
service of the Cardinal Demand, if Cardinal and the Dissenting Cardinal
Shareholder do not reach an agreement on the fair cash value of the
Dissenter's Cardinal Shares, the Dissenting Cardinal Shareholder or
Cardinal may file a complaint in the Court of Common Pleas of Franklin
County, Ohio (the "Common Pleas Court"), or join or be joined in an action
similarly brought by another Dissenting Cardinal Shareholder, for a
judicial determination of the fair cash value of the Dissenter's Cardinal
Shares. Cardinal does not intend to file any complaint for a judicial
determination of the fair cash value of any Dissenter's Cardinal Shares.
Upon motion of the complainant, the Common Pleas Court will hold a
hearing to determine whether the Dissenting Cardinal Shareholder is
entitled to be paid the fair cash value of the Dissenter's Cardinal Shares.
If the Common Pleas Court finds that the Dissenting Cardinal Shareholder is
so entitled, it may appoint one or more appraisers to receive evidence by
which to recommend a decision on the amount of such value. The Common Pleas
Court is required to make a finding as to the fair cash value of the
Dissenter's Cardinal Shares and to render a judgment against Cardinal for
the payment thereof, with interest at such rate and from such date as the
Common Pleas Court considers equitable. Costs of the proceedings, including
reasonable compensation to the appraiser or appraisers to be fixed by the
Common Pleas Court, are to be apportioned or assessed as the Common Pleas
Court considers equitable. Payment of the fair cash value of the
Dissenter's Cardinal Shares is required to be made within 30 days after the
date of final determination of such value or the Effective Time, whichever
is later, only upon surrender to Cardinal of the Certificates representing
the Dissenter's Cardinal Shares for which payment is made.
Fair cash value is the amount which a willing seller, under no
compulsion to sell, would be willing to accept, and which a willing buyer,
under no compulsion to purchase, would be willing to pay, but in no event
may the fair cash value exceed the amount specified in the Cardinal Demand.
The fair cash value is to be determined as of the day prior to the day of
the vote on the Cardinal Merger Proposal. In computing this value, any
appreciation or depreciation in the market value of the Dissenter's
Cardinal Shares resulting from the Merger is excluded.
The dissenters' rights of any Dissenting Cardinal Shareholder will
terminate if, among other things, (a) he has not complied with Section 1701.85
of the Ohio Revised Code (unless the Board of Directors of Cardinal waives
compliance), (b) the Merger is abandoned or otherwise not carried out or such
Dissenting Cardinal Shareholder withdraws his Cardinal Demand with the consent
of the Board of Directors of Cardinal, or (c) no agreement has been reached
between Cardinal and the Dissenting Cardinal Shareholder with respect to the
fair cash value of the Dissenter's Cardinal Shares and no complaint has been
timely filed in the Common Pleas Court.
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BERGEN SHAREHOLDERS
Bergen Shareholders will not be entitled to dissenters' appraisal rights
under the New Jersey Law or any other statute in connection with the Merger. See
"Comparison of Shareholder Rights -- Rights of Dissenting Shareholders."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a summary of the material
Federal income tax consequences of the Merger and does not purport to be a
complete analysis or listing of all potential tax effects relative to a decision
whether to vote for the approval of the Merger. The discussion does not address
all aspects of Federal income taxation that may be applicable to certain Bergen
Shareholders subject to special Federal income tax treatment, including, without
limitation, foreign persons, insurance companies, tax-exempt entities,
retirement plans and persons who acquired their Bergen Common Stock pursuant to
the exercise of employee stock options or otherwise as compensation. The
discussion addresses neither the effect of applicable state, local or foreign
tax laws, nor the effect of any Federal tax laws other than those pertaining to
Federal income tax.
Bergen has received an opinion from Lowenstein, Sandler, counsel to Bergen,
to the effect that, if the Merger occurs in accordance with the Merger
Agreement, the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code for Federal income tax purposes. Such opinion is
based on the Code, the regulations thereunder, administrative rulings of the
Internal Revenue Service and court decisions, all of which are subject to
change. Any such change, which may or may not be retroactive, could alter the
tax consequences discussed herein. The opinion is also based on certain
assumptions regarding the factual circumstances that will exist at the Effective
Time, including, without limitation, certain representations made by Cardinal,
Bergen and certain shareholders of Bergen. If any of these factual assumptions
is inaccurate, the tax consequences of the Merger could differ from those
described herein. The discussion below applies to Bergen Shareholders who hold
their shares of Bergen Common Stock as a capital asset within the meaning of
Section 1221 of the Code.
As a reorganization under Section 368(a) of the Code, no gain or loss will
be recognized by the Bergen Shareholders with respect to the Cardinal Common
Shares received in the Merger. The tax basis of the Cardinal Common Shares
received by a Bergen Shareholder in the Merger will be equal to the tax basis of
the shares of Bergen Common Stock exchanged therefor, reduced by any amount of
basis allocable to fractional share interests for which cash is received. For
purposes of determining whether or not gain or loss on the subsequent
disposition of Cardinal Common Shares received in the Merger is long-term or
short-term, the holding period of such Cardinal Common Shares received by the
Bergen Shareholders will include the holding period of the shares of Bergen
Common Stock exchanged therefor.
The receipt of cash in lieu of a fractional Cardinal Common Share by a
Bergen Shareholder pursuant to the Merger will result in taxable gain or loss to
such shareholder for Federal income tax purposes based on the difference between
the amount of cash received by such shareholder and such shareholder's basis in
such fractional share as set forth above. Such gain or loss will be a capital
gain or loss.
The Merger Agreement provides that neither Cardinal nor Bergen is obligated
to consummate the Merger unless Bergen shall have received an opinion from
Lowenstein, Sandler, counsel to Bergen, substantially to the effect that under
applicable law, for Federal income tax purposes, the Merger will constitute a
reorganization under Section 368(a) of the Code.
THE FOREGOING DISCUSSION OF MATERIAL FEDERAL INCOME TAX CONSEQUENCES IS FOR
GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. THE OPINION OF
LOWENSTEIN, SANDLER IS NOT BINDING ON THE INTERNAL REVENUE SERVICE. BECAUSE OF
THE COMPLEXITY OF THE TAX LAWS, AND BECAUSE THE TAX CONSEQUENCES OF ANY
PARTICULAR SHAREHOLDER MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, EACH
BERGEN SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO HIS
OWN PARTICULAR CIRCUMSTANCES AND WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER TO HIM, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND
FOREIGN TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE TAX LAWS.
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THE COMPANIES
BUSINESS OF BERGEN
Bergen is a diversified drug and health care distribution organization and
is one of the nation's leading suppliers of healthcare products and services to
the managed care and retail pharmacy markets. Bergen offers innovative logistics
management programs to all healthcare venues that help its customers grow
efficiently, improve their cost effectiveness and further support their focus on
patient/consumer care.
Bergen Brunswig Drug Company (the "Drug Company"), a wholly-owned and the
largest subsidiary of Bergen, is one of the largest national distributors of
products sold or used by institutional (hospital) and retail pharmacies. The
Drug Company distributes a full line of products, including pharmaceuticals,
proprietary medicines, cosmetics, toiletries, personal health products,
sundries, and home healthcare supplies and equipment. As of November 30, 1997,
the Drug Company's operations (including ASD (as defined below)) were located in
40 owned and leased warehouse and office facilities in Alabama, Arizona,
California, Colorado, Florida, Georgia, Hawaii, Indiana, Kentucky,
Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico,
North Carolina, Oklahoma, Oregon, Tennessee, Texas, Utah, Virginia and
Washington. Leased facilities range in size from approximately 5,800 to 181,300
square feet and have a combined area of approximately 1,733,200 square feet.
Owned facilities range in size from approximately 46,000 to 231,500 square feet.
The Drug Company's products are sold to a large number of hospital pharmacies,
managed care facilities, health maintenance organizations, independent retail
pharmacies, pharmacy chains, supermarkets, food-drug combination stores and
other retailers located in all 50 states, the District of Columbia, Puerto Rico,
Guam and Mexico. The Drug Company has been an innovator in the development and
utilization of computer-based retailer order entry systems and of electronic
data interchange systems including computer-to-computer ordering systems with
suppliers. During fiscal 1997, substantially all of the Drug Company's customer
orders were received via electronic order entry systems. These systems, combined
with daily delivery, improve customers' cash and inventory management and
profitability by freeing them from the burden of maintaining large inventories.
In June 1996, Bergen introduced its Generic Purchasing Program. Designed to
streamline customers' generic pharmaceutical costs, the Generic Purchasing
Program utilizes the products of a selected group of generic manufacturers and
combines that benefit with substantial volume to leverage buying power for
Bergen's customers.
In July 1994, Bergen introduced AccuSource(R), a multimedia communication,
product information, and electronic ordering system for pharmacies.
AccuSource(R) links the supplier, wholesaler and retailer in the pharmaceutical
distribution process. AccuSource(R) simplifies the ordering process and gives
retailers detailed information on thousands of products, services and special
purchase opportunities, as well as prescription substitution alternatives and
Medicaid coverage information. AccuSource(R)'s on-line feature provides
retailers with a convenient method for ensuring product availability by giving
immediate information on quantity levels at their Drug Company distribution
center.
The Drug Company also provides a wide variety of promotional, advertising,
merchandising, and marketing assistance to independent community pharmacies. For
example, the Good Neighbor Pharmacy(R) program utilizes circular and media
advertising to strengthen the consumer image of the independent pharmacy without
sacrificing its local individuality. Other programs for the independent
community pharmacy include in-store merchandising programs, private label
products, shelf management systems, pharmacy computers and a fully-integrated
point-of-sale system marketed under the Drug Company's trademark of
OmniPhase(TM).
Hospital and other institutional accounts are offered a wide variety of
inventory management and information services by the Drug Company to better
manage inventory investment and contain costs. AccuLine(TM), introduced in June
1995, provides an on-line, real-time, pharmacy management system in a
Windows(TM) (a trademark of Microsoft(R) Corporation) environment and features
local area network capability.
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<PAGE> 79
Bergen Brunswig Medical Corporation (formerly known as Durr Medical
Corporation) and other wholly-owned subsidiaries of Bergen (collectively,
"Medical"), distribute a variety of medical and surgical products to individual
hospitals and alternate site healthcare providers through 28 distribution
centers located in every region of the United States except the northeast. As of
November 30, 1997, Medical's operations were located in 34 owned and leased
warehouse and office facilities in Alabama, Alaska, Arizona, California,
Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Michigan, Minnesota,
Missouri, Nevada, North Carolina, Ohio, Oklahoma, Oregon, South Carolina,
Tennessee, Texas, Utah, Virginia and Washington. Leased facilities range in size
from approximately 6,600 to 97,000 square feet and have a combined area of
approximately 1,002,100 square feet. Owned facilities range in size from 30,800
to 188,000 square feet. Medical serves hospital customers and alternate site
customers in 44 states and the District of Columbia. Alternate site customers
include outpatient clinics, nursing homes, surgery centers, dialysis and
oncology centers, emergency centers, laboratories and veterinary clinics.
Medical's distribution centers range between 14,000 and 70,000 square feet and
average 40,000 square feet.
Alternate Site Distributors, Inc. ("ASD"), Bergen's specialty wholesale
subsidiary, supplies pharmaceuticals and oncology products to physician and
clinic accounts. Bergen created ASD during fiscal 1994 to respond to the rapid
growth in the alternate site market business. As a major supplier to the
alternate site market, ASD gives its customers quick access to a broad range of
specialty, value-added products and services, and commercial outsourcing.
In September 1995, Bergen formed IntePlex(TM) Inc. ("IntePlex"), a
subsidiary of Bergen, to focus exclusively on the evolving integrated healthcare
marketplace. The foundation of IntePlex involves the development of an
electronic catalog for one-stop-shopping and a centralized database for tracking
customers' purchasing information. IntePlex's offerings are expected to include
logistics management, continuous replenishment, just-in-time delivery, and
benefit plan compliance for both medical-surgical supplies and pharmaceuticals
combined with delivery to all points in a network: hospitals, alternate sites,
physician offices and retail stores.
On January 2, 1998, Bergen acquired Besse Medical Services, Inc., a
privately-held distributor of injectables, diagnostics and medical supplies.
Additional information concerning Bergen and its subsidiaries is included
in the Bergen documents filed with the Commission, which are incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
BUSINESS OF CARDINAL
Cardinal, a holding company operating through a number of operating
subsidiaries, is a leading health care service provider, offering an array of
value-added pharmaceutical distribution services and pharmaceutical related
products and services to a broad base of customers. It is one of the nation's
largest wholesale distributors of pharmaceutical and related health care
products to independent and chain drug stores, hospitals, alternate care centers
and the pharmacy departments of supermarkets and mass merchandisers located
throughout the continental United States. Through its Pyxis subsidiary, Cardinal
develops, manufactures, leases, sells and services unique point-of-use systems
which automate the distribution, management and control of medications and
supplies in hospitals and alternate care facilities. Cardinal is also the
largest franchisor of independent retail pharmacies in the United States through
its MSI subsidiary. In addition, through its Owen subsidiary, Cardinal provides
pharmacy management and information services to hospitals. PCI, another one of
Cardinal's subsidiaries, is also a leading international provider of integrated
packaging services to pharmaceutical manufacturers.
As a full-service wholesale distributor, Cardinal complements its
distribution activities by offering a broad range of value-added support
services to assist Cardinal's customers and suppliers in maintaining and
improving their market positions and to strengthen Cardinal's role in the
channel of distribution. These support services include computerized order entry
and order confirmation systems, customized invoicing, generic sourcing programs,
product movement and management reports, consultation on store operation and
merchandising, and customer training. Cardinal's proprietary software systems
feature customized databases
66
<PAGE> 80
specially designed to help its customers order more efficiently, contain costs,
and monitor their purchases which are covered by group contract purchasing
arrangements.
Cardinal operates several specialty health care businesses which offer
value-added services to Cardinal's customers and suppliers while providing
Cardinal with additional opportunities for growth and profitability. For
example, Cardinal operates a pharmaceutical repackaging program for both
independent and chain drugstore customers and serves as a distributor of
therapeutic plasma products and other specialty pharmaceuticals to hospitals,
clinics and other managed care facilities on a nationwide basis through the
utilization of telemarketing and direct mail programs. These specialty
distribution activities are part of Cardinal's overall strategy of developing
diversified products and services to enhance the profitability of its business
and that of its customers and suppliers.
In February 1994, Cardinal combined with Whitmire, a Folsom,
California-based drug wholesaler. The majority of Whitmire's sales were
concentrated in the western and central United States, complementing Cardinal's
former concentration of sales in the eastern United States and positioning the
combined company to service both customers and suppliers on a national basis. As
a result of the Whitmire merger, Cardinal now maintains a network of
pharmaceutical distribution centers enabling it to routinely serve the entire
population of the continental U.S. on a next-day basis.
Cardinal has completed several additional business combinations since the
Whitmire Merger. On July 1, 1994, Cardinal acquired Humiston-Keeling, Inc., a
Calumet City, Illinois-based drug wholesaler serving customers located primarily
in the upper midwest region of the United States. On July 18, 1994, Cardinal
completed a merger with Behrens Inc., a Waco, Texas-based drug wholesaler
serving customers located primarily in Texas and adjoining states. On November
13, 1995, Cardinal completed a merger with MSI, a St. Louis, Missouri-based
franchisor of independent apothecary-style retail pharmacies in the United
States and abroad. On May 7, 1996, Cardinal completed a merger with Pyxis, a San
Diego, California-based designer, manufacturer, marketer and servicer of unique,
point-of-use systems which automate the distribution, management and control of
medications and supplies in hospitals and other healthcare facilities. On
October 11, 1996, Cardinal completed a merger with PCI, a Philadelphia,
Pennsylvania-based provider of integrated packaging services to pharmaceutical
manufacturers. On March 18, 1997, Cardinal completed a merger with Owen, a
Houston, Texas-based provider of fully integrated pharmacy management and
information services to hospitals. Cardinal has entered into a merger agreement
to acquire MediQual, a leading supplier of clinical information management
systems and services to the healthcare industry. The transaction to acquire
MediQual is subject to the approval of MediQual's shareholders and the
satisfaction of other closing conditions.
Additional information concerning Cardinal and its subsidiaries is included
in the Cardinal documents filed with the Commission, which are incorporated by
reference herein. See "Incorporation of Certain Documents by Reference."
SUBCORP
Subcorp is a newly formed, wholly owned subsidiary of Cardinal formed for
the purpose of effecting the Merger.
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<PAGE> 81
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The impact of the proposed MediQual Merger on an historical basis is not
significant and prior period financial statements will not be restated upon
consummation of the MediQual Merger. Upon consummation of the Merger, historical
financial statements will be restated for the historical results of MediQual and
Bergen.
The following unaudited pro forma combined financial information should be
read in conjunction with the consolidated financial statements, including the
notes thereto, of Cardinal, MediQual and Bergen which are either included or
incorporated by reference in this Joint Proxy Statement/Prospectus. The
unaudited pro forma information is presented for illustration purposes only in
accordance with the assumptions set forth below, and is not necessarily
indicative of the operating results or financial position that would have
occurred if the MediQual Merger or the Merger had been consummated nor is it
necessarily indicative of future operating results or financial position of the
combined enterprise. The unaudited pro forma combined financial information does
not reflect any adjustments to conform accounting practices or to reflect any
cost savings or other synergies anticipated as a result of the Merger or any
merger-related expenses. See Note 2 for further discussion.
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<PAGE> 82
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
The following unaudited pro forma combined balance sheet presents, under
the pooling-of-interests accounting method, the consolidated balance sheets of
Cardinal, MediQual and Bergen combined as of September 30, 1997.
<TABLE>
<CAPTION>
CARDINAL MEDIQUAL BERGEN
HEALTH SYSTEMS, INC. BRUNSWIG
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
1997 1997 1997 ADJUSTMENTS BALANCES(1)
------------- ------------- ------------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and equivalents.......... $ 180,515 $ 4,196 $ 54,494 $ -- $ 239,205
Marketable securities......... -- 2,786 2,786
Trade receivables............. 691,063 1,915 772,342 1,465,320
Current portion of net
investment in sales-type
leases...................... 57,664 -- -- 57,664
Merchandise inventories(3).... 1,614,140 1,309,359 2,923,499
Prepaid expenses and other.... 111,648 31 16,494 128,173
---------- ------- ---------- -------- ----------
Total current assets........ 2,655,030 6,142 2,155,475 -- 4,816,647
---------- ------- ---------- -------- ----------
Property and equipment -- at
cost.......................... 492,539 3,461 270,306 -- 766,306
Accumulated depreciation and
amortization................ (206,573) (2,491) (131,944) (341,008)
---------- ------- ---------- -------- ----------
Property and
equipment -- net............ 285,966 970 138,362 -- 425,298
Other assets:
Net investment in sales-type
leases, less current
portion..................... 119,538 -- -- -- 119,538
Goodwill and other
intangibles................. 120,948 -- 339,621 460,569
Other......................... 78,007 8 73,665 151,680
---------- ------- ---------- -------- ----------
Total.................... $ 3,259,489 $ 7,120 $ 2,707,123 $ -- $ 5,973,732
========== ======= ========== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable -- banks........ $ 22,329 $ -- $ -- $ -- $ 22,329
Current portion of long-term
obligations................. 5,095 75 -- 5,170
Accounts payable.............. 1,239,463 187 1,336,070 2,575,720
Other accrued
liabilities(2).............. 227,647 1,870 288,236 517,753
---------- ------- ---------- -------- ----------
Total current liabilities... 1,494,534 2,132 1,624,306 -- 3,120,972
---------- ------- ---------- -------- ----------
Long-term obligations -- less
current portion............... 277,882 -- 418,177 -- 696,059
Deferred tax and other
liabilities................... 89,580 -- 19,779 109,359
Redeemable preferred stock....... -- 12,108 -- (12,108) --
Shareholders' equity:
Common Shares -- without par
value....................... 656,596 2,207 240,166 898,969
Retained earnings (accumulated
deficit)(2)................. 753,138 (9,106) 492,565 1,236,597
Common Shares in treasury, at
cost........................ (6,432) (19) (88,279) (94,730)
Other......................... (5,809) (202) 409 12,108 6,506
---------- ------- ---------- -------- ----------
Total shareholders' equity.... 1,397,493 (7,120) 644,861 -- 2,047,342
---------- ------- ---------- -------- ----------
Total.................... $ 3,259,489 $ 7,120 $ 2,707,123 $ -- $ 5,973,732
========== ======= ========== ======== ==========
</TABLE>
See accompanying notes to the unaudited pro forma combined financial
information.
69
<PAGE> 83
UNAUDITED PRO FORMA COMBINED STATEMENTS OF EARNINGS
The following unaudited pro forma combined statements of earnings present,
under the pooling-of-interests accounting method, the consolidated statements of
earnings of Cardinal for the fiscal years ended June 30, 1997, 1996 and 1995 and
the three months ended September 30, 1997 and 1996 combined with the statements
of earnings of MediQual for the twelve months ended June 30, 1997, the fiscal
years ended December 31, 1996 and 1995 and the three months ended September 30,
1997 and 1996, and the consolidated statements of earnings of Bergen for the
fiscal years ended September 30, 1997, 1996 and 1995 and the three months ended
September 30, 1997 and December 31, 1996, respectively. The financial results of
MediQual for the six months ended December 31, 1996 are included in the pro
forma data for both the fiscal years ended June 30, 1997 and 1996. MediQual's
net revenues and net earnings for the six months ended December 31, 1996 were
approximately $5.3 million and $0.9 million, respectively. The financial results
of Bergen for the quarter ended September 30, 1997 are included in the pro forma
data for both the fiscal year ended June 30, 1997 and the three months ended
September 30, 1997. Bergen's net revenues and net earnings for the quarter ended
September 30, 1997 were approximately $3.0 billion and $20.8 million,
respectively.
<TABLE>
<CAPTION>
FISCAL YEAR TWELVE MONTHS FISCAL YEAR
ENDED ENDED ENDED
------------- ------------- ------------------
JUNE 30, 1997 JUNE 30, 1997 SEPTEMBER 30, 1997
------------- ------------- ------------------
CARDINAL MEDIQUAL BERGEN BRUNSWIG PRO FORMA PRO FORMA
HEALTH, INC. SYSTEMS INC. CORPORATION ADJUSTMENTS RESULTS(1)
------------- ------------- ------------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues(3)................... $ 10,968,042 $11,246 $ 11,660,496 $ -- $22,639,784
Cost of products sold(3).......... 10,068,384 2,780 11,006,065 21,077,229
----------- ------- ----------- --- -----------
Gross margin...................... 899,658 8,466 654,431 -- 1,562,555
Selling, general and
administrative expenses......... 515,551 5,350 479,399 1,000,300
Merger related costs -- prior
mergers(4)...................... (50,929) -- (5,800) (56,729)
----------- ------- ----------- --- -----------
Operating earnings(4)............. 333,178 3,116 169,232 -- 505,526
Other income (expense)............ (22,098) (661) (30,793) (53,552)
----------- ------- ----------- --- -----------
Earnings before income taxes...... 311,080 2,455 138,439 -- 451,974
Provisions for income taxes....... 126,481 67 56,760 183,308
----------- ------- ----------- --- -----------
Net earnings, excluding estimated
Merger Expenses(2)(4)........... $ 184,599 $ 2,388 $ 81,679 $ -- $ 268,666
=========== ======= =========== === ===========
Earnings per Common Share,
excluding estimated Merger
Expenses(2)(4)(5)
Primary...................... $ 1.69 $ 1.80
Fully diluted................ $ 1.69 $ 1.80
Weighted average number of Common
Shares outstanding(5):
Primary...................... 109,118 148,968
Fully diluted................ 109,172 149,049
</TABLE>
See accompanying notes to the unaudited pro forma combined financial
information.
70
<PAGE> 84
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------
JUNE 30, DECEMBER 31, SEPTEMBER 30,
1996 1996 1996
------------ ---------------- ---------------
CARDINAL MEDIQUAL BERGEN BRUNSWIG PRO FORMA PRO FORMA
HEALTH, INC. SYSTEMS INC. CORPORATION ADJUSTMENTS RESULTS(1)
------------ ---------------- --------------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues(3)............... $ 9,407,591 $ 11,002 $ 9,942,697 $ -- $19,361,290
Cost of products sold(3)...... 8,597,878 2,067 9,368,893 17,968,838
---------- ------- ---------- ---------- -----------
Gross margin.................. 809,713 8,935 573,804 -- 1,392,452
Selling, general and
administrative expenses..... 514,879 6,058 418,364 939,301
Merger related costs -- prior
mergers(4).................. (49,200) -- -- (49,200)
---------- ------- ---------- ---------- -----------
Operating earnings(4)......... 245,634 2,877 155,440 -- 403,951
Other income (expense)........ (18,132) (463) (30,170) (48,765)
---------- ------- ---------- ---------- -----------
Earnings before income
taxes....................... 227,502 2,414 125,270 -- 355,186
Provisions for income taxes... 100,262 115 51,737 152,114
---------- ------- ---------- ---------- -----------
Net earnings, excluding
estimated Merger
Expenses(2)(4).............. $ 127,240 $ 2,299 $ 73,533 $ -- $ 203,072
========== ======= ========== ========== ===========
Earnings per Common Share,
excluding estimated Merger
Expenses(2)(4)(5)
Primary.................. $ 1.20 $ 1.39
Fully diluted............ $ 1.19 $ 1.39
Weighted average number of
Common Shares
outstanding(5):
Primary.................. 106,091 145,636
Fully diluted............ 107,001 146,581
</TABLE>
See accompanying notes to the unaudited pro forma combined financial
information.
71
<PAGE> 85
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------
JUNE 30, DECEMBER 31, SEPTEMBER 30,
1995 1995 1995
------------ ---------------- ---------------
CARDINAL MEDIQUAL BERGEN BRUNSWIG PRO FORMA PRO FORMA
HEALTH, INC. SYSTEMS INC. CORPORATION ADJUSTMENTS RESULTS(1)
------------ ---------------- --------------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues(3)............... $ 8,472,302 $ 10,974 $ 8,447,607 $ -- $16,930,883
Cost of products sold(3)...... 7,779,030 2,445 7,944,396 15,725,871
---------- ------- ---------- ---------- -----------
Gross margin.................. 693,272 8,529 503,211 -- 1,205,012
Selling, general and
administrative expenses..... 428,343 9,921 363,179 801,443
---------- ------- ---------- ---------- -----------
Operating earnings............ 264,929 (1,392) 140,032 -- 403,569
Other income (expense)........ (15,665) (70) (30,542) (46,277)
---------- ------- ---------- ---------- -----------
Earnings (loss) before income
taxes....................... 249,264 (1,462) 109,490 -- 357,292
Provisions for income taxes... 102,677 -- 45,548 148,225
---------- ------- ---------- ---------- -----------
Net earnings (loss), excluding
estimated Merger
Expenses(2)................. $ 146,587 $ (1,462) $ 63,942 $ -- $ 209,067
========== ======= ========== ========== ===========
Earnings per Common Share,
excluding estimated Merger
Expenses(2)(5)
Primary.................. $ 1.41 $ 1.46
Fully diluted............ $ 1.40 $ 1.45
Weighted average number of
Common Shares
outstanding(5):
Primary.................. 103,659 142,737
Fully diluted............ 104,849 143,944
</TABLE>
See accompanying notes to the unaudited pro forma combined financial
information.
72
<PAGE> 86
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 1997
-------------------------------------------------
CARDINAL MEDIQUAL BERGEN BRUNSWIG PRO FORMA PRO FORMA
HEALTH, INC. SYSTEMS INC. CORPORATION ADJUSTMENTS RESULTS(1)
------------ ---------------- --------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues(3)................ $ 2,869,971 $3,348 $ 3,020,043 $ -- $5,893,362
Cost of products sold(3)....... 2,644,106 771 2,848,233 5,493,110
---------- ------- ---------- ---------- -----------
Gross margin................... 225,865 2,577 171,810 -- 400,252
Selling, general and
administrative expenses...... 135,054 1,335 129,115 265,504
Merger-related costs -- prior
mergers(4)................... (2,183) -- -- (2,183)
---------- ------- ---------- ---------- -----------
Operating earnings(4).......... 88,628 1,242 42,695 -- 132,565
Other income (expense)......... (43) 46 (7,488) (7,485)
---------- ------- ---------- ---------- -----------
Earnings before income taxes... 88,585 1,288 35,207 -- 125,080
Provisions for income taxes.... 34,545 97 14,435 49,077
---------- ------- ---------- ---------- -----------
Net earnings, excluding
estimated Merger
Expenses(2)(4)............... $ 54,040 $1,191 $ 20,772 $ -- $ 76,003
========== ======= ========== ========== ===========
Earnings per Common Share,
excluding estimated Merger
Expenses(2)(4)(5)
Primary................... $ 0.49 $ 0.50
Fully diluted............. $ 0.49 $ 0.50
Weighted average number of
Common Shares outstanding(5):
Primary................... 110,777 150,901
Fully diluted............. 110,940 151,098
</TABLE>
See accompanying notes to the unaudited pro forma combined financial
information.
73
<PAGE> 87
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------
DECEMBER 31,
SEPTEMBER 30, 1996 1996
------------------------------- ---------------
CARDINAL MEDIQUAL BERGEN BRUNSWIG PRO FORMA PRO FORMA
HEALTH, INC. SYSTEMS INC. CORPORATION ADJUSTMENTS RESULTS(1)
------------ ---------------- --------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues(3)................ $ 2,535,476 $2,880 $ 2,822,122 $ -- $5,360,478
Cost of products sold(3)....... 2,341,648 525 2,668,146 5,010,319
---------- ------- ---------- ---------- -----------
Gross margin................... 193,828 2,355 153,976 -- 350,159
Selling, general and
administrative expenses...... 124,156 1,501 116,314 241,971
Merger-related costs -- prior
mergers(4)................... (158) -- -- (158)
---------- ------- ---------- ---------- -----------
Operating earnings(4).......... 69,514 854 37,662 -- 108,030
Other income (expense)......... (3,769) 9 (6,588) (10,348)
---------- ------- ---------- ---------- -----------
Earnings before income taxes... 65,745 863 31,074 -- 97,682
Provisions for income taxes.... 26,419 117 12,896 39,432
---------- ------- ---------- ---------- -----------
Net earnings, excluding
estimated Merger
Expenses(2)(4)............... $ 39,326 $ 746 $ 18,178 $ -- $ 58,250
========== ======= ========== ========== ===========
Earnings per Common Share,
excluding estimated Merger
Expenses(2)(4)(5)
Primary................... $ 0.37 $ 0.40
Fully diluted............. $ 0.37 $ 0.40
Weighted average number of
Common Shares outstanding
(5):
Primary................... 105,945 145,652
Fully diluted............. 106,150 145,890
</TABLE>
See accompanying notes to the unaudited pro forma combined financial
information.
74
<PAGE> 88
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
(1) CARDINAL, MEDIQUAL AND BERGEN HISTORICAL FISCAL YEARS
Cardinal's historical fiscal year ends on June 30, MediQual's historical
fiscal year ends on December 31, and Bergen's historical fiscal year ends on
September 30. For purposes of combining MediQual's and Bergen's historical
financial information with Cardinal's in the pro forma combined statements of
earnings herein, the financial information of Cardinal for the fiscal years
ended June 30, 1997, 1996 and 1995 have been combined with MediQual's financial
information for the twelve months ended June 30, 1997 and fiscal years ended
December 31, 1996 and 1995, and Bergen's financial information for the fiscal
years ended September 30, 1997, 1996 and 1995, respectively. Cardinal's
financial information for the three months ended September 30, 1997 and 1996
have been combined with MediQual's financial information for the three months
ended September 30, 1997 and 1996 and Bergen's financial information for the
three months ended September 30, 1997 and December 31, 1996, respectively. As a
result, the financial results of MediQual for the six months ended December 31,
1996 are included in the pro forma data for both fiscal years ended June 30,
1997 and 1996. MediQual's net revenues and net earnings for the six months ended
December 31, 1996 were approximately $5.3 million and $.9 million, respectively.
In addition, the financial results of Bergen for the quarter ended September 30,
1997 are included in the pro forma data for both the fiscal year ended June 30,
1997 and the three months ended September 30, 1997. Bergen's net revenues and
net earnings for the three months ended September 30, 1997 were approximately
$3.0 billion and $20.8 million, respectively.
In addition, certain amounts in the historical financial statements of
Cardinal, MediQual and Bergen have been reclassified for the pro forma
presentation.
(2) MERGER-RELATED EXPENSES
Cardinal and MediQual will incur transaction and other costs as a result of
the MediQual Merger. The amount of this charge is not expected to be significant
and will be charged to expense in the period in which the MediQual Merger is
consummated, or in subsequent periods, when incurred.
In connection with the Merger, the companies expect to incur investment
banking, legal, accounting, and other related transaction costs and fees.
Additionally, the companies expect to incur other merger-related costs
associated with the integration of the separate companies and institution of
efficiencies anticipated as a result of the Merger. Based on information
currently available, the total amount of merger-related charges to be recognized
in connection with the Merger is estimated to be between $100 and $130 million,
after tax. These merger-related expenses will be charged to expense in the
period in which the Merger is consummated, or in subsequent periods, when
incurred. Since the Merger has not yet been consummated, the merger expenses can
only be estimated at this time, and are subject to revision as further
information becomes available.
The accounting policies of Cardinal, MediQual and Bergen are currently
being studied from a conformity perspective. The impact of conforming accounting
policies (if any) is not presently estimable. If conforming adjustments are
required, they will be recorded as part of the restatement of prior periods as
required by the pooling-of-interests accounting method.
(3) TRANSACTIONS BETWEEN CARDINAL AND BERGEN
Owen, which became a subsidiary of Cardinal as a result of the Owen Merger,
purchased pharmaceuticals from Bergen during the period covered by the pro forma
financial statements. At September 30, 1997, Owen's unsold inventory related to
purchases from Bergen was not significant. The amounts arising from these
transactions are not material and, accordingly, the unaudited pro forma
statements of earnings do not include adjustments for these items.
75
<PAGE> 89
(4) EFFECT OF MERGER-RELATED ITEMS
Amounts include the effect of merger-related costs recorded by Cardinal in
the fiscal years ended June 30, 1997 and 1996 and the three months ended
September 30, 1997 and 1996 and by Bergen in the fiscal year ended September 30,
1997. During the fiscal year ended June 30, 1997, Cardinal recorded
merger-related charges associated with the PCI and Owen mergers ($46.2 million)
and additional integration costs related to the Pyxis and Medicine Shoppe
mergers ($4.7 million). During the fiscal year ended September 30, 1997, Bergen
recorded a charge of approximately $5.8 million for expenses related to the
terminated merger with IVAX Corporation. The effect of the merger-related costs
on the 1997 unaudited pro forma combined results was to reduce pro forma net
earnings by $40.0 million to $268.7 million and to reduce pro forma fully
diluted earnings per Common Share by $.27 per share to $1.80 per share.
During the fiscal year ended June 30, 1996, Cardinal recorded charges to
reflect the estimated MSI and Pyxis merger-related costs of approximately $49.2
million. The effect of the merger-related costs on the 1996 unaudited pro forma
combined results was to reduce pro forma net earnings by $36.9 million to $203.1
million and to reduce pro forma fully diluted earnings per Common Share by $.25
per share to $1.39 per share.
During the three months ended September 30, 1997 and 1996, Cardinal
recorded charges related to integrating the operations of the merged companies
of approximately $2.2 million and $0.2 million, respectively. The effect of the
merger-related costs on the unaudited pro forma combined results for the three-
month periods ended September 30, 1997 and 1996 was to reduce pro forma net
earnings by $1.3 million and $0.1 million, to $76.0 million and $58.3 million,
respectively. The impact was also to reduce the pro forma fully diluted earnings
per Common Share by $.01 per share to $.50 per share for the three months ended
September 30, 1997.
(5) EARNINGS PER SHARE
The pro forma net earnings per share reflect: (i) the weighted average
number of Cardinal Common Shares that would have been outstanding if the
MediQual Merger occurred at the beginning of the periods presented based upon
the conversion of each share of MediQual common stock, MediQual Class B
preferred stock and MediQual Class C preferred stock into Cardinal Common
Shares, assuming a common equivalent exchange ratio of .0802 and the conversion
of each share of MediQual Class A preferred stock into 293.6356 Cardinal Common
Shares (in each case assuming an average share price equal to $57.75 and
6,652,216 fully diluted shares of MediQual common stock and excluding the
accretion of preferred stock dividends because of the conversion of the
preferred stock), (ii) the weighted average number of Cardinal Common Shares
that would have been outstanding had the Merger occurred at the beginning of the
periods presented based upon an exchange ratio of 0.775 Cardinal Common Shares
to be issued for each share of Bergen Common Stock outstanding, and (iii) the
dilutive impact of stock options and warrants using the treasury stock method.
All MediQual options are assumed to be converted into options for Cardinal
Common Shares, assuming a common equivalent exchange ratio of .0802. All Bergen
options are assumed to be converted into options for Cardinal Common Shares at
an exchange ratio of 0.775 Cardinal Common Shares for each share of Bergen
Common Stock before application of the treasury stock method.
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COMPARISON OF SHAREHOLDER RIGHTS
As a result of the Merger, Bergen Shareholders will receive common shares
of Cardinal, an Ohio corporation, in exchange for their shares of common stock
in Bergen, a New Jersey corporation. The following is a summary of certain
material differences between the rights of holders of Bergen Common Stock and
the rights of holders of Cardinal Common Shares. These differences arise in part
from the differences between the New Jersey Business Corporation Act (the "New
Jersey Law") and the Ohio Revised Code (the "Ohio Law"). Additional differences
arise from the governing instruments of the two companies (in the case of
Bergen, the Bergen Certificate, the Bergen Bylaws and the Rights Agreement, and,
in the case of Cardinal, the Cardinal Articles and the Cardinal Regulations).
Although it is impractical to compare all of the aspects in which the New Jersey
Law and the Ohio Law and the companies' governing instruments differ with
respect to shareholders' rights, the following discussion summarizes certain
significant differences between them.
AMENDMENT OF CHARTER DOCUMENTS
Under the New Jersey Law, a proposed amendment to a corporation's
certificate of incorporation requires approval by the board of directors and an
affirmative vote of a majority of the votes cast by the holders of shares
entitled to vote thereon; provided that in the case of a corporation organized
prior to January 1, 1969, as is the case with Bergen, the proposed amendment
requires the affirmative vote of two-thirds of the votes cast by the holders of
shares entitled to vote thereon unless the corporation has adopted the majority
voting requirement by amendment of its certificate of incorporation adopted by
the affirmative vote of two-thirds of the votes cast by the holders of shares
entitled to vote thereon, as is the case with Bergen. Under the Bergen
Certificate, a proposed amendment to the Bergen Certificate requires the
affirmative votes cast by the holders of a majority of the votes cast of the
Bergen Common Stock entitled to vote thereon. In addition, the Bergen
Certificate provides that a proposed amendment to the Bergen Certificate which
would materially alter or change the powers, preferences or special rights of
the Junior Preferred Stock (as hereinafter defined) so as to affect them
adversely requires the affirmative vote of the holders of a majority or more of
the outstanding shares of Junior Preferred Stock, voting separately as a class.
To amend an Ohio corporation's articles of incorporation, the Ohio Law
requires the approval of shareholders holding two-thirds of the voting power of
the corporation or, in cases in which class voting is required, of shareholders
holding two-thirds of the voting power of each class, unless otherwise specified
in such corporation's articles of incorporation. The Cardinal Articles specify
that the holders of a majority of the voting power of Cardinal or, when
appropriate, any class of shareholders, may amend the Cardinal Articles.
AMENDMENT AND REPEAL OF BYLAWS AND REGULATIONS
Under the New Jersey Law, the board of directors of a corporation has the
power to make, alter and repeal bylaws unless such power is reserved to the
shareholders in the certificate of incorporation, but bylaws made by the board
may be altered or repealed and new bylaws made by the shareholders. In addition,
the shareholders may prescribe in the bylaws that any bylaw made by them shall
not be altered or repealed by the board. Under the Bergen Bylaws, the Board of
Directors of Bergen may adopt, amend or repeal the Bergen Bylaws subject to the
right of the Bergen Shareholders to adopt, amend or repeal such bylaws; provided
that a bylaw or an amendment thereto changing the number of directors may be
adopted, amended or repealed by the Bergen Board of Directors only for the
purpose of fixing the exact number of directors within the minimum (currently
nine directors) and maximum (currently 15 directors) limits specified in the
Bergen Bylaws.
The Ohio Law provides that only shareholders of a corporation have the
power to amend and repeal that corporation's code of regulations. The Cardinal
Regulations require that such amendments be approved by the affirmative vote of
the holders of a majority of the voting power entitled to vote on such matter,
except that the affirmative vote of the holders of not less than 75% of the
shares having voting power is required to amend, change, adopt any provision
inconsistent with, or repeal the provisions of the Cardinal Regulations dealing
with the number and classification of directors, the term of office of directors
or the removal of directors, or the provision relating to amendments to the
Cardinal Regulations.
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REMOVAL OF DIRECTORS
The New Jersey Law provides that directors may be removed from office with
or without cause, by the shareholders by the affirmative vote of a majority of
the votes cast by the holders of shares entitled to vote for the election of
directors; provided that, unless otherwise provided in the certificate of
incorporation, shareholders of a corporation whose board of directors is
classified shall not be entitled to remove directors without cause. The Bergen
Board of Directors is classified. The Bergen Certificate provides, however, that
any director may be removed at any time, either for or without cause, by, and
only by, a majority of the votes cast by the holders of record of Bergen Common
Stock voting at a meeting of such shareholders called for such purpose.
The Ohio Law provides that, unless the governing documents of a corporation
provide otherwise, directors may be removed, with or without cause, by the
affirmative vote of the holders of a majority of the voting power of the
corporation with respect to the election of directors, except that, unless all
the directors or all the directors of a particular class are removed, no
individual director may be removed if the votes of a sufficient number of shares
are cast against his removal which, if cumulatively voted at an election of all
the directors, or all the directors of a particular class, as the case may be,
would be sufficient to elect at least one director. The Cardinal Regulations
provide that such removal requires the affirmative votes of holders of at least
75% of such voting power. In addition, the Cardinal Regulations provide that any
director may be removed by the Board of Directors for certain causes specified
in Section 1701.58(B) of the Ohio Law (if a director is found by order of court
to be of unsound mind, if he is adjudicated a bankrupt or if he fails to meet
any qualifications for office).
VACANCIES ON THE BOARD
The New Jersey Law provides that unless the governing documents of a
corporation provide otherwise, any directorship not filled at the annual
meeting, any vacancy, however caused, occurring in the board of directors, and
newly created directorships resulting from an increase in the authorized number
of directors may be filled by the affirmative vote of a majority of the
remaining directors even though less than a quorum of the board, or by a sole
remaining director. The Bergen Bylaws also provide that any vacancy in the
Bergen Board of Directors may be filled by a majority of the remaining
directors. The Bergen Certificate provides that any vacancy caused by the
removal of a director by the holders of Bergen Common Stock may be filled at
such meeting, and any vacancy caused by the death or resignation of a director
elected by the holders of Bergen Common Stock may be filled only by the Bergen
Shareholders at a meeting called for that purpose or by a majority of the
remaining directors elected by those holders.
The Ohio Law provides that unless the governing documents of a corporation
provide otherwise, vacancies on the board of directors may be filled by a
majority of the remaining directors of a corporation. The Cardinal Regulations
provide that vacancies may be filled by the Board of Directors until Cardinal
Shareholders hold a meeting to fill such vacancy. In addition, Cardinal
Shareholders may elect a director to fill a vacancy (including any vacancy that
previously has been filled by the Board of Directors) at any meeting of Cardinal
Shareholders called for that purpose.
RIGHT TO CALL SPECIAL MEETINGS OF SHAREHOLDERS
The New Jersey Law permits special meetings of shareholders to be called by
the president or the board of directors of the corporation, or by such other
officers, directors or shareholders as the bylaws may provide. The New Jersey
Law provides, however, that upon application of the holder or holders of not
less than 10% of all the shares entitled to vote at a meeting, a court, in an
action in which the court may proceed in a summary manner, for good cause shown,
may order a special meeting of the shareholders to be called and held at such
time and place, upon such notice and for the transaction of such business as may
be designated in such order. The Bergen Bylaws provide that special meetings may
be called by the chairman of the Board of Directors, by the president or by the
Board of Directors of Bergen.
Under the Ohio Law, the holders of at least 25% of the outstanding shares
of a corporation, unless the corporation's regulations specify another
percentage, which may in no case be greater than 50%, the directors
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by action at a meeting or a majority of the directors acting without a meeting,
the chairman of the board, the president or, in case of the president's death or
disability, the vice president authorized to exercise the authority of the
president have the authority to call special meetings of shareholders. The
Cardinal Regulations expressly provide that special meetings of Cardinal
Shareholders may be called by the Chairman of the Board, the President, a
majority of the directors acting with or without a meeting or the holders of at
least 25% of the outstanding Cardinal Common Shares.
SHAREHOLDER ACTION WITHOUT A MEETING
The New Jersey Law provides that, except as otherwise provided in the
certificate of incorporation, any action that may be taken at a meeting of
shareholders, other than the annual election of directors, may be taken without
a meeting, without prior notice and without a vote, upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
which would be necessary to authorize such action at a meeting at which all
shareholders entitled to vote thereon were present and voting. The corporation
must notify non-consenting shareholders at least 20 days in advance of the
proposed effective date of a merger, consolidation, statutory share exchange, or
sale, lease exchange, or other disposition of all or substantially all, assets
of the corporation if not in the usual and regular course of its business and at
least 10 days in advance of the proposed effective date of any other action. The
Bergen Certificate does not provide otherwise. The Bergen Bylaws further provide
that any shareholder of record who seeks to have shareholders authorize or take
corporate action by written consent shall, by written notice to the Secretary,
request that the Bergen Board of Directors set a record date, which date shall
not be more than ten days after the date on which the resolution setting the
record date is adopted by the Board.
Under both the New Jersey Law and the Ohio Law, any action that may be
taken by shareholders at a meeting may be taken without a meeting with the
unanimous written consent of all shareholders entitled to vote at such meeting.
CUMULATIVE VOTING
Under the New Jersey Law, if the certificate of incorporation so provides,
shareholders may have the right to cumulate their votes in the election of
directors. The Bergen Certificate does not grant such rights.
Under the Ohio Law, unless the articles of incorporation are amended to
eliminate cumulative voting for directors following their initial filing with
the Ohio Secretary of State, each shareholder has the right to vote cumulatively
in the election of directors if certain notice requirements are satisfied. The
Cardinal Articles have not been amended to eliminate the rights of Cardinal
Shareholders to vote cumulatively in the election of directors.
MERGERS, ACQUISITIONS AND CERTAIN OTHER TRANSACTIONS
The New Jersey Law requires approval of mergers, consolidations and
dispositions of all or substantially all of a corporation's assets (other than
so-called parent-subsidiary mergers) by the board of directors and by the
affirmative vote of a majority of the votes cast by the holders of shares
entitled to vote thereon; provided that in the case of a corporation organized
prior to January 1, 1969, as is the case with Bergen, any such proposed
transaction requires the affirmative vote of two-thirds of the votes cast by the
holders of shares entitled to vote thereon unless the corporation has adopted
the majority voting requirement by amendment of its certificate of incorporation
adopted by the affirmative vote of two-thirds of the votes cast by the holders
of shares entitled to vote thereon, as is the case with Bergen. Under the Bergen
Certificate, such proposed transactions require the affirmative votes cast by
the holders of a majority of the Bergen Common Stock entitled to vote thereon.
The New Jersey Law does not require shareholder approval for control share
acquisitions and does not require shareholder approval for a merger if the
corporation is the surviving entity and (i) such corporation's certificate of
incorporation is not amended in connection with the merger, (ii) the
shareholders of the surviving corporation whose shares were outstanding
immediately before the effective date of the merger will hold the same number of
shares, with identical designations, preferences, limitations and rights,
immediately after the merger; and (iii) the number of voting or participation
shares outstanding
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immediately after the merger, plus the number of voting or participation shares
issuable on conversion of other securities or on exercise of rights and warrants
issued pursuant to the merger, will not exceed by more than 40% the total number
of voting or participation shares of the surviving corporation outstanding
immediately before the merger.
The Ohio Law generally requires approval of mergers, dissolutions,
dispositions of all or substantially all of a corporation's assets, and majority
share acquisitions and combinations involving issuance of shares representing
one-sixth or more of the voting power of the corporation immediately after the
consummation of the transaction (other than so-called parent-subsidiary
mergers), by two-thirds of the voting power of the corporation, unless the
articles of incorporation specify a different proportion (not less than a
majority). The Cardinal Articles provide that the vote of a majority of the
voting power of Cardinal is required to approve such actions.
PROVISIONS AFFECTING CONTROL SHARE ACQUISITIONS AND BUSINESS COMBINATIONS
Sections 14A:10A-1 et seq. of the New Jersey Law (the "New Jersey
Shareholders' Protection Act") provide generally that no public corporation
organized under the laws of New Jersey with its principal executive offices or
significant operations located in New Jersey (a "resident domestic corporation")
may engage in any "business combination" (as defined in the New Jersey Law) with
any "interested stockholder" (generally, a 10% or greater stockholder) of such
corporation for a period of five years following such interested stockholder's
stock acquisition, unless such business combination is approved by the board of
directors of such corporation prior to the stock acquisition. A resident
domestic corporation cannot opt out of the foregoing provisions of the New
Jersey Law. The approval of the Merger by the Bergen Board prior to Cardinal's
acquisition of a 10% interest in Bergen excludes the Merger from the operation
of the New Jersey Shareholders' Protection Act.
In addition, no resident domestic corporation may engage, at any time, in
any business combination with any interested stockholder of such corporation
other than: (i) a business combination approved by the board of directors of
such corporation prior to the stock acquisition, (ii) a business combination
approved by the affirmative vote of the holders of two-thirds of the voting
stock not beneficially owned by such interested stockholder at a meeting called
for such purpose or (iii) a business combination in which the interested
stockholder pays a formula price designed to ensure that all other stockholders
receive at least the highest price per share paid by such interested
stockholder.
Chapter 1704 of the Ohio Law also prohibits an interested shareholder from
engaging in a wide range of business combinations similar to those prohibited by
the New Jersey Shareholders' Protection Act. However, in contrast to the New
Jersey Law, under Chapter 1704 an interested shareholder includes a shareholder
who directly or indirectly exercises or directs the exercise of 10% or more of
the voting power of the corporation. Chapter 1704 restrictions do not apply
under certain circumstances including, but not limited to, the following (i) if
directors of the corporation have approved the transactions or the interested
shareholder's acquisition of shares of the corporation prior to the date the
interested shareholder became a shareholder of the corporation, and (ii) if the
corporation, by action of its shareholders holding at least 66 2/3% of the
voting power of the corporation, adopts an amendment to its articles of
incorporation specifying that Chapter 1704 shall not be applicable to the
corporation. No such amendment has been adopted by Cardinal.
Under Section 1701.831 of the Ohio Law, unless the articles of
incorporation or regulations of a corporation otherwise provide, any "control
share acquisition" of an "issuing public corporation" can only be made with the
prior approval of the corporation's shareholders. A "control share acquisition"
is defined as any acquisition of shares of a corporation that, when added to all
other shares of that corporation owned by the acquiring person, would enable
that person to exercise levels of voting power in any of the following ranges:
at least 20% but less than 33 1/3%; at least 33 1/3% but less than 50%; 50% or
more. The Cardinal Regulations expressly provide that the provisions of Section
1701.831 of the Ohio Law shall not apply.
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RIGHTS OF DISSENTING SHAREHOLDERS
Under the New Jersey Law, shareholders have the right to dissent from any
plan of merger or consolidation to which the corporation is a party and from any
sale, lease, exchange or other disposition of all or substantially all of the
assets of a corporation not in the usual or regular course of business (other
than to a wholly owned subsidiary), and to demand payment for the fair value of
their shares. However, unless the certificate of incorporation otherwise
provides, the New Jersey Law provides that shareholders do not have a right to
dissent from any plan of merger or consolidation with respect to shares (i) of a
class or series which is listed on a national securities exchange or is held of
record by not less than 1,000 holders; or (ii) for which, pursuant to the plan
of merger or consolidation, such shareholder will receive (x) cash, (y) shares,
obligations or other securities which, upon consummation of the merger or
consolidation, will either be listed on a national securities exchange or held
of record by not less than 1,000 holders, or (z) cash and such securities. In
addition, the New Jersey Law provides that, unless the certificate of
incorporation provides otherwise, shareholders of a surviving corporation do not
have the right to dissent from a plan of merger if the merger did not require
for its approval the vote of such shareholders. The Bergen Certificate does not
provide otherwise. As a result of such exceptions, Bergen Shareholders will not
have the right to dissent with respect to the Bergen Merger Proposal. See
"Rights of Dissenting Shareholders -- Bergen Shareholders." In addition, unless
a corporation's certificate of incorporation provides otherwise, the New Jersey
Law provides that shareholders do not have a right to dissent from any sale,
lease, exchange or other disposition of all or substantially all of the assets
of a corporation (i) with respect to shares of a class or series which is listed
on a national securities exchange or is held of record by not less than 1,000
holders; (ii) from a transaction pursuant to a plan of dissolution of the
corporation which provides for distribution of substantially all of its net
assets to shareholders in accordance with their respective interests within one
year after the date of such transaction, where such transaction is wholly for
(x) cash or (y) shares, obligations or other securities which, upon consummation
of the plan of dissolution, will either be listed on a national securities
exchange or held of record by not less than 1,000 holders, or (z) cash and such
securities; or (iii) from a sale pursuant to an order of a court having
jurisdiction.
Under the Ohio Law, dissenting shareholders are entitled to appraisal
rights in connection with the lease, sale, exchange, transfer, or other
disposition of all or substantially all of the assets of a corporation and in
connection with certain amendments to the corporation's articles of
incorporation. Shareholders of an Ohio corporation being merged into or
consolidated with another corporation are also entitled to appraisal rights. In
addition, shareholders of an acquiring corporation are entitled to appraisal
rights in any merger, combination or majority share acquisition in which such
shareholders are entitled to voting rights. The Ohio Law provides shareholders
of an acquiring corporation with voting rights if the acquisition involves the
transfer of shares of the acquiring corporation entitling the recipients thereof
to exercise one-sixth or more of the voting power of such acquiring corporation
immediately after the consummation of the transaction. As a result of such
provisions, Cardinal Shareholders will have the right to dissent with respect to
the Cardinal Merger Proposal. See "Rights of Dissenting Shareholders -- Cardinal
Shareholders."
Under the New Jersey Law, among other procedural requirements, a
shareholder's written notice of dissent stating that he intends to demand
payment for his shares, must be received before the taking of the vote on the
matter giving rise to dissenting rights. Under the Ohio Law, a shareholder's
written demand must be delivered to the corporation not later than ten days
after the taking of the vote on the matter giving rise to appraisal rights.
DIVIDENDS
Both the New Jersey Law and the Ohio Law provide that dividends may be paid
in cash, property or shares of a corporation's capital stock. The New Jersey Law
provides that dividends may also be paid in shares of a corporation's bonds and
in shares having a preference in the assets of the corporation upon liquidation,
whether or not the net assets at the time of the share dividend are less than
the aggregate amount of such prior and newly created preferences. The New Jersey
Law also prohibits a corporation from paying dividends or otherwise making a
distribution to its shareholders if, after giving effect thereto, either (a) the
corporation would be unable to pay its debts as they become due in the usual
course of business or (b) the corporation's
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total assets would be less than its total liabilities. The Ohio Law provides
that a corporation may pay dividends out of surplus and must notify its
shareholders if a dividend is paid out of capital surplus.
PREEMPTIVE RIGHTS OF SHAREHOLDERS
The New Jersey Law provides that, with respect to corporations organized
after January 1, 1969, the shareholders shall not have any preemptive rights to
purchase additional securities of the corporation unless the certificate of
incorporation expressly grants such rights, and with respect to corporations
organized before January 1, 1969, such as Bergen, the shareholders shall have
preemptive rights unless a bylaw duly adopted by the shareholders prior to that
date or the certificate of incorporation provides otherwise. The Bergen
Certificate expressly eliminates any preemptive rights.
The Ohio Law provides that, subject to certain limitations and conditions
contained in the Ohio Law and unless the articles of incorporation provide
otherwise, shareholders shall have preemptive rights to purchase additional
securities of the corporation. The Cardinal Articles expressly eliminate any
preemptive rights.
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
The New Jersey Law allows a New Jersey corporation to provide in its
certificate of incorporation that a director or officer shall not be personally
liable (and the Bergen Certificate so provides), or shall be liable only to the
extent therein provided, to the corporation or its shareholders for damages for
breach of any duty owed to the corporation or its shareholders, except that such
provision shall not relieve a director or officer from liability for any breach
of duty based upon an act or omission (i) in breach of such person's duty of
loyalty to the corporation or its shareholders; (ii) not in good faith or
involving a knowing violation of law; or (iii) resulting in receipt by such
person of an improper personal benefit.
There is under the Ohio law no comparable provision limiting the liability
of officers, employees or agents of the corporation and the Cardinal Articles
contain no such provision. However, under the Ohio Law, a director is not liable
for monetary damages unless it is proved by clear and convincing evidence that
his action or failure to act was undertaken with deliberate intent to cause
injury to the corporation or with reckless disregard for the best interests of
the corporation.
The Bergen Certificate provides for indemnification of every person who is
or was a director, officer, employee or agent of Bergen, or of any corporation
which he served as such at the request of Bergen, to the fullest extent
permitted by the New Jersey Law. The New Jersey Law permits a New Jersey
corporation to indemnify "corporate agents" (as defined below) under certain
circumstances and mandates indemnification under certain circumstances.
"Corporate agents," as used in the New Jersey Law, means any person who is or
was a director, officer, employee or agent of the indemnifying corporation or of
any constituent corporation absorbed by the indemnifying corporation in a
consolidation or merger and any person who is or was a director, officer,
trustee, employee or agent of any other enterprise, serving as such at the
request of the indemnifying corporation, or of any such constituent corporation,
or the legal representative of any such director, officer, trustee, employee or
agent. The New Jersey Law permits a corporation to indemnify a corporate agent
against his expenses and liabilities (including but not limited to fines and
penalties) in connection with any proceeding involving the corporate agent by
reason of his being or having been such a corporate agent, other than a
proceeding by or in the right of the corporation if (i) such corporate agent
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation; and (ii) with respect to any
criminal proceeding, such corporate agent had no reasonable cause to believe his
conduct was unlawful. Indemnification against expenses incurred by a corporate
agent in connection with a proceeding against such person for actions in such
capacity is mandatory to the extent that such person has been successful on the
merits. If a corporate agent is determined to be liable to the corporation,
indemnification for expenses is not allowable, subject to limited exceptions
when a court deems the award of expenses appropriate. The New Jersey Law grants
express power to a New Jersey corporation to purchase liability insurance for
its corporate agents, regardless of whether any such person is otherwise
eligible for indemnification by the corporation. Advancement of expenses is
permitted, but a person receiving such advances must repay those expenses if it
is ultimately determined that he is not entitled to indemnification. The
indemnification and advancement of
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expenses provided by or granted pursuant to the New Jersey Law does not exclude
any other rights, including the right to be indemnified against liabilities and
expenses incurred in proceedings by or in the right of the corporation, to which
a corporate agent may be entitled under a certificate of incorporation, by-law,
agreement, vote of shareholders, or otherwise; provided that, under the New
Jersey Law, no indemnification may be made to or on behalf of a corporate agent
if a judgment or other final adjudication adverse to the corporate agent
establishes that his acts or omissions (a) were in breach of his duty of loyalty
to the corporation or its shareholders, (b) were not in good faith or involved a
knowing violation of law or (c) resulted in receipt by the corporate agent of an
improper personal benefit.
Bergen has entered into indemnity agreements with certain of its current
and former directors which generally provide for Bergen to indemnify such
directors against liabilities and defense costs to the extent that such
directors would have been insured under the director and officer liability
insurance policies which Bergen had in effect on December 31, 1984. Bergen's
obligation to indemnify a director under such indemnity agreements is limited to
$30 million in the aggregate; however, the indemnity agreements do not limit the
directors' right to recover in excess of such $30 million maximum from Bergen if
the director is otherwise entitled to statutory indemnification.
Under the Ohio Law, Ohio corporations are permitted to indemnify directors,
officers, employees, and agents within prescribed limits and must indemnify them
under certain circumstances. The Ohio Law does not authorize payment by a
corporation of judgments against a director, officer, employee, or agent after a
finding of negligence or misconduct in a derivative suit absent a court order.
Indemnification is required, however, to the extent such person succeeds on the
merits. In all other cases, if it is determined that a director, officer,
employee, or agent acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, indemnification
is discretionary, except as otherwise provided by a corporation's articles of
incorporation, code of regulations, or by contract, except with respect to the
advancement of expenses of directors (as discussed in the next paragraph). The
statutory right to indemnification is not exclusive in Ohio, and Ohio
corporations may, among other things, purchase insurance to indemnify those
persons.
The Ohio Law provides that a director (but not an officer, employee, or
agent) is entitled to mandatory advancement of expenses, including attorneys'
fees, incurred in defending any action, including derivative actions, brought
against the director, provided the director agrees to cooperate with the
corporation concerning the matter and to repay the amount advanced if it is
proved by clear and convincing evidence that his act or failure to act was done
with deliberate intent to cause injury to the corporation or with reckless
disregard for the corporation's best interests.
The Cardinal Articles provide for indemnification by Cardinal to the
fullest extent expressly permitted by the Ohio Law of any person made or
threatened to be made a party to any action, suit, or proceeding by reason of
the fact that he is or was a director, officer, employee, or agent of Cardinal
or of any other corporation for which he was serving as a director, officer,
employee, or agent at the request of Cardinal. See also "The Merger -- Interests
of Certain Persons in the Merger."
Cardinal has entered into indemnification contracts with each of its
directors and executive officers. These contracts generally: (i) confirm the
existing indemnity provided to them under the Cardinal Regulations and assure
that this indemnity will continue to be provided; (ii) provide that if Cardinal
does not maintain directors' and officers' liability insurance, Cardinal will,
in effect, become a self-insurer of the coverage; (iii) provide that, in
addition, the directors and officers shall be indemnified to the fullest extent
permitted by law against all expenses (including legal fees), judgments, fines,
and settlement amounts paid or incurred by them in any action or proceeding,
including any action by or in the right of Cardinal, on account of their service
as a director, officer, employee or agent of Cardinal or at the request of
Cardinal as a director, officer, employee, trustee, fiduciary, manager, member
or agent of another corporation, partnership, trust, limited liability company,
employee benefit plan or other enterprise; and (iv) provide for the mandatory
advancement of expenses to the executive officer or director in connection with
the defense of any proceedings, provided the executive officer or director
agrees to reimburse Cardinal for that advancement if it is ultimately determined
that the executive officer or director is not entitled to indemnification for
that proceeding under
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the agreement. Coverage under the contracts is excluded: (A) on account of
conduct which is finally adjudged to be knowingly fraudulent, deliberately
dishonest, or willful misconduct; or (B) if a final court of adjudication shall
determine that such indemnification is not lawful; or (C) in respect of any suit
in which judgment is rendered for violation of Section 16(b) of the Exchange Act
or similar provisions of any federal, state, or local statutory law; or (D) on
account of any remuneration paid which is finally adjudged to have been in
violation of law; or (E) on account of conduct occurring prior to the time the
executive officer or director became an officer, director, employee, or agent of
Cardinal or its subsidiaries (but in no event earlier than the time such entity
became a subsidiary of Cardinal); or (F) with respect to proceedings initiated
or brought voluntarily by the executive officer or director and not by way of
defense, except for proceedings brought to enforce rights under the
indemnification agreement.
RIGHTS AGREEMENT
On February 8, 1994, the Board of Directors of Bergen declared a dividend
distribution of one Right for each outstanding share of Bergen Common Stock to
shareholders of record at the close of business on February 18, 1994. Each Right
entitles the registered holder to purchase from Bergen a unit (a "Unit")
consisting of one one-hundredth of a share of Series A Junior Participating
Preferred Stock, without par value (the "Junior Preferred Stock"), at a purchase
price of $80.00 per Unit, subject to adjustment (the "Purchase Price").
At present, the Rights are attached to all Bergen Common Stock certificates
representing outstanding shares, and no separate Rights Certificates have been
distributed. The Rights will separate from the Bergen Common Stock and a
"Distribution Date" will occur upon the earlier of (i) ten days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of Bergen Common
Stock (the "Stock Acquisition Date"), or (ii) ten business days (or such later
date as the Board shall determine) following the commencement of a tender offer
or exchange offer that would result in a person or group beneficially owning 15%
or more of such outstanding shares of Bergen Common Stock. Until the
Distribution Date, (i) the Rights will be evidenced by the Bergen Common Stock
certificates and will be transferred with and only with such Bergen Common Stock
certificates, (ii) Bergen Common Stock certificates issued after February 18,
1994 will contain a notation incorporating the Rights Agreement by reference and
(iii) the surrender for transfer of any certificates for Bergen Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Bergen Common Stock represented by such certificate. Pursuant to the Rights
Agreement, Bergen reserves the right to require prior to the occurrence of a
Triggering Event (as hereinafter defined) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares of Junior Preferred
Stock will be issued.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on February 18, 2004, unless earlier redeemed by Bergen
as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Bergen Common Stock as of the close
of business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Bergen Common Stock issued prior to the
Distribution Date will be issued with Rights.
In the event that (i) Bergen is the surviving corporation in a merger with
an Acquiring Person and the Bergen Common Stock is not changed or exchanged,
(ii) a Person becomes the beneficial owner of more than 15% of the then
outstanding shares of Bergen Common Stock (unless such transaction is approved
by the Board or such person is excepted by the Board, in either case before such
person acquires beneficial ownership of more than 15% of the outstanding Bergen
Common Stock), (iii) an Acquiring Person engages in one or more "self-dealing"
transactions as set forth in the Rights Agreement, or (iv) during such time as
there is an Acquiring Person, an event occurs which results in such Acquiring
Person's ownership interest being increased by more than 1% (e.g., a reverse
stock split), each holder of a Right will thereafter have the right to receive,
upon exercise, Bergen Common Stock (or, in certain circumstances, cash, property
or other securities of Bergen) having a value equal to two times the exercise
price of the Right. Notwithstanding any of the
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foregoing, following the occurrence of any of the events set forth in this
paragraph (the "Flip-In Events"), all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person will be null and void. However, Rights are not exercisable
following the occurrence of any of the Flip-In Events until such time as the
Rights are no longer redeemable by Bergen as set forth below. For example, at an
exercise price of $80 per Right, each Right not owned by an Acquiring Person (or
by certain related parties) following an event set forth in this paragraph would
entitle its holder to purchase $160 worth of Bergen Common Stock (or other
consideration, as noted above) for $80. Assuming that the Bergen Common Stock
had a per share value of $20 at such time, the holder of each valid Right would
be entitled to purchase 8 shares of Bergen Common Stock for $80.
In the event that, at any time following the Stock Acquisition Date, (i)
Bergen is acquired in a merger or other business combination transaction in
which Bergen is not the surviving corporation (other than following a permitted
transaction, as described in the Rights Agreement), or (ii) 50% or more of
Bergen's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right. The events set forth in this paragraph and in the immediately preceding
paragraph are referred to as the "Triggering Events."
The Purchase Price payable, and the number of Units of Junior Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Junior Preferred Stock, (ii) if holders of the Junior Preferred Stock are
granted certain rights or warrants to subscribe for Junior Preferred Stock or
convertible securities at less than the current market price of the Junior
Preferred Stock, or (iii) upon the distribution to holders of the Junior
Preferred Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Junior Preferred Stock on the
last trading date prior to the date of exercise.
At any time after the occurrence of any of the Flip-In Events, the Board of
Directors of Bergen may exchange the Rights (other than Rights owned by an
Acquiring Person which will become void as described above), in whole or in
part, for shares of Bergen Common Stock or shares of preferred stock of Bergen
having essentially the same value or economic rights as shares of Bergen Common
Stock, at an exchange ratio of one share of Bergen Common Stock per Right,
subject to antidilution adjustments.
At any time until ten days following the Stock Acquisition Date, Bergen may
redeem the Rights in whole, but not in part, at a price of $.01 per Right
(payable in cash, Bergen Common Stock or other consideration deemed appropriate
by the Board of Directors). Under certain circumstances set forth in the Rights
Agreement, the decision to redeem shall require the concurrence of a majority of
the Continuing Directors (as hereinafter defined). After the redemption period
has expired, Bergen's right of redemption may be reinstated if an Acquiring
Person reduces his beneficial ownership to 15% or less of the outstanding shares
of Bergen Common Stock in a transaction or series of transactions not involving
Bergen. Immediately upon the action of the Board of Directors ordering
redemption of the Rights, with, where required, the concurrence of the
Continuing Directors, the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption price.
The term "Continuing Directors" means any member of the Board of Directors
of Bergen who was a member of the Board prior to the date of the Rights
Agreement, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Continuing Directors, but
shall not include an Acquiring Person, or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing entities.
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Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of Bergen, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to shareholders or to Bergen, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Bergen Common Stock (or other consideration) or for common stock
of the acquiring company as set forth above.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of Bergen prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board (in certain circumstances, with the concurrence of the Continuing
Directors) in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights (excluding the interests of
any Acquiring Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the Rights are not
redeemable.
In connection with the execution of the Merger Agreement, Bergen and the
Rights Agent executed the Second Amendment to the Rights Agreement, dated as of
August 21, 1997, amending the Rights Agreement so as to provide that none of
Cardinal and its affiliates will become an "Acquiring Person" and that no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Rights Agreement) will occur as a result of the execution of the Merger
Agreement or the Stock Option Agreement or the consummation of the Merger or the
acquisition or transfer of shares of Bergen Common Stock by Cardinal pursuant to
the Stock Option Agreement.
The Rights are designed to protect Bergen Shareholders in the event of
unsolicited offers or attempts to acquire Bergen, including offers that do not
treat all Bergen Shareholders equally, acquisitions in the open market of shares
constituting control without offering fair value to all Bergen Shareholders and
other coercive or unfair takeover tactics that could impair the Bergen Board's
ability to represent Bergen Shareholders' interests fully.
Cardinal has not adopted a rights plan and has not declared a stock
purchase right dividend with respect to Cardinal Common Shares.
DESCRIPTION OF CARDINAL CAPITAL STOCK
As of the Cardinal Record Date, the authorized capital stock of Cardinal
consisted of: (i) 150,000,000 Cardinal Common Shares, of which 109,634,461 were
issued and outstanding, 250,759 were issued and held in treasury, and 3,985,810
were reserved for issuance pursuant to options outstanding under stock incentive
plans (with 1,434,318 additional Cardinal Common Shares available for issuance
under such plans), (ii) 5,000,000 Class B common shares, without par value, none
of which was outstanding or reserved for issuance, and (iii) 500,000 Nonvoting
Preferred Shares, without par value ("Preferred Shares"), none of which has been
issued or reserved for issuance. At the Cardinal Special Meeting, Cardinal
Shareholders are being asked to approve and adopt, among other proposals, the
Authorized Shares Proposal to increase the number of authorized Cardinal Common
Shares from 150,000,000 to 300,000,000. See "Other Action to be Taken at the
Cardinal Special Meeting -- Authorized Shares Proposal."
The holders of Cardinal Common Shares do not have preemptive rights and
have no rights to convert their shares into any other security. All Cardinal
Common Shares are entitled to participate equally and ratably in such dividends
on Cardinal Common Shares as may be declared by Cardinal's Board of Directors.
In the event of the liquidation of Cardinal, holders of Cardinal Common Shares
are entitled to share ratably in assets remaining after payment of all
liabilities, subject to prior distribution rights of any Preferred Shares then
outstanding. Holders of Cardinal Common Shares are entitled to one vote per
share for the election of directors and upon all matters on which shareholders
are entitled to vote. Cardinal Shareholders are afforded the right to vote their
shares cumulatively for the election of the nominees to fill the particular
class of directors to be elected at each annual meeting, subject to compliance
with certain procedural requirements.
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<PAGE> 100
The Cardinal Articles provide that the Cardinal Board is authorized to
approve the issuance of the Preferred Shares from time to time in one or more
series without future authorization of its shareholders. The Board of Directors
is authorized to adopt amendments to the Cardinal Articles from time to time
fixing or changing the terms and designations of the Preferred Shares, including
(i) division of such shares into series and the designation and authorized
number of shares of each series, (ii) dividend rate, (iii) dates of payment of
dividends and the dates from which they are cumulative, (iv) liquidation price,
(v) redemption rights and price, (vi) sinking fund requirements, (vii)
conversion rights, and (viii) restrictions on the issuance of such shares.
Holders of Preferred Shares will have no voting rights, except as required by
law. Holders of Preferred Shares will have no preemptive rights to subscribe to
or for any additional capital shares of Cardinal. Cardinal has no present plans
to issue any Preferred Shares.
The Cardinal Regulations provide that the Board of Directors shall consist
of that number of directors as determined by action of the Board of Directors,
but in no case fewer than nine or more than fourteen members, divided into three
classes, and require that any proposal to either remove a director during his
term of office or to further amend the Cardinal Regulations relating to the
classification, number, or removal of directors be approved by the affirmative
vote of the holders of not less than 75% of the shares having voting power with
respect to such proposal. The Board of Directors may fill any vacancy with a
person who shall serve until the Cardinal Shareholders hold an election to fill
the vacancy. The purpose of these provisions is to prevent directors from being
removed from office prior to the expiration of their respective terms, thus
protecting the safeguards inherent in the classified board structure unless
dissatisfaction with the performance of one or more directors is widely shared
by Cardinal Shareholders. However, these provisions could also have the effect
of increasing from one year to two or three years (depending upon the number of
Cardinal Common Shares held) the amount of time required for an acquiror to
obtain control of Cardinal by electing a majority of the Board of Directors and
may also make the removal of incumbent management more difficult and discourage
or render more difficult certain mergers, tender offers, proxy contests, or
other potential takeover proposals. To the extent that these provisions have the
effect of giving management more bargaining power in negotiations with a
potential acquiror, they could result in management's using the bargaining power
not only to try to negotiate a favorable price for an acquisition, but also to
negotiate more favorable terms for management.
Although Cardinal continually evaluates possible candidates for acquisition
and intends to seek additional acquisition opportunities in the health care
field, as of the date of this Joint Proxy Statement/Prospectus, other than the
merger agreement by Cardinal to acquire MediQual, a leading supplier of clinical
information management systems and services to the healthcare industry, no
material acquisition has been agreed upon or become the subject of a letter of
intent or agreement in principle.
OTHER ACTION TO BE TAKEN AT THE BERGEN SPECIAL MEETING
BERGEN ADJOURNMENT PROPOSAL
Bergen is submitting to its shareholders a proposal to authorize the named
attorneys-in-fact to vote in favor of the adjournment of the Bergen Special
Meeting, in the event that there are not sufficient votes to approve the Bergen
Merger Proposal at the time of the Bergen Special Meeting. Even though a quorum
may be present at the Bergen Special Meeting, it is possible that Bergen may not
have received sufficient votes to approve the Bergen Merger Proposal at the time
of the Bergen Special Meeting. In that event, the Bergen Merger Proposal could
not be approved unless the Bergen Special Meeting were adjourned in order to
permit further solicitation of proxies.
In order to allow the proxies that have been received by Bergen at the time
of the Bergen Special Meeting to be voted for such adjournment, if necessary,
Bergen has submitted the question of adjournment under such circumstances, and
only under such circumstances, to its shareholders for their consideration. A
majority of the shares of Bergen Common Stock represented and voting at the
Bergen Special Meeting is required in order to approve any such adjournment.
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The Bergen Board recommends that the Bergen Shareholders vote their proxies
in favor of the Bergen Adjournment Proposal so that their proxies may be used
for such purpose, should it become necessary. Properly executed proxies will be
voted in favor of such adjournment unless otherwise noted thereon. If it is
necessary to adjourn the Bergen Special Meeting, no notice of the time and place
of the adjourned meeting is required to be given to shareholders other than an
announcement of such time and place at the Bergen Special Meeting. This
adjournment proposal relates only to an adjournment occurring for purposes of
soliciting additional proxies for approval of the Bergen Merger Proposal in the
event that there are insufficient votes to approve the Bergen Merger Proposal at
the Bergen Special Meeting. Any other adjournment (e.g., an adjournment required
because of the absence of a quorum) would be voted upon pursuant to the
discretionary authority granted by the proxy.
The Bergen Board retains full authority to postpone the Bergen Special
Meeting prior to such meeting being convened, without the consent of any Bergen
Shareholder.
BERGEN'S BOARD OF DIRECTORS RECOMMENDS THAT BERGEN SHAREHOLDERS VOTE FOR
THE BERGEN ADJOURNMENT PROPOSAL.
OTHER ACTION TO BE TAKEN AT THE CARDINAL SPECIAL MEETING
AUTHORIZED SHARES PROPOSAL
The Cardinal Board of Directors has unanimously approved an amendment to
Article Fourth of the Cardinal Articles to increase the authorized number of
Cardinal Common Shares from 150,000,000 to 300,000,000 and recommends that
Cardinal Shareholders approve and adopt the amendment. The full text of Article
Fourth reflecting this amendment and the amendment described in "Name Change
Proposal" is attached to this Joint Proxy Statement/Prospectus as Annex C.
The additional Cardinal Common Shares for which authorization is sought
would have the same rights and privileges as the Cardinal Common Shares
presently outstanding. Holders of Cardinal Common Shares have no preemptive
rights to subscribe to or for any additional shares of Cardinal.
As of the Cardinal Record Date, 109,634,461 Cardinal Common Shares were
outstanding, 250,759 were issued and held in treasury, and 5,420,128 Cardinal
Common Shares were reserved for issuance under stock incentive plans. As of such
date, excluding Cardinal Common Shares already reserved as described above, a
balance of 34,694,652 authorized Cardinal Common Shares would have been
available for issuance without shareholder action. As a result of the Merger and
the transactions contemplated by the Merger Agreement, it is currently
contemplated that Cardinal will issue approximately 41,280,599 additional
Cardinal Common Shares in connection with the Merger. Completion of the Merger
is conditioned upon approval of the Authorized Shares Proposal. If approved,
however, adoption of the Authorized Shares Proposal will not be conditioned upon
the consummation of the Merger. Although Cardinal has no other present plan,
agreement or commitment for the issuance of additional Cardinal Common Shares
other than those described above or pursuant to existing employee benefit plans,
Cardinal's Board of Directors believes that the number of Cardinal Common Shares
currently available for issuance will be insufficient to meet the future needs
of Cardinal.
The Cardinal Board of Directors believes that it is desirable to have
additional authorized but unissued Cardinal Class A Common Shares available for
possible future share dividends or splits, employee benefit programs, financing
and acquisition transactions, and other general corporate purposes. For example,
Cardinal issued shares pursuant to 25% stock splits in September 1989, September
1990, September 1991 and June 1994 and a 3-for-2 stock split in December 1996;
approximately 3,018,800 shares in a registered public offering in March 1991 and
2,800,400 shares in a registered public offering in September 1994;
approximately 5,133,800 shares pursuant to the conversion of outstanding
debentures in July 1993; and approximately 65,800,000 shares and options to
purchase shares in acquisition transactions completed since May 1, 1993. All of
the above-referenced numbers are adjusted to reflect all stock splits. Although
there can be no assurance that similar transactions will occur in the future,
the Board wishes to have Cardinal Common Shares available
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for such purposes if conditions warrant. Like the presently authorized but
unissued Cardinal Common Shares, the additional Cardinal Common Shares would be
available for issuance without further action by the Cardinal Shareholders,
unless such action is required by applicable law or the rules of the NYSE on
which transactions in Cardinal Common Shares are presently reported or any other
stock exchange on which Cardinal Common Shares may be listed in the future. The
authorization of additional Cardinal Common Shares will enable the Merger to be
consummated and enable Cardinal, as the need may arise, to take timely advantage
of market conditions and the availability of favorable opportunities without the
delay and expense associated with the holding of a special meeting of its
shareholders.
The authorized and unissued Cardinal Common Shares could be issued for the
purpose of discouraging an attempt by another person or entity, through the
acquisition of a substantial number of Cardinal Common Shares, to acquire
control of Cardinal with a view to effecting a merger, sale of Cardinal's
assets, or similar transaction, since the issuance of Cardinal Common Shares
could be used to dilute the share ownership or voting rights of such a person or
entity. Further, any of such authorized but unissued Cardinal Common Shares
could be privately placed with purchasers who might support incumbent
management, making a change in control of Cardinal more difficult.
Under the Ohio Law, the affirmative vote of the holders of a majority of
the outstanding Cardinal Common Shares is required for the approval of the
Authorized Shares Proposal.
CARDINAL'S BOARD OF DIRECTORS RECOMMENDS THAT CARDINAL SHAREHOLDERS VOTE
FOR THE AUTHORIZED SHARES PROPOSAL.
NAME CHANGE PROPOSAL
The Cardinal Board of Directors has unanimously approved an amendment to
Article First of the Cardinal Articles changing the name of Cardinal from
"Cardinal Health, Inc." to "Cardinal Bergen Health, Inc.", subject to
consummation of the Merger. The proposed name is designed to retain the goodwill
associated with the Bergen name after the Merger is consummated. Approval of the
Name Change Proposal is not a condition to the Merger. The full text of Article
First reflecting this amendment is attached to this Joint Proxy
Statement/Prospectus as Annex C.
Under the Ohio Law, the affirmative vote of a majority of the outstanding
Cardinal Common Shares is required for the approval of the Name Change Proposal.
CARDINAL'S BOARD OF DIRECTORS RECOMMENDS THAT CARDINAL SHAREHOLDERS VOTE
FOR THE NAME CHANGE PROPOSAL.
CARDINAL ADJOURNMENT PROPOSAL
Cardinal is submitting to its shareholders a proposal to authorize the
named attorneys-in-fact to vote in favor of the adjournment of the Cardinal
Special Meeting, in the event that there are not sufficient votes to approve the
Cardinal Merger Proposal, the Authorized Shares Proposal and the Name Change
Proposal at the time of the Cardinal Special Meeting. Even though a quorum may
be present at the Cardinal Special Meeting, it is possible that Cardinal may not
have received sufficient votes to approve the Cardinal Merger Proposal, the
Authorized Shares Proposal and the Name Change Proposal at the time of the
Cardinal Special Meeting. In that event, such proposals could not be approved
unless the Cardinal Special Meeting were adjourned in order to permit further
solicitation of proxies.
In order to allow the proxies that have been received by Cardinal at the
time of the Cardinal Special Meeting to be voted for such adjournment, if
necessary, Cardinal has submitted the question of adjournment under such
circumstances, and only under such circumstances, to its shareholders for their
consideration. A majority of the shares of Cardinal Common Stock represented and
present in person or represented by proxy at the Cardinal Special Meeting is
required in order to approve any such adjournment.
The Cardinal Board recommends that the Cardinal Shareholders vote their
proxies in favor of the Cardinal Adjournment Proposal so that their proxies may
be used for such purpose, should it become
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necessary. Properly executed proxies will be voted in favor of such adjournment
unless otherwise noted thereon. If it is necessary to adjourn the Cardinal
Special Meeting, no notice of the time and place of the adjourned meeting is
required to be given to shareholders other than an announcement of such time and
place at the Cardinal Special Meeting. This adjournment proposal relates only to
an adjournment occurring for purposes of soliciting additional proxies for
approval of the Cardinal Merger Proposal and the Authorized Shares Proposal in
the event that there are insufficient votes to approve such proposals at the
Cardinal Special Meeting. Any other adjournment (e.g., an adjournment required
because of the absence of a quorum) would be voted upon pursuant to the
discretionary authority granted by the proxy.
The Cardinal Board retains full authority to postpone the Cardinal Special
Meeting prior to such meeting being convened, without the consent of any
Cardinal Shareholder.
CARDINAL'S BOARD OF DIRECTORS RECOMMENDS THAT CARDINAL SHAREHOLDERS VOTE
FOR THE CARDINAL ADJOURNMENT PROPOSAL.
LEGAL MATTERS
The validity of the Cardinal Common Shares to be issued in the Merger will
be passed upon for Cardinal by Wachtell, Lipton, Rosen & Katz, special counsel
to Cardinal.
Lowenstein, Sandler has rendered the opinion referred to under the caption
"Certain Federal Income Tax Consequences." As of the Bergen Record Date, members
of Lowenstein, Sandler participating in the consideration of legal matters
relating to the Merger and the transactions contemplated thereby beneficially
owned 1,375 shares of Bergen Common Stock.
EXPERTS
The consolidated financial statements and the related financial statement
schedule of Cardinal and its consolidated subsidiaries as of June 30, 1997 and
1996, and for each of the three years in the period ended June 30, 1997, have
been incorporated in this Joint Proxy Statement/Prospectus by reference from the
1997 Cardinal Form 10-K. Such consolidated financial statements and schedule of
Cardinal and its subsidiaries, except Pyxis and Owen financial statements
consolidated with Cardinal's financial statements for the years ended June 30,
1996 and 1995, have been audited by Deloitte & Touche LLP as stated in their
report which is incorporated herein by reference from the 1997 Cardinal Form
10-K. The financial statements of Pyxis and Owen (consolidated with those of
Cardinal in the consolidated financial statements for the years ended June 30,
1996 and 1995) have been audited by Ernst & Young LLP and Price Waterhouse LLP,
respectively, as stated in their reports which are incorporated herein by
reference from the 1997 Cardinal Form 10-K.
The consolidated financial statements of Bergen and its consolidated
subsidiaries as of September 30, 1997 and 1996, and for each of the three years
in the period ended September 30, 1997, which have been incorporated in this
Joint Proxy Statement/Prospectus by reference from the 1997 Bergen Form 10-K,
have been audited by Deloitte & Touche LLP, as stated in their report which is
incorporated herein by reference.
Such consolidated financial statements of Cardinal and its consolidated
subsidiaries and of Bergen and its consolidated subsidiaries are incorporated by
reference in reliance upon the respective reports of such firms given upon their
authority as experts in accounting and auditing. All of the foregoing firms are
independent auditors.
The MediQual audited financial statements incorporated by reference in this
Joint Proxy Statement/Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
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OTHER MATTERS
Representatives of Deloitte & Touche LLP are expected to be present at the
Cardinal Special Meeting and the Bergen Special Meeting with the opportunity to
make statements if they so desire. Such representatives are also expected to be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any Cardinal Shareholder who intends to present a proposal at Cardinal's
1998 Annual Meeting of Shareholders for inclusion in the proxy statement and
form of proxy relating to that meeting is advised that the proposal must be
received by Cardinal at its principal executive offices not later than June 15,
1998. Cardinal will not be required to include in its proxy statement a form of
proxy or shareholder proposal which is received after that date or which
otherwise fails to meet the requirements for shareholder proposals established
by regulations of the Commission.
Bergen Shareholder proposals in respect of the 1998 Annual Meeting of
Bergen Shareholders were required to have been submitted to Bergen by August 14,
1997 for inclusion in the proxy statement and form of proxy relating to that
meeting. No such shareholder proposals were submitted to Bergen by that date. If
the Merger is consummated, there will be no 1998 Annual Meeting of Bergen
Shareholders.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CARDINAL HEALTH, INC.
("CARDINAL"),
BRUIN MERGER CORP.
A WHOLLY OWNED DIRECT SUBSIDIARY OF CARDINAL
("SUBCORP"),
AND
BERGEN BRUNSWIG CORPORATION
("BERGEN")
AUGUST 23, 1997
<PAGE> 106
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AGREEMENT AND PLAN OF MERGER......................................................... A-1
PRELIMINARY STATEMENTS............................................................... A-1
AGREEMENT............................................................................ A-1
ARTICLE I. THE MERGER............................................................... A-1
1.1. The Merger.................................................................. A-1
1.2. Effective Time.............................................................. A-1
1.3. Effects of the Merger....................................................... A-2
1.4. Certificate of Incorporation and Bylaws..................................... A-2
1.5. Directors and Officers of the Surviving Corporation......................... A-2
1.6. Additional Actions.......................................................... A-2
ARTICLE II. CONVERSION OF SECURITIES................................................ A-2
2.1. Conversion of Capital Stock................................................. A-2
2.2. Exchange Ratio; Fractional Shares; Adjustments.............................. A-3
2.3. Exchange of Certificates.................................................... A-3
(a) Exchange Agent....................................................... A-3
(b) Exchange Procedures.................................................. A-3
(c) Distributions with Respect to Unexchanged Shares..................... A-4
(d) No Further Ownership Rights in Bergen Common Stock................... A-4
(e) Termination of Exchange Fund......................................... A-4
(f) No Liability......................................................... A-4
(g) Investment of Exchange Fund.......................................... A-4
2.4. Treatment of Stock Options.................................................. A-5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP................. A-5
3.1. Organization and Standing................................................... A-5
3.2. Subsidiaries................................................................ A-5
3.3. Corporate Power and Authority............................................... A-6
3.4. Capitalization of Cardinal and Subcorp...................................... A-6
3.5. Conflicts; Consents and Approval............................................ A-6
3.6. Brokerage and Finder's Fees................................................. A-7
3.7. Accounting Matters; Reorganization.......................................... A-7
3.8. Cardinal SEC Documents...................................................... A-7
3.9. Registration Statement...................................................... A-8
3.10. Compliance with Law......................................................... A-8
3.11. Litigation.................................................................. A-8
3.12. Board Recommendation........................................................ A-8
3.13. No Material Adverse Change.................................................. A-9
3.14. Title to and Condition of Properties........................................ A-9
3.15. Undisclosed Liabilities..................................................... A-9
3.16. Operation of Cardinal's Business; Relationships............................. A-9
3.17. Interested Stockholder or Acquiring Person.................................. A-9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BERGEN................................ A-9
4.1. Organization and Standing................................................... A-9
4.2. Subsidiaries................................................................ A-10
4.3. Corporate Power and Authority............................................... A-10
4.4. Capitalization of Bergen.................................................... A-10
</TABLE>
A-i
<PAGE> 107
<TABLE>
<CAPTION>
PAGE
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<S> <C>
4.5. Conflicts; Consents and Approvals........................................... A-11
4.6. No Material Adverse Change.................................................. A-12
4.7. Bergen SEC Documents........................................................ A-12
4.8. Taxes....................................................................... A-12
4.9. Compliance with Law......................................................... A-13
4.10. Intellectual Property....................................................... A-13
4.11. Title to and Condition of Properties........................................ A-14
4.12. Registration Statement; Joint Proxy Statement............................... A-14
4.13. Litigation.................................................................. A-14
4.14. Brokerage and Finder's Fees; Expenses....................................... A-14
4.15. Accounting Matters; Reorganization.......................................... A-14
4.16. Employee Benefit Plans...................................................... A-14
4.17. Contracts................................................................... A-16
4.18. Labor Matters............................................................... A-17
4.19. Undisclosed Liabilities..................................................... A-17
4.20. Operation of Bergen's Business; Relationships............................... A-17
4.21. Permits; Compliance......................................................... A-17
4.22. Environmental Matters....................................................... A-18
4.23. Opinion of Financial Advisors............................................... A-19
4.24. Board Recommendation........................................................ A-19
4.25. New Jersey Shareholders Protection Act and Rights Agreement................. A-19
4.26. Accounts Receivable and Inventories......................................... A-19
4.27. Insurance................................................................... A-19
4.28. Employee Agreements......................................................... A-20
4.29. Director Compensation....................................................... A-20
ARTICLE V. COVENANTS OF THE PARTIES................................................. A-20
5.1. Mutual Covenants............................................................ A-20
(a) HSR Act Filings; Reasonable Efforts; Notification.................... A-20
(b) Pooling-of-Interests................................................. A-21
(c) Tax-Free Treatment................................................... A-22
(d) Public Announcements................................................. A-22
5.2. Covenants of Cardinal....................................................... A-22
(a) Cardinal Shareholders Meeting........................................ A-22
(b) Preparation of Registration Statement................................ A-22
(c) Conduct of Cardinal's Operations..................................... A-23
(d) Indemnification; Directors' and Officers' Insurance.................. A-23
(e) Merger Sub........................................................... A-23
(f) NYSE Listing......................................................... A-24
(g) Access............................................................... A-24
(h) Board of Directors of Cardinal....................................... A-24
(i) Corporate Name...................................................... A-24
(j) Affiliates of Cardinal.............................................. A-24
(k) Notification of Certain Matters...................................... A-24
(l) Employees and Employee Benefit...................................... A-25
5.3. Covenants of Bergen......................................................... A-25
(a) Bergen Shareholders Meeting.......................................... A-25
(b) Information for the Registration Statement and Preparation of Joint
Proxy Statement....................................................... A-25
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(c) Conduct of Bergen's Operations....................................... A-25
(d) No Solicitation...................................................... A-27
(e) Termination Right.................................................... A-28
(f) Affiliates of Bergen................................................. A-29
(g) Access............................................................... A-29
(h) Notification of Certain Matters...................................... A-29
(i) Subsequent Financial Statements..................................... A-30
(j) Employee Agreements; Trust Amendment................................ A-30
ARTICLE VI. CONDITIONS.............................................................. A-30
6.1. Conditions to the Obligations of Each Party................................. A-30
6.2. Conditions to Obligations of Bergen......................................... A-31
6.3. Conditions to Obligations of Cardinal and Subcorp........................... A-32
ARTICLE VII. TERMINATION AND AMENDMENT.............................................. A-33
7.1. Termination................................................................. A-33
7.2. Effect of Termination....................................................... A-34
7.3. Amendment................................................................... A-35
7.4. Liquidated Damages.......................................................... A-35
7.5. Exclusive Remedy............................................................ A-36
7.6. Extension; Waiver........................................................... A-36
ARTICLE VIII. MISCELLANEOUS......................................................... A-36
8.1. Survival of Representations and Warranties.................................. A-36
8.2. Notices..................................................................... A-36
8.3. Interpretation.............................................................. A-37
8.4. Counterparts................................................................ A-38
8.5. Entire Agreement............................................................ A-38
8.6. Third Party Beneficiaries................................................... A-38
8.7. Governing Law............................................................... A-38
8.8. Consent to Jurisdiction; Venue.............................................. A-38
8.9. Specific Performance........................................................ A-38
8.10. Assignment.................................................................. A-39
8.11. Expenses.................................................................... A-39
</TABLE>
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of the 23rd day of August, 1997, by and among Cardinal Health, Inc., an
Ohio corporation ("Cardinal"), Bruin Merger Corp., a New Jersey corporation and
a wholly owned subsidiary of Cardinal ("Subcorp"), and Bergen Brunswig
Corporation, a New Jersey corporation ("Bergen").
PRELIMINARY STATEMENTS
A. Cardinal desires to combine its pharmaceutical distribution business
and other businesses with the pharmaceutical distribution business and other
businesses operated by Bergen through the merger of Subcorp with and into
Bergen, with Bergen as the surviving corporation (the "Merger"), pursuant to
which each share of Bergen Common Stock (as defined in Section 4.4) outstanding
at the Effective Time (as defined in Section 1.2) will be converted into the
right to receive Cardinal Common Shares (as defined in Section 3.4) as more
fully provided herein.
B. The Board of Directors of Bergen has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of Bergen
and Bergen desires to combine its pharmaceutical distribution business and other
businesses with the healthcare service businesses operated by Cardinal and for
the holders of shares of Bergen Common Stock ("Bergen Shareholders") to have a
continuing equity interest in the combined Cardinal/Bergen businesses through
the ownership of Cardinal Common Shares.
C. The parties intend that the Merger constitute a tax-free
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code"), by reason of Section 368(a)(2)(E)
thereof.
D. The parties intend that the Merger be accounted for as a
pooling-of-interests for financial reporting purposes.
E. The respective Boards of Directors of Cardinal, Subcorp and Bergen have
determined the Merger in the manner contemplated herein to be desirable and in
the best interests of their respective shareholders and, by resolutions duly
adopted, have approved and adopted this Agreement.
AGREEMENT
Now, therefore, in consideration of these premises and the mutual and
dependent promises hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions hereof, and
in accordance with the provisions of the New Jersey Business Corporation Act
(the "NJBCA"), Subcorp shall be merged with and into Bergen at the Effective
Time. As a result of the Merger, the separate corporate existence of Subcorp
shall cease and Bergen shall continue its existence under the laws of the State
of New Jersey. Bergen, in its capacity as the corporation surviving the Merger,
is hereinafter sometimes referred to as the "Surviving Corporation."
1.2. Effective Time. As promptly as possible on the Closing Date (as
defined below), the parties shall cause the Merger to be consummated by filing
with the Secretary of State of the State of New Jersey (the "New Jersey
Secretary of State") a certificate of merger (the "Certificate of Merger") in
such form as is required by and executed in accordance with Section 14A:10-4.1
of the NJBCA. The Merger shall become effective (the "Effective Time") when the
Certificate of Merger has been filed with the New Jersey Secretary of State or
at such later time as shall be agreed upon by Cardinal and Bergen and specified
in the Certificate of Merger. Prior to the filing referred to in this Section
1.2, a closing (the "Closing") shall be held at the offices of Cardinal, 5555
Glendon Court, Dublin, Ohio 43016, or such other place as the parties may agree
as soon as
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practicable (but in any event within ten business days) following the date upon
which all conditions set forth in Article VI hereof have been satisfied or
waived, or at such other date as Cardinal and Bergen may agree; provided, that
the conditions set forth in Article VI have been satisfied or waived at or prior
to such date. The date on which the Closing takes place is referred to herein as
the "Closing Date." For all tax purposes, the Closing shall be effective at the
end of the day on the Closing Date.
1.3. Effects of the Merger. From and after the Effective Time, the Merger
shall have the effects set forth in Section 14A:10-6 of the NJBCA.
1.4. Certificate of Incorporation and Bylaws. At the Effective Time (i)
the Certificate of Incorporation of the Surviving Corporation as in effect
immediately prior to the Effective Time shall be amended as of the Effective
Time so as to contain the provisions, and only the provisions, contained
immediately prior thereto in the Amended and Restated Certificate of
Incorporation of Subcorp, except for Article I thereof which shall continue to
read "The name of the corporation is 'BERGEN BRUNSWIG CORPORATION' ", and (ii)
the Bylaws of Subcorp in effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation; in each case until amended in
accordance with applicable law. Cardinal agrees not to amend the Certificate of
Incorporation of the Surviving Corporation for a period of at least one year
from the Effective Time.
1.5. Directors and Officers of the Surviving Corporation. From and after
the Effective Time, the officers of Bergen shall be the officers of the
Surviving Corporation and the directors of Subcorp shall be the directors of the
Surviving Corporation, in each case until their respective successors are duly
elected and qualified. On or prior to the Closing Date, Bergen shall deliver to
Cardinal a written acknowledgment reasonably satisfactory to Cardinal from each
director of Bergen that they will not be directors of Bergen or the Surviving
Corporation effective as of the Effective Time.
1.6. Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any further deeds,
assignments or assurances in law or any other acts are necessary or desirable to
(a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Bergen, or (b) otherwise carry out the provisions of
this Agreement, Bergen and its officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to execute
and deliver all such deeds, assignments or assurances in law and to take all
acts necessary, proper or desirable to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the provisions of this Agreement, and the officers and
directors of the Surviving Corporation are authorized in the name of Bergen or
otherwise to take any and all such action.
ARTICLE II.
CONVERSION OF SECURITIES
2.1. Conversion of Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Cardinal, Subcorp or Bergen or
their respective shareholders:
(a) Each share of common stock, $0.01 par value, of Subcorp issued and
outstanding immediately prior to the Effective Time shall be converted into
one share of common stock, $0.01 par value, of the Surviving Corporation.
Such newly issued shares shall thereafter constitute all of the issued and
outstanding capital stock of the Surviving Corporation.
(b) Subject to the other provisions of this Article II, each share of
Bergen Common Stock issued and outstanding immediately prior to the
Effective Time shall be converted into and represent a number of Cardinal
Common Shares equal to the Exchange Ratio (as defined in Section 2.2(a)).
(c) Each share of capital stock of Bergen held in the treasury of
Bergen shall be cancelled and retired and no payment shall be made in
respect thereof.
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<PAGE> 111
2.2. Exchange Ratio; Fractional Shares; Adjustments.
(a) The "Exchange Ratio" shall be equal to 0.775. No certificates for
fractional Cardinal Common Shares shall be issued as a result of the conversion
provided for in Section 2.1(b).
(b) In lieu of any such fractional shares, the holder of a certificate
previously evidencing Bergen Common Stock, upon presentation of such fractional
interest represented by an appropriate certificate for Bergen Common Stock to
the Exchange Agent pursuant to Section 2.3, shall be entitled to receive a cash
payment therefor in an amount equal to the value (determined with reference to
the closing price of Cardinal Common Shares as reported on the New York Stock
Exchange ("NYSE") Composite Tape ("NYSE Composite Tape") on the last full
trading day immediately prior to the Closing Date) of such fractional interest.
Such payment with respect to fractional shares is merely intended to provide a
mechanical rounding off of, and is not a separately bargained for,
consideration. If more than one certificate representing shares of Bergen Common
Stock shall be surrendered for the account of the same holder, the number of
Cardinal Common Shares for which certificates have been surrendered shall be
computed on the basis of the aggregate number of shares represented by the
certificates so surrendered.
(c) In the event that prior to the Effective Time Cardinal shall declare a
stock dividend or other distribution payable in Cardinal Common Shares or
securities convertible into Cardinal Common Shares, or effect a stock split,
reclassification, combination or other change with respect to Cardinal Common
Shares, the Exchange Ratio set forth in this Section 2.2 shall be adjusted to
reflect such dividend, distribution, stock split, reclassification, combination
or other change.
2.3. Exchange of Certificates.
(a) Exchange Agent. Promptly following the Effective Time, Cardinal shall
deposit with ChaseMellon Shareholder Services, Inc. or such other exchange agent
as may be designated by Cardinal (the "Exchange Agent"), for the benefit of
Bergen Shareholders, for exchange in accordance with this Section 2.3,
certificates representing Cardinal Common Shares issuable pursuant to Section
2.1 in exchange for outstanding shares of Bergen Common Stock and shall from
time-to-time deposit cash in an amount reasonably expected to be paid pursuant
to Section 2.2 (such Cardinal Common Shares and cash, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the Effective Time,
Cardinal shall instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Bergen Common Stock whose
shares were converted into the right to receive Cardinal Common Shares pursuant
to Section 2.1(b), (i) a letter of transmittal (the form and substance of which
shall have been reasonably approved by Bergen prior to the Effective Time and
which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other customary
provisions as Cardinal may reasonably specify) and (ii) instructions for
effecting the surrender of the Certificates in exchange for certificates
representing Cardinal Common Shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with a duly executed letter of
transmittal, the holder of such Certificate shall be entitled to receive in
exchange therefor (x) a certificate or certificates representing that whole
number of Cardinal Common Shares which such holder has the right to receive
pursuant to Section 2.1 in such denominations and registered in such names as
such holder may request and (y) a check representing the amount of cash in lieu
of fractional shares, if any, and unpaid dividends and distributions, if any,
which such holder has the right to receive pursuant to the provisions of this
Article II, after giving effect to any required withholding tax. The shares
represented by the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, payable to holders of
shares of Bergen Common Stock. In the event of a transfer of ownership of shares
of Bergen Common Stock which is not registered on the transfer records of
Bergen, a certificate representing the proper number of Cardinal Common Shares,
together with a check for the cash to be paid in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, may be issued to such
transferee if the Certificate representing such shares of Bergen Common Stock
held by such transferee is presented to the Exchange Agent, accompanied by all
documents
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<PAGE> 112
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon surrender a
certificate representing Cardinal Common Shares and cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, as provided in
this Article II.
(c) Distributions with Respect to Unexchanged Shares. Notwithstanding any
other provisions of this Agreement, no dividends or other distributions declared
or made after the Effective Time with respect to Cardinal Common Shares having a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate, and no cash payment in lieu of fractional shares
shall be paid to any such holder, until the holder shall surrender such
Certificate as provided in this Section 2.3. Subject to the effect of Applicable
Laws (as defined in Section 3.10), following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole
Cardinal Common Shares issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole Cardinal Common Shares and not paid, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date
subsequent to surrender, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole Cardinal Common
Shares, less the amount of any withholding taxes which may be required thereon.
(d) No Further Ownership Rights in Bergen Common Stock. All Cardinal
Common Shares issued upon surrender of Certificates in accordance with the terms
hereof (including any cash paid pursuant to this Article II) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Bergen Common Stock represented thereby, and there shall be no further
registration of transfers on the stock transfer books of Bergen of shares of
Bergen Common Stock outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Section 2.3. Certificates surrendered for exchange by any person
constituting an "affiliate" of Bergen for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until Cardinal has received written undertakings from such person in
the form attached hereto as Exhibit A-1.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to Bergen Shareholders six months after the date of the
mailing required by Section 2.3(b) shall be delivered to Cardinal, upon demand
therefor, and holders of Certificates previously representing shares of Bergen
Common Stock who have not theretofore complied with this Section 2.3 shall
thereafter look only to Cardinal for payment of any claim to Cardinal Common
Shares, cash in lieu of fractional shares thereof, or dividends or
distributions, if any, in respect thereof.
(f) No Liability. None of Cardinal, the Surviving Corporation or the
Exchange Agent shall be liable to any person in respect of any shares of Bergen
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time of the Merger (or
immediately prior to such earlier date on which any cash, any cash in lieu of
fractional shares or any dividends or distributions with respect to whole shares
of Bergen Common Stock in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Authority (as defined in Section
3.5), any such cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by Applicable Laws, become the property of
Cardinal, free and clear of all claims or interest of any person previously
entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Cardinal, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Cardinal upon termination of the Exchange Fund pursuant to Section 2.3(e).
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2.4. Treatment of Stock Options.
(a) Prior to the Effective Time, Cardinal and Bergen shall take all such
actions as may be necessary to cause each unexpired and unexercised option under
stock option plans of Bergen in effect on the date hereof which has been granted
to current or former directors, officers or employees of Bergen by Bergen (or
which has been granted by Bergen prior to the Effective Time pursuant to
agreements in compliance with the terms of this Agreement) (each, a "Bergen
Option") to be automatically converted at the Effective Time into an option (a
"Cardinal Exchange Option") to purchase that number of Cardinal Common Shares
equal to the number of shares of Bergen Common Stock issuable immediately prior
to the Effective Time upon exercise of the Bergen Option (without regard to
actual restrictions on exercisability) multiplied by the Exchange Ratio, with an
exercise price equal to the exercise price which existed under the corresponding
Bergen Option divided by the Exchange Ratio, and with other terms and conditions
that are the same as the terms and conditions of such Bergen Option immediately
before the Effective Time; provided that with respect to any Bergen Option that
is an "incentive stock option" within the meaning of Section 422 of the Code,
the foregoing conversion shall be carried out in a manner satisfying the
requirements of Section 424(a) of the Code. In connection with the issuance of
Cardinal Exchange Options, Cardinal shall (i) reserve for issuance the number of
Cardinal Common Shares that will become subject to Cardinal Exchange Options
pursuant to this Section 2.4 and (ii) from and after the Effective Time, upon
exercise of Cardinal Exchange Options, make available for issuance all Cardinal
Common Shares covered thereby, subject to the terms and conditions applicable
thereto.
(b) Bergen agrees to issue treasury shares of Bergen, to the extent
available, upon the exercise of Bergen Options prior to the Effective Time.
(c) Cardinal agrees to use its reasonable efforts to file with the
Securities and Exchange Commission (the "Commission") within 15 business days
after the Closing Date a registration statement on Form S-8 or other appropriate
form under the Securities Act to register Cardinal Common Shares issuable upon
exercise of the Cardinal Exchange Options and use its reasonable efforts to
cause such registration statement to remain effective until the exercise or
expiration of such options.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF CARDINAL AND SUBCORP
In order to induce Bergen to enter into this Agreement, Cardinal and
Subcorp hereby represent and warrant to Bergen that the statements contained in
this Article III are true, correct and complete.
3.1. Organization and Standing. Each of Cardinal and Subcorp is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation with full corporate power and authority to own,
lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Each of Cardinal and Subcorp is
duly qualified to do business and in good standing in each jurisdiction in which
the nature of the business conducted by it or the property it owns, leases or
operates, makes such qualification necessary, except where the failure to be so
qualified or in good standing in such jurisdiction would not reasonably be
expected to have a Material Adverse Effect (as defined in Section 8.3) on
Cardinal. Cardinal is not in default in the performance, observance or
fulfillment of any provision of its Articles of Incorporation, as amended and
restated (the "Cardinal Articles"), or its Code of Regulations, as amended and
restated (the "Cardinal Code of Regulations"), and Subcorp is not in default in
the performance, observance or fulfillment of any provisions of its Amended and
Restated Certificate of Incorporation or Bylaws. Cardinal has heretofore
furnished to Bergen a complete and correct copy of the Cardinal Articles and
Cardinal Code of Regulations.
3.2. Subsidiaries. Except as set forth in Section 3.2 to the disclosure
schedule delivered by Cardinal to Bergen and dated the date hereof (the
"Cardinal Disclosure Schedule"), Cardinal owns directly or indirectly each of
the outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such subsidiary) of each of
Cardinal's subsidiaries.
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3.3. Corporate Power and Authority. Each of Cardinal and Subcorp has all
requisite corporate power and authority to enter into and deliver this
Agreement, subject to approval of (i) amendments to the Cardinal Articles to
change Cardinal's name as provided for in Section 5.2(i) and to increase the
number of authorized Cardinal Common Shares, and (ii) the issuance of Cardinal
Common Shares issuable in the Merger and the transactions contemplated hereby by
the Cardinal Shareholders (such proposals to amend the Cardinal Articles and to
authorize the issuance of Cardinal Common Shares collectively the "Cardinal
Shareholder Proposals"), to perform its obligations hereunder and to consummate
the transactions contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of each of
Cardinal and Subcorp, subject to approval by the Cardinal Shareholders of the
Cardinal Shareholder Proposals. This Agreement has been duly executed and
delivered by each of Cardinal and Subcorp, and constitutes the legal, valid and
binding obligation of each of Subcorp and Cardinal enforceable against each of
them in accordance with its terms.
3.4. Capitalization of Cardinal and Subcorp.
(a) As of August 7, 1997, Cardinal's authorized capital stock consisted
solely of (a) 150,000,000 common shares, without par value ("Cardinal Common
Shares"), of which (i) 109,097,646 shares were issued and outstanding, (ii)
240,709 shares were issued and held in treasury (which does not include the
shares reserved for issuance as set forth in clause (a)(iii) below) and (iii)
6,000,434 shares were reserved for issuance upon the exercise or conversion of
options, warrants or convertible securities granted or issuable by Cardinal, (b)
5,000,000 Class B common shares, without par value, none of which was issued and
outstanding or reserved for issuance, and (c) 500,000 Non-Voting Preferred
Shares, without par value, none of which was issued and outstanding or reserved
for issuance. Each outstanding share of Cardinal capital stock is, and all
Cardinal Common Shares to be issued in connection with the Merger will be, duly
authorized and validly issued, fully paid and nonassessable, and each
outstanding share of Cardinal capital stock has not been, and all Cardinal
Common Shares to be issued in connection with the Merger will not be, issued in
violation of any preemptive or similar rights. As of the date hereof, other than
as set forth in the first sentence hereof or in Section 3.4 to the Cardinal
Disclosure Schedule, there are no outstanding subscriptions, options, warrants,
puts, calls, agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale, repurchase, transfer or registration
by Cardinal of any equity securities of Cardinal, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of Cardinal and neither Cardinal nor any Cardinal subsidiary has any
obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of Cardinal, its subsidiaries or its or their
predecessors. The Cardinal Common Shares (including those shares to be issued in
the Merger) are registered under the Securities Exchange Act of 1934, as amended
(together with the rules and regulations thereunder, the "Exchange Act"). Except
as set forth in Section 3.4 to the Cardinal Disclosure Schedule, Cardinal has no
agreement, arrangement or understanding to register any securities of Cardinal
or any of its subsidiaries under the Securities Act or under any state
securities law and has not granted registration rights to any person or entity
(other than agreements, arrangements or understandings with respect to
registration rights that are no longer in effect as of the date of this
Agreement); copies of all such agreements have previously been provided to
Bergen.
(b) Subcorp's authorized capital stock consists solely of 1,000 shares of
Common Stock, par value $.01 per share ("Subcorp Common Stock"), of which, as of
the date hereof, 100 were issued and outstanding and none were reserved for
issuance. As of the date hereof, all of the outstanding shares of Subcorp Common
Stock are owned free and clear of any liens, claims or encumbrances by Cardinal.
3.5. Conflicts; Consents and Approval. Neither the execution and delivery
of this Agreement by Cardinal or Subcorp nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or result in a breach of any provision of the
Cardinal Articles or Cardinal Code of Regulations or the Amended and
Restated Certificate of Incorporation or Bylaws of Subcorp, subject to
approval by the Cardinal Shareholders of the Cardinal Shareholder
Proposals;
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<PAGE> 115
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Cardinal or any of its
subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which Cardinal or any
of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Cardinal or any of its subsidiaries or any of
their respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Cardinal or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national court, arbitral
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) approval by the Cardinal Shareholders of the
Cardinal Shareholder Proposals, (ii) authorization for inclusion of the
Cardinal Common Shares to be issued in the Merger and the transactions
contemplated hereby on the NYSE, subject to official notice of issuance,
(iii) actions required by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder
(the "HSR Act"), (iv) registrations or other actions required under federal
and state securities laws as are contemplated by this Agreement, or (v)
consents or approvals of any Governmental Authority set forth in Section
3.5 to the Cardinal Disclosure Schedule;
except in the case of (b), (c) and (d) for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Cardinal or a material adverse effect on the ability of the
parties to consummate the transactions contemplated hereby.
3.6. Brokerage and Finder's Fees. Except as set forth in Section 3.6 of
the Cardinal Disclosure Schedule, neither Cardinal nor any shareholder,
director, officer or employee thereof has incurred or will incur on behalf of
Cardinal any brokerage, finder's or similar fee in connection with the
transactions contemplated by this Agreement.
3.7. Accounting Matters; Reorganization. Neither Cardinal nor any of its
affiliates has taken or agreed to take any action that (without giving effect to
any actions taken or agreed to be taken by Bergen or any of its affiliates)
would (a) prevent Cardinal from accounting for the business combination to be
effected by the Merger as a pooling-of-interests for financial reporting
purposes or (b) prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code.
3.8. Cardinal SEC Documents. Cardinal has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 1994 under the Exchange Act or the
Securities Act (such documents, as supplemented and amended since the time of
filing, collectively, the "Cardinal SEC Documents"). The Cardinal SEC Documents,
including, without limitation, any financial statements or schedules included
therein, at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) except as set forth in Section 3.8 to
the Cardinal Disclosure Schedule, complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be. The financial statements of Cardinal included in the Cardinal SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements
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to normal, recurring audit adjustments) the consolidated financial position of
Cardinal and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
3.9. Registration Statement. None of the information provided by Cardinal
in writing for inclusion in the registration statement on Form S-4 (such
registration statement as amended, supplemented or modified, the "Registration
Statement") to be filed with the Commission by Cardinal under the Securities
Act, including the prospectus relating to Cardinal Common Shares to be issued in
the Merger (as amended, supplemented or modified, the "Prospectus") and the
joint proxy statement and form of proxies relating to the vote of Bergen
Shareholders with respect to the Merger and the vote of Cardinal Shareholders
with respect to the Cardinal Shareholder Proposals (as amended, supplemented or
modified, the "Joint Proxy Statement"), at the time the Registration Statement
becomes effective or, in the case of the Joint Proxy Statement, at the date of
mailing and at the date of the Bergen Shareholders Meeting or the Cardinal
Shareholders Meeting (each, as hereinafter defined) to consider the Merger and
the transactions contemplated thereby, will contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. Each of the
Registration Statement and Joint Proxy Statement, except for such portions
thereof that relate only to Bergen, will comply as to form in all material
respects with the provisions of the Securities Act and Exchange Act.
3.10. Compliance with Law. Cardinal and its subsidiaries are in
compliance with, and at all times since September 30, 1994 have been in
compliance with, all applicable laws, statutes, orders, rules, regulations,
policies or guidelines promulgated, or judgments, decisions or orders entered by
any Governmental Authority, including, without limitation, the Federal
Prescription Drug Marketing Act and comparable or related state law provisions,
the Federal Controlled Substances Act of 1970, the Food, Drug and Cosmetic Act
(the "FDCA"), the Good Manufacturing Practices standards of the Food and Drug
Administration (the "FDA"), federal Medicare and Medicaid statutes, including,
without limitation, 42 U.S.C. Section 1320a-7b and 42 U.S.C. Section 1395nn or
related state or local statutes or regulations, applicable state laws regulating
pharmacy or wholesaling practices, the Occupational Safety and Health Act and
the regulations promulgated thereunder (all such laws, statutes, orders, rules,
regulations, policies, guidelines, judgments, decisions and orders,
collectively, "Applicable Laws"), relating to Cardinal, its subsidiaries or
their respective business or properties, except where the failure to be in
compliance therewith (individually or in the aggregate) would not reasonably be
expected to have a Material Adverse Effect on Cardinal or where such
non-compliance has been cured. Except as disclosed in Section 3.10 to the
Cardinal Disclosure Schedule, no investigation or review by any Governmental
Authority with respect to Cardinal or its subsidiaries is pending, or, to the
knowledge of Cardinal, threatened, nor has any Governmental Authority indicated
in writing an intention to conduct the same, other than those the outcome of
which would not reasonably be expected to have a Material Adverse Effect on
Cardinal.
3.11. Litigation. Except as set forth in Section 3.11 to the Cardinal
Disclosure Schedule or in the Cardinal SEC Documents, there is no suit, claim,
action, proceeding or investigation (an "Action") pending or, to the knowledge
of Cardinal, threatened against Cardinal or any of its subsidiaries which,
individually or in the aggregate, would have a Material Adverse Effect on
Cardinal or a material adverse effect on the ability of Cardinal to consummate
the transactions contemplated hereby. Neither Cardinal nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree
which, individually or in the aggregate, insofar as can be reasonably foreseen,
could have a Material Adverse Effect on Cardinal or a material adverse effect on
the ability of Cardinal to consummate the transactions contemplated hereby.
Except as set forth in Section 3.11 to the Cardinal Disclosure Schedule, since
September 30, 1994, neither Cardinal nor any of its subsidiaries has been
subject to any outstanding order, writ, injunction or decree relating to
Cardinal's method of doing business or its relationship with past, existing or
future users or purchasers of any goods or services of Cardinal.
3.12. Board Recommendation. The Board of Directors of Cardinal, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted 100% of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, taken
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together, are fair to and in the best interests of Cardinal and the Cardinal
Shareholders, and (ii) resolved to recommend that the Cardinal Shareholders
approve and authorize the Cardinal Shareholder Proposals and the transactions
contemplated hereby.
3.13. No Material Adverse Change. Except as disclosed in the Cardinal SEC
Documents filed prior to the date of this Agreement, since June 30, 1996, there
has been no change in the assets, liabilities, results of operations or
financial condition of Cardinal which would constitute a Material Adverse Effect
on Cardinal or any event, occurrence or development which would have a material
adverse effect on the ability of Cardinal to consummate the transactions
contemplated hereby.
3.14. Title to and Condition of Properties. Cardinal and its subsidiaries
own or hold under valid leases all real property, plants, machinery and
equipment necessary for the conduct of the business of Cardinal and its
subsidiaries as presently conducted, except where the failure to own or so hold
such property, plants, machinery and equipment would not reasonably be expected
to have a Material Adverse Effect on Cardinal.
3.15. Undisclosed Liabilities. Except (i) as and to the extent disclosed
or reserved against on the restated consolidated balance sheet of Cardinal as of
June 30, 1996 included in the Cardinal SEC Documents, (ii) as incurred after the
date thereof in the ordinary course of business consistent with prior practice
and not prohibited by this Agreement or (iii) as set forth in Section 3.15 to
the Cardinal Disclosure Schedule, Cardinal, together with its subsidiaries, does
not have any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, have or would have a Material Adverse
Effect on Cardinal.
3.16. Operation of Cardinal's Business; Relationships.
(a) Since March 31, 1997, through the date of this Agreement, neither
Cardinal nor any of its subsidiaries has engaged in any transaction which, if
done after execution of this Agreement, would violate in any material respect
Section 5.2(c) hereof except as set forth in Section 3.16(a) to the Cardinal
Disclosure Schedule.
(b) Except as set forth in Section 3.16(b) to the Cardinal Disclosure
Schedule, since January 1, 1997, no material customer of Cardinal or any of its
subsidiaries has indicated that it will stop or materially decrease purchasing
materials, products or services from Cardinal or its subsidiaries and no
material supplier of Cardinal or any of its subsidiaries has indicated that it
will stop or materially decrease the supply of materials, products or services
to Cardinal or its subsidiaries, in each case, the effect of which would have a
Material Adverse Effect on Cardinal.
3.17. Interested Stockholder or Acquiring Person. Neither Cardinal nor
any of its affiliates is or has been an "Interested Stockholder" as such term is
defined in the New Jersey Shareholders Protection Act (the "NJSPA") or an
"Acquiring Person" as such term is defined in the Bergen Rights Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BERGEN
In order to induce Subcorp and Cardinal to enter into this Agreement,
Bergen hereby represents and warrants to Cardinal and Subcorp that the
statements contained in this Article IV are true, correct and complete.
4.1. Organization and Standing. Bergen is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey
with full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted. Each of Bergen and each subsidiary of Bergen is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns, leases or
operates requires it to so qualify, except where the failure to be so qualified
or in good standing in such jurisdiction would not reasonably be expected to
have a Material Adverse Effect on Bergen. Bergen is not in default in the
performance, observance or fulfillment of any provision of its Certificate of
Incorporation, as
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amended and restated (the "Bergen Certificate"), or its Bylaws, as in effect on
the date hereof (the "Bergen Bylaws"). Bergen has heretofore furnished to
Cardinal a complete and correct copy of the Bergen Certificate and the Bergen
Bylaws. Listed in Section 4.1 to the disclosure schedule delivered by Bergen to
Cardinal and dated the date hereof (the "Bergen Disclosure Schedule") is each
jurisdiction in which Bergen or a subsidiary of Bergen is qualified to do
business and in good standing as of the date of the Agreement.
4.2. Subsidiaries. Bergen does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the subsidiaries and other
entities set forth in Section 4.2 to the Bergen Disclosure Schedule. Except as
set forth in Section 4.2 to the Bergen Disclosure Schedule, Bergen is not
subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
such entity that is not wholly owned by Bergen. Bergen owns directly or
indirectly each of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect a majority of
directors or others performing similar functions with respect to such
subsidiary) of each of Bergen's subsidiaries. Each of the outstanding shares of
capital stock of each of Bergen's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
Bergen free and clear of all liens, pledges, security interests, claims or other
encumbrances. The following information for each subsidiary of Bergen is set
forth in Section 4.2 to the Bergen Disclosure Schedule, as applicable: (i) its
name and jurisdiction of incorporation or organization; (ii) for a subsidiary
which is not wholly owned by Bergen, its authorized capital stock or share
capital; and (iii) for a subsidiary which is not wholly owned by Bergen, the
number of issued and outstanding shares of capital stock or share capital, the
record owner(s) thereof to the extent known to Bergen and the number of issued
and outstanding shares of capital stock or share capital beneficially owned by
Bergen. Other than as set forth in Section 4.2 to the Bergen Disclosure
Schedule, there are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer of any securities of any
subsidiary of Bergen, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of any
subsidiary of Bergen, and neither Bergen nor any subsidiary of Bergen has any
obligation of any kind to issue any additional securities of any subsidiary of
Bergen or to pay for or repurchase any securities of any subsidiary of Bergen or
any predecessor thereof.
4.3. Corporate Power and Authority. Bergen has all requisite corporate
power and authority to enter into and deliver this Agreement, to perform its
obligations hereunder and, subject to approval of the Merger and the
transactions contemplated hereby by Bergen Shareholders, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Bergen have been duly authorized by all necessary corporate action
on the part of Bergen, subject to approval of the Merger and the transactions
contemplated hereby by Bergen Shareholders. This Agreement has been duly
executed and delivered by Bergen and constitutes the legal, valid and binding
obligation of Bergen enforceable against it in accordance with its terms.
4.4. Capitalization of Bergen. As of July 31, 1997, Bergen's authorized
capital stock consisted solely of (a) 100,000,000 shares of Class A common
stock, par value $1.50 per share ("Bergen Common Stock"), of which (i)
50,392,779 shares were issued and outstanding, (ii) 5,454,983 shares were issued
and held in treasury (which does not include the shares reserved for issuance
set forth in clause (iii) below) and no shares were held by subsidiaries of
Bergen, (iii) 2,531,152 shares were reserved for issuance upon the exercise of
outstanding options and no shares were reserved for issuance upon the conversion
or exchange of convertible or exchangeable securities granted or issued by
Bergen, (iv) 820,313 shares of Bergen Common Stock were reserved for issuance
under the Bergen Elective Savings Retirement Plan and (v) 10,028,163 shares of
Bergen Common Stock were reserved for future issuance under the Stock Option
Agreement dated August 23, 1997 between Cardinal and Bergen (the "Bergen Stock
Option Agreement"); and (b) 3,000,000 shares of preferred stock, without par
value ("Bergen Preferred Stock"), none of which was issued and outstanding or
reserved for issuance, except for a series of 400,000 shares of Bergen Preferred
Stock designated as Series A Junior Participating Preferred Stock reserved for
issuance pursuant to the Bergen Rights Agreement (as defined in Section 4.25),
none of which was issued and outstanding. Each outstanding share of Bergen
capital stock is duly authorized and validly issued, fully paid and
nonassessable, and has not been issued in violation of any
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preemptive or similar rights. Other than as set forth in the first sentence
hereof, in Section 4.4 to the Bergen Disclosure Schedule or as contemplated by
the Bergen Stock Option Agreement, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale, repurchase or
transfer by Bergen of any securities of Bergen, nor are there outstanding any
securities which are convertible into or exchangeable for any shares of capital
stock of Bergen, and neither Bergen nor any subsidiary of Bergen has any
obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of Bergen or any predecessor. The Bergen Disclosure
Schedule accurately sets forth as of August 7, 1997 the names of, and the number
of shares of each class (including the number of shares issuable upon exercise
of Bergen Options and the exercise price and vesting schedule with respect
thereto) and the number of options held by, all holders of options to purchase
Bergen capital stock. Except as set forth in Section 4.4 to the Bergen
Disclosure Schedule, Bergen has no agreement, arrangement or understandings to
register any securities of Bergen or any of its subsidiaries under the
Securities Act or under any state securities law and has not granted
registration rights to any person or entity (other than agreements, arrangements
or understandings with respect to registration rights that are no longer in
effect as of the date of this Agreement); copies of all such agreements have
previously been provided to Cardinal.
4.5. Conflicts; Consents and Approvals. Neither the execution and
delivery of this Agreement or the Bergen Stock Option Agreement by Bergen, nor
the consummation of the transactions contemplated hereby or thereby will:
(a) conflict with, or result in a breach of any provision of, the
Bergen Certificate or the Bergen Bylaws;
(b) violate, or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Bergen under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, contract, undertaking, agreement, lease or other
instrument or obligation to which Bergen or any of its subsidiaries is a
party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Bergen or any of its subsidiaries or any of their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Bergen or any of its affiliates with, any third
party or any Governmental Authority, other than (i) approval of the Merger
and the transactions contemplated hereby by Bergen Shareholders, (ii)
actions required by the HSR Act, (iii) registrations or other actions
required under federal and state securities laws as are contemplated by
this Agreement and (iv) consents or approvals of any Governmental Authority
set forth in Section 4.5 to the Bergen Disclosure Schedule;
except in the case of (b), (c) and (d) for any of the foregoing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Bergen or a material adverse effect on the ability of the
parties to consummate the transactions contemplated hereby. Other than as set
forth on Schedule 4.5(b) to the Bergen Disclosure Schedule, to the knowledge of
Bergen, neither the execution and delivery of this Agreement or the Bergen Stock
Option Agreement by Bergen, nor the consummation of the transactions
contemplated hereby or thereby will violate, or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with the
giving of notice, the passage of time or otherwise, would constitute a default)
under, or entitle any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default under, or result
in the creation of any lien, security interest, charge or encumbrance upon any
of the material properties or assets of Bergen under, any of the terms,
conditions or provisions of any material note, bond, mortgage, indenture, deed
of trust, license, contract, undertaking, agreement, lease or other instrument
or obligation to which Bergen or any of its subsidiaries is a party.
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4.6. No Material Adverse Change. Except as disclosed in the Bergen SEC
Documents (as defined in Section 4.7 hereof) filed prior to the date of this
Agreement, since September 30, 1996, there has been no change in the assets,
liabilities, results of operations or financial condition of Bergen which would
constitute a Material Adverse Effect on Bergen or any event, occurrence or
development which would have a material adverse effect on the ability of Bergen
to consummate the transactions contemplated hereby.
4.7. Bergen SEC Documents. Bergen has timely filed with the Commission
all forms, reports, schedules, statements and other documents required to be
filed by it since December 31, 1994 under the Exchange Act or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Bergen SEC Documents"). The Bergen SEC Documents, including,
without limitation, any financial statements or schedules included therein, at
the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) except as set forth in Section 4.7 to
the Bergen Disclosure Schedule, complied in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be. The financial statements of Bergen included in the Bergen SEC Documents
at the time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively) complied as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the Commission), and fairly
present (subject in the case of unaudited statements to normal, recurring audit
adjustments) the consolidated financial position of Bergen and its consolidated
subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. No subsidiary of Bergen is
subject to the periodic reporting requirements of the Exchange Act or required
to file any form, report or other document with the Commission, the NYSE, any
other stock exchange or any other comparable Governmental Authority.
4.8. Taxes. Except as set forth in Section 4.8 to the Bergen Disclosure
Schedule and except for such matters that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Bergen:
(a) Bergen and its subsidiaries (i) have duly filed all federal,
state, local and foreign income, franchise, excise, real and personal
property and other Tax Returns and reports (including, but not limited to,
those filed on a consolidated, combined or unitary basis) required to have
been filed by Bergen or its subsidiaries prior to the date hereof, all of
which foregoing Tax Returns and reports are true and correct; (ii) have
within the time and manner prescribed by Applicable Law paid or, prior to
the Effective Time, will pay all Taxes, interest and penalties required to
be paid in respect of the periods covered by such returns or reports or
otherwise due to any federal, state, foreign, local or other taxing
authority; (iii) have adequate reserves on their financial statements for
any Taxes in excess of the amounts so paid; (iv) are not delinquent in the
payment of any Tax and have not requested or filed any document having the
effect of causing any extension of time within which to file any returns in
respect of any fiscal year which have not since been filed; and (v) have
not received written notice of any deficiencies for any Tax from any taxing
authority, against Bergen or any of its subsidiaries for which there are
not adequate reserves. Neither Bergen nor any of its subsidiaries is the
subject of any currently ongoing Tax audit. As of the date of this
Agreement, there are no pending requests for waivers of the time to assess
any Tax, other than those made in the ordinary course and for which payment
has been made or there are adequate reserves. With respect to any taxable
period ended prior to September 30, 1992, all federal income Tax Returns
including Bergen or any of its subsidiaries have been audited by the
Internal Revenue Service or are closed by the applicable statute of
limitations. Neither Bergen nor any of its subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency. There are no liens
with respect to Taxes upon any of the properties or assets, real or
personal, tangible or intangible of Bergen or any of its subsidiaries
(other than liens for Taxes not
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yet due). No claim has ever been made in writing by an authority in a
jurisdiction where none of Bergen and its subsidiaries files Tax Returns
that Bergen or any of its subsidiaries is or may be subject to taxation by
that jurisdiction. Bergen has not filed an election under Section 341(f) of
the Code to be treated as a consenting corporation.
(b) Neither Bergen nor any of its subsidiaries is obligated by any
contract, agreement or other arrangement to indemnify any other person with
respect to Taxes. Neither Bergen nor any of its subsidiaries are now or
have ever been a party to or bound by any agreement or arrangement (whether
or not written and including, without limitation, any arrangement required
or permitted by law) binding Bergen or any of its subsidiaries which (i)
requires Bergen or any of its subsidiaries to make any Tax payment to
(other than payments made prior to March 31, 1997 or payments which are
adequately reserved on Bergen's balance sheet as of September 30, 1996
included in the Bergen SEC Documents) or for the account of any other
person, (ii) affords any other person the benefit of any net operating
loss, net capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute which could
reduce Taxes (including, without limitation, deductions and credits related
to alternative minimum Taxes) of Bergen or any of its subsidiaries, or
(iii) requires or permits the transfer or assignment of income, revenues,
receipts or gains to Bergen or any of its subsidiaries, from any other
person.
(c) Bergen and its subsidiaries have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, shareholder or
other third party.
(d) "Tax Returns" means returns, reports and forms required to be
filed with any Governmental Authority of the United States or any other
jurisdiction responsible for the imposition or collection of Taxes.
(e) "Taxes" means (i) all Taxes (whether federal, state, local or
foreign) based upon or measured by income and any other Tax whatsoever,
including, without limitation, gross receipts, profits, sales, use,
occupation, value added, ad valorem, transfer, franchise, withholding,
payroll, employment, excise, or property Taxes, together with any interest
or penalties imposed with respect thereto and (ii) any obligations under
any agreements or arrangements with respect to any Taxes described in
clause (i) above.
4.9. Compliance with Law. Except as set forth in Section 4.9 to the
Bergen Disclosure Schedule, Bergen is in compliance, and at all times since
September 30, 1994 has been in compliance, with all Applicable Laws relating to
Bergen or its business or properties, except where the failure to be in
compliance with such Applicable Laws (individually or in the aggregate) would
not reasonably be expected to have a Material Adverse Effect on Bergen or where
such non-compliance has been cured. Except as disclosed in Section 4.9 to the
Bergen Disclosure Schedule, no investigation or review by any Governmental
Authority with respect to Bergen is pending, or, to the knowledge of Bergen,
threatened, nor has any Governmental Authority indicated in writing an intention
to conduct the same, other than those the outcome of which would not reasonably
be expected to have a Material Adverse Effect on Bergen.
4.10. Intellectual Property. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Bergen,
Bergen owns or possesses adequate licenses or other valid rights to use all
patents, patent rights, trademarks, trademark rights, trade names, trade dress,
trade name rights, copyrights, service marks, trade secrets, applications for
trademarks and for service marks, know-how and other proprietary rights and
information used or held for use in connection with the businesses of Bergen
("Intellectual Property") as currently conducted, and there has not been any
written assertion or claim against Bergen challenging the validity or the use by
Bergen of any of the foregoing. Other than licenses generally available to the
public at reasonable cost and material licenses or rights to use set forth in
Section 4.10 to the Bergen Disclosure Schedule, no material licenses or other
valid rights to use all patents, patent rights, trademarks, trademark rights,
trade names, trade dress, trade name rights, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and other
proprietary rights is necessary for the operation of the business of Bergen in
substantially the same manner as such business is
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presently conducted. The conduct of the businesses of Bergen as currently
conducted does not conflict with or infringe upon any patent, patent right,
license, trademark, trademark right, trade dress, trade name, trade name right,
service mark or copyright of any third party except for any conflict or
infringement that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Bergen. Except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Bergen, there are no infringements of any of the Intellectual
Property owned by or licensed by or to Bergen and the Intellectual Property is
not the subject to any pending Action.
4.11. Title to and Condition of Properties. Bergen owns or holds under
valid leases all real property, plants, machinery and equipment necessary for
the conduct of the business of Bergen as presently conducted, except where the
failure to own or so hold such property, plants, machinery and equipment would
not reasonably be expected to have a Material Adverse Effect on Bergen.
4.12. Registration Statement; Joint Proxy Statement. None of the
information provided in writing by Bergen for inclusion in the Registration
Statement at the time it becomes effective or, in the case of the Joint Proxy
Statement, at the date of mailing and at the date of the Bergen Shareholders
Meeting or the Cardinal Shareholders Meeting, will contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement and Joint Proxy Statement, except for such portions thereof that
relate only to Cardinal and its subsidiaries, will each comply as to form in all
material respects with the provisions of the Securities Act and the Exchange
Act.
4.13. Litigation. Except as set forth in Section 4.13 to the Bergen
Disclosure Schedule or specifically identified in the Bergen SEC Documents filed
prior to the date of the Agreement, there is no Action pending or, to the
knowledge of Bergen, threatened against Bergen or any executive officer or
director of Bergen which, individually or in the aggregate, would have a
Material Adverse Effect on Bergen or a material adverse effect on the ability of
Bergen to consummate the transactions contemplated hereby. Bergen is not subject
to any outstanding order, writ, injunction or decree which, individually or in
the aggregate, insofar as can be reasonably foreseen, could have a Material
Adverse Effect on Bergen or a material adverse effect on the ability of Bergen
to consummate the transactions contemplated hereby. Except as set forth in
Section 4.13 to the Bergen Disclosure Schedule, since September 30, 1994, Bergen
has not been subject to any outstanding order, writ, injunction or decree
relating to Bergen's method of doing business or its relationship with past,
existing or future users or purchasers of any goods or services of Bergen.
4.14. Brokerage and Finder's Fees; Expenses. Except for Bergen's
obligations to Merrill Lynch & Co., Inc. ("Merrill Lynch") (copies of all
written agreements relating to such obligations having previously been provided
to Cardinal), neither Bergen nor any stockholder, director, officer or employee
thereof, has incurred or will incur on behalf of Bergen, any brokerage, finder's
or similar fee in connection with the transactions contemplated by this
Agreement.
4.15. Accounting Matters; Reorganization. Neither Bergen nor any of its
affiliates has taken or agreed to take any action that (without giving effect to
any actions taken or agreed to be taken by Cardinal or any of its affiliates)
would (a) prevent Cardinal from accounting for the business combination to be
effected by the Merger as a pooling-of-interests for financial reporting
purposes or (b) prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code.
4.16. Employee Benefit Plans.
(a) For purposes of this Section 4.16, the following terms have the
definitions given below:
"Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971
of the Code, (iv) the continuation coverage requirements of section 601 et
seq. of ERISA and section 4980B of the Code, and (v) corresponding or
similar provisions of foreign laws or regulations, in each case other than
pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
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"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of ERISA that includes the first entity, trade or business, or
that is a member of the same "controlled group" as the first entity, trade
or business pursuant to Section 4001(a)(14) of ERISA.
"Plans" means all employee welfare benefit plans within the meaning of
Section 3(1) of ERISA and all employee pension benefit plans within the
meaning of Section 3(2) of ERISA sponsored or maintained by Bergen or any
of its subsidiaries or to which Bergen or any of its subsidiaries
contributes or is obligated to contribute.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
those terms are defined in Part I of Subtitle E of Title IV of ERISA.
(b) With respect to each Plan, Bergen has provided to Cardinal a true,
correct and complete copy of the following (where applicable): (i) each writing
constituting a part of such Plan, including without limitation all plan
documents, trust agreements, and insurance contracts and other funding vehicles;
(ii) the most recent Annual Report (Form 5500 Series) and accompanying schedule,
if any; (iii) the current summary plan description, if any; (iv) the most recent
annual financial report, if any; and (v) the most recent determination letter
from the Internal Revenue Service, if any.
(c) Except as set forth in Section 4.16(c) to the Bergen Disclosure
Schedule, the Internal Revenue Service has issued a favorable determination
letter with respect to each Plan that is intended to be a "qualified plan"
within the meaning of Section 401(a) of the Code (a "Qualified Plan") and there
are no existing circumstances nor any events that have occurred that would
adversely affect the qualified status of any Qualified Plan or the related trust
in a manner that would have a Material Adverse Effect.
(d) All contributions required to be made to any Plan by Applicable Laws or
by any plan document or other contractual undertaking, and all premiums due or
payable with respect to insurance policies funding any Plan, before the date
hereof have been made or paid in full on or before the final due date thereof
and through the Closing Date will be made or paid in full on or before the final
due date thereof.
(e) Bergen and its subsidiaries have complied, and are now in compliance,
in all material respects, with all provisions of ERISA, the Code and all laws
and regulations applicable to the Plans. Each Plan has been operated in material
compliance with its terms. There is not now, and there are no existing
circumstances that would give rise to, any requirement for the posting of
security with respect to a Plan or the imposition of any lien on the assets of
Bergen or any of its subsidiaries under ERISA or the Code.
(f) Except as set forth in Section 4.16(f) to the Bergen Disclosure
Schedule, no Plan is a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two or more
contributing sponsors at least two of whom are not under common control, within
the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor has
Bergen or any of its subsidiaries or any of their respective ERISA Affiliates,
at any time within six years before the date hereof, contributed to or been
obligated to contribute to any Multiemployer Plan or Multiple Employer Plan.
With respect to each Multiemployer Plan: (i) neither Bergen nor any of its ERISA
Affiliates has incurred any Withdrawal Liability that has not been satisfied in
full; and (ii) neither Bergen nor any ERISA Affiliate has received any
notification, nor has any reason to believe, that any such plan is in
reorganization, is insolvent, has been terminated, or would be in
reorganization, to be insolvent, or to be terminated. Except for Multiemployer
Plans, no Plan is subject to Title IV or Section 302 of ERISA or Section 412 or
4971 of the Code.
(g) There does not now exist, and there are no currently existing
circumstances that would result in, any material Controlled Group Liability that
would be a liability of Bergen or any of its subsidiaries following the Closing.
Without limiting the generality of the foregoing, neither Bergen nor any of its
subsidiaries nor any of their respective ERISA Affiliates has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
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(h) Except for health continuation coverage as required by Section 4980B of
the Code or Part 6 of Title I of ERISA and except as set forth in Section
4.16(h) to the Bergen Disclosure Schedule, neither Bergen nor any of its
subsidiaries has any material liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof.
(i) Except as disclosed in Section 4.16(i) to the Bergen Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will result in, cause the
accelerated vesting or delivery of, or increase the amount or value of, any
payment or benefit to any employee, officer, director or consultant of Bergen or
any of its subsidiaries. Without limiting the generality of the foregoing,
except as set forth in Section 4.16(i) to the Bergen Disclosure Schedule, no
amount paid or payable by Bergen or any of its subsidiaries in connection with
the transactions contemplated hereby either solely as a result thereof or as a
result of such transactions in conjunction with any other events will be an
"excess parachute payment" within the meaning of Section 280G of the Code.
(j) Except as disclosed in Section 4.16(j) to the Bergen Disclosure
Schedule, there are no pending or to the knowledge of Bergen threatened claims
(other than claims for benefits in the ordinary course), lawsuits or
arbitrations which have been asserted or instituted against the Plans, any
fiduciaries thereof with respect to their duties to the Plans or the assets of
any of the trusts under any of the Plans which would result in any material
liability of Bergen or any of its subsidiaries to the Pension Benefit Guaranty
Corporation, the Department of Treasury, the Department of Labor or any
Multiemployer Plan.
(k) Section 4.16(k) to the Bergen Disclosure Schedule sets forth a list of
each employment, severance or similar agreement under which Bergen or any of its
subsidiaries is or could become obligated to provide compensation or benefits in
excess of $200,000 in any one calendar year, and Bergen has provided to Cardinal
a copy of each such agreement.
(l) The Bergen Amended and Restated Supplemental Executive Retirement Plan
(the "SERP") and the Amended and Restated Bergen Capital Accumulation Plan (the
"CAP") have been amended, and the Company has executed an amendment (the "Trust
Amendment") to 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. (the "Trustee"), which amendment is
subject to execution by the Trustee. Such amendments provide that, except as set
forth in the immediately following sentence, (i) the consummation of the Merger
shall not effectuate a "Change in Control" within the meaning thereof, and (ii)
effective as of the Effective Time, all provisions thereof that relate to a
"Change in Control" shall be null and void and of no further force and effect,
as if deleted. Notwithstanding the foregoing, the consummation of the Merger
shall effectuate a "Change in Control" solely for purposes of giving effect to
(A) the provisions of Section 5.1(b)(i) of the SERP that call for full vesting
of the "Accrued Benefit" of each "Participant" upon a "Change in Control" (as
those terms are defined in the SERP, as amended to exclude from participation,
contingent upon consummation of the Merger, certain executives who previously
participated therein), and (B) the provisions of Section 5.4(a)(F) of the CAP
that call for the benefit of a "Participant" that is "Accrued" as of a "Change
in Control" (without giving effect to clauses (A)-(E) of Section 5.4(a)) to
become fully "Vested" as of a "Change in Control" (as those terms are defined in
the CAP, as similarly amended to exclude from participation, contingent upon
consummation of the Merger, certain executives who previously participated
therein).
4.17. Contracts. Section 4.17 to the Bergen Disclosure Schedule lists all
contracts, agreements, guarantees, leases and executory commitments that exist
as of the date hereof other than Plans (each a "Contract") to which Bergen is a
party and which fall within any of the following categories: (a) Contracts not
entered into in the ordinary course of Bergen's business other than those that
are not material to the business of Bergen, (b) joint venture and partnership
agreements, (c) Contracts containing covenants purporting to limit the freedom
of Bergen to compete in any line of business in any geographic area or to hire
any individual or group of individuals, (d) Contracts which after the Effective
Time would have the effect of limiting the freedom of Cardinal or its
subsidiaries (other than Bergen) to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (e) Contracts
which contain minimum purchase conditions in excess of $10,000,000 with respect
to inventory purchases for resale, and $500,000 in
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the case of everything else, or requirements or other terms that restrict or
limit the purchasing relationships of Bergen or its affiliates, or any customer,
licensee or lessee thereof, (f) Contracts relating to any outstanding commitment
for capital expenditures in excess of $2,000,000, (g) indentures, mortgages,
promissory notes, loan agreements or guarantees of borrowed money in excess of
$2,000,000, letters of credit or other agreements or instruments of Bergen or
commitments for the borrowing or the lending of amounts in excess of $2,000,000
by Bergen or providing for the creation of any charge, security interest,
encumbrance or lien upon any of the assets of Bergen with an aggregate value in
excess of $2,000,000, (h) Contracts providing for "earn-outs" or other
contingent payments by Bergen involving more than $100,000 over the term of the
Contract, and (i) except as specifically described in Bergen SEC Documents filed
prior to the date of this Agreement, Contracts with or for the benefit of any
affiliate of Bergen or immediate family member thereof (other than subsidiaries
of Bergen) involving more than $60,000 in the aggregate per affiliate. All such
Contracts and all contracts to which Bergen is a party and which involve annual
revenues to the business of Bergen in excess of 2.5% of Bergen's annual revenues
(each, a "Material Contract") are valid and binding obligations of Bergen and,
to the knowledge of Bergen, the valid and binding obligation of each other party
thereto except such Contracts or Material Contracts which if not so valid and
binding would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Bergen. Neither Bergen nor, to the knowledge
of Bergen, any other party thereto is in violation of or in default in respect
of, nor has there occurred an event or condition which with the passage of time
or giving of notice (or both) would constitute a default under or permit the
termination of, any such Contract or Material Contract except such violations or
defaults under or terminations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on Bergen. Set
forth in Section 4.17(j) to the Bergen Disclosure Schedule is a description of
any material changes to the amount and terms of the indentures of Bergen and its
subsidiaries from the description in the notes to the financial statements
incorporated in Bergen's Form 10-K for the period ending September 30, 1996
filed with the Commission. Set forth in Section 4.17(k) to the Bergen Disclosure
Schedule is the amount of the annual premium currently paid by Bergen for its
directors' and officers' liability insurance.
4.18. Labor Matters. Except as set forth in Section 4.18 to the Bergen
Disclosure Schedule, Bergen does not have any consulting agreements providing
for compensation of any individual in excess of $150,000 annually, or any labor
contracts or collective bargaining agreements with any persons employed by
Bergen or any persons otherwise performing services primarily for Bergen. There
is no labor strike, dispute or stoppage pending or, to the knowledge of Bergen,
threatened against Bergen, and Bergen has not experienced any labor strike,
dispute or stoppage since September 30, 1994.
4.19. Undisclosed Liabilities. Except (i) as and to the extent disclosed
or reserved against on the balance sheet of Bergen as of September 30, 1996
included in the Bergen SEC Documents, (ii) as incurred after the date thereof in
the ordinary course of business consistent with prior practice and not
prohibited by this Agreement or (iii) as set forth in Section 4.19 to the Bergen
Disclosure Schedule, Bergen does not have any liabilities or obligations of any
nature, whether known or unknown, absolute, accrued, contingent or otherwise and
whether due or to become due, that, individually or in the aggregate, have or
would have a Material Adverse Effect on Bergen.
4.20. Operation of Bergen's Business; Relationships.
(a) Since March 31, 1997 through the date of this Agreement, Bergen has not
engaged in any transaction which, if done after execution of this Agreement,
would violate in any material respect Section 5.3(c) hereof except as set forth
in Section 4.20(a) to the Bergen Disclosure Schedule.
(b) Except as set forth in Section 4.20(b) to the Bergen Disclosure
Schedule, since January 1, 1997 no material customer of Bergen has indicated
that it will stop or materially decrease purchasing materials, products or
services from Bergen and no material supplier of Bergen has indicated that it
will stop or materially decrease the supply of materials, products or services
to Bergen, in each case, the effect of which would have a Material Adverse
Effect on Bergen.
4.21. Permits; Compliance. (a) Bergen is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders
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necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "Bergen Permits"), except where
the failure to be in possession of such Bergen Permits would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Bergen or a material adverse effect on the ability of the parties to consummate
the transactions contemplated hereby, and there is no Action pending or, to the
knowledge of Bergen, threatened regarding any of the Bergen Permits which, if
successful, would have Material Adverse Effect on Bergen or a material adverse
effect on the ability of the parties to consummate the transactions contemplated
hereby. Bergen is not in conflict with, or in default or violation of any of the
Bergen Permits, except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Bergen.
(b) Except as set forth in Section 4.21(b) of the Bergen Disclosure
Schedule or as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Bergen:
(i) all necessary clearances or approvals from governmental agencies
for all drug and device products which are sold by Bergen and its
subsidiaries have, to the knowledge of Bergen, been obtained and Bergen and
its subsidiaries are in substantial compliance with the most current form
of each applicable clearance or approval with respect to the storage,
distribution, promotion and sale by Bergen and its subsidiaries of such
products;
(ii) none of Bergen, or any of its officers (during the term of such
person's employment by Bergen) has made any untrue statement of a material
fact or fraudulent statement to the FDA or any similar governmental agency,
failed to disclose a material fact required to be disclosed to the FDA or
similar governmental agency, or committed an act, made a statement or
failed to make a statement that would provide a basis for the FDA or
similar governmental agency to invoke its policy respecting "Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal Gratuities" or similar
governmental policy, rule, regulation or law;
(iii) as to each article of drug, device, cosmetic or vitamin
manufactured (directly or indirectly) and/or, to the knowledge of Bergen,
distributed by Bergen, such article is not adulterated or misbranded within
the meaning of the FDCA or any similar governmental act or law of any
jurisdiction; and
(iv) none of Bergen or any of its officers (during the term of such
person's employment by Bergen), subsidiaries or affiliates has been
convicted of any crime or engaged in any conduct for which debarment or
similar punishment is mandated or permitted by any Applicable Law.
4.22. Environmental Matters. Except for matters disclosed in Schedule
4.22 of the Bergen Disclosure Schedule and except for matters that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Bergen, (a) the properties, operations and activities of
Bergen and its subsidiaries are in compliance with all applicable Environmental
Laws (as defined below) and all past noncompliance of Bergen or any Bergen
subsidiary with any Environmental Laws or Environmental Permits (as defined
below) that has been resolved with any Governmental Authority has been resolved
without any pending, ongoing or future obligation, cost or liability; (b) Bergen
and its subsidiaries and the properties and operations of Bergen and its
subsidiaries are not subject to any existing, pending or, to the knowledge of
Bergen, threatened action, suit, investigation, inquiry or proceeding by or
before any court or governmental authority under any Environmental Law; (c)
there has been no release of any hazardous substance, pollutant or contaminant
into the environment by Bergen or its subsidiaries or in connection with their
properties or operations; (d) to the best of Bergen's knowledge, there has been
no exposure of any person or property to any hazardous substance, pollutant or
contaminant in connection with the properties, operations and activities of
Bergen and its subsidiaries; and (e) Bergen and its subsidiaries have made
available to Cardinal all internal and external environmental audits and reports
(in each case relevant to Bergen or any of its subsidiaries) prepared since
January 1, 1994 and in the possession of Bergen or its subsidiaries. The term
"Environmental Laws" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or
industrial, toxic or hazardous substances or wastes
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(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder, as in effect on
the date hereof. "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
4.23. Opinion of Financial Advisors. Bergen has received the written
opinion of Merrill Lynch, its financial advisor, to the effect that, as of the
date of this Agreement, the Exchange Ratio is fair to the Bergen Shareholders
from a financial point of view, Bergen has heretofore provided copies of such
opinion to Cardinal and such opinion has not been withdrawn or revoked or
modified in any material respect.
4.24. Board Recommendation. The Board of Directors of Bergen, at a
meeting duly called and held, has by unanimous vote of those directors present
(who constituted 100% of the directors then in office) (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, and
the Bergen Stock Option Agreement and the transactions contemplated thereby,
taken together, are fair to and in the best interests of the Bergen
Shareholders, and (ii) resolved to recommend that the holders of the shares of
Bergen Common Stock approve this Agreement and the transactions contemplated
herein, including the Merger (the "Bergen Board Recommendation").
4.25. New Jersey Shareholders Protection Act and Rights Agreement. Prior
to the date hereof, the Board of Directors of Bergen has taken all action
necessary to exempt under or make not subject to (x) the provisions of the NJSPA
and (y) any other New Jersey or California takeover law or New Jersey or
California law that purports to limit or restrict business combinations: (i) the
execution of this Agreement, the Bergen Stock Option Agreement and the
Support/Voting Agreement dated as of August 23, 1997 between Cardinal and Mr.
Robert E. Martini (the "Support Agreement"), (ii) the Merger and (iii) the
transactions contemplated hereby and by the Bergen Stock Option Agreement and
the Support Agreement. The Rights Agreement, dated as of February 8, 1994 (the
"Bergen Rights Agreement"), between Bergen and Chemical Trust Company of
California, a California banking corporation, has been amended so that Cardinal
is exempt from the definition of "Acquiring Person" contained in the Bergen
Rights Agreement, no "Stock Acquisition Date" or "Distribution Date" (as such
terms are defined in the Bergen Rights Agreement) will occur as a result of the
execution of this Agreement or the Bergen Stock Option Agreement or the
consummation of the Merger pursuant to this Agreement or the acquisition or
transfer of shares of Bergen Common Stock by Cardinal pursuant to the Bergen
Stock Option Agreement and the Bergen Rights Agreement will expire immediately
prior to the Effective Time, and the Bergen Rights Agreement, as so amended, has
not been further amended or modified. Copies of all such amendments to the
Bergen Rights Agreement have been previously provided to Cardinal.
4.26. Accounts Receivable and Inventories.
(a) All accounts and notes receivable of Bergen have arisen in the ordinary
course of business and the accounts receivable reserve reflected in the balance
sheet of Bergen as of March 31, 1997 included in the Bergen SEC Documents is as
of such date adequate and established in accordance with generally accepted
accounting principles consistently applied.
(b) The Bergen assets which are inventories have a net realizable value on
March 31, 1997 at least equal to the sum of the LIFO values and the
corresponding LIFO reserve at which such inventories are carried on the balance
sheet of Bergen as of March 31, 1997 included in the Bergen SEC Documents; and
have been purchased by Bergen directly from the manufacturer thereof or from an
authorized distributor of such products in accordance with the Federal
Prescription Drug Marketing Act, if applicable.
4.27. Insurance. Section 4.27 to the Bergen Disclosure Schedule sets
forth a list of the policies of fire, theft, liability and other insurance
maintained with respect to the assets or businesses of Bergen (copies of all of
which policies have been previously provided to Cardinal), which policies have
terms expiring as set forth in Section 4.27 to the Bergen Disclosure Schedule.
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4.28. Employee Agreements. Each of the employees of Bergen specified in
Section 4.28 to the Bergen Disclosure Schedule has duly executed and delivered
an employee agreement with Bergen substantially in the form attached to Section
4.28 to the Bergen Disclosure Schedule (the "Employee Agreements"), and such
Employee Agreements have not been amended or terminated. Bergen has previously
provided to Cardinal copies of all such Employee Agreements.
4.29. Director Compensation. Section 4.29 to the Bergen Disclosure
Schedule sets forth a list and a brief summary of the material terms of all
plans, programs, agreements, arrangements or understandings of Bergen under
which any director of Bergen may be entitled to payment or compensation from
Bergen or its subsidiaries (i) in connection with or as a result of any of the
transactions contemplated by this Agreement or (ii) after the Effective Time.
ARTICLE V.
COVENANTS OF THE PARTIES
The parties hereto agree that:
5.1. Mutual Covenants.
(a) HSR Act Filings; Reasonable Efforts; Notification.
(i) Each of Cardinal and Bergen shall (A) make or cause to be made the
filings required of such party or any of its subsidiaries or affiliates
under the HSR Act with respect to the transactions contemplated hereby as
promptly as practicable and in any event within ten business days after the
date of this Agreement, (B) comply at the earliest practicable date with
any request under the HSR Act for additional information, documents, or
other materials received by such party or any of its subsidiaries from the
Federal Trade Commission or the Department of Justice or any other
Governmental Authority in respect of such filings or such transactions, and
(C) cooperate with the other party in connection with any such filing
(including, with respect to the party making a filing, providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, to accept all reasonable additions, deletions or changes
suggested in connection therewith) and in connection with resolving any
investigation or other inquiry of any such agency or other Governmental
Authority under any Antitrust Laws (as hereinafter defined) with respect to
any such filing or any such transaction. Each party shall use all
reasonable efforts to furnish to each other all information required for
any application or other filing to be made pursuant to any Applicable Law
in connection with the Merger and the other transactions contemplated by
this Agreement. Each party shall promptly inform the other party of any
communication with, and any proposed understanding, undertaking, or
agreement with, any Governmental Authority regarding any such filings or
any such transaction. Neither party shall independently participate in any
formal meeting with any Governmental Authority in respect of any such
filings, investigation, or other inquiry without giving the other party
prior notice of the meeting and, to the extent permitted by such
Governmental Authority, the opportunity to attend and/or participate. The
parties hereto will consult and cooperate with one another, in connection
with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any
party hereto in connection with proceedings under or relating to the HSR
Act or other Antitrust Laws.
(ii) Each of Cardinal and Bergen shall use all reasonable efforts to
resolve such objections, if any, as may be asserted by any Governmental
Authority with respect to the transactions contemplated by this Agreement
under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign statues, rules, regulations, orders, decrees,
administrative or judicial doctrines or other laws that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or
proceeding is instituted (or threatened to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Antitrust
Law, each of Cardinal and Bergen shall cooperate and use all reasonable
efforts vigorously to contest and resist any such action or proceeding,
including any legislative,
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administrative or judicial action, and to have vacated, lifted, reversed,
or overturned any decree, judgment, injunction or other order whether
temporary, preliminary or permanent (each an "Order"), that is in effect
and that prohibits, prevents, or restricts consummation of the Merger or
any other transactions contemplated by this Agreement, including, without
limitation, by vigorously pursuing all available avenues of administrative
and judicial appeal and all available legislative action, unless by mutual
agreement Cardinal and Bergen decide that litigation is not in their
respective best interests. Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 5.1(a) shall limit a
party's right to terminate this Agreement pursuant to Section 7.1, so long
as such party has up to then complied in all material respects with its
obligations under this Section 5.1(a). Each of Cardinal and Bergen shall
use all reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under the HSR Act or other Antitrust
Laws with respect to such transactions as promptly as possible after the
execution of this Agreement.
(iii) Each of the parties agrees to use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement, including (A) the obtaining of all other
necessary actions or nonactions, waivers, consents, licenses, permits,
authorizations, orders and approvals from Governmental Authorities and the
making of all other necessary registrations and filings (including filings
under the New Jersey Industrial Site Recovery Act, if applicable, and other
filings with Governmental Authorities, if any), (B) the obtaining of all
consents, approvals or waivers from third parties related to or required in
connection with the Merger that are necessary to consummate the Merger and
the transactions contemplated by this Agreement or required to prevent a
Material Adverse Effect on Cardinal or Bergen from occurring prior to or
after the Effective Time, (C) the preparation of the Joint Proxy Statement,
the Prospectus and the Registration Statement, (D) the taking of all action
necessary to ensure that it is a "poolable entity" eligible to participate
in a transaction to be accounted for as a pooling of interests for
financial reporting purposes and to ensure that the Merger constitutes a
tax-free reorganization within the meaning of Section 368(a)(1)(A), and (E)
the execution and delivery of any additional instruments necessary to
consummate the transaction contemplated by, and to fully carry out the
purposes of, this Agreement.
(iv) Notwithstanding anything to the contrary in this Agreement,
neither Cardinal nor Bergen shall be required to hold separate (including
by trust or otherwise) or divest any of their respective businesses or
assets, provided, however, that unless Cardinal and Bergen otherwise agree,
if required to avoid an HSR Authority instituting an Action challenging the
transactions under this Agreement under the Antitrust Laws and seeking to
enjoin or prohibit the consummation of any of the transactions contemplated
by this Agreement, Cardinal shall and, at the direction of Cardinal, Bergen
shall, hold separate (including by trust or otherwise) or divest any of
their respective businesses or assets, or take or agree to take any action
or agree to any limitation required to avoid an HSR Authority instituting
an Action challenging the transactions under this Agreement under the
Antitrust Laws and seeking to enjoin or prohibit the consummation of any of
the transactions contemplated hereby unless such action would reasonably be
expected to have a material adverse effect on the assets, liabilities,
results of operations or financial condition of Cardinal combined with the
Surviving Corporation after the Effective Time, or would reasonably be
expected to substantially impair the overall benefits expected, as of the
date hereof, to be realized from consummation of the Merger.
Notwithstanding any other provision of this Section 5.1(a)(iv) neither
party shall be required to (i) waive any of the conditions to the Merger
set forth in Article VI of this Agreement as they apply to such party, or
(ii) divest any of their respective businesses or assets if the
divestitures would be required to be consummated prior to the Effective
Time.
(b) Pooling-of-Interests. Each of the parties agrees that it shall not,
and shall not permit any of its subsidiaries to, take any actions which would,
or would be reasonably likely to, prevent Cardinal from accounting, and shall
use its best efforts (including, without limitation, providing appropriate
representation letters to Cardinal's accountants) to allow Cardinal to account,
for the Merger in accordance with the pooling-of-interests method of accounting
under the requirements of Opinion No. 16 "Business Combinations" of the
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Accounting Principles Board of the American Institute of Certified Public
Accountants, as amended by applicable pronouncements by the Financial Accounting
Standards Board, and all related published rules, regulations and policies of
the Commission ("APB No. 16"), and to obtain a letter, in form and substance
reasonably satisfactory to Cardinal, from Deloitte & Touche LLP dated the date
of the Effective Time and, if requested by Cardinal, dated the date of the Joint
Proxy Statement stating that they concur with management's conclusion that the
Merger will qualify as a transaction to be accounted for by Cardinal in
accordance with the pooling of interests method of accounting under the
requirements of APB No. 16.
(c) Tax-Free Treatment. Each of the parties shall use its best efforts to
cause the Merger to constitute a tax-free "reorganization" under Section 368(a)
of the Code and to cooperate with one another in obtaining an opinion from
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A. ("Lowenstein, Sandler"),
counsel to Bergen, as provided for in Section 6.2(d). In connection therewith,
each of Cardinal and Bergen shall deliver to Lowenstein, Sandler representation
letters and Bergen shall use all reasonable efforts to obtain representation
letters from appropriate shareholders of Bergen and shall deliver any such
letters obtained to Lowenstein, Sandler, in each case in form and substance
reasonably satisfactory to Lowenstein, Sandler.
(d) Public Announcements. The initial press release concerning the Merger
and the transactions contemplated hereby shall be a joint press release, which
shall state, among other matters, that subject to the consummation of the
transactions contemplated hereby, Robert E. Martini shall be appointed Chairman
of the Board of Directors of Cardinal to serve in such office until the annual
meeting of Cardinal Shareholders in the year 2000. Unless otherwise required by
Applicable Laws or requirements of the NYSE (and in that event only if time does
not permit), at all times prior to the earlier of the Effective Time or
termination of this Agreement pursuant to Section 7.1, Cardinal and Bergen shall
consult with each other before issuing any press release with respect to the
Merger and shall not issue any such press release prior to such consultation.
5.2. Covenants of Cardinal.
(a) Cardinal Shareholders Meeting. Cardinal shall take all action in
accordance with the federal securities laws, the Ohio Revised Code and the
Cardinal Articles and Code of Regulations, as amended and restated, necessary to
convene a special meeting of Cardinal Shareholders (the "Cardinal Shareholders
Meeting") to be held on the earliest practical date determined by Cardinal,
subject to the consent of Bergen (which shall not be unreasonably withheld), and
to obtain the consent and approval of Cardinal Shareholders with respect to the
Cardinal Shareholder Proposals and the transactions contemplated hereby,
including recommending approval of the Cardinal Shareholder Proposals and
transactions contemplated by this Agreement to the Cardinal Shareholders as set
forth in Section 3.12 of this Agreement.
(b) Preparation of Registration Statement. Cardinal shall, as soon as is
reasonably practicable, prepare the Joint Proxy Statement for filing with the
Commission on a confidential basis. Consistent with the timing for the Cardinal
Shareholders Meeting and the Bergen Shareholders Meeting as determined by
Cardinal, subject to the consent of Bergen (which shall not be unreasonably
withheld), Cardinal shall prepare and file the Registration Statement with the
Commission as soon as is reasonably practicable following clearance of the Joint
Proxy Statement by the Commission and reasonable approval of the Joint Proxy
Statement by Bergen and shall use all reasonable efforts to have the
Registration Statement declared effective by the Commission as promptly as
practicable and to maintain the effectiveness of the Registration Statement
through the Effective Time. If, at any time prior to the Effective Time,
Cardinal shall obtain knowledge of any information pertaining to Cardinal
contained in or omitted from the Registration Statement that would require an
amendment or supplement to the Registration Statement or the Joint Proxy
Statement, Cardinal will so advise Bergen in writing and will promptly take such
action as shall be required to amend or supplement the Registration Statement
and/or the Joint Proxy Statement. Cardinal shall promptly furnish to Bergen all
information concerning it as may be required for the Joint Proxy Statement and
any supplements or amendments thereto. Cardinal shall cooperate with Bergen in
the preparation of the Joint Proxy Statement in a timely fashion and shall use
all reasonable efforts to assist Bergen in clearing the Joint Proxy Statement
with the Staff of the Commission, such Joint Proxy Statement to include the
recommendation of the Cardinal Board of Directors referred to in Section 3.12
above. Cardinal also shall take such other reasonable actions (other than
qualifying to do business in any jurisdiction in which it is not so qualified)
required to be taken
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under any applicable state securities laws in connection with the issuance of
Cardinal Common Shares in the Merger.
(c) Conduct of Cardinal's Operations. During the period from the date of
this Agreement to the Effective Time, Cardinal shall use its reasonable efforts
to maintain and preserve its business organization and to retain the services of
its officers and key employees and maintain relationships with customers,
suppliers and other third parties to the end that their goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time, Cardinal shall not, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby or as
set forth in Section 5.2(c) to the Cardinal Disclosure Schedule, without the
prior written consent of Bergen:
(i) change any method or principle of accounting in a manner that is
inconsistent with past practice except to the extent required by generally
accepted accounting principles as advised by Cardinal's regular independent
accountants;
(ii) take any action that could likely result in the representations
and warranties set forth in Article III becoming false or inaccurate in any
material respect;
(iii) make any changes in the Cardinal Articles that would adversely
affect in any material respect the rights and preferences of the holders of
Cardinal Common Shares or make any changes in the Amended and Restated
Certificate of Incorporation of Subcorp;
(iv) acquire a material amount of assets or capital stock of any other
person if such acquisition would materially and adversely affect the
ability of Section 6.1(b) to be satisfied on or prior to April 30, 1998
(and, in any case, Cardinal agrees to give Bergen reasonable prior notice
of any acquisition of a material amount of assets or capital stock of any
other person);
(v) permit or cause any subsidiary to do any of the foregoing or agree
or commit to do any of the foregoing; or
(vi) agree in writing or otherwise to take any of the foregoing
actions.
(d) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Cardinal shall cause
(including, to the extent required, providing sufficient funding to enable
the Surviving Corporation to satisfy all of its obligations under this
Section 5.2(d)(i)), the Surviving Corporation to indemnify, defend and hold
harmless the present and former officers and directors of Bergen in respect
of acts or omissions occurring prior to the Effective Time to the fullest
extent provided or permitted under the Bergen Certificate, as amended and
restated, the Bergen Bylaws, and the indemnification agreements disclosed
in Section 5.2(d) to the Bergen Disclosure Schedule in effect on the date
hereof.
(ii) Cardinal shall use all reasonable efforts to cause the Surviving
Corporation or Cardinal to obtain and maintain in effect for a period of
six years after the Effective Time policies of directors' and officers'
liability insurance at no cost to the beneficiaries thereof with respect to
acts or omissions occurring prior to the Effective Time with substantially
the same coverage and containing substantially similar terms and conditions
as existing policies; provided, however, that neither the Surviving
Corporation nor Cardinal shall be required to pay an aggregate premium for
such insurance coverage in excess of 325% of the amount set forth in
Section 4.17(k) to the Bergen Disclosure Schedule.
(iii) Cardinal covenants and agrees from and after the Effective Time
to (A) provide to the directors of Bergen who become directors of Cardinal
directors' and officers' liability insurance on the same basis and to the
same extent as that, if any, provided to other directors of Cardinal, and
(B) enter into indemnification agreements with the directors of Bergen who
become directors of Cardinal on terms entered into with other directors of
Cardinal generally.
(e) Merger Sub. Prior to the Effective Time, Subcorp shall not conduct any
business or make any investments other than as specifically contemplated by this
Agreement and will not have any assets (other
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than a de minimis amount of cash paid to Subcorp for the issuance of its stock
to Cardinal) or any material liabilities.
(f) NYSE Listing. Cardinal shall use its reasonable efforts to cause the
Cardinal Common Shares issuable pursuant to the Merger (including, without
limitation, the Cardinal Common Shares issuable upon the exercise of the
Cardinal Exchange Options) to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Effective Time.
(g) Access. Cardinal shall permit representatives of Bergen to have
appropriate access at all reasonable times to Cardinal's premises, properties,
books, records, contracts, documents, customers and suppliers. Information
obtained by Bergen pursuant to this Section 5.2(g) shall be subject to the
provisions of the confidentiality agreement between Cardinal and Bergen dated
July 23, 1997 (the "Confidentiality Agreement"), which agreement remains in full
force and effect. No investigation conducted pursuant to this Section 5.2(g)
shall affect or be deemed to modify any representation or warranty made in this
Agreement.
(h) Board of Directors of Cardinal. The Board of Directors of Cardinal
shall take all action necessary immediately following the Effective Time to
elect each of Robert E. Martini and Donald R. Roden and two other persons from
the Board of Directors of Bergen as of the date of this Agreement (designated by
Robert E. Martini and reasonably acceptable to Cardinal) as a director of
Cardinal (with Messrs. Robert E. Martini and Donald R. Roden being assigned to
the class of directors whose term of office expires at Cardinal's third annual
meeting of shareholders after the Effective Time and second annual meeting of
shareholders after the Effective Time, respectively, and the other two persons
being assigned to the class or classes of directors with a vacancy (other than
those vacancies to be filled by Robert E. Martini and Donald R. Roden) and with
the longest term of office available) effective as of the Effective Time, for a
term expiring at Cardinal's next annual meeting of stockholders following the
Effective Time at which the term of the class to which such director belongs
expires, subject to being renominated as a director at the discretion of
Cardinal's Board of Directors. The Board of Directors of Cardinal shall take all
action necessary immediately following the Effective Time to (i) elect Robert E.
Martini as the Chairman of the Board of Cardinal; (ii) elect Robert D. Walter as
the Chairman of the Executive Committee of the Board of Directors of Cardinal;
(iii) reformulate the Executive Committee of the Cardinal Board of Directors by
appointing each of Robert D. Walter, Robert E. Martini, Donald R. Roden and
three other members designated by Robert D. Walter to the Executive Committee of
the Board of Directors of Cardinal; and (iv) elect Donald R. Roden as
Co-President of Cardinal, effective as of the Effective Time, to hold such
offices until his successor is elected and qualified, subject to being reelected
or reappointed to such positions at the discretion of Cardinal's Board of
Directors.
(i) Corporate Name. Subject to approval of the holders of Cardinal Common
Shares (the "Cardinal Shareholders") at the Cardinal Shareholders Meeting of an
amendment to Article First of the Cardinal Articles, as soon as practicable
following the Effective Time, Article First of the Cardinal Articles shall read
"The name of the corporation shall be 'Cardinal Bergen Health, Inc.' " At any
time prior to the Cardinal Shareholders Meeting, Cardinal and Bergen may agree
to change the proposed name for Cardinal following the Effective Time.
(j) Affiliates of Cardinal. Cardinal shall cause each such person who may
be at the Effective Time or was on the date hereof an "affiliate" of Cardinal
for purposes of applicable accounting releases of the Commission with respect to
pooling of interests accounting treatment, to execute and deliver to Bergen no
less than 30 days prior to the date of the Cardinal Shareholders Meeting, the
written undertakings in the form attached hereto as Exhibit A-2 (the "Cardinal
Affiliate Letter").
(k) Notification of Certain Matters. Cardinal shall give prompt notice to
Bergen of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any Cardinal representation or warranty
contained in this Agreement to be untrue or inaccurate at or prior to the
Effective Time in any material respect and (ii) any material failure of Cardinal
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.2(k) shall not limit or otherwise affect the
remedies available hereunder to Bergen.
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(l) Employees and Employee Benefit. From and after the Effective Time,
Cardinal shall treat all service by Bergen Employees (as defined below) with
Bergen and their respective predecessors prior to the Effective Time for all
purposes as service with Cardinal (except to the extent such treatment would
result in duplicative accrual on or after the Closing Date of benefits for the
same period of service), and, with respect to any medical or dental benefit plan
in which Bergen Employees participate after the Effective Time, Cardinal shall
waive or cause to be waived any pre-existing condition exclusions and
actively-at-work requirements (provided, however, that no such waiver shall
apply to a pre-existing condition of any Bergen Employee who was, as of the
Effective Time, excluded from participation in a Bergen Benefit Plan by virtue
of such pre-existing condition), and shall provide that any covered expenses
incurred on or before the Effective Time by a Bergen Employee or a Bergen
Employee's covered dependent shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time to the same extent as such expenses are
taken into account for the benefit of similarly situated employees of Cardinal
and subsidiaries of Cardinal. For purposes of this Section 5.2(l), "Bergen
Employees" shall mean persons who are, as of the Effective Time, employees of
Bergen.
5.3. Covenants of Bergen.
(a) Bergen Shareholders Meeting. Bergen shall take all action in
accordance with the federal securities laws, the NJBCA and the Bergen
Certificate and the Bergen Bylaws necessary to convene a special meeting of
Bergen Shareholders (the "Bergen Shareholders Meeting") to be held on the
earliest practicable date determined by Cardinal, subject to the consent of
Bergen (which shall not be unreasonably withheld), to consider and vote upon
approval of the Merger, this Agreement and the transactions contemplated hereby.
(b) Information for the Registration Statement and Preparation of Joint
Proxy Statement. Bergen shall promptly furnish Cardinal with all information
concerning it as may be required for inclusion in the Registration Statement.
Bergen shall cooperate with Cardinal in the preparation of the Registration
Statement in a timely fashion and shall use all reasonable efforts to assist
Cardinal in having the Registration Statement declared effective by the
Commission as promptly as practicable consistent with the timing for the
Cardinal Shareholders Meeting and the Bergen Shareholders Meeting as determined
by Cardinal, subject to the consent of Bergen (which shall not be unreasonably
withheld). If, at any time prior to the Effective Time, Bergen obtains knowledge
of any information pertaining to Bergen that would require any amendment or
supplement to the Registration Statement or the Joint Proxy Statement, Bergen
shall so advise Cardinal and shall promptly furnish Cardinal with all
information as shall be required for such amendment or supplement and shall
promptly amend or supplement the Registration Statement and/or Joint Proxy
Statement. Bergen shall use all reasonable efforts to cooperate with Cardinal in
the preparation and filing of the Joint Proxy Statement with the Commission on a
confidential basis. Consistent with the timing for the Cardinal Shareholders
Meeting and the Bergen Shareholders Meeting as determined by Cardinal, subject
to the consent of Bergen (which shall not be unreasonably withheld), Bergen
shall use all reasonable efforts to mail at the earliest practicable date to
Bergen Shareholders the Joint Proxy Statement, which shall include all
information required under Applicable Law to be furnished to Bergen Shareholders
in connection with the Merger and the transactions contemplated thereby and
shall include the Bergen Board Recommendation to the extent not previously
withdrawn in compliance with Section 5.3(d) and the written opinion of Merrill
Lynch described in Section 4.23.
(c) Conduct of Bergen's Operations. Bergen shall conduct its operations in
the ordinary course except as expressly contemplated by this Agreement and the
transactions contemplated hereby and shall use all reasonable efforts to
maintain and preserve its business organization and its material rights and
franchises and to retain the services of its officers and key employees and
maintain relationships with customers, suppliers, lessees, licensees and other
third parties, and to maintain all of its operating assets in their current
condition (normal wear and tear excepted), to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Time, Bergen shall not, except as otherwise expressly
contemplated by this
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Agreement and the transactions contemplated hereby or as set forth in Section
5.3(c) to the Bergen Disclosure Schedule, without the prior written consent of
Cardinal:
(i) do or effect any of the following actions with respect to its
securities: (A) adjust, split, combine or reclassify its capital stock, (B)
make, declare or pay any dividend (other than regular quarterly dividends
on Bergen Common Stock of $0.12 per share with record and payment dates
consistent with past practice) or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for
any shares of its capital stock, (C) grant any person any right or option
to acquire any shares of its capital stock, provided, however, that Bergen
may grant options with a fair market value exercise price to purchase up to
1% of the number of shares of Bergen Common Stock outstanding as of the
date of this Agreement to employees of Bergen in the ordinary course
consistent with prior practice or in connection with acquisitions of assets
or capital stock permitted pursuant to clause (v) below, (D) issue, deliver
or sell or agree to issue, deliver or sell any additional shares of its
capital stock or any securities or obligations convertible into or
exchangeable or exercisable for any shares of its capital stock or such
securities (except pursuant to the exercise of Bergen Options which are
outstanding as of the date hereof or which are granted by Bergen prior to
the Effective Time in compliance with the terms of this Agreement), or (E)
enter into any agreement, understanding or arrangement with respect to the
sale, voting, registration or repurchase of its capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge, mortgage,
encumber or otherwise dispose of any of its property or assets other than
in the ordinary course of business;
(iii) make or propose any changes in the Bergen Certificate or the
Bergen Bylaws;
(iv) merge or consolidate with any other person (other than as
permitted, in each case, by Section 5.3(d));
(v) acquire for cash a material amount of assets or capital stock of
any other person valued, giving effect to assumed indebtedness, at more
than $50 million per transaction and $100 million in the aggregate (and, in
each case, Bergen shall give Cardinal reasonable prior notice of any such
acquisition or agreement to make such an acquisition); provided, that to
the extent Cardinal consents to any such acquisition, such acquisition
shall not be taken into account in computing the dollar limitations in this
clause (v); and provided further, that Bergen shall not make any
acquisition if such acquisition would materially and adversely affect the
ability of Section 6.1(b) to be satisfied on or prior to April 30, 1998;
(vi) amend or modify, or propose to amend or modify, the Bergen Rights
Agreement, as amended as of the date hereof;
(vii) except pursuant to existing credit arrangements, incur, create,
assume or otherwise become liable for any indebtedness for borrowed money
or assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual,
corporation or other entity, other than in the ordinary course of business,
consistent with past practice or in connection with a refinancing of
existing indebtedness (which refinancing shall not increase the aggregate
amount of indebtedness permitted to be outstanding thereunder and shall not
include any covenants that shall be more burdensome to Bergen in any
material respect or increase costs to the Surviving Corporation after the
Effective Time in any material respect);
(viii) create any subsidiaries other than in connection with
acquisitions of assets or capital stock permitted pursuant to clause (v) of
this Section 5.3(c);
(ix) enter into or modify any employment, severance, termination or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officer, director,
consultant or employee other than in the ordinary course of business
consistent with past practice (except for change-of-control severance
agreements that in all cases shall require the prior written consent of
Cardinal), or otherwise increase the compensation or benefits provided to
any officer, director, consultant or employee except as may be required by
Applicable Law or in the ordinary course
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of business consistent with past practice; provided, however, that Bergen
may implement a stay-bonus program providing for bonuses in an aggregate
amount, together with any severance benefits payable to Bergen employees in
such program or otherwise, not to exceed $13.75 million for employees of
Bergen (other than employees of Bergen who are in a position of Tier 1 or
Tier 2) and will consult with, but need not have the approval of, Cardinal
prior to implementing any such plans;
(x) enter into, adopt or amend any employee benefit or similar plan
except as may be required by Applicable Law;
(xi) change any method or principle of accounting in a manner that is
inconsistent with past practice except to the extent required by generally
accepted accounting principles as advised by Bergen's regular independent
accountants;
(xii) modify, amend or terminate, or waive, release or assign any
material rights or claims with respect to, any Contract set forth in
Section 4.17 to the Bergen Disclosure Schedule or any Material Contract
other than with respect to modifications or amendments to, terminations of,
waivers or releases under, or assignments of (A) Contracts or Material
Contracts with customers or suppliers entered into in the ordinary course
of business, (B) Contracts relating to existing indebtedness which may be
refinanced in compliance with Section 5.3(c)(vii) hereof, (C) Contracts
relating to the incurrence of or commitment to any capital expenditures up
to $1 million individually or $5 million in the aggregate or as set forth
in the budget set forth in Section 5.3(c) to the Bergen Disclosure
Schedule, or (D) without the prior written consent of Cardinal (which
consent shall not be unreasonably withheld) any other material Contract or
Material Contract to which Bergen is a party or any confidentiality
agreement to which Bergen is a party;
(xiii) enter into any confidentiality agreements or arrangements other
than in the ordinary course of business consistent with past practice;
(xiv) incur or commit to any capital expenditures, individually or in
the aggregate, in excess of 120% of the amount set forth in Bergen's
capital expenditure budget, which amount is set forth in Section 5.3(c) to
the Bergen Disclosure Schedule;
(xv) except as contemplated by Section 5.2(d)(ii), make any payments
in respect of policies of directors' and officers' liability insurance
(premiums or otherwise) other than amounts paid pursuant to current
policies or any policies replacing such policies not in excess of 200% of
the amount set forth in Section 4.17(k) to the Bergen Disclosure Schedule;
(xvi) take any action to exempt or make not subject to (x) the
provisions of the NJSPA or (y) any other state takeover law or state law
that purports to limit or restrict business combinations or the ability to
acquire or vote shares, any person or entity (other than Cardinal or its
subsidiaries) or any action taken thereby, which person, entity or action
would have otherwise been subject to the restrictive provisions thereof and
not exempt therefrom;
(xvii) take any action that will likely result in the representations
and warranties set forth in Article IV becoming false or inaccurate in any
material respect;
(xviii) enter into or carry out any other transaction other than in
the ordinary and usual course of business or other than as permitted
pursuant to the other clauses in this Section 5.3(c);
(xix) permit or cause any subsidiary to do any of the foregoing or
agree or commit to do any of the foregoing; or
(xx) agree in writing or otherwise to take any of the foregoing
actions.
(d) No Solicitation. Bergen agrees that, during the term of this
Agreement, it shall not, and shall not authorize or permit any of its
subsidiaries or any of its or its subsidiaries' directors, officers, employees,
agents or representatives, directly or indirectly, to solicit, initiate,
encourage or facilitate, or furnish or disclose non-public information in
furtherance of, any inquiries or the making of any proposal with respect to any
recapitalization, merger, consolidation or other business combination involving
Bergen, or acquisition of any
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capital stock from Bergen (other than upon exercise of Bergen Options which are
outstanding as of the date hereof and other than to the extent specifically
permitted by Section 5.3(c)(i)) or 15% or more of the assets of Bergen and its
subsidiaries, taken as a whole, in a single transaction or a series of related
transactions, or any acquisition by Bergen of any material assets or capital
stock of any other person (other than to the extent specifically permitted by
Section 5.3(c)(v)), or any combination of the foregoing (a "Competing
Transaction"), or negotiate, explore or otherwise engage in discussions with any
person (other than Cardinal, Subcorp or their respective directors, officers,
employees, agents and representatives) with respect to any Competing Transaction
or enter into any agreement, arrangement or understanding requiring it to
abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by this Agreement; provided that, at any time prior to the approval
of the Merger by the Bergen Shareholders, Bergen may furnish information to, and
negotiate or otherwise engage in discussions with, any party who delivers a
written proposal for a Competing Transaction which was not solicited or
encouraged after the date of this Agreement if and so long as the Board of
Directors of Bergen determines in good faith by a majority vote, after
consultation with and receipt of advice from its outside legal counsel, that
failing to take such action would constitute a breach of the fiduciary duties of
the Board of Directors of Bergen under Applicable Law and determines that such a
proposal is, after consulting with Merrill Lynch (or any other nationally
recognized investment banking firm), more favorable to Bergen's Stockholders
from a financial point of view than the transactions contemplated by this
Agreement (including any adjustment to the terms and conditions proposed by
Cardinal in response to such Competing Transaction). Bergen will immediately
cease all existing activities, discussions and negotiations with any parties
conducted heretofore with respect to any proposal for a Competing Transaction.
Notwithstanding any other provision of this Section 5.2(d), in the event that
prior to the approval of the Merger by the Bergen Shareholders the Board of
Directors of Bergen determines in good faith by a majority vote, after
consultation with and receipt of advice from outside legal counsel, that failure
to do so would constitute a breach of the fiduciary duties of the Bergen Board
of Directors under Applicable Law, the Board of Directors of Bergen may (subject
to this and the following sentences) withdraw, modify or change, in a manner
adverse to Cardinal, the Bergen Board Recommendation and, to the extent
applicable, comply with Rule 14e-2 promulgated under the Exchange Act with
respect to a Competing Transaction by disclosing such withdrawn, modified or
changed Bergen Board Recommendation in connection with a tender or exchange
offer for Bergen securities, provided that it uses all reasonable efforts to
give Cardinal two days prior written notice of its intention to do so (provided
that the foregoing shall in no way limit or otherwise affect Cardinal's right to
terminate this Agreement pursuant to Section 7.1(d)). The Bergen Board of
Directors shall not, in connection with any such withdrawal, modification or
change of the Bergen Board Recommendation, take any action to change the
approval of the Board of Directors of Bergen for purposes of causing any state
takeover statute or other state law to be inapplicable to the transactions
contemplated hereby, including the Merger, the Bergen Stock Option Agreement or
the Support Agreement. From and after the execution of this Agreement, Bergen
shall immediately advise Cardinal in writing of the receipt, directly or
indirectly, of any inquiries, discussions, negotiations, or proposals relating
to a Competing Transaction (including the specific terms thereof and the
identity of the other party or parties involved) and furnish to Cardinal within
24 hours of such receipt an accurate description of all material terms
(including any changes or adjustments to such terms as a result of negotiations
or otherwise) of any such written proposal in addition to any information
provided to any third party relating thereto. In addition, Bergen shall
immediately advise Cardinal, in writing, if the Board of Directors of Bergen
shall make any determination as to any Competing Transaction as contemplated by
the proviso to the first sentence of this Section 5.3(d).
(e) Termination Right. If prior to the approval of the Merger by the
Bergen Shareholders the Board of Directors of Bergen shall determine in good
faith, after consultation with its financial and legal advisors, with respect to
any written proposal from a third party for a Competing Transaction received
after the date hereof that was not solicited or encouraged by Bergen or any of
its subsidiaries or affiliates in violation of this Agreement that failure to
enter into such Competing Transaction would constitute a breach of the fiduciary
duties of the Board of Directors of Bergen under Applicable Law and that such
Competing Transaction is more favorable to the Bergen Shareholders from a
financial point of view than the transactions contemplated by this Agreement
(including any adjustment to the terms and conditions of such transaction
proposed in writing by Cardinal in response to such Competing Transaction) and
is in the best interest of the Bergen
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Shareholders and Bergen has received (x) the advice of its outside legal counsel
as to whether failure to enter into such a Competing Transaction would
constitute a breach of the Board of Directors' fiduciary duties under Applicable
Law and (y) an opinion (a copy of which, if delivered in writing, has been
delivered to Cardinal) from Merrill Lynch (or any other nationally recognized
investment banking firm) that the Competing Transaction is more favorable from a
financial point of view to the Bergen Shareholders than the transactions
contemplated by this Agreement (including any adjustment to the terms and
conditions of such transaction proposed in writing by Cardinal), Bergen may
terminate this Agreement and enter into a letter of intent,
agreement-in-principle, acquisition agreement or other similar agreement (each,
an "Acquisition Agreement") with respect to such Competing Transaction provided
that, prior to any such termination, (i) Bergen has provided Cardinal written
notice that it intends to terminate this Agreement pursuant to this Section
5.3(e), identifying the Competing Transaction then determined to be more
favorable and the parties thereto and delivering an accurate description of all
material terms (including any changes or adjustments to such terms as a result
of negotiations or otherwise) of the Acquisition Agreement to be entered into
for such Competing Transaction, and (ii) at least three full business days after
Bergen has provided the notice referred to in clause (i) above (provided that
the advice and opinion referred to in clauses (x) and (y) above shall continue
in effect without revocation, revision or modification), Bergen delivers to
Cardinal (A) a written notice of termination of this Agreement pursuant to this
Section 5.3(e), (B) a check in the amount of Cardinal's Costs (as defined in
Section 7.2) as the same may have been estimated by Cardinal in good faith prior
to the date of such delivery (subject to an adjustment payment between the
parties upon Cardinal's definitive determination of such Costs), plus the amount
of the termination fee as provided in Section 7.2, (C) a written acknowledgment
from Bergen that (x) the termination of this Agreement and the entry into the
Acquisition Agreement for the Competing Transaction will be a "Purchase Event"
as defined in the Bergen Stock Option Agreement and (y) the Bergen Stock Option
Agreement shall be honored in accordance with its terms and (D) a written
acknowledgment from each other party to such Competing Transaction that it is
aware of the substance of Bergen's acknowledgment under clause (C) above and
waives any right it may have to contest the matters thus acknowledged by Bergen.
(f) Affiliates of Bergen. Bergen shall cause each such person who may be
at the Effective Time or was on the date hereof an "affiliate" of Bergen for
purposes of Rule 145 under the Securities Act or applicable accounting releases
of the Commission with respect to pooling of interests accounting treatment, to
execute and deliver to Cardinal no less than 30 days prior to the date of the
Bergen Shareholders Meeting, the written undertakings in the form attached
hereto as Exhibit A-1 (the "Bergen Affiliate Letter"). No later than 45 days
prior to the date of the Bergen Shareholders Meeting, Bergen, after consultation
with its outside counsel, shall provide Cardinal with a letter (reasonably
satisfactory to outside counsel to Cardinal) specifying all of the persons or
entities who, in Bergen's opinion, may be deemed to be "affiliates" of Bergen
under the preceding sentence. The foregoing notwithstanding, Cardinal shall be
entitled to place legends as specified in the Bergen Affiliate Letter on the
certificates evidencing any of the Cardinal Common Shares to be received by (i)
any such "affiliate" of Bergen specified in such letter or (ii) any person
Cardinal reasonably identifies (by written notice to Bergen) as being a person
who may be deemed an "affiliate" for purposes of Rule 145 under the Securities
Act or applicable accounting releases of the Commission with respect to pooling
of interests accounting treatment, pursuant to the terms of this Agreement, and
to issue appropriate stop transfer instructions to the transfer agent for the
Cardinal Common Shares, consistent with the terms of the Bergen Affiliate
Letter, regardless of whether such person has executed the Bergen Affiliate
Letter and regardless of whether such person's name appears on the letter to be
delivered pursuant to the preceding sentence.
(g) Access. Bergen shall permit representatives of Cardinal to have
appropriate access at all reasonable times to Bergen's premises, properties,
books, records, contracts, documents, customers and suppliers. Information
obtained by Cardinal pursuant to this Section 5.3(g) shall be subject to the
provisions of the Confidentiality Agreement, which agreement remains in full
force and effect. No investigation conducted pursuant to this Section 5.3(g)
shall affect or be deemed to modify any representation or warranty made in this
Agreement.
(h) Notification of Certain Matters. Bergen shall give prompt notice to
Cardinal of (i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would cause any Bergen
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representation or warranty contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time in any material respect and (ii)
any material failure of Bergen to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.3(h) shall
not limit or otherwise affect the remedies available hereunder to Cardinal.
(i) Subsequent Financial Statements. Bergen shall consult with Cardinal
prior to making publicly available its financial results for any period after
the date of this Agreement and prior to filing any Bergen SEC Documents after
the date of this Agreement.
(j) Employee Agreements; Trust Amendment. Bergen shall use its reasonable
efforts to cause each of the employees of Bergen specified in Section 5.3(j) to
the Bergen Disclosure Schedule to execute and deliver an Employee Agreement with
Bergen substantially in the form attached to Section 4.28 to the Bergen
Disclosure Schedule as soon as possible after the date of this Agreement. Bergen
shall use its best efforts to cause the Trustee to execute the Trust Amendment
as soon as possible after the date of this Agreement.
ARTICLE VI.
CONDITIONS
6.1. Conditions to the Obligations of Each Party. The obligations of
Bergen, Cardinal and Subcorp to consummate the Merger shall be subject to the
satisfaction of the following conditions:
(a) (i) This Agreement, the Merger and the transactions contemplated hereby
shall have been approved and adopted by the Bergen Shareholders in the manner
required by any Applicable Law, and (ii) the issuance of the Cardinal Common
Shares to be issued in the Merger (and the transactions contemplated hereby) and
the increase in the number of authorized Cardinal Common Shares shall have been
approved by the Cardinal Shareholders in the manner required by any Applicable
Law and the applicable rules of the NYSE.
(b) Any applicable waiting periods under the HSR Act relating to the Merger
and the transactions contemplated by this Agreement shall have expired or been
terminated.
(c) No provision of any applicable law or regulation, as supported by
written opinion of outside legal counsel, and no judgment, injunction, order or
decree shall prohibit or enjoin the consummation of the Merger or the
transactions contemplated by this Agreement.
(d) There shall not be pending any Action by any Governmental Authority (i)
challenging or seeking to restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement, (ii) except to the
extent consistent with the obligations of Bergen and Cardinal under Section
5.1(a), seeking to prohibit or limit the ownership or operation by Cardinal,
Bergen or any of their respective subsidiaries of, or to compel Cardinal, Bergen
or any of their respective subsidiaries to dispose of or hold separate, any
material portion of the business or assets of Cardinal, Bergen or any of their
respective subsidiaries, as a result of the Merger or any of the other
transactions contemplated by this Agreement, (iii) seeking to impose limitations
on the ability of Cardinal to acquire or hold, or exercise full rights of
ownership of, any shares of capital stock of the Surviving Corporation,
including the right to vote such capital stock on all matters properly presented
to the stockholders of the Surviving Corporation or (iv) seeking to prohibit
Cardinal or any subsidiary of Cardinal from effectively controlling in any
material respect the business or operations of Cardinal or the subsidiaries of
Cardinal.
(e) The Commission shall have declared the Cardinal Registration Statement
effective under the Securities Act, and no stop order or similar restraining
order suspending the effectiveness of the Cardinal Registration Statement shall
be in effect and no proceedings for such purpose shall be pending before or
threatened by the Commission or any state securities administrator.
(f) The Cardinal Common Shares to be issued in the Merger (including,
without limitation, the Cardinal Common Shares issuable upon the exercise of the
Cardinal Exchange Options) shall have been approved for listing on the NYSE,
subject to official notice of issuance.
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(g) Cardinal shall have received a letter, in form and substance reasonably
satisfactory to Cardinal and Bergen, from Deloitte & Touche LLP dated the date
of the Effective Time stating that they concur with the conclusion of Cardinal's
management that the Merger will qualify as a transaction to be accounted for by
Cardinal in accordance with the pooling of interests method of accounting under
the requirements of APB No. 16.
6.2. Conditions to Obligations of Bergen. The obligations of Bergen to
consummate the Merger and the transactions contemplated hereby shall be subject
to the fulfillment of the following conditions unless waived by Bergen:
(a) Each of the representations and warranties of each of Cardinal and
Subcorp set forth in Article III:
(i) which is qualified by materiality or contains references to
Material Adverse Effect shall be true and correct in all respects on the
date hereof and on and as of the Closing Date as though made on and as of
the Closing Date (except for such representations and warranties made as of
a specified date, the accuracy of which will be determined as of the
specified date); provided, however, that
(x) with respect to any Non-Recurring Non-Attributable Change, the
aggregate amount excluded from the determination of whether there has
been a Material Adverse Effect on Cardinal from all such Non-Recurring
Non-Attributable Changes applied to all of the representations and
warranties of Cardinal shall not exceed $30 million (without giving
effect to any tax consequences), and
(y) solely for purposes of Section 7.1(j)(iii) of this Agreement,
Attributable Changes with respect to Cardinal may be considered in
determining whether there has been any Material Adverse Effect on
Cardinal; and
(ii) which is not qualified by materiality and does not contain any
reference to Material Adverse Effect shall be true and correct in all
material respects on the date hereof and on and as of the Closing Date as
though made on and as of the Closing Date (except for such representations
and warranties made as of a specified date, the accuracy of which will be
determined as of the specified date).
The representations and warranties of each of Cardinal and Subcorp set forth in
Article III shall be true and correct in all respects on the date hereof and on
and as of the Closing Date as though made on and as of the Closing Date (except
for such representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date), except where any
such failure of the representations and warranties in the aggregate to be true
and correct in all respects would not have a Material Adverse Effect on Cardinal
(disregarding, for purposes of this provision, the Material Adverse Effect
qualification in any single representation and warranty); provided, however,
that, solely for purposes of Section 7.1(j)(iii) of this Agreement, Attributable
Changes with respect to Cardinal may be considered in determining whether there
has been any Material Adverse Effect on Cardinal.
(b) Each of Cardinal and Subcorp shall have performed in all material
respects each obligation and agreement and shall have complied in all material
respects with each covenant to be performed and complied with by it hereunder at
or prior to the Effective Time, except, in all such cases, for acts and
omissions of Cardinal which, in the aggregate, do not have a Material Adverse
Effect on Cardinal.
(c) Each of Cardinal and Subcorp shall have furnished Bergen with a
certificate dated the Closing Date signed on behalf of it by the Chairman,
President or any Vice President to the effect that the conditions set forth in
Sections 6.2(a) and (b) have been satisfied.
(d) Bergen shall have received the opinion of Lowenstein, Sandler, dated on
or prior to the effective date of the Registration Statement, to the effect that
(i) the Merger will constitute a reorganization under section 368(a) of the
Code, (ii) Bergen, Cardinal and Subcorp will each be a party to that
reorganization, and (iii) no gain or loss will be recognized by the shareholders
of Bergen upon the receipt of Cardinal Common Shares in exchange for shares of
Bergen Common Stock pursuant to the Merger except with respect to cash received
in lieu of fractional share interests in Cardinal Common Shares.
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(e) There shall not be pending any Action which is reasonably likely to
have a Material Adverse Effect on Cardinal.
(f) Since the date of this Agreement, there shall not have been any change
in the assets, liabilities, results of operations or financial condition of
Cardinal which would constitute a Material Adverse Effect on Cardinal or any
event, occurrence or development which would have a material adverse effect on
the ability of Cardinal to consummate the transactions contemplated hereby;
provided, however, that solely for purposes of Section 7.1(j)(iii) of this
Agreement, Attributable Changes with respect to Cardinal may be considered in
determining whether there has been any such material adverse change that would
constitute a Material Adverse Effect on Cardinal.
6.3. Conditions to Obligations of Cardinal and Subcorp. The obligations
of Cardinal and Subcorp to consummate the Merger and the other transactions
contemplated hereby shall be subject to the fulfillment of the following
conditions unless waived by Cardinal:
(a) Each of the representations and warranties of Bergen set forth in
Article IV:
(i) which is qualified by materiality or contains references to
Material Adverse Effect shall be true and correct in all respects on the
date hereof and on and as of the Closing Date as though made on and as of
the Closing Date (except for such representations and warranties made as of
a specified date, the accuracy of which will be determined as of the
specified date); provided, however, that
(x) with respect to any Non-Recurring Non-Attributable Change, the
aggregate amount excluded from the determination of whether there has
been a Material Adverse Effect on Bergen from all such Non-Recurring
Non-Attributable Changes applied to all of the representations and
warranties of Bergen shall not exceed $30 million (without giving effect
to any tax consequences), and
(y) solely for purposes of Section 7.1(j)(iii) of this Agreement,
Attributable Changes with respect to Bergen may be considered in
determining whether there has been any Material Adverse Effect on
Bergen; and
(ii) which is not qualified by materiality and does not contain any
reference to Material Adverse Effect shall be true and correct in all
material respects on the date hereof and on and as of the Closing Date as
though made on and as of the Closing Date (except for such representations
and warranties made as of a specified date, the accuracy of which will be
determined as of the specified date).
The representations and warranties of Bergen set forth in Article IV shall be
true and correct in all respects on the date hereof and on and as of the Closing
Date as though made on and as of the Closing Date (except for such
representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), except where any such
failure of the representations and warranties in the aggregate to be true and
correct in all respects would not have a Material Adverse Effect on Bergen
(disregarding, for purposes of this provision, the Material Adverse Effect
qualification in any single representation and warranty); provided, however,
that, solely for purposes of Section 7.1(j)(iii) of this Agreement, Attributable
Changes with respect to Bergen may be considered in determining whether there
has been any Material Adverse Effect on Bergen.
(b) Bergen shall have performed in all material respects each obligation
and agreement and shall have complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the
Effective Time, except, in all such cases, for acts and omissions of Bergen
which, in the aggregate, do not have a Material Adverse Effect on Bergen.
(c) Bergen shall have furnished Cardinal with a certificate dated the
Closing Date signed on its behalf by its Chairman, President or any Vice
President to the effect that the conditions set forth in Sections 6.3(a) and (b)
have been satisfied.
(d) Since the date of this Agreement, there shall not have been any change
in the assets, liabilities, results of operations or financial condition of
Bergen which would constitute a Material Adverse Effect on
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Bergen or any event, occurrence or development which would have a material
adverse effect on the ability of Bergen to consummate the transactions
contemplated hereby; provided, however, that solely for purposes of Section
7.1(j)(iii) of this Agreement, Attributable Changes with respect to Bergen may
be considered in determining whether there has been any such material adverse
change that would constitute a Material Adverse Effect on Bergen.
(e) There shall not have been a material breach of the Bergen Stock Option
Agreement.
(f) There shall not be pending any Action which is reasonably likely to
have a Material Adverse Effect on Bergen.
(g) The Employee Agreements between Bergen and each employee of Bergen set
forth in Section 4.28 to the Bergen Disclosure Schedule, each as in effect as of
the date of this Agreement, shall be in full force and effect and shall not have
been terminated; provided, however, that it is understood that this condition
shall not fail to be satisfied with respect to any such person who is no longer
employed by Bergen so long as Bergen shall not have modified, amended or
terminated, granted any waiver or release under, or assigned any material rights
or claims under the Employee Agreement with such former employee other than in
accordance with its terms.
ARTICLE VII.
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by Bergen Shareholders and Cardinal Shareholders):
(a) by mutual written consent of Cardinal and Bergen;
(b) by either Cardinal or Bergen if there shall be any law or regulation
that, as supported by written opinion of outside legal counsel, makes
consummation of the Merger illegal or otherwise prohibited, or if any judgment,
injunction, order or decree of a court or other competent Governmental Authority
enjoining Cardinal or Bergen from consummating the Merger shall have been
entered and such judgment, injunction, order or decree shall have become final
and nonappealable;
(c) by either Cardinal or Bergen if the Merger shall not have been
consummated before April 30, 1998, provided, however, that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to any
party whose failure or whose affiliate's failure to perform any material
covenant or obligation under this Agreement has been the cause of or resulted in
the failure of the Merger to occur on or before such date;
(d) by Cardinal if the Board of Directors of Bergen shall withdraw, modify
or change the Bergen Board Recommendation in a manner adverse to Cardinal, or if
the Board of Directors of Bergen shall have refused to affirm the Bergen Board
Recommendation as promptly as practicable (but in any case within 10 business
days) after receipt of any written request from Cardinal which request was made
on a reasonable basis;
(e) by Cardinal or Bergen if at the Bergen Shareholders Meeting (including
any adjournment or postponement thereof) the requisite vote of the Bergen
Shareholders to approve the Merger and the transactions contemplated hereby
shall not have been obtained;
(f) by Cardinal or Bergen if the authorization of the Cardinal Shareholders
with respect to the issuance of Cardinal Common Shares in the Merger or the
increase in the number of authorized Cardinal Common Shares shall not have been
obtained by reason of the failure to obtain the required vote at a meeting held
for such purpose;
(g) by Bergen, pursuant to Section 5.3(e);
(h) by Cardinal if Bergen shall have breached in any material respect any
of its obligations under the Bergen Stock Option Agreement or if Mr. Robert E.
Martini shall have breached in any material respect any of his obligations under
the Support Agreement with Cardinal;
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(i) by Cardinal if at any time the representations and warranties of Bergen
set forth in Section 4.15 shall not be true and correct and Cardinal shall have
been advised by Deloitte & Touche LLP that the condition set forth in Section
6.1(g) cannot be satisfied;
(j) by Cardinal or Bergen if:
(i) there shall have been a material breach by the other of any of its
representations, warranties, covenants or agreements contained in this
Agreement, which breach would result in the failure to satisfy one or more
of the conditions set forth in Section 6.2(a) or 6.2(b) (in the case of a
breach by Cardinal) or Section 6.3(a) or 6.3(b) (in the case of a breach by
Bergen) or would result in a material adverse effect on the ability of
Cardinal and/or Bergen to consummate the transactions contemplated hereby,
and such breach shall not have been cured within 30 days after notice
thereof shall have been received by the party alleged to be in breach; or
(ii) the condition set forth in Section 6.3(d) (in the case of a
termination by Cardinal) or Section 6.2(f) (in the case of a termination by
Bergen) is not satisfied; or
(iii) the condition set forth in Sections 6.3(a) or 6.3(d) (in the
case of a termination by Cardinal) or Sections 6.2(a) or 6.2(f) (in the
case of a termination by Bergen) is not satisfied solely because the
proviso regarding Attributable Changes in such section is considered in
determining whether any such condition has been satisfied, provided, that
the terminating party complies with Section 7.4(c) hereof;
(k) by Bergen if at any time the representations and warranties of Cardinal
set forth in Section 3.7 shall not be true and correct and Cardinal shall have
been advised by Deloitte & Touche LLP that the condition set forth in Section
6.1(g) cannot be satisfied; or
(l) by Cardinal or Bergen on one business day's prior notice if either
party has received any communication from the Federal Trade Commission or the
Department of Justice (each an "HSR Authority") (such communication to be
confirmed to the other party by the Bureau Director of the Federal Trade
Commission or such Director's delegate or an Assistant Attorney General or the
latter's delegate) indicating that an HSR Authority has authorized the
institution of litigation challenging the transactions contemplated by this
Agreement under the Antitrust Laws, which litigation will include a motion
seeking an order or injunction prohibiting the consummation of any of the
transactions contemplated by this Agreement; provided, however, that the right
to terminate this Agreement pursuant to this Section 7.1(l) shall only be
exercisable within 10 business days after the receipt by either party of the
first such communication from an HSR Authority.
7.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to Section
7.1, this Agreement, except for the provisions of the second sentence of each of
Section 5.2(g) and Section 5.3(g) and the provisions of Sections 7.2 and 8.11,
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or stockholders. Notwithstanding the foregoing,
nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for a material breach of any provision of this Agreement and provided,
further, however, that if it shall be judicially determined that termination of
this Agreement was caused by an intentional breach of this Agreement, then, in
addition to other remedies at law or equity for breach of this Agreement, the
party so found to have intentionally breached this Agreement shall indemnify and
hold harmless the other parties for their respective out-of-pocket costs, fees
and expenses of their counsel, accountants, financial advisors and other experts
and advisors as well as fees and expenses incident to negotiation, preparation
and execution of this Agreement and related documentation and shareholders'
meetings and consents ("Costs").
(b) Bergen agrees that, if:
(i) Bergen terminates this Agreement pursuant to Sections 5.3(e) and
7.1(g);
(ii) Cardinal terminates this Agreement pursuant to Section 7.1(d) or
7.1(h); or
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(iii) (A) Cardinal or Bergen terminates this Agreement pursuant to
Section 7.1(e), (B) at the time of such failure by Bergen Shareholders to
so approve this Agreement there is a publicly announced or disclosed
Competing Transaction with respect to Bergen involving a third party, and
(C) within 12 months after such termination, Bergen shall enter into an
Acquisition Agreement for a Business Combination (as defined herein) or
consummates a Business Combination;
then, (X) in the case of a termination by Cardinal, within three business days
following any such termination, (Y) in the case of a termination by Bergen as
described in clause (i) above, concurrently with such termination, or (Z) in the
case of a termination by Bergen as described in clause (iii) above where a
Competing Transaction has been publicly announced or publicly disclosed prior to
the Bergen Shareholders Meeting (including any adjournment or postponement
thereof), prior to the earlier consummation of a Business Combination or
execution of a definitive agreement with respect thereto, Bergen will pay to
Cardinal in cash by wire transfer in immediately available funds to an account
designated by Cardinal (i) in reimbursement for Cardinal's expenses an amount in
cash equal to the aggregate amount of Cardinal's Costs incurred in connection
with pursuing the transactions contemplated by this Agreement, including,
without limitation, legal, accounting and investment banking fees, up to but not
in excess of an amount equal to $12 million in the aggregate and (ii) a
termination fee in an amount equal to $75 million (such amounts collectively,
the "Termination Fee"). For the purposes of this Section 7.2, "Business
Combination" means (i) a merger, consolidation, share exchange, business
combination or similar transaction involving Bergen as a result of which the
Bergen Shareholders prior to such transaction in the aggregate cease to own at
least 85% of the voting securities of the entity surviving or resulting from
such transaction (or the ultimate parent entity thereof), (ii) a sale, lease,
exchange, transfer or other disposition of more than 15% of the assets of Bergen
and its subsidiaries, taken as a whole, in a single transaction or a series of
related transactions, or (iii) the acquisition, by a person (other than Cardinal
or any affiliate thereof) or group (as such term is defined under Section 13(d)
of the Exchange Act and the rules and regulations thereunder) of beneficial
ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 15% of
the Bergen Common Stock whether by tender or exchange offer or otherwise.
7.3. Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after adoption of this Agreement by Bergen Shareholders, but after any
such approval, no amendment shall be made which by law requires further approval
or authorization by the Bergen Shareholders without such further approval or
authorization. Notwithstanding the foregoing, this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4. Liquidated Damages.
(a) In the event that the Board of Directors of Cardinal shall withdraw or
change in a manner adverse to Bergen its recommendation as set forth in Section
3.12 of this Agreement, and this Agreement shall have terminated in accordance
with the terms hereof as a result thereof, then within 3 days after delivery of
notice of such termination by Bergen to Cardinal, Cardinal shall pay to Bergen
in cash by wire transfer of immediately available funds to an account designated
by Bergen, as liquidated damages (i) in reimbursement for Bergen's expenses, an
amount of cash equal to the aggregate amount of Bergen's Costs up to but not
equal to $12 million in the aggregate and (ii) the amount of $75 million.
(b) In the event that this Agreement is terminated by Cardinal or Bergen
(the "Terminating Party") pursuant to Section 7.1(j) hereof as a result of the
failure of the other party or its affiliates (the "Breaching Party") to perform
its material covenants and obligations under Section 5.1(a)(i) or 5.1(a)(ii)
hereof, then within 3 days after such termination, the Breaching Party shall pay
to the Terminating Party in cash by wire transfer of immediately available funds
to an account designated by the Terminating Party, as liquidated damages, an
amount of cash equal to $50 million.
(c) In the event that this Agreement is terminated by Cardinal or Bergen
pursuant to Section 7.1(j)(iii) as a result, in whole or in part, of an
Attributable Change with respect to the other party, then contemporaneously with
such termination, the terminating party shall pay in cash by wire transfer of
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immediately available funds to an account designated by the other party as
liquidated damages the amount of $75 million.
7.5. Exclusive Remedy. In the event that any Termination Fee is paid
pursuant to Section 7.2 or any liquidated damages are paid pursuant to Section
7.4, notwithstanding any other provision of this Agreement, it is understood and
agreed that such Termination Fee or liquidated damages, as the case may be,
shall be the exclusive remedy for any act or omission resulting in the
termination of this Agreement or other claim arising out of this Agreement or
the transactions contemplated hereby.
7.6. Extension; Waiver. At any time prior to the Effective Time, Cardinal
(with respect to Bergen) and Bergen (with respect to Cardinal and Subcorp) by
action taken or authorized by their respective Boards of Directors, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE VIII.
MISCELLANEOUS
8.1. Survival of Representations and Warranties. The representations and
warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
hereto, which by its terms contemplates performance after the Effective Time or
after the termination of this Agreement.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Cardinal or Subcorp:
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Attention: Robert D. Walter
Telecopy No.: (614) 717-8919
with a copy to
David A. Katz
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopy No.: (212) 403-2000
(b) if to Bergen:
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, CA 92668
Attention: Milan A. Sawdei
Telecopy No.: (714) 978-1148
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with a copy to
Richard M. Sandler
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068
Telecopy No.: (201) 992-5820
8.3. Interpretation.
(a) When a reference is made in this Agreement to an Article or Section,
such reference shall be to an Article or Section of this Agreement unless
otherwise indicated. The headings and the table of contents contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. When a reference is made in this
Agreement to Bergen, such reference shall be deemed to include any and all
subsidiaries of Bergen, individually and in the aggregate, except for Sections
4.1, 4.2, 4.3, 4.4, 4.8, 4.16, 4.22, 4.23, 4.24, 4.25 and 8.3.
(b) For the purposes of any provision of this Agreement, a "Material
Adverse Effect" with respect to any party shall be deemed to occur if any event,
change or effect, individually or in the aggregate with such other events,
changes or effects, has occurred which has a material adverse effect on the
assets (including intangible assets), liabilities (contingent or otherwise),
results of operations or financial condition of such party and its subsidiaries
taken as a whole; provided, however, that a Material Adverse Effect with respect
to any party shall not include:
(i) any change in or effect upon the assets (including intangible
assets), liabilities (contingent or otherwise), financial condition, or
results of operations of such party or any of its subsidiaries directly or
indirectly arising out of or attributable to any decrease in the market
price of Cardinal Common Shares in the case of Cardinal or Bergen Common
Stock in the case of Bergen (but in either case not any change or effect
underlying such decrease to the extent such change or effect would
otherwise constitute a Material Adverse Effect on such party),
(ii) any change in or effect upon the assets (including intangible
assets), liabilities (contingent or otherwise), financial condition, or
results of operations of such party or any of its subsidiaries directly or
indirectly arising out of or attributable to conditions, events, or
circumstances generally affecting the industries in which Cardinal (and its
subsidiaries) and Bergen (and its subsidiaries) operate,
(iii) except to the extent provided in Section 7.1(j)(iii) of this
Agreement, Attributable Changes,
(iv) (A) a maximum of $30 million in the aggregate (determined without
giving effect to any tax consequences) of Non-Recurring Non-Attributable
Changes in determining whether the conditions set forth in Sections 6.3(d)
or 6.2(f) have been satisfied, and (B) in considering the accuracy of an
individual representation and warranty, such $30 million may be allocated
among the various representations and warranties so long as the aggregate
amount does not exceed $30 million (determined without giving effect to any
tax consequences), or
(v) any change in or effect upon the assets (including intangible
assets), liabilities (contingent or otherwise), financial condition, or
results of operations of such party or any of its subsidiaries directly
attributable to a Permitted Change.
(c) For the purposes of any provision of this Agreement, a "Permitted
Change" with respect to any party shall mean any change specifically
contemplated by the provisions of this Agreement (without reference to the
Bergen Disclosure Schedule or the Cardinal Disclosure Schedule).
(d) For the purposes of any provision of this Agreement, an "Attributable
Change" with respect to any party shall mean any change in or effect upon the
assets (including intangible assets), liabilities (contingent or otherwise),
financial condition, or results of operations of such party or any of its
subsidiaries directly or indirectly arising out of or attributable to the loss
by such party (and its subsidiaries) of any of its customers (including business
of such customers), suppliers or employees (including, without limitation, any
financial
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consequence of such loss of customers (including business of such customers),
suppliers or employees) due primarily to the transactions contemplated hereby or
the public announcement of this Agreement, in each case arising after the date
of this Agreement.
(e) For the purposes of any provision of this Agreement, a
"Non-Attributable Change" with respect to any party shall mean any change in or
effect upon the assets (including intangible assets), liabilities (contingent or
otherwise), financial condition, or results of operations of such party or any
of its subsidiaries that is not an Attributable Change, in each case arising
after the date of this Agreement.
(f) For the purposes of any provision of this Agreement, a "Non-Recurring
Non-Attributable Change" with respect to any party shall mean any
Non-Attributable Change that is a change in or effect upon the results of
operations of such party directly attributable to any non-recurring event,
occurrence or development that would not materially impact the continuing
operations of such party.
(g) For purposes of this Agreement, a "subsidiary" of any person means
another person, an amount of the voting securities or other voting ownership or
voting partnership interests of which is sufficient to elect at least a majority
of its Board of Directors or other governing body (or, if there are no such
voting securities or interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person.
(h) For purposes of this Agreement, "knowledge" of a party shall mean the
actual knowledge of all officers of such party with a title of executive vice
president or higher.
8.4. Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties may execute
more than one copy of the Agreement, each of which shall constitute an original.
8.5. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein), the Support Agreement, the Bergen Stock Option
Agreement and the Confidentiality Agreement constitute the entire agreement
among the parties and supersede all prior agreements and understandings,
agreements or representations by or among the parties, written and oral, with
respect to the subject matter hereof and thereof.
8.6. Third Party Beneficiaries. Except for the agreement set forth in
Section 5.2(d), nothing in this Agreement, express or implied, is intended or
shall be construed to create any third party beneficiaries.
8.7. Governing Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the Merger or to matters arising under or in
connection with this Agreement, this Agreement shall be governed by the laws of
the State of New York. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any state or federal court
sitting in the City of New York.
8.8. Consent to Jurisdiction; Venue.
(a) Each of the parties hereto irrevocably submits to the exclusive
jurisdiction of the state courts of New York and to the jurisdiction of the
United States District Court for the Southern District of New York, for the
purpose of any action or proceeding arising out of or relating to this Agreement
and each of the parties hereto irrevocably agrees that all claims in respect to
such action or proceeding may be heard and determined exclusively in any New
York state or federal court sitting in the City of New York. Each of the parties
hereto agrees that a final judgment in any action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Each of the parties hereto irrevocably consents to the service of any
summons and complaint and any other process in any other action or proceeding
relating to the Merger, on behalf of itself or its property, by the personal
delivery of copies of such process to such party. Nothing in this Section 8.8
shall affect the right of any party hereto to serve legal process in any other
manner permitted by law.
8.9. Specific Performance. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled,
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<PAGE> 147
each of the parties hereto is entitled to a decree of specific performance,
provided such party is not in material default hereunder.
8.10. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.11. Expenses. Subject to the provisions of Section 7.2 and the Bergen
Stock Option Agreement, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expenses, except that those expenses incurred in
connection with filing, printing and mailing the Registration Statement and the
Joint Proxy Statement (including filing fees related thereto) will be shared
equally by Cardinal and Bergen.
IN WITNESS WHEREOF, Cardinal, Subcorp and Bergen have signed this Agreement
as of the date first written above.
CARDINAL HEALTH, INC.
By: /s/ ROBERT D. WALTER
------------------------------------
Name: Robert D. Walter
Title: Chairman and Chief Executive
Officer
BRUIN MERGER CORP.
By: /s/ ROBERT D. WALTER
------------------------------------
Name: Robert D. Walter
Title: Chairman
BERGEN BRUNSWIG CORPORATION
By: /s/ ROBERT E. MARTINI
------------------------------------
Name: Robert E. Martini
Title: Chairman
A-39
<PAGE> 148
ANNEX B
<TABLE>
<S> <C>
[Merrill Lynch Logo] [MERRILL LYNCH ADDRESS]
</TABLE>
August 23, 1997
Board of Directors
Bergen Brunswig Corporation
4000 Metropolitan Drive
Orange, California 92868
Members of the Board of Directors:
Bergen Brunswig Corporation ("Bergen"), Cardinal Health, Inc. ("Cardinal")
and a newly formed wholly owned subsidiary of Cardinal (the "Cardinal Sub"),
propose to enter into an Agreement and Plan of Merger (the "Agreement") pursuant
to which the Cardinal Sub will be merged with and into Bergen in a transaction
(the "Merger") in which each outstanding share of Bergen's common stock (the
"Bergen Shares"), will be converted into the right to receive .775 shares (the
"Exchange Ratio") of the common stock of Cardinal (the "Cardinal Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to the holders of Bergen Shares, other than Cardinal
and its affiliates.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to Bergen and Cardinal which we deemed to be relevant;
(2) Reviewed certain information, including financial forecast
information from certain publicly available analysts' forecasts with
respect to Bergen and Cardinal, identified and reviewed by Bergen and
Cardinal, respectively, and provided to us as reasonable forecasts
appropriate for use in rendering our opinion, relating to the business,
earnings, cash flow, assets, liabilities and prospects of Bergen and
Cardinal, furnished to us by Bergen and Cardinal, respectively, as well as
certain information relating to the amount and timing of the cost savings
and related expenses and synergies expected to result from the Merger (the
"Expected Synergies"), furnished to us by Bergen;
(3) Conducted discussions with members of senior management of Bergen
and Cardinal concerning the matters described in clauses 1 and 2 above, as
well as their respective businesses and prospects before and after giving
effect to the Merger, and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for Bergen
Shares and Cardinal Shares and compared them with those of certain publicly
traded companies which we deemed to be relevant;
(5) Reviewed the results of operations of Bergen and Cardinal and
compared them with those of certain publicly traded companies which we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which we deemed to be
relevant;
(7) Reviewed the potential pro forma impact of the Merger, before and
after giving effect to the Expected Synergies;
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<PAGE> 149
(8) Reviewed the Agreement; and
(9) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information and we
have not undertaken an independent evaluation or appraisal of any of the assets
or liabilities of Bergen or Cardinal or been furnished with any such evaluation
or appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of Bergen or Cardinal. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by Bergen or Cardinal, we have assumed that
they have been reasonably prepared or reviewed and reflect the best currently
available estimates and judgment of Bergen's or Cardinal's management as to the
expected future financial performance of, or expenses or benefits to, Bergen or
Cardinal, as the case may be and the Expected Synergies. We have further assumed
that the Merger will be accounted for as a pooling of interests under generally
accepted accounting principles and that it will qualify as a tax-free
reorganization for U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been
authorized by Bergen or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of Bergen.
We are acting as financial advisor to Bergen in connection with the Merger
and will receive a fee from Bergen for our services, a significant portion of
which is contingent upon the consummation of the Merger. In addition, Bergen has
agreed to indemnify us for certain liabilities arising out of our engagement. We
have, in the past, provided financial advisory and financing services to Bergen
and may continue to do so and have received fees for the rendering of such
services. In addition, in the ordinary course of our business, we may actively
trade Bergen Shares and other securities of Bergen, as well as Cardinal Shares
and other securities of Cardinal, for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of
Bergen. Our opinion does not address the merits of the underlying decision by
Bergen to engage in the Merger and does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the proposed Merger. We
are not expressing any opinion herein as to the prices at which Cardinal Shares
will trade following the announcement or consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair from a financial point of view
to the holders of Bergen Shares, other than Cardinal and its affiliates.
Very truly yours,
Merrill Lynch Pierce Fenner & Smith
Incorporated
MERRILL LYNCH PIERCE FENNER & SMITH
INCORPORATED
B-2
<PAGE> 150
ANNEX C
FORM OF AMENDMENTS TO THE AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF CARDINAL HEALTH, INC., AS AMENDED
AMENDMENT TO ARTICLE FOURTH OF THE CARDINAL ARTICLES
Resolved, that Section 1 of Article FOURTH of the Amended and Restated
Articles of Incorporation, as amended, of Cardinal Health, Inc. be, and the same
hereby is, deleted in its entirety and there is substituted therefor the
following:
FOURTH: Section 1. Authorized Shares. The maximum aggregate number of
shares which the corporation is authorized to have outstanding is 305,500,000,
consisting of 300,000,000 common shares, without par value ("Class A Common
Shares"), 5,000,000 Class B common shares, without par value ("Class B Common
Shares") (the Class A Common Shares and the Class B Common Shares are sometimes
referred to herein collectively as the "Common Shares"), and 500,000 nonvoting
preferred shares, without par value.
AMENDMENT TO ARTICLE FIRST OF THE CARDINAL ARTICLES
Resolved, that Article FIRST, of the Amended and Restated Articles of
Incorporation, as amended, of Cardinal Health, Inc. be, and the same hereby is,
deleted in its entirety and there is substituted therefor the following:
FIRST: The name of the corporation shall be "Cardinal Bergen Health, Inc."
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ANNEX D
SECTION 1701.85 OF THE OHIO REVISED CODE
DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF SHARES.
(A) (1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance
with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record
holder of the shares of the corporation as to which he seeks relief as
of the date fixed for the determination of shareholders entitled to
notice of a meeting of the shareholders at which the proposal is to be
submitted, and such shares shall not have been voted in favor of the
proposal. Not later than ten days after the date on which the vote on
the proposal was taken at the meeting of the shareholders, the
dissenting shareholder shall deliver to the corporation a written
demand for payment to him of the fair cash value of the shares as to
which he seeks relief, which demand shall state his address, the number
and class of such shares, and the amount claimed by him as the fair
cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to
section 1701.80 of the Revised Code and a dissenting shareholder
entitled to relief under division (E) of section 1701.84 of the Revised
Code in the case of a merger pursuant to section 1701.801 [1701.80.1]
of the Revised Code shall be a record holder of the shares of the
corporation as to which he seeks relief as of the date on which the
agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 [1701.80.1] of the Revised Code, the
dissenting shareholder shall deliver to the corporation a written
demand for payment with the same information as that provided for in
division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving
or the new entity, whether the demand is served before, on, or after
the effective date of the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing
the shares as to which he seeks relief, the dissenting shareholder,
within fifteen days from the date of the sending of such request, shall
deliver to the corporation the certificates requested so that the
corporation may forthwith endorse on them a legend to the effect that
demand for the fair cash value of such shares has been made. The
corporation promptly shall return such endorsed certificates to the
dissenting shareholder. A dissenting shareholder's failure to deliver
such certificates terminates his rights as a dissenting shareholder, at
the option of the corporation, exercised by written notice sent to the
dissenting shareholder within twenty days after the lapse of the
fifteen-day period, unless a court for good cause shown otherwise
directs. If shares represented by a certificate on which such a legend
has been endorsed are transferred, each new certificate issued for them
shall bear a similar legend, together with the name of the original
dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of
uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If
uncertificated shares for which payment has been demanded are to be
transferred, any new certificate issued for the shares shall bear the
legend required for certificated securities as provided in this
paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights
in the corporation as the original dissenting holder of such shares had
immediately after the service of a demand for payment of the fair cash
value of the shares. A request under this paragraph by the corporation
is not an admission by the corporation that the shareholder is entitled
to relief under this section.
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<PAGE> 152
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving
or new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of
the county in which the principal office of the corporation that issued the
shares is located or was located when the proposal was adopted by the
shareholders of the corporation, or, if the proposal was not required to be
submitted to the shareholders, was approved by the directors. Other
dissenting shareholders, within that three-month period, may join as
plaintiffs or may be joined as defendants in any such proceeding, and any
two or more such proceedings may be consolidated. The complaint shall
contain a brief statement of the facts, including the vote and the facts
entitling the dissenting shareholder to the relief demanded. No answer to
such a complaint is required. Upon the filing of such a complaint, the
court, on motion of the petitioner, shall enter an order fixing a date for a
hearing on the complaint and requiring that a copy of the complaint and a
notice of the filing and of the date for hearing be given to the respondent
or defendant in the manner in which summons is required to be served or
substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by
either party whether the dissenting shareholder is entitled to be paid the
fair cash value of any shares and, if so, the number and class of such
shares. If the court finds that the dissenting shareholder is so entitled,
the court may appoint one or more persons as appraisers to receive evidence
and to recommend a decision on the amount of the fair cash value. The
appraisers have such power and authority as is specified in the order of
their appointment. The court thereupon shall make a finding as to the fair
cash value of a share and shall render judgment against the corporation for
the payment of it, with interest at such rate and from such date as the
court considers equitable. The costs of the proceeding, including reasonable
compensation to the appraisers to be fixed by the court, shall be assessed
or apportioned as the court considers equitable. The proceeding is a special
proceeding and final orders in it may be vacated, modified, or reversed on
appeal pursuant to the Rules of Appellate Procedure and, to the extent not
in conflict with those rules, Chapter 2505. of the Revised Code. If, during
the pendency of any proceeding instituted under this section, a suit or
proceeding is or has been instituted to enjoin or otherwise to prevent the
carrying out of the action as to which the shareholder has dissented, the
proceeding instituted under this section shall be stayed until the final
determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the
shares that is agreed upon by the parties or fixed under this section shall
be paid within thirty days after the date of final determination of such
value under this division, the effective date of the amendment to the
articles, or the consummation of the other action involved, whichever occurs
last. Upon the occurrence of the last such event, payment shall be made
immediately to a holder of uncertificated securities entitled to such
payment. In the case of holders of shares represented by certificates,
payment shall be made only upon and simultaneously with the surrender to the
corporation of the certificates representing the shares for which the
payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as
of the day prior to the day on which the vote by the shareholders was taken
and, in the case of a merger pursuant to section 1701.80 or 1701.801
[1701.80.1] of the Revised Code, fair cash value as to shareholders of a
constituent subsidiary corporation shall be determined as of the day before
the adoption of the agreement of merger by the directors of the particular
subsidiary corporation. The fair cash value of a share for the purposes of
this section is the amount that a willing seller who is under no compulsion
to sell would be willing to accept and that a willing buyer who is under no
compulsion to purchase would be willing to pay, but in no event shall the
fair cash value of a share exceed the amount specified in the demand of the
particular shareholder. In computing such fair cash value, any appreciation
or depreciation in market value resulting from the proposal submitted to the
directors or to the shareholders shall be excluded.
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<PAGE> 153
(D) (1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and
the right and obligation of the corporation to purchase such shares and
to pay the fair cash value of them terminates if any of the following
applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their
adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent of
the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the
shareholder nor the corporation has filed or joined in a complaint
under division (B) of this section within the period provided in
that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is
not a corporation, action required to be taken by the directors of the
corporation shall be taken by the general partners of a surviving or
new partnership or the comparable representatives of any other
surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand until
either the termination of the rights and obligations arising from it or the
purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest
is paid in money upon any securities issued in extinguishment of or in
substitution for such shares, an amount equal to the dividend, distribution,
or interest which, except for the suspension, would have been payable upon
such shares or securities, shall be paid to the holder of record as a credit
upon the fair cash value of the shares. If the right to receive fair cash
value is terminated other than by the purchase of the shares by the
corporation, all rights of the holder shall be restored and all
distributions which, except for the suspension, would have been made shall
be made to the holder of record of the shares at the time of termination.
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<PAGE> 154
CARDINAL HEALTH, INC.
PROXY
5555 Glendon Court
Dublin, Ohio 43016
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT D. WALTER and GEORGE H. BENNETT,
JR., and each of them, the attorneys and proxies of the undersigned with full
power of substitution to vote as indicated herein, all the common shares
("Cardinal Common Shares"), without par value, of Cardinal Health, Inc.
("Cardinal") held of record by the undersigned at the close of business on
January 20, 1998, at the Special Meeting of Cardinal Shareholders to be held on
February 20, 1998, or any postponements or adjournments thereof, with all the
powers the undersigned would possess if then and there personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE
SHAREHOLDER. IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED FOR EACH OF
THE FOLLOWING PROPOSALS, AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY POSTPONEMENTS OR
ADJOURNMENTS THEREOF.
(Continued and to be signed on reverse side)
<PAGE> 155
[ ]
PLEASE MARK
YOUR VOTES AS
INDICATED IN [X]
THIS EXAMPLE
1. Proposal to approve, authorize and adopt the
Agreement and Plan of Merger, dated as of
August 23, 1997, by and among Cardinal, Bergen
Brunswig Corporation and Bruin Merger Corp.
For [ ] Against [ ] Abstain [ ]
2. Proposal to approve, authorize and adopt an amend-
ment to the Articles of Incorporation of Cardinal, as
amended and restated to date, to increase the number
of authorized Cardinal Common Shares from 150,000,000
to 300,000,000.
For [ ] Against [ ] Abstain [ ]
3. Proposal to approve, authorize and adopt an amend-
ment to the Articles of Incorporation of Cardinal, as
amended and restated to date, to change Cardinal's
name from "Cardinal Health, Inc." to "Cardinal Bergen
Health, Inc."
For [ ] Against [ ] Abstain [ ]
4. Proposal to adjourn the Special Meeting, if necessary,
to permit further solicitation of proxies in the event
that there are not sufficient votes at the time of the
Special Meeting to approve any of Proposals 1 or 2.
For [ ] Against [ ] Abstain [ ]
5. In their discretion, to vote upon such other business
as may properly come before the meeting.
Receipt of Notice of Special Meeting of Shareholders and
the related Joint Proxy Statement/Prospectus is hereby
acknowledged.
PLEASE SIGN AS YOUR NAME APPEARS HEREIN. IF SHARES ARE HELD JOINTLY, ALL
HOLDERS MUST SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE YOUR FULL TITLE. IF A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON, INDICATING WHERE PROPER,
OFFICIAL POSITION OR REPRESENTATIVE CAPACITY.
Dated , 1998
----------------------------
- -----------------------------------------
- -----------------------------------------
- -----------------------------------------
Signature(s) of Shareholder(s)
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. [X]
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE> 156
BERGEN BRUNSWIG CORPORATION
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE SPECIAL MEETING OF SHAREHOLDERS ON FEBRUARY 20, 1998
The undersigned hereby appoints ROBERT E. MARTINI, DONALD R. RODEN and CHARLES
J. LEE, and each of them, attorneys and proxies, with power of substitution in
each of them, to vote for and on behalf of the undersigned at the Special
Meeting of Shareholders of Bergen Brunswig Corporation to be held on February
20, 1998, and any postponement or adjournment thereof, upon matters properly
coming before the meeting, as set forth in the Notice of Meeting and Joint
Proxy Statement/Prospectus, both of which have been received by the
undersigned, and upon all such other matters that may properly be brought
before the meeting, as to which the undersigned hereby confers discretionary
authority to vote upon said proxies. Without otherwise limiting the general
authorization given hereby, said attorneys and proxies are instructed to vote
as follows:
(THIS PROXY CARD CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE.)
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS
BELOW AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE SPECIAL MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
Please mark
your votes as
indicated in
this example [x]
<PAGE> 157
[ ]
Please mark
your votes as
indicated in
this example [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS BELOW.
1. To approve and adopt the Agreement and Plan of Merger, dated as of August
23, 1997, by and among Bergen Brunswig Corporation, Cardinal Health, Inc.
and Bruin Merger Corp.
For [ ] Against [ ] Abstain [ ]
2. To adjourn the Special Meeting, if necessary, to permit further solicitation
of proxies in the event that there are not sufficient votes at the time of
the Special Meeting to approve Proposal 1.
For [ ] Against [ ] Abstain [ ]
3. In their discretion, to vote upon such other business as may properly come
before the Special Meeting.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. GIVE FULL TITLE IF AN
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN, ETC. FOR AN ACCOUNT IN
THE NAME OF TWO OR MORE PERSONS, EACH SHOULD SIGN. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
Dated: , 1998
-------------------------
- -------------------------------------
(Signed)
- -------------------------------------
(Signed)
VOTES MUST BE INDICATED
(x) IN BLACK OR BLUE INK. [X]
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU EXPECT TO
ATTEND THIS MEETING. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND.
