10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2006

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission file number 1-16671

AMERISOURCEBERGEN CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	23-3079390
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1300 Morris Drive, Chesterbrook, PA	19087-5594
(Address of principal executive offices)	(Zip Code)

(610) 727-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Large accelerated filer  x                    Accelerated filer  ¨                    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  ¨    No  x

The number of shares of common stock of AmerisourceBergen Corporation outstanding as of April 30, 2006 was 209,899,765.

AMERISOURCEBERGEN CORPORATION

INDEX

			Page No.
Part I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements (Unaudited).
		Consolidated Balance Sheets, March 31, 2006 and September 30, 2005	3
		Consolidated Statements of Operations for the three and six months ended March 31, 2006 and 2005	5
		Consolidated Statements of Cash Flows for the six months ended March 31, 2006 and 2005	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
	Item 4.	Controls and Procedures	43
Part II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	44
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
	Item 4.	Submission of Matters to a Vote of Security Holders	45
	Item 6.	Exhibits	45
SIGNATURES			46

2

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements (Unaudited).

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)	March 31, 2006		September 30, 2005
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,051,725	$	966,553
Short-term investment securities available-for-sale		783,945		349,130
Accounts receivable, less allowances for returns and doubtful accounts:
$418,622 at March 31, 2006 and $420,538 at September 30, 2005		2,990,279		2,640,646
Merchandise inventories		4,353,870		4,003,690
Prepaid expenses and other		25,294		27,673
Total current assets		9,205,113		7,987,692
Property and equipment, at cost:
Land		43,082		43,676
Buildings and improvements		277,338		267,847
Machinery, equipment and other		510,464		484,671
Total property and equipment		830,884		796,194
Less accumulated depreciation		306,543		281,436
Property and equipment, net		524,341		514,758
Other assets:
Goodwill		2,565,457		2,431,568
Intangibles, deferred charges and other		486,657		447,156
Total other assets		3,052,114		2,878,724
TOTAL ASSETS	$	12,781,568	$	11,381,174

See notes to consolidated financial statements.

3

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS—(Continued)

(in thousands, except share and per share data)	March 31, 2006			September 30, 2005
	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,319,118		$	5,292,253
Accrued expenses and other		331,322			335,650
Current portion of long-term debt		3,043			1,232
Accrued income taxes		79,127			52,093
Deferred income taxes		399,843			370,868
Total current liabilities		7,132,453			6,052,096
Long-term debt, net of current portion		1,077,533			951,479
Other liabilities		104,990			97,242
Stockholders’ equity:
Common stock, $.01 par value—authorized, issued and outstanding: 600,000,000 shares, 234,361,952 shares and 209,488,458 shares at March 31, 2006, respectively, and 300,000,000 shares, 231,286,652 shares and 209,752,840 shares at September 30, 2005, respectively		2,344			2,312
Additional paid-in capital		3,417,446			3,314,060
Retained earnings		1,819,895			1,604,093
Accumulated other comprehensive loss		(25,573	)		(24,814	)
Treasury stock, at cost: 24,873,494 shares at March 31, 2006 and 21,533,812 shares at September 30, 2005		(747,520	)		(615,294	)
Total stockholders’ equity		4,466,592			4,280,357
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	12,781,568		$	11,381,174

See notes to consolidated financial statements.

4

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except per share data)	Three months ended March 31,						Six months ended March 31,
	2006			2005			2006			2005
Operating revenue	$	14,049,175		$	12,241,739		$	27,585,029		$	24,443,848
Bulk deliveries to customer warehouses		1,171,504			948,428			2,288,797			2,383,155
Total revenue		15,220,679			13,190,167			29,873,826			26,827,003
Cost of goods sold		14,659,916			12,688,417			28,784,685			25,870,661
Gross profit		560,763			501,750			1,089,141			956,342
Operating expenses:
Distribution, selling and administrative		339,113			295,246			670,972			590,071
Depreciation		16,951			17,580			35,509			35,573
Amortization		3,198			2,572			5,727			5,128
Facility consolidations, employee severance, and other		3,577			1,837			12,404			6,970
Impairment charge		—			5,259			—			5,259
Operating income		197,924			179,256			364,529			313,341
Other income		(5,826	)		(383	)		(5,043	)		(1,441	)
Interest expense, net		7,344			14,519			13,856			36,597
Loss on early retirement of debt		—			—			—			1,015
Income from continuing operations before income taxes and cumulative effect of change in accounting		196,406			165,120			355,716			277,170
Income taxes		67,816			63,407			129,150			106,434
Income from continuing operations before cumulative effect of change in accounting		128,590			101,713			226,566			170,736
(Income) loss from discontinued operations, net of tax (Note 3)		(411	)		2,291			298			10,196
Cumulative effect of change in accounting, net of tax of $6,341 (Note 1)		—			—			—			10,172
Net income	$	129,001		$	99,422		$	226,268		$	150,368
Earnings per share:
Basic earnings per share:
Continuing operations	$	0.62		$	0.46		$	1.09		$	0.79
Discontinued operations		—			(0.01	)		—			(0.05	)
Cumulative effect of change in accounting		—			—			—			(0.05	)
Rounding		—			—			—			0.01
Net income	$	0.62		$	0.45		$	1.09		$	0.70
Diluted earnings per share:
Continuing operations	$	0.61		$	0.46		$	1.08		$	0.78
Discontinued operations		—			(0.01	)		—			(0.05	)
Cumulative effect of change in accounting		—			—			—			(0.05	)
Rounding		—			—			(0.01	)		0.01
Net income	$	0.61		$	0.45		$	1.07		$	0.69
Weighted average common shares outstanding:
Basic		208,050			219,290			208,160			215,168
Diluted		210,771			220,468			210,570			221,864
Cash dividends declared per share of common stock	$	0.025		$	0.0125		$	0.05		$	0.025

See notes to consolidated financial statements.

5

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended March 31,
(in thousands)	2006			2005
OPERATING ACTIVITIES
Net income	$	226,268		$	150,368
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, including amounts charged to cost of goods sold		39,263			38,165
Amortization, including amounts charged to interest expense		7,660			8,628
Provision on accounts receivable		24,472			1,955
Provision for deferred income taxes		33,760			16,663
Employee stock compensation		6,649			578
Other (income) loss		(5,043	)		3,818
(Gain) loss on disposal of property and equipment		(792	)		495
Loss on early retirement of debt		—			1,015
Loss on sale of discontinued operations		468			10,549
Cumulative effect of change in accounting, net of tax		—			10,172
Other		(472	)		—
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:
Accounts receivable		(293,448	)		(183,994	)
Merchandise inventories		(305,167	)		461,962
Prepaid expenses and other assets		(5,162	)		9,462
Accounts payable, accrued expenses and income taxes		975,078			664,777
Other		(896	)		(1,607	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		702,638			1,193,006
INVESTING ACTIVITIES
Capital expenditures		(60,149	)		(123,246	)
Cost of acquired companies, net of cash acquired, and other		(238,427	)		(588	)
Proceeds from sale-leaseback transactions		28,143			20,732
Proceeds from sale of property and equipment		2,199			—
Proceeds from sale of equity investment and eminent domain settlement		7,582			—
Proceeds from sale of discontinued operations		—			3,560
Purchases of investment securities available-for-sale		(1,639,555	)		(391,275	)
Proceeds from sale of investment securities available-for-sale		1,204,740			91,530
NET CASH USED IN INVESTING ACTIVITIES		(695,467	)		(399,287	)
FINANCING ACTIVITIES
Net borrowings under revolving credit facilities		124,916			—
Long-term debt repayments		—			(180,000	)
Purchases of common stock		(132,226	)		(675,348	)
Exercise of stock options, including excess tax benefit of $12,551 in 2006		97,804			53,503
Cash dividends on common stock		(10,464	)		(5,381	)
Deferred financing costs and other		(992	)		(3,515	)
Common stock purchases for employee stock purchase plan		(1,037	)		(634	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		78,001			(811,375	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		85,172			(17,656	)
Cash and cash equivalents at beginning of period		966,553			871,343
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,051,725		$	853,687

See notes to consolidated financial statements.

6

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1.    Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements present the consolidated financial position, results of operations and cash flows of AmerisourceBergen Corporation and its wholly-owned subsidiaries (the “Company”) as of the dates and for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting only of normal recurring accruals, except as otherwise disclosed herein) considered necessary to present fairly the financial position as of March 31, 2006 and the results of operations and cash flows for the interim periods ended March 31, 2006 and 2005 have been included. Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States, but which are not required for interim reporting purposes, have been omitted. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual amounts could differ from these estimated amounts.

On December 28, 2005, the Company effected a two-for-one stock split of its outstanding shares of common stock in the form of a 100% stock dividend to stockholders of record at the close of business on December 13, 2005. All applicable share and per-share amounts in the consolidated financial statements and related disclosures have been retroactively adjusted to reflect this stock split.

Certain reclassifications have been made to prior-year amounts in order to conform to the current-year presentation.

Short-Term Investment Securities

At March 31, 2006 and September 30, 2005, the Company had invested $783.9 million and $349.1 million, respectively, in tax exempt variable rate demand notes. These short-term investments are classified as available-for-sale on the Company’s consolidated balance sheet. The Company reclassified $349.1 million from cash and cash equivalents at September 30, 2005 to short-term investment securities to conform to the current-year presentation. The Company also reflected reclassifications of net purchases of short-term investment securities of $299.7 million during the prior-year six-month period as an increase to net cash used in investing activities. Although the underlying maturities of these investments are long-term in nature, the investments are classified as short-term because they are automatically reinvested within a seven-day period unless the Company provides notice of intent to liquidate to the broker. The interest rate payable on these investments resets with each reinvestment. The Company’s investments in these securities are recorded at cost, which approximates fair market value due to their variable interest rates. The bonds are issued by municipalities and other tax exempt entities, but are backed by letters of credit from the banking institutions that broker the debt placements. All of the Company’s short-term investments are held in the custody of major financial institutions.

7

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Change in Accounting Method

During fiscal 2005, the Company changed its method of recognizing cash discounts and other related manufacturer incentives, effective October 1, 2004. The Company previously recognized cash discounts as a reduction of cost of goods sold when earned, which was primarily upon payment of vendor invoices. The Company now records cash discounts as a component of inventory cost and recognizes such discounts as a reduction of cost of goods sold upon the sale of the inventory. The Company’s operating results for the six months ended March 31, 2005 included a $10.2 million charge for the cumulative effect of change in accounting (net of tax of $6.3 million).

Recently Issued Financial Accounting Standard

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” which requires companies to measure compensation cost for all share-based payments (including employee stock options) at fair value for interim or annual periods beginning after June 15, 2005. In April 2005, the U.S. Securities and Exchange Commission issued a rule allowing public companies to delay the adoption of SFAS No. 123R to annual periods beginning after June 15, 2005. As a result, the Company adopted SFAS No. 123R, using the modified-prospective transition method, beginning on October 1, 2005 and, therefore, began to expense the fair value of all outstanding options over their remaining vesting periods to the extent the options were not fully vested as of the adoption date and began to expense the fair value of all share-based compensation granted subsequent to September 30, 2005 over its requisite service periods. During the three and six months ended March 31, 2006, the Company recorded $4.0 million and $6.6 million, respectively, of share-based compensation expense. Previous periods were not retrospectively adjusted (see Note 8 for further details).

Note 2.    Acquisitions

In October 2005, the Company acquired Trent Drugs (Wholesale) Ltd (“Trent”), one of the largest pharmaceutical distributors in Canada, for a purchase price of $81.1 million, which included the payment of Trent debt of $41.3 million at closing. The purchase price is subject to a working capital adjustment. The acquisition of Trent provides the Company a solid foundation to expand its pharmaceutical distribution capability into the Canadian marketplace. In the twelve months ended September 30, 2005, Trent’s operating revenues were approximately $500 million. In January 2006, the Company changed the name of Trent to AmerisourceBergen Canada Corporation. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their fair values at the date of the acquisition. The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired by $32.3 million, which was allocated to goodwill. The significant tangible assets acquired were accounts receivable and merchandise inventories totaling $55.7 million and $36.5 million, respectively. Accounts payable and accrued liabilities assumed totaled $53.9 million. Intangible assets of $7.4 million consisting of customer relationships are being amortized over their weighted average life of 7 years.

In February 2006, the Company acquired Network for Medical Communications & Research, LLC (“NMCR”), a privately held provider of physician accredited continuing medical education (“CME”) and analytical research for the oncology market, for a purchase price of $86.6 million, net of a working capital adjustment. The acquisition of NMCR will expand ABSG’s presence in its market-leading oncology distribution and services businesses. The CME business of NMCR will complement ABSG’s Imedex accredited CME business. In the twelve months ended December 31, 2005, NMCR’s operating revenues were approximately $38 million. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their fair values at the date of the acquisition. The purchase price exceeded the fair value of the net tangible

8

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

and identifiable intangible assets acquired by $69.0 million, which was allocated to goodwill. Intangible assets of $20.1 million primarily consist of trade names of $3.2 million and customer relationships of $16.1 million. Customer relationships are being amortized over their weighted average life of 8 years.

In March 2006, the Company acquired Brecon Pharmaceuticals Limited (“Brecon”), a United Kingdom-based provider of contract packaging and clinical trial materials (“CTM”) services for pharmaceutical manufacturers, for a purchase price of $50.2 million. The purchase price is subject to a working capital adjustment and a contingent payment of up to approximately $19 million based on Brecon achieving specific earnings targets in calendar year 2006. The acquisition of Brecon enhances the Company’s packaging business and provides the added capability to offer pharmaceutical manufacturers contract packaging and CTM services in new geographies. In the twelve months ended December 31, 2005, Brecon’s operating revenues were approximately $22 million. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their fair values at the date of the acquisition. The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired by $29.0 million, which was allocated to goodwill. Intangible assets of $11.8 million primarily consist of trade names of $5.8 million and customer relationships of $6.0 million. Customer relationships are being amortized over their weighted average life of 7 years.

In March 2006, AmerisourceBergen Canada Corporation acquired substantially all of the assets of Asenda Pharmaceutical Supplies Ltd (“Asenda”), a Canadian pharmaceutical distributor that operated primarily in British Columbia and Alberta, for a purchase price of $18.2 million. The purchase price is subject to a working capital adjustment. The Asenda acquisition strengthens the Company’s position in western Canada. In the twelve months ended December 31, 2005, Asenda’s operating revenues were approximately $172 million. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based upon their fair values at the date of the acquisition. The purchase price exceeded the fair value of the net tangible and identifiable intangible assets acquired by $4.7 million, which was allocated to goodwill. The significant tangible assets acquired were accounts receivable and merchandise inventories totaling $9.3 million and $8.3 million, respectively. Accounts payable and accrued liabilities assumed totaled $6.9 million. Intangible assets of $1.8 million primarily consist of customer relationships and are being amortized over their weighted average life of 5 years.

Note 3.    Discontinued Operations

In July 2005, the Company sold substantially all of the assets of Bridge Medical, Inc. (“Bridge”), a component of the Company’s Pharmaceutical Distribution reportable segment, for $11.0 million. During fiscal 2005, the Company recorded an estimated loss on the sale of the business of $4.6 million, net of tax. In December 2004, the Company sold Rita Ann Distributors (“Rita Ann”), a component of its Pharmaceutical Distribution reportable segment, for $3.6 million. During fiscal 2005, the Company recorded an estimated loss on the sale of Rita Ann of $6.5 million, net of tax. During the six months ended March 31, 2006, the Company recorded an additional loss of $0.3 million, net of tax, relating to the sales of Bridge and Rita Ann.

Operating revenue and loss before income taxes of Bridge and Rita Ann, in the aggregate, were $1.4 million and $2.8 million during the quarter ended March 31, 2005. Operating revenue and loss before income taxes of Bridge and Rita Ann, in the aggregate, were $10.9 million and $5.6 million during the six months ended March 31, 2005.

9

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 4.    Goodwill and Other Intangible Assets

Following is a summary of the changes in the carrying value of goodwill, by reportable segment, for the six months ended March 31, 2006 (in thousands):

	Pharmaceutical Distribution			PharMerica		Total
Goodwill at September 30, 2005	$	2,167,922		$	263,646	$	2,431,568
Goodwill recognized in connection with acquisitions (see Note 2)		134,948			—		134,948
Other		(1,059	)		—		(1,059	)
Goodwill at March 31, 2006	$	2,301,811		$	263,646	$	2,565,457

Following is a summary of other intangible assets (in thousands):

	March 31, 2006							September 30, 2005
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Unamortizable intangibles—trade names	$	263,715	$	—		$	263,715	$	254,782	$	—		$	254,782
Amortizable intangibles—customer lists and other		105,821		(34,556	)		71,265		75,504		(29,188	)		46,316
Total other intangible assets	$	369,536	$	(34,556	)	$	334,980	$	330,286	$	(29,188	)	$	301,098

Amortization expense for other intangible assets was $5.7 million and $5.1 million in the six months ended March 31, 2006 and 2005, respectively. Amortization expense for other intangible assets is estimated to be $12.9 million in fiscal 2006, $13.0 million in fiscal 2007, $9.0 million in fiscal 2008, $7.5 million in fiscal 2009, $7.2 million in fiscal 2010, and $27.3 million thereafter.

Note 5.    Debt

Debt consisted of the following (in thousands):

	March 31, 2006		September 30, 2005
Blanco revolving credit facility at 5.64% and 4.53%, respectively, due 2007	$	55,000	$	55,000
AmerisourceBergen securitization financing due 2009		—		—
Senior revolving credit facility due 2009		—		—
Canadian revolving credit facility at 4.46% due 2009		101,798		—
UK revolving credit facility at 5.07% due 2009		22,584		—
$400,000, 5 5/8% senior notes due 2012		398,128		398,010
$500,000, 5 7/8% senior notes due 2015		497,601		497,508
Other		5,465		2,193
Total debt		1,080,576		952,711
Less current portion		3,043		1,232
Total, net of current portion	$	1,077,533	$	951,479

10

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

In March 2006, the Company entered into a £20 million multicurrency revolving credit facility (the “UK Credit Facility”) due March 2009 with a financial institution in connection with the Company’s acquisition of Brecon. Interest on borrowings under the UK Credit Facility accrues at specific rates based on the Company’s debt rating (0.675% over LIBOR or EURIBOR at March 31, 2006). The Company will pay quarterly facility fees to maintain the availability under the UK Credit Facility at specific rates based on the Company’s debt rating (0.175% at March 31, 2006). The Company may choose to repay or reduce its commitments under the UK Credit Facility at any time. Borrowings under the UK Credit Facility are guaranteed by the Company. The UK Credit Facility contains restrictions on, among other things, additional indebtedness, distributions and dividends to stockholders and investments. Additional covenants require compliance with financial tests, including leverage and fixed charge coverage ratios.

In October 2005, the Company entered into a C$135 million senior unsecured revolving credit facility (the “Canadian Credit Facility”) due December 2009 with a syndicate of lenders in connection with the Company’s acquisition of Trent. Interest on borrowings under the Canadian Credit Facility accrues at specific rates based on the Company’s debt rating (0.675% over LIBOR or Bankers’ Acceptance Stamping Fee Spread at March 31, 2006). The Company will pay quarterly facility fees to maintain the availability under the Canadian Credit Facility at specific rates based on the Company’s debt rating (0.20% at March 31, 2006). The Company may choose to repay or reduce its commitments under the Canadian Credit Facility at any time. Borrowings under the Canadian Credit Facility are guaranteed by the Company. The Canadian Credit Facility contains restrictions on, among other things, additional indebtedness, distributions and dividends to stockholders, investments and capital expenditures. Additional covenants require compliance with financial tests, including leverage and minimum earnings to fixed charge coverage ratios.

In April 2006, the Company amended the Blanco revolving credit facility (the “Blanco Credit Facility”) to, among other things, extend the maturity date of the Blanco Credit Facility to April 2007. Borrowings under the Blanco Credit Facility are guaranteed by the Company. At March 31, 2006, borrowings under the Blanco Credit Facility bore interest at LIBOR plus 90 basis points. As a result of the amendment, interest on borrowings under the Blanco Credit Facility now accrues at specific rates based on the Company’s debt rating. Also, the Company will now pay quarterly facility fees to maintain the availability under the Blanco Credit Facility at specific rates based on the Company’s debt rating.

In December 2004, the Company redeemed its 5% convertible subordinated notes at a redemption price of 102.143% of the principal amount of the notes plus accrued interest through the redemption date of January 3, 2005. The noteholders were given the option to accept cash or convert the notes to common stock of the Company. The notes were convertible into 11,327,460 shares of common stock, which translated to a conversion ratio of 37.7582 shares of common stock for each $1,000 principal amount of notes. In connection with the redemption, the Company issued 11,326,288 shares of common stock from treasury to noteholders to redeem substantially all of the notes and paid $31,000 to redeem the remaining notes.

During the six months ended March 31, 2005, the Company recorded a $1.0 million loss resulting from the early retirement of its previously existing senior credit agreement.

Note 6.    Stockholders’ Equity and Earnings Per Share

Effective as of November 15, 2005, the Company’s board of directors declared a 100% increase in the quarterly dividend rate to $0.05 per common share from $0.025 per common share. Additionally, the Company declared a two-for-one stock split of the Company’s outstanding shares of common stock. The stock split occurred in the form of a 100% stock dividend, whereby each stockholder received one additional share for each

11

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

share owned. The shares were distributed on December 28, 2005 to stockholders of record at the close of business on December 13, 2005. Subsequent quarterly cash dividends have been adjusted to reflect the two-for-one stock split.

In May 2005, the Company’s board of directors authorized the Company to purchase up to $450 million of its outstanding shares of common stock, subject to market conditions and compliance with the stock repurchase restrictions contained in the indentures governing the Company’s senior notes and in the credit agreement for the Company’s senior credit facility. In August 2005, the Company’s board of directors authorized an increase in the amount available under the program, bringing the then-remaining availability to $750 million, and the total repurchase program to approximately $844 million. During the three and six months ended March 31, 2006, the Company purchased 1.0 million and 3.3 million shares of common stock for a total of $43.3 million and $132.2 million, respectively. As of March 31, 2006, the Company had $617.8 million of availability remaining under the share repurchase program. From April 1, 2006 to May 5, 2006, the Company purchased an additional 3,828,000 shares of its common stock for a total cost of $167.3 million.

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the periods plus the dilutive effect of stock options and restricted stock. Additionally, the diluted calculations for the three and six months ended March 31, 2005 consider the 5% convertible subordinated notes as if converted during those periods that the notes were outstanding and, therefore, the after-tax effect of interest expense related to these notes is added back to income from continuing operations in determining income from continuing operations available to common stockholders for those periods. On January 3, 2005, the Company completed the redemption of the 5% convertible subordinated notes (see Note 5 for further details). As a result, no amounts were added back to income from continuing operations for the after-tax effect of interest expense for the three and six months ended March 31, 2006.

(in thousands)	Three months ended March 31,				Six months ended March 31,
	2006		2005		2006		2005
Income from continuing operations before cumulative effect of change in accounting	$	128,590	$	101,713	$	226,566	$	170,736
Interest expense—convertible subordinated notes, net of income taxes		—		28		—		2,539
Income from continuing operations available to common stockholders	$	128,590	$	101,741	$	226,566	$	173,275
Weighted average common shares outstanding—basic		208,050		219,290		208,160		215,168
Effect of dilutive securities:
Stock options and restricted stock		2,721		954		2,410		900
Convertible subordinated notes		—		224		—		5,796
Weighted average common shares outstanding—diluted		210,771		220,468		210,570		221,864

12

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 7.    Defined Benefit Plans

The following table provides the pension expense and postretirement benefit expense recorded by the Company:

(in thousands)	Three Months Ended March 31,				Six Months Ended March 31,
	2006		2005		2006		2005
Pension expense	$	1,897	$	1,748	$	3,805	$	3,634
Postretirement benefit expense		366		248		605		496

The Company contributed $7.8 million and $4.7 million to its funded plans during the six months ended March 31, 2006 and 2005, respectively.

Note 8.    Stock Compensation Plans

The Company has a number of stock-related compensation plans, including stock option, employee stock purchase and restricted stock plans, which are described in Note 9 to the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the fiscal year ended September 30, 2005. Through September 30, 2005, the Company accounted for its stock option and employee stock purchase plans using the intrinsic value method set forth in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (“APB No. 25”) and related interpretations for these plans. Under APB No. 25, generally, when the exercise price of the Company’s stock options equaled the market price of the underlying stock on the date of the grant, no compensation expense was recognized. As previously noted, the Company adopted SFAS No. 123R, using the modified-prospective transition method, beginning on October 1, 2005 and, therefore, began to expense the fair value of all options over their remaining vesting periods to the extent the options were not fully vested as of the adoption date and began to expense the fair value of all share-based compensation granted subsequent to September 30, 2005 over its requisite service periods.

SFAS No. 123R also requires the benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense to be reported as a financing cash flow ($12.6 million for the six months ended March 31, 2006) rather than an operating cash flow, as previously required. In accordance with Staff Accounting Bulletin (“SAB”) No. 107, the Company classified share-based compensation within distribution, selling and administrative expenses to correspond with the same line item as the cash compensation paid to employees.

Employee options generally vest over a four-year service period and non-employee director options generally vest over a three-year service period. Compensation expense recognized for all option grants is net of estimated forfeitures and is recognized over the awards’ respective requisite service periods. The fair values relating to all of the fiscal 2006 option grants and the calendar 2005 option grants were estimated using a binomial option pricing model. The fair values relating to all options granted prior to calendar 2005 were estimated using the Black-Scholes option pricing model. Expected volatilities are based on historical volatility of our stock and other factors, such as implied market volatility. We used historical exercise data based on the age at grant of the option holder to estimate the options’ expected term, which represents the period of time that the options granted are expected to be outstanding. We anticipated the future option holding periods to be similar to the historical option holding periods. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. We recognize compensation expense for the fair values of these awards, which have graded vesting, on a straight-line basis over the requisite service period of the awards.

13

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following assumptions were used to estimate the fair values of options granted:

	Three months ended March 31,				Six months ended March 31,
	2006		2005		2006		2005
Weighted average risk-free interest rate	4.58	%	4.11	%	4.58	%	4.10	%
Expected dividend yield	0.23	%	0.17	%	0.23	%	0.17	%
Weighted average volatility factor of the expected market price of the Company’s common stock	25.72	%	27.92	%	25.74	%	27.98	%
Weighted average expected life of the options	4.17 years		4.50 years		4.17 years		4.50 years

Restricted shares generally vest in full after three years. The fair value of restricted shares under the Company’s restricted stock plans is determined by the product of the number of shares granted and the grant date market price of the Company’s common stock. The fair value of restricted shares is expensed on a straight-line basis over the requisite service period of three years.

During the three months ended March 31, 2006, the Company recorded $4.0 million of share-based compensation expense, which was comprised of stock option expense of $3.0 million, employee stock purchase plan expense of $0.4 million and restricted stock expense of $0.6 million. During the six months ended March 31, 2006, the Company recorded $6.6 million of share-based compensation expense, which was comprised of stock option expense of $5.1 million, employee stock purchase plan expense of $0.7 million and restricted stock expense of $0.8 million. The Company estimates it will record share-based compensation expense of approximately $16 million in fiscal 2006.

The following table illustrates the impact of share-based compensation on reported amounts:

(in thousands, except per share data)	Three months ended March 31, 2006				Six months ended March 31, 2006
	As Reported		Impact of Share-Based Compensation Expense		As Reported		Impact of Share-Based Compensation Expense
Operating income	$	197,924	$	3,974	$	364,529	$	6,649
Income from continuing operations		128,590		2,451		226,566		4,096
Net income		129,001		2,451		226,268		4,096
Earnings per share:
Basic	$	0.62	$	0.01	$	1.09	$	0.02
Diluted	$	0.61	$	0.01	$	1.07	$	0.02

A summary of the Company’s stock option activity and related information for its option plans for the six months ended March 31, 2006 was as follows:

	Options (000’s)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (000’s)
Outstanding at September 30, 2005	16,123		$	29
Granted	2,477			43
Exercised	(3,063	)		28
Forfeited	(126	)		30
Outstanding at March 31, 2006	15,411		$	32	7 years	$	253,033
Exercisable at March 31, 2006	9,883		$	29	6 years	$	188,303

14

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The weighted average fair value of stock options granted during the six months ended March 31, 2006 and 2005 was $10.56 and $8.32, respectively.

A summary of the status of the Company’s nonvested options as of March 31, 2006 and changes during the six months ended March 31, 2006, is presented below:

	Options (000’s)		Weighted Average Grant Date Fair Value
Nonvested at September 30, 2005	4,200		$	8
Granted	2,477			11
Vested	(1,099	)		8
Forfeited	(50	)		7
Nonvested at March 31, 2006	5,528		$	9

Expected future compensation expense relating to the 5.5 million nonvested options outstanding as of March 31, 2006 is $43.4 million over a weighted-average period of 3.3 years.

A summary of the status of the Company’s restricted shares as of March 31, 2006 and changes during the six months ended March 31, 2006 is presented below:

	Restricted Shares (000’s)		Weighted Average Grant Date Fair Value
Nonvested at September 30, 2005	58		$	30
Granted	282			43
Vested	(6	)		29
Forfeited	(1	)		29
Nonvested at March 31, 2006	333		$	41

Expected future compensation expense relating to the 333,341 restricted shares at March 31, 2006 is $10.3 million over a weighted-average period of 2.6 years.

For purposes of pro forma disclosures, the estimated fair value of the stock options, restricted shares, and shares under the employee stock purchase plan were amortized to expense over their assumed vesting periods. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, to all stock-related compensation.

(in thousands, except per share data)	Three months ended March 31, 2005			Six months ended March 31, 2005
Net income, as reported	$	99,422		$	150,368
Add: Stock-related compensation expense included in reported net income, net of income taxes		193			356
Deduct: Stock-related compensation expense determined under the fair value method, net of income taxes		(946	)		(1,681	)
Pro forma net income	$	98,669		$	149,043

15

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

(in thousands, except per share data)	Three months ended March 31, 2005		Six months ended March 31, 2005
Earnings per share:
Basic, as reported	$	0.45	$	0.70
Basic, pro forma	$	0.45	$	0.69
Diluted, as reported	$	0.45	$	0.69
Diluted, pro forma	$	0.45	$	0.68

The diluted earnings per share calculations consider the 5% convertible subordinated notes as if converted and, therefore, the after-tax effect of interest expense related to these notes is added back to net income in determining income available to common stockholders.

Note 9.    Facility Consolidations, Employee Severance and Other

In 2001, the Company developed an integration plan to consolidate its distribution network and eliminate duplicative administrative functions. During the fiscal year ended September 30, 2005, the Company decided to outsource a significant portion of its information technology activities as part of the integration plan. The Company’s plan, as revised, is to have a distribution facility network numbering in the mid-20’s within the next two years and to have successfully completed the outsourcing of such information technology activities by the end of fiscal 2006. The plan includes building six new facilities (five of which are currently operational) and closing facilities (26 of which have been closed through March 31, 2006). The sixth new facility is scheduled to open during fiscal 2006. The Company anticipates closing six distribution facilities during fiscal 2006, thereby reducing the Company’s total number of distribution facilities to 28 by the end of the fiscal year.

During the six months ended March 31, 2006, the Company closed three distribution facilities. During the six months ended March 31, 2006, the Company recorded $4.1 million of employee severance and lease cancellation costs primarily related to the fiscal 2006 facility closures and the elimination of duplicative administrative functions and $8.3 million of transition costs associated with the outsourcing of information technology activities.

As of March 31, 2006, approximately 139 employees had received termination notices as a result of the fiscal 2006 facility closures and the elimination of duplicative administrative functions, of which substantially all have been terminated. Additional amounts for integration initiatives will be recognized in subsequent periods as facilities to be consolidated are identified and specific plans are approved and announced. Most employees receive their severance benefits over a period of time, generally not in excess of 12 months, while others may receive a lump-sum payment.

The following table displays the activity in accrued expenses and other from September 30, 2005 to March 31, 2006 related to the integration plan discussed above (in thousands):

	Employee Severance			Lease Cancellation Costs and Other			Total
Balance as of September 30, 2005	$	5,236		$	7,083		$	12,319
Expense recorded during the period		5,407			6,997			12,404
Payments made during the period		(3,809	)		(6,000	)		(9,809	)
Balance as of March 31, 2006	$	6,834		$	8,080		$	14,914

16

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

Note 10.    Legal Matters and Contingencies

In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, including antitrust, environmental, product liability, regulatory and other matters. Significant damages or penalties may be sought from the Company in some matters, and some matters may require years for the Company to resolve. The Company establishes reserves based on its periodic assessment of estimates of probable losses. There can be no assurance that an adverse resolution of one or more matters during any subsequent reporting period will not have a material adverse effect on the Company’s results of operations for that period. However, on the basis of information furnished by counsel and others and taking into consideration the reserves established for pending matters, the Company does not believe that the resolution of currently pending matters (including the matter specifically described below), individually or in the aggregate, will have a material adverse effect on the Company’s financial condition.

New York Attorney General Subpoena

In April 2005, the Company received a subpoena from the Office of the Attorney General of the State of New York (the “NYAG”) requesting documents and responses to interrogatories concerning the manner and degree to which the Company purchases pharmaceuticals from other wholesalers, often referred to as the alternate source market, rather than directly from manufacturers. Similar subpoenas have been issued by the NYAG to other pharmaceutical distributors. The Company has not been advised of any allegations of misconduct by the Company. The Company has engaged in discussions with the NYAG, initially to clarify the scope of the subpoena and subsequently to provide background information requested by the NYAG. The Company continues to produce responsive information and documents and to cooperate with the NYAG. The Company believes that it has not engaged in any wrongdoing, but cannot predict the outcome of this matter.

Note 11.    Antitrust Litigation Settlements

During the six months ended March 31, 2006 and 2005, the Company recognized gains of $27.4 million and $18.8 million, respectively, from antitrust litigation settlements with pharmaceutical manufacturers. These gains, which are net of attorneys’ fees and estimated payments due to other parties, were recorded as reductions of cost of goods sold in the Company’s consolidated statements of operations.

Note 12.    Business Segment Information

The Company is organized based upon the products and services it provides to its customers, and substantially all of its operations are located in the United States. The Company’s operations are comprised of two reportable segments: Pharmaceutical Distribution and PharMerica.

The Pharmaceutical Distribution reportable segment includes the operations of AmerisourceBergen Drug Corporation (“ABDC”), AmerisourceBergen Specialty Group (“ABSG”) and the AmerisourceBergen Packaging Group. The Pharmaceutical Distribution segment is comprised of two operating segments: ABDC and ABSG. The ABDC operating segment includes the operations of the AmerisourceBergen Packaging Group.

The PharMerica reportable segment includes the operations of the PharMerica long-term care business (“Long-Term Care”) and a workers’ compensation-related business (“Workers’ Compensation”). The PharMerica reportable segment encompasses only the PharMerica operating segment.

17

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

The following tables present reportable segment information for the three and six months ended March 31 (in thousands):

	Revenue
	Three months ended March 31,						Six months ended March 31,
	2006			2005			2006			2005
Pharmaceutical Distribution	$	13,877,560		$	12,068,776		$	27,225,713		$	24,110,544
PharMerica		412,685			391,090			821,943			776,711
Intersegment eliminations		(241,070	)		(218,127	)		(462,627	)		(443,407	)
Operating revenue		14,049,175			12,241,739			27,585,029			24,443,848
Bulk deliveries to customer warehouses		1,171,504			948,428			2,288,797			2,383,155
Total revenue	$	15,220,679		$	13,190,167		$	29,873,826		$	26,827,003

Management evaluates segment performance based on revenues excluding bulk deliveries to customer warehouses. Intersegment eliminations represent the elimination of the Pharmaceutical Distribution segment’s sales to PharMerica. ABDC is the principal supplier of pharmaceuticals to PharMerica.

	Operating Income
	Three months ended March 31,						Six months ended March 31,
	2006			2005			2006			2005
Pharmaceutical Distribution	$	175,951		$	154,381		$	314,827		$	251,252
PharMerica		16,171			31,971			34,678			55,493
Facility consolidations, employee severance and other		(3,577	)		(1,837	)		(12,404	)		(6,970	)
Gain on antitrust litigation settlements		9,379			—			27,428			18,825
Impairment charge		—			(5,259	)		—			(5,259	)
Total operating income		197,924			179,256			364,529			313,341
Other income		(5,826	)		(383	)		(5,043	)		(1,441	)
Interest expense, net		7,344			14,519			13,856			36,597
Loss on early retirement of debt		—			—			—			1,015
Income from continuing operations before income taxes and cumulative effect of change in accounting	$	196,406		$	165,120		$	355,716		$	277,170

Segment operating income is evaluated before other income; interest expense, net; loss on early retirement of debt; facility consolidations, employee severance and other; gain on antitrust litigation settlements and impairment charge. All corporate office expenses are allocated to the two reportable segments.

Note 13.    Selected Consolidating Financial Statements of Parent, Guarantors and Non-Guarantors

The Company’s 5 ⁵/8% senior notes due September 15, 2012 (the “2012 Notes”) and the 5 ⁷/8% senior notes due September 15, 2015 (the “2015 Notes” and, together with the 2012 Notes, the “Notes”) each are fully and unconditionally guaranteed on a joint and several basis by certain of the Company’s subsidiaries (the subsidiaries of the Company that are guarantors of the Notes being referred to collectively as the “Guarantor Subsidiaries”). The total assets, stockholders’ equity, revenues, earnings and cash flows from operating activities of the Guarantor Subsidiaries exceeded a majority of the consolidated total of such items as of or for the periods

18

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

reported. The only consolidated subsidiaries of the Company that are not guarantors of the Notes (the “Non-Guarantor Subsidiaries”) are: (a) the receivables securitization special purpose entity and (b) certain operating subsidiaries, all of which, collectively, are minor. The following tables present condensed consolidating financial statements including AmerisourceBergen Corporation (the “Parent”), the Guarantor Subsidiaries, and the Non-Guarantor Subsidiaries. Such financial statements include balance sheets as of March 31, 2006 and September 30, 2005, statements of operations for the three and six months ended March 31, 2006 and 2005, and statements of cash flows for the six months ended March 31, 2006 and 2005.

SUMMARY CONSOLIDATING BALANCE SHEETS:

	March 31, 2006
(in thousands)	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Current assets:
Cash and cash equivalents	$	953,758		$	50,580	$	47,387		$	—		$	1,051,725
Short-term investment securities		783,945			—								783,945
Accounts receivable, net		2,475			806,992		2,180,812			—			2,990,279
Merchandise inventories		—			4,263,548		90,322			—			4,353,870
Prepaid expenses and other		114			22,416		2,764			—			25,294
Total current assets		1,740,292			5,143,536		2,321,285			—			9,205,113
Property and equipment, net		—			505,437		18,904			—			524,341
Goodwill		—			2,497,362		68,095			—			2,565,457
Intangibles, deferred charges and other		18,526			445,776		22,355			—			486,657
Intercompany investments and advances		3,348,574			3,590,202		(1,891,569	)		(5,047,207	)		—
Total assets	$	5,107,392		$	12,182,313	$	539,070		$	(5,047,207	)	$	12,781,568
Current liabilities:
Accounts payable	$	—		$	6,215,672	$	103,446		$	—		$	6,319,118
Accrued expenses and other		(254,929	)		655,548		9,830			—			410,449
Current portion of long-term debt		—			1,184		1,859			—			3,043
Deferred income taxes		—			401,194		(1,351	)		—			399,843
Total current liabilities		(254,929	)		7,273,598		113,784			—			7,132,453
Long-term debt, net of current portion		895,729			414		181,390			—			1,077,533
Other liabilities		—			100,945		4,045			—			104,990
Stockholders’ equity		4,466,592			4,807,356		239,851			(5,047,207	)		4,466,592
Total liabilities and stockholders’ equity	$	5,107,392		$	12,182,313	$	539,070		$	(5,047,207	)	$	12,781,568

19

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

SUMMARY CONSOLIDATING BALANCE SHEETS:

	September 30, 2005
(in thousands)	Parent			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Current assets:
Cash and cash equivalents	$	866,367		$	67,438	$	32,748		$	—		$	966,553
Short-term investment securities		349,130			—		—			—			349,130
Accounts receivable, net		1,460			595,401		2,043,785			—			2,640,646
Merchandise inventories		—			3,968,355		35,335			—			4,003,690
Prepaid expenses and other		15			26,585		1,073			—			27,673
Total current assets		1,216,972			4,657,779		2,112,941			—			7,987,692
Property and equipment, net		—			514,072		686			—			514,758
Goodwill		—			2,428,431		3,137			—			2,431,568
Intangibles, deferred charges and other		18,989			426,080		2,087			—			447,156
Intercompany investments and advance		3,685,627			2,830,284		(1,814,316	)		(4,701,595	)		—
Total assets	$	4,921,588		$	10,856,646	$	304,535		$	(4,701,595	)	$	11,381,174
Current liabilities:
Accounts payable	$	—		$	5,256,887	$	35,366		$	—		$	5,292,253
Accrued expenses and other		(254,287	)		636,522		5,508			—			387,743
Current portion of long-term debt		—			1,232		—			—			1,232
Deferred income taxes		—			372,144		(1,276	)		—			370,868
Total current liabilities		(254,287	)		6,266,785		39,598			—			6,052,096
Long-term debt, net of current portion		895,518			961		55,000			—			951,479
Other liabilities		—			97,242		—			—			97,242
Stockholders’ equity		4,280,357			4,491,658		209,937			(4,701,595	)		4,280,357
Total liabilities and stockholders’ equity	$	4,921,588		$	10,856,646	$	304,535		$	(4,701,595	)	$	11,381,174

20

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:

	Three months ended March 31, 2006
(in thousands)	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Operating revenue	$	—		$	13,793,610		$	255,565		$	—		$	14,049,175
Bulk deliveries to customer warehouses		—			1,171,497			7			—			1,171,504
Total revenue		—			14,965,107			255,572			—			15,220,679
Cost of goods sold		—			14,416,946			242,970			—			14,659,916
Gross profit		—			548,161			12,602			—			560,763
Operating expenses:
Distribution, selling and administrative		—			350,524			(11,411	)		—			339,113
Depreciation		—			16,894			57			—			16,951
Amortization		—			2,652			546			—			3,198
Facility consolidations, employee severance and other		—			3,577			—			—			3,577
Operating income		—			174,514			23,410			—			197,924
Other income		—			(5,819	)		(7	)		—			(5,826	)
Interest expense (income)		4,218			(21,482	)		24,608			—			7,344
Income from continuing operations before income taxes and equity in earnings of subsidiaries		(4,218	)		201,815			(1,191	)		—			196,406
Income taxes		22			68,251			(457	)		—			67,816
Equity in earnings of subsidiaries		133,241			—			—			(133,241	)		—
Income from continuing operations		129,001			133,564			(734	)		(133,241	)		128,590
Income from discontinued operations		—			(411	)		—			—			(411	)
Net income	$	129,001		$	133,975		$	(734	)	$	(133,241	)	$	129,001

21

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:

	Three months ended March 31, 2005
(in thousands)	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Operating revenue	$	—		$	12,151,155		$	90,584		$	—		$	12,241,739
Bulk deliveries to customer warehouses		—			948,416			12			—			948,428
Total revenue		—			13,099,571			90,596			—			13,190,167
Cost of goods sold		—			12,603,333			85,084			—			12,688,417
Gross profit		—			496,238			5,512			—			501,750
Operating expenses:
Distribution, selling and administrative		—			318,481			(23,235	)		—			295,246
Depreciation		—			17,528			52			—			17,580
Amortization		—			2,554			18			—			2,572
Facility consolidations and employee severance		—			1,837			—			—			1,837
Impairment charge		—			5,259			—			—			5,259
Operating income		—			150,579			28,677			—			179,256
Other income		—			(383	)		—			—			(383	)
Interest (income) expense		(8,086	)		8,936			13,669			—			14,519
Income from continuing operations before income taxes, equity in earnings of subsidiaries, and cumulative effect of change in accounting		8,086			142,026			15,008			—			165,120
Income taxes		3,105			54,538			5,764			—			63,407
Equity in earnings of subsidiaries		94,441			—			—			(94,441	)		—
Income from continuing operations		99,422			87,488			9,244			(94,441	)		101,713
Loss from discontinued operations		—			2,291			—			—			2,291
Net income	$	99,422		$	85,197		$	9,244		$	(94,441	)	$	99,422

22

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:

	Six months ended March 31, 2006
(in thousands)	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Operating revenue	$	—		$	27,105,802		$	479,227		$	—		$	27,585,029
Bulk deliveries to customer warehouses		—			2,288,786			11			—			2,288,797
Total revenue		—			29,394,588			479,238			—			29,873,826
Cost of goods sold		—			28,328,729			455,956			—			28,784,685
Gross profit		—			1,065,859			23,282			—			1,089,141
Operating expenses:
Distribution, selling and administrative		—			696,609			(25,637	)		—			670,972
Depreciation		—			34,910			599			—			35,509
Amortization		—			5,163			564			—			5,727
Facility consolidations, employee severance and other		—			12,404			—			—			12,404
Operating income		—			316,773			47,756			—			364,529
Other (income) loss		—			(5,408	)		365			—			(5,043	)
Interest (income) expense		5,277			(44,742	)		53,321			—			13,856
Income from continuing operations before taxes and equity in earnings of subsidiaries		(5,277	)		366,923			(5,930	)		—			355,716
Income taxes		(386	)		131,818			(2,282	)		—			129,150
Equity in earnings of subsidiaries		231,159			—			—			(231,159	)		—
Income from continuing operations		226,268			235,105			(3,648	)		(231,159	)		226,566
Loss from discontinued operations		—			298			—			—			298
Net income	$	226,268		$	234,807		$	(3,648	)	$	(231,159	)	$	226,268

23

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS:

	Six months ended March 31, 2005
(in thousands)	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Operating revenue	$	—		$	24,259,327		$	184,521		$	—		$	24,443,848
Bulk deliveries to customer warehouses		—			2,383,134			21			—			2,383,155
Total revenue		—			26,642,461			184,542			—			26,827,003
Cost of goods sold		—			25,697,121			173,540			—			25,870,661
Gross profit		—			945,340			11,002			—			956,342
Operating expenses:
Distribution, selling and administrative		—			629,482			(39,411	)		—			590,071
Depreciation		—			35,472			101			—			35,573
Amortization		—			5,092			36			—			5,128
Facility consolidations, employee severance and other		—			6,970			—			—			6,970
Impairment charge		—			5,259			—			—			5,259
Operating income		—			263,065			50,276			—			313,341
Other income		—			(1,441	)		—			—			(1,441	)
Interest (income) expense		(13,038	)		23,750			25,885			—			36,597
Loss on early retirement of debt		1,015			—			—			—			1,015
Income from continuing operations before income taxes, cumulative effect of change in accounting, and equity in earnings of subsidiaries		12,023			240,756			24,391			—			277,170
Income taxes		4,617			92,450			9,367			—			106,464
Equity in earnings of subsidiaries		142,962			—			—			(142,962	)		—
Income from continuing operations		150,368			148,306			15,024			(142,962	)		170,736
Loss from discontinued operations		—			10,196			—			—			10,196
Cumulative effect of change in accounting, net of tax		—			10,094			78			—			10,172
Net income	$	150,368		$	128,016		$	14,946		$	(142,962	)	$	150,368

24

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS:

	Six months ended March 31, 2006
(in thousands)	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Net income	$	226,228		$	234,807		$	(3,648	)	$	(231,159	)	$	226,268
Adjustments to reconcile net income to net cash (used in) provided by operating activities		(234,386	)		554,104			(74,507	)		231,159			476,370
Net cash (used in) provided by operating activities		(8,118	)		788,911			(78,155	)		—			702,638
Capital expenditures		—			(60,149	)		—			—			(60,149	)
Cost of acquired companies, net of cash acquired, and other		—			(88,935	)		(149,492	)		—			(238,427	)
Proceeds from sale-leaseback transactions		—			28,143			—			—			28,143
Proceeds from the sale of property and equipment		—			2,199			—			—			2,199
Proceeds from sale of equity investment and eminent domain settlement		—			7,582			—			—			7,582
Purchases of investment securities available-for-sale		(1,639,555	)		—			—			—			(1,639,555	)
Proceeds from sale of investment securities available-for-sale		1,204,740			—			—			—			1,204,740
Net cash used in investing activities		(434,815	)		(111,160	)		(149,492	)		—			(695,467	)
Net borrowings under revolving credit facilities		—			—			124,916			—			124,916
Purchases of common stock		(132,226	)		—			—			—			(132,226	)
Exercise of stock options, including excess tax benefit		97,804			—			—			—			97,804
Cash dividends on common stock		(10,464	)		—			—			—			(10,464	)
Deferred financing costs and other		1,934			(2,926	)		—			—			(992	)
Common stock purchases for employee stock purchase plan		(1,037	)		—			—			—			(1,037	)
Intercompany investments and advances		574,313			(691,683	)		117,370			—			—
Net cash provided by (used in) financing activities		530,324			(694,609	)		242,286			—			78,001
Increase (decrease) in cash and cash equivalents		87,391			(16,858	)		14,639			—			85,172
Cash and cash equivalents at beginning of period		866,367			67,438			32,748			—			966,553
Cash and cash equivalents at end of period	$	953,768		$	50,580		$	47,387		$	—		$	1,051,725

25

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(UNAUDITED)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS:

	Six months ended March 31, 2005
(in thousands)	Parent			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated Total
Net income	$	150,368		$	128,016		$	14,946		$	(142,962	)	$	150,368
Adjustments to reconcile net income to net cash provided by (used in) operating activities		(133,857	)		1,053,685			(20,152	)		142,962			1,042,638
Net cash provided by (used in) operating activities		16,511			1,181,701			(5,206	)		—			1,193,006
Capital expenditures		—			(123,246	)		—			—			(123,246	)
Proceeds from sale-leaseback transactions		—			20,732			—			—			20,732
Proceeds from sale of discontinued operations		—			3,560			—			—			3,560
Purchases of investment securities available-for-sale		(391,275	)		—			—			—			(391,275	)
Proceeds from sale of investment securities available-for-sale		91,530			—			—			—			91,530
Other		—			(588	)		—			—			(588	)
Net cash used in investing activities		(299,745	)		(99,542	)		—			—			(399,287	)
Long-term debt repayments		(180,000	)		—			—			—			(180,000	)
Purchases of common stock		(675,348	)		—			—			—			(675,348	)
Deferred financing costs and other		(1,758	)		(937	)		(820	)		—			(3,515	)
Exercise of stock options		53,503			—			—			—			53,503
Cash dividends on common stock		(5,381	)		—			—			—			(5,381	)
Common stock purchases for employee stock purchase plan		(634	)		—			—			—			(634	)
Intercompany investments and advances		1,061,000			(1,060,438	)		(562	)		—			—
Net cash provided by (used in) financing activities		251,382			(1,061,375	)		(1,382	)		—			(811,375	)
(Decrease) increase in cash and cash equivalents		(31,852	)		20,784			(6,588	)		—			(17,656	)
Cash and cash equivalents at beginning of period		754,745			82,174			34,424			—			871,343
Cash and cash equivalents at end of period	$	722,893		$	102,958		$	27,836		$	—		$	853,687

26

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto contained herein and in conjunction with the financial statements and notes thereto included in AmerisourceBergen Corporation’s (the “Company’s”) Annual Report on Form 10-K for the fiscal year ended September 30, 2005.

In November 2005, the Company declared a two-for-one stock split of its outstanding shares of common stock. The stock split occurred in the form of a 100% stock dividend, whereby each stockholder received one additional share for each share owned. The shares were distributed on December 28, 2005 to stockholders of record at the close of business on December 13, 2005. All applicable share and per-share data in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have been retroactively adjusted to give effect to this stock split.

The Company is a pharmaceutical services company providing drug distribution and related healthcare services and solutions to its customers, which currently are based primarily in the United States. The Company also provides pharmaceuticals to long-term care and workers’ compensation patients.

The Company is organized based upon the products and services it provides to its customers, and substantially all of its operations are located in the United States. In October 2005, the Company acquired Trent Drugs (Wholesale) Ltd (“Trent”), one of the largest pharmaceutical distributors in Canada. The acquisition of Trent provides the Company a solid foundation to expand its pharmaceutical distribution capability into the Canadian marketplace. In January 2006, the Company changed the name of Trent to AmerisourceBergen Canada Corporation (“ABCC”). In March 2006, to strengthen the Company’s position in western Canada, ABCC acquired the assets of Asenda Pharmaceutical Supply Ltd (“Asenda”), a distributor that operated primarily in the provinces of British Columbia and Alberta.

In February 2006, the Company acquired Network for Medical Communications & Research, LLC (“NMCR”) a privately held provider of physician accredited continuing medical education (“CME”) and analytical research for the oncology market. The acquisition of NMCR will expand the Company’s presence in its market-leading oncology distribution and services businesses. Additionally, in March 2006, the Company acquired Brecon Pharmaceuticals Limited (“Brecon”), a United Kingdom-based provider of contract packaging and clinical trial materials (“CTM”) services for pharmaceutical manufacturers. The acquisition of Brecon enhances the Company’s packaging business and provides the added capability to offer pharmaceutical manufacturers contract packaging and CTM services in new geographies.

The Company’s operations are comprised of two reportable segments: Pharmaceutical Distribution and PharMerica.

27

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Pharmaceutical Distribution

The Pharmaceutical Distribution reportable segment includes the operations of AmerisourceBergen Drug Corporation (“ABDC”), the AmerisourceBergen Specialty Group (“ABSG”) and the AmerisourceBergen Packaging Group. The Pharmaceutical Distribution reportable segment is comprised of two operating segments: ABDC and ABSG. The ABDC operating segment includes the operations of the AmerisourceBergen Packaging Group. Servicing both pharmaceutical manufacturers and healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution segment’s operations provide drug distribution and related services designed to reduce costs and improve patient outcomes.

ABDC distributes a comprehensive offering of brand name and generic pharmaceuticals, over-the-counter healthcare products, and home healthcare supplies and equipment to a wide variety of healthcare providers, including acute care hospitals and health systems, independent and chain retail pharmacies, mail order facilities, physicians, clinics and other alternate site facilities. ABDC also provides scalable automated pharmacy dispensing equipment, medication and supply dispensing cabinets and supply management software to a variety of retail and institutional healthcare providers.

We have been continuing our efforts to shift our pharmaceutical distribution business to a fee-for-service model where we are compensated for the services we provide manufacturers versus one that is dependent upon manufacturer price increases. The fee-for-service model is intended to improve the efficiency of the supply channel and may establish a more predictable earnings pattern for ABDC, while expanding our service relationship with pharmaceutical manufacturers. As of March 31, 2006, ABDC has signed fee-for-service agreements with a substantial majority of the large branded pharmaceutical manufacturers. During fiscal 2006, we expect that more than 75% of ABDC’s brand name manufacturer gross margin will not be contingent on manufacturer price increases.

ABSG, through a number of individual operating businesses, provides distribution and other services, including group purchasing services, to physicians and alternate care providers who specialize in a variety of disease states, including oncology, nephrology, and rheumatology. ABSG also distributes vaccines, other injectables, plasma and other blood products. In addition, through its manufacturer services and physician and patient services businesses, ABSG provides a number of commercialization, third party logistics, and other services for biotech and other pharmaceutical manufacturers, reimbursement consulting, practice management, and physician education.

ABSG’s business may be adversely impacted in the future by changes in the Medicare reimbursement rates for certain pharmaceuticals, including oncology drugs. The reimbursement changes that have been implemented by the U.S. Department of Health and Human Services (“HHS”) pursuant to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“Medicare Modernization Act”), and that are scheduled to be implemented in the future, may have the effect of reducing the amount of medications or the margins on medications purchased by physicians for administration in their offices and may force patients to other healthcare providers. Since ABSG provides a number of services to or through physicians, patient shifts from physicians to other healthcare providers may result in slower or reduced growth in revenues for ABSG. Although ABSG has contingency plans to enable it to retain and grow the business it conducts with and through physicians, there can be no assurance that it will retain or replace all of the revenue currently going through the physician channel or that such revenue will be as profitable.

The AmerisourceBergen Packaging Group consists of American Health Packaging, Anderson Packaging (“Anderson”) and the recently acquired Brecon. American Health Packaging delivers unit dose, punch card, unit-of-use and other packaging solutions to institutional and retail healthcare providers. Anderson is a leading provider of contracted packaging services for pharmaceutical manufacturers. Brecon is a United Kingdom-based provider of contract packaging and CTM services for pharmaceutical manufacturers.

28

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

PharMerica

The PharMerica segment includes the operations of the PharMerica long-term care business (“Long-Term Care”) and a workers’ compensation-related business (“Workers’ Compensation”). The PharMerica reportable segment encompasses only the PharMerica operating segment.

Long-Term Care is a leading national provider of pharmacy products and services to patients in long-term care and alternate site settings, including skilled nursing facilities, assisted living facilities and residential living communities. Long-Term Care’s institutional pharmacy business involves the purchase of bulk quantities of prescription and nonprescription pharmaceuticals, principally from our Pharmaceutical Distribution segment, and the distribution of those products to residents in long-term care and alternate site facilities. Unlike hospitals, most long-term and alternate care facilities do not have onsite pharmacies to dispense prescription drugs, but depend instead on institutional pharmacies, such as Long-Term Care, to provide the necessary pharmacy products and services and to play an integral role in monitoring patient medication. Long-Term Care pharmacies dispense pharmaceuticals in patient-specific packaging in accordance with physician orders. In addition, Long-Term Care provides infusion therapy services, as well as formulary management and other pharmacy consulting services.

The Company continues to evaluate the effect that the Medicare Modernization Act (“MMA”) will have on Long-Term Care’s business. This evaluation includes assessing the total compensation it receives for servicing patients covered by Medicare Part D under the MMA, effective January 1, 2006. Prior to January 1, 2006, the Long-Term Care business was compensated for servicing approximately 55% of these patients based on reimbursement rates previously established by Medicaid. During the quarter ended March 31, 2006, PharMerica’s total compensation, including supplier rebates, for servicing patients under coverage provided by Medicare Part D was less than the total compensation, including supplier rebates, it received in the prior-year quarter based on Medicaid reimbursement rates then in place. In addition, the Centers for Medicare & Medicaid Services (CMS) of the Department of Health and Human Services continues to question whether long-term care pharmacies should be permitted to receive access/performance rebates from pharmaceutical manufacturers with respect to prescriptions covered under the Medicare Part D benefit but has not prohibited the receipt of such rebates. In recent guidance issued to Medicare Part D Prescription Drug Plan Sponsors, CMS instructs Plan Sponsors to obtain full disclosure from long-term care pharmacies of all discounts, rebates, or other remuneration that such pharmacies receive from manufacturers and CMS indicates that it will provide further guidelines in this subject area. The elimination or reduction of manufacturer rebates, if not offset by other reimbursement, could have a further adverse affect on the Long-Term Care business.

Workers’ Compensation provides mail order and on-line pharmacy services to chronically and catastrophically ill patients under workers’ compensation programs, and provides pharmaceutical claims administration services for payors. Workers’ Compensation services include home delivery of prescription drugs, medical supplies and equipment and an array of computer software solutions to reduce the payor’s administrative costs.

29

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations

AmerisourceBergen Corporation

Summary Segment Information

	Operating Revenue Three Months Ended March 31,
(dollars in thousands)	2006			2005			Change
Pharmaceutical Distribution	$	13,877,560		$	12,068,776		15	%
PharMerica		412,685			391,090		6
Intersegment eliminations		(241,070	)		(218,127	)	11
Total	$	14,049,175		$	12,241,739		15	%
	Operating Income Three Months Ended March 31,
(dollars in thousands)	2006			2005			Change
Pharmaceutical Distribution	$	175,951		$	154,381		14	%
PharMerica		16,171			31,971		(49	)
Facility consolidations, employee severance and other		(3,577	)		(1,837	)	95
Gain on antitrust litigation settlement		9,379			—
Impairment charge		—			(5,259	)
Total	$	197,924		$	179,256		10	%
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit		3.16	%		3.21	%
Operating expenses		1.89	%		1.93	%
Operating income		1.27	%		1.28	%
PharMerica
Gross profit		27.48	%		29.25	%
Operating expenses		23.56	%		21.07	%
Operating income		3.92	%		8.17	%
AmerisourceBergen Corporation
Gross profit		3.99	%		4.10	%
Operating expenses		2.58	%		2.63	%
Operating income		1.41	%		1.46	%

30

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

AmerisourceBergen Corporation

Summary Segment Information

	Operating Revenue Six Months Ended March 31,
(dollars in thousands)	2006			2005			Change
Pharmaceutical Distribution	$	27,225,713		$	24,110,544		13	%
PharMerica		821,943			776,711		6
Intersegment eliminations		(462,627	)		(443,407	)	(4	)
Total	$	27,585,029		$	24,443,848		13	%
	Operating Income Six Months Ended March 31,
(dollars in thousands)	2006			2005			Change
Pharmaceutical Distribution	$	314,827		$	251,252		25	%
PharMerica		34,678			55,493		(38	)
Facility consolidations, employee severance and other		(12,404	)		(6,970	)	(78	)
Gain on antitrust litigation settlements		27,428			18,825		46
Impairment charge		—			(5,259	)
Total	$	364,529		$	313,341		16	%
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit		3.07	%		2.97	%
Operating expenses		1.91	%		1.93	%
Operating income		1.16	%		1.04	%
PharMerica
Gross profit		27.64	%		28.47	%
Operating expenses		23.42	%		21.33	%
Operating income		4.22	%		7.14	%
AmerisourceBergen Corporation
Gross profit		3.95	%		3.91	%
Operating expenses		2.63	%		2.63	%
Operating income		1.32	%		1.28	%

31

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Consolidated Results

Operating revenue, which excludes bulk deliveries, for the quarter ended March 31, 2006 increased 15% to $14.0 billion from $12.2 billion in the prior-year quarter. For the six months ended March 31, 2006, operating revenue increased 13% to $27.6 billion from $24.4 billion in the prior-year period. These increases were due to an increase in operating revenue in the Pharmaceutical Distribution segment.

Bulk deliveries for the quarter ended March 31, 2006 increased 24% to $1.2 billion from $0.9 billion in the prior-year quarter. For the six months ended March 31, 2006, bulk deliveries decreased 4% to $2.3 billion from $2.4 billion in the prior-year period. Changes in revenue relating to bulk deliveries fluctuate primarily due to changes in demand from the Company’s largest bulk customer. Due to the insignificant service fees generated from bulk deliveries, fluctuations in volume have no significant impact on operating margins. However, revenue from bulk deliveries has a positive impact on the Company’s cash flows due to favorable timing between the customer payments to the Company and payments by the Company to its suppliers.

Effective October 1, 2004, we changed our method of recognizing cash discounts and other related manufacturer incentives. ABDC previously recognized cash discounts as a reduction of cost of goods sold when earned, which was primarily upon payment of vendor invoices. ABDC now records cash discounts as a component of inventory cost and recognizes such discounts as a reduction of cost of goods sold upon the sale of the inventory. We recorded a $10.2 million charge for the cumulative effect of change in accounting (net of tax of $6.3 million) in the consolidated statement of operations for the six months ended March 31, 2005. This $10.2 million cumulative effect charge reduced diluted earnings per share by $0.05 for the six months ended March 31, 2005. The accounting change was incorporated in our results of operations for the three and six months ended March 31, 2005.

Gross profit of $560.8 million in the quarter ended March 31, 2006 increased 12% from $501.8 million in the prior-year quarter. Gross profit of $1,089.1 million in the six months ended March 31, 2006 increased 14% from $956.3 million in the prior-year period. During the quarter and six months ended March 31, 2006, the Company recognized gains of $9.4 million and $27.4 million, respectively, from antitrust litigation settlements with pharmaceutical manufacturers. These gains were recorded as a reduction of cost of goods sold and contributed 1.7% and 2.5% of gross profit for the quarter and six months ended March 31, 2006, respectively. During the six months ended March 31, 2005, the Company recognized an $18.8 million gain from antitrust litigation settlements with pharmaceutical manufacturers. This gain was recorded as a reduction of cost of goods sold and contributed 2.0% of gross profit for the six months ended March 31, 2005. As a percentage of operating revenue, gross profit in the quarter ended March 31, 2006 was 3.99%, as compared to the prior-year percentage of 4.10%, an 11 basis point reduction. As a percentage of operating revenue, gross profit in the six months ended March 31, 2006 was 3.95%, as compared to 3.91% in the prior-year period. The increases in gross profit were primarily due to increases in operating revenue in the Pharmaceutical Distribution segment, strong performance under our fee-for-service agreements and the growth of our generic programs. The decline in gross profit percentage in the quarter ended March 31, 2006 in comparison to the prior-year percentage was primarily due to the strong growth in business with our larger, lower-margin customers.

Distribution, selling and administrative expenses, depreciation and amortization (“DSAD&A”) of $359.3 million in the quarter ended March 31, 2006 reflects an increase of 14% compared to $315.4 million in the prior-year quarter. DSAD&A of $712.2 million in the six months ended March 31, 2006 reflects an increase of 13% from $630.8 million in the prior-year period. Increases in DSAD&A are primarily related to our growth in operating revenue, operating expenses of our acquired companies, bad debt expense, and an increase in PharMerica’s operating expenses. As a percentage of operating revenue, DSAD&A in the quarters ended March 31, 2006 and 2005 was 2.56% and 2.58%, respectively. The decline in the DSAD&A percentage in the quarter ended March 31, 2006 from the prior-year quarter was primarily due to Pharmaceutical Distribution’s continued productivity gains achieved throughout the Company’s network as a result of its Optimiz^® program,

32

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

substantially offset by investments made to strengthen our sales and marketing and information technology infrastructures, by an increase in bad debt expense and by an increase in PharMerica’s operating expenses.

In 2001, the Company developed an integration plan to consolidate its distribution network and eliminate duplicative administrative functions. During the fiscal year ended September 30, 2005, the Company decided to outsource a significant portion of its information technology activities as part of the integration plan. The Company’s plan, as revised, is to have a distribution facility network numbering in the mid-20’s within the next two years and to have successfully completed the outsourcing of such information technology activities by the end of fiscal 2006. The plan includes building six new facilities (five of which were operational as of March 31, 2006) and closing facilities (26 of which have been closed through March 31, 2006). The sixth new facility is scheduled to open during fiscal 2006. The Company anticipates closing six distribution facilities during fiscal 2006, thereby reducing the Company’s total number of distribution facilities to 28 by the end of the fiscal year.

During the six months ended March 31, 2006, the Company closed three distribution facilities. During the three and six months ended March 31, 2006, the Company recorded $1.9 million and $4.1 million, respectively, of employee severance and lease cancellation costs primarily related to the fiscal 2006 facility closures and the elimination of duplicative administrative functions and $1.6 million and $8.3 million, respectively, of transition costs associated with the outsourcing of information technology activities.

As of March 31, 2006, approximately 139 employees had received termination notices as a result of the fiscal 2006 facility closures and the elimination of duplicative administrative functions, of which substantially all have been terminated. Additional amounts for integration initiatives will be recognized in subsequent periods as facilities to be consolidated are identified and specific plans are approved and announced. Most employees receive their severance benefits over a period of time, generally not in excess of 12 months, while others may receive a lump-sum payment.

During the quarter and six months ended March 31, 2005, the Company recorded an impairment charge of $5.3 million relating to certain intangible assets held by ABDC.

Operating income of $197.9 million for the quarter ended March 31, 2006 reflects an increase of 10% from $179.3 million in the prior-year quarter. The Company’s operating income as a percentage of operating revenue was 1.41% in the quarter ended March 31, 2006 in comparison to 1.46% in the prior-year quarter. Operating income of $364.5 million for the six months ended March 31, 2006 reflects an increase of 16% from $313.3 million in the prior-year period. The Company’s operating income as a percentage of operating revenue was 1.32% for the six months ended March 31, 2006, in comparison to 1.28% in the prior-year period. The increases in operating income were primarily due to increases in gross profit in the Pharmaceutical Distribution segment, partially offset by increases in DSAD&A in both segments. The gain on antitrust litigation settlements, less the costs of facility consolidations, employee severance and other, increased operating income by $5.8 million and $15.0 million in the quarter and six-months ended March 31, 2006 and contributed 4 and 5 basis points, respectively, to the Company’s operating income as a percentage of operating revenue. The costs of the facility consolidations, employee severance and other and an impairment charge decreased operating income by $7.1 million in the quarter ended March 31, 2005. The gain on antitrust litigation settlements, less the costs of the facility consolidations, employee severance and other, and the impairment charge increased operating income by $6.6 million in the six months ended March 31, 2005. These items reduced the Company’s operating income as a percentage of operating revenue by 6 basis points in the quarter ended March 31, 2005 and increased operating income as a percentage of operating revenue by 3 basis points in the six months ended March 31, 2005.

Other income of $5.8 million and $5.0 million, respectively, for the three and six months ended March 31, 2006 includes a $3.4 million gain resulting from an eminent domain settlement and a $3.1 million gain on the sale of an equity investment.

Interest expense, net, decreased 49% in the quarter ended March 31, 2006 to $7.3 million from $14.5 million in the prior-year quarter due to a reduction in net average borrowings. During the quarter ended

33

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

March 31, 2006, the Company had an average cash position, net of borrowings, of $32 million, as compared to average borrowings, net of cash, of $322 million in the prior-year quarter. Interest expense, net, decreased 62% in the six months ended March 31, 2006 to $13.9 million from $36.6 million in the prior-year period due to a reduction in net average borrowings. During the six months ended March 31, 2006, the Company had an average cash position, net of borrowings, of $129 million, as compared to average borrowings, net of cash, of $548 million in the prior-year period. The reduction in average borrowings, net of cash, was achieved due to the Company’s strong cash flows generated from operations, including reduced merchandise inventories resulting from the aforementioned business model transition.

During the six months ended March 31, 2005, the Company recorded a $1.0 million loss resulting from the early retirement of its pre-existing senior credit agreement.

Income tax expense of $67.8 million and $63.4 million for the quarters ended March 31, 2006 and 2005, reflects an effective tax rate of 34.5% and 38.4%, respectively, a decline of 3.9% in the effective tax rate. Favorable tax adjustments of $5.5 million in the quarter ended March 31, 2006 contributed to 2.8% of the decline in the effective tax rate for the quarter. Additionally, the Company achieved a further reduction in the effective tax rate in the quarter ended March 31, 2006 by shifting more of its invested cash to tax-free investments. The Company expects to have an effective tax rate between 37% and 38% over the next six months depending upon the average invested cash in tax-free investments.

Income from continuing operations of $128.6 million for the quarter ended March 31, 2006 reflects an increase of 26% from $101.7 million in the prior-year quarter. Diluted earnings per share from continuing operations of $0.61 in the quarter ended March 31, 2006 reflects an increase of 33% from $0.46 per share in the prior-year quarter. The gains on the antitrust litigation settlement, the eminent domain settlement, and the sale of the equity investment, and the favorable tax adjustments, less the costs of facility consolidations, employee severance and other, increased income from continuing operations by $13.5 million and increased diluted earnings per share from continuing operations by $0.06 for the quarter ended March 31, 2006. The costs of facility consolidations, employee severance and other, and the impairment charge, decreased income from continuing operations by $4.4 million and decreased diluted earnings per share from continuing operations by $0.02 for the quarter ended March 31, 2005. Income from continuing operations of $226.6 million for the six months ended March 31, 2006 reflects an increase of 33% from $170.7 million in the prior-year period before the cumulative effect of the change in accounting. Diluted earnings per share from continuing operations of $1.08 in the six months ended March 31, 2006 reflects a 38% increase from $0.78 per share in the prior-year period before the cumulative effect of the change in accounting. The gains on the antitrust litigation settlements, the eminent domain settlement, and the sale of the equity investment, and the favorable tax adjustments, less the costs of facility consolidations, employee severance and other, increased income from continuing operations by $19.2 million and increased diluted earnings per share by $0.09 for the six months ended March 31, 2006. The gain on litigation settlements, less the costs of facility consolidations, employee severance and other, the impairment charge, and the loss on the early retirement of debt, increased income from continuing operations by $3.4 million and increased diluted earnings per share from continuing operations by $0.02 for the six months ended March 31, 2005.

(Income) loss from discontinued operations of $(0.4) million and $0.3 million, net of tax, for the quarter and six months ended March 31, 2006, respectively, relates to certain adjustments made by the Company in connection with the December 2004 sale of Rita Ann Distributors (“Rita Ann”) as well as the July 2005 sale of substantially all of the assets of Bridge Medical, Inc. (“Bridge”). Loss from discontinued operations of $2.3 million and $10.2 million, net of tax, for the quarter and six months ended March 31, 2005, respectively, includes operating losses incurred in connection with the Rita Ann and Bridge businesses. Additionally, the $6.0 million loss, net of tax, incurred on the sale of Rita Ann is included in the loss from discontinued operations for the six months ended March 31, 2005.

Net income of $129.0 million for the quarter ended March 31, 2006 reflects an increase of 30% from $99.4 million in the prior-year quarter. Diluted earnings per share of $0.61 for the quarter ended March 31, 2006,

34

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

reflects an increase of 36% from $0.45 per share in the prior-year quarter. Net income of $226.3 million for the six months ended March 31, 2006 reflects an increase of 50% from $150.4 million in the prior year period. Diluted earnings per share of $1.07 for the six months ended March 31, 2006 reflects and increase of 55% from $0.69 in the prior-year period. The increase in diluted earnings per share was larger than the increase in net income due to the reduced number of weighted average common shares outstanding resulting from the Company’s purchase of its common stock in connection with its stock buyback programs (see Liquidity and Capital Resources), net of the impact of stock option exercises.

Segment Information

Pharmaceutical Distribution Segment Results

Pharmaceutical Distribution operating revenue of $13.9 billion for the quarter ended March 31, 2006 increased 15% from $12.1 billion in the prior-year quarter. Operating revenue of $27.2 billion for the six months ended March 31, 2006 increased 13% from $24.1 billion in the prior-year period. The Company’s acquisitions contributed 1% of this operating revenue growth in the quarter and six months ended March 31, 2006. Our operating revenue growth was higher than the market growth rate, and was driven by growth from a few of our larger but lower margin institutional customers, the continued strong growth at ABSG, and new customers in all customer classes. During the quarter ended March 31, 2006, 59% of operating revenue was from sales to institutional customers and 41% was from sales to retail customers; this compares to a customer mix in the prior-year quarter of 56% institutional and 44% retail. In comparison with the prior-year results, sales to institutional customers increased 20% in the quarter primarily due to the continued above market growth of the specialty pharmaceutical business and the growth of sales to a few of our larger alternate-site institutional customers. Sales to retail customers increased 9% compared to the prior-year quarter. The Company’s acquisitions contributed 3% of the retail customer growth.

This segment’s growth largely reflects U.S. pharmaceutical industry conditions, including increases in prescription drug utilization and higher pharmaceutical prices offset, in part, by the increased use of lower-priced generics. The segment’s growth has also been impacted by industry competition and changes in customer mix. Industry sales in the United States, as estimated by industry data firm IMS Healthcare, Inc., are expected to grow between 6% and 7% in 2006 and annually between 5% and 8% over the next five years. Since our operating revenue has grown by 13% in the six months ended March 31, 2006, we currently expect that our annual growth rate for fiscal 2006 will be between 10% and 12%, which is an increase from our prior estimate of between 7% and 9%. Future operating revenue growth will continue to be affected by competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, changes in Federal government rules and regulations and industry growth trends, such as the likely increase in the number of generic drugs that will be available over the next few years as a result of the expiration of certain drug patents held by brand manufacturers.

The Company’s Specialty Group has been growing at rates in excess of overall pharmaceutical market growth. The Specialty Group’s revenue represented 16.4% of the Pharmaceutical Distribution segment’s operating revenue over the past twelve months. The majority of this Group’s revenue is generated from the distribution of pharmaceuticals to physicians who specialize in a variety of disease states, such as oncology, nephrology, and rheumatology. Additionally, the Specialty Group distributes vaccines, plasma and other blood products. The Specialty Group’s oncology business has continued to outperform the market and continues to be the Specialty Group’s most significant contributor to revenue growth. The Specialty Group’s business may be adversely impacted in the future by changes in the Medicare reimbursement rates for certain pharmaceuticals, including oncology drugs. The reimbursement changes that have been implemented by HHS pursuant to the MMA, or that may be proposed or implemented in the future, may have the effect of reducing the amount of medications or the margins on medications purchased by physicians for administration in their offices and may force patients to other healthcare providers. Since the Specialty Group provides a number of services to or through physicians, patient shifts from physicians to other healthcare providers may result in slower or reduced growth in revenues for the Specialty Group. Although the Specialty Group has contingency plans to enable it to

35

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

retain and grow the business it conducts with and through physicians, there can be no assurance that it will retain or replace all of the revenue currently going through the physician channel or that such revenue will be as profitable.

Pharmaceutical Distribution gross profit of $438.0 million in the quarter ended March 31, 2006 reflects an increase of 13% from $387.4 million in the prior-year quarter. Pharmaceutical Distribution gross profit of $834.5 million in the six months ended March 31, 2006 reflects an increase of 17% from $716.4 million in the prior-year period. The increases in gross profit were primarily due to increases in operating revenue, our strong performance under our fee-for-service agreements and the growth of our generic programs. As a percentage of operating revenue, gross profit in the quarter ended March 31, 2006 was 3.16%, as compared to 3.21% in the prior-year quarter. The five basis point decline was due to the higher than average growth rate of our larger, lower margin customers, which offset the strong performance under our fee-for-service agreements and the growth of our generic programs. As a percentage of operating revenue, gross profit in the six months ended March 31, 2006 was 3.07%, as compared to 2.97% in the prior-year period. The ten basis point improvement was primarily due to our strong performance under our fee-for-service agreements, the growth of our generic programs, and an increase in profits related to pharmaceutical price increases, which were less than expected in the prior-year period, less the impact of the higher than average growth rate of our larger, lower margin customers.

The Company’s cost of goods sold for interim periods includes a last-in, first-out (“LIFO”) provision that is based on the Company’s estimated annual LIFO provision. The annual LIFO provision is affected by changes in inventory quantities, product mix, and manufacturer pricing practices, which may be impacted by market and other external influences.

Pharmaceutical Distribution operating expenses of $262.0 million in the quarter ended March 31, 2006 reflected an increase of 13% from $233.0 million in the prior-year quarter. Pharmaceutical Distribution operating expenses of $519.7 million in the six months ended March 31, 2006 reflected an increase of 12% from $465.1 million in the prior-year period. Increases in operating expenses are primarily related to our growth in operating revenue, operating expenses of our acquired companies and bad debt expense. As a percentage of operating revenue, operating expenses in the quarter ended March 31, 2006 were 1.89%, as compared to 1.93% in the prior-year quarter. As a percentage of operating revenue, operating expenses in the six months ended March 31, 2006 were 1.91%, as compared to 1.93% in the prior-year period. The operating expense percentages improved slightly in the quarter and six months ended March 31, 2006, as we continued to achieve productivity gains throughout the Company’s distribution network, resulting from our Optimiz^® program. These productivity gains were largely offset by our investments made to strengthen our sales and marketing and information technology infrastructures.

Pharmaceutical Distribution operating income of $176.0 million in the quarter ended March 31, 2006 reflects an increase of 14% from $154.4 million in the prior-year quarter. As a percentage of operating revenue, operating income in the quarter ended March 31, 2006 was 1.27%, as compared to 1.28% in the prior-year quarter. This percentage declined slightly in the quarter ended March 31, 2006 as improvements in gross profit were offset by an increase in operating expenses. Pharmaceutical Distribution operating income of $314.8 million in the six months ended March 31, 2006 reflected an increase of 25% from $251.3 million in the prior-year period. As a percentage of operating revenue, operating income in the six months ended March 31, 2006 was 1.16%, as compared to 1.04% in the prior-year period. This increase over the prior-year percentage was due primarily to the increase in gross profit in the six months ended March 31, 2006, as compared to the prior-year period.

PharMerica Segment Results

PharMerica operating revenue of $412.7 million for the quarter ended March 31, 2006 reflects an increase of 6% from $391.1 million in the prior-year quarter. Operating revenue for the six months ended March 31, 2006 increased 6% to $821.9 million from $776.7 million in the prior-year period. The increases in operating revenue

36

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

were due to increases in both the Long-Term Care and Workers’ Compensation businesses. The operating revenue growth rate in fiscal 2006 is expected to be in the mid-single digits. The future operating revenue growth rate will likely continue to be impacted by competitive pressures, changes in the regulatory environment (including the reimbursement changes that have been implemented pursuant to the MMA as well as the implementation of the voluntary prescription drug benefit program for seniors thereunder) and the pharmaceutical inflation rate.

PharMerica gross profit of $113.4 million for the quarter ended March 31, 2006 reflects a decrease of 1% from $114.4 million in the prior-year quarter. PharMerica gross profit of $227.2 million for the six months ended March 31, 2006 reflects an increase of 3% from $221.2 million in the prior-year period. As a percentage of operating revenue, gross profit in the quarter ended March 31, 2006 was 27.48%, compared to 29.25% in the prior-year quarter. As a percentage of operating revenue, gross profit in the six months ended March 31, 2006 was 27.64%, as compared to 28.47% in the prior-year period. During the quarter ended March 31, 2006, PharMerica’s total compensation, including supplier rebates, for servicing patients under coverage provided by Medicare Part D was less than the total compensation, including supplier rebates, it received in the prior-year quarter based on the Medicaid reimbursement rates then in place. Future gross profit will likely be impacted by industry competitive pressures and rates of reimbursement for services provided by both the Long-Term Care and Workers’ Compensation businesses, and rebate amounts from pharmaceutical manufacturers and the portion of any such rebates that may be retained by PharMerica.

PharMerica operating expenses of $97.2 million for the quarter ended March 31, 2006 increased 18% from $82.4 million in the prior-year quarter. PharMerica operating expenses of $192.5 million for the six months ended March 31, 2006 increased 16% from $165.7 million in the prior-year period. As a percentage of operating revenue, operating expenses increased to 23.56% in the quarter ended March 31, 2006 from 21.07% in the prior-year quarter. As a percentage of operating revenue, operating expenses increased to 23.42% in the six months ended March 31, 2006 from 21.33% in the prior-year period. The increases in PharMerica’s operating expenses were partly due to increases in bad debt expense of $3.5 million and $12.4 million in the three and six months ended March 31, 2006, respectively, in comparison to prior-year periods. Additionally, the quarter ended March 31, 2005 benefited from a $4.0 million reduction in sales and use tax liability due to favorable audit experience and other settlements. Lastly, increased costs of $2 million to $3 million were incurred by PharMerica during the quarter ended March 31, 2006 related to the implementation of Medicare Part D under the MMA, which became effective January 1, 2006.

PharMerica operating income of $16.2 million for the quarter ended March 31, 2006 decreased 49% from $32.0 million in the prior-year quarter. As a percentage of operating revenue, operating income in the quarter ended March 31, 2006 was 3.92%, as compared to 8.17% in the prior-year quarter. The reduction in operating income was due to the aforementioned decrease in gross profit combined with an increase in the operating expenses. PharMerica operating income of $34.7 million for the six months ended March 31, 2006 decreased 38% from $55.5 million in the prior-year period. As a percentage of operating revenue, operating income in the six months ended March 31, 2006 was 4.22% as compared to 7.14% in the prior-year period. The reduction of operating income was due to an increase operating expenses. We believe PharMerica’s operating income margin in fiscal 2006 will continue to be impacted by industry competitive pressures and the reduced total compensation it is currently receiving for servicing patients covered by Medicare Part D under the MMA, as previously mentioned. As a result, we are currently estimating that PharMerica’s operating income as a percentage of operating revenue for the fiscal year ending September 30, 2006 will be between 4% and 5%.

Intersegment Eliminations

These amounts represent the elimination of the Pharmaceutical Distribution segment’s sales to PharMerica. ABDC is the principal supplier of pharmaceuticals to PharMerica.

37

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity and Capital Resources

The following table illustrates the Company’s debt structure at March 31, 2006, including availability under revolving credit facilities and the receivables securitization facility (in thousands):

	Outstanding Balance		Additional Availability
Fixed-Rate Debt:
$400,000, 5 5/8% senior notes due 2012	$	398,128	$	—
$500,000, 5 7/8% senior notes due 2015		497,601		—
Other		4,883		—
Total fixed-rate debt		900,612		—
Variable-Rate Debt:
Blanco revolving credit facility due 2007		55,000		—
UK revolving credit facility due 2009		22,584		12,160
Canadian revolving credit facility due 2009		101,798		13,725
Senior revolving credit facility due 2009		—		689,315
Receivables securitization facility due 2007		—		700,000
Other		582		2,893
Total variable-rate debt		179,964		1,418,093
Total debt, including current portion	$	1,080,576	$	1,418,093

The Company’s $1.6 billion of aggregate availability under its revolving credit facilities and its receivables securitization facility provide sufficient sources of capital to fund the Company’s working capital requirements.

In March 2006, the Company entered into a £20 million multicurrency revolving credit facility (the “UK Credit Facility”) due March 2009 with a financial institution in connection with the Company’s acquisition of Brecon. Interest on borrowings under the UK Credit Facility accrues at specific rates based on the Company’s debt rating (0.675% over LIBOR or EURIBOR at March 31, 2006). The Company will pay quarterly facility fees to maintain the availability under the UK Credit Facility at specific rates based on the Company’s debt rating (0.175% at March 31, 2006). The Company may choose to repay or reduce its commitments under the UK Credit Facility at any time. The UK Credit Facility contains restrictions on, among other things, additional indebtedness, distributions and dividends to stockholders and investments. Additional covenants require compliance with financial tests, including leverage and fixed charge coverage ratios. Brecon will utilize the UK Credit Facility as needed to finance its working capital requirements.

In October 2005, the Company entered into a C$135 million senior unsecured revolving credit facility (the “Canadian Credit Facility”) due December 2009 with a syndicate of lenders in connection with the Company’s acquisition of Trent. Subsequently, additional borrowings were made by Trent to finance its working capital requirements. Interest on borrowings under the Canadian Credit Facility accrues at specific rates based on the Company’s debt rating (0.675% over LIBOR or Bankers’ Acceptance Stamping Fee Spread at March 31, 2006). The Company will pay quarterly facility fees to maintain the availability under the Canadian Credit Facility at specific rates based on the Company’s debt rating (0.20% at March 31, 2006). The Company may choose to repay or reduce its commitments under the Canadian Credit Facility at any time. The Canadian Credit Facility contains restrictions on, among other things, additional indebtedness, distributions and dividends to stockholders, investments and capital expenditures. Additional covenants require compliance with financial tests, including leverage and minimum earnings to fixed charge coverage ratios.

The $55 million Blanco revolving credit facility, which was scheduled to expire in April 2006, was amended and now expires in April 2007.

38

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

In November 2005, Standard & Poor’s Ratings Services announced that it raised its corporate credit and senior unsecured debt ratings on the Company to ‘BBB-’ from ‘BB+’. As a result of the upgrade, a substantial number of covenants under the indenture governing its 5 ⁵/8% senior notes due 2012 and 5 ⁷/8% senior notes due 2015 were eliminated.

The Company’s most significant market risk is the effect of fluctuations in interest rates. The Company manages interest rate risk by using a combination of fixed-rate and variable-rate debt. The Company also has market risk exposure relating to its cash and cash equivalents and its short-term investment securities available-for-sale. At March 31, 2006, the Company had $180.0 million of variable-rate debt. The amount of variable rate debt fluctuates during the year based on the Company’s working capital requirements. The Company periodically evaluates various financial instruments that could mitigate a portion of its exposure to variable interest rates. However, there are no assurances that such instruments will be available on terms acceptable to the Company. There were no such financial instruments in effect at March 31, 2006. The Company had $1.8 billion in cash and cash equivalents and short-term investment securities available-for-sale at March 31, 2006. The unfavorable impact of a hypothetical decrease in interest rates on cash and cash equivalents and short-term investment securities available-for-sale would be partially offset by the favorable impact of such a decrease on variable-rate debt. For every $100 million of variable-rate net cash invested, a 50 basis point decrease in interest rates would increase the Company’s annual net interest expense by $0.5 million.

The Company’s operating results have generated cash flow, which, together with availability under its debt agreements and credit terms from suppliers, has provided sufficient capital resources to finance working capital and cash operating requirements, and to fund capital expenditures, acquisitions, repayment of debt, the payment of interest on outstanding debt and repurchases of shares of the Company’s common stock. The Company’s primary ongoing cash requirements will be to finance working capital, fund the payment of interest on debt, finance merger integration initiatives and fund capital expenditures and routine growth and expansion through new business opportunities. Future cash flows from operations and borrowings are expected to be sufficient to fund the Company’s ongoing cash requirements.

Following is a summary of the Company’s contractual obligations for future principal and interest payments on its debt, minimum rental payments on its noncancelable operating leases and minimum payments on its other commitments at March 31, 2006 (in thousands):

	Payments Due by Period
	Total		Within 1 year		1-3 years		4-5 years		After 5 years
Debt, including interest payments	$	1,519,962	$	60,167	$	187,821	$	206,036	$	1,065,938
Operating leases		291,363		71,581		107,438		60,578		51,766
Other commitments		1,251,829		105,859		277,877		270,447		597,646
Total	$	3,063,154	$	237,607	$	573,136	$	537,061	$	1,715,350

In December 2004, the Company entered into a distribution agreement with an influenza vaccine manufacturer to distribute product through March 31, 2015. The agreement includes a commitment to purchase at least 12 million doses per year of the influenza vaccine provided the vaccine is approved and available for distribution in the United States by the Food and Drug Administration (“FDA”). The Company will be required to purchase the annual doses at market prices, as adjusted for inflation and other factors. We expect the manufacturer will receive FDA approval by the 2006/2007 influenza season. If the initial year of the purchase commitment begins in fiscal 2007, then the Company anticipates its purchase commitment for that year will approximate $66 million. The Company anticipates its total purchase commitment (assuming the commitment commences in fiscal 2007) will be approximately $1.1 billion. The influenza vaccine commitment is included in “Other commitments” in the above table.

39

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

In fiscal 2005, the Company decided to outsource a significant portion of its corporate and ABDC information technology activities and entered into a ten-year commitment, effective July 1, 2005, with IBM Global Services, which will assume responsibility for performing the outsourced information technology activities following the completion of certain transition matters. The Company estimates that it will incur approximately $23 million of transition costs in connection with this plan. These transition costs will include employee severance and other contract expenses. Through March 31, 2006, the Company has incurred approximately $20.5 million of these costs. The minimum commitment under the outsourcing arrangement is approximately $200 million (excluding the above-mentioned transition costs) over a ten-year period; however, the Company believes it will likely spend between $300 million and $400 million under the outsourcing arrangement to maintain and improve its information technology infrastructure during that period. The Company has included the minimum contractual commitment of $200 million in “Other commitments” in the above table.

During the six months ended March 31, 2006, the Company’s operating activities provided $702.6 million of cash as compared to $1.2 billion in the prior-year period. Cash provided by operations during the six months ended March 31, 2006 was principally the result of net income of $226.3 million, non-cash items of $106.0 million, and an increase in accounts payable, accrued expenses and income taxes of $975.1 million, offset by an increase in accounts receivable of $293.4 million and an increase in merchandise inventories of $305.2 million. The increase in accounts payable is primarily a result of our operating revenue increase, additional business days in March 2006 in comparison to September 2005, and the timing of payments to our suppliers. Merchandise inventories at March 31, 2006 were $4.4 billion and we continue to expect inventory levels to be in the range of $4.0 billion and $4.5 billion by the end of fiscal 2006. The inventory turnover rate for the Pharmaceutical Distribution segment improved to 12.0 times in the six months ended March 31, 2006 from 9.5 times in the prior-year period. The improvement was derived from lower average inventory levels due to an increase in the number of fee-for-service agreements, inventory management and other agreements, and a reduction in the number of distribution facilities. Average days sales outstanding for the Pharmaceutical Distribution segment increased to 15.8 days in the six months ended March 31, 2006 from 15.5 days in the prior-year period. This increase was largely driven by the above-market rate growth of the Specialty Group, which generally has a higher receivable investment than the ABDC distribution business. Average days sales outstanding for the PharMerica segment were 43.6 days in the six months ended March 31, 2006 compared to 39.1 days in the prior-year period. The increase in PharMerica’s average days sales outstanding is primarily due to changes made by PharMerica related to the implementation of Medicare Part D under the MMA. Operating cash uses during the six months ended March 31, 2006 included $28.6 million in interest payments and $53.8 million of income tax payments, net of refunds. The Company currently expects cash flow from operations in fiscal 2006 to be between $600 million and $700 million as cash provided by net income in the next six months is expected to offset an expected increase in working capital during that period. This estimate exceeds the Company’s prior estimate which was between $500 million and $600 million.

During the six months ended March 31, 2005, the Company’s operating activities provided $1.2 billion of cash as compared to cash provided of $22.0 million in the prior-year period. Cash provided by operations during the six months ended March 31, 2005 was principally the result of net income of $150.4 million; an increase in accounts payable, accrued expenses and income taxes of $664.8 million; a decrease in merchandise inventories of $462.0 million; and non-cash items of $92.0 million, offset partially by an increase in accounts receivable of $184.0 million. The increase in accounts payable, accrued expenses and income taxes is primarily due to the timing of purchases of merchandise inventories and cash payments to our vendors. Accounts payable increased toward the end of March 2005 due to larger than normal merchandise inventory purchases. The inventory turnover rate for the Pharmaceutical Distribution segment improved to 9.5 times in the six months ended March 31, 2005 from 7.9 times in the prior-year period. The improvement was derived from lower average inventory levels due to an increase in the number of inventory management and other vendor agreements, a reduction in buy-side profit opportunities, and a reduction in the number of distribution facilities. Average days sales outstanding for the Pharmaceutical Distribution segment decreased to 15.5 days in the six months ended

40

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

March 31, 2005 from 17.4 days in the prior-year period. Average days sales outstanding for the PharMerica segment were 39.1 days in the six months ended March 31, 2005 compared to 38.4 days in the prior-year period. Operating cash uses during the six months ended March 31, 2005 included $47.6 million in interest payments and $80.0 million of income tax payments, net of refunds.

Capital expenditures for the six months ended March 31, 2006 were $60.1 million and related principally to the construction of one of the new distribution facilities, information technology and warehouse automation.

Capital expenditures for the six months ended March 31, 2005 were $123.2 million and related principally to the construction of the new distribution facilities, investments in warehouse expansions and improvements, information technology and warehouse automation.

During the six months ended March 31, 2006, the Company acquired Trent for a purchase price of $81.1 million, NMCR for a purchase price of $86.6 million, Brecon for a purchase price of $50.2 million, and Asenda for a purchase price of $18.2 million. The purchase price paid for each acquisition above is subject to a working capital adjustment. Additionally, the Brecon acquisition is subject to a contingent payment of up to approximately $19 million based on Brecon achieving certain earnings targets in calendar 2006.

Cash used in investing activities in the six months ended March 31, 2006 also included purchases of investment securities of $1.6 billion, proceeds from the sale of investment securities of $1.2 billion, and $28.1 million from two sale-leaseback transactions entered into by the Company with financial institutions relating to equipment previously acquired for our new distribution facilities.

Cash used in investing activities for the six months ended March 31, 2005 also included purchases of investment securities of $391.3 million, proceeds from the sale of investment securities of $91.5 million, and $20.7 million from two sale-leaseback transactions entered into by the Company with a financial institution.

Cash provided by financing activities during the six months ended March 31, 2006 includes $124.9 million of net borrowings under the Canadian Credit Facility and the UK Credit Facility, which were entered into in connection with the Trent and Brecon acquisitions, respectively.

In May 2005, the Company’s board of directors authorized the Company to purchase up to $450 million of its outstanding shares of common stock, subject to market conditions and compliance with the stock repurchase restrictions contained in the indentures governing the Company’s senior notes and in the credit agreement for the Company’s senior credit facility. In August 2005, the Company’s board of directors authorized an increase in the amount available under the program, bringing the then-current availability to $750 million, and the total repurchase program to approximately $844 million. During the six months ended March 31, 2006, the Company purchased 3.3 million shares of common stock for a total of $132.2 million. As of March 31, 2006, the Company had $617.8 million of availability remaining under the share repurchase program. From April 1, 2006 to May 5, 2006, the Company purchased an additional 3,828,000 shares of its common stock for $167.3 million.

During the six months ended March 31, 2005, the Company repaid the remaining $180.0 million outstanding under its then existing term loan facility. Additionally, during the six months ended March 31, 2005, the Company acquired $675.3 million of its common stock outstanding.

On November 15, 2005, the Company’s board of directors declared a 100% increase in the quarterly dividend rate to $0.05 per common share from $0.025 per common share, which was paid on December 12, 2005 to stockholders of record as of close of business on November 25, 2005. Subsequent quarterly cash dividends have been adjusted proportionally to reflect the Company’s two-for-one stock split. On February 9, 2006, the Company’s board of director’s declared a cash dividend of $0.025 per share, which was paid on March 6, 2006 to stockholders of record as of the close of business on February 20, 2006. The Company anticipates that it will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remain within the discretion of the Company’s board of directors and will depend upon the Company’s future earnings, financial condition, capital requirements and other factors.

41

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Recently Issued Financial Accounting Standard

In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based Payment,” which requires companies to measure compensation cost for all share-based payments (including employee stock options) at fair value for interim or annual periods beginning after June 15, 2005. In April 2005, the U.S. Securities and Exchange Commission issued a rule allowing public companies to delay the adoption of SFAS No. 123R to annual periods beginning after June 15, 2005. As a result, the Company adopted SFAS No. 123R, using the modified-prospective transition method, beginning on October 1, 2005 and, therefore, began to expense the fair value of all outstanding options over their remaining vesting periods to the extent the options were not fully vested as of the adoption date and began to expense the fair value of all share-based compensation granted subsequent to September 30, 2005 over its requisite service periods. During the six months ended March 31, 2006, the Company recorded $6.6 million of share-based compensation expense. Previous periods were not retrospectively adjusted. SFAS No. 123R also requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow rather than an operating cash flow, as previously required. In accordance with Staff Accounting Bulletin (“SAB”) No. 107, the Company classified share-based compensation within distribution, selling and administrative expenses to correspond with the same line item as the majority of the cash compensation paid to employees (see Note 8 for further details).

Forward-Looking Statements

Certain of the statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and elsewhere in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. The forward-looking statements herein include statements addressing management’s views with respect to future financial and operating results and the benefits, efficiencies and savings to be derived from the Company’s integration plan to consolidate its distribution network. The following factors, among others, could cause actual results to differ materially from those described in any forward-looking statements: competitive pressures; the loss of one or more key customer or supplier relationships; customer defaults or insolvencies; changes in customer mix; supplier defaults or insolvencies; changes in pharmaceutical manufacturers’ pricing and distribution policies or practices; adverse resolution of any contract or other disputes with customers (including departments and agencies of the U.S. Government) or suppliers; regulatory changes; changes in U.S. government policies (including reimbursement changes arising from the Medicare Modernization Act); declines in the amounts of market share rebates offered by pharmaceutical manufacturers to the PharMerica long-term care business, declines in the amounts of rebates that the PharMerica Long-Term Care business can retain, and/or the inability of the business to offset the rebate reductions that have already occurred or any rebate reductions that may occur in the future; market interest rates; operational or control issues arising from the Company’s outsourcing of information technology activities; the Pharmaceutical Distribution segment’s ability to continue to successfully transition its business model to fee-for-service; success of integration, restructuring or systems initiatives; fluctuations in the U.S. dollar—Canadian dollar exchange rate and other foreign exchange rates; economic, business, competitive and/or regulatory developments in Canada, the United Kingdom and elsewhere outside of the United States; acquisition of businesses that do not perform as we expect or that are difficult for us to integrate or control; and other economic, business, competitive, legal, regulatory and/or operational factors affecting the business of the Company generally. Certain additional factors that management believes could cause actual outcomes and results to differ materially from those described in forward-looking statements are set forth (i) elsewhere in this report, (ii) in Item 1 (Business) under the heading “Certain Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2005 and elsewhere in that report and (iii) in other reports filed by the Company pursuant to the Securities Exchange Act of 1934.

42

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company’s most significant market risk is the effect of fluctuations in interest rates. See discussion under “Liquidity and Capital Resources” in Item 2 above on page 39.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are intended to ensure that information required to be disclosed in the Company’s reports submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also are intended to ensure that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.

The Company’s Chief Executive Officer and Chief Financial Officer, with the participation of other members of the Company’s management, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and have concluded that the Company’s disclosure controls and procedures were effective for their intended purposes as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes during the fiscal quarter ended March 31, 2006 in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, those controls.

During the fiscal quarter ended September 30, 2005, the Company outsourced a significant portion of its corporate and ABDC information technology activities to IBM Global Services. The outsourced services primarily include management of applications and hardware as well as systems design and development. The Company retains responsibility and authority for application selection, hardware selection, technology strategy and standards for technology use. Management has implemented or has monitored the implementation by IBM Global Services, of controls over the outsourced activities and believes such controls were adequate to ensure that the outsourcing did not materially affect internal control over financial reporting during the fiscal quarter ended March 31, 2006.

43

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings.

See Note 10 (Legal Matters and Contingencies) of the Notes to Consolidated Financial Statements set forth under Item 1 of Part I of this report for the Company’s current description of legal proceedings.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(c) Issuer Purchases of Equity Securities

In May 2005, the Company’s board of directors authorized the Company to purchase up to $450 million of its outstanding shares of common stock, subject to market conditions and to compliance with the stock repurchase restrictions contained in the indentures governing the Company’s then-existing senior notes and in the credit agreement for the Company’s senior credit facility. Through June 30, 2005, the Company had purchased $94.2 million of its common stock under this program for a weighted average price of $65.50. In August 2005, the Company’s board of directors authorized an increase in the amount available under the program by approximately $394 million, bringing the then-remaining availability to $750 million, and the total repurchase program to approximately $844 million. The increase in repurchase authority was subject to the completion of the tender and repurchase of the Company’s $500 million principal amount 8 ¹/8% senior notes due 2008 and $300 million principal amount 7 ¹/4% senior notes due 2012 and the offering and sale of $400 million principal amount 5 ⁵/8% senior notes due 2012 and $500 million principal amount 5 ⁷/8% senior notes due 2015 (collectively, the “Refinancing”). The Refinancing was completed in September 2005.

The following table sets forth the number of shares purchased and the average price paid per share during the quarter ended March 31, 2006, and the dollar value that may yet be purchased under this program as of March 31, 2006.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of the $844 Million Program	Maximum Dollar Value of Shares that May Yet Be Purchased Under the $844 Million Program
February 1 to February 28	1,006,600	$	43.00	6,215,082	617,829,232
Total	1,006,600	$	43.00

From April 1, 2006 to May 5, 2006, the Company purchased an additional 3,828,000 shares of its common stock for a total cost of $167.3 million.

44

ITEM 4. Submission of Matters to a Vote of Security Holders.

The Annual Meeting of Stockholders of the Company was held on February 9, 2006 in Philadelphia, Pennsylvania. At the meeting, the stockholders of the Company were asked to vote upon the following matters and cast their votes as set forth below.

Election of Directors. The two nominees each were elected to a three-year term expiring in 2008 by the following vote:

Nominee	For	Withheld
Richard C. Gozon	172,081,395	3,930,297
J. Lawrence Wilson	172,118,442	3,893,250

Directors whose term of office continued after the Annual Meeting were: Edward E. Hagenlocker, Kurt J. Hilzinger and Henry W. McGee, each of whose terms expire in 2007, and Rodney H. Brady, Charles H. Cotros, Jane E. Henney, M.D. and R. David Yost, each of whose terms expire in 2007.

Increase Shares. The proposed amendment of the Certificate of Incorporation to increase the number of shares of common stock that the Company is authorized to issue was approved by the following vote:

For	Withheld
146,980,328	29,031,364

2002 Incentive Plan. The proposed amendments to the AmerisourceBergen Corporation 2002 Management Stock Incentive Plan were approved by the following vote:

For	Withheld
134,873,983	41,137,709

Independent Registered Public Accountants. The appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2006 was ratified by the following vote:

Nominee	For	Withheld
Ernst & Young LLP	174,246,517	1,765,175

ITEM 6. Exhibits.

(a) Exhibits:

10.1	Multicurrency Revolving Credit Facility dated March 1, 2006 between AmerisourceBergen Corporation, Brecon Holdings Limited and Barclays Bank PLC
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer

45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERISOURCEBERGEN CORPORATION

/s/    R. DAVID YOST        

R. David Yost

Chief Executive Officer

/s/    MICHAEL D. DICANDILO        

Michael D. DiCandilo

Executive Vice President and

Chief Financial Officer

May 8, 2006

46

EX-10.1

Exhibit 10.1

MULTICURRENCY REVOLVING CREDIT FACILITY

DATED 1 MARCH 2006

£20,000,000

BRECON HOLDINGS LIMITED

as Original Borrower

and

AMERISOURCEBERGEN CORPORATION

as Company

FACILITY AGREEMENT

CONTENTS

Clause		Page
1.	Definitions And Interpretation	1
2.	The Facility	11
3.	Purpose	11
4.	Conditions Of Utilisation	11
5.	Utilisation	12
6.	Optional Currencies	13
7.	Repayment	13
8.	Prepayment And Cancellation	13
9.	Interest	14
10.	Interest Periods	15
11.	Changes To The Calculation Of Interest	16
12.	Fees	17
13.	Tax Gross Up And Indemnities	17
14.	Increased Costs	20
15.	Other Indemnities	21
16.	Mitigation By The Lender	22
17.	Costs And Expenses	22
18.	Guarantee And Indemnity	23
19.	Representations	26
20.	Information Undertakings	29
21.	Incorporated Undertakings	32
22.	General Undertakings	33
23.	Events Of Default	33
24.	Changes To The Lender	36
25.	Changes To The Obligors	39
26.	Payment Mechanics	41
27.	Set Off	43
28.	Notices	43
29.	Calculations And Certificates	44
30.	Partial Invalidity	44
31.	Remedies And Waivers	45

32.	Amendments And Waivers	45
33.	Counterparts	45
34.	Governing Law	45
35.	Enforcement	45

Schedule 1	THE ORIGINAL PARTIES	46
Schedule 2	CONDITIONS PRECEDENT	47
Part I	Conditions Precedent To Initial Utilisation	47
Part II	Conditions Precedent Required To Be Delivered By An Additional Obligor	49
Schedule 3	UTILISATION REQUEST	51
Schedule 4	MANDATORY COST FORMULAE	52
Schedule 5	FORM OF ACCESSION LETTER	54
Schedule 6	FORM OF RESIGNATION LETTER	55
Schedule 7	TIMETABLES	56
Schedule 8	PRICING SCHEDULE	57

THIS AGREEMENT is dated 1 March 2006 and made between:

(1) AMERISOURCEBERGEN CORPORATION, a Delaware Corporation (the “Company”);

(2) THE PARTIES listed in Schedule 1 as original borrowers (the “Original Borrowers”);

(3) THE PARTIES listed in Schedule 1 as original guarantors (the “Original Guarantors”); and

(4) BARCLAYS BANK PLC (the “Lender”).

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement, in addition to the terms defined in the introductory paragraph, (a) where the context requires, capitalised terms used but not defined herein have the respective meanings set forth in the U.S. Parent Agreement (as defined below) and (b) the following terms have the following meanings:

“Accession Letter” means a document substantially in the form set out in Schedule 5 (Form of Accession Letter).

“Additional Borrower” means a company which becomes an Additional Borrower in accordance with Clause 25 (Changes to the Obligors).

“Additional Guarantor” means a company which becomes an Additional Guarantor in accordance with Clause 25 (Changes to the Obligors).

“Additional Obligor” means an Additional Borrower or an Additional Guarantor.

“Affiliate” means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

“Authorisation” means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

“Availability Period” means the period from and including the date of this Agreement to and including the earlier of the date of termination of the Commitment and one month prior to the Termination Date.

“Available Commitment” means the Commitment minus:

(a) the Base Currency Amount of any outstanding Loans; and

(b) in relation to any proposed Utilisation, the Base Currency Amount of any Loans that are due to be made on or before the proposed Utilisation Date, but excluding any Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date.

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“Base Currency” means Sterling.

“Base Currency Amount” means, in relation to a Loan, the amount specified in the Utilisation Request delivered by a Borrower for that Loan (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the Lender’s Spot Rate of Exchange on the date which is two Business Days before the Utilisation Date or, if later, on the date the Lender receives the Utilisation Request) adjusted to reflect any repayment or prepayment of the Loan.

“Borrower” means an Original Borrower or an Additional Borrower unless it has ceased to be a Borrower in accordance with Clause 25 (Changes to the Obligors).

“Break Costs” means the amount (if any) by which:

(a) the interest which the Lender should have received for the period from the date of receipt of all or any part of a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds:

(b) the amount which the Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

“Business Day” means a day (other than a Saturday or Sunday) on which banks are open for general business in London and New York and:

(a) (in relation to any date for payment or purchase of a currency other than Euro) the principal financial centre of the country of that currency; or

(b) (in relation to any date for payment or purchase of Euro) any TARGET Day.

“Change of Control” means:

(a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the United States Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date of this Agreement), of Equity Interests representing more than 30% of either the aggregate ordinary voting power or the aggregate equity value represented by the issued and outstanding Equity Interests of the Company;

- 2 -

(b) occupation of a majority of the seats (other than vacant seats) on the board of directors of the Company by persons who were not:

(i) directors of the Company on the date of this Agreement;

(ii) nominated by the board of directors of the Company; or

(iii) appointed by directors referred to in the preceding clauses (i) and (ii); or

(c) the occurrence of a “Change of Control” (or other similar event or condition however denominated) under any Material Indebtedness.

“Commitment” means £20,000,000 to the extent not cancelled, reduced or transferred under this Agreement.

“Default” means an Event of Default or any event or circumstance specified in Clause 23 (Events of Default) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

“EURIBOR” means, in relation to any Loan in Euro:

(a) the applicable Screen Rate as of the Specified Time on the Quotation Day for the offering of deposits in Euro for a period comparable to the Interest Period for that Loan; or

(b) (if no Screen Rate is available for the Interest Period of that Loan) the cost to the Lender of deposits in Euro, being the rate, expressed as a percentage per annum, at which deposits in Euro are offered by the Lender in the European interbank market as of the Specified Time on the Quotation Day for a period comparable to the Interest Period for that Loan.

“Euro” means the single currency unit of the Participating Member States.

“Event of Default” means any event or circumstance specified as such in Clause 23 (Events of Default).

“Facility” means the revolving loan facility made available under this Agreement as described in Clause 2 (The Facility).

“Facility Fee Rate” means at any time the rate set forth in the table on Schedule 8 (Pricing Schedule) under the heading “Facility Fee” and corresponding to the rating of the Company’s Index Debt in effect at such time.

“Facility Office” means the office or offices notified by the Lender to the Company in writing on or before the date of this Agreement (or, following that date, by not less than ten Business Days’ written notice) as the office or offices through which it will perform its obligations under this Agreement.

“Fee Letter” means the letter between the Company and the Lender dated as of 17 February 2006 specifying certain fees to be paid by the Company to the Lender.

- 3 -

“Finance Document” means this Agreement, the Fee Letter, any Accession Letter, any Resignation Letter and any other document designated as such by the Lender and the Company.

“Financial Indebtedness” of any Person means, without duplication:

(a) all obligations of such Person for borrowed money or with respect to deposits (other than customer deposits in respect of accounts receivable maintained in the ordinary course of business consistent with past practices) or advances of any kind;

(b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments;

(c) all obligations of such Person upon which interest charges are customarily paid (excluding trade accounts payable and obligations to pay salary or benefits under deferred compensation, executive compensation or other benefit programs);

(d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person;

(e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business);

(f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed;

(g) all Guarantees by such Person of Indebtedness of others;

(h) all Capital Lease Obligations and Synthetic Lease Obligations of such Person;

(i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty;

(j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances; and

(k) all obligations of such Person incurred under or in connection with a Securitization.

The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

- 4 -

“GAAP” means generally accepted accounting principles in the United States of America.

“Group” means the Company and its Subsidiaries for the time being.

“Guarantor” means an Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 25 (Changes to the Obligors).

“Holding Company” means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.

“Index Debt” means the Company’s senior, unsecured, non-credit-enhanced long-term indebtedness for borrowed money.

“Interest Period” means, in relation to a Loan, each period determined in accordance with Clause 10 (Interest Periods) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 9.3 (Default interest).

“Lender’s Spot Rate of Exchange” means the Lender’s spot rate of exchange for the purchase of the relevant currency with the Base Currency in the London foreign exchange market at or about 11:00 a.m. on a particular day.

“LIBOR” means, in relation to any Loan:

(a) the applicable Screen Rate as of the Specified Time on the Quotation Day for the offering of deposits in the currency of that Loan and for a period comparable to the Interest Period for that Loan; or

(b) (if no Screen Rate is available for the currency or Interest Period of that Loan) the cost to the Lender of deposits in the currency of that Loan, being the rate, expressed as a percentage per annum, at which deposits in such currency are offered by the Lender in the London interbank market as of the Specified Time on the Quotation Day for a period comparable to the Interest Period for that Loan.

“Loan” means a loan made or to be made under the Facility or the principal amount outstanding for the time being of that loan.

“Mandatory Cost” means the percentage rate per annum calculated by the Lender in accordance with Schedule 4 (Mandatory Cost formulae).

“Margin” means the rate set forth in the table in Schedule 8 (Pricing Schedule) under the heading “LIBOR Spread” and corresponding to the rating of the Company’s Index Debt in effect at such time.

“Material Adverse Effect” means a material adverse effect on:

(a) the business, operations or financial condition of the Group taken as a whole;

(b) the ability of the Obligors (taken as a whole) to perform the payment obligations under the Finance Documents or to comply with the obligations in

- 5 -

Clause 21 (Incorporated Undertakings) insofar as those obligations relate to Section 6.11 (Fixed Charge Coverage Ratio) and Section 6.12 (Leverage Ratio) of the U.S. Parent Agreement; or

(c) the validity or enforceability of the Finance Documents or the rights or remedies of the Lender under the Finance Documents.

“Month” means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a) (subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;

(b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and

(c) if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

The above rules will only apply to the last Month of any period.

For the avoidance of doubt, nothing in this definition shall oblige an Obligor to pay interest in respect of the same amount more than once in respect of any one day.

“Moody’s” means Moody’s Investors Service, Inc.

“Newco” means Brecon Holdings Limited.

“Obligor” means a Borrower or a Guarantor.

“Optional Currency” means a currency (other than the Base Currency) which complies with the conditions set out in Clause 4.3 (Conditions relating to Optional Currencies).

“Original Financial Statements” means:

(a) in relation to the Company, the audited consolidated financial statements of the Group for the financial year ended 30 September 2005; and

(b) in relation to each Original Obligor other than the Company, its opening balance sheet.

“Original Obligor” means an Original Borrower or an Original Guarantor.

“Participating Member State” means any member state of the European Communities that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

- 6 -

“Party” means a party to this Agreement.

“Quotation Day” means, in relation to any period for which an interest rate is to be determined:

(a) (if the currency is Sterling) the first day of that period;

(b) (if the currency is Euro) two TARGET Days before the first day of that period; or

(c) (for any other currency) two Business Days before the first day of that period,

unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Lender in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

“Rating Agency” means each of Moody’s and S&P and such other rating agency as may be agreed from time to time between the Borrower and the Lender.

“Relevant Interbank Market” means in relation to Euro, the European interbank market and in relation to any other currency, the London interbank market.

“Reservations” means each of the following reservations:

(a) equitable remedies may be granted or refused at the discretion of the court;

(b) there are limitations on enforcement by laws relating to insolvency generally and other laws generally affecting the rights of creditors;

(c) there is time barring of claims under the Limitation Act 1980;

(d) there is the possibility that an undertaking to assume liability for or to indemnify against non-payment of United Kingdom stamp duty land tax may be void; and

(e) there may be defences of set-off or counterclaim (provided that nothing in this definition purports to grant any Obligor any such right and is without prejudice to any restriction contained in the Finance Documents) and similar principles, rights and defences under the laws of any jurisdictions in which relevant obligations may have to be performed.

“Resignation Letter” means a letter substantially in the form set out in Schedule 6 (Form of Resignation Letter).

- 7 -

“Rollover Loan” means one or more Loans:

(a) made or to be made on the same day that a maturing Loan is due to be repaid;

(b) the aggregate amount of which is equal to or less than the maturing Loan;

(c) in the same currency as the maturing Loan (unless it arose as a result of the operation of Clause 6.2 (Unavailability of a currency)); and

(d) made or to be made to the same Borrower for the purpose of refinancing a maturing Loan.

“S&P” means Standard & Poor’s, a division of the McGraw-Hill Companies, Inc.

“Screen Rate” means:

(a) in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period; and

(b) in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period,

displayed on the appropriate page of the Telerate or Reuters screen, respectively. If the agreed page is replaced or service ceases to be available, the Lender may specify another page or service displaying the appropriate rate after consultation with the Company.

“Security” means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

“Specified Time” means a time determined in accordance with Schedule 7 (Timetables).

“Sterling” and “£” means the lawful currency of the United Kingdom.

“Subsidiary” means:

(a) in relation to the U.S. Parent Agreement, with respect to the Company at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the Company in the Company’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity:

(i) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held;

(ii) that is, as of such date, otherwise Controlled, by the Company or one or more subsidiaries of the Company or by the Company and one or more subsidiaries of the Company; and

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(b) with respect to this Agreement, in relation to any company or corporation, a company or corporation:

(i) which is controlled, directly or indirectly, by the first mentioned company or corporation;

(ii) more than half the issued share capital of which is beneficially owned, directly or indirectly by the first mentioned company or corporation; or

(iii) which is a Subsidiary of another Subsidiary of the first mentioned company or corporation,

and for this purpose, a company or corporation shall be treated as being controlled by another if that other company or corporation is able to direct its affairs and/or to control the composition of its board of directors or equivalent body.

“TARGET” means Trans European Automated Real time Gross Settlement Express Transfer payment system.

“TARGET Day” means any day on which TARGET is open for the settlement of payments in Euro.

“Tax” means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

“Taxes Act” means the Income and Corporation Taxes Act 1988.

“Termination Date” means the date that is three years from the date of this Agreement.

“Unpaid Sum” means any sum due and payable but unpaid by an Obligor under the Finance Documents.

“U.S. Parent Agreement” means, subject to paragraph (e) of Clause 1.2 (Construction) and Clause 1.3 (Third Party Rights), the credit agreement dated as of December 2, 2004 among the Company, JPMorgan Chase Bank, N.A. as Administrative Agent, the lenders named therein and others, as amended by a First Amendment dated as of September 29, 2005.

“Utilisation” means a utilisation of the Facility.

“Utilisation Date” means the date of a Utilisation, being the date on which a Loan is to be made.

“Utilisation Request” means a notice substantially in the form set out in Schedule 3 (Utilisation Request).

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“VAT” means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.

1.2 Construction

(a) Unless a contrary indication appears, any reference in this Agreement to:

(i) the “Lender”, any “Obligor” or any “Party” shall be construed so as to include its successors in title, permitted assigns and permitted transferees;

(ii) “assets” includes present and future properties, revenues and rights of every description;

(iii) the “European interbank market” means the interbank market for Euro operating in Participating Member States;

(iv) a “Finance Document” or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;

(v) “indebtedness” includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

(vi) a “person” includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) or two or more of the foregoing;

(vii) a “regulation” includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self regulatory or other authority or organisation;

(viii) a provision of law is a reference to that provision as amended or re-enacted;

(ix) a time of day is a reference to London time; and

(x) “US$” denotes the lawful currency of the United States of America.

(b) Section, Clause and Schedule headings are for ease of reference only.

(c) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

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(d) A Default (other than an Event of Default) is “continuing” if it has not been remedied or waived and an Event of Default is “continuing” if it has not been remedied or waived.

(e) Notwithstanding paragraph (a)(iv) of Clause 1.2 (Construction) and subject to Clause 20.3 (Notification of amendments to U.S. Parent Agreement), any reference in this Agreement to the “U.S. Parent Agreement” means such agreement as may be amended, varied, modified or supplemented from time to time, provided that where the consent of all the Lenders (as defined in the U.S. Parent Agreement) is required for an amendment, variation, modification or supplementation thereof, the consent of the Lender hereunder shall be required in order for such amendment, variation, modification or supplementation to be incorporated into this Agreement. If the U.S. Parent Agreement ceases to be in effect at any time, references herein to the provisions thereof shall mean the provisions thereof as in effect under this Agreement immediately prior to such cessation.

1.3 Third Party Rights

(a) Unless expressly provided to the contrary in a Finance Document a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the “Third Parties Act”) to enforce or to enjoy the benefit of any term of this Agreement.

(b) Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

2. THE FACILITY

Subject to the terms of this Agreement, the Lender makes available to the Borrowers a multicurrency revolving credit facility in an aggregate amount equal to the Commitment.

3. PURPOSE

3.1 Purpose

Each Borrower shall apply all amounts borrowed by it under the Facility to make acquisitions and for general corporate purposes.

3.2 Monitoring

The Lender is not bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4. CONDITIONS OF UTILISATION

4.1 Initial conditions precedent

No Borrower may deliver a Utilisation Request unless the Lender has received all of the documents and other evidence listed in Part I of Schedule 2 (Conditions Precedent) in form and substance satisfactory to it. The Lender shall notify the Company promptly upon being so satisfied.

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4.2 Further conditions precedent

The Lender will only be obliged to and will make a Loan available to a Borrower if the conditions set out in this Agreement have been met and on the date of the Utilisation Request and on the proposed Utilisation Date:

(a) in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan and, in the case of any other Loan, no Default is continuing or would result from the proposed Loan; and

(b) the representations and warranties made under Clause 19 (Representations) (other than the representations and warranties contained in Clause 19.6 (Deduction of Tax), paragraph (a) of Clause 19.8 (No default) (but without prejudice to paragraph (a) above) and Clause 19.10 (Financial Statements)) shall be true in all material respects as though made on the date of such Utilisation Request or such Utilisation Date.

4.3 Conditions relating to Optional Currencies

(a) A currency will constitute an Optional Currency in relation to a Loan if:

(i) it is readily available in the amount required and freely convertible into the Base Currency in the Relevant Interbank Market on the Quotation Day and the Utilisation Date for that Loan; and

(ii) it is Euro.

(b) If a Borrower has specified in a Utilisation Request that Euro is the currency of the proposed Loan, that Loan will only be made available in Euro unit or any other units of Euro agreed by the Lender.

4.4 Maximum number of Loans

A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation ten or more Loans would be outstanding at any one time.

5. UTILISATION

5.1 Delivery of a Utilisation Request

A Borrower may utilise the Facility by delivery to the Lender of a duly completed Utilisation Request not later than the Specified Time.

5.2 Completion of a Utilisation Request

(a) Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(i) the proposed Utilisation Date is a Business Day within the Availability Period;

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(ii) the currency and amount of the Utilisation comply with Clause 5.3 (Currency and amount); and

(iii) the proposed Interest Period complies with Clause 10 (Interest Periods).

(b) Only one Loan may be requested in each Utilisation Request.

5.3 Currency and amount

(a) The currency specified in a Utilisation Request must be the Base Currency or an Optional Currency.

(b) The amount of the proposed Loan must be:

(i) if the currency selected is the Base Currency, a minimum of £250,000 or, if less, the Available Commitment; or

(ii) if the currency selected is Euro, a minimum of EUR250,000 or, if less, the Available Commitment; and

(iii) in any event such that its Base Currency Amount is less than or equal to the Available Commitment.

6. OPTIONAL CURRENCIES

6.1 Selection of currency

A Borrower (or the Company on behalf of a Borrower) shall select the currency of a Loan in a Utilisation Request.

6.2 Unavailability of a currency

If before the Specified Time on any Quotation Day:

(a) the Lender notifies the relevant Borrower that the Optional Currency requested is not readily available to it in the amount required; or

(b) the Lender notifies the relevant Borrower that compliance with its obligation to fund a Loan in the proposed Optional Currency would contravene a law or regulation applicable to it,

then the Loan shall be denominated in the Base Currency (in an amount equal to the Base Currency Amount or, in respect of a Rollover Loan, an amount equal to the Base Currency Amount of the maturing Loan that is due to be repaid).

7. REPAYMENT

Each Borrower which has drawn a Loan shall repay that Loan on the last day of its Interest Period.

8. PREPAYMENT AND CANCELLATION

8.1 Illegality

If it becomes unlawful in any applicable jurisdiction for the Lender to perform any of its obligations as contemplated by this Agreement or to fund any Loan:

(a) the Lender shall promptly notify the Company upon becoming aware of that event;

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(b) upon such notification, the Commitment will be immediately cancelled; and

(c) each Borrower shall repay the Loans made to it on the last day of the Interest Period for each Loan occurring after the Lender has notified the Company or, if earlier, the date specified by the Lender in the notice delivered to the Company (being no earlier than the last day of any applicable grace period permitted by law).

8.2 Voluntary cancellation

The Company may, if it gives the Lender not less than five Business Days’ (or such shorter period as the Lender may agree) prior notice, cancel the whole or any part (being a minimum amount of £250,000) of the Available Commitment.

8.3 Voluntary Prepayment of Loans

The Borrower to which a Loan has been made may, if it gives the Lender not less than three Business Days’ (or such shorter period as the Lender may agree) prior notice, prepay the whole or any part of a Loan (but if in part, being an amount that reduces the Base Currency Amount of the Loan by a minimum amount of £250,000).

8.4 Restrictions

(a) Any notice of cancellation or prepayment given by any Party under this Clause 8 (Prepayment and cancellation) shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

(c) Unless a contrary indication appears in this Agreement, any part of the Facility which is prepaid may be reborrowed in accordance with the terms of this Agreement.

(d) The Borrowers shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitment except at the times and in the manner expressly provided for in this Agreement.

(e) No amount of the Commitment cancelled under this Agreement may be subsequently reinstated.

9. INTEREST

9.1 Calculation of interest

The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:

(a) Margin;

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(b) LIBOR or, in relation to any Loan in Euro, EURIBOR; and

(c) Mandatory Cost, if any.

9.2 Payment of interest

The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the Interest Period is longer than six Months, on the dates falling at six monthly intervals after the first day of the Interest Period).

9.3 Default interest

(a) If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is two per cent. higher than the rate which would have been payable if the overdue amount had, during the period of non payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Lender (acting reasonably). Any interest accruing under this Clause 9.3 (Default Interest) shall be immediately payable by the Obligor on demand by the Lender.

(b) If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:

(i) the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and

(ii) the rate of interest applying to the overdue amount during that first Interest Period shall be two per cent. higher than the rate which would have applied if the overdue amount had not become due.

(c) Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

9.4 Notification of rates of interest

The Lender shall promptly notify the relevant Borrower of the determination of a rate of interest under this Agreement.

10. INTEREST PERIODS

10.1 Selection of Interest Periods

(a) A Borrower (or the Company on behalf of a Borrower) may select an Interest Period for a Loan in the Utilisation Request for that Loan.

(b) Subject to this Clause 10 (Interest Periods), a Borrower (or the Company) may select an Interest Period of one week, two weeks, one Month, three Months or six Months or any other period agreed between the Company and the Lender.

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(c) An Interest Period for a Loan shall not extend beyond the Termination Date.

(d) Each Interest Period for a Loan shall start on the Utilisation Date.

(e) A Loan has one Interest Period only.

10.2 Non Business Days

If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).

11. CHANGES TO THE CALCULATION OF INTEREST

11.1 Market disruption

If the Lender determines (acting reasonably) that adequate and fair means do not exist for ascertaining LIBOR or, if applicable, EURIBOR for a Loan for any Interest Period, then the rate of interest on that Loan for the Interest Period shall be the percentage rate per annum which is the sum of:

(a) the Margin;

(b) the rate notified to the Company by the Lender as soon as practicable and in any event at least 2 Business Days before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to the Lender of funding that Loan from whatever source it may reasonably select; and

(c) the Mandatory Cost, if any.

11.2 Alternative basis of interest or funding

(a) If after receiving notification under Clause 11.1 (Market disruption) the Lender or the Company so requires, the Lender and the Company shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.

(b) Any alternative basis agreed pursuant to paragraph (a) above shall be binding on all Parties unless otherwise agreed between the Parties.

11.3 Break Costs

(a) Each Borrower shall, within five Business Days of demand by the Lender, pay to the Lender its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

(b) The Lender shall provide to the Company, if so requested, a certificate confirming the amount of its Break Costs and the basis of calculating such amount for any Interest Period in which they accrue.

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12. FEES

12.1 Fees

(a) The Company shall pay to the Lender a facility fee in the Base Currency computed at the Facility Fee Rate on the Commitment then in effect.

(b) The accrued facility fee is payable in arrears on 1 January, 1 April, 1 July and 1 October of each year (provided that if any such day is not a Business Day, on the next Business Day) during the Availability Period, on the last day of the Availability Period and, if cancelled in full or in part, on the cancelled amount of the Commitment at the time the cancellation is effective.

13. TAX GROSS UP AND INDEMNITIES

13.1 Definitions

(a) In this Agreement:

“Qualifying Lender” means a Lender which is beneficially entitled to interest payable to it in respect of an advance under a Finance Document and:

(i)

(A) which is a bank (as defined for the purposes of Section 349 of the Taxes Act) making an advance under a Finance Document; or

(B) in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 349 of the Taxes Act) at the time that advance was made,

and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or

(ii) a company resident in the United Kingdom for United Kingdom tax purposes;

(iii) a partnership each member of which is a company resident in the United Kingdom for United Kingdom tax purposes; or

(iv) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing its chargeable profits (within the meaning given by section 11(2) of the Taxes Act).

“Tax Credit” means a credit against, relief or remission for, or repayment of any Tax.

“Tax Deduction” means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

“Tax Payment” means an increased payment made by an Obligor to the Lenders under Clause 13.2 (Tax gross up) or a payment under Clause 13.3 (Tax indemnity).

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(b) Unless a contrary indication appears, in this Clause 13 a reference to “determines” or “determined” means a determination made in the absolute discretion of the person making the determination.

13.2 Tax gross up

(a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b) The Company shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Lender accordingly. Similarly, the Lender shall promptly notify the Company on becoming so aware in respect of a payment payable to the Lender.

(c) If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d) An Obligor is not required to make an increased payment to the Lender under paragraph (c) above for a Tax Deduction in respect of tax imposed by the United Kingdom from a payment of interest on a Loan, if on the date on which the payment falls due the payment could have been made to the Lender without a Tax Deduction if it was a Qualifying Lender, but on that date the Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date of this Agreement in (or in the interpretation, administration, or application of) any law, or any published practice or concession of any relevant taxing authority.

(e) If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(f) Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Lender evidence reasonably satisfactory to the Lender that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

13.3 Tax indemnity

(a) The Company shall (within ten days of demand (setting out in reasonable detail the basis and calculation of such claim) by the Lender) pay to the Lender an amount equal to the loss, liability or cost which the Lender (acting reasonably) determines will be or has been (directly or indirectly) suffered by it for or on account of Tax in respect of a Finance Document.

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(b) Paragraph (a) above shall not apply:

(i) with respect to any Tax assessed on the Lender:

(A) under the law of the jurisdiction in which the Lender is incorporated or, if different, the jurisdiction (or jurisdictions) in which the Lender is treated as resident for tax purposes; or

(B) under the law of the jurisdiction in which the Lender’s Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by the Lender; or

(ii) to the extent a loss, liability or cost:

(A) is compensated for by an increased payment under Clause 13.2 (Tax gross up); or

(B) would have been compensated for by an increased payment under Clause 13.2 (Tax gross up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 13.2 (Tax gross up) applied.

(c) If the Lender makes, or intends to make a claim under this Clause 13.3 (Tax Indemnity), it shall promptly notify the Company of the event which will give, or has given, rise to the claim.

13.4 Tax Credit

If an Obligor makes a Tax Payment and the Lender determines that:

(a) a Tax Credit is attributable to that Tax Payment; and

(b) it has obtained, utilised and retained that Tax Credit,

the Lender shall promptly pay an amount to the Obligor which the Lender determines will leave it (after that payment) in the same after Tax position as it would have been in had the Tax Payment not been made by the Obligor.

13.5 Stamp taxes

The Company shall pay and, within ten days of demand (setting out in reasonable detail the basis and calculation of such claim), indemnify the Lender against any cost, loss or liability that the Lender incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

13.6 Value added tax

(a) All consideration expressed to be payable under a Finance Document by an Obligor to the Lender shall be deemed to be exclusive of any VAT. If VAT is chargeable on any supply made by the Lender to an Obligor in connection with any Finance Document, the relevant Obligor shall pay to the Lender (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT.

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(b) Where a Finance Document requires an Obligor to reimburse the Lender for any costs or expenses, that Obligor shall also at the same time pay and indemnify the Lender against all VAT incurred by the Lender in respect of the costs or expenses to the extent that the Lender reasonably determines that it is not entitled to credit or repayment of the VAT.

14. INCREASED COSTS

14.1 Increased costs

(a) Subject to Clause 14.3 (Exceptions) the Company shall, within ten days of a demand by the Lender (setting out in reasonable detail the basis and calculation of such claim), pay to the Lender the amount of any Increased Costs incurred by the Lender or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.

(b) In this Agreement “Increased Costs” means:

(i) a reduction in the rate of return from the Facility or on the Lender’s (or its Affiliate’s) overall capital;

(ii) an additional or increased cost; or

(iii) a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by the Lender or any of its Affiliates to the extent that it is attributable to the Lender having entered into the Commitment or funding or performing its obligations under any Finance Document.

14.2 Increased cost claims

(a) If the Lender intends to make a claim pursuant to Clause 14.1 (Increased costs) it shall notify the Company.

(b) The Lender shall provide to the Company, if so requested, a certificate confirming the amount of its Increased Costs.

14.3 Exceptions

(a) Clause 14.1 (Increased costs) does not apply to the extent any Increased Cost is:

(i) attributable to a Tax Deduction required by law to be made by an Obligor;

(ii) compensated for by Clause 13.3 (Tax indemnity) (or would have been compensated for under Clause 13.3 (Tax indemnity) but was not so compensated solely because the exclusion in paragraph (b) of Clause 13.3 (Tax indemnity) applied);

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(iii) compensated for by the payment of the Mandatory Cost; or

(iv) attributable to the wilful breach by the Lender or its Affiliates of any law or regulation.

(b) In this Clause 14.3, a reference to a “Tax Deduction” has the same meaning given to the term in Clause 13.1 (Definitions).

15. OTHER INDEMNITIES

15.1 Currency indemnity

(a) If any sum due from an Obligor under the Finance Documents (a “Sum”), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another currency (the “Second Currency”) for the purpose of:

(i) making or filing a claim or proof against that Obligor;

(ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

that Obligor shall as an independent obligation, within ten days of demand (setting out in reasonable detail the basis and calculation of such claim), indemnify the Lender to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

(b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

15.2 Other indemnities

(a) The Company shall (or shall procure that an Obligor will), within ten days of demand (setting out in reasonable detail the basis and calculation of such claim), indemnify the Lender against any cost (including, without limitation, reasonable costs and expenses of legal advisers), loss or liability incurred by the Lender as a result of:

(i) the occurrence of any Event of Default which is continuing;

(ii) a failure by an Obligor to pay any amount due under a Finance Document on its due date;

(iii) funding, or making arrangements to fund, a Loan requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by the Lender alone);

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(iv) a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by a Borrower or the Company;

(v) investigating any event which it reasonably believes is a Default; or

(vi) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.

16. MITIGATION BY THE LENDER

16.1 Mitigation

(a) The Lender shall, in consultation with the Company, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 8.1 (Illegality), Clause 13 (Tax gross up and indemnities), Clause 14 (Increased Costs) or paragraph 3 of Schedule 4 (Mandatory Cost Formulae) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

(b) Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.

16.2 Limitation of liability

(a) The Company shall indemnify the Lender for all costs and expenses reasonably incurred by the Lender as a result of steps taken by it under Clause 16.1 (Mitigation).

(b) The Lender is not obliged to take any steps under Clause 16.1 (Mitigation) if, in its opinion (acting reasonably), to do so might be prejudicial to it.

16.3 Conduct of Business by the Lender

No provision of this Agreement will:

(a) interfere with the right of the Lender to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

(b) oblige the Lender to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c) oblige the Lender to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

17. COSTS AND EXPENSES

17.1 Transaction expenses

The Company shall promptly on demand pay the Lender the amount of all costs and expenses (including legal fees (up to an agreed amount in the case of paragraph (a) below)) reasonably incurred by it in connection with the negotiation, preparation, printing and execution of:

(a) this Agreement and any other documents referred to in this Agreement; and

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(b) any other Finance Documents executed after the date of this Agreement.

17.2 Amendment costs

If (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 26.7 (Change of currency), the Company shall, within three Business Days of demand, reimburse the Lender for the amount of all costs and expenses (including legal fees) reasonably incurred by the Lender in responding to, evaluating, negotiating or complying with that request or requirement.

17.3 Enforcement costs

The Company shall, within three Business Days of demand, pay to the Lender the amount of all costs and expenses (including legal fees) properly incurred by the Lender in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

18. GUARANTEE AND INDEMNITY

18.1 Guarantee and indemnity

Each Guarantor irrevocably and unconditionally jointly and severally:

(a) guarantees to the Lender punctual performance by each Borrower of all that Borrower’s obligations under the Finance Documents;

(b) undertakes with the Lender that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

(c) indemnifies the Lender immediately on demand against any cost, loss or liability suffered by the Lender if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which the Lender would otherwise have been entitled to recover under the guarantee had such obligation been enforceable, valid and legal.

18.2 Continuing guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

18.3 Reinstatement

If any payment by an Obligor or any discharge given by the Lender (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:

(a) the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

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(b) the Lender shall be entitled to recover the value or amount of that security or payment from each Obligor, as if the payment, discharge, avoidance or reduction had not occurred.

18.4 Waiver of defences

The obligations of each Guarantor under this Clause 18 (Guarantee and Indemnity) will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 18 (without limitation and whether or not known to it or the Lender) including:

(a) any time, waiver or consent granted to, or composition with, any Obligor or other person;

(b) the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non presentation or non observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

(e) any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of a Finance Document or any other document or security including without limitation any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;

(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

(g) any insolvency or similar proceedings.

18.5 Immediate recourse

Each Guarantor waives any right it may have of first requiring the Lender (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 18. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

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18.6 Appropriations

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, the Lender (or any trustee or agent on its behalf) may:

(a) refrain from applying or enforcing any other moneys, security or rights held or received by it (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

(b) hold in an interest bearing suspense account any moneys received from any Guarantor or on account of any Guarantor’s liability under this Clause 18.

18.7 Deferral of Guarantors’ rights

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Lender otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:

(a) to be indemnified by an Obligor;

(b) to claim any contribution from any other guarantor of any Obligor’s obligations under the Finance Documents; and/or

(c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Lender under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by the Lender.

18.8 Release of Guarantors’ right of contribution

If any Guarantor (a “Retiring Guarantor”) ceases to be a Guarantor in accordance with the terms of the Finance Documents for the purpose of any sale or other disposal of that Retiring Guarantor then on the date such Retiring Guarantor ceases to be a Guarantor:

(a) that Retiring Guarantor is released by each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a contribution to any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Finance Documents; and

(b) each other Guarantor waives any rights it may have by reason of the performance of its obligations under the Finance Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under any Finance Document or of any other security taken pursuant to, or in connection with, any Finance Document where such rights or security are granted by or in relation to the assets of the Retiring Guarantor.

18.9 Additional security

This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by the Lender.

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19. REPRESENTATIONS

Each Obligor represents and warrants to the Lender as set out in this Clause 19.

19.1 Status

(a) Each Borrower is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.

(b) Each Borrower (and each of its Subsidiaries) has the power to own its assets and carry on its business as it is being conducted except where failure to do so could not reasonably be expected to have a Material Adverse Effect.

19.2 Binding obligations

The obligations expressed to be assumed by each Borrower in each Finance Document are, subject to the Reservations, legal, valid, binding and enforceable obligations.

19.3 Non conflict with other obligations

The entry into and performance by each Borrower of, and the transactions contemplated by, the Finance Documents do not and will not conflict with:

(a) any law or regulation applicable to it;

(b) its constitutional documents;

(c) the U.S. Parent Agreement; or

(d) any other material agreement or material instrument binding upon it or any of its assets.

19.4 Power and authority

Each Borrower has the power to enter into, perform and deliver, and has taken all necessary action to authorise its entry into, performance and delivery of, the Finance Documents to which it is a party and the transactions contemplated by those Finance Documents.

19.5 Validity and admissibility in evidence

All Authorisations required:

(a) to enable each Borrower lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and

(b) to make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation,

have been obtained or effected and are in full force and effect.

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19.6 Deduction of Tax

It is not required under the law of its jurisdiction of incorporation to make any deduction for or on account of Tax from any payment it may make under any Finance Document.

19.7 No filing or stamp taxes

Under the law of its jurisdiction of incorporation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.

19.8 No default

(a) No Event of Default is continuing or would result from the making of any Utilisation.

(b) No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or to which its assets are subject which could reasonably be expected to have a Material Adverse Effect.

19.9 No misleading information

(a) It has disclosed to the Lender all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to any of them, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

(b) None of the reports, financial statements, certificates or other information furnished by or on behalf of it to the Lender in connection with the negotiation of this Agreement or any other Finance Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished), taken as a whole, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided that, with respect to projected financial information, it represents only that such information was prepared in good faith based on assumptions believed to be reasonable at the time.

19.10 Financial statements

(a) Each Borrower’s Original Financial Statements were prepared in all material respects in accordance with GAAP consistently applied.

(b) Each Borrower’s Original Financial Statements fairly represent in all material respects its financial condition and operations in accordance with GAAP during the relevant financial year.

19.11 Pari passu ranking

Each Borrower’s payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.

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19.12 Incorporated Representations and Warranties

Each of the representations and warranties set forth in Section 3.01 (Organization; Powers) through Section 3.10 (ERISA) (inclusive) and Section 3.12 (Subsidiaries) through Section 3.15 (Senior Indebtedness) (inclusive) of the U.S. Parent Agreement and given by the Company is hereby incorporated by reference into this Agreement for all purposes hereof as if fully set forth herein, subject to the following:

(a) references to the Borrower in the U.S. Parent Agreement shall mean the Company hereunder;

(b) references to the Transactions shall mean the execution, delivery and performance of the Finance Documents and the transactions contemplated thereby;

(c) references to Material Adverse Effect shall be to such term as defined in this Agreement;

(d) references to the Loan Documents shall mean the Finance Documents;

(e) references to the Obligations shall mean all obligations of any nature whatsoever of any Obligor under the Finance Documents, whether primary, secondary, direct, contingent, fixed or otherwise (including obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding);

(f) references in such incorporated representations and warranties to Articles, Sections, Schedules and similar terms shall be to the relevant provisions in the U.S. Parent Agreement;

(g) references to Loan Parties in Section 3.01 (Organization; Powers), Section 3.02 (Authorization; Enforceability) and paragraph (a) of Section 3.03 (Governmental Authorities; No Conflicts) shall mean the Company;

(h) the reference to Loan in paragraph (b) of Section 3.03 (Governmental Approvals; No Conflicts) shall mean any Loan under this Agreement;

(i) the reference to the Lenders in paragraph (a) of Section 3.04 (Financial Condition; No Material Adverse Change) shall mean the Lender under this Agreement;

(j) references to September 30, 2003 in paragraph (a)(i) and paragraph (b) of Section 3.04 (Financial Condition; No Material Adverse Change) shall be to September 30, 2005;

(k) references to June 30, 2004 in paragraph (a)(ii) and paragraph (b) of Section 3.04 (Financial Condition; No Material Adverse Change) shall be to December 31, 2005;

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(l) the last sentence of Section 3.07 (Compliance with Laws and Agreements) shall not be incorporated into this Agreement; and

(m) the reference to the Borrower or any Subsidiary in Section 3.15 (Senior Indebtedness) shall mean the Company hereunder.

20. INFORMATION UNDERTAKINGS

The undertakings in this Clause 20 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

20.1 Financial statements and other information

The Company shall supply to the Lender:

(a) all of the financial and other information and notices required to be supplied by the Company to the Administrative Agent pursuant to the U.S. Parent Agreement and at the same time as such information is supplied to the Administrative Agent (it being agreed that, to the extent that the Company is permitted to provide such information and notices by posting it or them on the Company’s website on the internet at http://www.amerisourcebergen.com/ or at the appropriate Company designated website at http://www.sec.gov/ or http://intralinks.com/, information and notices required to be supplied pursuant to this paragraph (a) shall be deemed to have been delivered on the date on which the Company gives notice to the Lender that such information has been posted on the Company’s website on the internet at http://www.amerisourcebergen.com/ or at the appropriate Company designated website at http://www.sec.gov/ or http://intralinks.com/, provided that, if requested by the Lender, the Company shall deliver to the Lender paper copies of the relevant information or notice within 5 Business Days of such request); and

(b) within 95 days after the end of each financial year of each other Obligor, the unaudited consolidating balance sheet and related statements of operations in respect of each such Obligor for that financial year.

20.2 Information: miscellaneous

The Company shall supply to the Lender (to the extent not supplied pursuant to Clause 20.1 (Financial statements and other information)):

(a) promptly, notice of any filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Company or any Affiliate (as defined in the U.S. Parent Agreement) thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(b) promptly upon (and in any event within 5 Business Days of) becoming aware of the same, the details of any change in the rating for the Index Debt by a Rating Agency; and

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(c) promptly, such further information regarding the financial condition, business and operations of the Company, Newco or any Significant Subsidiary as the Lender may reasonably request.

20.3 Notification of amendments to U.S. Parent Agreement

The Company shall promptly provide to the Lender a signed copy of each consent or agreement relating to any amendment, variation, modification, supplementation or waiver of or to the U.S. Parent Agreement. Until such signed consent or agreement is provided to the Lender, the relevant amendment, variation, modification, supplementation or waiver of or to the U.S. Parent Agreement shall not be binding on the Lender and shall not be incorporated into this Agreement.

20.4 Notification of default

(a) Each Obligor shall notify the Lender of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).

(b) Promptly upon a request by the Lender, the Company shall supply to the Lender a certificate signed by two of its senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

20.5 Use of websites

(a) The Company may satisfy its obligation under this Agreement to deliver any information by posting this information onto an electronic website designated by the Company and the Lender (the “Designated Website”) if:

(i) the Lender expressly agrees that it will accept communication of the information by this method;

(ii) both the Company and the Lender are aware of the address of and any relevant password specifications for the Designated Website; and

(iii) the information is in a format previously agreed between the Company and the Lender.

(b) The Company shall promptly upon becoming aware of its occurrence notify the Lender if:

(i) the Designated Website cannot be accessed due to technical failure;

(ii) the password specifications for the Designated Website change;

(iii) any new information which is required to be provided under this Agreement is posted onto the Designated Website;

(iv) any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or

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(v) the Company becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.

If the Company notifies the Lender under paragraph (b)(i) or paragraph (b)(v) above, all information to be provided by the Company under this Agreement after the date of that notice shall be supplied in paper form unless and until the Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

(c) The Lender may request one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Company shall comply with any such request within five Business Days.

20.6 “Know your customer” checks

(a) If:

(i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;

(ii) any change in the status of an Obligor after the date of this Agreement; or

(iii) a proposed assignment or transfer by the Lender of any of its rights and obligations under this Agreement,

obliges the Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the any Lender (for itself or, in the case of the event described in paragraph (iii) above, on behalf of any prospective new Lender) in order for the Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

(b) The Company shall, by not less than 15 Business Days’ prior written notice, notify the Lender of its intention to request that one of the Subsidiaries becomes an Additional Obligor pursuant to Clause 25 (Changes to the Obligors).

(c) Following the giving of any notice pursuant to paragraph (b) above, if the accession of such Additional Obligor obliges the Lender to comply with “know your customer” or similar identification procedures in circumstances where the necessary information is not already available to it, the Company

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shall promptly upon the request of the Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Lender (for itself or on behalf of any prospective new Lender) in order for the Lender or any prospective new Lender to carry out and be satisfied it has complied with all necessary “know your customer” or other similar checks under all applicable laws and regulations pursuant to the accession of such Subsidiary to this Agreement as an Additional Obligor.

21. INCORPORATED UNDERTAKINGS

From the date of this Agreement and so long as any amount is outstanding under the Finance Documents or the Commitment is in effect, the Company will comply with Sections 5.03 (Existence; Conduct of Business) through 5.08 (Use of Proceeds and Letters of Credit) inclusive, Section 5.10 (Maintenance of Corporate Separateness), Section 5.11 (Senior Debt Status) and the covenants set forth in Article VI (Negative Covenants) of the U.S. Parent Agreement, subject to the following:

(a) references to the Administrative Agent or any Lender shall mean the Lender as defined in this Agreement;

(b) references to the Borrower in the U.S. Parent Agreement shall mean the Company hereunder;

(c) references to Material Adverse Effect shall be to such term as defined in this Agreement;

(d) references to Agreement (and “hereof”, “herewith” and similar expressions) shall mean this Agreement;

(e) references to the Obligations shall mean all obligations of any nature whatsoever of any Obligor under the Finance Documents, whether primary, secondary, direct, contingent, fixed or otherwise (including obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding);

(f) references in such incorporated representations and warranties to Articles, Sections, Schedules and similar terms shall be to the relevant provisions in the U.S. Parent Agreement;

(g) any provision deemed incorporated into the U.S. Parent Agreement by Section 6.01 (Indebtedness) thereof shall also be deemed incorporated into this Agreement; and

(h) references in clause (i) of the proviso to Section 6.09 (Restrictive Agreements) of the U.S. Parent Agreement to any Loan Document shall mean any Loan Document or Finance Document.

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22. GENERAL UNDERTAKINGS

The undertakings in this Clause 22 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or the Commitment is in force.

22.1 Authorisations

Each Obligor shall promptly:

(a) obtain, comply with and do all that is necessary to maintain in full force and effect; and

(b) supply certified copies to the Lender of,

any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.

22.2 Compliance with laws

Each Obligor shall comply in all material respects with all laws to which it may be subject, if failure so to comply would impair its ability to perform its obligations under the Finance Documents.

22.3 Pari passu ranking

Each Borrower shall ensure that its payment obligations under the Finance Documents rank at least pari passu with all its other unsecured and unsubordinated payment obligations, except for obligations mandatorily preferred by law applying to companies generally.

23. EVENTS OF DEFAULT

Each of the events or circumstances set out in Clause 23 (Events of Default) is an Event of Default.

23.1 Non payment

An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:

(a) its failure to pay is caused by administrative or technical error; and

(b) payment is made within three Business Days of its due date.

23.2 Certain obligations

An Obligor does not comply with Clause 20.2 (Information: miscellaneous) or Clause 20.3 (Notification of default).

23.3 Other obligations

(a) An Obligor does not comply with any provision of the Finance Documents (other than those in Clause 23.1 (Non payment) and Clause 23.2 (Certain obligations)).

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(b) No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within 30 days of the Lender giving notice to the Company or the Company becoming aware of the failure to comply.

23.4 Misrepresentation

Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.

23.5 Cross default

(a) Any Financial Indebtedness of any member of the Group is not paid when due nor within any originally applicable grace period.

(b) Any Financial Indebtedness of any member of the Group is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).

(c) Any commitment for any Financial Indebtedness of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).

(d) Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).

(e) Subject to paragraph (g) below, an Event of Default (as defined in the U.S. Parent Agreement) shall occur under the U.S. Parent Agreement.

(f) No Event of Default will occur under paragraphs (a), (b), (c) or (d) of this Clause 23.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is less than US$25,000,000 (or its equivalent in any other currency or currencies).

(g) An Event of Default under paragraph (e) of this Clause 23.5 shall be deemed to be waived by the Lender if the underlying Event of Default (as defined in the U.S. Parent Agreement) is waived in accordance with the terms of the U.S. Parent Agreement (and the Company shall promptly inform the Lender of any such waiver in accordance with Clause 20.3 (Notification of amendments to U.S. Parent Agreement) and until such information is provided to the Lender, the waiver shall not be binding on the Lender), unless the waiver requires the unanimous consent of the Lenders under the U.S. Parent Agreement.

23.6 Insolvency

(a) An Obligor or a Significant Subsidiary is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.

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(b) The value of the assets of any Obligor or a Significant Subsidiary is less than its liabilities (taking into account contingent and prospective liabilities).

(c) A moratorium is declared in respect of any indebtedness of any Obligor or any Significant Subsidiary.

23.7 Insolvency proceedings

Any corporate action, legal proceedings or other procedure or step is taken in relation to:

(a) the suspension of payments, a moratorium of any indebtedness, winding up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any Obligor or any Significant Subsidiary other than a solvent liquidation or reorganisation of any member of the Group which is not an Obligor;

(b) a composition, compromise, assignment or arrangement with any creditor of any Obligor or any Significant Subsidiary;

(c) the appointment of a liquidator (other than in respect of a solvent liquidation of a member of the Group which is not an Obligor), receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of any member of the Group or any of its assets; or

(d) enforcement of any Security over any assets of any member of the Group,

or any analogous procedure or step is taken in any jurisdiction.

This Clause 23.7 does not apply to a:

(a) reconstruction or amalgamation whilst solvent on terms previously approved in writing by the Lender; and/or

(b) petition instituted against any Obligor (but not by it) for the winding-up of any Obligor which the Lender agrees is frivolous or vexatious and is being diligently contested by the relevant Obligor in good faith and is discharged within 14 Business Days of the petition being made.

23.8 Creditors’ process

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of an Obligor or any Significant Subsidiary having an aggregate value of US$25,000,000 and is not discharged within 30 days.

23.9 Ownership of the Obligors

An Obligor (other than the Company) is not or ceases to be a Subsidiary of the Company.

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23.10 Change of Control

A Change of Control occurs.

23.11 Unlawfulness

It is or becomes unlawful for an Obligor to perform any of its obligations under the Finance Documents.

23.12 Repudiation

An Obligor repudiates a Finance Document or takes any action to repudiate a Finance Document.

23.13 Material adverse change

Any event or series of events occurs which, in the opinion of the Lender (acting reasonably), has a Material Adverse Effect.

23.14 Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Lender may by notice to the Company:

(a) cancel the Commitment whereupon it shall immediately be cancelled;

(b) declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(c) declare that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on demand by the Lender.

23.15 Automatic Acceleration

Without limitation of the foregoing, if an event described in Clause 23.6 (Insolvency) or 23.7 (Insolvency proceedings) shall occur with respect to the Company, then without notice to the Company or any other act by the Lender or any other person, the Loans, interest thereon and all other amounts owed by any Obligor under the Finance Documents shall become immediately due and payable without presentment, demand, protest or notice of any kind, all of which are expressly waived.

24. CHANGES TO THE LENDER

24.1 Assignments and transfers by the Lender

Subject to this Clause 24, the Lender (the “Existing Lender”) may, after giving prior notice to the Company:

(a) assign any of its rights; or

(b) transfer by novation any of its rights and obligations,

to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the “New Lender”).

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24.2 Conditions of assignment or transfer

(a) The consent of the Company is required for an assignment or transfer by the Lender, unless the assignment or transfer is to an Affiliate of the Lender or an Event of Default is continuing.

(b) The consent of the Company to an assignment or transfer must not be unreasonably withheld or delayed. The Company will be deemed to have given its consent five Business Days after the Existing Lender has requested it unless consent is expressly refused by the Company within that time.

(c) The consent of the Company to an assignment or transfer must not be withheld solely because the assignment or transfer may result in an increase to the Mandatory Cost.

(d) An assignment or transfer will only be effective on:

(i) receipt by the Company of written confirmation from the New Lender (in form and substance satisfactory to the Company) that it is bound by the terms of this Agreement as the Lender; and

(ii) (if an assignment or transfer of part of the Lender’s rights and/or obligations) performance by the Lender of all necessary “know your customer” or other similar checks under all applicable laws and regulations in relation to such assignment or transfer to the New Lender, the completion of which the New Lender shall promptly notify to the Existing Lender and the Company.

On the transfer becoming effective in this manner, the Existing Lender will be released from its obligations under this Agreement to the extent that they are transferred to the New Lender.

(e) If:

(i) the Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and

(ii) as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 13 (Tax gross up and indemnities) or Clause 14 (Increased Costs),

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

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24.3 Confidentiality and disclosure of information

The Lender agrees to maintain the confidentiality of the Information (as defined below) and will not use such confidential Information for any purpose or in any manner except in connection with this Agreement, provided that Information may be disclosed:

(a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisers (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential);

(b) to the extent requested by any governmental, supervisory or regulatory authority (it being understood that it will, to the extent reasonably practicable, provide the Company with an opportunity to request confidential treatment from such authority);

(c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process;

(d) to any other Party;

(e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to any Finance Document or the enforcement of rights thereunder;

(f) subject to an agreement containing provisions substantially the same as those of this Clause 24.3, to any of its Affiliates and any other person:

(i) to (or through) whom the Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under this Agreement;

(ii) with (or through) whom the Lender enters into (or may potentially enter into) any sub participation in relation to, or any other transaction under which payments are to be made by reference to, this Agreement or any Obligor;

(g) with the written consent of the Company; or

(h) to the extent such Information:

(i) becomes publicly available other than as a result of a breach of this Clause 24.3 or any other confidentiality agreement to which it is a party with the Company or any Subsidiary;

(ii) becomes available to the Lender on a non-confidential basis from a source other than the Company.

For the purposes of this Clause 24.3, “Information” means all confidential information received from the Company relating to the Company or its businesses,

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other than any such information that is available to the Lender on a non-confidential basis prior to disclosure by the Company, provided that, in the case of information received from the Company after the date hereof, such information is clearly identified at the time of delivery as confidential.

Any Person required to maintain the confidentiality of Information as provided under this Clause 24.3 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

25. CHANGES TO THE OBLIGORS

25.1 Assignments and transfer by Obligors

No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

25.2 Additional Borrowers

(a) Subject to compliance with the provisions of paragraphs (b) and (c) of Clause 20.6 (“Know your customer” checks), the Company may request that any of its wholly owned Subsidiaries becomes an Additional Borrower. That Subsidiary shall become an Additional Borrower if:

(i) the Lender approves the addition of that Subsidiary;

(ii) the Company delivers to the Lender a duly completed and executed Accession Letter;

(iii) the Company confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Borrower; and

(iv) the Lender has received all of the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent) in relation to that Additional Borrower, each in form and substance satisfactory to it.

(b) The Lender shall notify the Company promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent).

25.3 Resignation of a Borrower

(a) The Company may request that a Borrower ceases to be a Borrower by delivering to the Lender a Resignation Letter.

(b) The Lender shall accept a Resignation Letter and notify the Company of its acceptance if:

(i) no Default is continuing or would result from the acceptance of the Resignation Letter (and the Company has confirmed this is the case); and

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(ii) the Borrower is under no actual or contingent obligations as a Borrower under any Finance Documents,

whereupon that company shall cease to be a Borrower and shall have no further rights or obligations under the Finance Documents.

25.4 Additional Guarantors

(a) Subject to compliance with the provisions of paragraphs (b) and (c) of Clause 20.6 (“Know your customer” checks), the Company may request that any of its Subsidiaries become an Additional Guarantor. That Subsidiary shall become an Additional Guarantor if:

(i) the Company delivers to the Lender a duly completed and executed Accession Letter; and

(ii) the Lender has received all of the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent) in relation to that Additional Guarantor, each in form and substance satisfactory to it.

(b) The Lender shall notify the Company promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in Part II of Schedule 2 (Conditions Precedent).

25.5 Repetition of Representations

Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the representations and warranties in Clause 19 (Representations) are true and correct in relation to it as at the date of delivery as if:

(a) made by reference to the facts and circumstances then existing;

(b) references to “Original Financial Statements” were to the audited financial statements of the relevant Subsidiary delivered to the Lender pursuant to paragraph (a) of 25.2 (Additional Borrowers) or paragraph (a) of 25.4 (Additional Guarantors); and

(c) references to “each Borrower” (if applicable) were to the relevant Subsidiary.

25.6 Resignation of a Guarantor

(a) The Company may request that a Guarantor (other than the Company) ceases to be a Guarantor by delivering to the Lender a Resignation Letter.

(b) The Lender shall accept a Resignation Letter and notify the Company of its acceptance if:

(i) no Default is continuing or would result from the acceptance of the Resignation Letter (and the Company has confirmed this is the case); and

(ii) no amount owed by that Guarantor under this Agreement is still outstanding.

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26. PAYMENT MECHANICS

26.1 Payments to the Lender

(a) On each date on which an Obligor is required to make a payment under a Finance Document, that Obligor shall make the same available to the Lender (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Lender as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b) Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to Euro, in a principal financial centre in a Participating Member State or London) with such bank as the Lender specifies.

26.2 Distributions to an Obligor

The Lender may (with the consent of the Obligor or in accordance with Clause 27 (Set off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.

26.3 Partial payments

(a) If the Lender receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Lender shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order:

(i) first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Lender under the Finance Documents;

(ii) secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;

(iii) thirdly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and

(iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b) The Lender may vary the order set out in paragraphs (a)(ii) to (iv) above.

(c) Paragraphs (a) and (b) above will override any appropriation made by an Obligor.

26.4 No set off by Obligors

All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set off or counterclaim.

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26.5 Business Days

(a) Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

(b) During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.

26.6 Currency of account

(a) Subject to paragraphs (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from an Obligor under any Finance Document.

(b) A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum shall be made in the currency in which that Loan or Unpaid Sum is denominated on its due date.

(c) Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.

(d) Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(e) Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.

26.7 Change of currency

(a) Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(i) any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Lender (after consultation with the Company); and

(ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Lender (acting reasonably).

(b) If a change in any currency of a country occurs, this Agreement will, to the extent the Lender (acting reasonably and after consultation with the Company) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.

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27. SET OFF

The Lender may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by the Lender) against any matured obligation owed by the Lender to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set off.

28. NOTICES

28.1 Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax, letter or electronic mail.

28.2 Addresses

The postal address, electronic mail address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

(a) in the case of the Company, that identified with its name below;

(b) in the case of any other Original Obligor, that notified in writing to the Lender on or prior to the date on which it becomes a Party; and

(c) in the case of the Lender, that identified with its name below,

or any substitute postal address, electronic mail address, fax number, telex number of department or officer as the Party may notify to the Lender (or the Lender may notify to the Company, if a change is made by the Lender) by not less than five Business Days’ notice.

28.3 Delivery

(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i) if by way of fax, when received in legible form; or

(ii) if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or

(iii) if by way of electronic mail, when received in legible form.

and, if a particular department or officer is specified as part of its address details provided under Clause 28.2 (Addresses), if addressed to that department or officer.

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(b) Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender and then only if it is expressly marked for the attention of the department or officer identified with the Lender’s signature below (or any substitute department or officer as the Lender shall specify for this purpose).

(c) Any communication or document made or delivered to the Company in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors.

28.4 English language

(a) Any notice given under or in connection with any Finance Document must be in English.

(b) All other documents provided under or in connection with any Finance Document must be:

(i) in English; or

(ii) if not in English, and if so required by the Lender, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

29. CALCULATIONS AND CERTIFICATES

29.1 Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by the Lender are prima facie evidence of the matters to which they relate.

29.2 Certificates and Determinations

Any certification or determination by the Lender of a rate or amount under any Finance Document is, in the absence of manifest error, prima facie evidence of the matters to which it relates.

29.3 Day count convention

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 365 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.

30. PARTIAL INVALIDITY

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

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31. REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of the Lender, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

32. AMENDMENTS AND WAIVERS

Any term of the Finance Documents may be amended, waived, supplemented or modified only with the consent of the Lender and the Obligors and any such amendment or waiver will be binding on all Parties.

33. COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

34. GOVERNING LAW

This Agreement is governed by English law.

35. ENFORCEMENT

35.1 Jurisdiction of English courts

(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a “Dispute”).

(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

(c) This Clause 35.1 is for the benefit of the Lender only. As a result, the Lender shall not be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Lender may take concurrent proceedings in any number of jurisdictions.

35.2 Service of process

Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):

(a) irrevocably appoints Newco as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document; and

(b) agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.

Newco expressly agrees and consents to the provisions of this Clause 35.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

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SCHEDULE 1

THE ORIGINAL PARTIES

The Original Obligors

Name of Original Borrower	Registration number (or equivalent, if any)
Brecon Holdings Limited	05710366
Name of Original Guarantor	Registration number (or equivalent, if any)
AmerisourceBergen Corporation	23-3079390 (IRS Employer Identification Number)

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SCHEDULE 2

CONDITIONS PRECEDENT

Part I

Conditions precedent to Initial Utilisation

1. Original Obligors

(a) Executed Finance Documents.

(b) A copy of the constitutional documents of each Original Obligor.

(c) A copy of a good standing certificate (including verification of tax status) with respect to the Company, issued as of a recent date by the Secretary of State or other appropriate official of the Company’s jurisdiction of incorporation or organisation.

(d) A copy of a resolution of the board of directors of each Original Obligor:

(i) approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(ii) authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf; and

(iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party.

(e) A specimen of the signature of each person authorised by the resolution referred to in paragraph (d) above.

(f) A certificate of the Original Guarantor (signed by the corporate treasurer or another senior officer) confirming that guaranteeing the Commitment would not cause any guaranteeing or similar limit binding on it to be exceeded.

(g) A certificate of the Original Borrower (signed by a director) confirming that borrowing the Commitment would not cause any borrowing or similar limit binding on it to be exceeded.

(h) A certificate of an authorised signatory of the relevant Original Obligor certifying that each copy document relating to it specified in this Part I of Schedule 2 is correct and complete and has not been rescinded or superseded as at a date no earlier than the date of this Agreement.

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2. Legal opinions

(a) An opinion of English counsel to the Lender as to such matters as the Lender may reasonably request.

(b) An opinion of New York counsel to the Obligors as to such matters as the Lender may reasonably request.

(c) An opinion of the Company’s general or deputy general counsel as to such matters as the Lender may reasonably request.

3. Other documents and evidence

(a) Evidence that any process agent referred to in Clause 35.2 (Service of process), if not an Original Obligor, has accepted its appointment.

(b) A copy of any other Authorisation or other document, opinion or assurance which the Lender (acting reasonably) considers to be necessary or desirable (if it has notified the Company accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.

(c) The Original Financial Statements of each Original Obligor.

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Part II

Conditions precedent required to be

delivered by an Additional Obligor

1. An Accession Letter, duly executed by the Additional Obligor and the Company.

2. A copy of the constitutional documents of the Additional Obligor.

3. A copy of a resolution of the board of directors of the Additional Obligor:

(a) approving the terms of, and the transactions contemplated by, the Accession Letter and the Finance Documents and resolving that it execute the Accession Letter;

(b) authorising a specified person or persons to execute the Accession Letter on its behalf; and

(c) authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices (including, in relation to an Additional Borrower, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents.

4. A specimen of the signature of each person authorised by the resolution referred to in paragraph 3 above.

5. If applicable, a copy of a resolution signed by all the holders of the issued shares of the Additional Guarantor, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Additional Guarantor is a party.

6. If the Additional Obligor is to be an Additional Guarantor, a certificate of such Additional Guarantor (signed by a director or other senior officer acceptable to the Lender) confirming that guaranteeing the Commitment would not cause any guaranteeing or similar limit binding on it to be exceeded and if the Additional Obligor is to be an Additional Borrower, a certificate of such Additional Borrower (signed by a director or other senior officer acceptable to the Lender) confirming that borrowing the Commitment would not cause any borrowing or similar limit binding on it to be exceeded.

7. A certificate of an authorised signatory of the Additional Obligor certifying that each copy document listed in this Part II of Schedule 2 is correct and complete and has not been rescinded or superseded as at a date no earlier than the date of the Accession Letter.

8. A copy of any other Authorisation or other document, opinion or assurance which the Lender considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Accession Letter or for the validity and enforceability of any Finance Document.

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9. If available, the latest audited financial statements of the Additional Obligor.

10. A legal opinion of the legal advisers to the Lender in England.

11. If the Additional Obligor is incorporated in a jurisdiction other than England and Wales, a legal opinion of the legal advisers to the Lender in the jurisdiction in which the Additional Obligor is incorporated or, if acceptable to the Lender (acting reasonably), the Company’s general or deputy general counsel.

12. If the proposed Additional Obligor is incorporated in a jurisdiction other than England and Wales, evidence that the process agent specified in Clause 35.2 (Service of process), if not an Obligor, has accepted its appointment in relation to the proposed Additional Obligor.

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SCHEDULE 3

UTILISATION REQUEST

From:	[Borrower]
To:	Barclays Bank PLC
Dated:

Dear Sirs

AmerisourceBergen Corporation – £20,000,000 Facility Agreement

dated [•] 2006 (the “Agreement”)

1. We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

2. We wish to borrow a Loan on the following terms:

Proposed Utilisation Date:	[•] (or, if that is not a Business Day, the next Business Day)
Currency of Loan:	[•]
Amount:	[•] or, if less, the Available Commitment
Interest Period:	[•]

3. We confirm that each condition specified in Clause 4.2 (Further conditions precedent) is satisfied on the date of this Utilisation Request.

4. The proceeds of this Loan should be credited to [account].

5. This Utilisation Request is irrevocable.

Yours faithfully

authorised signatory for

[name of relevant Borrower]

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SCHEDULE 4

MANDATORY COST FORMULAE

1. The Mandatory Cost is an addition to the interest rate to compensate the Lender for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2. On the first day of each Interest Period (or as soon as possible thereafter) the Lender shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”), in accordance with the paragraphs set out below.

3. The Additional Cost Rate for the Lender if lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Company as being its reasonable determination of the cost of complying with the minimum reserve requirements of the European Central Bank in respect of Loans made from that Facility Office.

4. The Additional Cost Rate for the Lender if lending from a Facility Office in the United Kingdom will be calculated by the Lender as follows:

(a) in relation to a Sterling Loan:

AB - C (B - D) - Ex0.01	per cent. per annum
100 – (A + C)

(b) in relation to a Loan in any currency other than Sterling:

Ex0.01	per cent. per annum
300

Where:

(A) A is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which the Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

(B) B is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in paragraph (a) of Clause 9.3 (Default interest) payable for the relevant Interest Period on the Loan.

(C) C is the percentage (if any) of Eligible Liabilities which the Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

(D) D is the percentage rate per annum payable by the Bank of England to the Lender on interest bearing Special Deposits.

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(E) E is designed to compensate the Lender for amounts payable under the Fees Rules and is calculated as the rate of charge payable by the Lender to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated, for this purpose, by the Lender as being the average of the Fee Tariffs applicable to the Lender for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of the Lender.

5. For the purposes of this Schedule:

(a) “Eligible Liabilities” and “Special Deposits” have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b) “Fees Rules” means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits; and

(c) “Fee Tariffs” means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any discount rate); and

(d) “Tariff Base” has the meaning given to it in the Fees Rules.

6. In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

7. The Lender may from time to time, after consultation with the Company, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

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SCHEDULE 5

FORM OF ACCESSION LETTER

To:	Barclays Bank PLC
From:	[Subsidiary] and AmerisourceBergen Corporation
Dated:

Dear Sirs

AmerisourceBergen Corporation – £20,000,000 Facility Agreement

dated [•] 2006 (the “Agreement”)

1. We refer to the Agreement. This is an Accession Letter. Terms defined in the Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.

2. [Subsidiary] agrees to become an Additional [Borrower]/[Guarantor] and to be bound by the terms of the Agreement as an Additional [Borrower]/[Guarantor] pursuant to Clause [25.2 (Additional Borrowers)]/[Clause 25.4 (Additional Guarantors)] of the Agreement. [Subsidiary] is a company duly incorporated under the laws of [name of relevant jurisdiction].

3. [Subsidiary’s] administrative details are as follows:

Address:

Fax No:

Attention:

4. This Accession Letter is governed by English law.

[This Guarantor Accession Letter is entered into by deed.]

[Company]                                              [Subsidiary]

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SCHEDULE 6

FORM OF RESIGNATION LETTER

To:	Barclays Bank PLC
From:	[resigning Obligor] and AmerisourceBergen Corporation
Dated:

Dear Sirs

AmerisourceBergen Corporation – £20,000,000 Facility Agreement

dated [•] 2006 (the “Agreement”)

1. We refer to the Agreement. This is a Resignation Letter. Terms defined in the Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.

2. Pursuant to [Clause 25.3 (Resignation of a Borrower)]/[Clause 25.6 (Resignation of a Guarantor), we request that [resigning Obligor] be released from its obligations as a [Borrower]/[Guarantor] under the Agreement.

3. We confirm that:

(a) no Default is continuing or would result from the acceptance of this request; and

(b) [resigning Obligor is under no actual or contingent obligations as a Borrower under any Finance Documents]* / [no amount owed by [resigning Obligor] under the Agreement is still outstanding]**.

4. This Resignation Letter is governed by English law.

[Company]	[Subsidiary]
By:	By:

* Use for a resigning Borrower.

** Use for a resigning Guarantor.

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SCHEDULE 7

TIMETABLES

	Loans in Euro	Loans in Sterling
Lender notifies the Company if a currency is approved as an Optional Currency in accordance with Clause 4.3 (Conditions relating to Optional Currencies)
Delivery of a duly completed Utilisation Request (Clause 5.1 (Delivery of a Utilisation Request)	D – 2 9.00 am	D – 1 1.00 pm
Lender determines (in relation to a Utilisation) the Base Currency Amount of the Loan	D – 2 9.30 am
Lender gives notice in accordance with Clause 6.2 (Unavailability of a currency)
LIBOR or EURIBOR is fixed	Quotation Day as of 11:00 a.m. Brussels time in respect of EURIBOR	Quotation Day as of 11:00 a.m. London time in respect of LIBOR

“D” = date of utilisation.

Number of days refer to Business Days.

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SCHEDULE 8

PRICING SCHEDULE

Applicable rates are as set forth in the table below and based upon the ratings established by S&P or Moody’s for the Index Debt as of the most recent determination date.

Status	Ratings (S&P/Moody’s)	Facility Fee (basis points per annum)	LIBOR Spread (basis points per annum)
Category 1	A/A2 or higher	5.5	32.0
Category 2	A-/A3	7.5	35.0
Category 3	BBB+/Baa1	10.0	37.5
Category 4	BBB/Baa2	12.5	47.5
Category 5	BBB-/Baa3	15.0	57.5
Category 6	BB+/Ba1	17.5	67.5
Category 7	BB/Ba2	22.5	87.5
Category 8	BB-/Ba3 or lower	27.5	120.0

For purposes of the foregoing, (i) if either Moody’s or S&P shall not have in effect a rating for the Index Debt (other than by reason of the circumstances referred to in the last sentence of this definition), then such Rating Agency shall be deemed to have established a rating in Category 8; (ii) if the ratings established or deemed to have been established by Moody’s and S&P and for the Index Debt shall fall within different Categories, the Applicable Rate shall be based on the higher of the two ratings unless one of the two ratings is two or more Categories above the other, in which case the Applicable Rate shall be determined by reference to the Category one level above the Category corresponding to the lower rating; and (iii) if the ratings established or deemed to have been established by Moody’s or S&P for the Index Debt shall be changed (other than as a result of a change in the rating system of Moody’s or S&P), such change shall be effective as of the date on which it is first announced by the applicable Rating Agency. Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change. If the rating system of Moody’s or S&P shall change, or if either such Rating Agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lender shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such Rating Agency and, pending the effectiveness of any such amendment, the Applicable Rate shall be determined by reference to the rating of the other Rating Agency (or, if the circumstances referred to in this sentence shall affect both Rating Agencies, the ratings most recently in effect prior to such changes or cessations).

- 57 -

SIGNATORIES

The Company

AMERISOURCEBERGEN CORPORATION

By:	J. F. QUINN
Address:	1300 Morris Drive
	Chesterbrook, PA 19087-5594
	United States of America
Fax number:	+1 (610)-727-3639
Electronic mail address:	jquinn@amerisourcebergen.com
For the attention of:	Vice President and Treasurer

The Original Borrower

BRECON HOLDINGS LIMITED

By:	ROGER SPREEN
Address:	C/O 1300 Morris Drive
	Chesterbrook, PA 19087-5594
	United States of America
Fax number:	+1 (610)-727-3639
Electronic mail address:	jquinn@amerisourcebergen.com
For the attention of:	Vice President and Treasurer

The Original Guarantor

AMERISOURCEBERGEN CORPORATION

By: J. F. QUINN

- 58 -

The Lender

BARCLAYS BANK PLC

By:	DOUG BERNEGGER
Address:	5 The North Colonnade
	London
	E14 4BB
	United Kingdom
Fax number:	+44 (0) 20 7773 1840
For the attention of:	Cliff Baylis/Jeff Garner

- 59 -

EX-31.1

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer

I, R. David Yost, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of AmerisourceBergen Corporation (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 8, 2006

/s/    R. DAVID YOST        

R. David Yost

Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer

I, Michael D. DiCandilo, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of AmerisourceBergen Corporation (the “Registrant”);

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of Registrant’s board of directors:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 8, 2006

/s/    MICHAEL D. DICANDILO        

Michael D. DiCandilo

Executive Vice President and

Chief Financial Officer

EX-32.1

Exhibit 32.1

Section 1350 Certification of Chief Executive Officer

In connection with the Quarterly Report of AmerisourceBergen Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. David Yost, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    R. DAVID YOST        

R. David Yost

Chief Executive Officer

May 8, 2006

EX-32.2

Exhibit 32.2

Section 1350 Certification of Chief Financial Officer

In connection with the Quarterly Report of AmerisourceBergen Corporation (the “Company”) on Form 10-Q for the quarter ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. DiCandilo, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/    MICHAEL D. DICANDILO        

Michael D. DiCandilo

Executive Vice President and

Chief Financial Officer

May 8, 2006