-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JHmj150L+JeDhGU8jRiN7P1WU0+UOt2DekI0HQ8S1uBArvUOssqryknQoj82WHYZ k2HujxrX+TJB2x9uIEawkg== 0000920527-01-500009.txt : 20010814 0000920527-01-500009.hdr.sgml : 20010814 ACCESSION NUMBER: 0000920527-01-500009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20010629 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSS WORLD MEDICAL INC CENTRAL INDEX KEY: 0000920527 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MEDICAL, DENTAL & HOSPITAL EQUIPMENT & SUPPLIES [5047] IRS NUMBER: 592280364 STATE OF INCORPORATION: FL FISCAL YEAR END: 0329 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23832 FILM NUMBER: 1706374 BUSINESS ADDRESS: STREET 1: 4345 SOUTHPOINT BLVD STREET 2: STE 250 CITY: JACKSONVILLE STATE: FL ZIP: 32216 BUSINESS PHONE: 9043323000 MAIL ADDRESS: STREET 1: 4345 SOUTHPOINT BLVD STREET 2: STE 250 CITY: JACKSONVILLE STATE: FL ZIP: 32216 FORMER COMPANY: FORMER CONFORMED NAME: PHYSICIAN SALES & SERVICE INC /FL/ DATE OF NAME CHANGE: 19940318 10-Q 1 form10qdocument_q102.txt FORM 10Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 29, 2001 ------------- [ ] 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 0-23832 PSS WORLD MEDICAL, INC. (Exact name of registrant as specified in its charter) Florida 59-2280364 ------- ---------- (State or other jurisdiction (IRS employer of incorporation) Identification number) 4345 Southpoint Blvd. Jacksonville, Florida 32216 --------------------- ----- (Address of principal executive offices) (Zip code) Registrant's telephone number (904) 332-3000 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 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. [X] Yes [ ] No As of August 10, 2001 a total of 71,071,025 shares of common stock, par value $.01 per share, of the registrant were outstanding. PSS WORLD MEDICAL, INC. AND SUBSIDIARIES June 29, 2001 TABLE OF CONTENTS
PAGE ITEM Information Regarding Forward-Looking Statements.............................................. 3 PART I - FINANCIAL INFORMATION 1. Financial Statements Condensed Consolidated Balance Sheets - June 29, 2001 and March 30, 2001...................... 4 Condensed Consolidated Income Statements for the Three Months Ended June 29, 2001 and June 30, 2000 5 Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 29, 2001 and June 6 30, 2000.................................................................................. Notes to Condensed Consolidated Financial Statements - June 29, 2001 and June 30, 2000........ 7 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............. 17 3. Quantitative and Qualitative Disclosures About Market Risk........................................ 24 PART II - OTHER INFORMATION 1. Legal Proceedings................................................................................. 25 2. Change in Securities and Use of Proceeds.......................................................... 25 3. Defaults Upon Senior Securities................................................................... 25 4. Submission of Matters to a Vote of Security Holders............................................... 25 5. Other Information................................................................................. 25 6. Exhibits and Reports on Form 8-K.................................................................. 25 SIGNATURES........................................................................................... 28
2 CAUTIONARY STATEMENTS Forward-Looking Statements This Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements regarding the Company's and its subsidiaries' expected future financial position, results of operations, cash flows, funds from operations, dividends and dividend plans, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, growth opportunities, plans and objectives of management for future operations and statements that include words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "may," "could," and other similar expressions are forward-looking statements. Such forward-looking statements are inherently uncertain, and stockholders must recognize that actual results may differ from the Company's expectations. Actual future results and trends for the Company may differ materially depending on a variety of factors discussed in the Company's Annual Report on Form 10-K and in this Form 10-Q and elsewhere in the Company's filings with the Securities and Exchange Commission (the "Commission"). Factors that may affect the plans or results of the Company include (a) the ability of the Company to successfully implement its business plan; (b) the availability of sufficient capital to finance the Company's business plans on terms satisfactory to the Company; (c) competitive factors; (d) the ability of the Company to adequately defend or reach a settlement of outstanding litigations and investigations involving the Company or its management; (d) changes in labor, equipment and capital costs; (e) changes in regulations affecting the Company's business; (f) future acquisitions or strategic partnerships; and (g) general business and economic conditions. Many of these factors are outside the control of the Company and its management. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. The Company undertakes no duty to update such forward-looking statements. 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS PSS WORLD MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, Except Per Share Data)
June 29, March 30, 2001 2001 ------------------ ----------------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents.................................................. $ 28,336 $ 34,374 Marketable securities...................................................... 264 314 Accounts receivable, net................................................... 229,598 236,846 Inventories, net........................................................... 162,376 154,725 Employee advances.......................................................... 359 478 Prepaid expenses and other................................................. 51,443 60,633 ------------------ ----------------- Total current assets............................................... 472,376 487,370 Property and equipment, net................................................... 78,141 76,247 Other Assets: Goodwill .................................................................. 163,879 163,879 Intangibles................................................................ 18,317 19,573 Employee advances.......................................................... 527 524 Other...................................................................... 16,780 25,041 ------------------ ----------------- Total assets....................................................... $ 750,020 $ 772,634 ================== ================= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable........................................................... $ 146,944 $ 119,238 Accrued expenses........................................................... 31,354 39,234 Current maturities of long-term debt and capital lease obligations......... 124 1,752 Other...................................................................... 9,188 10,855 ------------------ ----------------- Total current liabilities.......................................... 187,610 171,079 Long-term debt and capital lease obligations, net of current portion.......... 147,379 190,040 Other......................................................................... 8,117 7,213 ------------------ ----------------- Total liabilities.................................................. 343,106 368,332 ------------------ ----------------- Shareholders' Equity: Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares issued and outstanding................................................. -- -- Common stock, $.01 par value; 150,000,000 shares authorized, 71,071,025 and 71,077,236 shares issued and outstanding at June 29, 2001 and March 30, 2001, respectively..................................................... 711 711 Additional paid-in capital................................................. 348,623 348,701 Retained earnings.......................................................... 57,580 54,890 Total shareholders' equity......................................... 406,914 404,302 ------------------ ----------------- Total liabilities and shareholders' equity......................... $ 750,020 $ 772,634 ================== ================= The accompanying notes are an integral part of these condensed consolidated statements.
4 PSS WORLD MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited) (Dollars in Thousands, Except Per Share Data)
Three Months Ended ---------------------------------------- June 29, 2001 June 30, 2000 ------------------- ------------------- Net sales.................................. $ 446,740 $ 471,648 Cost of goods sold......................... 344,996 357,362 ------------------- ------------------- Gross profit......................... 101,744 114,286 General and administrative expenses........ 68,461 72,640 Selling expenses........................... 26,499 29,378 International business exit charge reversal (514) -- ------------------- ------------------- Income from operations............... 7,298 12,268 ------------------- ------------------- Other income (expense): Interest expense..................... (4,251) (5,035) Interest and investment income....... 238 700 Other income......................... 946 812 ------------------- ------------------- (3,067) (3,523) ------------------- ------------------- Income before provision for income taxes... 4,231 8,745 Provision for income taxes................. 1,541 4,125 ------------------- ------------------- Net income................................. $ 2,690 $ 4,620 =================== =================== Earnings per share - Basic: Net income.............................. $ 0.04 $ 0.06 =================== =================== Earnings per share - Diluted: Net income.............................. $ 0.04 $ 0.06 =================== =================== The accompanying notes are an integral part of these condensed consolidated statements.
5 PSS WORLD MEDICAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Three Months Ended ------------------------------------ June 29, 2001 June 30, 2000 ------------------ ---------------- Cash Flows From Operating Activities: Net income................................................................. $ 2,690 $ 4,620 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation........................................................... 2,836 2,390 Amortization of intangible assets...................................... 1,455 3,084 Amortization of debt issuance costs.................................... 689 201 Provision for doubtful accounts........................................ 1,590 1,484 International Business exit charge reversal............................ (514) -- Gain on sale of fixed assets........................................... 13 7 Changes in operating assets and liabilities, net of effects from business acquisitions: Accounts receivable................................................. 3,039 (1,529) Inventories, net.................................................... (10,494) 12,377 Prepaid expenses and other current assets........................... 9,051 (3,142) Other assets........................................................ 7,370 (3,469) Accounts payable, accrued expenses, and other liabilities........... 25,410 (3,135) ------------------ ----------------- Net cash provided by operating activities....................... 43,135 12,888 ------------------ ----------------- Cash Flows From Investing Activities: Proceeds from sales and maturities of marketable securities............... 50 -- Proceeds from sales of property and equipment............................. 46 8 Capital expenditures...................................................... (6,108) (4,407) Proceeds from sale of International Business.............................. 222 -- Payments on noncompete agreements......................................... (729) (168) ------------------ ----------------- Net cash used in investing activities........................... (6,519) (4,567) ------------------ ----------------- Cash Flows From Financing Activities: Proceeds from borrowings.................................................. 25,052 43 Repayment of borrowings................................................... (67,702) (27,074) Other..................................................................... (4) 126 Net cash used in financing activities........................... (42,654) (26,905) ------------------ ----------------- Net decrease in cash and cash equivalents..................................... (6,038) (18,584) Cash and cash equivalents, beginning of period................................ 34,374 60,414 ------------------ ----------------- Cash and cash equivalents, end of period...................................... $ 28,336 $ 41,830 ================== ================= The accompanying notes are an integral part of these condensed consolidated statements.
6 PSS WORLD MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 29, 2001 AND JUNE 30, 2000 (Unaudited) (Dollars in Thousands, Except Per Share Data, Unless Otherwise Noted) NOTE 1 - BASIS OF PRESENTATION PSS World Medical, Inc. (the "Company" or "PSS") is a specialty marketer and distributor of medical products to physicians, alternate-site imaging centers, long-term care providers, home care providers, and hospitals through 94 service centers to customers in all 50 states. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC"). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to the SEC rules and regulations. The condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations for the periods indicated. The condensed consolidated balance sheet as of March 30, 2001 has been derived from the Company's audited consolidated financial statements for the year ended March 30, 2001. The financial statements and related notes included in this report should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended March 30, 2001. The Company operates on a thirteen week quarter which ends on the Friday closest to each calendar quarter end. The results of operations for the interim periods covered by this report may not necessarily be indicative of operating results for the full fiscal year. Recent Accounting Pronouncements In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"). SFAS 141 requires the purchase method of accounting for business combinations initiated after June 30, 2001 and eliminates the poolings-of-interests method. The Company will apply the provisions of SFAS 141 to future acquisitions. In July 2001, the FASB also issued SFAS No. 142, Goodwill and Other Intangibles ("SFAS 142"). SFAS 142 requires, among other things, the discontinuance of goodwill amortization and includes provisions for reassessment of the useful lives of existing intangibles and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires the Company to complete a two-step transitional goodwill impairment test. The first step of the impairment test must be completed six months from the date of adoption and the second step must be completed as soon as possible, but no later than the end of the year of initial application. The Company is currently in the process of performing the first step of the transitional goodwill impairment test, which will be completed during the second quarter. Therefore, the Company is currently assessing but has not yet determined the impact of SFAS 142 on its financial position and results of operations. Refer to Note 5, Intangibles for further discussion relating to the adoption of the Statement. NOTE 2 - CHARGES INCLUDED IN GENERAL AND ADMINISTRATIVE EXPENSES In addition to normal general and administrative expenses, this caption includes charges related to merger activity, restructuring activity, and other special items. The following table summarizes unusual charges 7 included as components of general and administrative expenses in the accompanying consolidated income statements: Three Months Ended ------------------------------- June 29, 2001 June 30, 2000 -------------- --------------- Merger costs and expenses............ $ 541 $ 1,575 Restructuring costs and expenses..... 494 1,240 Operational tax charge............... (451) -- Other................................ 8 786 -------------- --------------- $ 592 $ 3,601 ============== =============== Merger Costs and Expenses The Company's policy is to accrue merger costs and expenses at the commitment date of an integration plan if certain criteria under EITF 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity ("EITF 94-3") or EITF 95-14, Recognition of Liabilities in Anticipation of a Business Combination ("EITF 95-14"), are met. Merger costs and expenses recorded at the commitment date primarily include charges for involuntary employee termination costs, branch shut-down costs, lease termination costs, and other exit costs. If the criteria described in EITF 94-3 or EITF 95-14 are not met, the Company records merger costs and expenses as incurred. Merger costs expensed as incurred include the following: (1) costs to pack and move inventory from one facility to another or within a facility in a consolidation of facilities, (2) relocation costs paid to employees in relation to an acquisition accounted for under the pooling-of-interests method of accounting, (3) systems or training costs to convert the acquired companies to the Company's existing information system, and (4) training costs related to conforming the acquired companies' operational policies to that of the Company's operational policies. In addition, amounts incurred in excess of the original amount accrued at the commitment date are expensed as incurred. Effective February 1, 2000, the Board of Directors approved and adopted the PSS World Medical, Inc. Officer Retention Bonus Plan and the PSS World Medical, Inc. Corporate Office Employee Retention Bonus Plan (collectively the "Retention Plans"). As part of the Company's strategic alternatives process, management adopted these plans to retain certain officers and key employees during the strategic alternatives transition period. Accordingly, during the three months ended June 29, 2001 and June 30, 2000, the Company expensed $776 and $1,271 respectively, related to the Retention Plans. In addition, the Company has recorded merger costs and expenses that primarily related to branch shutdown and lease termination costs. For the three months ended June 29, 2001 and June 30, 2000, the Company recorded $36 and $304, respectively, of merger charges expensed as incurred. At the end of each quarter, management reevaluates its plans and adjusts previous estimates. For the three months ended June 29, 2001, the Company reversed $271 of merger costs and expenses, which primarily related to lease termination expenses not incurred as previously expected. Refer to Note 3, Accrued Merger and Restructuring Costs and Expenses, for further discussion regarding merger plans. Restructuring Costs and Expenses The Company has recorded restructuring costs and expenses primarily related to other exit costs as incurred, which include costs to pack and move inventory, costs to set up new facilities, employee relocation costs, and other related facility closure costs. For the three months ended June 29, 2001 and June 30, 2000, the Company recorded $505 and $1,240, respectively, of restructuring costs as incurred. At the end of each quarter, management reevaluates its plans and adjusts previous estimates. For the three months ended June 29, 2001, the Company reversed $11 of restructuring costs. Operational Tax Charge During the three months ended June 29, 2001, the Company performed an analysis and reversed $451 of a previously recorded operating tax charge reserve. 8 Other During the three months ended June 29, 2001 and June 30, 2000, the Company incurred $8 and $692, respectively, primarily relating to legal and professional fees and other costs pursuant to the Company's strategic alternatives process and severance costs. In addition, during the three months ended June 30, 2000, the Imaging Business incurred $94 of professional fees for acquisitions not consummated. NOTE 3 - ACCRUED MERGER AND RESTRUCTURING COSTS AND EXPENSES Summary of Accrued Merger Costs and Expenses In connection with the consummation of business combinations, management often develops formal plans to exit certain activities, involuntarily terminate employees, and relocate employees of acquired companies. Management's plans to exit an activity often include identification of duplicate facilities for closure and identification of facilities for consolidation into other facilities. Generally, completion of the integration plans will occur within one year from the date in which the plans are formalized and adopted by management. However, intervening events occurring prior to completion of the plan, such as subsequent acquisitions or system conversion issues, can significantly impact a plan that had been previously established. Such intervening events may cause modifications to the plans and are accounted for on a prospective basis. At the end of each quarter, management reevaluates its integration plans and adjusts previous estimates. As part of the integration plans, certain costs are recognized at the date in which a plan is formalized and adopted by management (commitment date). These costs are generally related to employee terminations and relocation, lease terminations, and branch shutdown. In addition, there are certain costs that do not meet the criteria for accrual at the commitment date and are expensed as the plan is implemented (refer to Note 2, Charges Included in General and Administrative Expenses). Involuntary employee termination costs are employee severance costs and termination benefits. Lease termination costs are lease cancellation fees and forfeited deposits. Branch shutdown costs include costs related to facility closure costs. Employee relocation costs are moving costs of employees of an acquired company in transactions accounted for under the purchase method of accounting. Accrued merger costs and expenses, classified as accrued expenses in the accompanying condensed consolidated balance sheets, were $29 and $294 at June 29, 2001 and March 30, 2001, respectively. The discussion of the accrued merger costs and expenses below summarize the significant and nonsignificant integration plans adopted by management for business combinations accounted for under the purchase method of accounting and pooling-of-interests method of accounting. Integration plans are considered to be significant if the charge recorded to establish the accrual is in excess of 5% of consolidated pretax income. Significant Pooling-of-Interests Business Combination Plan The Company formalized and adopted an integration plan in December 1997 to integrate the operations of S&W X-Ray, Inc. with Diagnostic Imaging, Inc. ("DI" or the "Imaging Business"). As of June 29, 2001, all of the employees have been terminated and all of the seven identified distribution facilities have been shut down, and all costs related to the merger plan had been incurred. During the three months ended June 29, 2001, $16 of lease expense was charged against the accrual leaving no remaining accrual. Nonsignificant Purchase Business Combination Plans The Imaging Business acquired South Jersey X-Ray, Inc. in October 1998, and management formalized and adopted an integration plan during the three months ended June 30, 1999 to integrate the operations of the acquired company. All costs related to the merger plan had been incurred at March 30, 2001. During the three months ended June 29, 2001, $10 of lease expense was charged against the accrual and the Company reversed approximately $235 9 of merger costs and expenses previously established under prior plans, all of which related to lease termination costs. Summary of Accrued Restructuring Costs and Expenses As a result of the impact of the merger with Gulf South Medical Supply, Inc. ("Gulf South" or the "Long-Term Care Business") and to improve customer service, reduce costs, and improve productivity and asset utilization, the Company decided to realign and consolidate its operations. Accordingly, the Company adopted a restructuring plan during the first quarter of fiscal 1999 related to Gulf South ("Plan B"). During the second quarter of fiscal 2000, management evaluated the Company's overall cost structure and implemented cost reductions in order to meet internal profitability targets. In addition, management decided to improve its distribution model and relocate the corporate office for Gulf South to Jacksonville, Florida where the corporate offices for the Imaging and Physician Supply Businesses are located. The Company implemented the restructuring plan during the second quarter of fiscal 2000 that impacted all divisions ("Plan C"). The total number of employees to be terminated was 272. During the third quarter of fiscal 2001, the Company's Board of Directors along with senior management evaluated the Company's operating performance. During this process, the Board and management decided to implement a long-range action plan that would stabilize the workforce and business. As part of the new strategic plan, the Company planned to reorganize several senior management positions and make permanently idle two distribution centers - one in the Diagnostic Imaging division and one in the Physician Supply division ("Plan E"). The total number of employees to be terminated in Plan E is 29. Accrued restructuring costs and expenses related to Plans B, C, and E, classified as accrued expenses in the accompanying consolidated balance sheets, totaled $2,484 and $3,715 at June 29, 2001 and March 30, 2001, respectively. The following is a summary of the restructuring plan activity for the three months ended June 29, 2001: Involuntary Employee Lease Termination Termination Costs Costs Total ------------- -------------- -------------- Balance at March 30, 2001...... $ $ 379 $ 3,715 3,336 Adjustments............... (11) -- (11) Utilized.................. (1,122) (98) (1,220) ------------- -------------- -------------- Balance at June 29, 2001....... $ 2,203 $ 281 $ 2,484 ============= ============== ============== Plans B and C As of December 31, 1999, all of the six locations had been shut down and all employees were terminated as a result of Plan B. As of March 31, 2000, all employees scheduled to be terminated had been terminated as a result of Plan C. Approximately $54 and $227 of lease termination payments remain accrued at June 29, 2001 related to Plans B and C, respectively, for which payments will extend through fiscal 2002. Plan E Accrued restructuring costs and expenses related to Plan E at June 29, 2001 were approximately $2,203, all of which relates to involuntary employee terminations. As of June 29, 2001, 28 employees had been terminated under the plan. Payments related to Plan E will extend through fiscal 2004. Note 4 - International Business Exit Charge During the quarter ended December 29, 2000, management adopted, and the Board of Directors approved, a plan for divesting the Company's European operations. Management's primary consideration for this decision was that the European operations are outside the core United States business segments, making effective management difficult and resulting in lower than 10 expected operating performance for the past several years. The net assets held for disposal consisted of the operating assets of the European operations less outstanding liabilities, and were valued at the lower of aggregate fair value less costs incurred for sale. During the quarter ended December 29, 2000, the Company recorded $14.9 million as an International Business exit charge. The Company consummated the sale of the German operations on April 6, 2001 and the Belgium operations on May 20, 2001. Proceeds received consisted of approximately $222 and a note receivable of $400 from the sale of the common stock of these entities. Upon completion of the transactions, the Company recorded a reversal of $0.5 million of the previously established charge due to lower than expected costs to exit the operations. During the quarters ended June 29, 2001 and June 30, 2000, the European operations reported the following results through the date of sale:
Three Months Ended ------------------------------------ June 29, 2001 June 30, 2000 ------------------- --------------- Net sales.................................. $ 431 $ 5,051 Cost of goods sold......................... 295 3,355 ------------------- --------------- Gross profit......................... 136 1,696 Selling, general and administrative expenses 66 1,858 International Business exit charge reversal (514) -- ------------------- --------------- Operating income (loss).............. 584 (162) Interest expense (external)................ (14) 179 Interest expense (intercompany)............ -- (600) ------------------- --------------- (14) (421) ------------------- --------------- Income before provision for income taxes... 570 (583) Provision for income taxes................. -- 26 ------------------- --------------- Net income (loss).................... $ 570 $ (609) =================== ===============
NOTE 5 - INTANGIBLES The Company adopted SFAS 142, Goodwill and Other Intangibles, effective March 31, 2001. In connection with the adoption of SFAS 142, the Company has discontinued amortizing goodwill. During the quarter ended June 29, 2001, there was no change in the carrying amount of goodwill. The following table summarizes, by business segment and major asset class, the gross carrying amount and accumulated amortization for existing intangible assets subject to amortization: 11 As of March 30, 2001 ---------------------------------------- Gross Carrying Accumulated Amount Amortization Net ------------ ------------- --------- Non-Competition Agreements:..... Physician Supply Business.... $ 5,432 $ (3,953) $ 1,479 Imaging Business............. 22,662 (8,615) 14,047 Long-Term Care Business...... 1,570 (685) 885 ------------ ------------- --------- 29,664 (13,253) 16,411 ------------ ------------- --------- Signing Bonuses: Physician Supply Business.... 1,210 (964) 246 Imaging Business............. 3,325 (1,881) 1,444 Long-Term Care Business...... 221 (125) 96 ------------ ------------- --------- 4,756 (2,970) 1,786 ------------ ------------- --------- Customer Lists: Physician Supply Business.... 2,956 (1,580) 1,376 Imaging Business............. - - - Long-Term Care Business...... - - - ------------ ------------- --------- 2,956 (1,580) 1,376 ------------ ------------- --------- Total $ 37,376 $ (17,803) $ 19,573 ============ ============= ========= The Company has reassessed the useful lives of the existing intangible assets summarized above and determined that they are appropriate in determining amortization expense. Total amortization expense for the quarter ended June 29, 2001 and June 30, 2000 was $1,455 and $3,084, respectively. The estimated amortization expense for the next five fiscal years are as follows: Fiscal 2002.......................... $ 5,294 Fiscal 2003.......................... 4,320 Fiscal 2004.......................... 3,430 Fiscal 2005.......................... 2,206 Fiscal 2006.......................... 853 ----------- Total............................ $ 16,103 =========== The following table provides comparative disclosure of adjusted net income excluding goodwill amortization expense, net of taxes, for the periods presented.
Three Months Ended ------------------------------------ June 29, 2001 June 30, 2000 ------------------- --------------- Net income, as reported................... $ 2,690 $ 4,620 Goodwill amortization, net of tax......... -- 1,460 ------------------- --------------- Adjusted Net income....................... $ 2,690 $ 6,080 =================== =============== Basic and Diluted EPS, as reported........ $0.04 $0.06 Goodwill amortization, net of tax......... -- 0.03 ------------------- --------------- Basic and Diluted EPS, adjusted........... $0.04 $0.09 =================== ===============
NOTE 6 - COMPREHENSIVE INCOME Comprehensive income is defined as net income plus direct adjustments to shareholders' equity. The following details the components of comprehensive income for the periods presented: 12 Three Months Ended ----------------------------- June 29, 2001 June 30, 2000 ------------- ------------- Net income.............................. $ 2,690 $ 4,620 Other comprehensive (expense) income, net of tax: Foreign currency translation -- 161 adjustment................ Unrealized loss on available for sale security -- (1,507) ------------- ------------- Comprehensive income.................... $ 2,690 $ 3,274 ============= ============= NOTE 7 - EARNINGS PER SHARE In accordance with SFAS No. 128, Earnings Per Share, the calculation of basic net earnings per common share and diluted earnings per common share is presented below (share amounts in thousands, except per share data): Three Months Ended ----------------------------- June 29, 2001 June 30, 2000 ------------- ------------- Net income............................... $ 2,690 $ 4,620 ============= ============= Earnings per share - Basic: Net income............................ $0.04 $0.06 ============= ============= Earnings per share - Dilutive: Net income............................ $0.04 $0.06 ============= ============= Weighted average shares outstanding: Common shares......................... 71,201 71,128 Assumed exercise of stock options..... 300 123 ------------- ------------- Diluted shares outstanding............ 71,501 71,251 ============= ============= NOTE 8 - SEGMENT INFORMATION SFAS No. 131, Disclosure About Segments of an Enterprise and Related Information, requires segment reporting in interim periods and disclosures regarding products and services, geographic areas, and major customers. The Company's reportable segments are strategic businesses that offer different products and services to different segments of the health care industry, and are based upon how management regularly evaluates the Company. These segments are managed separately because of different customers and products. These segments include the Physician Sales & Service division (the "Physician Supply Business"), Diagnostic Imaging, Inc., Gulf South Medical Supply, Inc., and the Other segment that combines WorldMed International, Inc. ("WorldMed Int'l") with corporate and back office operations. The Physician Supply Business is a distributor of medical supplies, equipment, and pharmaceuticals to primary care and other office-based physicians in the United States. DI is a distributor of medical diagnostic imaging supplies, chemicals, equipment, and service to the acute and alternate-care markets in the United States. Gulf South is a distributor of medical supplies and other related products to the long-term care market in the United States. WorldMed Int'l along with WorldMed, Inc. managed and developed PSS' European medical equipment and supply distribution market. During the quarter ended June 29, 2001, the Company sold its European operations. The Company primarily evaluates the operating performance of its segments based on net sales and income from operations. The following table presents financial information about the Company's business segments (in thousands): 13
Three Months Ended ----------------------------- June 29, 2001 June 30, 2000 ------------- ------------- NET SALES: Physician Supply Business....................... $ 171,343 $ 177,937 Imaging Business................................ 179,608 196,426 Long-Term Care Business......................... 95,358 92,234 Other........................................... 431 5,051 ------------- ------------- Total net sales............................. $ 446,740 $ 471,648 ------------- ------------- CHARGES INCLUDED IN GENERAL AND ADMINISTRATIVE EXPENSES: Physician Supply Business....................... $ 145 $ 75 Imaging Business................................ 13 1,170 Long-Term Care Business......................... 89 387 Other........................................... 345 1,969 ------------- ------------- Total charges included in general and administrative expenses............. $ 592 $ 3,601 ------------- ------------- INCOME (LOSS) FROM OPERATIONS: Physician Supply Business....................... $ 5,735 $ 11,333 Imaging Business................................ 107 2,107 Long-Term Care Business......................... 1,773 1,789 Other........................................... (317) (2,961) ------------- ------------- Total income (loss) from operations......... $ 7,298 $ 12,268 ------------- ------------- DEPRECIATION: Physician Supply Business....................... $ 1,145 $ 1,009 Imaging Business................................ 1,097 813 Long-Term Care Business......................... 462 461 Other........................................... 132 107 ------------- ------------- Total depreciation.......................... $ 2,836 $ 2,390 ------------- ------------- AMORTIZATION OF INTANGIBLE ASSETS: Physician Supply Business....................... $ 234 $ 428 Imaging Business................................ 1,117 2,005 Long-Term Care Business......................... 104 560 Other........................................... -- 91 ------------- ------------- Total amortization of intangible assets..... $ 1,455 $ 3,084 ------------- ------------- PROVISION FOR DOUBTFUL ACCOUNTS: Physician Supply Business....................... $ 320 $ (77) Imaging Business................................ 325 367 Long-Term Care Business......................... 945 1,194 Other........................................... -- -- ------------- ------------- Total provision for doubtful accounts....... $ 1,590 $ 1,484 ------------- ------------- INTEREST EXPENSE: Physician Supply Business....................... $ 278 $ 521 Imaging Business................................ 2,592 2,427 Long-Term Care Business......................... 1,377 1,328 Other........................................... 4 759 ------------- ------------- Total interest expense...................... $ 4,251 $ 5,035 ------------- ------------- INTEREST AND INVESTMENT INCOME: Physician Supply Business....................... $ $ 47 1 Imaging Business................................ -- -- Long-Term Care Business......................... -- 13 Other........................................... 237 640 ------------- ------------- Total interest and investment income........ $ 238 $ 700 ------------- ------------- PROVISION (BENEFIT) FOR INCOME TAXES: Physician Supply Business....................... $ 2,284 $ 4,459 Imaging Business................................ (840) 336 Long-Term Care Business......................... 231 -- Other........................................... (134) (670) ------------- ------------- Total provision (benefit) for income taxes.. $ 1,541 $ 4,125 ------------- -------------
14
Three Months Ended ----------------------------- June 29, 2001 June 30, 2000 ------------- ------------- CAPITAL EXPENDITURES: Physician Supply Business....................... $ 3,292 $ 2,756 Imaging Business................................ 878 1,227 Long-Term Care Business......................... 183 200 Other........................................... 1,755 224 ------------- ------------- Total capital expenditures.................. $ 6,108 $ 4,407 ------------- ------------- June 29, 2001 March 30, 2001 ------------- ------------- ASSETS: Physician Supply Business....................... $ 229,169 $ 225,080 Imaging Business................................ 325,891 324,830 Long-Term Care Business......................... 163,298 156,581 Other........................................... 31,662 66,143 ------------- ------------- Total assets $ 750,020 $ 772,634 ------------- -------------
NOTE 9 - COMMITMENTS AND CONTINGENCIES The Company has employment agreements with certain executive officers which provide that in the event of their termination or resignation, under certain conditions, the Company may be required to continue salary payments and provide insurance for a period ranging from 3 to 12 months for certain executives and to repurchase a portion or all of the shares of common stock held by the executives upon their demand at the fair market value at the time of repurchase. The period of salary and insurance continuation and the level of stock repurchases are based on the conditions of the termination or resignation. During fiscal 2000, the Board of Directors approved and adopted the PSS World Medical, Inc. Officer Retention Bonus Plan and the PSS World Medical, Inc. Corporate Office Employee Retention Bonus Plan. Refer to Note 2, Charges included in General and Administrative Expenses for further discussion. The Company, through its Gulf South Medical Supply subsidiary, Physician Sales & Service division and/or predecessor companies, has been named as one of many defendants in latex glove product liability claims in various Federal and state courts. The defendants are primarily distributors of certain brands of latex gloves. Currently, state litigation exists in New Hampshire, Massachusetts and California, while Federal and/or Federal multi-district litigation is present in Washington, Georgia, Indiana, New Hampshire, Pennsylvania and Ohio. Defense costs are currently allocated by agreement between a consortium of insurers on a pro rata basis for each case depending upon policy years and alleged years of exposure. All of the insurance carriers are defending subject to a reservation of rights. Ultimately, the manufacturers from which the gloves were purchased may assume the defense and liability obligations. The Company intends to vigorously defend the proceedings. The Company and certain of its current officers and directors are named as defendants in a purported securities class action lawsuit entitled Jack Hirsch v. PSS World Medical, Inc., et al., Civil Action No. 3:98-cv-502-J-21TEM. The action, which was filed on or about May 28, 1998, is pending in the United States District Court for the Middle District of Florida, Jacksonville Division. An amended complaint was filed on December 11, 1998. The plaintiff alleges, for himself and for a purported class of similarly situated stockholders who allegedly purchased the Company's stock between December 23, 1997 and May 8, 1998, that the defendants engaged in violations of certain provisions of the Exchange Act, and Rule 10b-5 promulgated thereunder. The allegations are based upon a decline in the Company's stock price following announcement by the Company in May 1998 regarding the Gulf South Merger which resulted in earnings below analyst's expectations. The plaintiff seeks indeterminate damages, including costs and expenses. The Company filed a motion to dismiss the first amended complaint on January 25, 1999. The court granted that motion without prejudice by order dated February 9, 2000. Plaintiffs filed their second amended complaint on March 15, 2000. The Company filed a motion to dismiss the second amended complaint on May 1, 2000, which is pending. The Company believes that the allegations contained in the complaint are without merit and intends to defend vigorously against the claims. There can be no assurance that this litigation will be ultimately resolved on terms that are favorable to the Company. 15 Although the Company does not manufacture products, the distribution of medical supplies and equipment entails inherent risks of product liability, for which the Company maintains product liability insurance coverage. The Company is also a party to various other legal and administrative proceedings and claims arising in the normal course of business. While any litigation contains an element of uncertainty, management, after consultation with outside legal counsel, believes that the outcome of such other proceedings or claims which are pending or known to be threatened will not have a material adverse effect on the Company's consolidated financial position, liquidity, or results of operations. On September 30, 1999, DI entered into a three year distributorship agreement with an imaging supply vendor. The agreement stipulates that, among other things, in the event of termination of the agreement due to a change in control of DI, the Company will pay liquidated damages to the vendor in the amount of $250,000 multiplied by the number of months remaining under the agreement. The Company's trade receivables are subject to pre-petition bankruptcy risk relating to certain Gulf South customers that resulted from receivable balances outstanding prior to the filing of these customers for relief under Chapter 11 of the Bankruptcy Code. In addition, the Company is subject to credit risk through the continued servicing of these customers on a post-petition basis with payments remitted under negotiated terms. As these customers are in the process of reorganization, the Company is not able to estimate the final collectability of the accounts. As of June 29, 2001, Gulf South had one customer with balances subject to pre-petition bankruptcy risk, which totaled approximately $1.9 million and the total outstanding balances related to this customer was approximately $1.9 million. Based on information currently available, management believes the Company has recorded an appropriate reserve for these outstanding receivables. The terms of certain of the Company's past acquisition agreements provide for additional consideration to be paid (earnout payments) if the acquired entity's results of operations exceed certain targeted levels. Targeted levels are generally set above the historical experience of the acquired entity at the time of acquisition. Such additional consideration is to be paid in cash and is recorded when earned as additional purchase price. The maximum amount of remaining contingent consideration is approximately $2.4 million (payable through fiscal 2003). During the three months ended June 29, 2001 and June 30, 2000, there were no earnout payments. NOTE 10 - SUBSEQUENT EVENTS Subsequent to the end of the fiscal quarter ended June 29, 2001, the Company was named in the following seven class action complaints: (1) Bordeaux v. PSS World Medical, Inc. et al.; (2) Gold v. PSS World Medical, Inc., et al; (3) McIntosh v. PSS World Medical, Inc. et al. ; (4) Rothbart v. PSS World Medical, Inc. et al.; (5) Schaechter v. PSS World Medical, Inc. et al.; (6) Van Den Haag v. PSS World Medical, Inc. et al. ; and (7) Rodighiero v. PSS World Medical, Inc. et al. Certain present and former directors and officers of the Company have also been named as defendants. The complaints have all been filed in the United States District Court for the Middle District of Florida. They were filed as purported class actions on behalf of persons who purchased or acquired the Company's common stock at various times during the period between October 26, 1999 and October 3, 2000. The complaints allege, among other things, violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and seek unspecified damages. The plaintiffs allege that the defendants issued false and misleading statements and failed to disclose material facts concerning, among other things, the Company's financial condition. The plaintiffs further allege that because of the issuance of false and misleading statements and/or failure to disclose material facts, the price of the Company's common stock was artificially inflated during the class period. The Company believes that the allegations contained in the complaints are without merit and intends to defend vigorously against the claims. There can be no assurance that this litigation will be ultimately resolved on terms favorable to the Company. 16 ITEM 2. PSS WORLD MEDICAL, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL PSS World Medical, Inc., a Florida corporation (the "Company", "PSS World Medical", or "PSS") is a specialty marketer and distributor of medical products to physicians, alternate-site imaging centers, long-term care providers, home care providers, and hospitals through 94 service centers to customers in all 50 states. Since its inception in 1983, the Company, through strategic acquisitions and internal growth, has become a leader in three market segments it serves. The company's strategic advantages include a focused and differentiated approach to customer service, a consultative sales force, unique arrangements with product manufacturers, innovative systems, and a culture of performance. The Company's Physician Sales & Service division is a leading distributor of medical supplies, equipment and pharmaceuticals to office-based physicians in the United States based on revenues, number of physician-office customers, number and quality of sales representatives, number of service centers, and exclusively distributed products. Physician Sales & Service currently operates 49 medical supply distribution service centers with approximately 715 sales representatives ("Physician Supply Business") serving physician offices in all 50 states. The Physician Supply Business' primary market is office-based physicians throughout the United States. The Company's subsidiary Diagnostic Imaging, Inc. ("DI") is a leading distributor of medical diagnostic imaging supplies, chemicals, equipment, and service to the acute care and alternate-care markets in the United States based on revenues, number of service specialists, and number of sales representatives. DI currently operates 31 imaging distribution service centers with approximately 860 service specialists and 199 sales representatives ("Imaging Business") serving customer sites in 42 states. The Imaging Business' primary markets are acute-care hospitals, imaging centers, and private practice physicians, veterinarians and chiropractors. The Company's subsidiary Gulf South Medical Supply, Inc. ("GSMS", or "Gulf South") is a leading national distributor of medical supplies and related products to the long-term care industry in the United States based on revenues and number of sales representatives. GSMS currently operates 14 distribution service centers with approximately 105 sales representatives ("Long-Term Care Business") serving long-term care accounts in all 50 states. The Long-Term Care Business' primary market is comprised of a large number of independent operators, small to mid-sized local and regional chains, and several national chains. Previously, the Company's subsidiary WorldMed International, Inc. ("WorldMed") operated two European service centers ("International Business") distributing medical products to the physician office and hospital markets in Belgium and Germany. During the quarter ended June 29, 2001, the Company sold its European operations. INDUSTRY According to industry estimates, the United States medical supply and equipment segment of the health care industry represents approximately a $43 billion market comprised of distribution of medical products to hospitals, home health care agencies, imaging centers, physician offices, dental offices, and long-term care facilities. The Company's primary focus is the distribution of medical products to physician offices, providers of imaging services, and long-term care facilities. Approximately 60% of products in this market come through the distributor channel, representing an approximate $25 billion market potential for the Company. Revenues of the medical products distribution industry are estimated to be growing as a result of a growing and aging population, increased health care awareness, proliferation of medical technology and testing, and expanding third-party insurance coverage. In addition, the physician market continues to benefit from the shift of procedures and diagnostic testing from hospitals to alternate sites, particularly physician offices, despite a migration of significantly lower hospital medical product pricing into the physician office market. Also, as the cosmetic surgery and elective market continues to grow, physicians are increasingly performing more procedures in-office. 17 The health care industry is subject to extensive government regulation, licensure, and operating procedures. National health care reform has been the subject of a number of legislative initiatives by Congress. Additionally, government and private insurance programs fund the cost of a significant portion of medical care in the United States. In recent years, government-imposed limits on reimbursement of hospitals, long-term care facilities, and other health care providers have affected spending budgets in certain markets within the medical products industry. In 1997, the Balanced Budget Act passed by Congress made radical changes to reimbursements for nursing homes and home care providers. The healthcare industry has struggled with these changes and the ability of providers, distributors and manufacturers to adapt to the changes is not yet determined. These changes also affect some distributors who directly bill the government for these providers. The industry estimates that approximately 11% of Long-Term Care facilities have filed for bankruptcy protection. Over 100 of the Company's customers filed for bankruptcy in the last two years. Over the past few years, the health care industry has undergone significant consolidation. Physician provider groups, long-term care facilities, and other alternate-site providers, along with hospitals, continue to consolidate, creating new and larger customers. However, the majority of the market serviced by the Company remains small customers, with no single customer exceeding 10% of the consolidated Company's revenues. However, the Long-Term Care Business depends on a limited number of large customers for a significant portion of its net sales, and approximately 35% of Long-Term Care Business' revenues for the three months ended June 29, 2001 represented sales to its top five customers. One of these top five customers is currently in Chapter 11 bankruptcy reorganization, and sales to this customer represents approximately 9% of Long-Term Care Business revenues, and less than 2% of the Company's consolidated sales, for the quarter ended June 29, 2001. Growth in the Long-Term Care Business, as well as consolidation of the health care industry, may increase the Company's dependence on large customers. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 29, 2001 VERSUS THREE MONTHS ENDED JUNE 30, 2000 Net Sales. Net sales for the three months ended June 29, 2001 totaled $446.7 million, a decrease of $24.9 million, or 5.3%, from net sales of $471.6 million for the three months ended June 30, 2000. The net sales decrease over the prior year quarter was primarily attributable to i) approximately $14 million in reduced net sales due to vendor supply interruptions that began in fiscal year 2001, ii) the elimination of $4.7 million of International Business revenues due to the sale of the European operations, iii) the reduction of $6.6 million of revenues related to the elimination of certain product lines that were not supported by the new Strategic Business Unit ("SBU") structure of the Imaging Business, and iv) the reduction of $2.2 million of revenues related the termination of certain vendor relationships in the Physician Supply Business. In addition, on a comparative basis, the Physician Supply Business and Long-term Care Business experienced moderate growth of approximately 3% to 4% in sales for the consumable product category. Gross Profit. Gross profit for the three months ended June 29, 2001 totaled $101.7 million, a decrease of $12.6 million, or 11.0%, from gross profit of $114.3 million for the three months ended June 30, 2000. Gross profit as a percentage of net sales was 22.8% and 24.2% for the three months ended June 29, 2001 and June 30, 2000, respectively. The gross profit decrease over the prior year quarter was primarily attributable to the factors discussed in the change in net sales discussed above. These factors include i) approximately $5.0 million in reduced gross profit due to vendor supply interruptions that began in fiscal year 2001, ii) the elimination of $1.6 million of International Business gross profit due to the sale of the European operations, iii) the reduction of $1.2 million of gross profit related to the elimination of certain product lines that were not supported by the new SBU structure of the Imaging Business, iv) the reduction of $0.5 million of gross profit related the termination of certain vendor relationships in the Physician Business, v) increases in reserves of approximately $1.0 million for inventory associated with the product lines eliminated in the Imaging Business and the termination of vendor relationships in the Physician Supply Business, and vi) a decrease of $3.6 million due to changes in product mix. Gross profit as a percentage of sales was unfavorably impacted by changes in product mix. 18 General and Administrative Expenses. General and administrative expenses for the three months ended June 29, 2001 totaled $68.5 million, a decrease of $4.1 million, or 5.6%, from general and administrative expenses of $72.6 million for the three months ended June 30, 2000. General and administrative expense as a percentage of net sales decreased to 15.3% from 15.4% for the comparable three-month period. On March 31, 2001, the Company elected to early adopt Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangibles ("SFAS 142"). SFAS 142 requires, among other things, the discontinuance of goodwill amortization and includes provisions for reassessment of the useful lives of existing intangibles and the identification of reporting units for purposes of assessing potential future impairments of goodwill. SFAS 142 also requires the Company to complete a two-step transitional goodwill impairment test. The first step of the impairment test must be completed six months from the date of adoption and the second step must be completed as soon as possible, but no later than the end of the year of initial application. The Company is currently in the process of performing the first step of the transitional goodwill impairment test, which will be completed during the second quarter. Therefore, the Company is currently assessing but has not yet determined the impact of SFAS 142 on its financial position and results of operations. During the quarter ended June 29, 2001, the adoption of these provisions eliminated approximately $1.5 million of goodwill amortization that would be recorded under prior accounting pronouncements. In addition, the prior year comparable period included $1.6 million of goodwill amortization (refer to Note 5, Intangibles in the accompanying condensed consolidated financial statements for further discussion). General and administrative expenses in the Company's Other Segment decreased over the prior year period by $1.5 million due to the sale of the European operations. In addition to typical general and administrative expenses, this caption includes charges related to merger activity, restructuring activity, and other special items. The following table summarizes charges included as a component of general and administrative expenses in the accompanying consolidated statements of operations: Three Months Ended ------------------------------ June 29, 2001 June 30, 2000 ------------- ------------- Merger costs and expenses............ $ 541 $ 1,575 Restructuring costs and expenses..... 494 1,240 Operational tax charge............... (451) -- Other................................ 8 786 ------------- ------------- $ 592 $ 3,601 ============= ============= Merger Costs and Expenses Refer to Note 2, Charges Included in General and Administrative Expenses, for the Company's policy related to merger costs and expenses. Effective February 1, 2000, the Board of Directors approved and adopted the PSS World Medical, Inc. Officer Retention Bonus Plan and the PSS World Medical, Inc. Corporate Office Employee Retention Bonus Plan (collectively the "Retention Plans"). As part of the Company's strategic alternatives process, management adopted these plans to retain certain officers and key employees during the strategic alternatives transition period. Accordingly, during the three months ended June 29, 2001 and June 30, 2000, the Company expensed $776 and $1,271, respectively, related to the Retention Plans. In addition, the Company has recorded merger costs and expenses that primarily related to branch shutdown and lease termination costs. For the three months ended June 29, 2001 and June 30, 2000, the Company recorded $36 and $304, respectively, of merger charges expensed as incurred. At the end of each quarter, management reevaluates its plans and adjusts previous estimates. For the three months ended June 29, 2001, the Company reversed $271 of merger costs and expenses previously established under prior plans not incurred as previously expected. 19 Restructuring Costs and Expenses The Company has recorded restructuring costs and expenses primarily related to other exit costs as incurred, which include costs to pack and move inventory, costs to set up new facilities, employee relocation costs, and other related facility closure costs. For the three months ended June 29, 2001 and June 30, 2000, the Company recorded $505 and $1,240, respectively, of restructuring costs as incurred. At the end of each quarter, management reevaluates its plans and adjusts previous estimates. For the three months ended June 29, 2001, the Company reversed $11 of restructuring costs. Operational Tax Charge During the three months ended June 29, 2001, the Company performed an analysis and reversed $451 of a previously recorded operating tax charge reserve. Other During the three months ended June 29, 2001 and June 30, 2000, the Company incurred $8 and $692 in legal and professional fees and other costs pursuant to the Company's strategic alternative process and severance costs. In addition, during the three months ended June 30, 2000, the Imaging Business incurred $94 of professional fees for acquisitions not consummated. Selling Expenses. Selling expenses for the three months ended June 29, 2001 totaled $26.5 million, a decrease of $2.9 million, or 9.9%, from selling expenses of $29.4 million for the three months ended June 30, 2000. Selling expense as a percentage of net sales was approximately 5.9% and 6.2% for the three months ended June 29, 2001 and June 30, 2000, respectively. The decrease in selling expense as a percentage of net sales is a result of i) a reduction in sales representatives in the Long-Term Care Business, a portion of which were compensated under fixed commission plans and ii) changes in the compensation programs in the Physician Supply Business and Long-Term Care Business. International Business Exit Charge. During the quarter ended December 29, 2000, the Company adopted a plan for divesting the Company's European operations and recorded a $14.9 million charge as an International Business exit charge. During the quarter ended June 29, 2001, the Company completed the sale of its European operations and recorded a reversal of $0.5 million of the previously established charge due to lower than expected costs to exit the operations. Operating Income. Operating income for the three months ended June 29, 2001 totaled $7.3 million, a decrease of $5.0 million, compared to the three months ended June 30, 2000 total of $12.3 million due to the factors discussed above. Interest Expense. Interest expense for the three months ended June 29, 2001 totaled $4.3 million, a decrease of $0.7 million, or 14.0%, from interest expense of $5.0 million for the three months ended June 30, 2000. The decrease is primarily attributable to lower outstanding debt balances under the revolving Credit Agreement over the prior year partially offset by the accelerated amortization of approximately $400 of debt issuance costs upon refinancing the prior credit facility on May 24, 2001. Interest and Investment Income. Interest and investment income for the three months ended June 29, 2001 totaled $0.2 million, a decrease of $0.5 million, or 71.4%, from interest and investment income of $0.7 million for the three months ended June 30, 2000. The decrease primarily results from lower invested cash balances over the prior year period. Other Income. Other income for the three months ended June 29, 2001 totaled $0.9 million, an increase of $0.1 million, or 12.5%, from other income of $0.8 million for the three months ended June 30, 2000. Other income primarily consists of finance charges on customer accounts. Provision for Income Taxes. Provision for income taxes was $1.5 million for the three months ended June 29, 2001, a change of $2.6 million from the provision for income taxes of $4.1 million for the three months ended June 20 30, 2000. The effective income tax rate was approximately 36.4% and 47.2% for the three months ended June 29, 2001 and June 30, 2000, respectively. Historically, the effective tax rate has been higher than the Company's statutory rate due to the non-deductibility of a portion of goodwill amortization expense resulting from the tax-free nature of certain acquisitions. The elimination of goodwill amortization during the quarter ended June 29, 2001 due to the adoption of SFAS 142 has resulted in increased pretax earnings with minimal incremental effect on the provision of income taxes. Net Income. Net income for the three months ended June 29, 2001 totaled $2.7 million compared to net income of $4.6 million for the three months ended June 30, 2000 due to the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES As the Company's business grows, its cash and working capital requirements will also continue to increase as a result of the anticipated growth of the Company's operations. This growth will be funded through a combination of cash flow from operations and revolving credit borrowings. Statement of Cash Flows Discussion Net cash provided by operating activities was $43.1 million and $12.9 million for the three months ended June 29, 2001 and June 30, 2000, respectively. The increase in operating cash flows primarily resulted from the continued implementation of working capital reduction initiatives. During the three months ended June 29, 2001, operating cash flows were positively impacted by a $25 million increase in accounts payable and accrued liabilities, a $3 million decrease in accounts receivable, and a $16 million decrease in other assets, of which $7 million relates to an Internal Revenue Service tax refund. These items were negatively impacted by a $10 million increase in inventory. Net cash used in investing activities was $6.5 million and $4.6 million for the three months ended June 29, 2001 and June 30, 2000, respectively. During the three months ended June 29, 2001, cash used in investing activities resulted from approximately $6 million of capital expenditures primarily related to the continued development of the Company's Enterprise Resource Planning System, E-Commerce platforms and supply chain integration. Net cash used in financing activities was $42.7 million and $26.9 million for the three months ended June 29, 2001 and June 30, 2000, respectively. During the three months ended June 29, 2001, the Company repaid a net $42 million in bank debt. Sources of the repayment included approximately $7 million from cash balances and $35 from cash flows from operating activities. Operating Trends The Company had working capital of $284.8 million and $316.3 million as of June 29, 2001 and March 30, 2001, respectively. Accounts receivable, net of allowances, were $229.6 million and $236.8 million at June 29, 2001 and March 30, 2001, respectively. The average number of days sales in accounts receivable outstanding was approximately 47.0 and 51.7 days for the three months ended June 29, 2001 (annualized) and the year ended March 30, 2001, respectively. For the three months ended June 29, 2001, the Company's Physician Supply, Imaging, and Long-Term Care Businesses had annualized days sales in accounts receivable of approximately 46.4, 40.8, and 58.7 days, respectively. Inventories were $162.4 million and $154.7 million as of June 29, 2001 and March 30, 2001, respectively. The Company had inventory turnover of 8.7x and 8.4x for the three months ended June 29, 2001 (annualized) and the year ended March 30, 2001, respectively. For the three months ended June 29, 2001, the Company's Physician Supply, Imaging, and Long-Term Care Businesses had annualized inventory turnover of 8.5x, 8.5x, and 10.0x, respectively. The following table presents EBITDA and other financial data for the three months ended June 29, 2001 and June 30, 2000: 21
Three Months Ended ---------------------------- June 29, 2001 June 30, 2000 ------------- ------------- (Dollars in thousands) Other Financial Data: Income from operations............................................ $ 7,298 $ 12,268 Plus: other income............................................... 946 812 Plus: depreciation and amortization.............................. 4,291 5,474 ------------- ------------- EBITDA (a).......................................................... $ 12,535 $ 18,554 ------------- ------------- Interest expense.................................................. $ 4,251 $ 5,035 Interest coverage (b)............................................. 2.9x 3.7x EBITDA margin (c)................................................. 2.8% 3.9% Cash provided by operating activities............................. $ 43,135 $ 12,888 Cash used in investing activities................................. $ (6,519) $ (4,567) Cash used in financing activities................................. $ (42,654) $ (26,905)
Refer to the Liquidity and Capital Resources section above of Management's Discussion and Analysis of Financial Condition and Results of Operations for a discussion of cash flows from operating, investing and financing activities. (a) EBITDA represents income (loss) from operations, plus other income, plus depreciation and amortization, and excludes net interest expense and provision for income taxes. EBITDA is not a measure of performance or financial condition under generally accepted accounting principles ("GAAP"). EBITDA is not intended to represent cash flow from operations and should not be considered as an alternative measure to income from operations or net income computed in accordance with GAAP, as an indicator of the Company's operating performance, as an alternative to cash flow from operating activities, or as a measure of liquidity. In addition, EBITDA does not provide information regarding cash flows from investing and financing activities which are integral to assessing the effects on the Company's financial position and liquidity as well as understanding the Company's historical growth. The Company believes that EBITDA is a standard measure of liquidity commonly reported and widely used by analysts, investors, and other interested parties in the financial markets. However, not all companies calculate EBITDA using the same method and the EBITDA numbers set forth above may not be comparable to EBITDA reported by other companies. (b) Interest coverage represents the Ratio of EBITDA to interest expense. (c) EBITDA margin represents the ratio of EBITDA to net sales. Senior Subordinated Notes The Company has issued $125.0 million aggregate principal amount of 8.5% senior subordinated notes due in 2007 (the "Notes"). The Notes are unconditionally guaranteed on a senior subordinated basis by all of the Company's domestic subsidiaries. Interest on the Notes accrues from the date of original issuance and is payable semiannually on April 1 and October 1 of each year, commencing on April 1, 1998, at a rate of 8.5% per annum. The semiannual payments of approximately $5.3 million are expected to be funded by the operating cash flow of the Company. No principal payments on the Notes are required over the next five years. The Notes contain certain restrictive covenants that, among other things, limit the Company's ability to incur additional indebtedness. The Company may incur indebtedness up to certain specified levels and, provided that no event of default exists, additional indebtedness may be incurred if the Company maintains a consolidated fixed charge coverage ratio, after giving effect to such additional indebtedness, of greater than 2.0 to 1.0. New Revolving Credit Agreement On May 24, 2001, the Company entered into a credit agreement (the "Credit Agreement"), by and among the Company, as borrower thereunder (the "Borrower"), the subsidiaries of the Borrower party thereto, the lenders 22 from time to time party thereto (the "Lenders"), Bank of America, N.A., as Agent for the Lenders (in such capacity, the "Agent", or the "Bank") and Banc of America Securities LLC, as Arranger. The Credit Agreement provides for a four-year credit facility consisting of an aggregate $120 million revolving line of credit and letters of credit (the "Credit Facility"). Availability of borrowings under the Credit Facility depends upon (a) the amount of a borrowing base consisting of accounts receivable and, upon satisfaction of certain requirements, inventory and (b) compliance with certain debt incurrence tests under the Company's Indenture, dated as of October 7, 1997, relating to the Notes. The Credit Facility will bear interest at the Bank's prime rate plus a margin of between 0.25% and 1.00% based on the Company's ratio of funded debt to EBITDA (as defined in the Agreement) or at LIBOR plus a margin of between 1.75% and 3.50% based on the Company's ratio of funded debt to EBITDA. Under the Credit Agreement, the Company and its subsidiaries are subject to certain covenants, including but not limited to, limitations on (a) paying dividends and repurchasing stock, (b) repurchasing its Notes, (c) selling or transferring assets, (d) making certain investments (including acquisitions) and (e) incurring additional indebtedness and liens. Initial proceeds from the Credit Facility were used to refinance existing indebtedness outstanding under the Company's prior credit agreement, and future proceeds will be used to issue letters of credit, finance ongoing working capital requirements and general corporate purposes of the Company. The Credit Facility matures on May 24, 2005. On June 28, 2001, the Company entered into a First Amendment to the Credit Agreement (the "Amendment"), by and among the Company, as borrower thereunder, the subsidiaries of the Company party thereto, the Lenders and the Agent for the Lenders. The Amendment amends the Credit Agreement. As a result of the Amendment, the maximum available borrowings under the Credit Agreement were increased from $120 million to $150 million. The Amendment also, among other things, increased the percentage of Lenders whose consent was required for an amendment of Credit Agreement from more than 50% to more than 55% and amended certain provisions relating to protective advances, limitations on issuances of letters of credit, indemnification, and landlord consents. The conditions to the effectiveness of the Amendment were satisfied on June 29, 2001. As of June 29, 2001, the Company has not entered into any material working capital commitments that require funding. The Company believes that the expected cash flows from operations, available borrowing under the credit facility, and capital markets are sufficient to meet the Company's anticipated future requirements for working capital, capital expenditures, and acquisitions for the foreseeable future. 23 ITEM 3. PSS WORLD MEDICAL, INC. AND SUBSIDIARIES QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following assessment of the Company's market risks does not include uncertainties that are either nonfinancial or nonquantifiable, such as political, economic, tax and credit risks. Interest Rates. The Company's exposure to market risk for changes in interest rates relates primarily to the Company's Credit Facility and investments. The Company's long-term debt obligations are primarily comprised of the $125.0 million senior subordinated notes, which bear interest at a fixed rate of 8.5%, and borrowings under the Credit Facility. As of June 29, 2001, the Company had $22.4 million outstanding under the Credit Facility at variable interest rates, at the Company's option, at either the bank's prime rate plus a margin of between 0.25% and 1.00% or at LIBOR plus a margin of between 1.75% and 3.50%. The weighted-average interest rate of borrowings under the Credit Agreement was 6.39% as of June 29, 2001. The Company's investment portfolio consists of cash and cash equivalents including deposits in banks, government securities, money market funds, and short-term investments with maturities, when acquired, of 90 days or less. The Company seeks to maximize capital preservation by investing these funds in high-quality issuers. As of June 29, 2001, the Company did not hold any derivative financial or commodity instruments. 24 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Notes 9 and 10 of this Form 10-Q and Item 3 of the Company's Form 10-K for the fiscal year ended on March 30, 2001. The Company disputed the calculation of a supplemental premium charged by CIGNA upon the termination by the Company of the health insurance program administered by CIGNA. The Company has entered into a definitive settlement agreement with CIGNA, wherein the Company has agreed to pay CIGNA $2.85 million. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES (a) Not applicable. (b) Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a)The following exhibits are filed as a part of this Quarterly Report on Form 10-Q: Exhibit Number Description
3.1 Amended and Restated Articles of Incorporation, dated as of March 15, 1994, as amended.(13) 3.2 Amended and Restated Bylaws, dated as of March 15, 1994.(3) 4.1 Form of Indenture, dated as of October 7, 1997, by and among the Company, the Subsidiary Guarantors named therein, and SunTrust Bank, Central Florida, National Association, as Trustee.(4) 4.1a Supplemental Indenture, dated as of February 15, 2001, by and among the New Subsidiary Guarantors named therein and SunTrust Bank (formerly known as SunTrust Bank, Central Florida, National Association), as Trustee. (12) 4.2 Registration Rights Agreement, dated as of October 7, 1997, by and among the Company, the Subsidiary Guarantors named therein, BT Alex. Brown Incorporated, Salomon Brothers Inc. and NationsBanc Montgomery Securities, Inc.(4)
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4.3 Form of 81/2% Senior Subordinated Note due 2007, including Form of Guarantee (Exchange Notes).(4) 4.4 Shareholder Protection Rights Agreement, dated as of April 20, 1998, between PSS World Medical, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent.(14) 4.4a Amendment to Shareholder Protection Rights Agreement, dated as of June 21, 2000, between PSS World Medical, Inc. and Continental Stock Transfer & Trust Company as Rights Agent.(11) 10.1 Incentive Stock Option Plan, dated as of May 14, 1986.(1) 10.2 Amended and Restated Directors Stock Plan.(8) 10.3 Amended and Restated 1994 Long-Term Incentive Plan.(8) 10.4 Amended and Restated 1994 Long-Term Stock Plan.(8) 10.5 1994 Employee Stock Purchase Plan.(2) 10.6 1994 Amended Incentive Stock Option Plan.(1) 10.7 PSS World Medical, Inc. 1999 Long-Term Incentive Plan.(10) 10.8 Distributorship Agreement between Abbott Laboratories and PSS World Medical, Inc. (Portions omitted pursuant to a request for confidential treatment - Separately filed with Commission).(6) 10.9 Stock Purchase Agreement between Abbott Laboratories and Physician Sales & Service, Inc.(6) 10.10 Amended and Restated Physician Sales and Service, Inc. Employee Stock Ownership and Savings Plan.(9) 10.10a First Amendment to the Physician Sales and Service, Inc. Employee Stock Ownership and Savings Plan.(9) 10.11 Agreement and Plan of Merger, dated as of December 14, 1997, by and among the Company, PSS Merger Corp. and Gulf South Medical Supply, Inc.(5) 10.12 Credit Agreement, dated as of May 24, 2001, by and among the Company, each of the Company's subsidiaries therein named, the Lenders from time to time party thereto, Bank of America,, N.A., as Agent, and Banc of America Securities LLC, as Arranger. (16) 10.12a Amendment No. 1 to Credit Agreement, dated as of June 28, 2001, by and among the Company, each of the Company's subsidiaries therein named, the Lenders from time to time party thereto, Bank of America,, N.A., as Agent, and Banc of America Securities LLC, as Arranger.(17) 10.13 Employment Agreement, dated as of March 4, 1998, by and between the Company and David A. Smith.(7) 10.13a Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and David A. Smith.(7) 10.14 Employment Agreement, dated as of April 1, 1998, by and between the Company and John F. Sasen, Sr.(7) 10.14a Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and John F. Sasen, Sr.(7)
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10.15 Employment Agreement, dated as of April 1, 1998, by and between the Company and Douglas J. Harper. 10.15a Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and Douglas J. Harper. 10.16 Employment Agreement, dated as of April 1, 1998, by and between the Company and Gary A. Corless. 10.16a Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and Gary A. Corless. 10.17 Employment Agreement, dated as of April 1, 1998, by and between the Company and Kevin P. English. 10.17a Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and Kevin P. English. 10.18 Severance Agreement, dated as of October 11, 2000, by and between the Company and Frederick E. Dell.(7) 10.19 Severance Agreement, dated as of February 1, 2001, by and between the Company and Kirk A. Zambetti.(7) 10.20 Severance Agreement, dated as of March 21, 2001, by and between the Company and Patrick C. Kelly.(7) 21.1 List of Subsidiaries of the Company.(7) (1) Incorporated by Reference to the Company's Registration Statement on Form S-1, Registration No. 33-76580. (2) Incorporated by Reference to the Company's Registration Statement on Form S-8, Registration No. 33-80657. (3) Incorporated by Reference to the Company's Registration Statement on Form S-3, Registration No. 33-97524. (4) Incorporated by Reference to the Company's Registration Statement on Form S-4, Registration No. 333-39679. (5) Incorporated by Reference from Annex A to the Company's Registration Statement on Form S-4, Registration No. 333-44323. (6) Incorporated by Reference to the Company's Annual Report on Form 10-K for the year ended March 30, 1995. (7) Incorporated by Reference to the Company's Annual Report on Form 10-K for the year ended March 30, 2001. (8) Incorporated by Reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996. (9) Incorporated by Reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997. (10) Incorporated by Reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999. (11) Incorporated by Reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000. (12) Incorporated by Reference to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 2000. (13) Incorporated by Reference to the Company's Current Report on Form 8-K, filed April 8, 1998. (14) Incorporated by Reference to the Company's Current Report on Form 8-K, filed April 22, 1998. (15) Incorporated by Reference to the Company's Current Report on Form 8-K, filed January 12, 2001. (16) Incorporated by Reference to the Company's Current Report on Form 8-K, filed June 5, 2001. (17) Incorporated by Reference to the Company's Current Report on Form 8-K, filed July 3, 2001.
(b) Reports on Form 8-K The following current reports on Form 8-K were filed during the quarter ended June 29, 2001: Date of Report Items Reported --------------- ------------------------------------------------------- July 3, 2001 Announcing the terms of an amendment, dated as of June 28, 2001, to the Company's Credit Agreement. --------------- ------------------------------------------------------- 27 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, in the City of Jacksonville, State of Florida, on August 10, 2001. PSS WORLD MEDICAL, INC. By: /s/ David A. Smith -------------------------------------------- David A. Smith, President and Chief Financial Officer 28 EX-10 3 exhibit1015.txt EMPLOYMENT AGREEMENT, HARPER Exhibit 10.15 Employment AGREEMENT This EMPLOYMENT Agreement (this "Agreement") is made and entered into this 1st day of April, 1998 by and between PSS World Medical, Inc., a Florida corporation (hereinafter, the "Company" which term shall include the Company's other subsidiaries, affiliates and successors), and DOUGLAS J. HARPER (hereinafter, "Executive"). BACKGROUND The Company desires to engage Executive in Executive capacities set forth herein, in accordance with the terms and conditions of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. This Agreement is effective as of April 1, 1998 (the "Effective Date"). 2. Employment. Executive is hereby employed on the Effective Date as the Senior Vice President Eastern Region of the Company. Executive's responsibilities under this Agreement shall be in accordance with the policies and objectives established by the President or the Board of Directors of the Company and shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. 3. Employment Period. Unless earlier terminated herein in accordance with Section 7 hereof, Executive's employment shall be for a two-year term (the "Employment Period"), beginning on the Effective Date. The Employment Period shall, without further action by Executive or the Company, be extended by an additional one-year period on each anniversary of the Effective Date; provided, however, that either party may, by notice to the other, cause the Employment Period to cease to extend automatically. Upon such notice, the Employment Period shall terminate upon the expiration of the then-current term, including any prior extensions. 4. Extent of Service. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. 5. Compensation and Benefits. (a) Base Salary. During the Employment Period, the Company will pay to Executive a base salary as previously agreed ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board of Directors of the Company shall review Executive's Base Salary annually and in its sole discretion, subject to approval of the Board of Directors of the Company, may increase Executive's Base Salary from year to year. The annual review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive, Savings and Retirement Plans. During the Employment Period, Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to peer executives of the Company and its affiliated companies ("Peer Executives"), and on the same basis as such other similarly situated officers. (c) Welfare Benefit Plans. During the Employment Period, Executive and Executive's family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to Peer Executives. (d) Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to Peer Executives. (e) Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies in effect for Peer Executives. 6. Change of Control. A "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (ii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 6; or (b) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. Notwithstanding the above definition, a Change of Control will not be deemed to have occurred for purposes of this Agreement if, immediately after the event that otherwise would constitute a Change of Control, Patrick Kelly and a least a majority of the 12 next most highly compensated officers of the Company and its subsidiaries (as measured immediately prior to such transaction) shall have entered into employment agreements with by the Company, the resulting or surviving company, or its or their subsidiaries. 7. Termination of Employment. (a) Death, Retirement or Disability. Executive's employment shall terminate automatically upon Executive's death or Retirement during the Employment Period. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in accordance with Section 15(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board of Directors of the Company in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to perform the essential functions of his regular duties and responsibilities (with or without reasonable accommodation) due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. (b) Termination by the Company. The Company may terminate Executive's employment during the Employment Period with or without Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President or the Board of Directors of the Company which specifically identifies the manner in which such Board or the President believes that Executive has not substantially performed Executive's duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, or (iii) Executive engages in any misconduct involving moral turpitude whether occurring in the performance of his duties or otherwise. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of the Company at a meeting of such Board called and held for such purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before such Board), finding that, in the good faith opinion of such Board, Executive is guilty of the conduct described in subparagraph (i), (ii) or (iii) above, and specifying the particulars thereof in detail. (c) Termination by Executive. Executive's employment may be terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the came may be increased from time to time, unless a similar reduction is made in salary and benefits of Peer Executives, or the failure by the Company to increase Executive's Base Salary each year during the Employment Period by an amount which at least equals, on a percentage basis, the mean average percentage increase in base salary for Peer Executives, unless such failure to increase is based on nonarbitrary criteria applied to Executive and Peer Executives; (iii) after the occurrence of a Change of Control, the Company's requiring Executive to be based at any office or location other than in the greater Jacksonville, Florida metropolitan area or the Company's requiring Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any failure by the Company to comply with and satisfy Section 14(b) of this Agreement; or (v) any termination by Executive for any reason or no reason during the 30-day period beginning on the first anniversary of a Change of Control. (d) Notice of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 15(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies Executive of such termination and (iii) if Executive's employment is terminated by reason of death, Retirement or Disability, the Date of Termination shall be the date of death or Retirement of Executive or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. (a) Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate Executive's employment other than for Cause, death or Disability, or Executive shall terminate employment for Good Reason within a period of 30 days after the occurrence of the event giving rise to Good Reason, then in consideration of Executive's services rendered prior to such termination and as reasonable compensation for his compliance with the Restrictive Covenants in Section 13 hereof: (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination or, with respect to the prorata bonus described in clause A(2) below, within 30 days after the determination of the bonus amount, the aggregate of the following amounts: A. the sum of (1) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, (2) if the Date of Termination occurs after or in connection with the occurrence of a Change of Control, the product of (x) Executive's annual bonus that would have been payable with respect to the fiscal year in which the Date of Termination occurs (determined at the end of such year based on actual performance results through the end of such year) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (3) any compensation previously deferred by Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to six times Executive's monthly Base Salary in effect as of the Date of Termination (the "Severance Payment"); provided, however, that if the Date of Termination occurs after or in connection with the occurrence of a Change of Control, the Severance Payment shall be the amount equal to two times Executive's annual Base Salary in effect as of the Date of Termination; and (ii) for six months after Executive's Date of Termination (or two years in the event that the Date of Termination occurs after or in connection with the occurrence of a Change of Control), or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the welfare plans, programs, practices and policies described in Section 5(c) of this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to Peer Executives and their families, provided, however, that if Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility ("Welfare Benefits"); and (iii) the Company shall, within 30 days of receipt of reasonably documented invoices therefor, reimburse Executive's actual cost (not to exceed $15,000) for outplacement expenses incurred within one year after the Date of Termination; and (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If Executive's employment is terminated by reason of Executive's death during the Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)), the timely payment or provision of Other Benefits, and a lump sum amount equal to one and one half (1 1/2 ) months' salary, based on Executive's Base Salary in effect as of the date of death. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(b) shall include, without limitation, and Executive's estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death benefits, if any, as applicable generally to Peer Executives and their beneficiaries, and on the same basis as Peer Executives and their beneficiaries. (c) Disability. If Executive's employment is terminated by reason of Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)) and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(c) shall include, without limitation, and Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits under such plans, programs, practices and policies relating to disability, if any, as applicable generally to Peer Executives and their families, and on the same basis as Peer Executives and their families. (d) Retirement. If Executive's employment is terminated by reason of Executive's Retirement during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)) and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(d) shall include, without limitation, and Executive shall be entitled after the Date of Termination to receive, retirement and other benefits under such plans, programs, practices and policies relating to retirement, if any, as applicable generally to Peer Executives and their families, and on the same basis as Peer Executives and their families. (e) Cause or Voluntary Termination without Good Reason. If Executive's employment shall be terminated for Cause during the Employment Period, or if Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)), the continuation of Welfare Benefits for a period of 30 days after the Date of Termination, and the timely payment or provision of Other Benefits, payment of a lump sum amount equal to 30 days' salary, based on Executive's Base Salary in effect as of the Date of Termination. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor, subject to Section 15(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then: Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. The Executive may select the Payments to be limited or reduced. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's regular independent accounting firm at the expense of the Company or, at the election and expense of Executive, another nationally recognized independent accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). 11. Costs of Enforcement. In any action taken in good faith relating to the enforcement of this Agreement or any provision herein after the occurrence of a Change of Control, Executive shall be entitled to be paid any and all costs and expenses incurred by him in enforcing or establishing his rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. In all other circumstances, each party in any such action shall pay his or its own such costs and expenses. 12. Representations and Warranties. Executive hereby represents and warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete (other than as contained herein) with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. (a) General. Executive and the Company understand and agree that the purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law upon the restrictions set forth herein, Executive shall be subject to the restrictions set forth in this Section 13. (b) Definitions. The following capitalized terms used in this Section 13 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Services" means any services provided by Company at the Determination Date, including, but not limited to the marketing, sale and distribution of medical supplies, equipment and pharmaceuticals to primary care and other office-based physicians; the marketing, sale and distribution of medical diagnostic imaging supplies, chemicals, equipment and service to the acute care and alternate care market; and the provisions of special group purchasing contract pricing and periodic cost analyses to help manage the supply needs of individual physicians or practices. "Confidential Information" means any confidential or proprietary information possessed by the Company or its affiliated entities or relating to its or their business, including without limitation, any confidential "know-how", customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or plans, computer software programs (including object code and source code), data and documentation, data base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, financial information and data, business acquisition plans, new personnel acquisition plans and any other information that would constitute a Trade Secret (as defined herein). "Determination Date" means the date of termination of Executive's employment with the Company for any reason whatsoever or any earlier date (during the Employment Period) of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, joint venture, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Clients" means any Person to whom the Company provided services or submitted a written proposal therefor, within eighteen (18) months prior to the Determination Date. "Protected Employees" means employees of the Company who were employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the term of Executive's employment hereunder and a period extending until eighteen (18) months from the Date of Termination; provided, however that such period shall be extended by any length of time during which Executive is in breach of the Restricted Covenants. "Restrictive Covenants" means the restrictive covenants contained in Section 13(c) hereof. "Trade Secret" means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or statutory law of the State of Florida. (c) Restrictive Covenants. (i) Restriction on Disclosure and Use of Confidential Information. Executive understands and agrees that the Confidential Information constitutes a valuable asset of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company; provided, however, in the event the Confidential Information constitutes a Trade Secret, the Restricted Period referred to above shall be five (5) years. Notwithstanding the above, this covenant shall expire (except with respect to Trade Secrets) upon the occurrence of a Change of Control. (ii) Nonsolicitation of Protected Employees. Executive understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into any relationship of employment, agency or independent contractorship with any other Person. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (iii) Restriction on Relationships with Protected Clients. Executive understands and agrees that the relationship between the Company and each of its Protected Clients constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not, without the prior written consent of the Company, become a Principal or Representative of a Protected Client or otherwise provide services to a Protected Client as a consultant or independent contractor. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (iv) Noncompetition with the Company. During the Restricted Period Executive, unless acting in accordance with the Company's prior written consent, will not directly provide any Competitive Services to, and will not, directly or indirectly, (i) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or (ii) be connected as a Principal or Representative or otherwise with, or (iii) permit Executive's name to be used by or in connection with, any Person engaged in providing Competitive Services to any Person conducting business activities within the territory in which the Company is or was engaged in the provision of the Competitive Services on the Determination Date; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (d) Exceptions from Disclosure Restrictions. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that: (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by Executive or his agent; (b) becomes available to Executive in a manner that is not in contravention of applicable law from a source (other than the Company or its affiliated entities or one of its or their officers, employees, agents or representatives) that is not bound by a confidential relationship with the Company or its affiliated entities or by a confidentiality or other similar agreement; (c) was known to Executive on a non-confidential basis and not in contravention of applicable law or a confidentiality or other similar agreement before its disclosure to Executive by the Company or its affiliated entities or one of its or their officers, employees, agents or representatives; or (d) is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (e) Enforcement of Restrictive Covenants. (i) Rights and Remedies Upon Breach. In the event Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: A. the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and B. the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. 14. Assignment and Successors. (a) Executive. This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. 15. Miscellaneous. (a) Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof, and it supersedes and invalidates any previous agreements or contracts between them which relate to the subject matter hereof, including without limitation that certain Contract of Employment, dated as of May 30, 1992, by and between Executive and the Company. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect. (e) Governing Law. Except to the extent preempted by federal law, and without regard to conflict of laws principles, the laws of the State of Florida shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: PSS World Medical, Inc. 4345 Southpoint Boulevard Jacksonville, Florida 32216 Facsimile No. (904) 332-3209 Attention: Patrick Kelly and Fred Elefant To Executive: Douglas J. Harper Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement; provided, however, that if, in the opinion of the Corporation's accountants, any provision of this Agreement would preclude the use of "pooling of interest" accounting treatment for a Change of Control transaction that (1) would otherwise qualify for such accounting treatment, and (2) is contingent upon qualifying for such accounting treatment, then Executive and the Company agree to negotiate in good faith to amend this Agreement so that it will not preclude the use of "pooling of interest" accounting treatment for such Change of Control transaction. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. PSS WORLD MEDICAL, INC. By: /s/ Patrick Kelly ----------------------------------------------- Patrick Kelly Chairman of the Board EXECUTIVE: /s/ Douglas J. Harper -------------------------------------------- DOUGLAS J. HARPER EX-10 4 exhibit1015a.txt AMENDMENT TO AGREEMENT, HARPER Exhibit 10.15a AMENDMENT to LEVEL 3 EMPLOYMENT AGREEMENT This AMENDMENT (the "Amendment"), effective as of April 17, 2000, by and between PSS World Medical, Inc., a Florida corporation (the "Company"), and the officer of the Company whose signature appears below ("Executive"), amends that certain Employment Agreement, dated as of the date indicated below, by and between the Company and Executive, as heretofore amended (the "Employment Agreement"). In consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: 1. Section 3 of the Employment Agreement is hereby amended by adding the following sentence at the end thereof: "Notwithstanding the foregoing, if a Change of Control occurs the Employment Period shall be automatically extended through the later of (i) the third anniversary of the Change of Control, or (ii) the normal expiration of the then-current term, including any prior extensions." 2. Section 6 of the Employment Agreement is hereby amended by deleting in its entirety the definition of Change of Control and substituting therefor the following: A "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (ii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or (b) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) If Executive's employment responsibilities are primarily with Diagnostic Imaging, Inc., a disposition by the Company of a majority of the stock or substantially all of the assets of Diagnostic Imaging, Inc.; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of Diagnostic Imaging, Inc., then a Change of Control shall not be deemed to have occurred by virtue of this subsection (d); or (e) If Executive's employment responsibilities are primarily with Gulf South Medical Supply, Inc., a disposition by the Company of a majority of the stock or substantially all of the assets of Gulf South Medical Supply, Inc.; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of Gulf South Medical Supply, Inc., then a Change of Control shall not be deemed to have occurred by virtue of this subsection (e); or (f) If Executive's employment responsibilities are primarily with the Physician Sales & Service division of the Company, a disposition by the Company of substantially all of the assets of such division; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of the Physician Sales & Service division, then a Change of Control shall not be deemed to have occurred by virtue of this subsection (f). 3. Notwithstanding the foregoing, if, in the opinion of the Company's accountants, the foregoing amendments (or any portion thereof) would preclude the use of "pooling of interest" accounting treatment for a Change of Control transaction that (a) would otherwise qualify for such accounting treatment, and (b) is contingent upon qualifying for such accounting treatment, then such amendments (to the extent so determined to preclude such pooling of interests accounting treatment) will not be effective and the terms of the Employment Agreement will remain in effect as if such amendments (or portion thereof) had not been proposed. 4. As amended hereby, the Employment Agreement, as heretofore amended, shall be and remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. PSS WORLD MEDICAL, INC. By: /s/ Patrick C. Kelly ----------------------------- Patrick C. Kelly Chairman of the Board and CEO By: /s/ David A. Smith ----------------------------- David A. Smith Executive Vice President and CFO EXECUTIVE /s/ DOUGLAS J. HARPER ------------------------------ DOUGLAS J. HARPER Date of original Employment Agreement: April 1, 1998 EX-10 5 exhibit1016.txt EMPLOYMENT AGREEMENT, CORLESS Exhibit 10.16 Employment AGREEMENT This EMPLOYMENT Agreement (this "Agreement") is made and entered into this 1st day of April, 1998 by and between PSS World Medical, Inc., a Florida corporation (hereinafter, the "Company" which term shall include the Company's other subsidiaries, affiliates and successors), and GARY A. CORLESS (hereinafter, "Executive"). BACKGROUND The Company desires to engage Executive in Executive capacities set forth herein, in accordance with the terms and conditions of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. This Agreement is effective as of April 1, 1998 (the "Effective Date"). 2. Employment. Executive is hereby employed on the Effective Date as the Senior Vice President Eastern Region of the Company. Executive's responsibilities under this Agreement shall be in accordance with the policies and objectives established by the President or the Board of Directors of the Company and shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. 3. Employment Period. Unless earlier terminated herein in accordance with Section 7 hereof, Executive's employment shall be for a two-year term (the "Employment Period"), beginning on the Effective Date. The Employment Period shall, without further action by Executive or the Company, be extended by an additional one-year period on each anniversary of the Effective Date; provided, however, that either party may, by notice to the other, cause the Employment Period to cease to extend automatically. Upon such notice, the Employment Period shall terminate upon the expiration of the then-current term, including any prior extensions. 4. Extent of Service. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. 5. Compensation and Benefits. (a) Base Salary. During the Employment Period, the Company will pay to Executive a base salary as previously agreed ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board of Directors of the Company shall review Executive's Base Salary annually and in its sole discretion, subject to approval of the Board of Directors of the Company, may increase Executive's Base Salary from year to year. The annual review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive, Savings and Retirement Plans. During the Employment Period, Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to peer executives of the Company and its affiliated companies ("Peer Executives"), and on the same basis as such other similarly situated officers. (c) Welfare Benefit Plans. During the Employment Period, Executive and Executive's family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to Peer Executives. (d) Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to Peer Executives. (e) Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies in effect for Peer Executives. 6. Change of Control. A "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (ii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 6; or (b) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting power of the then outstanding voting securities of such corporation resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. Notwithstanding the above definition, a Change of Control will not be deemed to have occurred for purposes of this Agreement if, immediately after the event that otherwise would constitute a Change of Control, Patrick Kelly and a least a majority of the 12 next most highly compensated officers of the Company and its subsidiaries (as measured immediately prior to such transaction) shall have entered into employment agreements with by the Company, the resulting or surviving company, or its or their subsidiaries. 7. Termination of Employment. (a) Death, Retirement or Disability. Executive's employment shall terminate automatically upon Executive's death or Retirement during the Employment Period. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in accordance with Section 15(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board of Directors of the Company in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to perform the essential functions of his regular duties and responsibilities (with or without reasonable accommodation) due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. (b) Termination by the Company. The Company may terminate Executive's employment during the Employment Period with or without Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President or the Board of Directors of the Company which specifically identifies the manner in which such Board or the President believes that Executive has not substantially performed Executive's duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, or (iii) Executive engages in any misconduct involving moral turpitude whether occurring in the performance of his duties or otherwise. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of the Company at a meeting of such Board called and held for such purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before such Board), finding that, in the good faith opinion of such Board, Executive is guilty of the conduct described in subparagraph (i), (ii) or (iii) above, and specifying the particulars thereof in detail. (c) Termination by Executive. Executive's employment may be terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the came may be increased from time to time, unless a similar reduction is made in salary and benefits of Peer Executives, or the failure by the Company to increase Executive's Base Salary each year during the Employment Period by an amount which at least equals, on a percentage basis, the mean average percentage increase in base salary for Peer Executives, unless such failure to increase is based on nonarbitrary criteria applied to Executive and Peer Executives; (iii) after the occurrence of a Change of Control, the Company's requiring Executive to be based at any office or location other than in the greater Jacksonville, Florida metropolitan area or the Company's requiring Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any failure by the Company to comply with and satisfy Section 14(b) of this Agreement; or (v) any termination by Executive for any reason or no reason during the 30-day period beginning on the first anniversary of a Change of Control. (d) Notice of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 15(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies Executive of such termination and (iii) if Executive's employment is terminated by reason of death, Retirement or Disability, the Date of Termination shall be the date of death or Retirement of Executive or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. (a) Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate Executive's employment other than for Cause, death or Disability, or Executive shall terminate employment for Good Reason within a period of 30 days after the occurrence of the event giving rise to Good Reason, then in consideration of Executive's services rendered prior to such termination and as reasonable compensation for his compliance with the Restrictive Covenants in Section 13 hereof: (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination or, with respect to the prorata bonus described in clause A(2) below, within 30 days after the determination of the bonus amount, the aggregate of the following amounts: A. the sum of (1) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, (2) if the Date of Termination occurs after or in connection with the occurrence of a Change of Control, the product of (x) Executive's annual bonus that would have been payable with respect to the fiscal year in which the Date of Termination occurs (determined at the end of such year based on actual performance results through the end of such year) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (3) any compensation previously deferred by Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to six times Executive's monthly Base Salary in effect as of the Date of Termination (the "Severance Payment"); provided, however, that if the Date of Termination occurs after or in connection with the occurrence of a Change of Control, the Severance Payment shall be the amount equal to two times Executive's annual Base Salary in effect as of the Date of Termination; and (ii) for six months after Executive's Date of Termination (or two years in the event that the Date of Termination occurs after or in connection with the occurrence of a Change of Control), or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the welfare plans, programs, practices and policies described in Section 5(c) of this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to Peer Executives and their families, provided, however, that if Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility ("Welfare Benefits"); and (iii) the Company shall, within 30 days of receipt of reasonably documented invoices therefor, reimburse Executive's actual cost (not to exceed $15,000) for outplacement expenses incurred within one year after the Date of Termination; and (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If Executive's employment is terminated by reason of Executive's death during the Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)), the timely payment or provision of Other Benefits, and a lump sum amount equal to one and one half (1 1/2 ) months' salary, based on Executive's Base Salary in effect as of the date of death. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(b) shall include, without limitation, and Executive's estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death benefits, if any, as applicable generally to Peer Executives and their beneficiaries, and on the same basis as Peer Executives and their beneficiaries. (c) Disability. If Executive's employment is terminated by reason of Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)) and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(c) shall include, without limitation, and Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits under such plans, programs, practices and policies relating to disability, if any, as applicable generally to Peer Executives and their families, and on the same basis as Peer Executives and their families. (d) Retirement. If Executive's employment is terminated by reason of Executive's Retirement during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)) and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(d) shall include, without limitation, and Executive shall be entitled after the Date of Termination to receive, retirement and other benefits under such plans, programs, practices and policies relating to retirement, if any, as applicable generally to Peer Executives and their families, and on the same basis as Peer Executives and their families. (e) Cause or Voluntary Termination without Good Reason. If Executive's employment shall be terminated for Cause during the Employment Period, or if Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)), the continuation of Welfare Benefits for a period of 30 days after the Date of Termination, and the timely payment or provision of Other Benefits, payment of a lump sum amount equal to 30 days' salary, based on Executive's Base Salary in effect as of the Date of Termination. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor, subject to Section 15(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then: Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. The Executive may select the Payments to be limited or reduced. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's regular independent accounting firm at the expense of the Company or, at the election and expense of Executive, another nationally recognized independent accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). 11. Costs of Enforcement. In any action taken in good faith relating to the enforcement of this Agreement or any provision herein after the occurrence of a Change of Control, Executive shall be entitled to be paid any and all costs and expenses incurred by him in enforcing or establishing his rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. In all other circumstances, each party in any such action shall pay his or its own such costs and expenses. 12. Representations and Warranties. Executive hereby represents and warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete (other than as contained herein) with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. (a) General. Executive and the Company understand and agree that the purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law upon the restrictions set forth herein, Executive shall be subject to the restrictions set forth in this Section 13. (b) Definitions. The following capitalized terms used in this Section 13 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Services" means any services provided by Company at the Determination Date, including, but not limited to the marketing, sale and distribution of medical supplies, equipment and pharmaceuticals to primary care and other office-based physicians; the marketing, sale and distribution of medical diagnostic imaging supplies, chemicals, equipment and service to the acute care and alternate care market; and the provisions of special group purchasing contract pricing and periodic cost analyses to help manage the supply needs of individual physicians or practices. "Confidential Information" means any confidential or proprietary information possessed by the Company or its affiliated entities or relating to its or their business, including without limitation, any confidential "know-how", customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or plans, computer software programs (including object code and source code), data and documentation, data base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, financial information and data, business acquisition plans, new personnel acquisition plans and any other information that would constitute a Trade Secret (as defined herein). "Determination Date" means the date of termination of Executive's employment with the Company for any reason whatsoever or any earlier date (during the Employment Period) of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, joint venture, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Clients" means any Person to whom the Company provided services or submitted a written proposal therefor, within eighteen (18) months prior to the Determination Date. "Protected Employees" means employees of the Company who were employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the term of Executive's employment hereunder and a period extending until eighteen (18) months from the Date of Termination; provided, however that such period shall be extended by any length of time during which Executive is in breach of the Restricted Covenants. "Restrictive Covenants" means the restrictive covenants contained in Section 13(c) hereof. "Trade Secret" means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or statutory law of the State of Florida. (c) Restrictive Covenants. (i) Restriction on Disclosure and Use of Confidential Information. Executive understands and agrees that the Confidential Information constitutes a valuable asset of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company; provided, however, in the event the Confidential Information constitutes a Trade Secret, the Restricted Period referred to above shall be five (5) years. Notwithstanding the above, this covenant shall expire (except with respect to Trade Secrets) upon the occurrence of a Change of Control. (ii) Nonsolicitation of Protected Employees. Executive understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into any relationship of employment, agency or independent contractorship with any other Person. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (iii) Restriction on Relationships with Protected Clients. Executive understands and agrees that the relationship between the Company and each of its Protected Clients constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not, without the prior written consent of the Company, become a Principal or Representative of a Protected Client or otherwise provide services to a Protected Client as a consultant or independent contractor. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (iv) Noncompetition with the Company. During the Restricted Period Executive, unless acting in accordance with the Company's prior written consent, will not directly provide any Competitive Services to, and will not, directly or indirectly, (i) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or (ii) be connected as a Principal or Representative or otherwise with, or (iii) permit Executive's name to be used by or in connection with, any Person engaged in providing Competitive Services to any Person conducting business activities within the territory in which the Company is or was engaged in the provision of the Competitive Services on the Determination Date; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (d) Exceptions from Disclosure Restrictions. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that: (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by Executive or his agent; (b) becomes available to Executive in a manner that is not in contravention of applicable law from a source (other than the Company or its affiliated entities or one of its or their officers, employees, agents or representatives) that is not bound by a confidential relationship with the Company or its affiliated entities or by a confidentiality or other similar agreement; (c) was known to Executive on a non-confidential basis and not in contravention of applicable law or a confidentiality or other similar agreement before its disclosure to Executive by the Company or its affiliated entities or one of its or their officers, employees, agents or representatives; or (d) is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (e) Enforcement of Restrictive Covenants. (i) Rights and Remedies Upon Breach. In the event Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: A. the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and B. the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. 14. Assignment and Successors. (a) Executive. This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. 15. Miscellaneous. (a) Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof, and it supersedes and invalidates any previous agreements or contracts between them which relate to the subject matter hereof, including without limitation that certain Contract of Employment, dated as of May 30, 1992, by and between Executive and the Company. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect. (e) Governing Law. Except to the extent preempted by federal law, and without regard to conflict of laws principles, the laws of the State of Florida shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: PSS World Medical, Inc. 4345 Southpoint Boulevard Jacksonville, Florida 32216 Facsimile No. (904) 332-3209 Attention: Patrick Kelly and Fred Elefant To Executive: GARY A. CORLESS Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement; provided, however, that if, in the opinion of the Corporation's accountants, any provision of this Agreement would preclude the use of "pooling of interest" accounting treatment for a Change of Control transaction that (1) would otherwise qualify for such accounting treatment, and (2) is contingent upon qualifying for such accounting treatment, then Executive and the Company agree to negotiate in good faith to amend this Agreement so that it will not preclude the use of "pooling of interest" accounting treatment for such Change of Control transaction. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. PSS WORLD MEDICAL, INC. By: /s/ Patrick Kelly ----------------------------------------------- Patrick Kelly Chairman of the Board EXECUTIVE: /s/ GARY A. CORLESS -------------------------------------------- GARY A. CORLESS EX-10 6 exhibit1016a.txt AMENDMENT TO AGREEMENT, CORLESS Exhibit 10.16a AMENDMENT to LEVEL 3 EMPLOYMENT AGREEMENT This AMENDMENT (the "Amendment"), effective as of April 17, 2000, by and between PSS World Medical, Inc., a Florida corporation (the "Company"), and the officer of the Company whose signature appears below ("Executive"), amends that certain Employment Agreement, dated as of the date indicated below, by and between the Company and Executive, as heretofore amended (the "Employment Agreement"). In consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: 1. Section 3 of the Employment Agreement is hereby amended by adding the following sentence at the end thereof: "Notwithstanding the foregoing, if a Change of Control occurs the Employment Period shall be automatically extended through the later of (i) the third anniversary of the Change of Control, or (ii) the normal expiration of the then-current term, including any prior extensions." 2. Section 6 of the Employment Agreement is hereby amended by deleting in its entirety the definition of Change of Control and substituting therefor the following: A "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (ii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or (b) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) If Executive's employment responsibilities are primarily with Diagnostic Imaging, Inc., a disposition by the Company of a majority of the stock or substantially all of the assets of Diagnostic Imaging, Inc.; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of Diagnostic Imaging, Inc., then a Change of Control shall not be deemed to have occurred by virtue of this subsection (d); or (e) If Executive's employment responsibilities are primarily with Gulf South Medical Supply, Inc., a disposition by the Company of a majority of the stock or substantially all of the assets of Gulf South Medical Supply, Inc.; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of Gulf South Medical Supply, Inc., then a Change of Control shall not be deemed to have occurred by virtue of this subsection (e); or (f) If Executive's employment responsibilities are primarily with the Physician Sales & Service division of the Company, a disposition by the Company of substantially all of the assets of such division; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of the Physician Sales & Service division, then a Change of Control shall not be deemed to have occurred by virtue of this subsection (f). 3. Notwithstanding the foregoing, if, in the opinion of the Company's accountants, the foregoing amendments (or any portion thereof) would preclude the use of "pooling of interest" accounting treatment for a Change of Control transaction that (a) would otherwise qualify for such accounting treatment, and (b) is contingent upon qualifying for such accounting treatment, then such amendments (to the extent so determined to preclude such pooling of interests accounting treatment) will not be effective and the terms of the Employment Agreement will remain in effect as if such amendments (or portion thereof) had not been proposed. 4. As amended hereby, the Employment Agreement, as heretofore amended, shall be and remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. PSS WORLD MEDICAL, INC. By: /s/ Patrick C. Kelly ----------------------------- Patrick C. Kelly Chairman of the Board and CEO By: /s/ David A. Smith ----------------------------- David A. Smith Executive Vice President and CFO EXECUTIVE /s/ GARY A. CORLESS ------------------------------ GARY A. CORLESS Date of original Employment Agreement: April 1, 1998 EX-10 7 exhibit1017.txt EMPLOYMENT AGREEMENT, ENGLISH Exhibit 10.17 Employment AGREEMENT This EMPLOYMENT Agreement (this "Agreement") is made and entered into this 1st day of April, 1998 by and between PSS WORLD MEDICAL, INC., a Florida corporation (hereinafter, the "Company" which term shall include the Company's other subsidiaries, affiliates and successors), and KEVIN P. ENGLISH (hereinafter, "Executive"). BACKGROUND The Company desires to engage Executive in Executive capacities set forth herein, in accordance with the terms and conditions of this Agreement. Executive is willing to serve as such in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Effective Date. This Agreement is effective as of April 1, 1998 (the "Effective Date"). 2. Employment. Executive is hereby employed on the Effective Date as the Vice President Controller of the Company. Executive's responsibilities under this Agreement shall be in accordance with the policies and objectives established by the President or the Board of Directors of the Company and shall be consistent with the responsibilities of similarly situated executives of comparable companies in similar lines of business. 3. Employment Period. Unless earlier terminated herein in accordance with Section 7 hereof, Executive's employment shall be for a one-year term (the "Employment Period"), beginning on the Effective Date. The Employment Period shall, without further action by Executive or the Company, be extended by an additional one-year period on each anniversary of the Effective Date; provided, however, that either party may, by notice to the other, cause the Employment Period to cease to extend automatically. Upon such notice, the Employment Period shall terminate upon the expiration of the then-current term, including any prior extensions. 4. Extent of Service. During the Employment Period, and excluding any periods of vacation and sick leave to which Executive is entitled, Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder; provided, however, that it shall not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal business interests and investments, so long as such activities do not materially interfere with the performance of Executive's responsibilities under this Agreement. 5. Compensation and Benefits. (a) Base Salary. During the Employment Period, the Company will pay to Executive a base salary as previously agreed ("Base Salary"), less normal withholdings, payable in equal monthly or more frequent installments as are customary under the Company's payroll practices from time to time. The Compensation Committee of the Board of Directors of the Company shall review Executive's Base Salary annually and in its sole discretion, subject to approval of the Board of Directors of the Company, may increase Executive's Base Salary from year to year. The annual review of Executive's salary by the Board will consider, among other things, Executive's own performance and the Company's performance. (b) Incentive, Savings and Retirement Plans. During the Employment Period, Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to peer executives of the Company and its affiliated companies ("Peer Executives"), and on the same basis as such other similarly situated officers. (c) Welfare Benefit Plans. During the Employment Period, Executive and Executive's family shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to Peer Executives. (d) Expenses. During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company and its affiliated companies to the extent applicable generally to Peer Executives. (e) Fringe Benefits. During the Employment Period, Executive shall be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies in effect for Peer Executives. 6. Change of Control. A "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (ii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 6; or (b) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination. Notwithstanding the above definition, a Change of Control will not be deemed to have occurred for purposes of this Agreement if, immediately after the event that otherwise would constitute a Change of Control, Patrick Kelly and a least a majority of the 12 next most highly compensated officers of the Company and its subsidiaries (as measured immediately prior to such transaction) shall have entered into employment agreements with by the Company, the resulting or surviving company, or its or their subsidiaries. 7. Termination of Employment. (a) Death, Retirement or Disability. Executive's employment shall terminate automatically upon Executive's death or Retirement during the Employment Period. For purposes of this Agreement, "Retirement" shall mean normal retirement as defined in the Company's then-current retirement plan, or there is no such retirement plan, "Retirement" shall mean voluntary termination after age 65 with ten years of service. If the Company determines in good faith that the Disability of Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to Executive written notice in accordance with Section 15(f) of this Agreement of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such written notice by Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, "Disability" shall mean a mental or physical disability as determined by the Board of Directors of the Company in accordance with standards and procedures similar to those under the Company's employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability shall mean the inability of Executive, as determined by the Board, to perform the essential functions of his regular duties and responsibilities (with or without reasonable accommodation) due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months. (b) Termination by the Company. The Company may terminate Executive's employment during the Employment Period with or without Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of Executive to perform substantially Executive's duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the President or the Board of Directors of the Company which specifically identifies the manner in which such Board or the President believes that Executive has not substantially performed Executive's duties, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, or (iii) Executive engages in any misconduct involving moral turpitude whether occurring in the performance of his duties or otherwise. For purposes of this provision, no act or failure to act, on the part of Executive, shall be considered "willful" unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board of the Company at a meeting of such Board called and held for such purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before such Board), finding that, in the good faith opinion of such Board, Executive is guilty of the conduct described in subparagraph (i), (ii) or (iii) above, and specifying the particulars thereof in detail. (c) Termination by Executive. Executive's employment may be terminated by Executive for Good Reason or no reason. For purposes of this Agreement, "Good Reason" shall mean: (i) without the written consent of Executive, the assignment to Executive of any duties materially inconsistent with Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as in effect on the Effective Date, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by Executive; (ii) a reduction by the Company in Executive's Base Salary and benefits as in effect on the Effective Date or as the same may be increased from time to time, unless a similar reduction is made in salary and benefits of Peer Executives, or the failure by the Company to increase Executive's Base Salary each year during the Employment Period by an amount which at least equals, on a percentage basis, the mean average percentage increase in base salary for Peer Executives, unless such failure to increase is based on nonarbitrary criteria applied to Executive and Peer Executives; (iii) after the occurrence of a Change of Control, the Company's requiring Executive to be based at any office or location other than in the greater Jacksonville, Florida metropolitan area or the Company's requiring Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any failure by the Company to comply with and satisfy Section 14(b) of this Agreement; or (v) any termination by Executive for any reason or no reason during the 30-day period beginning on the first anniversary of a Change of Control. (d) Notice of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 15(f) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if Executive's employment is terminated by the Company for Cause, or by Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies Executive of such termination and (iii) if Executive's employment is terminated by reason of death, Retirement or Disability, the Date of Termination shall be the date of death or Retirement of Executive or the Disability Effective Date, as the case may be. 8. Obligations of the Company upon Termination. (a) Termination by Executive for Good Reason; Termination by the Company Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate Executive's employment other than for Cause, death or Disability, or Executive shall terminate employment for Good Reason within a period of 30 days after the occurrence of the event giving rise to Good Reason, then in consideration of Executive's services rendered prior to such termination and as reasonable compensation for his compliance with the Restrictive Covenants in Section 13 hereof: (i) the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination or, with respect to the prorata bonus described in clause A(2) below, within 30 days after the determination of the bonus amount, the aggregate of the following amounts: A. the sum of (1) Executive's Base Salary through the Date of Termination to the extent not theretofore paid, (2) if the Date of Termination occurs after or in connection with the occurrence of a Change of Control, the product of (x) Executive's annual bonus that would have been payable with respect to the fiscal year in which the Date of Termination occurs (determined at the end of such year based on actual performance results through the end of such year) and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, and (3) any compensation previously deferred by Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to six times Executive's monthly Base Salary in effect as of the Date of Termination (the "Severance Payment"); provided, however, that if the Date of Termination occurs after or in connection with the occurrence of a Change of Control, the Severance Payment shall be the amount equal to two times Executive's annual Base Salary in effect as of the Date of Termination; and (ii) for six months after Executive's Date of Termination (or two years in the event that the Date of Termination occurs after or in connection with the occurrence of a Change of Control), or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to Executive and/or Executive's family at least equal to those which would have been provided to them in accordance with the welfare plans, programs, practices and policies described in Section 5(c) of this Agreement if Executive's employment had not been terminated or, if more favorable to Executive, as in effect generally at any time thereafter with respect to Peer Executives and their families, provided, however, that if Executive becomes re-employed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility ("Welfare Benefits"); and (iii) the Company shall, within 30 days of receipt of reasonably documented invoices therefor, reimburse Executive's actual cost (not to exceed $15,000) for outplacement expenses incurred within one year after the Date of Termination; and (iv) to the extent not theretofore paid or provided, the Company shall timely pay or provide to Executive any other amounts or benefits required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. If Executive's employment is terminated by reason of Executive's death during the Employment Period, this Agreement shall terminate without further obligations to Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)), the timely payment or provision of Other Benefits, and a lump sum amount equal to one (1) month's salary, based on Executive's Base Salary in effect as of the date of death. Accrued Obligations shall be paid to Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(b) shall include, without limitation, and Executive's estate and/or beneficiaries shall be entitled to receive, benefits under such plans, programs, practices and policies relating to death benefits, if any, as applicable generally to Peer Executives and their beneficiaries, and on the same basis as Peer Executives and their beneficiaries. (c) Disability. If Executive's employment is terminated by reason of Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)) and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(c) shall include, without limitation, and Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits under such plans, programs, practices and policies relating to disability, if any, as applicable generally to Peer Executives and their families, and on the same basis as Peer Executives and their families. (d) Retirement. If Executive's employment is terminated by reason of Executive's Retirement during the Employment Period, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)) and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 8(d) shall include, without limitation, and Executive shall be entitled after the Date of Termination to receive, retirement and other benefits under such plans, programs, practices and policies relating to retirement, if any, as applicable generally to Peer Executives and their families, and on the same basis as Peer Executives and their families. (e) Cause or Voluntary Termination without Good Reason. If Executive's employment shall be terminated for Cause during the Employment Period, or if Executive voluntarily terminates employment during the Employment Period without Good Reason, this Agreement shall terminate without further obligations to Executive, other than for payment of Accrued Obligations (excluding the pro-rata bonus described in clause 2 of Section 8(a)(i)(A)), the continuation of Welfare Benefits for a period of 30 days after the Date of Termination, and the timely payment or provision of Other Benefits, payment of a lump sum amount equal to 30 days' salary, based on Executive's Base Salary in effect as of the Date of Termination. 9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which Executive may qualify, nor, subject to Section 15(d), shall anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 10. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any benefit, payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then: Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it shall be determined that Executive is entitled to a Gross-Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. The Executive may select the Payments to be limited or reduced. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by the Company's regular independent accounting firm at the expense of the Company or, at the election and expense of Executive, another nationally recognized independent accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations. Any determination by the Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of Executive. (c) Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 10(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to Executive, on an interest-free basis and shall indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive shall (subject to the Company's complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). 11. Costs of Enforcement. In any action taken in good faith relating to the enforcement of this Agreement or any provision herein after the occurrence of a Change of Control, Executive shall be entitled to be paid any and all costs and expenses incurred by him in enforcing or establishing his rights thereunder, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings. In all other circumstances, each party in any such action shall pay his or its own such costs and expenses. 12. Representations and Warranties. Executive hereby represents and warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete (other than as contained herein) with any person or entity, and Executive's execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity. 13. Restrictions on Conduct of Executive. (a) General. Executive and the Company understand and agree that the purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive's post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive's right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law upon the restrictions set forth herein, Executive shall be subject to the restrictions set forth in this Section 13. (b) Definitions. The following capitalized terms used in this Section 13 shall have the meanings assigned to them below, which definitions shall apply to both the singular and the plural forms of such terms: "Competitive Services" means any services provided by Company at the Determination Date, including, but not limited to the marketing, sale and distribution of medical supplies, equipment and pharmaceuticals to primary care and other office-based physicians; the marketing, sale and distribution of medical diagnostic imaging supplies, chemicals, equipment and service to the acute care and alternate care market; and the provisions of special group purchasing contract pricing and periodic cost analyses to help manage the supply needs of individual physicians or practices. "Confidential Information" means any confidential or proprietary information possessed by the Company or its affiliated entities or relating to its or their business, including without limitation, any confidential "know-how", customer lists, details of client or consultant contracts, current and anticipated customer requirements, pricing policies price lists, market studies, business plans, operational methods, marketing plans or strategies, product development techniques or plans, computer software programs (including object code and source code), data and documentation, data base technologies, systems, structures and architectures, inventions and ideas, past, current and planned research and development, compilations, devices, methods, techniques, processes, financial information and data, business acquisition plans, new personnel acquisition plans and any other information that would constitute a Trade Secret (as defined herein). "Determination Date" means the date of termination of Executive's employment with the Company for any reason whatsoever or any earlier date (during the Employment Period) of an alleged breach of the Restrictive Covenants by Executive. "Person" means any individual or any corporation, partnership, joint venture, association or other entity or enterprise. "Principal or Representative" means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant. "Protected Clients" means any Person to whom the Company provided services or submitted a written proposal therefor, within eighteen (18) months prior to the Determination Date. "Protected Employees" means employees of the Company who were employed by the Company at any time within six (6) months prior to the Determination Date. "Restricted Period" means the term of Executive's employment hereunder and a period extending until eighteen (18) months from the Date of Termination; provided, however that such period shall be extended by any length of time during which Executive is in breach of the Restricted Covenants. "Restrictive Covenants" means the restrictive covenants contained in Section 13(c) hereof. "Trade Secret" means any item of Confidential Information that constitutes a "trade secret(s)" under the common law or statutory law of the State of Florida. (c) Restrictive Covenants. (i) Restriction on Disclosure and Use of Confidential Information. Executive understands and agrees that the Confidential Information constitutes a valuable asset of the Company and its affiliated entities, and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that Executive shall not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive shall not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company; provided, however, in the event the Confidential Information constitutes a Trade Secret, the Restricted Period referred to above shall be five (5) years. Notwithstanding the above, this covenant shall expire (except with respect to Trade Secrets) upon the occurrence of a Change of Control. (ii) Nonsolicitation of Protected Employees. Executive understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not directly or indirectly on Executive's own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into any relationship of employment, agency or independent contractorship with any other Person. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (iii) Restriction on Relationships with Protected Clients. Executive understands and agrees that the relationship between the Company and each of its Protected Clients constitutes a valuable asset of the Company and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive shall not, without the prior written consent of the Company, become a Principal or Representative of a Protected Client or otherwise provide services to a Protected Client as a consultant or independent contractor. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (iv) Noncompetition with the Company. During the Restricted Period Executive, unless acting in accordance with the Company's prior written consent, will not directly provide any Competitive Services to, and will not, directly or indirectly, (i) own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or (ii) be connected as a Principal or Representative or otherwise with, or (iii) permit Executive's name to be used by or in connection with, any Person engaged in providing Competitive Services to any Person conducting business activities within the territory in which the Company is or was engaged in the provision of the Competitive Services on the Determination Date; provided, however, that the provisions of this Agreement shall not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended. Notwithstanding the above, this covenant shall expire upon the occurrence of a Change of Control. (d) Exceptions from Disclosure Restrictions. Anything herein to the contrary notwithstanding, Executive shall not be restricted from disclosing or using Confidential Information that: (a) is or becomes generally available to the public other than as a result of an unauthorized disclosure by Executive or his agent; (b) becomes available to Executive in a manner that is not in contravention of applicable law from a source (other than the Company or its affiliated entities or one of its or their officers, employees, agents or representatives) that is not bound by a confidential relationship with the Company or its affiliated entities or by a confidentiality or other similar agreement; (c) was known to Executive on a non-confidential basis and not in contravention of applicable law or a confidentiality or other similar agreement before its disclosure to Executive by the Company or its affiliated entities or one of its or their officers, employees, agents or representatives; or (d) is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive shall provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive. (e) Enforcement of Restrictive Covenants. (i) Rights and Remedies Upon Breach. In the event Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity: A. the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and B. the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as the result of any transactions constituting a breach of the Restrictive Covenants. (ii) Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. If any court determines that any of the Restrictive Covenants, or any part thereof, are invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. 14. Assignment and Successors. (a) Executive. This Agreement is personal to Executive and without the prior written consent of the Company shall not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal representatives. (b) The Company. This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. The Company will require any successor to all or substantially all of the business and/or assets of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "the Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law or otherwise. 15. Miscellaneous. (a) Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver. (b) Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect. (c) Other Agents. Nothing in this Agreement is to be interpreted as limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it. (d) Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof, and it supersedes and invalidates any previous agreements or contracts between them which relate to the subject matter hereof. No representations, inducements, promises or agreements, oral or otherwise, which are not embodied herein shall be of any force or effect. (e) Governing Law. Except to the extent preempted by federal law, and without regard to conflict of laws principles, the laws of the State of Florida shall govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise. (f) Notices. All notices, requests, demands and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid: To Company: PSS World Medical, Inc. 4345 Southpoint Boulevard Jacksonville, Florida 32216 Facsimile No. (904) 332-3209 Attention: Patrick Kelly and Fred Elefant To Executive: Kevin P. English Any party may change the address to which notices, requests, demands and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein. (g) Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement; provided, however, that if, in the opinion of the Corporation's accountants, any provision of this Agreement would preclude the use of "pooling of interest" accounting treatment for a Change of Control transaction that (1) would otherwise qualify for such accounting treatment, and (2) is contingent upon qualifying for such accounting treatment, then Executive and the Company agree to negotiate in good faith to amend this Agreement so that it will not preclude the use of "pooling of interest" accounting treatment for such Change of Control transaction. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written. PSS WORLD MEDICAL, INC. By: /s/ Patrick Kelly ----------------------------------- Patrick Kelly Chairman of the Board EXECUTIVE: /s/ Kevin P. English -------------------------------------------- KEVIN P. ENGLISH EX-10 8 exhibit1017a.txt AMENDMENT TO AGREEMENT, ENGLISH Exhibit 10.17a AMENDMENT to LEVEL 3 EMPLOYMENT AGREEMENT This AMENDMENT (the "Amendment"), effective as of April 17, 2000, by and between PSS World Medical, Inc., a Florida corporation (the "Company"), and the officer of the Company whose signature appears below ("Executive"), amends that certain Employment Agreement, dated as of the date indicated below, by and between the Company and Executive, as heretofore amended (the "Employment Agreement"). In consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows: 1. Section 3 of the Employment Agreement is hereby amended by adding the following sentence at the end thereof: "Notwithstanding the foregoing, if a Change of Control occurs the Employment Period shall be automatically extended through the later of (i) the third anniversary of the Change of Control, or (ii) the normal expiration of the then-current term, including any prior extensions." 2. Section 6 of the Employment Agreement is hereby amended by deleting in its entirety the definition of Change of Control and substituting therefor the following: A "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (ii) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this definition; or (b) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 80% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation resulting from such Business Combination except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) If Executive's employment responsibilities are primarily with Diagnostic Imaging, Inc., a disposition by the Company of a majority of the stock or substantially all of the assets of Diagnostic Imaging, Inc.; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of Diagnostic Imaging, Inc., then a Change of Control shall not be deemed to have occurred by virtue of this subsection (d); or (e) If Executive's employment responsibilities are primarily with Gulf South Medical Supply, Inc., a disposition by the Company of a majority of the stock or substantially all of the assets of Gulf South Medical Supply, Inc.; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of Gulf South Medical Supply, Inc., then a Change of Control shall not be deemed to have occurred by virtue of this subsection (e); or (f) If Executive's employment responsibilities are primarily with the Physician Sales & Service division of the Company, a disposition by the Company of substantially all of the assets of such division; provided, however, that if Executive is offered and accepts a position with the Company or another subsidiary or division of the Company immediately following such disposition of the Physician Sales & Service division, then a Change of Control shall not be deemed to have occurred by virtue of this subsection (f). 3. Notwithstanding the foregoing, if, in the opinion of the Company's accountants, the foregoing amendments (or any portion thereof) would preclude the use of "pooling of interest" accounting treatment for a Change of Control transaction that (a) would otherwise qualify for such accounting treatment, and (b) is contingent upon qualifying for such accounting treatment, then such amendments (to the extent so determined to preclude such pooling of interests accounting treatment) will not be effective and the terms of the Employment Agreement will remain in effect as if such amendments (or portion thereof) had not been proposed. 4. As amended hereby, the Employment Agreement, as heretofore amended, shall be and remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first above written. PSS WORLD MEDICAL, INC. By: /s/ Patrick C. Kelly ----------------------------- Patrick C. Kelly Chairman of the Board and CEO By: /s/ David A. Smith ----------------------------- David A. Smith Executive Vice President and CFO EXECUTIVE /s/ Kevin P. English ------------------------------ Kevin P. English Date of original Employment Agreement: April 1, 1998 -----END PRIVACY-ENHANCED MESSAGE-----