PRIORITY HEALTHCARE CORP, S-3, 1999-05-06

PRIORITY HEALTHCARE CORP
S-3, 1999-05-06
DRUGS, PROPRIETARIES & DRUGGISTS' SUNDRIES

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1999
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

PRIORITY HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)

<TABLE>
<S> <C>
INDIANA 35-1927379
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
</TABLE>

285 WEST CENTRAL PARKWAY
ALTAMONTE SPRINGS, FLORIDA 32714
(407) 869-7001
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------

ROBERT L. MYERS
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PRIORITY HEALTHCARE CORPORATION
285 WEST CENTRAL PARKWAY
ALTAMONTE SPRINGS, FLORIDA 32714
(407) 869-7001
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------

COPIES TO:

<TABLE>
<S> <C>
JAMES A. ASCHLEMAN REBECCA R. ORAND
BAKER & DANIELS GREENBERG TRAURIG, P.A.
SUITE 2700 1221 BRICKELL AVENUE
300 NORTH MERIDIAN STREET MIAMI, FLORIDA 33131
INDIANAPOLIS, INDIANA (305) 579-0500
46204-1782
(317) 237-0300
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
is practicable after the effective date
of this registration statement.
------------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED (1) PER SHARE (1) PRICE (2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value............... 2,990,000 $34.28125 $102,500,938 $28,496
</TABLE>

(1) Includes 390,000 shares subject to an over-allotment option granted to the
Underwriters.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED MAY 6, 1999

PROSPECTUS

2,600,000 SHARES

[LOGO]

PRIORITY HEALTHCARE CORPORATION

CLASS B COMMON STOCK
-------------

WE ARE OFFERING AND SELLING 2,600,000 SHARES OF OUR CLASS B COMMON STOCK. WE
HAVE BOTH CLASS A AND CLASS B COMMON STOCK OUTSTANDING. THE CLASS A COMMON STOCK
IS CONVERTIBLE INTO CLASS B COMMON STOCK ON A SHARE-FOR-SHARE BASIS AT THE
HOLDER'S OPTION OR AUTOMATICALLY ON MOST TRANSFERS BY THE HOLDER. HOLDERS OF
CLASS A COMMON STOCK HAVE THREE VOTES PER SHARE AND HOLDERS OF CLASS B COMMON
STOCK HAVE ONE VOTE PER SHARE ON ALL MATTERS SUBMITTED TO A VOTE OF HOLDERS OF
OUR COMMON STOCK. HOLDERS OF CLASS A COMMON STOCK AND HOLDERS OF CLASS B COMMON
STOCK GENERALLY VOTE AS A SINGLE CLASS ON ALL MATTERS SUBMITTED TO A VOTE OF
STOCKHOLDERS. ON APRIL 20, 1999 THERE WERE 7,162,752 SHARES OF CLASS A COMMON
STOCK OUTSTANDING AND 11,705,707 SHARES OF CLASS B COMMON STOCK OUTSTANDING.

THE CLASS B COMMON STOCK IS TRADED ON THE NASDAQ NATIONAL MARKET UNDER THE
SYMBOL "PHCC." THE LAST REPORTED SALE PRICE OF OUR CLASS B COMMON STOCK ON MAY
5, 1999 WAS $32.75 PER SHARE. THE CLASS A COMMON STOCK IS NOT PUBLICLY TRADED.

You should consider the risks which we have described in "Risk Factors"
beginning on page 8 before buying shares of our Class B common stock.

-------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------ ------------------
<S> <C> <C>
Public offering price....................................................
Underwriting discount....................................................
Proceeds, before expenses, to us.........................................
</TABLE>

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The underwriters may purchase up to an additional 390,000 shares from us at
the public offering price, less the underwriting discount, within 30 days from
the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

Raymond James & Associates, Inc., on behalf of the underwriters, expects to
deliver the shares to purchasers on or about , 1999.
-------------------

RAYMOND JAMES & ASSOCIATES, INC.

FIRST UNION CAPITAL MARKETS CORP.

NATIONSBANC MONTGOMERY SECURITIES LLC

SUNTRUST EQUITABLE SECURITIES

The date of this prospectus is , 1999
<PAGE>

<TABLE>
<S> <C>
[Photo of pharmacists filling [Photo of Pharmacist and nurse]
prescriptions]

Our JCAHO-accredited pharmacy fills Our pharmacists and registered nurses are
individual prescriptions for always available for ongoing consultation
self-injectable with the patient and prescribing physician
biopharmaceuticals for over 2,500 regarding the patient's therapy and
patients. progress.

[Photo of biopharmaceuticals]

We provide patient-specific biopharmaceuticals
and disease treatment services to people with
chronic diseases and specialty
pharmaceuticals and
related medical supplies.

[Photo of patient with nurse] [Photo of computer operator]

We provide disease treatment services to Our systems provide important outcomes
patients and physicians through our highly data, cross-selling opportunities, and
trained clinical staff of pharmacists, ease of ordering for our customers.
nurses and patient care coordinators.

[Photo of distribution facility]

We generally ship products ordered before 6:00 p.m. for
delivery the next day and fill 99% of our
orders within one day of being ordered.
</TABLE>

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<PAGE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate as of the date on the
front cover of this prospectus only. Our business, financial condition, results
of operations and prospects may have changed since that date.

-------------------

FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this prospectus and in our public
documents which are incorporated by reference, which represent our expectations
or beliefs about future events and financial performance. Forward-looking
statements are subject to known and unknown risks and uncertainties, including:

- changes in interest rates;

- competitive pressures;

- changes in customer mix;

- changes in third party reimbursement rates;

- financial stability of major customers;

- changes in governmental regulations or the interpretation of these
regulations;

- asserted and unasserted claims; and

- our ability and the ability of entities with which we do business to
modify or redesign our and their computer systems to work properly in the
year 2000.

These risks, uncertainties, assumptions and other factors include, among
others, those described under "Risk Factors" and elsewhere in this prospectus.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur. In addition, actual results
could differ materially from those suggested by the forward-looking statements,
and therefore you should not place undue reliance on the forward-looking
statements. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

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<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THIS
OFFERING FULLY, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE
RISK FACTORS AND THE FINANCIAL STATEMENTS AND RELATED NOTES, BEFORE YOU DECIDE
WHETHER TO INVEST IN OUR CLASS B COMMON STOCK. UNLESS WE STATE OTHERWISE, ALL
FINANCIAL INFORMATION AND SHARE AND PER SHARE DATA IN THIS PROSPECTUS (1) GIVE
EFFECT TO THE 3-FOR-2 STOCK SPLIT EFFECTED AS A STOCK DIVIDEND PAID ON MAY 4,
1999, (2) ASSUME THAT THE UNDERWRITERS DO NOT EXERCISE THEIR OVER-ALLOTMENT
OPTION AND (3) DO NOT INCLUDE SHARES RESERVED FOR ISSUANCE UNDER OUR STOCK
OPTION PLANS.

OUR COMPANY

Priority Healthcare Corporation provides patient-specific, self-injectable
biopharmaceuticals and disease treatment services to people with chronic
diseases, and specialty pharmaceuticals and related medical supplies to the
office-based physician, outpatient renal dialysis center and homecare markets.
We provide products that are administered by physicians or patients themselves
in an alternate site, or non-hospital, setting and that typically require
specialized shipping and support services. We currently sell most of our
products and services on a national basis for use in four large and growing
markets:

- oncology;

- gastroenterology;

- chronic renal dialysis; and

- vaccines.

To address the specific needs of physicians and patients within these markets,
we distribute our products and deliver our services directly to patients through
Priority Healthcare Pharmacy, and to physicians and clinics through Priority
Healthcare Distribution.

Through Priority Healthcare Pharmacy, we provide a comprehensive solution to
the chronic disease treatment challenges faced by patients, doctors,
biopharmaceutical manufacturers and third party payors. Priority Healthcare
Pharmacy currently provides disease treatment services for:

- hepatitis;

- melanoma;

- cancer;

- human growth deficiency; and

- the complications of HIV.

Currently, Priority Healthcare Pharmacy fills individual patient
prescriptions for self-injectable biopharmaceuticals for over 2,500 patients. We
fill these patient-specific prescriptions at our licensed pharmacy in Altamonte
Springs, Florida, where we prepare the physician-prescribed biopharmaceuticals
in sterile conditions. We prepare each prescription, including filling syringes,
so that it is ready to use upon delivery. We ship these products directly to the
patient overnight in specialized packages. Our disease treatment services are
designed to:

- increase patient compliance with the prescribed therapy;

- educate patients on the preparation and use of injectable
biopharmaceuticals;

- reduce the potential for patient errors in dosing or product waste;

- decrease patient and caregiver anxiety;

- reduce the overall cost of treatment; and

- collect better outcomes data on the results of patient treatment.

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<PAGE>
Through Priority Healthcare Distribution, we sell over 3,500 SKUs of
specialty pharmaceuticals and medical supplies primarily to office-based
physicians in the oncology and infectious disease markets, outpatient renal
dialysis centers and office-based physicians administering vaccines. Priority
Healthcare Distribution offers value-added services to meet the specific needs
of these markets, such as shipping refrigerated pharmaceuticals overnight in
special packaging to maintain appropriate temperatures, and offering automated
order entry services and customized distribution for group accounts. From
distribution centers in Tustin, California and Grove City, Ohio, Priority
Healthcare Distribution services over 2,000 customers in all 50 states and
Puerto Rico, including approximately 600 office-based oncologists and 800 renal
dialysis clinics.

We were formed on June 23, 1994, by Bindley Western Industries, Inc., a
wholesale distributor of pharmaceuticals and related healthcare products, to
distribute products and provide services to the alternate site segment of the
healthcare industry. On October 29, 1997, we completed our initial public
offering of Class B common stock. On December 31, 1998, Bindley Western
distributed to its common stockholders all of our Class A common stock that was
owned by Bindley Western in a spin-off transaction and Bindley Western no longer
has any ownership interest in us. Our principal executive offices are located at
285 West Central Parkway, Altamonte Springs, Florida 32714 and our telephone
number at that address is (407) 869-7001. We maintain a website with the address
www.priorityhealthcare.com. None of the content of our website is a part of this
prospectus.

OUR GROWTH STRATEGY

Our net sales have increased from $107.4 million in 1994 to $275.6 million
in 1998, which represents a compound annual growth rate of 26.6%. In the same
period, earnings from operations have increased from $2.3 million in 1994 to
$15.9 million in 1998, which represents a compound annual growth rate of 62.2%.
Net earnings have increased from $1.3 million in 1994 to $10.1 million in 1998,
which represents a compound annual growth rate of 68.6%. Our goal is to continue
to grow rapidly by taking advantage of our business strengths and our market
position as a leading specialty distributor and by pursuing the following
strategies:

- accelerate growth of our higher margin, patient-specific pharmacy
business;

- provide services for additional diseases by targeting new product
categories and patient-specific biopharmaceuticals;

- enhance existing and create new relationships with biopharmaceutical
manufacturers;

- maintain intense cost control while investing in operating infrastructure;

- continue to focus on and further penetrate the alternate site market; and

- pursue acquisitions that complement existing product offerings or add new
product offerings.

RECENT DEVELOPMENTS

On April 12, 1999, we purchased for cash the majority of the operating
assets of Pharmacy Plus, Ltd. Pharmacy Plus is a specialty mail order pharmacy
in Philadelphia, Pennsylvania, that primarily provides injectable
biopharmaceuticals by overnight delivery. Pharmacy Plus should complement our
disease treatment services and national distribution capabilities and readily
fit within our existing operating systems for accounting and purchasing. The
Pharmacy Plus mail order services typically include a somewhat lower level of
disease treatment services than Priority Healthcare Pharmacy, which allows for
lower mail order pricing for those services. We believe that this will make us
more attractive to managed care organizations seeking to have prescriptions

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filled at lower costs. The Pharmacy Plus acquisition increases our market share
in the oncology, infectious disease and human growth hormone markets and gives
us an entree into additional diseases, such as rheumatoid arthritis and
fertility. Pharmacy Plus is an approved provider of injectable pharmaceuticals
to a large national managed care organization, and we believe that the mail
order component of Pharmacy Plus provides us an opportunity to compete for
additional managed care contracts. The total purchase price for the Pharmacy
Plus assets was approximately $3.5 million.

THE OFFERING

We have both Class A and Class B common stock outstanding. The Class A
common stock is not publicly traded, but is convertible into Class B common
stock on a share-for-share basis at the holder's option or automatically on most
transfers by the holder. Holders of Class A common stock have three votes per
share and holders of Class B common stock have one vote per share on all matters
submitted to a vote of holders of our common stock. Holders of Class A common
stock and holders of Class B common stock generally vote as a single class on
all matters submitted to a vote of stockholders of our common stock. You should
also be aware that we have stock option plans under which we must issue shares
of Class B common stock when the participants in the plans exercise their stock
options. As of April 20, 1999, there were (1) 1,788,494 shares issuable upon the
exercise of outstanding options, of which 277,823 were exercisable and (2)
617,631 shares were available for future awards of options under these plans. We
are seeking stockholder approval at our annual meeting on May 10, 1999, to
increase the authorized shares under one of our stock option plans by 1,000,000
shares. If and when we issue shares under these stock option plans, the
percentage of the Class B common stock you own will decrease. We base the
following information on 11,705,707 Class B common shares and 7,162,752 Class A
common shares outstanding at April 20, 1999.

<TABLE>
<S> <C>
Class B common stock offered...... 2,600,000 shares

Class B common stock outstanding
after the offering.............. 14,305,707 shares

Class A common stock outstanding
after the offering.............. 7,162,752 shares

Use of proceeds................... We intend to use the proceeds for general corporate
purposes, including potential acquisitions and working
capital. See "Use of Proceeds."

Risk factors...................... You should consider the risks discussed in "Risk
Factors" and elsewhere in this prospectus before
deciding whether to invest in our Class B common stock.

Nasdaq National Market symbol..... PHCC
</TABLE>

6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

THE FOLLOWING TABLE SUMMARIZES THE FINANCIAL INFORMATION FOR PRIORITY
HEALTHCARE CORPORATION. YOU SHOULD READ THIS INFORMATION WITH THE FINANCIAL
STATEMENTS AND NOTES TO THE FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS. SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------------------------------- ---------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales............................. $ 107,449 $ 123,990 $ 158,247 $ 230,982 $ 275,626 $ 58,129 $ 83,159
Cost of products sold................. 100,254 111,448 141,074 207,755 244,485 51,313 72,853
---------- ---------- ---------- ---------- ---------- --------- ---------
Gross profit.......................... 7,195 12,542 17,173 23,227 31,141 6,816 10,306
Selling, general and administrative
expense............................. 4,394 7,836 8,443 10,620 13,989 3,167 4,251
Depreciation and amortization......... 512 998 1,009 1,161 1,234 311 313
---------- ---------- ---------- ---------- ---------- --------- ---------
Earnings from operations.............. 2,289 3,708 7,721 11,446 15,918 3,338 5,742
Stock option expense.................. -- -- -- 350 -- -- --
Interest expense (income), net........ 200 511 437 887 (916) (109) (258)
---------- ---------- ---------- ---------- ---------- --------- ---------
Earnings before income taxes.......... 2,089 3,197 7,284 10,209 16,834 3,447 6,000
Provision for income taxes............ 835 1,311 2,915 4,058 6,691 1,370 2,382
---------- ---------- ---------- ---------- ---------- --------- ---------
Net earnings.......................... $ 1,254 $ 1,886 $ 4,369 $ 6,151 $ 10,143 $ 2,077 $ 3,618
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------

EARNINGS PER SHARE (1):
Basic............................... $ 0.08 $ 0.12 $ 0.29 $ 0.39 $ 0.54 $ 0.11 $ 0.19
Diluted............................. $ 0.08 $ 0.12 $ 0.29 $ 0.39 $ 0.54 $ 0.11 $ 0.19

WEIGHTED AVERAGE SHARES OUTSTANDING
(1):
Basic............................... 15,321 15,321 15,321 15,934 18,773 18,773 18,831
Diluted............................. 15,321 15,321 15,321 15,940 18,854 18,818 19,234
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1999
----------------------------
ACTUAL AS ADJUSTED(2)
-------- ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................................. $ 67,230 $147,522
Receivable from Bindley Western (3).............................. 13,166 13,166
Total assets..................................................... 114,605 194,897
Total liabilities................................................ 39,479 39,479
Stockholders' equity............................................. 75,126 155,418
</TABLE>

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(1) Adjusted to reflect the 3-for-2 stock split effected as a stock dividend
paid on May 4, 1999.

(2) As adjusted to reflect the net proceeds from the issuance and sale of
2,600,000 shares of Class B common stock at an assumed public offering price
of $32.75 per share, the last sale price of the Class B common stock
reported on the Nasdaq National Market on May 5, 1999.

(3) Represents loans of Priority Healthcare to Bindley Western on a short-term,
interest-bearing basis. The loan balances are due on December 31, 1999.
Priority Healthcare does not intend to advance additional funds to Bindley
Western, including any proceeds from this offering.

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<PAGE>
RISK FACTORS

INVESTING IN OUR CLASS B COMMON STOCK WILL PROVIDE YOU WITH AN EQUITY
OWNERSHIP IN PRIORITY HEALTHCARE CORPORATION. AS A STOCKHOLDER YOU MAY BE
SUBJECT TO RISKS INHERENT IN OUR BUSINESS. PERFORMANCE OF YOUR SHARES WILL
REFLECT THE PERFORMANCE OF OUR BUSINESS RELATED TO, AMONG OTHER THINGS, OUR
COMPETITION, GENERAL, ECONOMIC AND MARKET CONDITIONS AND INDUSTRY CONDITIONS.
THE PRICE OF OUR STOCK MAY DECLINE AND COULD LOWER THE VALUE OF YOUR INVESTMENT.
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AS WELL AS OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN SHARES OF OUR
CLASS B COMMON STOCK.

WE DEPEND ON A SINGLE SOURCE FOR SEVERAL OF OUR KEY PRODUCTS AND THE LOSS OF ANY
OF OUR KEY SUPPLIERS COULD ADVERSELY AFFECT OUR BUSINESS.

Any termination of, or adverse change in, our relationships with our key
suppliers or the loss of supply of one of our key products for any other reason,
could have a material adverse effect on our business, financial condition or
results of operations. During 1998, approximately 27% of our revenues were
attributable to sales of erythropoietin, known as EPO, to the renal care market.
EPO for the renal care market is available from only one manufacturer, Amgen,
Inc., with which we must maintain good working relations. We are involved in a
lawsuit in which this supplier is an adverse party. We have a single source of
supply for many of our other key products, including Neupogen-Registered
Trademark-, Procrit and Rebetron. In addition, we have few long-term contracts
with our suppliers. Our arrangements with most of our suppliers may be canceled
by either party, without cause, on minimal notice. Many of these arrangements
are not governed by written agreements.

OUR ACQUISITION STRATEGY MAY NOT BE SUCCESSFUL, WHICH COULD CAUSE OUR BUSINESS
AND FUTURE GROWTH PROSPECTS TO SUFFER.

We have built our current business in part through six acquisitions and we
expect to pursue acquisitions of complementary businesses in the future.
Acquisitions involve many risks, including:

- difficulties in identifying suitable acquisition candidates and in
negotiating and consummating acquisitions on terms attractive to us;

- difficulties in the assimilation of the operations of the acquired
company;

- the diversion of management's attention from other business concerns;

- risks of entering new geographic or product markets in which we have
limited or no direct prior experience;

- the potential loss of key employees of the acquired company; and

- the assumption of undisclosed liabilities.

In addition to the above risks, future acquisitions may result in the
dilution of earnings and the amortization or write-off of goodwill and
intangible assets, either of which could have a material adverse effect on our
business, financial condition or results of operations.

WE DEPEND ON REIMBURSEMENTS FROM THIRD PARTY PAYORS AND CHANGES IN REIMBURSEMENT
POLICIES COULD HAVE AN ADVERSE EFFECT ON OUR REVENUES AND RESULTS OF OPERATIONS.

The profitability of Priority Healthcare Pharmacy depends in large part on
reimbursement from third-party payors. In recent years, competition for
patients, efforts by traditional third-party payors to contain or reduce
healthcare costs, and the increasing influence of managed care payors, such as
health maintenance organizations, have resulted in reduced rates of
reimbursement. If

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these trends continue, they could adversely affect our results of operations
unless we can implement measures to offset the loss of revenues and decreased
profitability. The profitability of Priority Healthcare Distribution also
depends, indirectly, on reimbursement from third-party payors because our
office-based physician and clinic customers seek reimbursement from third-party
payors for the cost of pharmaceuticals and related medical supplies that we
distribute. Changes in reimbursement policies of private and governmental
third-party payors, including policies relating to the Medicare and Medicaid
programs, could reduce the amounts reimbursed to these customers for our
products and in turn, the amount these customers would be willing to pay for the
products. Although our revenues in 1998 did not include reimbursement from
Medicare and Medicaid, changes in those reimbursement policies affect our
customers, which in turn could have an adverse effect on us.

LOSS OF ONE OR MORE OF OUR LARGEST CUSTOMERS COULD HURT OUR BUSINESS BY REDUCING
OUR REVENUES AND PROFITABILITY.

During 1998, our largest 20 customers accounted for approximately 38% of our
revenues and one customer, Everest Healthcare Services Corporation, an operator
of dialysis clinics, accounted for 12% of our revenues. As is customary in our
industry, we generally do not have long-term contracts with our customers.
Significant declines in the level of purchases by one or more of these customers
or the loss of one of these customers through industry consolidation could have
a material adverse effect on our business, financial condition or results of
operations. Also, an adverse change in the financial condition of any of these
customers, including an adverse change as a result of a change in governmental
or private reimbursement programs, could have a material adverse effect on our
business, financial condition or results of operations. In addition, Pharmacy
Plus is an approved provider of injectable biopharmaceuticals to a national
managed care organization under a contract that may be terminated by either
party upon 90 days prior written notice. The loss of this contract could have a
material adverse effect on our business, financial condition or results of
operations. We also have a contract with a group purchasing organization for
physicians' offices under which we are a recommended supplier of
biopharmaceuticals. Failure to renew this contract could cause a reduction in
our sales through the loss of sales to members who determine not to purchase
from us on their own, which could result in a material adverse effect on our
business, financial condition or results of operations.

THE HIGH LEVEL OF COMPETITION IN OUR INDUSTRY PLACES PRESSURE ON OUR PROFIT
MARGINS AND WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.

The alternate site segment of the healthcare industry in which we operate is
highly competitive and is experiencing both horizontal and vertical
consolidation. All of the products which we sell are available from sources
other than us. The high level of competition in our industry places pressure on
profit margins, particularly those of Priority Healthcare Distribution. Some of
our competitors have greater financial, technical, marketing and managerial
resources than we have. These competitive pressures could have a material
adverse effect on our business, financial condition or results of operations.
Our current and potential competitors include:

- regional and national full-line, full-service medical supply distributors;

- independent specialty distributors;

- national full-line, full-service wholesale drug distributors that operate
their own specialty distribution businesses;

- institutional pharmacies;

- hospital-based pharmacies;

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<PAGE>
- home healthcare agencies;

- mail order distributors that distribute pharmaceuticals and medical
supplies on a regional or national basis; and

- manufacturers like Bristol-Myers Squibb Company that own distributors or
that sell their products both to distributors and directly to users,
including clinics and physician offices.

Bristol-Myers Squibb, a major pharmaceutical manufacturer, owns a
distributor which markets oncology-related products to the office-based
oncologist market, which is a market from which we derive substantial revenues.
As a result, that distributor has a significant price advantage over us on
Bristol-Myers Squibb products and currently controls a substantial portion of
the market for Bristol-Myers Squibb products. Other pharmaceutical
manufacturers, including those whose products account for a significant portion
of our revenues, also could limit the availability or change the terms of supply
of their products in the future.

THE DEVELOPMENT OF METHODS OTHER THAN INJECTION FOR PATIENTS TO TAKE
BIOPHARMACEUTICALS COULD ADVERSELY IMPACT US.

We dispense biopharmaceuticals in syringes to fill patient-specific
prescriptions. Most biopharmaceuticals must be injected subcutaneously, or under
the skin, to be effective. The development of other methods for patients to take
biopharmaceuticals, rather than by injection, could have a material adverse
effect on our business, financial condition or results of operations.

OUR BUSINESS AND OUR INDUSTRY ARE HIGHLY REGULATED AND IF GOVERNMENT REGULATIONS
ARE INTERPRETED OR ENFORCED IN A MANNER ADVERSE TO US OR OUR BUSINESS, WE MAY BE
SUBJECT TO ENFORCEMENT ACTIONS AND MATERIAL LIMITATIONS ON OUR OPERATIONS.

We and our customers and suppliers are extensively regulated by federal,
state and local government agencies. We are required to register our business
for permits and/or licenses with, and comply with certain operating and security
standards of, the United States Drug Enforcement Administration, or DEA, the
Food and Drug Administration, or FDA, state boards of pharmacy, state health
departments and other state agencies in states where we operate. Although we
believe that we have obtained or are obtaining the permits and/or licenses
required to conduct our business and operations, failure to have the necessary
permits and licenses could have a material adverse effect on our business,
financial condition or results of operations.

In addition, we are subject to federal and state regulations which govern
financial and other arrangements between healthcare providers, including the
federal anti-kickback statute and other fraud and abuse laws. Failure to comply
with these laws and regulations could subject us to significant civil sanctions
and could result in suspension of our operations.

Our pharmacy in Altamonte Springs, Florida has been inspected by the State
of Florida Board of Pharmacy and the FDA. In November 1995 and June 1997, the
FDA issued FDA Forms-483, which is the form used by FDA investigators to
identify any observed or suspected noncompliance with the laws administered by
the agency. The FDA Forms-483 identified the facility as a pharmacy/repackager
and listed three observations related to certain requirements that the FDA
typically imposes on manufacturers of sterile products. We believe that we are
not, under the statute or the regulations, a repackager or manufacturer.
Although we believe that our position is supported by an FDA Compliance Policy
Guide issued in 1992, and a 1997 amendment to the Federal Food, Drug and
Cosmetic Act, the criteria that differentiate drug manufacturing from pharmacy
operations are uncertain under the current state of the law. We cannot assure
you that our position is correct or that future legislation, future rulemaking,
or active enforcement by the

10
<PAGE>
FDA of a determination that we are a drug manufacturer will not have an adverse
effect on our business, financial condition or results of operations.

We are also subject to federal and state laws governing the confidentiality
of patient information. In addition, recent federal legislation will result in
new national standards for the protection of patient information in electronic
health information transactions. Failure to comply with all applicable laws and
regulations regarding medical information privacy could have a material adverse
effect on our business, financial condition or results of operations.

Federal regulatory and law enforcement authorities have recently increased
enforcement activities with respect to Medicare and Medicaid fraud and abuse
regulations and other reimbursement laws and rules, including laws and
regulations that govern the activities of many of our customers that depend upon
Medicare and Medicaid reimbursement in their businesses. We cannot assure you
that such increased enforcement activities will not indirectly have a material
adverse effect on our business, financial condition or results of operations.

Because the healthcare industry will continue to be subject to substantial
regulations, we cannot guarantee that our activities will not be reviewed or
challenged by regulatory agencies in the future. Any such action could have a
material adverse effect on our business, financial condition or results of
operations.

IF WE ARE UNABLE TO EFFECTIVELY ADAPT TO CHANGES IN THE HEALTHCARE INDUSTRY, OUR
CONTINUED SUCCESS COULD BE MATERIALLY ADVERSELY AFFECTED.

In recent years, the healthcare industry has experienced significant change
driven by efforts to reduce costs and improve standards of care. These efforts
include potential national healthcare reform, trends toward managed care,
purchasing groups and pharmacy benefit managers, cuts in Medicare and horizontal
and vertical consolidation within the healthcare industry. Our inability to
react effectively to these and other changes in the healthcare industry could
adversely affect our operating results. We cannot predict whether any healthcare
reform efforts will be enacted and what effect any such reforms may have on us
or our customers and suppliers.

A DISRUPTION IN OUR COMPUTER SYSTEM OR OUR TELEPHONE SYSTEM COULD INTERFERE WITH
OUR OPERATIONS AND HURT OUR RELATIONS WITH OUR CUSTOMERS.

Our success depends, in part, upon our telephone sales and direct marketing
efforts and our ability to provide prompt, accurate and complete service to our
customers on a price-competitive basis. Any continuing disruption in either our
computer system or our telephone system could adversely affect our ability to
receive and process customer orders and ship products on a timely basis, and
could adversely affect our relations with our customers, potentially resulting
in partial reduction in orders from customers or loss of customers.

OUR BUSINESS IS DEPENDENT ON SHIPPING AND PRICE INCREASES OR SERVICE
INTERRUPTIONS IN OUR SHIPPING SERVICES COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS AND OUR ABILITY TO DELIVER PRODUCTS ON A TIMELY BASIS.

Shipping is a significant expense and is essential to our operations. We
ship most of our orders by overnight courier or other delivery services, and we
typically pay the cost of shipment. As a result, any significant increase in
shipping rates could have an adverse effect on our results of operations.
Similarly, strikes or other service interruptions by couriers or other delivery
services would adversely affect our ability to deliver products on a timely
basis.

11
<PAGE>
OUR EXECUTIVE OFFICERS AND DIRECTORS HAVE EFFECTIVE CONTROL OVER ANY MATTER
SUBMITTED TO A VOTE OF OUR STOCKHOLDERS.

After the offering, our executive officers and directors will have the power
to vote approximately 1.2% of the Class B common stock, and 46.2% of the Class A
common stock, giving them approximately 28.2% of the combined voting power of
the outstanding common stock. As a result, they will be able to significantly
affect the outcome of any corporate transaction or other matter submitted to a
vote of our stockholders, and they may be able to prevent or cause a change in
control of our company.

OUR RELATIONSHIP WITH BINDLEY WESTERN POSES RISKS.

Three of our directors, including our Chairman of the Board, are executive
officers and directors of Bindley Western. We currently have, and will continue
to have, a variety of contractual relationships with Bindley Western, including
a Distribution Agreement entered into in connection with Bindley Western's
spin-off of our Class A common stock, an Indemnification and Hold Harmless
Agreement by which we and Bindley Western will indemnify and hold harmless each
other from certain obligations and contingent liabilities, a Tax Sharing
Agreement relating to the allocation of tax liabilities between Bindley Western
and us created up to December 31, 1998, and an Administrative Services Agreement
relating to certain services to be provided by Bindley Western to us. Bindley
Western's interests under the above contracts are adverse to our interests and
we cannot be certain whether Bindley Western management will use its position in
a manner adverse to us, either in the context of these contracts or otherwise.
We also have loaned significant amounts of our cash balances to Bindley Western.
At March 31, 1999, loans to Bindley Western, which mature on December 31, 1999,
aggregated $13.2 million. We do not intend to advance additional funds to
Bindley Western, including any proceeds from this offering. Although we believe
Bindley Western will pay the outstanding loans at maturity, we cannot assure you
that it will do so.

WE DEPEND ON KEY EMPLOYEES AND THE LOSS OF A KEY EMPLOYEE COULD ADVERSELY AFFECT
OUR BUSINESS.

Our future performance will depend in part on the efforts and abilities of
our key employees, including Robert L. Myers, President and Chief Executive
Officer. The loss of the services of Mr. Myers or other key employees could have
an adverse effect on our business. We have no key man life insurance policies on
any of our employees.

IF WE BECOME SUBJECT TO LIABILITY CLAIMS THAT ARE NOT ADEQUATELY COVERED BY OUR
INSURANCE POLICIES, WE MAY HAVE TO PAY DAMAGES AND OTHER EXPENSES WHICH COULD
HAVE A MATERIAL ADVERSE EFFECT ON US.

Our business exposes us to risks that are inherent in the distribution of
pharmaceuticals and the provision of ancillary services. A successful claim not
covered by our professional liability and products liability insurance or in
excess of our coverage under the insurance could have a material adverse effect
on our business, financial condition or results of operations. In addition, we
cannot guarantee that we will be able to maintain professional liability
insurance in the future on acceptable terms or with adequate coverage against
potential liabilities.

YEAR 2000 ISSUES MAY ADVERSELY AFFECT OUR BUSINESS.

The year 2000 will pose a unique challenge to industries that rely on
information technology. Because of the methods used by early programmers, many
software applications and operational programs may be unable to distinguish the
year 2000 from the year 1900. If not effectively

12
<PAGE>
addressed, this problem could result in the production of inaccurate data, or,
in the worst cases, the inability of the systems to continue to function
altogether. We and other companies in the same business are vulnerable to this
problem because of our dependence on distribution and communications systems.

Since December 31, 1996, we have replaced all of our hardware and software
systems for reasons other than year 2000 compliance. Our hardware systems and
our three main software systems have been tested and we believe they are year
2000 compliant. We also have tested the recently acquired software and hardware
systems of Pharmacy Plus and estimate that it will cost approximately $10,000 to
make those systems year 2000 compliant. We believe that the costs required to
bring our systems into compliance have not had and will not have a material
adverse effect on us. However, the year 2000 problem is widespread and complex
and can affect any computer process. As a result, we cannot guarantee that the
year 2000 compliance can be achieved without additional unanticipated
expenditures and uncertainties that might affect future financial results. In
addition, the failure of our key third party service providers, customers,
suppliers or third party payors to adequately address their year 2000 issues
could result in a material adverse effect on our business, financial condition
or results of operations.

WE MAY BE UNABLE TO EFFECTIVELY MANAGE SIGNIFICANT UNALLOCATED NET PROCEEDS FROM
THIS OFFERING, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON US.

We have not allocated the net proceeds from this offering to a specific use,
other than for general corporate purposes. We will have broad discretion in how
we use the net proceeds of this offering, which may include potential
acquisitions and working capital. The failure of management to apply these
proceeds effectively could have a material adverse effect on our business,
financial condition or results of operations, and therefore the market price of
the Class B common stock.

AVAILABILITY OF SIGNIFICANT AMOUNTS OF CLASS B COMMON STOCK FOR SALE COULD CAUSE
THE MARKET PRICE OF THE CLASS B COMMON STOCK TO FALL.

Upon completion of this offering, there will be approximately 7,162,752
shares of Class A common stock and 14,305,707 shares of Class B common stock
outstanding. Future sales of shares of Class B common stock, or the availability
of shares of Class B common stock for future sales, may cause the market price
of the shares of Class B common stock prevailing from time to time to fall. A
holder of Class A common stock can request to convert shares of Class A common
stock into shares of Class B common stock at any time on a share-for-share
basis. In addition, shares of Class A common stock will convert automatically
into shares of Class B common stock on a share-for-share basis upon any sale or
other transfer, except a transfer to family members of the transferor or trusts
for the benefit of or entities controlled by the transferor or family members of
the transferor. The outstanding Class B common stock and the Class B common
stock sold in this offering will be freely tradable without restrictions by
persons other than our affiliates. All of the shares of Class A common stock,
when converted into Class B common stock, will also be freely tradable without
restrictions by persons other than our affiliates. We, our executive officers
and our directors have generally agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Class B common stock, or any securities
convertible into or exercisable or exchangeable for shares of Class B common
stock, for a period of 120 days after the date of this prospectus without the
prior written consent of Raymond James & Associates, Inc.

THE MARKET PRICE FOR CLASS B COMMON STOCK MAY BE VOLATILE.

Future developments concerning our business or our competitors, including
operating results, governmental regulation, changes in financial estimates by
financial analysts or our failure to meet

13
<PAGE>
these estimates, and other factors, could have a significant impact on the
market price of the Class B common stock. In addition, in recent years the stock
market has experienced a high level of price and volume volatility, and market
prices for the stock of many companies, particularly small and emerging growth
companies, have experienced wide price fluctuations which have not necessarily
been related to the operating performance of these companies. These broad market
fluctuations could have a material adverse effect on the market price of the
Class B common stock.

ANTI-TAKEOVER PROVISIONS IN OUR ORGANIZATIONAL DOCUMENTS AND INDIANA LAW COULD
DETER TAKEOVER ATTEMPTS THAT STOCKHOLDERS MAY THINK ARE IN THEIR BEST INTERESTS.

Our Restated Articles of Incorporation and By-Laws contain provisions that
may have the effect of delaying, deferring or preventing a change in control of
our company, may discourage bids at a premium over the market price of the Class
B common stock and may adversely affect the market price of our common stock,
and the voting and other rights of the holders of the Class B common stock.
These provisions include:

- the division of our board of directors into three classes serving
staggered three-year terms;

- removal of directors only for cause and only upon a 66 2/3% stockholder
vote;

- requiring stockholders representing 80% of the voting power to call a
special meeting of stockholders;

- the ability to issue additional shares of our common stock or preferred
stock without stockholder approval; and

- advance notice requirements for raising business or making nominations at
stockholders' meetings.

The Indiana corporation law contains business combination provisions that,
in general, prohibit for five years any business combination with a beneficial
owner of 10% or more of our common stock unless the holder's acquisition of the
stock was approved in advance by our board of directors. The Indiana corporation
law also contains control share acquisition provisions that limit the ability of
certain stockholders to vote their shares unless their control share acquisition
was approved in advance.

USE OF PROCEEDS

We expect to receive approximately $80.3 million from the sale of the
2,600,000 shares of Class B common stock offered by us at an assumed public
offering price of $32.75 per share, based on the last reported sale price of the
Class B common stock on the Nasdaq National Market on May 5, 1999, after
deducting underwriting discounts and commissions and estimated expenses to be
paid by us. We expect to receive approximately $92.4 million of net proceeds if
the underwriters exercise their over-allotment option in full.

We intend to use the net proceeds of this offering for general corporate
purposes, including potential acquisitions and working capital. Pending these
uses, we expect to invest the net proceeds from this offering in short-term
investment grade, interest-bearing securities. While we engage in discussions
relating to potential acquisitions from time to time, we are not currently a
party to any definitive agreement or letter of intent regarding any material
acquisition, nor are there any material acquisitions which we consider probable.

14
<PAGE>
PRICE RANGE OF COMMON STOCK

Our Class B common stock trades on the Nasdaq National Market under the
symbol PHCC. Before October 24, 1997, there was no public market for the Class B
common stock. The prices shown below are the high and low sales quotations for
the Class B common stock as reported on the Nasdaq National Market for the
calendar period indicated, beginning on October 24, 1997, as adjusted to reflect
a 3-for-2 stock split effected as a stock dividend paid on May 4, 1999. As of
March 31, 1999, there were approximately 45 holders of record of Class B common
stock.

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1997:
Fourth Quarter (from October 24, 1997)................................. $ 11.00 $ 9.33

1998:
First Quarter.......................................................... 12.72 8.83
Second Quarter......................................................... 13.50 11.33
Third Quarter.......................................................... 16.17 10.83
Fourth Quarter......................................................... 35.96 13.17

1999:
First Quarter.......................................................... 33.58 18.17
Second Quarter (through May 5, 1999)................................... 37.83 29.58
</TABLE>

On May 5, 1999, the last sale price of the Class B common stock as reported
on the Nasdaq National Market was $32.75 per share. Our Class A common stock is
not listed for trading. However, because the Class A common stock is
automatically converted into Class B common stock on a one-for-one basis when it
is transferred (except in limited circumstances), the Class A common stock is
freely tradable except by our affiliates. Holders of Class A common stock have
three votes per share on matters submitted to a vote of our stockholders, and
holders of Class B common stock have one vote per share. Holders of Class A
common stock and holders of Class B common stock generally vote as a single
class on all matters submitted to a vote of stockholders. As of March 31, 1999,
there were approximately 780 holders of record of Class A common stock.

DIVIDEND POLICY

We do not expect to pay any cash dividends on our common stock in the
foreseeable future and we plan to retain our earnings to finance operations,
future growth and possible acquisitions. The payment of dividends on our common
stock will be at the discretion of our board of directors and must comply with
applicable law. In addition, the terms of our credit facility prohibit us from
paying dividends without the prior written consent of the lender, which may not
be unreasonably withheld. Any decisions to pay dividends in the future will
depend on a number of factors, including our financial condition, capital
requirements, future business prospects, the terms of any documents governing
our indebtedness and other factors that the board of directors deems relevant.

On March 31, 1997, we paid a dividend to Bindley Western in the form of a
subordinated promissory note with a principal amount of $6.0 million to return
to Bindley Western a portion of its equity investment in us. We satisfied in
full the dividend note on September 30, 1998.

On April 6, 1999, our board of directors declared a 3-for-2 stock split,
effected as a stock dividend paid on May 4, 1999, to stockholders of record at
the close of business on April 20, 1999. Holders of Class A common stock
received Class A common stock and holders of Class B common stock received Class
B common stock in the stock split.

15
<PAGE>
CAPITALIZATION

The following table shows (1) our actual capitalization as of March 31,
1999, after giving effect to a 3-for-2 stock split effected as a stock dividend
paid on May 4, 1999, and (2) our capitalization as adjusted to reflect our
receipt and application of the estimated net proceeds, at an assumed offering
price of $32.75 per share based on the last sale price of the Class B common
stock as reported on the Nasdaq National Market on May 5, 1999, from the sale of
Class B common stock offered by this prospectus. You should read this table with
the financial statements and the notes to the financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. This table excludes 2,420,900
shares of our Class B common stock which may be issued under our option plans.
Options to purchase an aggregate of 1,780,764 shares of Class B common stock
were outstanding under these plans on March 31, 1999.

<TABLE>
<CAPTION>
MARCH 31, 1999
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C>
Long-term obligations.................................................................... $ -- $ --
--------- ------------
Stockholders' equity:
Preferred Stock, no par value, 5,000,000 shares authorized; none issued or
outstanding.......................................................................... -- --
Class A Common Stock, $0.01 par value; 15,000,000 shares authorized; 8,198,245 shares
issued and outstanding, actual and as adjusted....................................... 82 82
Class B Common Stock, $0.01 par value; 40,000,000 shares authorized; 10,655,439 issued
and outstanding, actual; and 13,255,439 shares issued and outstanding, as adjusted... 107 133
Additional paid-in capital............................................................. 54,325 134,591
Retained earnings...................................................................... 20,612 20,612
--------- ------------
Total stockholders' equity........................................................... 75,126 155,418
--------- ------------
Total capitalization................................................................. $ 75,126 $ 155,418
--------- ------------
--------- ------------
</TABLE>

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

In the table below, we provide selected consolidated financial data of
Priority Healthcare Corporation. We prepared this information using our
unaudited consolidated financial statements for the three-month periods ended
March 31, 1998 and 1999 and from our audited consolidated financial statements
for the five years ended December 31, 1998. You should read this selected
consolidated financial data together with our consolidated financial statements
and notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in this prospectus. In our opinion, our selected
consolidated financial data for the three-month periods ended March 31, 1998 and
1999 include all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of such data. The selected consolidated
financial data do not necessarily indicate the results to be expected in the
future.

EARNINGS PER SHARE (1):
Basic............................... $ 0.08 $ 0.12 $ 0.29 $ 0.39 $ 0.54 $ 0.11 $ 0.19
Diluted............................. $ 0.08 $ 0.12 $ 0.29 $ 0.39 $ 0.54 $ 0.11 $ 0.19

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------- MARCH 31,
1994 1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................... $ 12,955 $ 16,000 $ 20,792 $ 57,488 $ 61,875 $ 67,230
Receivable from Bindley Western (2)... -- -- -- 5,290 16,517 13,166
Total assets.......................... 36,849 41,584 57,220 91,728 107,519 114,605
Payable to Bindley Western............ 8,345 3,873 9,290 -- -- --
Long-term obligations................. 113 751 560 272 -- --
Note payable to Bindley Western....... -- -- -- 6,000 -- --
Total liabilities..................... 16,610 16,553 27,820 31,845 37,478 39,479
Stockholders' equity.................. 20,239 25,031 29,400 59,883 70,041 75,126
</TABLE>

- ------------------------

(1) Adjusted to reflect the 3-for-2 stock split effected as a stock dividend
paid on May 4, 1999.

(2) Represents loans of Priority Healthcare to Bindley Western on a short-term,
interest-bearing basis. The loan balances are due on December 31, 1999.
Priority Healthcare does not intend to advance additional funds to Bindley
Western, including any proceeds from this offering.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion and analysis should be read with our consolidated financial
statements and related notes included elsewhere in this prospectus.

OVERVIEW

Priority Healthcare Corporation provides patient-specific self-injectable
biopharmaceuticals and disease treatment services to people with chronic
diseases, and specialty pharmaceuticals and related medical supplies to the
office-based physician, outpatient renal dialysis center and homecare markets.
From our formation in June 1994 through our initial public offering on October
24, 1997, we operated as a wholly owned subsidiary of Bindley Western. Since the
initial public offering, we have incurred and will continue to incur incremental
recurring legal, audit, risk management and administrative costs related to
operating as a stand-alone entity that we did not experience as a wholly owned
subsidiary of Bindley Western.

We have built our business through internal growth and acquisitions. The
acquisitions by Bindley Western or by us include:

- Charise Charles, Ltd., Inc., a specialty wholesale distributor of oncology
and renal care biopharmaceuticals, in February 1993;

- PRN Medical, Inc., a specialty wholesale distributor of renal care
supplies and dialysis equipment, in October 1993;

- 3C Medical, Inc., a specialty distributor of acute dialysis products, in
October 1994;

- IV-1, Inc., IV-One Services, Inc. and National Pharmacy Providers, Inc.,
three related companies that provided specialty pharmacy related
healthcare services, in January 1995;

- Grove Way Pharmacy, Inc., a vaccine and injectable drug distributor, in
August 1997; and

- Pharmacy Plus, Ltd., a specialty mail order pharmacy, on April 12, 1999.

Because these acquisitions were accounted for under the purchase method of
accounting, the results of operations of the acquired companies are, or in the
case of Pharmacy Plus will be, included in our financial statements from their
dates of acquisition. As a result, we believe that period-to-period comparisons
of financial position and results of operations may not be meaningful. You
should not rely on them to predict our future performance.

The majority of our net sales are currently derived from:

- the sale of Neupogen, Procrit, Intron-A and related oncological pharmacy
products and supplies to oncology practices through Priority Healthcare
Distribution;

- the sale of EPO, Calcijex, INFeD and related dialysis pharmacy products
and supplies to outpatient renal dialysis centers through Priority
Healthcare Distribution;

- the provision of Rebetron and related support services on a
patient-specific basis for treatment of hepatitis C through Priority
Healthcare Pharmacy; and

- the provision of Intron-A and related support services on a
patient-specific basis for treatment of hepatitis B and C and several
forms of cancer through Priority Healthcare Pharmacy.

We typically are reimbursed for products and services provided by Priority
Healthcare Pharmacy by third-party payors, primarily private insurers and
managed care organizations. Sales derived from agreements with managed care
organizations generally are made pursuant to

18
<PAGE>
established rates negotiated periodically. We typically are reimbursed for
products provided by Priority Healthcare Distribution directly by oncology
practices, renal dialysis centers and other healthcare providers and pricing is
negotiated directly with the providers. In 1998, our net sales did not include
reimbursement from Medicare or Medicaid. Net sales by Priority Healthcare
Pharmacy increased from 8% of total net sales in 1997 to 12% of total net sales
in 1998. The higher level of specialized services provided by Priority
Healthcare Pharmacy generates substantially higher margins than Priority
Healthcare Distribution. As a result, sales from pharmacy services have a
proportionately greater impact on our earnings than sales from our lower margin
distribution services.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated, the percentages of
total revenues represented by the respective financial items:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales......................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold............................................. 89.1 89.9 88.7 88.3 87.6
--------- --------- --------- --------- ---------
Gross profit...................................................... 10.9 10.1 11.3 11.7 12.4
Selling, general and administrative expense....................... 5.3 4.6 5.1 5.4 5.1
Depreciation and amortization..................................... 0.6 0.5 0.4 0.5 0.4
--------- --------- --------- --------- ---------
Earnings from operations.......................................... 4.9 5.0 5.8 5.8 6.9
Stock option expense.............................................. 0.0 0.2 0.0 0.0 0.0
Interest expense (income), net.................................... 0.3 0.4 (0.3) (0.2) (0.3)
--------- --------- --------- --------- ---------
Earnings before income taxes...................................... 4.6 4.4 6.1 6.0 7.2
Provision for income taxes........................................ 1.8 1.8 2.4 2.4 2.8
--------- --------- --------- --------- ---------
Net earnings...................................................... 2.8% 2.7% 3.7% 3.6% 4.4%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31,
1998

NET SALES. Net sales increased to $83.2 million in the first three months
of 1999 from $58.1 million in the first three months of 1998, an increase of
43%. The growth primarily reflected the addition of new customers, new product
introductions, including the new Rebetron treatment for hepatitis-C, additional
sales to existing customers and inflationary price increases.

GROSS PROFIT. Gross profit increased to $10.3 million in the first three
months of 1999 from $6.8 million in the first three months of 1998, an increase
of 51%. Gross profit as a percentage of net sales increased in the first three
months of 1999 to 12.4% from 11.7% in the first three months of 1998. The
increase in gross profit reflected increased sales by both Priority Healthcare
Pharmacy and Priority Healthcare Distribution. The increase in gross profit as a
percentage of net sales was primarily attributed to the change in sales mix, as
Priority Healthcare Pharmacy experienced increased sales, which generate higher
gross margins than Priority Healthcare Distribution sales. Competition continues
to exert pressure on margins, particularly those of Priority Healthcare
Distribution.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased to $4.3 million in the first three months of
1999 from $3.2 million in the first three months of 1998, an increase of 34%.
Selling, general and administrative expense as a percentage of net sales
decreased in the first three months of 1999 to 5.1% from 5.4% in the first three

19
<PAGE>
months of 1998. The increase in selling, general and administrative expense
reflected the growth in our business. The decrease in selling, general and
administrative expense as a percentage of net sales resulted from the spreading
of fixed costs over a larger sales base. Management continually monitors
selling, general and administrative expense and remains focused on controlling
these increases through improved technology and efficient asset management.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$313,000 in the first three months of 1999 from $311,000 in the first three
months of 1998, an increase of 0.6%. The increase was primarily the result of
additional depreciation on new equipment, particularly management information
systems, offset, in part, by a decrease in amortization of intangible assets
that became fully amortized.

INTEREST EXPENSE (INCOME), NET. Interest income, net of expense, increased
to $258,000 in the first three months of 1999, from $109,000 in the first three
months of 1998. In the first three months of 1999, interest income of $45,000
was primarily related to amounts earned by investing excess cash balances in
overnight repurchase agreements with a major financial institution and interest
income of $213,000 was related to loaning funds to Bindley Western. In the first
three months of 1998, interest income of $111,000 was primarily related to
amounts earned by investing funds received from the October 1997 initial public
offering of Class B common stock in overnight repurchase agreements with a major
financial institution and interest income of $112,000 was related to loaning
funds to Bindley Western. This interest income was partially offset by interest
expense of $109,000 in the first three months of 1998 for interest due on the
subordinated note issued to Bindley Western on March 31, 1997. The subordinated
note issued to Bindley Western was paid on September 30, 1998. The interest
income on the loans to Bindley Western was calculated by applying Bindley
Western's average incremental borrowing rate to the average outstanding loans.
The average outstanding loans to Bindley Western were $13.5 million in the first
three months of 1999, and $7.0 million in the first three months of 1998.
Bindley Western's average incremental borrowing rate was 5.3% in the first three
months of 1999 and 6.4% in the first three months of 1998.

PROVISION FOR INCOME TAXES. Through December 31, 1998, we participated in
the consolidated federal and state income tax returns filed by Bindley Western.
Bindley Western charged federal and state income tax expense to us as if we
filed our own separate federal and state income tax returns. The provision for
income taxes in the first three months of 1999 and 1998 represented 39.7% of
earnings before taxes.

1998 COMPARED TO 1997

NET SALES. Net sales increased to $275.6 million in 1998 from $231.0
million in 1997, an increase of 19%. The growth was primarily from the addition
of new customers, new product introductions, including Rebetron, additional
sales to existing customers and, to a lesser extent, the acquisition of Grove
Way Pharmacy and inflationary price increases.

GROSS PROFIT. Gross profit increased to $31.1 million in 1998 from $23.2
million in 1997, an increase of 34%. The increase in gross profit reflected
increased sales by both Priority Healthcare Pharmacy and Priority Healthcare
Distribution. Gross profit as a percentage of net sales increased in 1998 to
11.3% from 10.1% in 1997. This increase was primarily the result of the change
in sales mix caused by the significant increase in sales by Priority Healthcare
Pharmacy which generated higher gross margins than those of Priority Healthcare
Distribution. Competition continues to exert pressure on margins, particularly
those of Priority Healthcare Distribution.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased to $14.0 million in 1998 from $10.6 million in
1997, an increase of 32%. Selling, general

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and administrative expense as a percentage of net sales increased to 5.1% in
1998 from 4.6% in 1997. We constantly monitor selling, general and
administrative expense and remain focused on controlling these increases through
improved technology and efficient asset management. The increase in selling,
general and administrative expense as a percentage of net sales resulted from
incurring expenses associated with our Grove City, Ohio facility, which opened
in November 1997, training and payroll costs from hiring additional sales
personnel at Priority Healthcare Pharmacy, and increased overall costs of being
a publicly traded company.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization was $1.2
million in both 1998 and 1997.

INTEREST EXPENSE (INCOME), NET. Interest income, net, was $916,000 in 1998,
as opposed to interest expense, net, of $887,000 in 1997. In 1998, interest
income of $348,000 was primarily related to amounts earned by investing funds
received from the October 1997 initial public offering of our Class B common
stock in overnight repurchase agreements with a major financial institution and
interest income of $1.1 million related to loaning funds to Bindley Western.
This interest income was partially offset by interest expense of $326,000 on the
subordinated note issued to Bindley Western on March 31, 1997, which was paid
September 30, 1998, and interest expense of $155,000 on the deferred
compensation of one of our executives. During 1997, the interest expense
primarily resulted from borrowings from Bindley Western and $324,000 of interest
expense on the subordinated note issued to Bindley Western. The interest income
or expense on the loans to or borrowings from Bindley Western is calculated by
applying Bindley Western's average incremental borrowing rate, which was 6.3%
for 1998 and 6.4% for 1997, to the average outstanding balances. During 1998,
the average outstanding loans to Bindley Western were $16.9 million, while in
1997 the average outstanding borrowings from Bindley Western were $10.3 million.

PROVISION FOR INCOME TAXES. Through December 31, 1998, we participated in
the consolidated federal and state income tax returns filed by Bindley Western.
Bindley Western charged federal and state income tax expense to us as if we
filed our own separate federal and state income tax returns. The provision for
income taxes in 1998 represented 39.7% of earnings before taxes and the
provision for income taxes in 1997 represented 39.8% of earnings before taxes.

1997 COMPARED TO 1996

NET SALES. Net sales increased to $231.0 million in 1997 from $158.2
million in 1996, an increase of 46%. The growth reflected the addition of new
customers, new product introductions, additional sales to existing customers
and, to a lesser extent, inflationary price increases of approximately 4%.

GROSS PROFIT. Gross profit increased to $23.2 million in 1997 from $17.2
million in 1996, an increase of 35%. The increase in gross profit reflected
increased sales by both Priority Healthcare Pharmacy and Priority Healthcare
Distribution. Gross profit as a percentage of net sales decreased in 1997 to
10.1% from 10.9% in 1996. This decrease was primarily attributable to the change
in sales mix resulting from the significant increase in sales by Priority
Healthcare Distribution which generated lower gross margins than those of
Priority Healthcare Pharmacy. Competition continues to exert pressure on
margins, particularly those of Priority Healthcare Distribution.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense increased to $10.6 million in 1997 from $8.4 million in
1996, an increase of 26%. Still, selling, general and administrative expense as
a percentage of net sales decreased to 4.6% in 1997 from 5.3% in 1996.
Management constantly monitors selling, general and administrative expense and
remains focused on controlling these increases through improved technology and
efficient asset

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management. The decrease in selling, general and administrative expense as a
percentage of net sales resulted from the revenue growth in excess of the fixed
portion of selling, general and administrative expense.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$1.2 million in 1997 from $1.0 million in 1996, an increase of 15%. The increase
was primarily the result of depreciation of new equipment, particularly
management information systems.

STOCK OPTION EXPENSE. Upon completion of our initial public offering, we
granted one of our consultants a 10-year option to purchase 50,000 shares of
Class B common stock at the initial public offering price. The grant of this
option resulted in a one-time compensation expense charge of $350,000 in 1997.
The number of shares and the exercise price of this option have subsequently
been adjusted to reflect the 3-for-2 stock split.

INTEREST EXPENSE (INCOME), NET. Interest expense increased to $1.0 million
in 1997 from $457,000 in 1996. This expense was primarily related to financing
provided to us by Bindley Western through our initial public offering date. The
expense also included $324,000 of interest due on the subordinated note issued
to Bindley Western on March 31, 1997. The interest expense on the intercompany
borrowings was calculated by applying the Bindley Western average incremental
borrowing rate to the average outstanding borrowings, while interest on the
subordinated note was calculated at the fixed 7.25% face rate of the note. The
average outstanding borrowings, excluding the subordinated note, were $10.3
million during 1997 and $6.4 million during 1996, and the average incremental
borrowing rate charged was 6.4% in both 1997 and 1996.

Interest income increased to $153,000 in 1997 from $20,000 in 1996. This
income included $87,000 earned on short-term investments with outside financial
institutions and finance charges from customers. The remaining $66,000 of
interest income was from advances to Bindley Western subsequent to our initial
public offering date. This interest income was calculated by applying the
Bindley Western average incremental borrowing rate to the average outstanding
advances. During the last two months of 1997, the average outstanding balance
was $5.9 million and the average incremental borrowing rate was 6.4%.

PROVISION FOR INCOME TAXES. We participated in the consolidated federal and
state income tax returns filed by Bindley Western. Bindley Western charged
federal and state income tax expense to us as if we filed our own separate
federal and state income tax returns. The provision for income taxes in 1997
represented 39.8% of earnings before taxes as compared to 40.0% for 1996.

LIQUIDITY AND CAPITAL RESOURCES

Our principal capital requirements have been to fund working capital needs
to support internal growth, for acquisitions and for capital expenditures. Our
principal working capital needs are for inventory and accounts receivable.
Management controls inventory levels in order to minimize carrying costs and
maximize purchasing opportunities. We sell inventory to our customers on various
payment terms. This requires significant working capital to finance inventory
purchases and entails accounts receivable exposure in the event any of our major
customers encounter financial difficulties. Although we monitor closely the
creditworthiness of our major customers, we cannot assure you that we will not
incur some collection loss on major customer accounts receivable in the future.

We had cash of $5.7 million, cash advances to Bindley Western of $13.2
million and working capital of $67.2 million at March 31, 1999. In addition, we
have a $10.0 million unsecured line of credit under which we had at March 31,
1999 a $5.0 million letter of credit outstanding and $5.0 million of additional
availability.

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THREE MONTHS ENDED MARCH 31, 1999

NET CASH PROVIDED BY OPERATING ACTIVITIES. Our operations generated
$951,000 in cash during the first three months of 1999. Accounts receivable
increased $4.3 million during the first three months of 1999, primarily to
support the increase in sales and the extension of credit terms to meet
competitive conditions. Inventory increased $145,000 during the first three
months of 1999 to support the increase in sales. Trade accounts payable
increased $2.1 million to partially reduce the cash required for the accounts
receivable increase. This increase was attributable to the timing of payments,
the inventory increase and the credit terms negotiated with vendors.
Depreciation and amortization totaled $313,000 during the first three months of
1999.

NET CASH USED BY INVESTING ACTIVITIES. Capital expenditures during the
first three months of 1999 totaled $65,000. We expect that capital expenditures
during the last nine months of 1999 will be approximately $1.0 million and
during 2000 will be approximately $1.0 million. We anticipate that these
expenditures will relate primarily to the purchase of computer hardware and
software, telecommunications equipment, and furniture and equipment for our new
corporate office. We expect to complete the move to our new corporate office in
November of 1999.

NET CASH PROVIDED BY FINANCING ACTIVITIES. We have advanced excess cash to
Bindley Western on an interest-bearing basis under the terms of a $25.0 million
revolving credit promissory note which is effective through December 31, 1999,
at which time all outstanding amounts are due in full. During the first three
months of 1999, our receivable from Bindley Western decreased by $3.4 million.
During the first three months of 1999, we also received proceeds of $1.5
million, including the income tax benefit, from stock option exercises.

YEAR ENDED DECEMBER 31, 1998

NET CASH PROVIDED BY OPERATING ACTIVITIES. Our operations generated $10.4
million in cash during 1998. Accounts receivable increased $13.2 million,
primarily to support the increase in sales and the extension of credit terms to
meet competitive conditions. Inventory decreased $695,000 in 1998 due to our
conscious effort to closely monitor inventory and maintain it at an optimal
level. The $10.7 million increase in trade accounts payable partially reduced
the cash requirements for accounts receivable; this increase resulted from the
timing of payments and the credit terms negotiated with vendors. Depreciation
and amortization totaled $1.2 million in 1998.

NET CASH USED BY INVESTING ACTIVITIES. In 1998 we purchased $825,000 in
fixed assets, primarily computer hardware and software. We expect that capital
expenditures during 1999 will be approximately $1.1 million. We anticipate that
these expenditures will relate primarily to the purchase of computer hardware
and software, telecommunications equipment, and furniture and equipment for a
new corporate office.

NET CASH USED BY FINANCING ACTIVITIES. We have advanced excess cash to
Bindley Western on an interest-bearing basis under the terms of a $25.0 million
Revolving Credit Promissory Note which is effective through December 31, 1999,
at which time all outstanding amounts are due in full. In 1998 this receivable
from Bindley Western increased by $11.2 million. We also paid the $6.0 million
subordinated note payable to Bindley Western.

Management believes that cash from operations, the proceeds of this
offering, repayment by Bindley Western of advances made to it and availability
under our line of credit will be sufficient to meet our working capital needs
for at least two years.

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SELECTED QUARTERLY FINANCIAL RESULTS

The following table presents selected unaudited quarterly statement of
earnings items, and percentages of total sales represented by those respective
items, for each of the last six fiscal quarters ended March 31, 1999. This
information has been prepared on the same basis as the audited financial
statements appearing elsewhere in this prospectus, and includes all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of the information when read in conjunction with our
consolidated financial statements and notes thereto appearing elsewhere in this
prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1997 1998 1998 1998 1998 1999
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales................................ $ 61,682 $ 58,129 $ 63,924 $ 71,723 $ 81,850 $ 83,159
Gross profit............................. 6,207 6,816 6,930 8,053 9,342 10,306
Earnings from operations................. 3,037 3,338 3,571 4,070 4,939 5,742
Net earnings............................. 1,605 2,077 2,271 2,653 3,143 3,618

AS A PERCENTAGE OF NET SALES:
Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............................. 10.1 11.7 10.8 11.2 11.4 12.4
Earnings from operations................. 4.9 5.7 5.6 5.7 6.0 6.9
Net earnings............................. 2.6 3.6 3.6 3.7 3.8 4.4
</TABLE>

INFLATION

Our financial statements are prepared on the basis of historical costs and
are not intended to reflect changes in the relative purchasing power of the
dollar. Because of our ability to take advantage of forward purchasing
opportunities, we believe that our gross profits generally increase as a result
of manufacturers' price increases in the products we distribute. Gross profits
may decline if the rate of price increases by manufacturers declines.

Generally, price increases are passed through to customers as we receive
them and therefore they reduce the negative effect of inflation. Other
non-inventory cost increases, such as payroll, supplies and services, have been
partially offset during the past three years by increased volume and
productivity.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary exposure to market risk consists of changes in interest rates on
our loans to Bindley Western. Interest income on these loans is determined based
on Bindley Western's average incremental borrowing rate (a variable rate) with
its third-party lender. A decrease in interest rates would adversely affect our
operating results and cash flow available to fund operations and expansion.
Based on the average loan balance for the first three months of 1999, a decrease
of 10% in Bindley Western's average incremental borrowing rate would result in
an approximately $85,000 annual decrease in interest income. In contrast, a 10%
increase in Bindley Western's average incremental borrowing rate would result in
an approximately $85,000 annual increase in interest income.

YEAR 2000 COMPLIANCE

The year 2000 will pose a unique set of challenges to those industries that
rely on information technology. Because of the methods employed by early
programmers, many software applications

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and operational programs may be unable to distinguish the year 2000 from the
year 1900. If not effectively addressed, this problem could result in the
production of inaccurate data, or, in the worst cases, the inability of the
systems to continue to function altogether. We and other companies in the same
business are vulnerable to this problem because of our dependence on
distribution and communications systems.

Since December 31, 1996, we have replaced all of our hardware and software
systems for reasons other than year 2000 compliance; we have spent approximately
$425,000 for these systems. The hardware systems have been successfully tested
for year 2000 compliance. In May 1998, we initiated the process of preparing our
software applications to make them year 2000 compliant. Two of the three main
software packages that we use were tested for year 2000 compliance during 1998
and the third software package was upgraded during January 1999. We believe
these software systems are now year 2000 compliant. The total costs relating to
the upgrade of our software programs was approximately $75,000. Funds for these
payments were generated from operations. In addition, we have tested the
recently acquired software and hardware systems of Pharmacy Plus and estimate
that it will cost approximately $10,000 to make those systems year 2000
compliant.

We believe that the payments required to bring our systems into compliance
have not had and will not have a material adverse effect on us. However, the
year 2000 problem is widespread and complex and can potentially affect any
computer process. As a result, we cannot assure you that the year 2000
compliance can be achieved without additional unanticipated expenditures and
uncertainties that might affect future financial results.

Also, to operate our business, we rely on governmental agencies, utility
companies, telecommunications companies, shipping companies, suppliers and other
third party service providers over which we have little control. Our ability to
conduct our business is dependent upon the ability of these third parties to
avoid year 2000 related disruptions. We are in the process of contacting our
third party service providers about their year 2000 readiness, but we have not
yet received any assurances from any of these third parties about their year
2000 compliance. The failure of our key third party service providers,
customers, suppliers or third party payors to adequately address their year 2000
issues could result in a material adverse effect on our business, financial
condition or results of operations.

We have not to date developed any contingency plans, because these plans
will depend in part on the responses from our third party service providers.

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<PAGE>
BUSINESS

OVERVIEW

Priority Healthcare Corporation provides patient-specific, self-injectable
biopharmaceuticals and disease treatment services to people with chronic
diseases, and specialty pharmaceuticals and related medical supplies to the
office-based physician, outpatient renal dialysis center and homecare markets.
We provide products that are administered by physicians or patients themselves
in a non-hospital setting and that typically require specialized shipping and
support services.

INDUSTRY AND MARKET OVERVIEW

INDUSTRY OVERVIEW. The alternate site, or non-hospital, specialty
pharmaceutical and medical supply industry is fragmented with many public and
private companies focusing on different product or customer niches. Few
companies offer a wide range of pharmaceuticals and related supplies targeted to
multiple customer groups, specifically office-based physicians and outpatient
renal dialysis centers. Historically, cancer therapy, renal dialysis and most
other treatments for chronic and life-threatening medical conditions were
administered almost exclusively in a hospital inpatient setting. During the
1990s, these treatments have been administered outside the hospital with more
frequency, primarily in response to cost control efforts.

The operations of office-based physicians and clinics are very different
from those of the hospital market, creating logistical challenges and increasing
administrative costs for those offices. Office-based physicians and clinics
generally order relatively small quantities of drugs at irregular intervals and
do not have inventory management systems or sufficient pharmacy staffing.
Challenges facing these caregivers include building necessary administrative and
financial resources, managing relationships with multiple suppliers, managing
inventories, billing patients and third-party payors and monitoring new clinical
developments. We believe that the shift from hospital-based to office-based or
home-based care has created a significant opportunity, particularly in the
oncology, gastroenterology, renal dialysis and vaccine markets.

ONCOLOGY. The number of cancer patients continues to grow in the United
States. According to estimates by the American Cancer Society, approximately 1.2
million cases of cancer will be diagnosed in the United States in 1999. The
overall incidence of cancer is expected to increase as the average age of the
U.S. population continues to increase. According to the National Institutes of
Health, or NIH, over 50% of all cancers are diagnosed in people age 65 or over.

The principal treatments for cancer are surgery and a regimen of radiation
and pharmaceutical treatments. Surgery usually involves hospitalization, but
radiation and chemotherapy are increasingly being delivered in alternate site
settings like the physician office and the home. The NIH estimates that direct
medical costs for the treatment of cancer in the United States will be $37.0
billion in 1999. Frost & Sullivan estimated the U.S. market for oncology
pharmaceuticals to be $4.1 billion in 1996 and projected it to grow at a
compound annual rate of 13.2% from 1996 through 2003. We believe that the
office-based segment of the oncology pharmaceutical market represents
approximately 25% of that market and has been growing faster than the oncology
pharmaceutical market. Growth in the oncology pharmaceutical market is expected
to be driven by the continued introduction of new pharmaceuticals and increases
in the incidence of cancer. Almost one-half of the 350 biotechnology medicines
currently in development are cancer related, according to a 1998 survey
conducted by Pharmaceutical Research and Manufacturers of America, or PhRMA.

GASTROENTEROLOGY. We operate in the gastroenterology market, mainly through
the sale of interferon and Rebetron for the treatment of hepatitis C. The NIH
estimates that nearly

26
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four million Americans are infected with hepatitis C and that approximately
30,000 new acute hepatitis C infections occur each year. According to the NIH,
the occurrence of hepatitis C infection appears to be declining from its peak in
1989, but only 25% to 30% of new hepatitis C infections are currently diagnosed.
We believe the treated portion of this population is likely to increase as
awareness of hepatitis disease management programs increases. According to the
NIH, hepatitis C is responsible for 8,000 to 10,000 deaths annually and is
currently the leading reason for liver transplantation in the United States.

RENAL DIALYSIS. According to the Health Care Financing Administration, or
HCFA, the incidence of end-stage renal disease is growing by approximately 6%
per year. End-stage renal disease causes the irreversible loss of kidney
function and requires kidney transplantation or routine dialysis treatment,
including hemodialysis, which involves removing waste products and excess fluids
from the blood. According to HCFA, as of December 31, 1997, over 80% of dialysis
patients, which we believe is still valid, were receiving hemodialysis in
outpatient treatment centers. Hemodialysis typically uses various specialty
pharmaceuticals and related medical supplies as part of the treatment.
Hemodialysis treatments usually last three hours and are performed three times a
week at over 3,000 outpatient facilities in the United States. The medication
most frequently prescribed to hemodialysis patients is EPO, which stimulates the
production of red blood cells, as well as Calcijex-Registered Trademark-
(calcium), INFeD-Registered Trademark- (iron), hepatitis vaccine and other
nutrient compounds. According to HCFA, EPO was being used to treat approximately
230,000 hemodialysis patients in 1997. We estimate that the United States market
for EPO alone exceeds $1.0 billion. Growth in this market is driven by the
general aging of the population, favorable reimbursement trends and proposed
regulatory changes, expansion of ancillary services and increased managed care
contracts.

VACCINE MARKET. The worldwide vaccine market currently exceeds $3.0 billion
annually, and is expected to grow to $7.0 billion by 2001, according to
SmithKline Beecham, one of the leading vaccine manufacturers. Growth in the
vaccine market is expected to be driven by the growth of combination pediatric
vaccines, travelers' vaccines, vaccines for adolescent protection, vaccines for
the elderly and vaccines to treat chronic infectious disease and cancer. We
estimate that pediatric vaccines represent 40% of the world market, and
hepatitis vaccines represent over 20% of the world market. According to the 1998
PhRMA survey, 77 vaccines are currently in development.

BUSINESS STRENGTHS

We believe the following business strengths have been major contributors to
our business success to date.

CLINICAL EXPERTISE. We provide disease treatment services to patients and
physicians through our highly trained clinical staff of pharmacists, nurses and
patient care coordinators. These personnel are available for ongoing
consultation with the patient and the dispensing physician regarding the
patient's therapy and progress seven days a week, 24 hours a day. To serve the
specific needs of our Priority Healthcare Pharmacy customers, we operate a
licensed pharmacy in Florida, which has been accredited with commendation by the
Joint Commission on Accreditation of Healthcare Organizations.

KNOWLEDGEABLE SALES, MARKETING AND SUPPORT STAFF. We have a well-trained,
knowledgeable telemarketing and sales support staff of approximately 50
full-time associates. Our sales support staff and telemarketers are most
experienced in the areas of oncology, gastroenterology, renal care and vaccines.
We hold frequent meetings and training sessions with our suppliers to enable our
sales and support staff to be well-informed about current and new
biopharmaceuticals. The sales and support staff provides knowledgeable customer
service, and promotes the sale of new products.

27
<PAGE>
BROAD PRODUCT OFFERINGS TO TARGETED MARKETS. We sell over 3,500 SKUs of
pharmaceuticals and medical supplies which enables us to provide "one-stop
shopping" to our customers. We target our selling efforts of products and
services to customers in alternate site settings, such as office-based
physicians and renal dialysis clinics. We constantly evaluate new products that
we can add to our offerings to continue to meet the needs of these specialized
markets.

COMMITMENT TO HIGH LEVEL OF CUSTOMER SERVICE. We are committed to providing
superior customer service that includes shipping products ordered before 6 p.m.
for delivery the next day and filling 99% of our orders within one day of being
ordered. Our software enables our salespeople to quickly determine product
availability, pricing, customer order history and billing information. Also,
Priority Healthcare Pharmacy provides patient education, counseling and
follow-up with 24-hour on-call pharmacists, nurses and patient care coordinators
to assist our patients in better understanding and following their treatments.

ESTABLISHED RELATIONSHIPS WITH LARGE CUSTOMER BASE OF PHYSICIANS, CLINICS
AND PATIENTS. We have an established customer base of over 2,000 physicians and
clinics, and over 2,500 patients, which enables us to provide value-added
services to biopharmaceutical manufacturers that desire direct access to
physicians and patients. These services include educating patients, monitoring
patient compliance, assisting in clinical trials and assisting in the
introduction of new biopharmaceuticals.

EFFICIENT OPERATING INFRASTRUCTURE. In the last two years, we have focused
considerable time and expense on building an infrastructure, including computer
systems and training, to enable us to operate efficiently and manage rapid
growth. Our management also focuses on tightly controlling expenses and is
constantly re-evaluating the efficiency of its operations, including purchasing
and distribution.

GROWTH STRATEGY

Our goal is to continue to grow rapidly and enhance our market position as a
leading specialty distributor by taking advantage of our business strengths and
pursuing the following strategies.

ACCELERATE GROWTH OF OUR HIGHER MARGIN, PATIENT-SPECIFIC PHARMACY
BUSINESS. We intend to continue to add telemarketing and sales support
personnel in an effort to reach more potential pharmacy customers and referring
physicians. By adding new product offerings, we should be able to attract a
broader range of additional customers. We believe that a number of physicians
that order pharmaceuticals and supplies from us also treat patients who require
patient-specific, self-injectable biopharmaceuticals. We use our database of
over 2,000 customers, including physicians focusing on oncology,
gastroenterology, renal care and vaccines, to identify these cross-selling
opportunities. We believe we are well-positioned to capture increased revenue
from these customers.

PROVIDE SERVICES FOR ADDITIONAL DISEASES BY TARGETING NEW PRODUCT CATEGORIES
AND PATIENT-SPECIFIC BIOPHARMACEUTICALS. We intend to begin providing services
for additional chronic diseases such as rheumatoid arthritis. Also, by targeting
additional chronic disease therapies that require patient-specific,
self-injectable biopharmaceuticals, we continue to leverage our clinical and
operational expertise from our existing disease services and expand our market.

ENHANCE EXISTING AND CREATE NEW RELATIONSHIPS WITH BIOPHARMACEUTICAL
MANUFACTURERS. We believe that our physician, clinic and patient customer base
is of significant value to biopharmaceutical manufacturers and enhances our
ability to form alliances which could expand our products, services and
geographic scope. Our current relationships focus on oncology, gastroenterology,
chronic renal dialysis and vaccines. We intend to target additional physicians
and patients in the rheumatoid arthritis and fertility markets. By increasing
the number of

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<PAGE>
specialists and the range of specializations in our customer base, we believe
that we enhance our value to biopharmaceutical manufacturers.

MAINTAIN INTENSE COST CONTROL WHILE INVESTING IN OPERATING
INFRASTRUCTURE. Our goal is to remain a low cost provider of specialty
distribution products, while increasing value-added services to customers, such
as 24-hour on-call nurse support, patient counseling, specialized shipping and
software to our larger customers.

CONTINUE TO FOCUS ON AND FURTHER PENETRATE THE ALTERNATE SITE MARKET. By
focusing our Priority Healthcare Distribution business on the alternate site
market, we have targeted growth segments of the healthcare industry. We intend
to increase our alternate site market presence by expanding our product and
service offerings, increasing our telemarketing and sales support personnel and
committing resources to developing additional group accounts.

PURSUE ACQUISITIONS THAT COMPLEMENT OUR EXISTING PRODUCT OFFERINGS OR ADD
NEW PRODUCT OFFERINGS. We believe that the highly fragmented specialty
distribution and pharmacy industries present us with an opportunity to grow
through selective acquisitions. By acquiring complementary businesses, we can
increase our customer base, expand our product and geographic scope and
supplement our existing infrastructure. For example, the acquisition of Grove
Way Pharmacy enabled us to enter the market for distribution of vaccines into
the alternate site market and our recent acquisition of Pharmacy Plus has added
a mail order capability to our business.

PRODUCTS AND SERVICES

PRIORITY HEALTHCARE PHARMACY. Priority Healthcare Pharmacy provides
patient-specific, self-injectable biopharmaceuticals and related disease
treatment services to individuals with chronic diseases. In Altamonte Springs,
Florida, Priority Healthcare Pharmacy fills patient-specific prescriptions and
ships them via overnight delivery in special shipping containers to maintain
appropriate temperatures. The following biopharmaceuticals are provided to
patients as one component of our comprehensive disease treatment services:

- Rebetron, an oral antiviral and a synthetic biopharmaceutical used to
treat hepatitis C;

- interferon, a synthetic biopharmaceutical used to treat hepatitis B and C
and oncology patients;

- epoetin alfa, a synthetic biopharmaceutical used to treat anemia; and

- octreotide, a synthetic hormone used to treat diarrhea associated with
intestinal peptide tumors.

Priority Healthcare Pharmacy continues to evaluate expanding its product
offerings.

In connection with the delivery of biopharmaceuticals, our pharmacy and
nursing staff provide disease treatment services, including education,
counseling and other services. We have a distinctive approach to interacting
with patients from the time of initial contact through completion of the disease
treatment program. Upon referral, after we verify insurance or other
reimbursement information, our intake nurses call the new patients, explain the
program and provide education on self-injection techniques, side effects and
potential adverse drug interactions. After the initial prescription delivery,
patients are contacted by patient care coordinators who listen to patient
concerns, direct questions to our clinical staff, assess patient compliance and
progress, and inquire regarding any potential side effects. In addition, our
pharmacists and registered nurses are available for ongoing consultation with
the patient and the dispensing physician regarding the patient's therapy and
progress seven days a week, 24 hours a day.

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A key component of our disease treatment services is our preparation,
shipment and delivery of products. At initial contact, our patient care
coordinators arrange the next scheduled prescription delivery and verify the
shipping address in order to avoid any problems with delivery. Most parenteral,
or injectable, prescriptions are prepared in sterile conditions that are
maintained by using class 100 laminar flow hoods. We prepare each prescription,
including filling syringes, so that it is ready to use upon delivery. Licensed
pharmacists verify the prescription with the prescribing physician and recheck
the prescription before shipping. In order to ensure the safe delivery of
prescriptions to the patient, we call the patient several days before shipping
to confirm that the patient or another person will be at home to receive the
package upon delivery. In addition, we require the overnight delivery service
provider to obtain a signed receipt before leaving the prescriptions at a
residence.

We believe our disease treatment services offer many advantages to patients,
physicians, third-party payors and drug manufacturers. These advantages include:

- increased patient compliance with the prescribed therapy;

- education of patients on the preparation and use of injectable
biopharmaceuticals;

- reduced potential for patient errors in dosing or product waste;

- decreased patient and caregiver anxiety;

- reduced overall cost of treatment; and

- collection of better outcomes data on the results of patient treatment.

We also expect to offer additional services to patients and physicians
through our website at www.hepatitisneighborhood.com. Our goal is to provide
Internet users with helpful, health-related information, including information
about diseases as well as general well-being. Initially, we will build the
content of our website to include information regarding hepatitis C. In the
longer term, we plan to provide confidential patient-specific information,
including specific disease treatment services, accessible only by the particular
patient and the treating physician. We will continue to assess changes in and
additions to the content of our website based on the feedback that we receive
from patients, physicians and other Internet users who access the site. The
information on the website is not a part of this prospectus.

PRIORITY HEALTHCARE DISTRIBUTION. Priority Healthcare Distribution provides
a broad range of services and supplies to meet the needs of the alternate site
market, including office-based physicians in the oncology and infectious disease
markets, outpatient renal dialysis centers and office-based physicians
administering vaccines. Priority Healthcare Distribution offers value-added
services to meet the specialized needs of these markets such as shipping
refrigerated pharmaceuticals overnight in special packaging to maintain
appropriate temperatures and offering automated order entry services and
customized distribution for group accounts. Priority Healthcare Distribution
distributes its products from distribution centers in Tustin, California and
Grove City, Ohio. We sell over 3,500 SKUs of pharmaceuticals such as EPO,
Neupogen, Calcijex and INFeD and related medical supplies such as dialyzers,
blood tubing, fistula needles, IV sets, transducers, tape and sponges. During
1998, approximately 27% of our revenues were from sales of EPO to the renal care
market. EPO for the renal care market is available from only one manufacturer,
Amgen. Priority Healthcare Distribution services over 2,000 customers located in
all 50 states and Puerto Rico, including approximately 600 office-based
oncologists and 800 renal dialysis clinics.

We believe our knowledgeable salesforce gives us a competitive advantage for
selling into the alternate site market. Since a majority of customer orders are
placed by telephone, we offer our customers a toll-free telephone number and fax
line. Also, we are beginning to use electronic data interchange ordering
capability to accept electronically transmitted orders. Our telemarketing sales

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and service personnel typically receive customer orders. As part of our
commitment to superior customer service, we offer our customers easy order
placement. Once an order is received, it is electronically sent to the
appropriate distribution center where it is filled and shipped. We estimate that
approximately 98% of all items are shipped without back ordering, and that 99%
of all orders received before 6 p.m. are shipped on the same day that the order
is received.

SALES AND MARKETING

We currently employ approximately 50 full-time telemarketing and sales
support staff personnel. We strive to generate new customers and solidify
existing customer relationships through frequent direct marketing contact that
emphasizes our broad product lines in specialty markets, competitive prices,
responsive service and easy order placement. We telemarket to oncology clinics,
physician offices and dialysis centers. We target larger customers with
customized approaches developed by management and its key account team. We also
link the Priority Healthcare Distribution and Priority Healthcare Pharmacy
databases to facilitate cross-selling efforts. We believe that there is a
significant opportunity to provide our specialty pharmacy services to patients
of physicians that currently order pharmaceuticals and supplies from Priority
Healthcare Distribution.

Our sales personnel service both in-bound and out-bound calls and are
responsible for assisting customers in purchasing decisions, answering questions
and placing orders. Sales personnel also make calls to market our services to
customer accounts that we identify as high volume accounts, high order frequency
accounts or accounts with cross-selling opportunities. Our sales personnel use
PC-based computer systems to enter customer orders and to access information
about products, product availability, pricing, promotions and customer buying
and referral history. All telemarketing sales personnel work to establish
long-term relationships with our customers through regularly scheduled phone
contact and personalized service.

We provide training for sales personnel on a regular basis through
in-service meetings, seminars and field training, supported by print and video
materials. Initial and ongoing training focuses on industry and product
information, selling skills, ethics and compliance requirements and computer
software skills. We believe that our investment in training is critical to
establishing and maintaining our competitive position in the marketplace.

CUSTOMERS

Priority Healthcare Distribution serves over 2,000 customers located in all
50 states and Puerto Rico, including approximately 600 office-based oncologists
and 800 renal dialysis clinics.

During 1998, our largest 20 customers accounted for approximately 38% of our
revenues and one customer, Everest Healthcare Services Corporation, accounted
for approximately 12% of our revenues. Significant declines in purchases by one
or more of our largest customers could have a material adverse effect on our
business, financial condition or results of operations. In addition, Pharmacy
Plus is an approved provider of injectable biopharmaceuticals to a national
managed care organization under a contract that may be terminated by either
party upon 90 days prior written notice. We also have a contract with a group
purchasing organization for physicians' offices under which we are a recommended
supplier of biopharmaceuticals. As is customary in our industry, we generally do
not have long-term contracts with our customers. Management believes that the
retention rate for our customers is very favorable. Although we have not to date
failed to collect accounts receivable from our largest customers, an adverse
change in the financial condition of any of these customers, including an
adverse change as a result of a change in governmental or private reimbursement
programs, could have a material adverse effect on our business, financial
condition or results of operations.

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<PAGE>
PURCHASING

We believe that effective purchasing is key to both profitability and
maintaining market share. Products from our largest supplier, Amgen, accounted
for approximately 42% of our revenues in 1996, approximately 40% of our revenues
in 1997 and approximately 32% of our revenues in 1998. We have a $5.0 million
standby letter of credit with a major financial institution with Amgen as the
beneficiary. We constantly evaluate our purchase requirements and anticipated
increases in manufacturer prices to obtain products at the best cost. We have
several partnership relationships with manufacturers that offer favorable
pricing, volume-based incentives and opportunities to reduce supply chain costs
for both parties.

COMPETITION

The alternate site specialty pharmaceutical and medical supply industry is
highly competitive and is experiencing both horizontal and vertical
consolidation. The industry is fragmented, with many public and private
companies focusing on different product or customer niches. Some of our current
and potential competitors include:

- regional and national full-line, full-service medical supply distributors;

- independent specialty distributors;

- national full-line, full-service wholesale drug distributors that operate
their own specialty distribution businesses;

- institutional pharmacies;

- hospital-based pharmacies;

- home healthcare agencies;

- mail order distributors that distribute pharmaceuticals and medical
supplies on a regional or national basis; and

- manufacturers like Bristol-Myers Squibb that own distributors or that sell
their products both to distributors and directly to users, including
clinics and physician offices.

Some of our competitors have greater financial, technical, marketing and
managerial resources than we have. While competition is primarily price and
service oriented, it can also be affected by depth of product line, technical
support systems, specific patient requirements and reputation.

GOVERNMENT REGULATION

As a provider of healthcare services and products, we are subject to
extensive regulation by federal, state and local government agencies.

LICENSING. We are required to register with the United States Drug
Enforcement Administration, or DEA, the Food and Drug Administration, or FDA,
and appropriate state agencies for various permits and/or licenses. We also must
comply with the operating and security standards of these agencies. Our Tustin,
California and Grove City, Ohio distribution centers are licensed to distribute
pharmaceuticals in accordance with the Prescription Drug Marketing Act of 1987.
The Grove City location is also licensed to distribute or dispense certain
controlled substances in accordance with the requirements of the Controlled
Substances Act of 1970. Our pharmacy program and provider businesses also are
subject to licensing by the DEA and by the state boards of pharmacy, state
health departments and other state agencies where they operate.

On November 14, 1995, an investigator for the FDA and an inspector from the
State of Florida Board of Pharmacy inspected our pharmacy in Altamonte Springs,
Florida. At the end of the

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inspection, the FDA investigator issued an FDA Form-483, which is the form used
by FDA investigators to identify any observed or suspected noncompliance with
the laws administered by the agency. The FDA Form-483 identified the facility as
a pharmacy/repackager and listed three observations related to certain
requirements that the FDA typically imposes on manufacturers of sterile
products. We advised the FDA in December 1995 that we believe we are not, under
the statute or the regulations, a repackager or a manufacturer. The FDA
investigator and Florida pharmacy authorities inspected the same facility again
on June 26, 1997. The FDA investigator issued a substantially identical FDA
Form-483 at the end of that inspection. The Florida State Board of Pharmacy did
not issue any deficiencies regarding the operations of the Altamonte Springs
pharmacy in either of these inspections.

On March 16, 1992, the FDA issued a Compliance Policy Guide (CPG 460.200),
which explains the criteria the FDA uses to distinguish between pharmacy
operations that are properly regulated under state law and drug manufacturing
regulated by the FDA. Our response to the FDA in December 1995 cited this CPG
and explained our argument that, using the FDA's own criteria, the Altamonte
Springs pharmacy is properly regulated under state and local laws.

On November 21, 1997, the President signed into law the FDA Modernization
Act of 1997, which included a new section of the Federal Food, Drug and Cosmetic
Act on pharmacy compounding. In this provision, Congress clarified a gray area
by stating the circumstances in which pharmacies may compound drugs without
filing a New Drug Application, observing the FDA's Good Manufacturing Practice
regulations or complying with several other Federal Food, Drug and Cosmetic Act
requirements. Congress provided that "compounding" does not include mixing or
reconstituting done in accordance with directions in approved labeling provided
by the manufacturer of the product. We believe that, as a result of this
amendment, if we follow the manufacturer's approved labeling in each case, and
prepare drugs only for identified individual patients using licensed
practitioners, our activities should be regulated by the Florida State Board of
Pharmacy and not be subjected by the FDA to a full New Drug Application
requirement demonstrating the basic safety and effectiveness of the drugs.

If we are correct and our operations are limited to those engaged in by
pharmacies, there should be no material adverse effect from the FDA Form-483s
because we believe we are currently in compliance in all material respects with
applicable state and local laws. If we are deemed to be a sterile product
manufacturer or a sterile product repackager, we will be subject to additional
regulatory requirements. If for some reason the FDA or other legal authorities
decide that we must file for approval of a New Drug Application, this event
could have a material adverse effect on our business, financial condition or
results of operations.

We cannot guarantee that future legislation, future rulemaking or active
enforcement by the FDA of a determination that we are a drug manufacturer will
not have a material adverse effect on our business, financial condition or
results of operations.

The State of Florida Board of Pharmacy regulates the compounding activities
of Florida pharmacies, including some of our activities. We have a
Community/Special Parenteral/Enteral Compounding Pharmacy Permit. Over the past
several years, the Florida Board of Pharmacy has proposed several changes to its
compounding requirements. We believe that we are in compliance with the current
requirements, but we cannot guarantee that other conditions or requirements will
not be imposed in the future that will have a material adverse effect on our
business, financial condition or results of operations.

Additionally, state laws prohibit the practice of medicine and nursing
without a license. Many states interpret the practice of nursing to include
health teaching, health counseling, the provision of care supportive to or
restorative of life and well being and the execution of medical regimens
prescribed by a physician. Accordingly, to the extent that we assist patients
and providers in

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helping patients comply with prescribed treatment programs, our activities could
be deemed by a state to be the practice of medicine or nursing. There can be no
assurance that our operations will not be challenged as constituting the
unlicensed practice of medicine or nursing. If such a challenge were made
successfully in any state, we could be subject to civil and criminal penalties
under that state's law and could be required to restructure our business in that
state. These results or the inability to successfully restructure our business
could have a material adverse effect on us.

REFERRAL RESTRICTIONS. We must comply with federal and state laws that
govern financial and other arrangements between healthcare providers. These laws
include the federal anti-kickback statute, which prohibits, among other things,
knowingly and willfully soliciting, receiving, offering or paying any
remuneration directly or indirectly, in return for or to induce the referral of
an individual to a person for the furnishing of any item or service for which
payment may be made in whole or in part under Medicare or Medicaid. Many states
have similar statutes which are not necessarily limited to items and services
for which payment is made by Medicare or Medicaid. Violations of these laws may
result in fines, imprisonment and exclusion from the Medicare and Medicaid
programs or other state-funded programs. The limited number of federal and state
court decisions interpreting these statutes have generally interpreted the
statutes to apply if "one purpose" of remuneration is to produce referrals or
other conduct covered by the statute.

In part to address concerns regarding the anti-kickback statute, the federal
government has issued regulations that provide exceptions, or "safe harbors,"
for transactions that will be deemed not to violate the anti-kickback statute.
Proposed regulations to clarify these safe harbors and to provide additional
safe harbors have been published but final regulations have not yet been
adopted. Although we believe that we are not in violation of the anti-kickback
statute, our operations do not fit within any of the existing or proposed safe
harbors.

Until recently, there were no procedures for obtaining binding
interpretations or advisory opinions from the Health and Human Services Office
of the Inspector General, or OIG, on the application of the federal
anti-kickback statute to an arrangement or its qualification for a safe harbor
upon which we can rely. However, the Health Insurance Portability and
Accountability Act of 1996, or HIPAA, requires the Secretary of Health and Human
Services to issue written advisory opinions regarding the applicability of
certain aspects of the anti-kickback statute to specific arrangements or
proposed arrangements. Advisory opinions are binding on the Secretary and the
party requesting the opinion.

The OIG has issued fraud alerts identifying certain questionable
arrangements and practices which it believes may implicate the federal
anti-kickback statute. The OIG has issued a fraud alert with its views on
certain joint venture and contractual arrangements between healthcare providers.
According to another fraud alert, certain prescription drug marketing practices
could violate the federal anti-kickback statute. These marketing activities may
be covered by the federal anti-kickback statute because drugs are often
reimbursed under the Medicaid program. According to the fraud alert, practices
that could violate the statute include some arrangements under which payment is
made to pharmacists to recommend a particular pharmaceutical product.

A number of states have recently undertaken enforcement actions against
pharmaceutical manufacturers involving pharmaceutical marketing programs,
including programs with incentives to pharmacists to dispense one product rather
than another. These enforcement actions arise under state consumer protection
laws which generally prohibit false advertising, deceptive trade practices and
the like. Also, a number of the states involved in these enforcement actions
have requested that the FDA increase its oversight in the area of pharmaceutical
promotional activities by pharmacists. It is not possible to determine whether
the FDA will take this action or what effect, if any, FDA or State involvement
would have on our operations.

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Congress enacted major prohibitions against physician referrals in 1993.
These prohibitions, commonly known as Stark II, amended prior physician
self-referral legislation known as Stark I by dramatically enlarging the field
of physician-owned or physician-interested entities to which the referral
prohibitions apply. As of January 1, 1995, Stark II prohibits a physician from
referring Medicare or Medicaid patients to an entity providing "designated
health services" in which the physician has an ownership or investment interest,
or with which the physician has entered into a compensation arrangement. Stark
II also prohibits the entity from billing the government for services rendered
pursuant to a prohibited referral. The designated health services include
clinical laboratory services, radiology services, radiation therapy services and
supplies, physical and occupational therapy services, durable medical equipment
and supplies, parenteral and enteral nutrients, equipment and supplies,
prosthetic devices, orthotics and prosthetics, outpatient prescription drugs,
home health services, and inpatient and outpatient hospital services. The
penalties for violating Stark II include a prohibition on payment by these
government programs, civil penalties of as much as $15,000 for each violative
referral and $100,000 for participation in a "circumvention scheme," and
exclusion from further participation in Medicare or Medicaid.

In January 1998, HCFA published proposed regulations which implement Stark
II and interpret the Stark II provisions. Some of these interpretations are more
restrictive than previously assumed. As of the date of this prospectus, we
cannot predict when the proposed rules will be published in final form or what
changes may be made to the rules before they are finalized. We cannot determine
the impact of the anti-referral provisions of Stark II on our financial
condition and results of our operations.

In addition, HIPAA prohibits any person or entity from knowingly and
willfully committing a federal health care offense relating to a health care
benefit program. Under HIPAA, a "health care benefit program" broadly includes
"any public or private plan or contract, affecting commerce, under which any
medical benefit, item, or service is provided to any individual." Among the
"federal health care offenses" prohibited by HIPAA are health care fraud and
making false statements relative to health care matters. Any person or entity
that knowingly and willfully defrauds or attempts to defraud a health care
benefit program or obtains by means of false or fraudulent pretenses,
representations, or promises, any of the money or property of any health care
benefit program in connection with the delivery of health care services is
subject to a fine and/or imprisonment. HIPAA also provides that any person or
entity that knowingly and willfully falsifies or conceals or covers up a
material fact or makes any materially false or fraudulent statements in
connection with the delivery of or payment of health care services by a health
care benefit plan is subject to a fine and/or imprisonment . These provisions of
HIPAA represent the criminalization of situations which previously would have
been handled civilly through the administrative processes of repayment of
overpayments, offsets and fines.

We are also subject to federal and state laws, including the federal False
Claims Act, prohibiting an individual or entity from knowingly and willfully
presenting claims for payment by Medicare, Medicaid or other third party payors
that contain false or fraudulent information. These laws also provide for both
criminal and civil penalties. Also, providers found to have submitted claims
which they knew or should have known were false, fraudulent, or for items or
services that were not provided as claimed, may be excluded from Medicare and
Medicaid participation, required to repay previously collected amounts, and
subject to substantial civil monetary penalties.

Federal regulatory and law enforcement authorities have recently increased
enforcement activities with respect to Medicare and Medicaid fraud and abuse
regulations and other reimbursement laws and rules. Some of these laws and
regulations govern the activities of many of our customers. We cannot guarantee
that increased enforcement activities will not indirectly have a material
adverse effect on our business, financial condition or results of operations.

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PATIENT CONFIDENTIALITY. Various federal and state laws establish minimum
standards for the maintenance of medical records and protect the confidentiality
of patient medical information. In the course of our business, we maintain
medical records for each patient to whom we dispense pharmaceuticals. As a
result, we are subject to one or more of these medical record and patient
confidentiality laws. Also, we may become subjected to new rules recently
mandated by HIPAA, and proposed by HCFA to ensure the integrity and
confidentiality of patient data by creating mandatory security standards for
entities which maintain or transmit health information electronically.
Unauthorized disclosure of confidential patient information, or other failure to
comply with any applicable laws and regulations regarding the maintenance of
patient records and the confidentiality of medical information could have a
material adverse effect on our business, financial condition or results of
operation.

PRACTICE OF PHARMACY. State laws prohibit the practice of pharmacy without
a license. Accordingly, our pharmacists are licensed in Florida and other states
where required. Although we monitor the professional aspects of their practice,
to the extent that our employees assist patients and providers in helping
patients comply with prescribed treatment programs, these activities could be
deemed by a state to be the practice of medicine, nursing or outside the scope
of permitted pharmacy practice.

LABELING AND MAIL ORDER. In addition, federal statutes and regulations
establish standards for the labeling, packaging, repackaging, advertising and
adulteration of prescription drugs and the dispensing of "controlled" substances
and prescription drugs. To the extent that we were to use the federal postal
service, Federal Trade Commission and United States Postal Service regulations
require mail order sellers to engage in truthful advertising, to stock a
reasonable supply of drugs, to fill mail orders within thirty days and, if that
is impossible, to inform the consumer of his or her right to a refund. We
believe that we are in substantial compliance with the above requirements.

OTHER REGULATORY ISSUES. Some states have adopted, or are considering
adopting, restrictions similar to the restrictions contained in the federal
anti-kickback and physician self-referral laws. Although we believe that our
operations do not violate applicable state laws, state regulatory authorities
could challenge our activities under these laws or challenge the dispensing of
patient-specific, self-injectable biopharmaceuticals by us as being subject to
state laws regulating out-of-state pharmacies.

We believe our pharmacy practices and our contract arrangements with other
healthcare providers and pharmaceutical suppliers are in compliance with these
laws. To address the risks presented by these laws, we have appointed an
employee trained as a lawyer as Vice President of Administration, arranged for
compliance reviews conducted by outside advisors and put in place an ethics and
corporate compliance program. We cannot guarantee that our interpretation and
application of these laws will be consistent with future interpretations of the
laws.

REIMBURSEMENT

A large portion of Priority Healthcare Pharmacy's sales is derived from
third-party payors, including private insurers and managed care organizations
such as HMOs and PPOs. Similar to other medical service providers, we experience
long reimbursement collection periods because of third party payment procedures.
As a result, effective management of accounts receivable through effective
patient registration, billing, collection and reimbursement procedures is
critical to our financial success.

Private payors typically reimburse a higher amount for a given service and
provide a broader range of benefits than governmental payors, although net
revenue and gross profits from private payors have been affected by the
continuing efforts to contain or reduce the costs of healthcare. A

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<PAGE>
portion of our revenue has been derived in recent years from agreements with
HMOs, PPOs and other managed care providers. Although these agreements often
provide for negotiated reimbursement at reduced rates, they generally result in
lower bad debts and provide opportunities to generate greater volumes than
traditional indemnity referrals.

In 1998, our revenues did not include reimbursement from Medicare and
Medicaid. Nonetheless, because of the reliance of office-based oncologists and
renal dialysis clinics on Medicare and Medicaid reimbursement, changes in these
governmental programs could have a material effect on our business, financial
condition and results of operations.

Because the Medicare program represents a large portion of the federal
budget, Congress acts in almost every legislative session to reduce the amounts
payable from the Medicare program to healthcare providers. Legislation or
regulations may be enacted in the future that may significantly change the end
stage renal dialysis program or substantially reduce the amount paid for
dialysis or oncology treatments. Also, statutes or regulations may be adopted
which impose additional requirements on our customers to be eligible to
participate in the federal and state payment programs. It is possible that the
new legislation or regulations could adversely affect our business operations.

Additionally, the Balanced Budget Act of 1997, which was enacted in August
1997, contained numerous provisions related to Medicare and Medicaid
reimbursement. Although many of the details will not be known for the next
several years, the general thrust of the provisions dealing with Medicare and
Medicaid contained in the Budget Act is intended to significantly slow the
growth in Medicare spending. The Budget Act contains changes to reimbursement
rates for certain Medicare and Medicaid covered services, and limitations on the
coverage of these services. Although our revenues in 1998 did not include
reimbursement from Medicare and Medicaid, the Budget Act may affect our
suppliers and customers, which in turn could have an adverse effect on us.

Also, we expect that private payors will continue their efforts to contain
or reduce healthcare costs through reductions in reimbursement rates or other
cost-containment measures. These efforts could have a material adverse effect on
our business, financial condition and results of operations.

EMPLOYEES

At March 31, 1999, we had approximately 160 full-time equivalent employees.
None of our employees is currently represented by a labor union or other labor
organization. Approximately 8% of the employees are pharmacists or nurses. We
believe that our relationship with our employees is good.

FACILITIES

Our headquarters are located in Altamonte Springs, Florida, and consist of
approximately 33,000 square feet of space leased through December 1999. We have
signed a five year lease beginning in January 2000 for a new 38,000 square foot
corporate headquarters and pharmacy facility in nearby Lake Mary, Florida. The
lessor has agreed to allow us to move into the space prior to January 2000 and
we intend to do so in November 1999. Priority Healthcare Distribution has a
19,300 square foot distribution center in Tustin, California, which is leased
through November 2000 and a 36,000 square foot distribution center in Grove
City, Ohio, which is leased through July 2002. Priority Healthcare Distribution
also has a 1,200 square foot sales office in San Ramon, California, which is
leased through April 2001. Pharmacy Plus has an approximately 1,500 square foot
pharmacy in Philadelphia, Pennsylvania, which is leased through March 2004.

Our distribution centers have been constructed or adapted to our
specifications for climate control, alarm systems and, where required, separate
security areas for controlled substances.

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Overall, we believe that our facilities are suitable and adequate for our
current needs, and for projected internal growth through at least 2000.

LEGAL PROCEEDINGS

IV-1, now known as Priority Healthcare Pharmacy, Inc., and IV-One Services,
which was merged into IV-1 on December 31, 1998, have been named as defendants
in a second amended counterclaim filed by Amgen on May 14, 1996, in the Circuit
Court of the Eighteenth Judicial District of Seminole County, Florida. Amgen has
asserted that these entities tortiously interfered with a license agreement
between Amgen and Ortho Pharmaceutical Corporation. Under this agreement, Amgen
licensed Ortho to sell EPO for use in the treatment of non-dialysis patients,
while Amgen reserved the exclusive right to sell EPO for use in the treatment of
dialysis patients. Amgen has asserted that, before we purchased IV-1 and IV-One
Services, these entities induced Ortho to sell EPO to them for resale in the
dialysis market in violation of the license agreement. Amgen has also alleged
that IV-1 and IV-One Services were involved in a civil conspiracy to circumvent
the terms of the license agreement to allow the resale of EPO to the dialysis
market. Amgen has also asserted unfair competition claims against IV-1,
including that IV-1 manufactured
and distributed unapproved prefilled syringes of EPO and another product
manufactured by Amgen in container systems unapproved by Amgen. Amgen did not
state a time frame for the acts complained of in the civil conspiracy and unfair
competition allegations. In each count, Amgen has demanded an unspecified amount
of compensatory damages, including costs and interest.

We believe that the sellers of IV-1, IV-One Services and Charise Charles
have a contractual obligation to provide legal defense and to indemnify us for
losses and liabilities with respect to this litigation, to the extent that the
alleged acts happened before we purchased these entities. To date, the sellers
have provided the legal defense for IV-1 and IV-One Services in the litigation.
Indemnification from the sellers of IV-1 and IV-One Services is limited to no
more than $1.5 million and indemnification from the sellers of Charise Charles
is limited to no more than $2.0 million. As of March 31, 1999, approximately
$161,000 of charges have been incurred on behalf of the sellers for claims for
indemnification.

We do not expect the Amgen litigation to be material to our results of
operations, financial condition or cash flows; however, we cannot guarantee that
this litigation will not have a material adverse effect on our business,
financial condition or results of operations. Also, Amgen is our largest
supplier. As a result, this litigation could adversely affect our business
relationship with Amgen, which could have a material adverse effect on our
business, financial condition or results of operations.

We are also subject to ordinary and routine lawsuits and governmental
inspections, investigations and proceedings incidental to our business, none of
which is material to our results of operations, financial condition or cash
flows.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table shows certain information about our directors and
executive officers.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -----------------------------------------------------------------------
<S> <C> <C>
William E. Bindley................ 58 Chairman of the Board

Robert L. Myers................... 53 President, Chief Executive Officer and Director

Guy F. Bryant..................... 40 Executive Vice President--Priority Healthcare Distribution

Steven D. Cosler.................. 43 Executive Vice President--Priority Healthcare Pharmacy

Donald J. Perfetto................ 52 Executive Vice President, Chief Financial Officer, Treasurer and
Director

Melissa E. McIntyre............... 38 Vice President--Clinical Services

Barbara J. Luttrell............... 58 Vice President--Administration and Secretary

William M. Woodard................ 40 Vice President--Strategic Alliances

Michael D. McCormick.............. 51 Director

Richard W. Roberson............... 52 Director

Thomas J. Salentine............... 59 Director

Rebecca M. Shanahan............... 45 Director
</TABLE>

WILLIAM E. BINDLEY has served as our Chairman of the Board and director
since inception. Mr. Bindley was our Chief Executive Officer from July 1994
until May 1997 and our President from May 1996 until July 1996. Mr. Bindley is
the Chairman of the Board, Chief Executive Officer and President of Bindley
Western, positions he has held since founding Bindley Western in 1968. He is
also a director of Bindley Western and Shoe Carnival, Inc., a shoe retailer.

ROBERT L. MYERS has been the President since July 1996 and the Chief
Executive Officer since May 1997. From July 1996 to May 1997, he was the Chief
Operating Officer. From June 1995 through June 1996, Mr. Myers was a consultant
to the healthcare industry. From 1971 to June 1995, he was employed by Eckerd
Corporation, a retail drug store chain, where he served as a corporate officer
from 1981 through 1995 and as senior vice president of pharmacy from 1990 to
1995. Mr. Myers has served as a director since May 1997. Mr. Myers is a
registered pharmacist.

GUY F. BRYANT serves as the Executive Vice President--Priority Healthcare
Distribution, a position that he has held since September 1995. Prior to joining
Priority, he was employed in sales management positions by Major
Pharmaceuticals, a distributor of generic pharmaceuticals, since September 1992
and was vice president of sales from August 1994 to August 1995.

STEVEN D. COSLER became Executive Vice President--Priority Healthcare
Pharmacy in August 1997. Prior to that time and since July 1996, he was senior
vice president and general manager of Priority Healthcare Services Corporation,
a subsidiary of Bindley Western. From January 1992 to June 1996, he was senior
vice president of sales and operations for Coresource, a managed care and third
party administrator. Prior to that time and from 1978, Mr. Cosler held various
positions with IBM including business unit executive for consulting services.

DONALD J. PERFETTO became Executive Vice President in November 1998. Prior
to that time and since June 1997 he was a Vice President. Mr. Perfetto also has
served as Chief Financial Officer and Treasurer since June 1997. Mr. Perfetto
has served as a director since February 1999. From 1986 to May 1997, he was
employed by Bimeco, Inc., a distributor of medical products. During

39
<PAGE>
that time, Mr. Perfetto held the positions of vice president of finance and
operations and secretary/ treasurer of Bimeco, Inc.

MELISSA E. MCINTYRE, RN, OCN, is the Vice President--Clinical Services, a
position that she has held since August 1997. She has also held various
positions with our subsidiaries since June 1994. Prior to joining Priority, and
since June 1991, she was employed by Intracare, an outpatient infusion center,
as clinical director of nursing.

BARBARA J. LUTTRELL is the Vice President--Administration, a position she
has held since May 1997. Ms. Luttrell has served as Secretary since February
1999. Prior to joining Priority in January 1997, she was employed by Physician's
Alliance, a physician group, as director of human resources since September
1996. She attended law school from May 1993 to December 1995 and practiced as an
attorney from May 1996 to September 1996. Ms. Luttrell has 15 years of
experience in human resource management.

WILLIAM M. WOODARD has held the positions of Vice President--Strategic
Alliances or Vice President--Marketing since May 1997. Prior to that time, Mr.
Woodard held various positions with our subsidiaries. From March 1990 until
April 1993, Mr. Woodard was a sales representative for Tri State Hospital
Supply, a distributor of medical supplies.

MICHAEL D. MCCORMICK is the Executive Vice President, General Counsel and
Secretary of Bindley Western, positions he has held for more than the past five
years, and a director of Bindley Western. Mr. McCormick was our Executive Vice
President and General Counsel from July 1994 until May 1997, was our Secretary
from July 1994 until February 1999 and has served as a director since June 1994.

RICHARD W. ROBERSON is the President of Sand Dollar Partners, Inc., an
investment and consulting firm, a position which he has held since November
1996. Prior to that time, Mr. Roberson served as president and chief executive
officer of Visionworks, Inc., a retail superstore optical chain, from March 1993
to September 1996. Mr. Roberson is also a director of C.H. Heist Corporation, an
industrial cleaning and maintenance company.

THOMAS J. SALENTINE is the Executive Vice President and Chief Financial
Officer of Bindley Western, positions he has held for more than the past five
years. He is also a director of Bindley Western. Mr. Salentine was our Executive
Vice President from July 1994 until May 1997, our Chief Financial Officer from
July 1994 until May 1995 and our Treasurer from May 1997 to June 1997. He has
served as a director since July 1994.

REBECCA M. SHANAHAN is the Vice President, Managed Care of the University of
Chicago Hospitals and Health Systems, a position she has held since September
1997, where she is responsible for the development and implementation of managed
care programs and products. From December 1996 until assuming her present
position, she performed legal and consulting services as an independent
contractor for various entities in the health care industry. From 1991 until
December 1996, she held executive officer positions with Methodist Medical Group
and Beltway Services, a 600 member physician practice group affiliated with
Methodist Hospital in Indianapolis, Indiana, with her latest position being
senior vice president and chief operating officer.

Our directors are divided into three classes with staggered three-year
terms. The terms of our current directors will expire at the annual meeting of
stockholders in the year shown as follows: Mr. Bindley and Ms. Shanahan--2000;
Messrs. McCormick and Salentine--2001; and Messrs. Myers, Perfetto and
Roberson--2002.

Our executive officers serve at the discretion of our board of directors.
There is no family relationship between any of our directors or executive
officers.

40
<PAGE>
EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes compensation paid by us for services rendered
in all capacities to us during each of the last three years to our Chief
Executive Officer and to each of our four other most highly compensated
executive officers, based on salary and bonus earned during 1998 (the "Named
Executive Officers").

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------
AWARDS
--------------
ANNUAL COMPENSATION SECURITIES
------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(2) COMPENSATION
- ----------------------------------------------- --------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Robert L. Myers ............................... 1998 $ 262,620 $ 275,000 100,000 $ 21,592(3)
President and Chief Executive Officer (4) 1997 233,450 200,000 100,000 21,236
1996 105,000 130,000 50,000 121

Steven D. Cosler .............................. 1998 $ 163,654 $ 83,161 40,000 $ 12,861(5)
Executive Vice President--Priority Pharmacy 1997 152,004 65,000 46,000 12,896
Services (6) 1996 -- -- -- --

Guy F. Bryant ................................. 1998 $ 149,738 $ 58,208 40,000 $ 12,929(7)
Executive Vice President--Priority Healthcare 1997 138,400 77,723 46,000 12,996
Distribution 1996 125,735 55,500 15,000 11,861

Donald J. Perfetto ............................ 1998 $ 122,308 $ 68,439 40,000 $ 12,800(8)
Executive Vice President, Chief Financial 1997 55,000 40,000 36,000 --
Officer and Treasurer (9) 1996 -- -- -- --

Melissa E. McIntyre ........................... 1998 $ 127,200 $ 56,972 15,000 $ 12,924(10)
Vice President--Clinical Services 1997 125,234 51,839 40,000 12,993
1996 110,923 55,500 15,000 12,080
</TABLE>

- -------------------

(1) Reflects bonus earned during the specified year, which bonuses at times
have been paid in
the following year.

(2) Includes options to acquire shares of Class B common stock for awards made
in 1998 and 1997 and options to acquire shares of Bindley Western common
stock for awards made in 1996. The numbers in this column have not been
adjusted for the 3-for-2 stock split effected as a stock dividend paid on
May 4, 1999. We have never granted stock appreciation rights or restricted
stock. Under the terms of a Distribution Agreement that we have with
Bindley Western, holders of stock options to acquire Bindley Western common
stock surrendered some of those options at the time of the spin-off in
exchange for options to acquire shares of Class B common stock.

(3) Consists of $12,800 in contributions by us to Bindley Western's qualified
profit sharing plan, $8,586 in contributions by us to Bindley Western's
profit sharing excess plan and $206 in group life insurance premiums.

(4) Mr. Myers joined us in July 1996 and became the Chief Executive Officer in
May 1997. The amounts disclosed in the table do not include consulting fees
paid to Mr. Myers prior to his being employed by us in 1996 of $50,547, the
majority of which was paid in the form of shares of common stock of Bindley
Western.

41
<PAGE>
(5) Consists of $12,800 in contributions by us to Bindley Western's qualified
profit sharing plan and $61 in group life insurance premiums.

(6) Mr. Cosler began serving as Executive Vice President--Priority Healthcare
Pharmacy in August 1997. This table includes amounts paid by Bindley
Western in 1997 for services of Mr. Cosler to Bindley Western prior to
joining our company.

(7) Consists of $12,800 in contributions by us to Bindley Western's qualified
profit sharing plan and $129 in group life insurance premiums.

(8) Consists of $12,800 in contributions by us to Bindley Western's qualified
profit sharing plan.

(9) Mr. Perfetto joined us in June 1997.

(10) Consists of $12,800 in contributions by us to Bindley Western's qualified
profit sharing plan and $124 in group life insurance premiums.

42
<PAGE>
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
AGREEMENTS

We have entered into a Termination Benefits Agreement with Mr. Myers. The
purpose of the agreement is to encourage him to remain with us by assuring him
of certain benefits in the event of a change in control of our company.

The Termination Benefits Agreement provides for payments to Mr. Myers upon
the occurrence of certain events. The Termination Benefits Agreement has an
initial term through December 31, 1998 and is automatically extended annually
for an additional one-year period unless notice is given by us or Mr. Myers. The
Termination Benefits Agreement protects Mr. Myers against termination of his
employment following a change in control of our company. For purposes of the
Termination Benefits Agreement, change in control is broadly defined to include,
among other things, the acquisition by a person or group of persons of 25% or
more of the combined voting power of our stock, the replacement of a majority of
the current board of directors, the approval by our stockholders of a
reorganization, merger or consolidation, or the approval by stockholders of a
liquidation or dissolution or the sale or disposition of all or substantially
all of our assets.

Following a change in control, we must provide to Mr. Myers the benefits
provided by the Termination Benefits Agreement if his employment is terminated
within three years for any reason other than his death, disability, or normal
retirement or is terminated by us for cause.

In addition, we must provide to Mr. Myers the benefits of the Termination
Benefits Agreement if, after a change in control, he terminates his employment
within three years in response to certain actions by us which include, among
other things, a substantial reduction in his duties or responsibilities, a
reduction in the level of salary payable to him, our failure to continue to
provide him with benefits substantially similar to those previously provided to
him, the required relocation of Mr. Myers, or the breach by us of any of the
provisions of the Termination Benefits Agreement.

Upon termination of employment, if we must provide to Mr. Myers the benefits
payable under the Termination Benefits Agreement, we will pay to him within 30
days following his termination all earned but unpaid salary, bonus and incentive
payments through the date of his termination. In addition, we shall pay to him a
lump-sum payment of an amount equal to 2.9 times his average annual compensation
for the past five years. Any lump sum payment will be grossed up in an amount
sufficient to cover any excise tax imposed upon such payment pursuant to Section
4999 of the Internal Revenue Code.

Effective March 1, 1999, we entered into an employment agreement with each
of Messrs. Bryant, Cosler and Perfetto, each for a term to expire on February
28, 2000. Under the terms of these employment agreements, we are to pay to Mr.
Bryant a base salary of $12,916 per month, to Mr. Cosler a base salary of
$14,166 per month and to Mr. Perfetto a base salary of $12,500 per month. These
employment agreements provide that such officers are eligible to receive an
annual bonus based on individual and company performance, up to 60% of
annualized monthly salary. Pursuant to the employment agreements, if we
terminate the officer without cause prior to the expiration of the employment
agreement, we shall pay to such individual the aggregate amount of regular
compensation that he would be entitled to receive under the agreement for a
six-month period.

We also entered into a non-compete agreement with each of Messrs. Bryant,
Cosler and Perfetto on March 1, 1999. These non-compete agreements contain
confidentiality provisions and provide that, for one year after termination of
employment for any reason other than termination by us without cause, in which
event the period shall be six months, the officer may not compete with us,
solicit our customers or induce our employees to terminate their employment.

43
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of each class of our common stock as of April 20, 1999 by the
following individuals or groups:

- each person (or group of affiliated persons) who is known by us to
beneficially own more than 5% of the outstanding shares of each class of
our common stock;

- each director;

- each Named Executive Officer; and

- all directors and executive officers as a group.

Unless otherwise noted, we believe that all persons named in the table have
sole voting and investment power with respect to all shares beneficially owned
by them. The number of shares of Class B common stock shown in the table below
as beneficially owned by each individual or entity includes (1) any shares of
Class A common stock beneficially owned by such person or entity, as indicated,
because any holder of shares of Class A common stock may request to convert any
or all of such shares into Class B common stock at any time on a one-for-one
basis and (2) options held by such person or entity which are exercisable for
Class B common stock within 60 days. Unless otherwise indicated, the address of
each director or executive officer is c/o Priority Healthcare Corporation, 285
West Central Parkway, Altamonte Springs, Florida 32714.

<TABLE>
<CAPTION>
CLASS B COMMON STOCK CLASS A COMMON STOCK COMBINED
-------------------------------------- -------------------------------------- VOTING
PERCENT OF CLASS PERCENT OF CLASS POWER (IF
NAME AND ADDRESS NUMBER OF SHARES (IF NUMBER OF SHARES (IF MORE THAN
OF INDIVIDUAL OR GROUP BENEFICIALLY OWNED MORE THAN 1%) BENEFICIALLY OWNED MORE THAN 1%) 1%)(1)
- -------------------------------- ------------------- ----------------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
William E. Bindley (2) ......... 3,016,589(3) 20.5% 3,009,089(4) 42.0% 27.2%
Robert L. Myers ................ 135,564(5)(6) 1.2% 6,619 -- --
Steven D. Cosler ............... 32,477(5)(7) -- 2,013 -- --
Guy F. Bryant .................. 36,864(5)(8) -- 10,363 -- --
Melissa E. McIntyre ............ 23,276(5)(9) -- 0 -- --
Donald J. Perfetto ............. 24,821(5)(10) -- 177 -- --
Michael D. McCormick ........... 132,741(11) 1.1% 125,241(12) 1.8% 1.2%
Richard W. Roberson ............ 25,107(13) -- 0 -- --
Thomas J. Salentine ............ 230,136(14) 1.9% 155,136 2.2% 1.6%
Rebecca M. Shanahan ............ 3,807(13) -- 0 -- --
Morgan Stanley Dean Witter & 625,324 5.3% 0 -- 1.9%
Co. ..........................
1585 Broadway
New York, NY 10036 (15)*
All current directors and 3,691,124(5)(16) 24.3% 3,309,815 46.2% 30.4%
executive officers as a group
(12 persons) .................
</TABLE>

- -------------------

* Information is based solely on reports filed by such stockholder under
Section 13(d) of the Securities Exchange Act of 1934.

(1) Based on outstanding shares only. Holders of Class A common stock are
entitled to three votes for each share and holders of Class B common stock
are entitled to one vote for each share, on all matters submitted to a vote
of stockholders. Holders of Class A common stock and holders of Class B
common stock vote generally as a single class on all matters submitted to a
vote of holders of our common stock.

(2) The address of this stockholder is 8909 Purdue Road, Indianapolis, Indiana
46268.

44
<PAGE>
(3) Includes 3,009,089 shares of Class A common stock (see footnote 4 below for
a description of the manner by which certain of such shares of Class A
common stock are held). Excludes 5,254 shares of Class A common stock and
3,000 shares of Class B common stock held by Mr. Bindley's spouse; Mr.
Bindley disclaims beneficial ownership of such shares.

(4) Includes 43,387 shares of Class A common stock held by two family
foundations and 38,751 shares of Class A common stock held by a charitable
remainder trust of which Mr. Bindley is the trustee and has investment
control. Excludes 5,254 shares of Class A common stock held by Mr.
Bindley's spouse; Mr. Bindley disclaims beneficial ownership of such
shares.

(5) Does not include shares subject to stock options which are not exercisable
within 60 days.

(6) Includes 6,619 shares of Class A common stock. Also includes presently
exercisable stock options to purchase 82,751 shares of Class B common stock
granted under our stock option plans.

(7) Includes 2,013 shares of Class A common stock. Also includes presently
exercisable stock options to purchase 25,001 shares of Class B common stock
granted under our stock option plans.

(8) Includes 10,363 shares of Class A common stock. Also includes presently
exercisable stock options to purchase 25,001 shares of Class B common stock
granted under our stock option plans.

(9) Includes presently exercisable stock options to purchase 22,751 shares of
Class B common stock granted under our stock option plans.

(10) Includes 177 shares of Class A common stock. Also includes presently
exercisable stock options to purchase 21,251 shares of Class B common
stock granted under our stock option plans.

(11) Includes 125,241 shares of Class A common stock (see footnote 12 below for
a description of the manner by which certain of such shares of Class A
common stock are held).

(12) Includes 1,989 shares held in a family foundation.

(13) Includes presently exercisable stock options to purchase 1,500 shares of
Class B common stock granted under our stock option plans.

(14) Includes 155,136 shares of Class A common stock.

(15) The stockholder is an investment adviser.

(16) Includes 3,309,815 shares of Class A common stock. Also includes presently
exercisable stock options to purchase 206,507 shares of Class B common
stock granted under our stock option plans.

45
<PAGE>
UNDERWRITING

Subject to the terms and conditions of an underwriting agreement, the
underwriters named below, through their representatives, Raymond James &
Associates, Inc., First Union Capital Markets Corp., NationsBanc Montgomery
Securities LLC and SunTrust Equitable Securities Corporation, have severally
agreed to purchase from us the respective number of shares of Class B common
stock set forth opposite their names below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Raymond James & Associates, Inc..................................................
First Union Capital Markets Corp.................................................
NationsBanc Montgomery Securities LLC............................................
SunTrust Equitable Securities Corporation........................................

-----------
Total........................................................................ 2,600,000
-----------
-----------
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions precedent, including the absence of any
material adverse change in our business and the receipt of certain certificates,
opinions and letters from us and our counsel and independent auditors. The
nature of the underwriters' obligation is such that they are committed to
purchase all shares of Class B common stock offered hereby if any of such shares
are purchased.

We have granted an option to the underwriters, exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of 390,000 shares of
Class B common stock at the public offering price, less the underwriting
discounts and commissions set forth on the cover page of this prospectus. The
underwriters may exercise this option solely to cover over-allotments, if any,
made on the sale of the Class B common stock. To the extent that the
underwriters exercise this option, each underwriter will be obligated, subject
to certain conditions, to purchase a number of additional shares of Class B
common stock proportionate to such underwriter's initial amount set forth in the
table above.

The following table summarizes the underwriting discounts and commissions to
be paid by us to the underwriters and the expenses payable by us for each share
of Class B common stock and in total. This information is presented assuming
either no exercise or full exercise of the underwriters' option to purchase
additional shares of Class B common stock.

<TABLE>
<CAPTION>
PER WITHOUT WITH
SHARE OPTION OPTION
--------- --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable by us............................... $ $ $
Expenses payable by us............................................................. $ $ $
</TABLE>

We have been advised by the representatives that the underwriters propose to
offer the shares of Class B common stock to the public at the public offering
price set forth on the cover page of this prospectus and to certain dealers at
such price less a concession not in excess of $ per share. The underwriters
may allow, and such dealers may reallow, a concession not in excess of $
per share to certain other dealers. The offering of the shares of Class B common
stock is made for delivery when, as and if accepted by the underwriters and
subject to prior sale and to

46
<PAGE>
withdrawal, cancellation or modification of this offering without notice. The
underwriters reserve the right to reject an order for the purchase of shares in
whole or in part.

We and our executive officers and directors have agreed that for a period of
120 days after the date of this prospectus, that we and they will not, without
the prior written consent of Raymond James & Associates, Inc., directly or
indirectly:

- offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right
or warrant for the sale of or otherwise dispose of or transfer any shares
of our common stock or securities convertible into or exchangeable or
exercisable for shares of our common stock, whether now owned or acquired
after the date of this prospectus by any such person or with respect to
which any such person acquires after the date of this prospectus the power
of disposition, or file any registration statement under the Securities
Act with respect to any of the foregoing; or

- enter into any swap or other agreement or any other agreement that
transfers, in whole or in part, directly or indirectly, the economic
consequence of ownership of shares of our common stock whether any such
swap or transaction is to be settled by delivery of our common stock or
other securities, in cash or otherwise.

The foregoing restrictions, however, do not apply to:

- shares of Class B common stock being sold hereunder;

- any grant of options by us for our Class B common stock under our stock
option plans; or

- any shares of Class B common stock issued by us pursuant to the exercise
of stock options currently outstanding or granted under our stock option
plans.

Until the offering of the shares of Class B common stock is completed, rules
of the Securities and Exchange Commission may limit the ability of the
underwriters and certain selling group members to bid for and purchase the Class
B common stock. As an exception to these rules, the underwriters may engage in
certain transactions that stabilize the price of the Class B common stock. These
transactions may include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of shares of Class B common stock than they are
required to purchase in the offering. Stabilizing transactions consist of
certain bids or purchases made for the purpose of preventing or retarding a
decline in the market price of the Class B common stock while the offering is in
progress.

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the Class B common stock. As a result, the price of
the Class B common stock may be higher than the price that otherwise might exist
in the open market. If these activities are commenced, they may be discontinued
by the underwriters without notice at any time. These transactions may be
effected on the Nasdaq National Market, or otherwise.

Certain of the underwriters or their affiliates have in the past and may in
the future provide investment banking or other services for us.

We have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the underwriters may be required to make in respect thereof.

47
<PAGE>
LEGAL MATTERS

The validity of the shares of Class B common stock offered by this
prospectus will be passed upon by Baker & Daniels, Indianapolis, Indiana.
Certain legal matters will be passed upon for the underwriters by Greenberg
Traurig, P.A., Miami, Florida.

EXPERTS

The consolidated financial statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 included in
this prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings and other information about us are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may read and copy any document we file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. The SEC's address in Washington, D.C. is 450 Fifth Street, N.W.,
Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. You should know that we have filed with the SEC a
registration statement that contains this prospectus. We also have filed a copy
of the underwriting agreement under which the shares of Class B common stock are
being issued.

We "incorporate by reference" into this prospectus the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings we make with the SEC
under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
after the initial filing of the registration statement that contains this
prospectus and before the time that we sell all the Class B common stock offered
by this prospectus:

(a) our Annual Report on Form 10-K for the fiscal year ended December 31,
1998;

(b) our Current Report on Form 8-K dated December 31, 1998;

(d) our Definitive Proxy Statement on Schedule 14A in connection with our
1999 Annual Meeting of Stockholders; and

(e) the description of our Class B common stock contained in our
Registration Statement on Form 8-A which was filed with the SEC on
December 14, 1998, under Section 12(g) of the Securities Exchange Act of
1934.

You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Priority Healthcare Corporation, 285
West Central Parkway, Altamonte Springs, Florida 32714, Attention: Barbara J.
Luttrell, Vice President--Administration, telephone (407) 869-7001.

You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with different information. We are only offering these securities in states
where the offer is permitted. You should not assume that the information in this
prospectus or in any document we incorporate by reference is accurate as of any
date other than the date on the front of those documents.

48
<PAGE>
PRIORITY HEALTHCARE CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-1

Consolidated Statements of Earnings for the years ended December 31, 1996, December 31, 1997 and December
31, 1998 and (unaudited) for the three-month periods ended March 31, 1998 and March 31, 1999............. F-2

Consolidated Balance Sheets as of December 31, 1997 and December 31, 1998 and (unaudited) as of March 31,
1999..................................................................................................... F-3

Consolidated Statements of Cash Flows for the years ended December 31, 1996, December 31, 1997 and December
31, 1998 and (unaudited) for the three month periods ended March 31, 1998 and March 31, 1999............. F-4

Consolidated Statements of Shareholders' Equity for the years ended December 31, 1996, December 31, 1997
and December 31, 1998 and (unaudited) for the three-month period ended March 31, 1999.................... F-5

Notes to Consolidated Financial Statements................................................................. F-6
</TABLE>

49
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Priority Healthcare Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Priority
Healthcare Corporation and its subsidiaries (the "Company") at December 31, 1997
and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 19, 1999, except as to the restatement for the
stock split described in Note 1, which is as of May 4, 1999

F-1
<PAGE>
PRIORITY HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(000'S OMITTED, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------- ----------------------------
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 158,247 $ 230,982 $ 275,626 $ 58,129 $ 83,159
Cost of products sold.................... 141,074 207,755 244,485 51,313 72,853
------------- ------------- ------------- ------------- -------------
Gross profit............................. 17,173 23,227 31,141 6,816 10,306
Selling, general and administrative
expense................................ 8,443 10,620 13,989 3,167 4,251
Depreciation and amortization............ 1,009 1,161 1,234 311 313
------------- ------------- ------------- ------------- -------------
Earnings from operations................. 7,721 11,446 15,918 3,338 5,742
Stock option expense..................... -- 350 -- -- --
Interest expense (income), net (primarily
Bindley Western)....................... 437 887 (916) (109) (258)
------------- ------------- ------------- ------------- -------------
Earnings before income taxes............. 7,284 10,209 16,834 3,447 6,000
------------- ------------- ------------- ------------- -------------
Provision for income taxes:
Current................................ 3,061 4,495 6,875 1,370 2,428
Deferred............................... (146) (437) (184) -- (46)
------------- ------------- ------------- ------------- -------------
2,915 4,058 6,691 1,370 2,382
------------- ------------- ------------- ------------- -------------
Net earnings............................. $ 4,369 $ 6,151 $ 10,143 $ 2,077 $ 3,618
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------

Earnings per share:
Basic.................................. $ 0.29 $ 0.39 $ 0.54 $ 0.11 $ 0.19
Diluted................................ $ 0.29 $ 0.39 $ 0.54 $ 0.11 $ 0.19
Weighted average shares outstanding:
Basic.................................. 15,321,429 15,934,411 18,772,974 18,772,812 18,831,438
Diluted................................ 15,321,429 15,939,883 18,854,041 18,817,576 19,233,594
</TABLE>

(See accompanying notes to consolidated financial statements.)

F-2
<PAGE>
PRIORITY HEALTHCARE CORPORATION

CONSOLIDATED BALANCE SHEETS

(000'S OMITTED, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998
--------- ---------- MARCH 31,
1999
------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................................................ $ 7,910 $ 2 $ 5,706
Accounts receivable, less allowance for doubtful accounts of $402, $778
and $811, respectively................................................. 43,643 56,825 61,151
Receivable from Bindley Western.......................................... 5,290 16,517 13,166
Finished goods inventory................................................. 25,082 24,387 24,532
Deferred income taxes.................................................... 869 1,145 1,214
Other current assets..................................................... 166 284 724
--------- ---------- ------------
82,960 99,160 106,493
--------- ---------- ------------
Fixed assets, at cost...................................................... 2,492 3,279 3,344
Less: accumulated depreciation........................................... 997 1,459 1,602
--------- ---------- ------------
1,495 1,820 1,742
--------- ---------- ------------
Intangibles, net............................................................. 7,273 6,539 6,370
--------- ---------- ------------
Total assets........................................................... $ 91,728 $ 107,519 $ 114,605
--------- ---------- ------------
--------- ---------- ------------

LIABILITIES AND SHAREHOLDERS' EQUITY:

Current liabilities:
Accounts payable......................................................... $ 23,180 $ 33,857 $ 35,981
Other current liabilities................................................ 2,292 3,428 3,282
--------- ---------- ------------
25,472 37,285 39,263
--------- ---------- ------------
Long-term obligations........................................................ 272 -- --
--------- ---------- ------------
Deferred income taxes........................................................ 101 193 216
--------- ---------- ------------
Subordinated note payable to Bindley Western................................. 6,000 -- --
--------- ---------- ------------
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized, none issued
and outstanding........................................................ -- -- --
Common stock
Class A, $0.01 par value, 15,000,000 shares authorized, (and split
adjusted) 15,321,429, 15,321,429 and 8,198,245 issued and
outstanding, respectively............................................ 153 153 82
Class B, $0.01 par value, 40,000,000 shares authorized, (and split
adjusted) 3,451,383, 3,452,214 and 10,655,439 issued and outstanding,
respectively......................................................... 35 35 107
Additional paid in capital............................................. 52,844 52,859 54,325
Retained earnings...................................................... 6,851 16,994 20,612
--------- ---------- ------------
Total shareholders' equity........................................... 59,883 70,041 75,126
--------- ---------- ------------
Commitments and contingencies................................................ -- -- --
Total liabilities and shareholders' equity........................... $ 91,728 $ 107,519 $ 114,605
--------- ---------- ------------
--------- ---------- ------------
</TABLE>

(See accompanying notes to consolidated financial statements.)

F-3
<PAGE>
PRIORITY HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(000'S OMITTED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net income............................................. $ 4,369 $ 6,151 $ 10,143 $ 2,077 $ 3,618
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Depreciation and amortization.......................... 1,009 1,161 1,234 311 313
Loss on disposal of fixed assets....................... -- 126 -- -- --
Compensation expense on stock and option grants........ -- 365 15 -- --
Deferred income taxes.................................. (146) (437) (184) -- (46)
Change in assets and liabilities, net of acquisitions:
Accounts receivable.................................... (12,208) (13,549) (13,182) 1,761 (4,326)
Finished goods inventory............................... (3,485) (8,554) 695 2,526 (145)
Trade accounts payable................................. 5,657 5,992 10,677 (4,460) 2,124
Other current assets and liabilities................... 280 877 1,018 (387) (587)
--------- --------- --------- --------- ---------
Net cash (used) provided by operating activities..... (4,524) (7,868) 10,416 1,828 951
--------- --------- --------- --------- ---------
Cash flow from investing activities:
Purchase of fixed assets............................... (405) (727) (825) (195) (65)
Acquisition of business................................ -- (250) -- -- --
--------- --------- --------- --------- ---------
Net cash used by investing activities................ (405) (977) (825) (195) (65)
--------- --------- --------- --------- ---------
Cash flow from financing activities:
Net change in amounts due to/from Bindley Western...... 5,417 (14,580) (11,227) (4,444) 3,351
Repayment of subordinated note payable to Bindley
Western.............................................. -- -- (6,000) -- --
Payments on long-term obligations...................... (191) (288) (272) (19) --
Proceeds from stock option exercises and related tax
benefit.............................................. -- -- -- -- 1,467
Proceeds from initial public offering, net............. -- 29,967 -- -- --
--------- --------- --------- --------- ---------
Net cash provided (used) by financing activities..... 5,226 15,099 (17,499) (4,463) 4,818
--------- --------- --------- --------- ---------
Net increase (decrease) in cash............................ 297 6,254 (7,908) (2,830) 5,704
Cash and cash equivalents at beginning of period........... 1,359 1,656 7,910 7,910 2
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period................. $ 1,656 $ 7,910 $ 2 $ 5,080 $ 5,706
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental cash flow information:
Interest paid.......................................... $ 445 $ 1,040 $ 361 $ 116 $ --
Income taxes paid...................................... $ 3,061 $ 4,495 $ 6,875 $ 1,370 $ 1,500
</TABLE>

(See accompanying notes to consolidated financial statements.)

F-4
<PAGE>
PRIORITY HEALTHCARE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(000'S OMITTED, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK
------------------------- ------------------------- ADDITIONAL
SHARES SHARES PAID IN RETAINED SHAREHOLDERS'
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL EARNINGS EQUITY
------------ ----------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995.... 15,321,429 $ 153 -- $ -- $ 22,547 $ 2,331 $ 25,031
Net earnings..................... 4,369 4,369
------------ ----- ------------ ----- ----------- ----------- -------------
Balances at December 31, 1996.... 15,321,429 153 -- -- 22,547 6,700 29,400
Net earnings..................... 6,151 6,151
Dividend to Bindley Western...... (6,000) (6,000)
Issuance of Class B common stock:
Initial public offering........ 3,450,000 35 29,932 29,967
Board of Directors'
compensation................. 1,383 15 15
Stock option grant............... 350 350
------------ ----- ------------ ----- ----------- ----------- -------------
Balances at December 31, 1997.... 15,321,429 153 3,451,383 35 52,844 6,851 59,883
Net earnings..................... 10,143 10,143
Issuance of Class B common stock:
Board of Directors'
compensation................. 831 15 15
------------ ----- ------------ ----- ----------- ----------- -------------
Balances at December 31, 1998.... 15,321,429 153 3,452,214 35 52,859 16,994 70,041
Net earnings (unaudited)......... 3,618 3,618
Issuance of Class B common stock:
Stock option exercises and
related tax benefit
(unaudited).................. 91,600 1 1,466 1,467
Conversions from Class A
(unaudited).................. (7,123,184) (71) 7,111,625 71
------------ ----- ------------ ----- ----------- ----------- -------------
Balances at March 31, 1999
(unaudited).................... 8,198,245 $ 82 10,655,439 $ 107 $ 54,325 $ 20,612 $ 75,126
------------ ----- ------------ ----- ----------- ----------- -------------
------------ ----- ------------ ----- ----------- ----------- -------------
</TABLE>

(See accompanying notes to consolidated financial statements.)

F-5
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION. Priority Healthcare Corporation (the "Company") was
formed by Bindley Western Industries, Inc. ("Bindley Western") on June 23, 1994,
as an Indiana corporation to focus on the distribution of products and provision
of services to the "alternate site" segment of the healthcare industry. On
August 1, 1994, Bindley Western transferred the net assets of its Charise
Charles and PRN divisions to the Company in exchange for 1,000 shares of common
stock, no par value. The Company now operates as a national distributor of
specialty pharmaceuticals and related medical supplies to the alternate site
healthcare market and is a provider of patient-specific, self-injectable
biopharmaceuticals and disease prevention programs to individuals with chronic
diseases.

On August 25, 1997, the board of directors and Bindley Western, as the sole
shareholder of the Company, completed a recapitalization of the Company.
Effective on that date, the Company's capitalization consisted of: (i)
15,000,000 authorized shares of Class A common stock, $0.01 par value,
10,214,286 shares (before adjustment for stock split) of which were issued and
outstanding and owned by Bindley Western, (ii) 40,000,000 shares of Class B
common stock, $0.01 par value (of which 2,300,000 shares (before adjustment for
stock split) were subsequently issued in an initial public offering described in
Note 2--Related Party Transactions), and (iii) 5,000,000 shares of Preferred
Stock, without par value, none of which are issued and outstanding. This
recapitalization has been given retroactive effect in these consolidated
financial statements.

The consolidated financial statements of the Company include certain
allocations of corporate overhead and other expenses incurred by Bindley Western
on behalf of the Company. These expenses and the basis of allocations are
discussed in Note 2--Related Party Transactions. The Company's financial
statements for 1997 and prior years are not necessarily indicative of the
results the Company would have reported had it existed as a stand-alone public
entity, or of the financial position, results of operations and cash flows of
the Company in the future.

On April 7, 1999, the Company announced that the Board of Directors
authorized a 3-for-2 stock split of the Company's common stock to be effected as
a stock dividend to all shareholders of record at the close of business on April
20, 1999, the Record Date. Shareholders on the Record Date received a stock
dividend of one share for each two shares held. The stock dividend was paid on
May 4, 1999. Holders of Class A common stock received Class A shares in the
split and holders of Class B common stock received Class B shares. Cash was paid
in lieu of fractional shares. All share and per share amounts in these
consolidated financial statements have been restated to give effect to the stock
split.

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

REVENUE RECOGNITION. Revenues are recognized when products are shipped to
unaffiliated customers with appropriate provisions recorded for estimated
discounts and allowances.

INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS. The accompanying
consolidated balance sheet as of March 31, 1999, the consolidated statements of
earnings and cash flows for the three months ended March 31, 1998 and 1999 and
the consolidated statement of shareholders' equity for the three months ended
March 31, 1999 are unaudited. In the opinion of management, these interim
unaudited consolidated financial statements have been prepared on the same basis
as the

F-6
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
audited financial statements and include all adjustments, consisting of only
normal recurring adjustments, necessary for fair presentation of the interim
periods. The disclosures in these notes related to these interim unaudited
consolidated financial statements are also unaudited.

CASH AND CASH EQUIVALENTS. The Company considers all investments with an
original maturity of less than 3 months to be a cash equivalent.

INVENTORIES. Inventories are stated on the basis of lower of cost or market
using the first-in, first-out ("FIFO") method.

FIXED ASSETS. Depreciation is computed on the straight-line method for
financial reporting purposes. Accelerated methods are primarily used for income
tax purposes. Assets, valued at cost, are generally being depreciated over their
estimated useful lives as follows:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
(YEARS)
-------------
<S> <C>
Furnishings............................................................. 5-7
Leasehold improvements.................................................. 12
Transportation and other equipment...................................... 3-7
</TABLE>

In the event facts and circumstances indicate an asset could be impaired, an
evaluation of the undiscounted estimated future cash flows from operations is
compared to the asset's carrying amount to determine if a write-down is
required. At December 31, 1997 and December 31, 1998, no impairments existed.

INTANGIBLES. The Company continually monitors its cost in excess of net
assets acquired (goodwill), covenants not to compete and its other intangibles
(customer lists and consulting agreements) to determine whether any impairment
of these assets has occurred. In making such determination, the Company
evaluates the expected future cash flows from operations, on an undiscounted
basis, of the underlying businesses which gave rise to such amounts. Goodwill is
being amortized on the straight-line method, principally over 40 years. Other
intangibles are being amortized on the straight-line method over 4 to 15 years.

EARNINGS PER SHARE. The Company has adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," for all
periods presented. Basic earnings per share is computed by dividing net income
by the weighted average of Class A and Class B shares outstanding for the
period. Diluted earnings per share computations assume outstanding stock options
with a dilutive effect on earnings were exercised. These common stock
equivalents are added to the weighted average number of shares outstanding in
the diluted

F-7
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
calculation. A reconciliation of the basic and diluted weighted average shares
outstanding is as follows for the years ended December 31 (after giving effect
to the stock split):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS) (UNAUDITED)
Weighted average number of Class A and Class B common shares
outstanding used as the denominator in the basic earnings
per share calculation....................................... 15,321 15,934 18,773 18,773 18,831
Additional shares assuming exercise of dilutive stock
options..................................................... -- 6 81 45 403
--------- --------- --------- --------- ---------
Weighted average number of Class A and Class B common and
equivalent shares used as the denominator in the diluted
earnings per share calculation.............................. 15,321 15,940 18,854 18,818 19,234
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

INCOME TAXES. Through December 31, 1998, the Company participated in the
consolidated federal and state income tax returns filed by Bindley Western.
Bindley Western charged federal and state income tax expense to the Company as
if the Company filed its own separate federal and state income tax returns.

In accordance with the provisions of SFAS No. 109, "Accounting for Income
Taxes," the Company accounts for income taxes using the asset and liability
method. The asset and liability method requires the recognition of deferred tax
assets and liabilities for expected future tax consequences of temporary
differences that currently exist between the tax bases and financial reporting
bases of the Company's assets and liabilities.

USE OF ESTIMATES. The preparation of financial statements in accordance
with generally accepted accounting principles requires the use of estimates made
by management. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying values of cash, accounts
receivable, payable to/from Bindley Western, other current assets, accounts
payable and other current liabilities approximate their fair market values due
to the short-term maturity of these instruments.

PRIOR YEAR RECLASSIFICATIONS. Certain amounts in the prior year financial
statements have been reclassified to conform to the current year presentation.

NOTE 2--RELATED PARTY TRANSACTIONS

On October 29, 1997, the Company consummated an initial public offering
("IPO") of 2,000,000 (3,000,000 after giving effect to the stock split) shares
of Class B common stock. An additional 300,000 (450,000 after giving effect to
the stock split) shares of Class B common stock were sold on November 25, 1997
pursuant to the exercise of the underwriters' overallotment option. Prior to the
IPO, the Company was a wholly-owned subsidiary of Bindley Western. After

F-8
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--RELATED PARTY TRANSACTIONS (CONTINUED)
the IPO, Bindley Western owned over 80% of the Company's outstanding capital
stock. On October 23, 1998, the board of directors of Bindley Western declared a
distribution payable on December 31, 1998 to the holders of Bindley Western
common stock of the 10,214,286 (15,321,429 after giving effect to the stock
split) shares of Priority Class A common stock owned by Bindley Western on the
basis of .448 shares of Priority Class A common stock for each share of Bindley
Western common stock outstanding on December 15, 1998, which was the record date
for the Distribution. The fraction of a share of Priority Class A common stock
that was distributed for each share of Bindley Western Common Stock was based
upon the 10,214,286 shares of Priority Class A common stock owned by Bindley
Western divided by the 22,782,545 shares of Bindley Western common stock
outstanding on the record date. The Company and Bindley Western have entered
into certain related party transactions which are described below. Had the
Company operated as a stand-alone, non-public entity for all periods presented,
management believes the costs and expenses incurred by the Company would not
have differed materially from those reported in the financial statements. In
addition, the Company participated in the Bindley Western profit sharing plan,
as discussed in Note 8--Profit Sharing Plan, through December 31, 1998.

Bindley Western provided management and consulting services to the Company
which included, but were not limited to, legal, human resources, payroll and
tax. The Company was charged $65,000 during each of the years ended December 31,
1996, 1997 and 1998 for such services. These amounts were based on an allocation
of the actual services rendered by Bindley Western and were calculated in a
manner considered reasonable by management.

The Company was also provided certain coverage under the Bindley Western
insurance plans. These expenses were charged to the Company based on a
combination of a pro rata allocation and the push-down of actual expenses
incurred, depending on the type of expenditure. These methods are considered
reasonable by management. This insurance expense was $132,000, $151,000 and
$163,000 for 1996, 1997 and 1998, respectively.

At December 31, 1997 and 1998, Bindley Western owed the Company $5.3 million
and $16.5 million, respectively. These amounts are due on demand and represent
loans of excess cash balances of the Company to Bindley Western on a short-term,
interest-bearing basis. In 1996 and 1997 (until the October 24, 1997 date of the
IPO), the Company borrowed from Bindley Western to finance its operations, those
borrowings offset in part by cash collections from operations that were
transferred to Bindley Western. Net interest expense attributable to these
borrowings from Bindley Western were $408,000 for 1996 and $605,000 (net of
$66,000 of interest income) for 1997. Interest income attributable to loans to
Bindley Western was $1.1 million for 1998. These amounts were calculated by
applying Bindley Western's average incremental borrowing rate, which was 6.4%,
6.4% and 6.3% for 1996, 1997 and 1998, respectively, to the average outstanding
balances. During 1996 and 1997, the average outstanding borrowings from Bindley
Western were $6.4 million and $10.3 million, respectively, while in 1998 the
average outstanding loans to Bindley Western were $16.9 million.

On March 31, 1997, the Company declared and paid a dividend to Bindley
Western in the form of a $6.0 million subordinated promissory note that was to
become due on March 31, 1999. The Company paid the note on September 30, 1998.
The note carried an interest rate of 7.25% per annum. For 1997 and 1998,
interest expense associated with this note totaled $324,000 and $326,000,
respectively.

F-9
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--RELATED PARTY TRANSACTIONS (CONTINUED)
For 1996, 1997 and 1998, intercompany purchases of inventory from Bindley
Western (at the price paid by Bindley Western) totaled $1.8 million, $2.0
million and $6.0 million, respectively.

Certain employees of the Company were granted options to purchase Bindley
Western stock under a Bindley Western stock option plan. 155,750 and 15,000 such
options were granted by Bindley Western to Company employees in 1996 and 1997
(prior to the IPO), respectively, with exercise prices equal to the market price
of the Bindley Western stock at the date of grant. No compensation expense was
recognized on any Bindley Western option grants pursuant to Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees". If
the Company had recognized compensation expense based on the grant date fair
value of those options as prescribed by SFAS No. 123, "Accounting for
Stock-Based Compensation", net income for the years ended December 31, 1996,
1997 and 1998 would have decreased $280,000, $377,000 and $54,000, respectively,
on a pro forma basis. See Note 9--Capital Stock for a calculation of pro forma
earnings per share required by SFAS No. 123. The weighted average fair value of
each 1996 and 1997 Bindley Western option granted of $6.04 and $7.21,
respectively, was estimated using the Black-Scholes option pricing model, and
certain assumptions relevant to those Bindley Western options and the underlying
Bindley Western common stock. On December 31, 1998, the unvested Bindley Western
stock options were converted to options to purchase shares of Class B common
stock of the Company. See Note 9--Capital Stock.

NOTE 3--ACQUISITIONS

The Company acquired Grove Way Pharmacy effective August 6, 1997. This
acquisition was accounted for as a purchase and its results of operations are
included in the consolidated financial statements from the effective date of
acquisition. Grove Way Pharmacy was a specialty distributor of vaccines and
medical supplies to the physicians market. The consideration exchanged for Grove
Way Pharmacy was approximately $250,000, which exceeded the fair value of net
assets acquired and resulted in approximately $156,000 of intangibles. These
intangibles include a three-year noncompete with the prior owner. The results of
operations of Grove Way Pharmacy for 1996 and for the pre-acquisition period in
1997 were not material to the Company's consolidated sales and net earnings.

NOTE 4--FIXED ASSETS (IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Furnishings.............................................................. $ 797 $ 857
Leasehold improvements................................................... 274 450
Transportation and other equipment....................................... 1,421 1,972
--------- ---------
2,492 3,279
Less: accumulated depreciation........................................... (997) (1,459)
--------- ---------
$ 1,495 $ 1,820
--------- ---------
--------- ---------
</TABLE>

F-10
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--INTANGIBLES (IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Goodwill................................................................ $ 6,019 $ 6,019
Accumulated amortization................................................ (616) (768)
--------- ---------
Goodwill, net......................................................... 5,403 5,251
--------- ---------
Other................................................................... 4,001 4,001
Accumulated amortization................................................ (2,131) (2,713)
--------- ---------
Other, net............................................................ 1,870 1,288
--------- ---------
Intangibles, net........................................................ $ 7,273 $ 6,539
--------- ---------
--------- ---------
</TABLE>

NOTE 6--SHORT-TERM BORROWINGS

The Company entered into an agreement with a major financial institution on
November 24, 1998 for a three year unsecured revolving credit facility. The
Company may use the entire $10.0 million credit facility for letters of credit
or direct borrowings. The Company made no direct borrowings during 1998; a $5.0
million standby letter of credit is outstanding as of December 31, 1998. The
annual interest rate on direct borrowings is a variable rate equal to LIBOR plus
thirty-seven and one-half basis points (0.375%). The letter of credit carries an
annual fee of one percent (1.0%) of the face amount. The Company is also
required to maintain all of its operating accounts with this financial
institution. The revolving credit facility contains covenants related to fixed
charge coverage, funded debt to capitalization and funded debt to EBITDA ratios.

NOTE 7--INCOME TAXES

The provision for income taxes includes state income taxes of $479,000,
$669,000 and $1.1 million in 1996, 1997 and 1998, respectively.

The following table indicates the significant elements contributing to the
difference between the U.S. federal statutory tax rate and the effective tax
rate:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Percentage of earnings before taxes:
U.S. federal statutory rate.......................................................... 35.0% 35.0% 35.0%
State and local taxes on income, net of federal income tax benefit................... 4.3% 4.3% 4.2%
Other................................................................................ 0.7% 0.5% 0.5%
--- --- ---
Effective rate......................................................................... 40.0% 39.8% 39.7%
--- --- ---
--- --- ---
</TABLE>

F-11
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--INCOME TAXES (CONTINUED)
Presented below are the significant elements of the net deferred tax balance
sheet accounts at December 31, 1997 and 1998 (in thousands):

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Deferred tax asset:
Current:
Accounts receivable.................................................... $ 491 $ 635
Inventories............................................................ 206 223
Deferred compensation and stock option expense......................... 172 287
--------- ---------
Subtotal............................................................. 869 1,145
--------- ---------
Long-term: -- --
--------- ---------
Total deferred tax assets............................................ $ 869 $ 1,145
--------- ---------
--------- ---------
Deferred tax liabilities:
Current: -- --
--------- ---------
Long-term:
Fixed assets........................................................... $ 60 $ 86
Intangibles............................................................ 41 107
--------- ---------
Subtotal............................................................. 101 193
--------- ---------
Total deferred tax liabilities....................................... $ 101 $ 193
--------- ---------
--------- ---------
</TABLE>

NOTE 8--PROFIT SHARING PLAN

The Company's eligible employees participated in the Bindley Western
qualified Profit Sharing Plan ("Bindley Western Plan") through December 31, 1998
at which time the Company established its own qualified Profit Sharing Plan
("Profit Sharing Plan"). On February 8, 1999, all employees of the Company and
their account balances transferred from the Bindley Western Plan to the
Company's Profit Sharing Plan. All employees are generally eligible to
participate in the Profit Sharing Plan as of the first January 1, April 1, July
1 or October 1 after having completed at least one year of service (as defined
in the Profit Sharing Plan) and having reached age 21 ("Participant"). The
annual contribution of the Company to the Bindley Western Plan was at the
discretion of the board of directors of Bindley Western and for the Profit
Sharing Plan is now at the discretion of the board of directors of the Company
and is generally 8% of the Participant's compensation for the year. The employer
contribution for a year is allocated among the Participants employed on the last
day of the year in proportion to their relative compensation for the year. The
contributions to the Bindley Western Plan with respect to the Company which are
included as expense in the statement of earnings for 1996 and 1997 were $230,000
and $260,000, respectively. The contribution to the Profit Sharing Plan which is
included as expense in the statement of earnings for 1998 was $394,000.

Subject to limitations imposed by the Internal Revenue Code of 1986, as
amended, a Participant may have a percentage of his or her compensation withheld
from pay and contributed to the Profit Sharing Plan and make "rollover"
contributions to the Profit Sharing Plan of qualifying distributions from other
employers' qualified plans.

F-12
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8--PROFIT SHARING PLAN (CONTINUED)
A Participant's interest in amounts withheld from his or her pay and
contributed to the Profit Sharing Plan or in rollover contributions and in the
earnings on those amounts are fully vested at all times. A Participant's
interest in employer contributions made on his or her behalf and the earnings on
those contributions become 20% vested after one year of service and an
additional 20% vested during each of the next four years. A Participant's
interest in employer contributions made on his or her behalf and the earnings on
those contributions also become fully vested when the employee retires at age 65
or older, dies or becomes totally disabled.

All contributions to the Profit Sharing Plan are paid in cash to a
Cleveland, Ohio bank, as trustee, and are invested by the trustee until
distributed to Participants or their beneficiaries. Participants are permitted
to direct the trustee as to the investment of their accounts by choosing among
several investment funds that are offered, including one fund under the Bindley
Western Plan consisting of Bindley Western common stock. Under the Company's
Profit Sharing Plan, a Participant may elect to invest in the Company's common
stock, but may not make additional investments in Bindley Western common stock.
Participants may elect to invest in one fund or a combination of the available
funds according to their investment goals. If a Participant does not make an
investment election, his or her Profit Sharing Plan accounts will be invested in
a fund designated by the Company.

Except in certain cases of financial hardship, a Participant (or his or her
beneficiary) receives his or her interest in the Profit Sharing Plan only at
death, retirement or termination of employment.

NOTE 9--CAPITAL STOCK

As described in Note 1--Significant Accounting Policies, on August 25, 1997,
the board of directors and Bindley Western, as the sole shareholder of the
Company, approved a recapitalization of the Company. The recapitalization
resulted in the authorization of Class A common stock, Class B common stock and
Preferred Stock. The two classes of common stock entitle holders to the same
rights and privileges, except that holders of shares of Class A common stock are
entitled to three votes per share on all matters submitted to a vote of holders
of common stock and holders of Class B common stock are entitled to one vote per
share on such matters. The two classes of common stock vote together, as a
single class on all matters except as otherwise required by applicable law.

The Class A common stock will automatically be converted into shares of
Class B common stock on a share-for-share basis upon any transfer or purported
transfer to any person other than: (i) a dividend or other distribution of the
shares of Class A Common Stock to the shareholders of Bindley Western or; (ii)
family members of the holder of Class A common stock, or trusts for the benefit
of or entities controlled by the holder of Class A common stock or family
members of the holder.

On October 29, 1997, the Company consummated an initial public offering of
2,000,000 (3,000,000 after giving effect to the stock split) shares of Class B
common stock. An additional 300,000 (450,000 after giving effect to the stock
split) shares of Class B common stock were sold on November 25, 1997 pursuant to
the exercise of the underwriters' overallotment option. All shares were issued
at an initial price of $14.50 per share. Net proceeds to the Company, after

F-13
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--CAPITAL STOCK (CONTINUED)
deducting underwriting discounts and commissions and other expenses of the
offering, was $30.0 million.

On October 29, 1997 and October 22, 1998, 922 and 554 (1,383 and 831 after
giving effect to the stock split) shares, respectively, of Class B common stock
were granted to the two non-employee directors of the Company, representing the
stock portion of their annual retainer for serving on the board of directors.
Compensation expense relating to these grants was $15,000 in both 1997 and 1998.

On December 31, 1998, Bindley Western made a distribution to the holders of
Bindley Western common stock of the 10,214,286 (15,321,429 after giving effect
to the stock split) shares of Priority Class A common stock owned by Bindley
Western on the basis of .448 shares of Priority Class A common stock for each
share of Bindley Western Common Stock outstanding on December 15, 1998, which
was the Record Date for the Distribution. The fraction of a share of Priority
Class A common stock that was distributed for each share of Bindley Western
common stock was based upon the number of shares of Priority Class A common
stock owned by Bindley Western divided by the number of shares of Bindley
Western common stock outstanding on the Record Date.

On August 25, 1997, the board of directors and Bindley Western, as sole
shareholder of the Company, adopted the 1997 Stock Option and Incentive Plan
(the "1997 Stock Option Plan"). Under the 1997 Stock Option Plan, the Company
may award stock options and shares of restricted stock to officers, key
employees and consultants of the Company. The aggregate number of shares of
Class B common stock that may be awarded under the 1997 Stock Option Plan is
1,250,000 (pre stock split), subject to adjustment in certain events. This total
will increase to 2,250,000 subject to shareholder approval at the May 10, 1999
annual meeting of shareholders. No individual participant may receive awards for
more than 300,000 shares in any calendar year. Under the 1997 Stock Option Plan,
awards of restricted shares may be made, in which case the grantee would be
granted shares of Class B common stock, subject to any determined forfeiture or
transfer restrictions.

The Compensation Committee of the board of directors administers the 1997
Stock Option Plan and has the authority to select those officers and key
employees to whom awards will be made, to designate the number of shares to be
covered by each award, to establish vesting schedules, and to specify all other
terms of the awards. With respect to stock options that are intended to qualify
as "incentive stock options" under Section 422 of the Internal Revenue Code, the
option price must be at least 100% (or, in the case of a holder of more than 10%
of the total combined voting power of the Company's stock, 110%) of the fair
market value of a share of Class B common stock on the date of the grant of the
stock option. The Compensation Committee will establish the exercise price of
options that do not qualify as incentive stock options ("non-qualified stock
options"). No options may be exercised more than 10 years from the date of
grant, or for such shorter period as the Compensation Committee may determine at
the date of grant. Awards of options and shares of restricted stock as to which
restrictions have not lapsed are not transferable other than pursuant to the
laws of descent and distribution.

On August 25, 1997, the board of directors and Bindley Western, as sole
shareholder of the Company, approved the adoption of the Outside Directors Stock
Option Plan (the "Directors Plan"). The Directors Plan reserves for issuance
25,000 (pre stock split) shares of the Company's

F-14
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--CAPITAL STOCK (CONTINUED)
Class B common stock, subject to adjustment in certain events. Pursuant to the
Directors Plan, each non-employee director will be automatically granted an
option to purchase 1,000 shares of Class B common stock on June 1 of each year
beginning June 1, 1998. The option exercise price per share will be the fair
market value of one share of Class B common stock on the date of grant. Each
option becomes exercisable six months following the date of grant and expires 10
years following the date of grant.

On September 15, 1998, the board of directors of the Company approved the
adoption of the Broad Based Stock Option Plan (the "Broad Based Plan"). The
Broad Based Plan reserves for issuance 400,000 shares (pre stock split) of the
Company's Class B common stock, subject to adjustment in certain events. The
number of shares which may be granted under the Broad Based Plan during any
calendar year shall not exceed 40,000 shares to any one person. The Compensation
Committee of the board of directors administers the Broad Based Plan and
establishes vesting schedules. Each option expires 10 years following the date
of grant.

In accordance with the provision of SFAS No. 123, "Accounting for
Stock-Based Compensation" (SFAS No. 123), the Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related Interpretations in accounting for its stock
option plans, and accordingly, generally does not recognize compensation expense
related to options granted to employees. If the Company had elected to recognize
compensation expense based on the fair value of the options at the grant date,
whether granted by the Company or by Bindley Western as described in Note
2--Related Party Transactions, as prescribed by SFAS No. 123, pro forma net
income and earnings would have been (after giving effect to the stock split):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net earnings--as reported........................................................ $ 4,369 $ 6,151 $ 10,143
Pro forma impact of Bindley Western option grants (Note 2)..................... (280) (377) (54)
Pro forma impact of Company option grants...................................... -- (224) (1,718)
--------- --------- ---------
Pro forma net earnings........................................................... $ 4,089 $ 5,550 $ 8,371
--------- --------- ---------
--------- --------- ---------
Pro forma earnings per share:
Basic.......................................................................... $ 0.27 $ 0.35 $ 0.45
Diluted........................................................................ $ 0.27 $ 0.35 $ 0.44
</TABLE>

F-15
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--CAPITAL STOCK (CONTINUED)
The fair values of the Company's 1997 and 1998 option grants were estimated
on the date of grant using the Black Scholes option pricing model, with the
following weighted average assumptions:

<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Risk free interest rate................................................. 5.90% 5.02%
Expected dividend yield................................................. .00% .00%
Expected life of options................................................ 4.60 4.71
Volatility of stock price............................................... 54.79% 55.94%
Weighted average fair value of options (after giving effect to the stock
split)................................................................ $ 5.01 $ 6.43
</TABLE>

The board of directors granted a non-qualified stock option to a consultant
of the Company for 50,000 (75,000 after giving effect to the stock split) shares
of Class B common stock effective at the closing date of the IPO. This option
granted to the consultant of the Company (a non-employee under SFAS No. 123 and
APB 25) resulted in $350,000 of compensation expense that was recorded by the
Company in October, 1997. The compensation expense was determined based on the
fair value of those options at the date of grant as estimated by using the
Black-Scholes option pricing model.

As discussed in Note 2--Related Party Transactions, prior to the IPO,
certain employees of the Company were granted options to purchase Bindley
Western stock under a Bindley Western stock option plan. On December 31, 1998,
the unvested Bindley Western stock options held by these employees were
converted to options to purchase 67,033 (100,549 after giving effect to the
stock split) shares of Class B common stock of the Company. As these options
were converted in accordance with accounting principles issued by the Financial
Accounting Standards Board, no compensation expense was recorded on the
conversion.

Changes in stock options under all of the Company's plans are shown below
(after giving effect to the stock split):

<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
----------- ------------------
<S> <C> <C>
Options outstanding at December 31, 1996.................... -- --
Forfeited during 1997....................................... (20,700) $9.67 to $ 9.67
Granted during 1997......................................... 709,575 $9.67 to $10.00
Exercised during 1997....................................... -- --
-----------
Options outstanding at December 31, 1997.................... 688,875 $9.67 to $10.00
Forfeited during 1998....................................... (43,680) $9.67 to $13.33
Granted during 1998......................................... 802,380 $9.25 to $13.33
Exercised during 1998....................................... -- --
Converted from Bindley Western during 1998.................. 100,549 $8.16 to $11.91
-----------
Options outstanding at December 31, 1998.................... 1,548,124 $8.16 to $13.33
-----------
-----------
Exercisable at December 31, 1998............................ --
-----------
-----------
Available for grant at December 31, 1998.................... 964,376
-----------
-----------
</TABLE>

F-16
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 9--CAPITAL STOCK (CONTINUED)
Additional information regarding the Company's options outstanding at
December 31, 1998 is shown below (after giving effect to the stock split):

<TABLE>
<CAPTION>
EXERCISE PRICE RANGE
-----------------------------------------------------
$8.16-$9.61 $9.67-$11.91 $12.00-$13.33 TOTAL
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Number of options outstanding............................ 242,601 694,423 611,100 1,548,124
Weighted average exercise price.......................... $ 9.27 $ 9.73 $ 13.31 $ 11.07
Weighted average remaining contractual life.............. 8.62 8.84 9.78 9.18
Number of shares exercisable............................. -- -- -- --
Weighted average exercisable price....................... -- -- -- --
</TABLE>

NOTE 10--COMMITMENTS

The Company leases warehouse and office space under noncancelable operating
leases expiring at various dates through 2004, with options to renew for various
periods. Minimum commitments under leases aggregate $595,000 for 1999, $679,000
for 2000, $557,000 for 2001, $524,000 for 2002, $462,000 for 2003 and $473,000
for 2004.

The consolidated rent expense for 1996, 1997 and 1998 was $470,000, $515,000
and $635,000, respectively, of which approximately $75,000 in 1996, $89,000 in
1997 and $26,000 in 1998 pertained to leases with terms of one year or less.

NOTE 11--MAJOR CUSTOMERS AND OTHER CONCENTRATIONS

The Company services customers in 50 states and Puerto Rico. For the years
ended December 31, 1996, 1997 and 1998, the Company had one customer, Everest
Healthcare Services Corporation, which accounted for 12%, 11%, and 12%,
respectively, of the Company's revenues. The Company sells goods and services to
its customers on various payment terms which entail accounts receivable
exposure. Although the Company monitors closely the creditworthiness of its
customers, there can be no assurance that the Company will not incur a write-off
or writedown of a significant account in the future.

Products provided by the Company's largest vendor accounted for
approximately 42% of total revenues in 1996, 40% in 1997 and 32% in 1998. In
addition, the sale of one product supplied by this vendor accounted for 36% of
revenues in 1996, 35% in 1997 and 27% in 1998. This product is available from
only one manufacturer, with which the Company must maintain a good working
relationship. The Company is a party in a lawsuit involving this vendor. See
Note 12--Legal Proceedings.

NOTE 12--LEGAL PROCEEDINGS

IV-1, Inc. ("IV-1") and IV-One Services, Inc. ("IV-One Services") have been
named as defendants in a second amended counterclaim filed by Amgen, Inc.
("Amgen") on May 14, 1996, in the Circuit Court of the Eighteenth Judicial
District of Seminole County, Florida. Amgen has asserted that these entities
tortiously interfered with a license agreement (the "License Agreement") between
Amgen and Ortho Pharmaceutical Corporation ("Ortho"). Pursuant to this
agreement, Amgen licensed Ortho to sell EPO for use in the treatment of
non-dialysis patients, while Amgen reserved the exclusive right to sell EPO for
use in the treatment of dialysis patients.

F-17
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
Amgen has asserted that, prior to the purchase of IV-1 and IV-One Services by
the Company, these entities induced Ortho to sell EPO to them for resale in the
dialysis market in contravention of the License Agreement. Amgen has also
alleged that IV-1 and IV-One Services were involved in a civil conspiracy to
circumvent the terms of the License Agreement to allow the resale of EPO to the
dialysis market. Furthermore, Amgen has asserted unfair competition claims
against IV-1, including that IV-1 manufactured and distributed unapproved
prefilled syringes of EPO and another product manufactured by Amgen in container
systems unapproved by Amgen. Amgen did not specify a time frame for the acts
complained of in the civil conspiracy and unfair competition allegations. In
each count, Amgen has demanded an unspecified amount of compensatory damages,
including costs and interest.

The Company believes that the sellers of IV-1, IV-One Services and Charise
Charles are contractually obligated to provide legal defense and to indemnify
the Company for losses and liabilities with respect to this litigation, to the
extent that the alleged acts occurred prior to the purchase of such entities by
the Company. To date, the sellers have provided the legal defense for IV-1 and
IV-One Services in the litigation. Indemnification from the sellers of IV-1 and
IV-One Services is limited to no more than $1.5 million and indemnification from
the sellers of Charise Charles is limited to no more than $2.0 million. The
Company does not expect the Amgen litigation to be material to the Company's
results of operations, financial condition or cash flows; however, no assurance
can be given that this litigation will not have a material adverse effect on our
business, financial condition or results of operations. In addition, Amgen is
the Company's largest supplier. Consequently, this litigation presents the risk
of adversely affecting the Company's business relationship with Amgen, which
could have a material adverse effect on the Company. See Note 11--Major
Customers and Other Concentrations.

The Company is also subject to ordinary and routine litigation incidental to
its business, none of which is material to the Company's results of operations,
financial condition, or cash flows.

On November 14, 1995, an investigator for the FDA, accompanied by an
inspector from the State of Florida Board of Pharmacy, inspected the Company's
pharmacy in Altamonte Springs, Florida. At the end of the inspection, the FDA
investigator issued an FDA Form-483, which is the form used by FDA investigators
to identify any observed or suspected noncompliance with the laws administered
by the agency. The FDA Form-483 identified the facility as a pharmacy/
repackager and listed three observations related to certain requirements that
the FDA typically imposes on manufacturers of sterile products. The Company
advised the FDA in December 1995 that the Company believes it is not, within the
statutory or regulatory meaning of these terms, a repackager or a manufacturer.
A second inspection of the same facility occurred on June 26, 1997, in which the
FDA investigator was again accompanied by Florida pharmacy authorities. The FDA
investigator issued a substantially identical FDA Form-483 at the end of that
inspection. The Florida State Board of Pharmacy did not issue any deficiencies
regarding the operations of the Altamonte Springs pharmacy in either of these
inspections.

On March 16, 1992, the FDA issued a Compliance Policy Guide (CPG 460.200),
which explains the criteria the FDA uses to distinguish between pharmacy
operations that are properly regulated under state law and drug manufacturing
regulated by the FDA. The Company's response to the FDA in December 1995 cited
this CPG and explained the Company's contention that,

F-18
<PAGE>
PRIORITY HEALTHCARE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--LEGAL PROCEEDINGS (CONTINUED)
according to the FDA's own criteria, the facility is a pharmacy properly
regulated under state and local laws.

On November 21, 1997, the President signed into law the FDA Modernization
Act of 1997, which, among a number of other items, adds a new section on
pharmacy compounding to the Federal Food, Drug and Cosmetic Act. In this
provision, Congress clarified a gray area by explicitly identifying the
circumstances in which pharmacies may compound drugs without the need for filing
a New Drug Application, observing the FDA's Good Manufacturing Practice
regulations or complying with certain other specific Federal Food, Drug and
Cosmetic Act requirements. Congress provided that the term "compounding" does
not include mixing or reconstituting that is done in accordance with directions
contained in approved labeling provided by the manufacturer of the product. The
Company believes that, as a result of this amendment, so long as it follows the
manufacturer's approved labeling in each case, and prepares drugs only for
identified individual patients using licensed practitioners, the Company's
activities should be regulated by the Florida State Board of Pharmacy and not be
subjected by the FDA to a full New Drug Application requirement demonstrating
the basic safety and effectiveness of the drugs.

If the Company is correct and its operations are limited to those engaged in
by pharmacies, there should be no material adverse effect from the FDA Form-483s
because the Company believes it is currently in compliance in all material
respects with applicable state and local laws. If the Company is deemed to be a
sterile product manufacturer or a sterile product repackager, it would be
subject to additional regulatory requirements. If for some reason the FDA or
other legal authorities decide that the Company must file for approval of a New
Drug Application, such an event could have a material adverse effect on the
Company.

There can be no assurance that future legislation, future rulemaking, or
active enforcement by the FDA of a determination that the Company is a drug
manufacturer will not have a material adverse effect on the business of the
Company.

NOTE 13--SUBSEQUENT EVENT (UNAUDITED)

On April 12, 1999, the Company completed an acquisition of the majority of
the operating assets of Pharmacy Plus, Ltd., a specialty mail order pharmacy in
Philadelphia, Pennsylvania, that primarily provides injectable
biopharmaceuticals by overnight delivery. The acquisition will be accounted for
using the purchase method of accounting and the results of operations will be
included in the consolidated financial statements subsequent to the date of
acquisition. The total purchase price for the Pharmacy Plus assets was
approximately $3.5 million, which includes approximately $450,000 for inventory
and fixed assets and results in approximately $3.1 million of goodwill. No
indebtedness was assumed. The results of operations of Pharmacy Plus would not
have been material to the results of the Company for the periods presented in
these financial statements.

F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THROUGH AND INCLUDING , 1999 (THE 25TH DAY AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATIONS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.

-------------------

TABLE OF CONTENTS

<TABLE>
<S> <C>
Forward-looking Statements................................................ 3

Prospectus Summary........................................................ 4

Risk Factors.............................................................. 8

Use of Proceeds........................................................... 14

Price Range of Common Stock............................................... 15

Dividend Policy........................................................... 15

Capitalization............................................................ 16

Selected Consolidated Financial Data...................................... 17

Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 18

Business.................................................................. 26

Management................................................................ 39

Executive Compensation.................................................... 41

Principal Stockholders.................................................... 44

Underwriting.............................................................. 46

Legal Matters............................................................. 48

Experts................................................................... 48

Where You Can Find More Information....................................... 48

Index to Consolidated Financial Statements................................ 49
</TABLE>

2,600,000 SHARES

[LOGO]

PRIORITY
HEALTHCARE
CORPORATION

CLASS B COMMON STOCK

-------------

PROSPECTUS

-------------------

RAYMOND JAMES &
ASSOCIATES, INC.

FIRST UNION CAPITAL
MARKETS CORP.

NATIONSBANC MONTGOMERY
SECURITIES LLC

SUNTRUST EQUITABLE
SECURITIES

, 1999

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the issuance and
distribution of the Class B common stock being registered hereunder, other than
underwriting discounts and commissions:

<TABLE>
<CAPTION>
AMOUNT EXPENSES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Securities and Exchange Commission registration fee.............................. $ 28,496
Nasdaq National Market listing fee............................................... 17,500
NASD filing fee.................................................................. 30,500
Blue Sky fees and expenses (including fees of counsel)........................... 7,500
Accounting fees and expenses..................................................... 100,000
Legal fees and expenses.......................................................... 175,000
Printing and engraving expenses.................................................. 175,000
Transfer Agent and Registrar fees................................................ 10,000
Miscellaneous.................................................................... 56,004
-----------
Total........................................................................ $ 600,000
-----------
-----------
</TABLE>

All amounts except the registration fee, Nasdaq listing fee and NASD filing
fee are estimated. Items which are not included will be supplied by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Indiana Business Corporation Law provides that a corporation, unless
limited by its articles of incorporation, is required to indemnify its directors
and officers against reasonable expenses incurred in the successful defense of
any proceeding arising out of their service as a director or officer of the
corporation.

As permitted by the Indiana Business Corporation Law, the Registrant's
Restated Articles of Incorporation provide for indemnification of directors,
officers and employees of the Registrant against any and all liability and
reasonable expense that may be incurred by them, arising out of any claim or
action, civil, criminal, administrative or investigative, in which they may
become involved by reason of being or having been a director, officer, or
employee. To be entitled to indemnification, those persons must have been wholly
successful in the claim or action or the board of directors must have determined
that such persons acted in good faith in what they reasonably believed to be the
best interests of the Registrant (or at least not opposed to its best interests)
and, in addition, in any criminal action, had reasonable cause to believe their
conduct was lawful (or had no reasonable cause to believe that their conduct was
unlawful).

The rights of indemnification provided by the Restated Articles of
Incorporation are not exhaustive and are in addition to any rights to which a
director or officer may otherwise be entitled by contract or as a matter of law.
Irrespective of the provisions of the Restated Articles of Incorporation, the
Registrant may, at any time and from time to time, indemnify directors,
officers, employees and other persons to the full extent permitted by the
provisions of applicable law at the time in effect, whether on account of past
or future transactions.

S-1
<PAGE>
The Registrant has agreed to indemnify the underwriters, and the
underwriters have agreed to indemnify the Registrant, against certain civil
liabilities, including liabilities under the Securities Act. See the Form of
Underwriting Agreement filed as Exhibit 1 hereto.

In addition, the Registrant has a directors' and officers' liability and
company reimbursement policy that insures against certain liabilities, including
liabilities under the Securities Act, subject to applicable retentions.

ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES

(a) EXHIBITS

The list of exhibits is incorporated by reference to the Index to Exhibits
beginning on page E-1.

(b) FINANCIAL STATEMENT SCHEDULES

All schedules are omitted because of the absence of conditions under which
they are required or because the information is included in the consolidated
financial statements or the notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

S-2
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Indianapolis, State of Indiana, on the 5th day of
May, 1999.

<TABLE>
<S> <C> <C>
PRIORITY HEALTHCARE CORPORATION

BY: /s/ ROBERT L. MYERS
-----------------------------------------
Robert L. Myers
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby authorizes each of Robert L. Myers and Donald J. Perfetto, each
with full power of substitution, to execute in the name and on behalf of such
person any amendment or any post-effective amendment to this Registration
Statement and any subsequent registration statement filed pursuant to Rule 462
under the Securities Act of 1933 and to file the same, with exhibits thereto,
and other documents in connection therewith, making such changes in this
Registration Statement and any such subsequent registration statement as the
Registrant deems appropriate, and appoints each of Robert L. Myers and Donald J.
Perfetto, each with full power of substitution, attorney-in-fact to sign any
amendment and any post-effective amendment to this Registration Statement and
any such subsequent registration statement and to file same, with exhibits
thereto, and other documents in connection therewith.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in their
respective capacities and on the respective dates set forth opposite their
names.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ WILLIAM E. BINDLEY
- ------------------------------ Chairman of the Board May 5, 1999
William E. Bindley

President, Chief Executive
/s/ ROBERT L. MYERS Officer and Director
- ------------------------------ (Principal Executive May 5, 1999
Robert L. Myers Officer)

Chief Financial Officer
/s/ DONALD J. PERFETTO and Director (Principal
- ------------------------------ Financial and Accounting May 5, 1999
Donald J. Perfetto Officer)

/s/ MICHAEL D. MCCORMICK
- ------------------------------ Director May 5, 1999
Michael D. McCormick
</TABLE>

S-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
/s/ RICHARD W. ROBERSON
- ------------------------------ Director May 5, 1999
Richard W. Roberson

/s/ THOMAS J. SALENTINE
- ------------------------------ Director May 5, 1999
Thomas J. Salentine

/s/ REBECCA M. SHANAHAN
- ------------------------------ Director May 5, 1999
Rebecca M. Shanahan
</TABLE>

S-4
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
- --------- ------------------------------------------------------------------------------------------- -------------
<C> <S> <C>
1 Form of Underwriting Agreement.

4.1 (1)Articles of Restatement of the Restated Articles of Incorporation.

4.2 (2) Loan Agreement By and Between the Registrant and SunTrust Bank, Central Florida,
National Association, dated November 24, 1998.

5 Opinion of Baker & Daniels.

23-A Consent of PricewaterhouseCoopers LLP.

23-B Consent of Baker & Daniels (contained in Exhibit 5).

24 Power of Attorney (included on signature page).
</TABLE>

- -------------------

(1) The copy of this exhibit filed as Exhibit 3-C to the Registrant's
Registration Statement on Form S-1 (Registration No. 333-34463) is
incorporated herein by reference.

(2) The copy of this exhibit filed as the same exhibit number to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1998
is incorporated herein by reference.

E-1

<PAGE>

Exhibit 1

2,600,000 SHARES (*)

PRIORITY HEALTHCARE CORPORATION

CLASS B COMMON STOCK

-------------------------------

UNDERWRITING AGREEMENT

St. Petersburg, Florida
May ___, 1999

Raymond James & Associates, Inc.
First Union Capital Markets Corp.
SunTrust Equitable Securities Corporation
NationsBanc Montgomery Securities LLC
As Representatives of the Several Underwriters
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716

Ladies and Gentlemen:

Priority Healthcare Corporation, an Indiana corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and
sell an aggregate of 2,600,000 shares of Class B Common Stock, $.01 par value
per share (the "Class B Common Stock"), of the Company, to the several
Underwriters named in Schedule I hereto (the "Underwriters"), subject to the
terms and conditions stated herein (such 2,600,000 aggregate shares to be
sold by the Company are hereinafter referred to as the "Firm Shares"). In
addition, the Company has agreed to sell to the Underwriters, upon the terms
and conditions set forth herein, up to an additional 390,000 shares (the
"Additional Shares") of the Class B Common Stock to cover over-allotments by
the Underwriters, if any. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares."

The Company wishes to confirm as follows its agreement with you and the
other several Underwriters, on whose behalf you are acting, in connection
with the several purchases of the Shares from the Company.

1. REGISTRATION STATEMENT AND PROSPECTUS. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 (File No. ________), including a
prospectus subject to completion, relating to the Shares. Such registration
statement, as amended at the time when it becomes effective and as thereafter
amended by post-effective amendment, is referred to in this Agreement as the
"Registration Statement." The prospectus in the form included in the
Registration Statement, or, if the prospectus included in the Registration
Statement omits information in reliance upon Rule 430A under the Act and such
information is included in a

- -------------------

(*) Plus an additional 390,000 shares subject to
Underwriters' over-allotment option

<PAGE>

prospectus filed with the Commission pursuant to Rule 424(b) under the Act or
as part of a post-effective amendment to the Registration Statement after the
Registration Statement becomes effective, the prospectus as so filed, is
referred to in this Agreement as the "Prospectus." If the Company elects to
rely on Rule 434 under the Act, all references to the Prospectus shall be
deemed to include, without limitation, the form of prospectus and the term
sheet contemplated by Rule 434, taken together, provided to the Underwriters
by the Company in reliance on Rule 434 under the Act. If the Company files
another registration statement with the Commission to register a portion of
the Shares pursuant to Rule 462(b) under the Act (the "Rule 462 Registration
Statement"), then any reference to "Registration Statement" herein shall be
deemed to include the registration statement on Form S-3 (File No.
__________) and the Rule 462 Registration Statement, as each such
registration statement may be amended pursuant to the Act. The prospectus
subject to completion in the form included in the Registration Statement at
the time of the initial filing of such Registration Statement with the
Commission and as such prospectus is amended from time to time until the date
of the Prospectus are collectively referred to in this Agreement as the
"Prepricing Prospectus." Any reference in this Agreement to the Registration
Statement, any Prepricing Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the Act, as of the date of the Registration
Statement, such Prepricing Prospectus or the Prospectus, as the case may be,
and any reference to any amendment or supplement to the Registration
Statement, any Prepricing Prospectus or the Prospectus shall be deemed to
refer to and include any documents filed after such date under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") which, upon filing, are
incorporated by reference therein, as required by paragraph (b) of Item 12 of
Form S-3. As used herein, the term "Incorporated Documents" means the
documents which at the time are incorporated by reference in the Registration
Statement, any Prepricing Prospectus, the Prospectus, or any amendment or
supplement thereto.

2. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to
sell the Firm Shares to the Underwriters and, upon the basis of the
representations, warranties and agreements of the Company herein contained
and subject to all the terms and conditions set forth herein, each
Underwriter agrees, severally and not jointly, to purchase from the Company
at a purchase price of $________ per Share (the "purchase price per Share"),
the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto.

The Company hereby also agrees to sell to the Underwriters, and upon the
basis of the representations, warranties and agreements of the Company herein
contained and subject to all the terms and conditions set forth herein, the
Underwriters shall have the right for 30 days from the date of the Prospectus
to purchase from the Company up to 390,000 Additional Shares at the purchase
price per Share for the Firm Shares. The Additional Shares may be purchased
solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the Firm Shares. If any Additional Shares
are to be purchased, each Underwriter, severally and not jointly, agrees to
purchase the number of Additional Shares (subject to such adjustments as you
may determine to avoid fractional shares) which bears the same proportion to
the total number of Additional Shares to be purchased by the Underwriters as
the number of Firm Shares set forth opposite the name of such Underwriter in
Schedule I hereto bears to the total number of Firm Shares.

3. TERMS OF PUBLIC OFFERING. The Company has been advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and
initially to offer the Shares upon the terms set forth in the Prospectus.

4. DELIVERY OF THE SHARES AND PAYMENT THEREFOR. Delivery to the
Underwriters of the Firm Shares and payment therefor shall be made at the
offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St.
Petersburg, Florida, at 10:00 a.m., St. Petersburg, Florida time, on
________, 1999 (the "Closing Date"). The place of closing for the Firm
Shares and the Closing Date may be varied by agreement between the
Representative and the Company.

Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made at the offices of Raymond
James & Associates, Inc., 880 Carillon Parkway, St.

<PAGE>

Petersburg, Florida, at 10:00 a.m., Florida time, on such date or dates (the
"Additional Closing Date") (which may be the same as the Closing Date but
shall in no event be earlier than the Closing Date nor earlier than three nor
later than ten business days after the giving of the notice hereinafter
referred to) as shall be specified in a written notice from you on behalf of
the Underwriters to the Company of the Underwriters' determination to
purchase a number, specified in such notice, of Additional Shares. Such
notice may be given to the Company by you at any time within 30 days after
the date of the Prospectus. The place of closing for the Additional Shares
and the Additional Closing Date may be varied by agreement between you and
the Company.

Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such
denominations as you shall request prior to 1:00 p.m., Florida time, not
later than the second full business day preceding the Closing Date or the
Additional Closing Date, as the case may be. Such certificates shall be made
available to you in St. Petersburg, Florida for inspection and packaging not
later than 9:30 a.m., Florida time, on the business day immediately preceding
the Closing Date or the Additional Closing Date, as the case may be. The
certificates evidencing the Firm Shares and any Additional Shares to be
purchased hereunder shall be delivered to you on the Closing Date or the
Additional Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks payable in New
York Clearing House (next day) funds. Payment for the Firm Shares sold by the
Company hereunder shall be delivered by the Representative to the Company.

5. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants
and agrees with the several Underwriters as follows:

(a) The Company will use its best efforts to cause the
Registration Statement and any amendments thereto to become effective, if
it has not already become effective, and will advise you promptly and, if
requested by you, will confirm such advice in writing (i) when the
Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, (ii) if Rule 430A under the Act is
employed, when the Prospectus has been timely filed pursuant to Rule 424(b)
under the Act, (iii) of any request by the Commission for amendments or
supplements to the Registration Statement, any Prepricing Prospectus or the
Prospectus or for additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or of the suspension of qualification of the Shares
for offering or sale in any jurisdiction or the initiation of any
proceeding for such purposes and (v) within the period of time referred to
in Section 5(e) below, of any change in the Company's condition (financial
or other), business, prospects, properties, net worth or results of
operations, or of any event that comes to the attention of the Company that
makes any statement made in the Registration Statement or the Prospectus
(as then amended or supplemented) untrue in any material respect or that
requires the making of any additions thereto or changes therein in order to
make the statements therein not misleading in any material respect, or of
the necessity to amend or supplement the Prospectus (as then amended or
supplemented) to comply with the Act or any other law. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, the Company will make every reasonable effort to
obtain the withdrawal or lifting of such order at the earliest possible
time. If the Company elects to rely on Rule 434 under the Act, the Company
will provide the Underwriters with copies of the form of Rule 434
Prospectus (including copies of a term sheet that complies with the
requirements of Rule 434 under the Act), in such number as the Underwriters
may reasonably request, and file with the Commission in accordance with
Rule 424(b) of the Act the form of Prospectus complying with Rule 434(c) of
the Act before the close of business on the first business day immediately
following the date hereof. If the Company elects not to rely on Rule 434
under the Act, the Company will provide the Underwriters with copies of the
form of Prospectus, in such number as the Underwriters may reasonably
request, and file with the Commission such Prospectus in accordance with
Rule 424(b) of the Act before the close of business on the first business
day immediately following the date hereof.

<PAGE>

(b) The Company will furnish to you, without charge, two
signed duplicate originals of the Registration Statement as originally
filed with the Commission and of each amendment thereto, including
financial statements and all exhibits thereto, and will also furnish to
you, without charge, such number of conformed copies of the Registration
Statement as originally filed and of each amendment thereto as you may
reasonably request.

(c) The Company will not file any Rule 462 Registration
Statement or any amendment to the Registration Statement or make any
amendment or supplement to the Prospectus unless (A) you shall have
previously been advised thereof and been given a reasonable opportunity to
review such filing, amendment or supplement, and (B) you have not
reasonably objected to such filing, amendment or supplement after being so
advised and having been given a reasonable opportunity to review same.

(d) Prior to the execution and delivery of this Agreement,
the Company has delivered or will deliver to you, without charge, in such
quantities as you have requested or may hereafter reasonably request,
copies of each form of the Prepricing Prospectus. The Company consents to
the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are
offered by the several Underwriters and by dealers, prior to the date of
the Prospectus, of each Prepricing Prospectus so furnished by the Company.

(e) As soon after the execution and delivery of this
Agreement as is practicable and thereafter from time to time for such
period as in the reasonable opinion of counsel for the Underwriters a
prospectus is required by the Act to be delivered in connection with sales
by any Underwriter or a dealer, and for so long a period as you may request
for the distribution of the Shares, the Company will deliver to each
Underwriter and each dealer, without charge, as many copies of the
Prospectus (and of any amendment or supplement thereto) as they may
reasonably request. The Company consents to the use of the Prospectus (and
of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers
to whom Shares may be sold, both in connection with the offering and sale
of the Shares and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with sales by any
Underwriter or dealer. If at any time prior to the later of (i) the
completion of the distribution of the Shares pursuant to the offering
contemplated by the Registration Statement or (ii) the expiration of
prospectus delivery requirements with respect to the Shares under
Section 4(3) of the Act and Rule 174 thereunder, any event shall occur that
in the judgment of the Company or in the opinion of counsel for the
Underwriters is required to be set forth in the Prospectus (as then amended
or supplemented) or should be set forth therein in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if it is necessary to supplement or amend the
Prospectus to comply with the Act or any other law, the Company will
forthwith prepare and, subject to Sections 5(a) and 5(c) hereof, file with
the Commission and use its best efforts to cause to become effective as
promptly as possible an appropriate supplement or amendment thereto, and
will furnish to each Underwriter who has previously requested Prospectuses,
without charge, a reasonable number of copies thereof.

(f) The Company will cooperate with you and counsel for the
Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky laws of such jurisdictions as you may
reasonably designate and will file such consents to service of process or
other documents as may be reasonably necessary in order to effect and
maintain such registration or qualification for so long as required to
complete the distribution of the Shares; provided that in no event shall
the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject
it to general service of process in suits, other than those arising out of
the offering or sale of the Shares, in any jurisdiction where it is not now
so subject. In the event that the qualification of the Shares in any
jurisdiction is suspended, the Company shall so advise you promptly in
writing.

<PAGE>

(g) The Company will make generally available to its security
holders a consolidated earnings statement (in form complying with the
provisions of Rule 158), which need not be audited, covering a twelve-month
period commencing after the effective date of the Registration Statement
and the Rule 462 Registration Statement, if any, and ending not later than
15 months thereafter, as soon as practicable after the end of such period,
which consolidated earnings statement shall satisfy the provisions of
Section 11(a) of the Act.

(h) During the period ending three years from the date
hereof, the Company will furnish to you and, upon your request, to each of
the other Underwriters, (i) as soon as available, a copy of each proxy
statement, quarterly or annual report or other report of the Company mailed
to stockholders or filed with the Commission, the National Association of
Securities Dealers, Inc. (the "NASD") or The Nasdaq Stock Market or any
securities exchange and (ii) from time to time such other information
concerning the Company as you may reasonably request.

(i) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provision hereof (except pursuant to a
termination under Section 11 hereof) or if this Agreement shall be
terminated by the Underwriters because of any inability, failure or refusal
on the part of the Company to perform in all material respects any
agreement herein or to comply in all material respects with any of the
terms or provisions hereof or to fulfill in all material respects any of
the conditions of this Agreement, the Company agrees to reimburse you and
the other Underwriters for all out-of-pocket expenses (including travel
expenses and reasonable fees and expenses of counsel for the Underwriters
but excluding wages and salaries paid by you) reasonably incurred by you in
connection herewith.

(j) The Company will apply the net proceeds from the sale of
the Shares to be sold by it hereunder in accordance in all material
respects with the statements under the caption "Use of Proceeds" in the
Prospectus.

(k) If Rule 430A under the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act.

(l) For a period of 120 days after the date of the Prospectus
first filed pursuant to Rule 424(b) under the Act, without your prior
written consent, the Company will not, directly or indirectly, issue, sell,
offer or contract to sell or otherwise dispose of or transfer any shares of
Class B Common Stock or securities convertible into or exchangeable or
exercisable for shares of Class B Common Stock (collectively, "Company
Securities") or any rights to purchase Company Securities, except to the
Underwriters pursuant to this Agreement and except for grants of options
pursuant to the Company's stock option plans in effect as of the date
hereof and except for issuances of shares of Class B Common Stock upon the
exercise of options outstanding as of the date hereof under such stock
option plans.

(m) Prior to the Closing Date or the Additional Closing Date,
as the case may be, the Company will furnish to you, as promptly as
possible, copies of any unaudited interim consolidated financial statements
of the Company and its subsidiaries for any period subsequent to the
periods covered by the financial statements appearing in the Prospectus.

(n) The Company will comply with all provisions of any
undertakings contained in the Registration Statement.

(o) The Company will not at any time, directly or indirectly
take any action designed, or which might reasonably be expected to cause or
result in, or which will constitute, stabilization or manipulation of the
price of the shares of Class B Common Stock to facilitate the sale or
resale of any of the Shares.

<PAGE>

(p) The Company will use its best efforts to qualify or
register its Class B Common Stock for sale in non-issuer transactions under
(or obtain exemptions from the application of) the Blue Sky laws of each
state where necessary to permit market making transactions and secondary
trading, and will comply with such Blue Sky laws and will continue such
qualifications, registrations and exemptions in effect for a period of five
years after the date hereof.

(q) The Company will timely file with the National
Association of Securities Dealers Automated Quotation National Market
System ("NASDAQ/NMS") all documents and notices required by the NASDAQ/NMS
of companies that have or will issue securities that are traded in the
over-the-counter market and quotations for which are reported by the
NASDAQ/NMS.

(r) The Company will not make any loan or extend any credit
to Bindley Western Industries, Inc. or any of its affiliates (collectively
"BWI"), including advancing additional funds to BWI under the revolving
credit promissory note described in the Prospectus, and the Company shall,
on or before December 31, 1999, demand repayment from BWI of the loan
balances outstanding under such revolving credit promissory note in the
amount set forth in the Prospectus.

6. REPRESENTATIONS AND WARRANTIES.

The Company hereby, represents and warrants to each Underwriter on
the date hereof, and shall be deemed to represent and warrant to each
Underwriter on the Closing Date and the Additional Closing Date, as the case
may be, that:

(a) The Company satisfies all of the requirements of the Act for
use of Form S-3 for the offering of Shares contemplated hereby. Each
Prepricing Prospectus included as part of the Registration Statement as
originally filed or as part of any amendment or supplement thereto, or
filed pursuant to Rule 424(a) under the Act, complied when so filed in all
material respects with the provisions of the Act, except that this
representation and warranty does not apply to statements in or omissions
from such Prepricing Prospectus (or any amendment or supplement thereto)
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein. No order preventing or
suspending the use of any Prepricing Prospectus has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission or the securities authority of any state or other jurisdiction.

(b) The Registration Statement (including any Rule 462
Registration Statement), in the form in which it becomes effective and also
in such form as it may be when any post-effective amendment thereto shall
become effective, and the Prospectus, and any supplement or amendment
thereto when filed with the Commission under Rule 424(b) under the Act,
will comply in all material respects with the provisions of the Act and
will not at any such times contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, except that this
representation and warranty does not apply to statements in or omissions
from the Registration Statement or the Prospectus (or any amendment or
supplement thereto) made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by or on behalf of any Underwriter through you expressly for use therein.

(c) The Incorporated Documents heretofore filed, when they were
filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
and any further Incorporated Documents so filed will, when they are filed,
conform in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder; no such Incorporated Document
when it was filed (or, if an amendment with respect to any such document
was filed, when such amendment was filed), contained an untrue statement of
a material fact or omitted to state a material fact

<PAGE>

required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further Incorporated
Document, when it is filed, will contain an untrue statement of a
material fact or will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading.

(d) The capitalization of the Company is and will be as set
forth in the Prospectus as of the date set forth therein. All the
outstanding shares of the capital stock of the Company have been, and as of
the Closing Date, and the Additional Closing Date, as the case may be, will
be, duly authorized and validly issued, are fully paid and nonassessable
and are free of any preemptive or similar rights; except as set forth in
the Prospectus, the Company is not a party to or bound by any outstanding
options, warrants, or similar rights to subscribe for, or contractual
obligations to issue, sell, transfer or acquire, any of its capital stock
or any securities convertible into or exchangeable for any of such capital
stock; the Shares to be issued and sold to the Underwriters by the Company
hereunder have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof
will be validly issued, fully paid and nonassessable and free of any
preemptive or similar rights; the capital stock of the Company conforms to
the description thereof incorporated by reference in the Registration
Statement and the Prospectus (or any amendment or supplement thereto); and
the delivery of certificates for the Shares against payment therefor
pursuant to the terms of this Agreement, will pass valid title to the
Shares, free and clear of any claim, encumbrance or defect in title, to the
several Underwriters purchasing such shares in good faith and without
notice of any lien, claim or encumbrance. The certificates for the Shares
are in valid and sufficient form.

(e) Each of the Company and its subsidiaries is a corporation
duly organized and validly existing as a corporation in good standing under
the laws of the state of its incorporation with full corporate power and
authority to own, lease and operate its properties and to conduct its
business as presently conducted and as described in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), and
is duly registered and qualified to conduct its business and is in good
standing in each jurisdiction or place where the nature of its properties
or the conduct of its business requires such registration or qualification,
except where the failure to so register or qualify does not have a material
adverse effect on the condition (financial or other), business, properties,
net worth, results of operations or prospects of the Company and its
subsidiaries, taken as a whole (a "Material Adverse Effect").

(f) The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable and are owned by the Company free and clear of any
security interests, liens, encumbrances, equities or claims. The Company
does not have any subsidiaries and does not own a material interest in or
control, directly or indirectly, any other corporation, partnership, joint
venture, association, trust or other business organization, except for
those set forth in exhibit 21 to the Annual Report on Form 10-K of the
Company for the fiscal year ended December 31, 1998. As used in this
Agreement, subsidiaries shall mean direct and indirect subsidiaries of the
Company.

(g) There are no legal or governmental proceedings pending or,
to the best knowledge of the Company, threatened, against the Company or
its subsidiaries or to which the Company or its subsidiaries or any of
their properties are subject, that are required to be described in the
Registration Statement or the Prospectus (or any amendment or supplement
thereto) but are not described as required. Except as described in the
Prospectus, there is no action, suit, inquiry, proceeding, or investigation
by or before any court or governmental or other regulatory or
administrative agency or commission pending or, to the best knowledge of
the Company, threatened, against or involving the Company or its
subsidiaries, which might individually or in the aggregate prevent or
adversely affect the transactions contemplated by this Agreement or result
in a Material Adverse Effect, nor is there any basis for any such action,
suit, inquiry, proceeding, or investigation. There are no agreements,
contracts, indentures, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus (or any amendment
or supplement thereto) or to be filed as an exhibit to or incorporated by
reference in the Registration

<PAGE>

Statement that are not described or filed or incorporated by reference
as required by the Act. All such contracts to which the Company or any
of its subsidiaries is a party have been duly authorized, executed and
delivered by the Company or the applicable subsidiary, constitute valid
and binding agreements of the Company or the applicable subsidiary and
are enforceable against the Company or the applicable subsidiary in
accordance with the terms thereof, and neither the Company or the
applicable subsidiary, nor to the best of the Company's knowledge, any
other party, is in breach of or in default under any of such contracts.

(h) Neither the Company nor any of its subsidiaries is: (i) in
violation of (aa) its articles of incorporation or bylaws or (bb) any law,
ordinance, administrative or governmental rule or regulation applicable to
the Company or any of its subsidiaries the violation of which would have a
Material Adverse Effect or (cc) any decree of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries; or (ii) in default in any material respect in the performance
of any obligation, agreement or condition contained in (aa) any bond,
debenture, note or any other evidence of indebtedness, or (bb) any material
agreement, indenture, lease or other material instrument to which the
Company or any of its subsidiaries is a party or by which any of their
properties may be bound; and there does not exist any state of facts which
constitutes an event of default on the part of the Company or any of its
subsidiaries as defined in such documents or which, with notice or lapse of
time or both, would constitute such an event of default.

(i) The Company's execution and delivery of this Agreement and
the performance by the Company of its obligations under this Agreement have
been duly and validly authorized by the Company, and this Agreement has
been duly executed and delivered by the Company, and this Agreement
constitutes a valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent enforceability may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws relating to or
affecting enforcement of creditors' rights generally or by general
equitable principles and public policy exceptions.

(j) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby or
thereby (i) requires any consent, approval, authorization or other order of
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency or official (except such as may
be required for the registration of the Shares under the Act, the listing
of the Shares for trading on the NASDAQ/NMS, and compliance with the
securities or Blue Sky laws of various jurisdictions, all of which will be,
or have been, effected in accordance with this Agreement and except for the
NASD's clearance of the underwriting terms of the offering contemplated
hereby as required under the NASD's Rules of Fair Practice), (ii) conflicts
with or will conflict with or constitutes or will constitute a breach of,
or a default under, the articles of incorporation or bylaws of the Company
or any agreement, indenture, lease or other instrument to which the Company
or any of its subsidiaries is a party or by which any of its properties may
be bound, (iii) violates any statute, law, regulation, ruling, filing,
judgment, injunction, order or decree applicable to the Company or any of
its subsidiaries or any of their properties, or (iv) results in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or its subsidiaries.

(k) Except as described in the Prospectus, neither the Company
nor any of its subsidiaries has outstanding, and at the Closing Date and
the Additional Closing Date, as the case may be, neither the Company nor
any of its subsidiaries will have outstanding, any options to purchase, or
any warrants to subscribe for, or any securities or obligations convertible
into, or any contracts or commitments to issue or sell, any shares of Class
B Common Stock or any such warrants or convertible securities or
obligations. No holder of securities of the Company has rights to the
registration of any securities of the Company as a result of or in
connection with the filing of the Registration Statement or the
consummation of the transactions contemplated hereby that have not been
satisfied or heretofore waived in writing.

<PAGE>

(l) PricewaterhouseCoopers LLP, the certified public accountants
who have certified the financial statements filed as part of the
Registration Statement and the Prospectus (or any amendment or supplement
thereto), are independent public accountants as required by the Act.

(m) The financial statements, together with related schedules
and notes, included in the Registration Statement and the Prospectus (and
any amendment or supplement thereto), present fairly the financial
position, results of operations and changes in financial position of the
Company on the basis stated in the Registration Statement at the respective
dates or for the respective periods to which they apply; such statements
and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the periods involved, except as disclosed therein; and the other financial
and statistical information and data set forth in the Registration
Statement and Prospectus (and any amendment or supplement thereto) is
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company. No other financial
statements or schedules are required to be included in the Registration
Statement.

(n) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), (i)
neither the Company nor any of its subsidiaries has incurred any material
liabilities or obligations, indirect, direct or contingent, or entered into
any transaction which is not in the ordinary course of business or which
could result in a material reduction in the future earnings of the Company;
(ii) neither the Company nor any of its subsidiaries has sustained any
material loss or interference with its business or properties from fire,
flood, windstorm, accident or other calamity, whether or not covered by
insurance; (iii) neither the Company nor any of its subsidiaries has paid
or declared any dividends or other distributions with respect to its
capital stock and the Company is not in default under the terms of any
class of capital stock of the Company or any outstanding debt obligations;
(iv) neither the Company nor any of its subsidiaries has made any loan or
extended any credit to BWI; (v) there has not been any change in the
authorized or outstanding capital stock of the Company or any material
change in the indebtedness of the Company (other than in the ordinary
course of business); and (vi) there has not been any material adverse
change, or any development having or which may reasonably be expected to
have a Material Adverse Effect.

(o) Each of the Company and its subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims,
security interests or other encumbrances except (i) such as are described
in the financial statements included or incorporated by reference in the
Prospectus or (ii) such as are not materially burdensome and do not
interfere in any material respect with the use of the property or the
conduct of the business of the Company. All property (real and personal)
held under lease by the Company and its subsidiaries is held by it under
valid, subsisting and enforceable leases with only such exceptions as in
the aggregate are not materially burdensome and do not interfere in any
material respect with the conduct of the business of the Company or its
subsidiaries.

(p) The Company has not distributed and will not distribute any
offering material in connection with the offering and sale of the Shares
other than the Prepricing Prospectus, the Prospectus, or other offering
material, if any, as permitted by the Act.

(q) The Company has not taken, directly or indirectly, any
action which constituted, or any action designed, or which might reasonably
be expected to cause or result in or constitute, under the Act or
otherwise, stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares or for any other
purpose.

<PAGE>

(r) The Company is not an "investment company," an "affiliated
person" of, or "promoter" or "principal underwriter" for an investment
company within the meaning of the Investment Company Act of 1940, as
amended.

(s) Each of the Company and its subsidiaries has all permits,
licenses, franchises, approvals, consents and authorizations of
governmental or regulatory authorities (hereinafter "permit" or "permits")
as are necessary to own its properties and to conduct its business in the
manner described in the Prospectus, subject to such qualifications as may
be set forth in the Prospectus, except where the failure to have obtained
any such permit has not and will not have a Material Adverse Effect; each
of the Company and its subsidiaries has fulfilled and performed in all
material respects all of its obligations with respect to each such permit
and no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination of any such permit or result in any
other material impairment of the rights of the holder of any such permit,
subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, such permits
contain no restrictions that are materially burdensome to the Company or
any of its subsidiaries.

(t) Each of the Company and its subsidiaries has complied and
will comply with wage and hour determinations issued by the U.S. Department
of Labor under the Service Contract Act of 1965 and the Fair Labor
Standards Act in paying its employees' salaries, fringe benefits, and other
compensation for the performance of work or other duties in connection with
contracts with the U.S. government, except where the failure to comply has
not had and will not have a Material Adverse Effect. Each of the Company
and its subsidiaries has complied and will comply in all material respects
with the terms of all certifications and representations made to the U.S.
government in connection with the submission of any bid or proposal or any
contract. Each of the Company and its subsidiaries has complied and will
comply with the requirements of the American with Disabilities Act of 1990,
the Family and Medical Leave Act of 1993, the Employee Retirement Income
Security Act, the Civil Rights Act of 1964 (Title VII), as amended, the Age
Discrimination in Employment Act and other applicable federal and state
employment and labor laws, except where the failure to comply has not had
and will not have a Material Adverse Effect.

(u) The Company, and its subsidiaries, maintain a system of
internal accounting controls sufficient to provide reasonable assurances
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's
general or specific authorizations; and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

(v) Neither the Company, at any time, nor any of its
subsidiaries, since each has been held as a subsidiary of the Company, has,
directly or indirectly, (i) made any unlawful contribution to any candidate
for political office, or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal, state or foreign
governmental official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the laws
of the United States or any jurisdiction thereof or applicable foreign
jurisdictions.

(w) Each of the Company and its subsidiaries has obtained all
required permits, licenses, and other authorizations, if any, which are
required under federal, state, local and foreign statutes, ordinances and
other laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, chemicals, or industrial, hazardous,
or toxic materials or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, land surface, or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, hazardous, or toxic
materials or wastes, or any regulation, rule, code, plan, order, decree,

<PAGE>

judgment, injunction, notice, or demand letter issued, entered,
promulgated, or approved thereunder ("Environmental Laws"), except where
the failure to obtain any such permit, license or other authorization has
not resulted in and will not result in a Material Adverse Effect. Each of
the Company and its subsidiaries is in material compliance with all terms
and conditions of all required permits, licenses, and authorizations, and
are also in material compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules,
and timetables contained in the Environmental Laws. There is no pending
or, to the best knowledge of the Company after due inquiry, threatened
civil or criminal litigation, notice of violation, or administrative
proceeding relating in any way to the Environmental Laws (including but not
limited to notices, demand letters, or claims under the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Emergency Planning and Community Right to
Know Act of 1986, as amended ("EPCRA"), the Clan Air Act, as amended
("CAA"), or the Clean Water Act, as amended ("CWA") and similar federal,
foreign, state, or local laws) involving the Company or any of its
subsidiaries. There have not been and there are not any past, present, or
foreseeable future events, conditions, circumstances, activities,
practices, incidents, actions, or plans which may interfere with or prevent
continued compliance, or which may give rise to any common law or legal
liability, or otherwise form the basis of any claim, action, demand, suit,
proceeding, hearing, study, or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release, or threatened
release into the environment, of any pollutant, contaminant, chemical, or
industrial, hazardous, or toxic material or waste, including, without
limitation, any liability arising, or any claim, action, demand, suit,
proceeding, hearing, study, or investigation which may be brought, under
RCRA, CERCLA, EPCRA, CAA, CWA or similar federal, foreign, state or local
laws.

(x) Each of the Company and its subsidiaries owns and has full
right, title and interest in and to, or has valid licenses to use, each
material trade name, trademark or service mark under which each of the
Company and its subsidiaries conducts all or any material part of its
business, and the Company has created no lien or encumbrance on, or granted
any right or license with respect to, any such trade name, trademark or
service mark; there is no claim pending against the Company or any of its
subsidiaries with respect to any trade name, trademark or service mark and
neither the Company nor any of its subsidiaries has received notice that
any trade name, trademark or service mark which it uses or has used in the
conduct of its business infringes upon or conflicts with the rights of any
third party. Neither the Company nor any of its subsidiaries has become
aware that any material trade name, trademark or service mark which it uses
or has used in the conduct of its business infringes upon or conflicts with
the rights of any third party.

(y) All offers, sales, conversions and redemptions of the
Company's capital stock and other securities through the date hereof were
made in compliance with the Act and all other applicable state and federal
laws or regulations.

(z) The Shares have been duly authorized for trading on the
NASDAQ/NMS under the symbol "PHCC," subject to notice of issuance of the
Shares being sold by the Company, and upon consummation of the offering
contemplated hereby the Company will be in compliance with the designation
and maintenance criteria applicable to Nasdaq National Market issuers.

(aa) All federal, state, local and foreign tax returns required
to be filed by or on behalf of the Company and its subsidiaries (and their
predecessors) with respect to all periods ended prior to the date of this
Agreement have been filed (or are the subject of valid extension) with the
appropriate federal, state, local and foreign authorities and all such tax
returns, as filed, are accurate in all material respects. All federal,
state, local and foreign taxes (including estimated tax and sales tax
payments) required to be shown on all such tax returns or claimed to be due
from or with respect to the business of the Company and its

<PAGE>

subsidiaries (and their predecessors) have been paid or reflected as a
liability on the financial statements of the Company included or
incorporated by reference in the Prospectus for appropriate periods,
except for those taxes or claims therefor which are being contested by
the Company in good faith and for which appropriate reserves are
reflected in the Company's financial statements included or incorporated
by reference in the Prospectus. Except as disclosed in the Prospectus,
all deficiencies asserted as a result of any federal, state, local or
foreign tax audits have been paid or finally settled and no issue has
been raised in any such audit which, by application of the same or
similar principles, reasonably could be expected to result in a proposed
deficiency for any other period not so audited. There are no outstanding
agreements or waivers extending the statutory period of limitation
applicable to any federal, state, local or foreign tax return for any
period. On the Closing Date, and the Additional Closing Date, as the
case may be, all stock transfer and other taxes which are required to be
paid in connection with the sale of the shares to be sold by the Company
to the Underwriters will have been fully paid by the Company and all
laws imposing such taxes will have been complied with.

(bb) Except as set forth in the Prospectus or incorporated by
reference in the Registration Statement, there are no transactions with
"affiliates" (as defined in Rule 405 promulgated under the Act) or any
officer, director or security holder of the Company (whether or not an
affiliate) which are required by the Act and the applicable rules and
regulations thereunder to be disclosed.

(cc) The Company has procured the written agreement of its
officers and directors not to (i) directly or indirectly sell, offer or
contract to sell or otherwise dispose of or transfer any shares of Company
Securities owned or controlled by such persons now or hereafter or any
rights to purchase Company Securities for a period of 120 days after the
date of the Prospectus first filed pursuant to Rule 424(b) under the Act
(the "Restriction Period"), without your prior written consent, or
(ii) exercise or seek to exercise or effectuate in any manner any rights of
any nature that such persons have or may hereafter have to require the
Company to register under the Act any such person's sale, transfer or other
disposition of any Company Securities or other securities of the Company
held by any such persons, or to otherwise participate as a selling
securityholder in any manner in any registration effected by the Company
under the Act, including the registration to which this Agreement relates,
before the expiration of the Restriction Period.

(dd) Neither the Company nor any of its subsidiaries (i) conduct
business or have affiliates which conduct business in or with Cuba, (ii)
plan to commence doing business in or with Cuba after the effective date of
the Registration Statement or (iii) are required by Florida law to report a
material change in information previously reported to the State of Florida
regarding business conducted in or with Cuba.

(ee) No officer, director, nominee for director or shareholder of
the Company has a direct or indirect affiliation or association with any
member of the NASD.

7. EXPENSES. Whether or not the transactions contemplated hereby are
consummated or this Agreement becomes effective or is terminated, the Company
will pay or cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof and of any Prepricing Prospectus to the Underwriters and
dealers; (ii) the printing and delivery (including, without limitation, postage,
air freight charges and charges for counting and packaging) of such copies of
the Registration Statement, the Prospectus, each Prepricing Prospectus, the
Incorporated Documents, the Blue Sky memoranda, the Master Agreement Among
Underwriters, this Agreement, the Selected Dealers Agreement and all amendments
or supplements to any of them as may be reasonably requested for use in
connection with the offering and sale of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws or Blue Sky laws, including the reasonable attorneys' fees
and out-of-pocket expenses of the counsel for the Underwriters in connection
therewith; (iv) the filing fees incident to securing any

<PAGE>

required review by the NASD of the terms of the sale of the Shares and the
reasonable fees and disbursements of the Underwriters' counsel relating
thereto; (v) the cost of preparing stock certificates; (vi) the costs and
charges of any transfer agent or registrar; (vii) the cost of the tax stamps,
if any, in connection with the issuance and delivery of the Shares to the
respective Underwriters; (viii) all other fees, costs and expenses referred
to in Item 13 of the Registration Statement, (ix) the transportation,
lodging, graphics and other expenses incidental to the Company's preparation
for and participation in the "roadshow" for the offering contemplated hereby,
and (x) all other costs and expenses incident to the performance of the
obligations of the Company hereunder which are not otherwise specifically
provided for in this Section 7. Notwithstanding the foregoing, in the event
that the proposed offering is terminated for the reasons set forth in Section
5(i) hereof, the Company agrees to reimburse the Underwriters as provided in
Section 5(i).

8. INDEMNIFICATION AND CONTRIBUTION. Subject to the limitations in
this paragraph below, the Company agrees to indemnify and hold harmless you and
each other Underwriter, the directors, officers, employees and agents of each
Underwriter, and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses,
including, without limitation, reasonable costs of investigation and attorneys'
fees and expenses (collectively, "Damages") arising out of or based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in any
Prepricing Prospectus or in the Registration Statement or the Prospectus or in
any amendment or supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except to the extent that any such
Damages arise out of or are based upon an untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information furnished in
writing to the Company by or on behalf of any Underwriter through you expressly
for use in connection therewith, or (ii) any inaccuracy in or breach of the
representations and warranties of the Company contained herein or any failure of
the Company to perform its obligations hereunder or under law; PROVIDED,
HOWEVER, that with respect to any untrue statement or omission made in any
Prepricing Prospectus, the indemnity agreement contained in this paragraph shall
not inure to the benefit of any Underwriter (or to the benefit of any person
controlling such Underwriter) from whom the person asserting any such losses,
claims, damages or liabilities purchased the Shares concerned if both (y) a copy
of the Prospectus was not sent or given to such person at or prior to the
written confirmation of the sale of such Shares to such person as required by
the Act, and (z) the untrue statement or omission in the Prepricing Prospectus
was corrected in the Prospectus.

In addition to its other obligations under this Section 8, the Company
agrees that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
untrue statement or omission, or any inaccuracy in the representations and
warranties of the Company herein or failure to perform its obligations
hereunder, all as set forth in this Section 8, it will reimburse each
Underwriter on a quarterly basis for all reasonable legal or other out-of-pocket
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
obligation of the Company to reimburse each Underwriter for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, each Underwriter shall
promptly return it to the person(s) from whom it was received, together with
interest compounded daily determined on the basis of the base lending rate
announced from time to time by Chase Manhattan Bank, N.A. (the "Prime Rate").
Any such interim reimbursement payments which are not made to the Underwriters
within 30 days of a request for reimbursement shall bear interest at the Prime
Rate from the date of such request.

If any action or claim shall be brought against any Underwriter or any
person controlling any Underwriter in respect of which indemnity may be sought
against the Company, such Underwriter or such controlling person shall promptly
notify in writing the Company, and the Company shall assume the defense thereof,
including the employment of counsel reasonably acceptable to such Underwriter or
such controlling person and payment of all fees and expenses. Such Underwriter
or any such controlling person shall have the right to employ separate counsel

<PAGE>

(but the Company shall not be liable for the fees and expenses of more than
one counsel) in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Underwriter or such controlling person unless (i) the Company has agreed in
writing to pay such fees and expenses, (ii) the Company has failed to assume
the defense and employ counsel reasonably acceptable to the Underwriter or
such controlling person or (iii) the named parties to any such action
(including any impleaded parties) include both such Underwriter or such
controlling person and the Company, and such Underwriter or such controlling
person shall have been advised by its counsel that one or more legal defenses
may be available to the Underwriter which may not be available to the
Company, or that representation of such indemnified party and the Company by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel
has been proposed) due to actual or potential differing interests between
them (in which case the Company shall not have the right to assume the
defense of such action on behalf of such Underwriter or such controlling
person (notwithstanding its obligation to bear the fees and expenses of such
counsel)). The Company shall not be liable for any settlement of any such
action effected without its written consent, but if settled with such written
consent, or if there be a final judgment for the plaintiff in any such
action, the Company agrees to indemnify and hold harmless any Underwriter and
any such controlling person from and against any loss, claim, damage,
liability or expense by reason of such settlement or judgment, but in the
case of a judgment only to the extent stated in the immediately preceding
paragraph.

Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, and its officers who sign the
Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the
same extent as the foregoing indemnity from the Company to each Underwriter,
but only with respect to information furnished in writing by or on behalf of
such Underwriter through you expressly for use in the Registration Statement,
the Prospectus or any Prepricing Prospectus, or any amendment or supplement
thereto. If any action or claim shall be brought or asserted against the
Company, any of its directors, any such officers, or any such controlling
person based on the Registration Statement, the Prospectus or any Prepricing
Prospectus, or any amendment or supplement thereto, and in respect of which
indemnity may be sought against any Underwriter pursuant to this paragraph,
such Underwriter shall have the rights and duties given to the Company by the
preceding paragraph (except that if the Company shall have assumed the
defense thereof such Underwriter shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof, but
the fees and expenses of such counsel shall be at such Underwriter's
expense), and the Company, its directors, any such officers, and any such
controlling persons shall have the rights and duties given to the
Underwriters by the immediately preceding paragraph.

If the indemnification provided for in this Section 8 is unavailable or
insufficient for any reason whatsoever to an indemnified party under the
first or fourth paragraph of this Section 8 in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then an indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Underwriters on the
other hand in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus; provided that, in the
event that the Underwriters shall have purchased any Additional Shares
hereunder, any determination of the relative benefits received by the Company
or the Underwriters from the offering of the Shares shall include the net
proceeds (before deducting expenses) received by the Company, and the
underwriting discounts and commissions received by the Underwriters, from the
sale of such Additional Shares. The relative fault of the Company on the one
hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or

<PAGE>

alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company on the one hand or by the Underwriters on the other hand and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 8 was determined by a pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable to an indemnified party as a result of
the losses, claims, damages, liabilities and expenses referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price of the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 8 are several in proportion to the
respective numbers of Firm Shares set forth opposite their names in Schedule
I hereto (or such numbers of Firm Shares increased as set forth in Section 10
hereof) and not joint.

Notwithstanding the second paragraph of this Section 8, any losses,
claims, damages, liabilities or expenses for which an indemnified party is
entitled to indemnification or contribution under this Section 8 shall be
paid by the indemnifying party to the indemnified party as such losses,
claims, damages, liabilities or expenses are incurred. The indemnity,
contribution and reimbursement agreements contained in this Section 8 and the
representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
person controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder and (iii) any termination of this Agreement. A successor
to any Underwriter or any person controlling any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.

It is agreed that any controversy arising out of the operation of the
interim reimbursement arrangements set forth in the second paragraph of this
Section 8, including the amounts of any requested reimbursement payments and
the method of determining such amounts, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the NASD. Any
such arbitration must be commenced by service of a written demand for
arbitration or written notice of intention to arbitrate, therein electing the
arbitration tribunal. In the event the party demanding arbitration does not
make such designation of an arbitration tribunal in such demand or notice,
then the party responding to said demand or notice is authorized to do so.
Such an arbitration would be limited to the operation of the interim
reimbursement provisions contained in the second paragraph of this Section 8,
and would not resolve the ultimate propriety or enforceability of the
obligation to reimburse expenses which is created by the provisions of the
second paragraph of this Section 8.

9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:

(a) The Registration Statement shall have become effective not
later than 12:00 noon, New York City time, on the date hereof, or at such
later date and time as shall be consented to in writing by you, and all
filings required by Rules 424(b), 430A and 462 under the Act shall have
been timely made.

(b) You shall be reasonably satisfied that since the respective
dates as of which information are given in the Registration Statement and
Prospectus, (i) there shall not have been any change in the

<PAGE>

capital stock of the Company or any material change in the indebtedness
(other than in the ordinary course of business) of the Company, (ii)
except as set forth or contemplated by the Registration Statement or the
Prospectus, no material oral or written agreement or other transaction
shall have been entered into by the Company which is not in the ordinary
course of business or which could reasonably be expected to result in a
material reduction in the future earnings of the Company, (iii) no loss
or damage (whether or not insured) to the property of the Company shall
have been sustained which had or could reasonably be expected to have a
Material Adverse Effect, (iv) no legal or governmental action, suit or
proceeding affecting the Company or any of its properties which is
material to the Company or which affects or could reasonably be expected
to affect the transactions contemplated by this Agreement shall have
been instituted or threatened, and (v) there shall not have been any
material change in the condition (financial or otherwise), business,
management, results of operations or prospects of the Company or its
subsidiaries which makes it impractical or inadvisable in your judgment
to proceed with the public offering or purchase the Shares as
contemplated hereby.

(c) You shall have received on the Closing Date an opinion of
Baker & Daniels, counsel to the Company, to the effect that:

(i) The Company is a corporation duly incorporated and
validly existing under the laws of the State of Indiana, with full
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement thereto), and is duly registered or otherwise qualified
to conduct its business as a foreign corporation and is in good
standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration
or qualification, except where the failure to so register or qualify
does not have a Material Adverse Effect.

(ii) Each of the Company's subsidiaries is a corporation
validly existing in good standing under the laws of the jurisdiction
of its organization, with full corporate power and authority to own,
lease and operate its properties and to conduct its business as
described in the Registration Statement and the Prospectus (and any
amendment or supplement thereto); and is duly registered and
qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the
conduct of its business requires such registration or qualification,
except where the failure to so register or qualify does not have a
Material Adverse Effect; and all of the outstanding shares of
capital stock of each of the subsidiaries have been duly authorized
and validly issued, and are fully paid and nonassessable, and are
owned by the Company directly, or indirectly through one of the
other subsidiaries, free and clear of any perfected security
interest, or to the best knowledge of such counsel after reasonable
inquiry, any other security interest, lien, adverse claim, equity or
other encumbrance.

(iii) The authorized and the aggregate outstanding capital
stock of the Company is as set forth in the Prospectus under the
caption "Capitalization" and the capital stock of the Company
conforms to the description in all material respects to the
description thereof incorporated by reference in the Prospectus.
Except as set forth in the Prospectus, to the best of such counsel's
knowledge, the Company is not a party to or bound by any outstanding
options, warrants or similar rights to subscribe for, or contractual
obligations to issue, sell, transfer or acquire, any of its capital
stock or any securities convertible into or exchangeable for any of
such capital stock.

(iv) All shares of capital stock of the Company
outstanding prior to the issuance of the Shares to be issued and
sold by the Company hereunder, have been duly authorized and validly
issued, are fully paid and nonassessable and are free of any
preemptive or, to the best knowledge of such counsel, similar rights
that entitle or will entitle any person to acquire any

<PAGE>

Shares upon the issuance thereof by the Company, and no such
rights will exist as of the Closing Date.

(v) All offers and sales of the Company's securities
heretofore have been made in compliance in all material respects
with the registration requirements of the Act and other applicable
state securities laws or regulations or applicable exemptions
therefrom.

(vi) The Shares to be issued and sold to the Underwriters
by the Company hereunder have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, (A) such Shares will be validly
issued, fully paid and nonassessable and free of any preemptive or,
to the best knowledge of such counsel, similar rights that entitle
or will entitle any person to acquire any Shares upon the issuance
thereof by the Company, and (B) good, valid and marketable title to
such Shares issued hereunder, free and clear of any claim,
encumbrance or defect in title of any nature (other than any arising
by or through the Underwriters), will pass to each Underwriter that
has purchased any portion of such Shares in good faith and without
knowledge of any such claim, encumbrance or defect.

(vii) The form of certificates for the Shares conforms in
all material respects to the requirements of the applicable
corporate laws of the State of Indiana.

(viii) The Registration Statement has become effective
under the Act and, to the best knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose are pending before
or contemplated by the Commission.

(ix) The Company has all requisite corporate power and
authority to enter into this Agreement and to issue, sell and
deliver the Shares to be sold by it to the Underwriters as provided
herein, and this Agreement has been duly authorized, executed and
delivered by the Company and is a valid, legal and binding agreement
of the Company enforceable against the Company in accordance with
its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally or by general equitable
principles, and except to the extent enforceability of the
provisions relating to indemnity and contribution for liabilities
under the Act may be limited by or under the Act, or by public
policy.

(x) Neither the Company nor any of the subsidiaries is
in violation of its certificate of incorporation or bylaws, and, to
the best knowledge of such counsel, the Company is not in default in
the performance of any obligation, agreement or condition contained
in any bond, indenture, note or other evidence of indebtedness or
any other agreement or obligation of the Company, where the default
would have, individually or in the aggregate, a Material Adverse
Effect.

(xi) Neither the offer, sale or delivery of the Shares,
the execution, delivery or performance of this Agreement, compliance
by the Company with all provisions hereof nor consummation by the
Company of the transactions contemplated hereby (A) conflicts or
will conflict with or constitutes or will constitute a breach of, or
a default under, the certificate of incorporation or bylaws of the
Company or any material agreement, indenture, lease or other
instrument known to such counsel to which the Company is a party or
by which any of its properties is bound, (B) creates or will result
in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company, or (C) violates or will
result in any violation of any existing law, statute, regulation,
ruling (assuming compliance with all applicable

<PAGE>

state securities and Blue Sky laws), judgment, injunction, order
or decree which is known to such counsel and applicable to the
Company or any of its properties.

(xii) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body,
administrative agency or other governmental body, agency or official
is required on the part of the Company (except such as have been
obtained under the Act or such as may be required under state
securities or Blue Sky laws governing the purchase and distribution
of the Shares) for the valid issuance and sale of the Shares to the
Underwriters under this Agreement.

(xiii) The Registration Statement and the Prospectus and
any supplements or amendments thereto (except for the financial
statements and the notes and the schedules thereto and other
financial and statistical data included therein, as to which such
counsel need not express any opinion) comply as to form in all
material respects with the requirements of the Act. Without
limiting the generality of the foregoing, any Rule 434 Prospectus
conforms in all material respects with the requirements of Rule 434
under the Act.

(xiv) To the best knowledge of such counsel, (A) there are
no legal or governmental proceedings pending or threatened against
the Company or any of its subsidiaries or to which the Company or
any of its subsidiaries or any of their respective properties is
subject, that are required to be described in the Registration
Statement or Prospectus (or any amendment or supplement thereto)
that are not described as required therein, and (B) there are no
agreements, contracts, indentures, leases or other instruments that
are required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to or incorporated by
reference in the Registration Statement that are not described or
filed or incorporated by reference as required, as the case may be.

(xv) The properties described in the Prospectus as held
under lease by the Company are held under duly executed leases.

(xvi) Such counsel has reviewed all agreements, contracts,
indentures, leases or other documents or instruments described or
referred to in the Registration Statement and the Prospectus (other
than routine contracts entered into by the Company for the purchase
of materials or the sale of products entered into in the normal
course of business, although such counsel has reviewed the forms of
such routine contracts), and such agreements, contracts (and forms
of contracts), indentures, leases or other documents or instruments
are fairly summarized or disclosed in all material respects therein,
and filed or incorporated by reference as exhibits thereto as
required, and such counsel does not know of any agreements,
contracts, indentures, leases or other documents or instruments
required to be so summarized or disclosed or filed or incorporated
by reference which have not been so summarized or disclosed or filed
or incorporated by reference.

(xvii) The descriptions in the Prospectus of statutes,
regulations or legal or governmental proceedings, insofar as they
purport to summarize certain of the provisions thereof, are accurate
in all material respects and fairly present the information required
to be presented by the Act and the rules and regulations thereunder.

(xviii) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended.

<PAGE>

(xix) The Company and its subsidiaries have such permits,
licenses, franchises, approvals, consents and authorizations of
federal governmental or regulatory authorities (collectively the
"Federal Permits"), as are necessary for the Company and its
subsidiaries to own their properties and to conduct their business
in the manner described in the Prospectus, except where the failure
to have such Federal Permits would not individually or in the
aggregate have a Material Adverse Effect.

In rendering such opinion, in each case where such opinion is
qualified by "the best knowledge of such counsel" or "known to such
counsel", such counsel may rely as to matters of fact upon certificates of
executive and other officers and employees of the Company as you and such
counsel shall deem are appropriate and such other procedures as you and
such counsel shall mutually agree; provided, however, in each such case,
such counsel shall state that it has no knowledge contrary to the
information contained in such certificates or developed by such procedures
and knows of no reason why you should not reasonably rely upon the
information contained in such certificates or developed by such procedures.
Such counsel may state in such opinion that its knowledge is limited to the
knowledge of its attorneys and other representatives and employees that
have given attention to the Company's matters in connection with the
transactions contemplated by this Agreement.

In addition to the opinion set forth above, such counsel shall state
that during the course of their participation in the preparation of the
Registration Statement and the Prospectus and the amendments thereto, nothing
has come to the attention of such counsel which has caused them to believe or
given them reason to believe that the Registration Statement or the
Prospectus or any amendment thereto (except for the financial statements and
other financial and statistical information contained therein or omitted
therefrom as to which no opinion need be expressed), at the date thereof,
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Registration Statement or the
Prospectus as of the date of the opinion (except as aforesaid), contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.

(d) You shall have received on the Closing Date an opinion of
Baker & Daniels, as special Food and Drug Administration ("FDA") counsel to
the Company, substantially to the effect that the FDA would not require the
Company to file a New Drug Application with respect to its Priority
Healthcare Pharmacy.

(e) You shall have received on the Closing Date an opinion of
special counsel to the Company, to the effect that: (i) the Company and its
subsidiaries have such permits, licenses, franchises, approvals, consents
and authorizations of Florida governmental or regulatory authorities
(collectively the "Florida Permits"), as are necessary for the Company and
its subsidiaries to own their properties and to conduct their business in
the manner described in the Prospectus, except where the failure to have
such Florida Permits would not individually or in the aggregate have a
Material Adverse Effect; and (ii) neither the Company nor any of its
subsidiaries is in violation of any federal or Florida law, ordinance,
administrative or governmental rule or regulation applicable thereto or of
any decree of any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries except where such violation
does not and will not have a Material Adverse Effect.

In rendering such opinion, counsel may rely, to the extent they deem
such reliance proper, as to matters of fact upon certificates of officers
of the Company and of government officials, provided that counsel shall
state their belief that they and you are justified in relying thereon.
Copies of all such certificates shall be furnished to you and your counsel
on the Closing Date.

<PAGE>

(f) You shall have received on the Closing Date an opinion of
Greenberg Traurig, P.A., as counsel for the Underwriters, dated the Closing
Date with respect to the issuance and sale of the Shares, the Registration
Statement and other related matters as you may reasonably request, and the
Company and its counsel shall have furnished to your counsel such documents
as they may reasonably request for the purpose of enabling them to pass
upon such matters.

(g) You shall have received letters addressed to you and dated
the date hereof and the Closing Date from (i) the firm of
PricewaterhouseCoopers LLP, independent certified public accountants, and
(ii) the Chief Financial Officer of the Company, substantially in the forms
heretofore approved by you.

(h) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or, to the knowledge of the Company, shall be
threatened or contemplated by the Commission at or prior to the Closing
Date; (ii) no order suspending the effectiveness of the Registration
Statement or the qualification or registration of the Shares under the
securities or Blue Sky laws of any jurisdiction shall be in effect and no
proceeding for such purpose shall be pending or, to the knowledge of the
Company, threatened or contemplated by the Commission or the authorities of
any jurisdiction; (iii) any request for additional information on the part
of the staff of the Commission or any such authorities shall have been
complied with to the satisfaction of the staff of the Commission or such
authorities; (iv) after the date hereof no amendment or supplement to the
Registration Statement or the Prospectus shall have been filed unless a
copy thereof was first submitted to you and you did not object thereto in
good faith; and (v) all of the representations and warranties of the
Company contained in this Agreement shall be true and correct in all
respects on and as of the date hereof and on and as of the Closing Date as
if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive
officer and the chief financial officer of the Company (or such other
officers as are acceptable to you) to the effect set forth in this Section
9(h) and in Sections 9(b) and 9(i) hereof.

(i) The Company shall not have failed in any material respect at
or prior to the Closing Date to have performed or complied with any of its
agreements herein contained and required to be performed or complied with
by it hereunder at or prior to the Closing Date.

(j) The Company shall have furnished or caused to have been
furnished to you such further certificates and documents as you shall have
reasonably requested.

(k) At or prior to the Closing Date, you shall have received the
written commitment of each of the Company's officers and directors not to
(i) directly or indirectly sell, offer or contract to sell, or otherwise
dispose of or transfer any shares of Company Securities owned or controlled
by such persons now or hereafter or any rights to purchase Company
Securities, before the expiration of the Restriction Period, without your
prior written consent, or (ii) exercise or seek to exercise or effectuate
in any manner any rights of any nature that such persons have or may
hereafter have to require the Company to register under the Act any such
person's sale, transfer or other disposition of any Company Securities or
other securities of the Company held by any such persons, or to otherwise
participate as a selling securityholder in any manner in any registration
effected by the Company under the Act, including the registration to which
this Agreement relates, before the expiration of the Restriction Period.

(l) At or prior to the effective date of the Registration
Statement, you shall have received a letter from the Corporate Financing
Department of the NASD confirming that such Department has determined to
raise no objections with respect to the fairness or reasonableness of the
underwriting terms and arrangements of the offering contemplated hereby.

All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.

<PAGE>

The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Additional
Closing Date of the conditions set forth in this Section 9, except that, if
the Additional Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (j) shall be dated
as of the Additional Closing Date and the opinions called for by paragraphs
(c) through (f) shall be revised to reflect the sale of Additional Shares.

If any of the conditions hereinabove provided for in this Section 9
shall not have been satisfied when and as required by this Agreement, this
Agreement may be terminated by you by notifying the Company of such
termination in writing or by telegram at or prior to such Closing Date, but
you shall be entitled to waive any of such conditions.

10. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become
effective upon the later of (a) the execution and delivery hereof by the
parties hereto, and (b) release of notification of the effectiveness of the
Registration Statement by the Commission; provided, however, that the
provisions of Sections 7 and 8 shall at all times be effective.

If any one or more of the Underwriters shall fail or refuse to purchase
Firm Shares which it or they have agreed to purchase hereunder, and the
aggregate number of Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of the Firm Shares, each non-defaulting
Underwriter shall be obligated, severally, in the proportion which the number
of Firm Shares set forth opposite its name in Schedule I hereto bears to the
aggregate number of Firm Shares set forth opposite the names of all
non-defaulting Underwriters or in such other proportion as you may specify in
the Agreement Among Underwriters, to purchase the Firm Shares which such
defaulting Underwriter or Underwriters agreed, but failed or refused to
purchase. If any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of
Firm Shares and arrangements satisfactory to you and the Company for the
purchase of such Firm Shares are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case which does not
result in termination of this Agreement, either you or the Company shall have
the right to postpone the Closing Date, but in no event for longer than seven
(7) days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any
such Underwriter under this Agreement.

11. TERMINATION OF AGREEMENT. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company by notice to the Company, if prior to the Closing
Date or the Additional Closing Date (if different from the Closing Date and
then only as to the Additional Shares), as the case may be, in your sole
judgment, (i) trading in the Company's Class B Common Stock shall have been
suspended by the Commission or the NASDAQ/NMS, (ii) trading in securities
generally on the New York Stock Exchange, American Stock Exchange or
NASDAQ/NMS shall have been suspended or materially limited, or minimum or
maximum prices shall have been generally established on such exchange, or
additional material governmental restrictions, not in force on the date of
this Agreement, shall have been imposed upon trading in securities generally
by any such exchange or by order of the Commission or any court or other
governmental authority, (iii) a general moratorium on commercial banking
activities shall have been declared by either federal or New York State
authorities or (iv) there shall have occurred any outbreak or escalation of
hostilities or other international or domestic calamity, crisis or change in
political, financial or economic conditions or other material event the
effect of which on the financial markets of the United States is such as to
make it, in your judgment, impracticable or inadvisable to market the Shares
or to enforce contracts for the sale of the Shares. Notice of such
cancellation shall be promptly given to the Company and its counsel by
telegraph, telecopy or telephone and shall be subsequently confirmed by
letter.

<PAGE>

12. INFORMATION FURNISHED BY THE UNDERWRITERS. The Company
acknowledges that (i) the last paragraph on the cover page of the Prospectus,
and (ii) the fifth, seventh, eighth, ninth and tenth paragraphs under the
caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you or on your behalf as such information is referred to in Sections
6(a), 6(b) and 8 hereof.

13. MISCELLANEOUS. Except as otherwise provided in Sections 5 and 11
hereof, notice given pursuant to any of the provisions of this Agreement
shall be in writing and shall be delivered (i) if to the Company to the
office of the Company at 285 West Central Parkway, Suite 1704, Altamonte
Springs, Florida 32714, Attention: Robert L. Myers (with copy to Baker &
Daniels, 300 North Meridian Street, Suite 2700, Indianapolis, Indiana, 46204,
Attention: James A. Aschleman, Esq.), or (iii) if to you, as Representative
of the Underwriters, to Raymond James & Associates, Inc., 880 Carillon
Parkway, St. Petersburg, Florida 33716, Attention: Frank E. Hancock, Managing
Director (with copy to Greenberg Traurig, P.A., 1221 Brickell Avenue, Miami,
Florida 33131, Attention: Rebecca R. Orand, Esq.).

This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company and their respective directors and officers.

14. APPLICABLE LAW; COUNTERPARTS. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida without
reference to choice of law principles thereunder.

This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.

This Agreement shall be effective when, but only when, at least one
counterpart hereof shall have been executed on behalf of each party hereto.

The Company and the Underwriters each hereby irrevocably waive any right
they may have to a trial by jury in respect to any claim based upon or
arising out of this Agreement or the transactions contemplated hereby.

<PAGE>

Please confirm that the foregoing correctly sets forth the agreement
among the Company and the several Underwriters.

Very truly yours,

PRIORITY HEALTHCARE CORPORATION

By: ------------------------------------
Robert L. Myers
President and Chief Executive Officer

CONFIRMED as of the date first above
mentioned, on behalf of the Representatives
and the other several Underwriters named
in Schedule I hereto.

RAYMOND JAMES & ASSOCIATES, INC.

By: ---------------------------
Frank E. Hancock
Authorized Representative

<PAGE>

SCHEDULE I

NUMBER OF
NAME FIRM
SHARES
- ----------------------------------------------------------------- ----------
Raymond James & Associates, Inc . . . . . . . . . . . . . . . .

First Union Capital Markets Corp.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NationsBanc Montgomery Securities LLC
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SunTrust Equitable Securities
Corporation . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

<PAGE>

- ------------------------

TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,600,000

<PAGE>

EXHIBIT 5

BAKER & DANIELS
300 NORTH MERIDIAN STREET, SUITE 2700, INDIANAPOLIS, INDIANA 46204
(317) 237-0300. FAX (317) 237-1000

May 5, 1999

Priority Healthcare Corporation
285 West Central Parkway
Altamonte Springs, FL 32714

Ladies and Gentlemen:

We have examined the corporate records and proceedings of Priority
Healthcare Corporation, an Indiana corporation (the "Company"), with respect to:
(a) the existence of the Company and (b) the legal sufficiency of all corporate
proceedings of the Company taken in connection with the authorization, issuance,
form, validity and nonassessability of the authorized but unissued shares
(including the shares to cover an over-allotment option) of Class B Common
Stock, $.01 par value per share, of the Company ("Class B Common Stock") to be
offered for sale by the Company under its Registration Statement on Form S-3
(the "Registration Statement"), in connection with which this opinion is given.

Based on such examination, we are of the opinion that:

1. The Company is a validly existing corporation under the laws of
the State of Indiana.

2. The shares of Class B Common Stock being offered pursuant to the
Registration Statement are validly authorized and, when the Registration
Statement shall have become effective and the authorized but unissued shares of
Class B Common Stock being offered by the Company pursuant thereto have been
sold upon the terms and conditions described in the Registration Statement and
set forth in the Underwriting Agreement, a form of which has been filed as an
exhibit to the Registration Statement, all of such shares will be legally
issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus which is a part of the Registration Statement. In
giving this consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or rules and regulations of the Securities and Exchange Commission
promulgated thereunder.

Yours very truly,

/s/ Baker & Daniels

BAKER & DANIELS
149058

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of our report dated February 19, 1999,
except as to the restatement for the stock split described in Note 1, which
is as of May 4, 1999, relating to the consolidated financial statements of
Priority Healthcare Corporation, which appears in such Prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.

PricewaterhouseCoopers LLP
Indianapolis, Indiana
May 4, 1999