<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Gulf South Medical Supply, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
March 24, 1997
Dear Fellow Stockholder:
You are cordially invited to attend our Annual Meeting of
Stockholders, which will be held this year on Thursday, April 24, 1997 at 9:00
A.M., at the Harvey Hotel-North, Jackson, Mississippi.
At this year's meeting, you are asked to elect two Class III
directors, to approve a proposal to adopt the Corporation's 1997 Stock Plan and
to ratify the selection of the Corporation's auditors. The accompanying Notice
of Meeting and Proxy Statement describe these proposals. We urge you to read
this information carefully.
Your Board of Directors unanimously believes that the election of its
nominees as directors, the adoption of the 1997 Stock Plan and the ratification
of its appointment of auditors, are in the best interest of Gulf South Medical
Supply, Inc. and its stockholders, and accordingly, recommends a vote FOR Items
1 through 3 on the enclosed proxy card.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the
enclosed Notice of Annual Meeting and Proxy Statement, may I urge you to
complete, sign, date and return your proxy ballot in the envelope provided. If
the address on the accompanying material is incorrect, please advise the
Corporation in writing at One Woodgreen Place, Madison, Mississippi 39110,
Attention: Stanton Keith Pritchard.
For the Board of Directors
Thomas G. Hixon
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
GULF SOUTH MEDICAL SUPPLY, INC.
ONE WOODGREEN PLACE
MADISON, MISSISSIPPI 39110
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 1997
----------
To The Stockholders:
The Annual Meeting of Stockholders of Gulf South Medical Supply, Inc., a
Delaware corporation (the "Corporation"), will be held on Thursday, April 24,
1997 at 9:00 A.M. at the Harvey Hotel-North, Jackson, Mississippi, for the
following purposes:
1. To elect two Class III directors each to serve for a three-year
term.
2. To consider and act on a proposal to adopt the Corporation's 1997
Stock Plan.
3. To ratify the selection of the firm of Ernst & Young LLP as
auditors for the fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the
meeting and any adjournments thereof.
Stockholders entitled to notice of and to vote at the meeting shall be
determined as of the close of business on Tuesday, March 11, 1997, the record
date fixed by the Board of Directors for such purpose.
By Order of the Board of Directors,
STANTON KEITH PRITCHARD,
Secretary
Madison, Mississippi
March 24, 1997
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED STAMPED
ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES.
- --------------------------------------------------------------------------------
<PAGE> 4
GULF SOUTH MEDICAL SUPPLY, INC.
ONE WOODGREEN PLACE
MADISON, MISSISSIPPI 39110
----------
PROXY STATEMENT
----------
March 24, 1997
Proxies in the form enclosed with this proxy statement are solicited by
the Board of Directors of Gulf South Medical Supply, Inc. (the "Corporation")
for use at the Annual Meeting of Stockholders of the Corporation to be held on
Thursday, April 24, 1997 at 9:00 A.M. at the Harvey Hotel-North, Jackson,
Mississippi.
Only stockholders of record as of the close of business on March 11, 1997
(the "Record Date") will be entitled to vote at the meeting and any
adjournments thereof. As of that date, 16,308,564 shares of Common Stock of
the Corporation were issued and outstanding. Each share of Common Stock
outstanding as of the Record Date will be entitled to one vote and stockholders
may vote in person or by proxy. Execution of a proxy will not in any way
affect a stockholder's right to attend the meeting and vote in person. Any
stockholder giving a proxy has the right to revoke it by written notice to the
Secretary of the Corporation at any time before it is exercised. Each of the
persons named as a proxy in the proxy is a director and/or executive officer of
the Corporation.
An Annual Report to Stockholders, containing audited financial statements
for the fiscal year ended December 31, 1996, is being mailed together with this
proxy statement to all stockholders entitled to vote. It is anticipated that
this proxy statement and the accompanying proxy will be first mailed to
stockholders on or about March 24, 1997.
The mailing address of the Corporation's principal executive offices is
One Woodgreen Place, Madison, Mississippi 39110.
All properly executed proxies returned in time to be counted at the
meeting and not revoked will be voted, and with respect to the election of
members of the Board of Directors, will be voted as stated under "Election of
Directors" below. In addition to the election of directors, the stockholders
will act on a proposal to adopt the Corporation's 1997 Stock Plan and to ratify
the selection of auditors, all as further described in this proxy statement.
Where a choice has been specified on the proxy with respect to the foregoing
matters, the shares represented by the proxy will be voted in accordance with
the specification and will be voted FOR the matters if no specification is
indicated.
The representation in person or by proxy of at least a majority of all
shares of Common Stock issued, outstanding and entitled to vote at the meeting
is necessary to constitute a quorum for the transaction of business. Votes
withheld from the nominee for election as director, or which contain one or
more abstentions or broker "non-votes", are counted as present or represented
for purposes of determining the presence or absence of a quorum for the
meeting. A "non-vote" occurs when a broker or other nominee holding shares for
a beneficial owner votes on one proposal, but does not vote on another proposal
because, in respect of such other proposal, the nominee does not have
discretionary voting power and has not received instructions from the
beneficial owner.
<PAGE> 5
The election of directors by the stockholders will require a plurality of
the shares of Common Stock voting on the proposal in person or by proxy at the
meeting. Thus, abstentions and broker non-votes will not be included in vote
totals and will have no effect on the outcome of the vote. On all other
matters being submitted to stockholders, the affirmative vote of the majority
of shares present or represented and voting on that matter is required for
approval. Thus, abstentions and broker non-voting will not be included in vote
totals and will have no effect on the outcome of the votes. An automated
system administered by the Corporation's transfer agent tabulates the votes.
The vote on each matter submitted to stockholders is tabulated separately.
The Board of Directors knows of no other matter to be presented at the
meeting. If any other matter should be presented at the meeting upon which a
vote may be properly taken, shares represented by all proxies received by the
Board of Directors will be voted with respect thereto in accordance with the
judgment of the persons named as proxies in the proxy.
- 2 -
<PAGE> 6
MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Corporation's Common Stock as of the Record Date,
except as set forth below: (i) by each person who, to the knowledge of the
Corporation, owned beneficially more than 5% of the shares of Common Stock of
the Corporation outstanding at such date; (ii) by each director and nominee;
(iii) by each executive officer identified in the Summary Compensation Table
set forth below under "Compensation and Other Information Concerning Directors
and Officers," and (iv) by the directors, nominees and executive officers of
the Corporation as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP (1)(2)(3) PERCENT OF CLASS
---------------- ------------------- ----------------
<S> <C> <C>
Thomas G. Hixon . . . . . . . . . . . . . 1,715,836 10.5 %
1045 NewLand Drive
Jackson, MS 39211
AIM Management Group, Inc.(4) . . . . . . 1,668,300 10.2 %
11 Greenway Plaza, Suite 1919
Houston, TX 77046
Pilgrim Baxter & Associates, Ltd.(5) . . 1,334,000 8.2 %
1255 Drummers Lane, Suite 300
Wayne, PA 19087
William Blair & Company, L.L.C.(6) . . . 1,037,105 6.4 %
222 West Adams Street
Chicago, IL 60606
Guy W. Edwards . . . . . . . . . . . . . 112,112 *
Steven L. Richardson . . . . . . . . . . 114,513 *
John C. Piper. . . . . . . . . . . . . . 43,563 *
Michael C. Tibbitts . . . . . . . . . . . 35,925 *
David L. Bogetz . . . . . . . . . . . . . 37,000 *
Melvin L. Hecktman . . . . . . . . . . . 17,000 *
William W. McInnes . . . . . . . . . . . 11,002 *
All executive officers, nominees and
directors as a group (8 persons) . . . . 2,137,063 12.9 %
</TABLE>
- ---------------
* Less than 1% of the outstanding Common Stock.
(1) The persons and entities named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them, except as noted in the footnotes below.
(2) The number of shares of Common Stock deemed outstanding includes (i)
16,308,564 shares of Common Stock outstanding as of the Record Date
and (ii) shares of Common Stock issuable pursuant to options held by
the respective person or group which may be exercised within 60 days
after the Record Date, as set forth below.
(3) Includes options to purchase shares of Common Stock which may be
exercised within 60 days of the Record Date as follows: Mr. Hixon,
84,240 shares; Mr. Edwards, 54,775 shares; Mr. Richardson, 95,016
shares; Mr. Piper, 28,066 shares; Mr. Tibbitts, 35,925 shares; Mr.
Bogetz, 36,000 shares; Mr. Hecktman, 11,000 shares; and Mr. McInnes,
11,002 shares. In addition, all current directors, nominees and
executive officers as a group hold options to purchase 321,633 shares
of Common Stock which may be exercised within 60 days of the Record
Date.
- 3 -
<PAGE> 7
(4) AIM Management Group Inc. is the parent holding company of AIM
Advisors, Inc. and AIM Capital Management, Inc.; AIM Management Group
Inc. has shared voting and shared investment power with respect to
all of such shares. This information is as of December 31, 1996 and
is based on Schedule 13G dated February 12, 1997 filed by AIM
Management Group Inc.
(5) Pilgrim Baxter & Associates, Ltd. has shared voting power and sole
investment power with respect to these shares. Share ownership as
of December 31, 1996.
(6) Of such shares, William Blair & Company, L.L.C. ("William Blair") has
sole voting power with respect to 281,290 shares and sole investment
power with respect to all of such shares. This information is as of
December 31, 1996 and is based on Schedule 13G dated February 14,
1997 filed by William Blair.
PROPOSAL I
ELECTION OF DIRECTORS
No proxy may be voted for more people than the number of nominees set
forth below. Shares represented by all proxies received by the Board of
Directors and not so marked to withhold authority to vote for Melvin L.
Hecktman or William W. McInnes (by writing that individual director's name
where indicated on the proxy) will be voted FOR the election of Mr. Hecktman
and Mr. McInnes, respectively. The Board of Directors knows of no reason why
Mr. Hecktman or Mr. McInnes should be unable or unwilling to serve, but if such
should be the case, proxies may be voted for the election of some other person
or persons or for fixing the number of directors at a lesser number.
INFORMATION PERTAINING TO DIRECTORS AND NOMINEES
In accordance with the Corporation's Amended and Restated Certificate of
Incorporation, the Corporation's Board of Directors is divided into three
classes. Each of the Corporation's two Class I Directors, David L. Bogetz and
Guy W. Edwards, was elected for a three-year term by the stockholders of the
Corporation at the Annual Meeting of Stockholders held in 1995. The terms of
Messrs. Bogetz and Edwards expire as of the date of the Annual Meeting of
Stockholders to be held in 1998. The Corporation's Class II Director, Thomas
G. Hixon, was elected for a three-year term by the stockholders of the
Corporation at the Annual Meeting of Stockholders held in 1996. The term of
Mr. Hixon expires as of the date of the Annual Meeting of Stockholders to be
held in 1999. Each of the Corporation's two Class III Directors, Melvin L.
Hecktman and William W. McInnes, was elected for a three-year term by Unanimous
Written Consent of the Board of Directors dated February 9, 1994. The terms of
Messrs. Hecktman and McInnes expire as of the date of the Annual Meeting of
Stockholders to be held in 1997.
Two Class III Directors will be elected at the Annual Meeting of
Stockholders on April 24, 1997 each for a term of three years. Class III
nominees Messrs. Hecktman and McInnes are currently serving as Directors of the
Corporation.
The following table sets forth for each nominee to be elected at the
meeting and for each director who will continue to serve as a director beyond
the meeting, the year such nominee or director was first elected as a director,
the positions currently held by such nominee or director with the Corporation,
the year such nominee's or director's term will expire and the class of
director of such nominee or director.
- 4 -
<PAGE> 8
<TABLE>
<CAPTION>
NOMINEE'S OR DIRECTOR'S NAME AND
YEAR NOMINEE OR DIRECTOR YEAR TERM CLASS OF
FIRST BECAME A DIRECTOR POSITION(S) HELD WILL EXPIRE DIRECTOR
- -------------------------------- ------------------ ----------- --------
<S> <C> <C> <C>
David L. Bogetz Director 1998 I
(1993)
Guy W. Edwards Chief Financial Officer, 1998 I
(1992) Senior Vice President,
Treasurer and Director
Thomas G. Hixon President, Chief Executive 1999 II
(1985) Officer and Chairman of the
Board
Melvin L. Hecktman Director 1997 III
(1993)
William W. McInnes Director 1997 III
(1993)
</TABLE>
OCCUPATIONS OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Class III nominees to be elected at
the meeting, the current directors who will continue to serve as directors
beyond the meeting, and the current executive officers of the Corporation,
their ages and the positions currently held by each such person with the
Corporation:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas G. Hixon(1) . . . . . . . . . 53 President, Chief Executive Officer and Chairman of the Board
Guy W. Edwards . . . . . . . . . . . 39 Chief Financial Officer, Senior Vice President, Treasurer and
Director
Steven L. Richardson . . . . . . . . 38 Senior Vice President, Operations
Stanton Keith Pritchard . . . . . . . 32 Senior Vice President, Business Development and Administration,
Secretary and General Counsel
Edward Schulman . . . . . . . . . . . 49 Senior Vice President, Sales and Marketing
David L. Bogetz(1)(2)(3) . . . . . . 41 Director
Melvin L. Hecktman(1)(2)(3) . . . . . 57 Director
William W. McInnes(1)(2)(3) . . . . . 48 Director
</TABLE>
_______________
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Stock Option Committee.
DIRECTORS TO BE ELECTED AT THE MEETING
Melvin L. Hecktman has been a director of the Corporation since May
1993. Mr. Hecktman was associated with United Stationers, Inc. as an employee
or director for 33 years and served as its Vice Chairman from 1989 to 1993. He
is presently President of Hecktman Management, an investment management and
consulting firm and a partner of Commonwealth Capital Partners, a merchant
banking group.
- 5 -
<PAGE> 9
William W. McInnes has been a director of the Corporation since May
1993. Prior to his retirement in 1993, Mr. McInnes was Vice President Finance
and Treasurer of Hospital Corporation of America, where he was employed for 14
years. Mr. McInnes is currently a director of The Infinity Funds, Inc.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE MEETING
David L. Bogetz has been a director of the Corporation since May 1993.
Since January 1996, Mr. Bogetz has served as Senior Vice President, Private
Equity Management of The Chicago Corporation. From March 1990 and March 1993
until December 1995, Mr. Bogetz served as Investment Manager and Portfolio
Manager, respectively, for Sears Investment Management Co., a wholly-owned
subsidiary of Sears, Roebuck and Co., which manages the Sears pension and
profit sharing funds.
Guy W. Edwards has been employed by the Corporation since 1986,
serving as Vice President of Operations from 1986 to 1991, as Vice President of
Finance from 1991 until February 1995, as Senior Vice President from February
1995 to the present and as Chief Financial Officer from 1991 to the present.
Mr. Edwards has served as a director of the Corporation since June 1992. Mr.
Edwards is a Certified Public Accountant.
Thomas G. Hixon has served as President, Chief Executive Officer and
director of the Corporation since 1985, and Chairman of the Board since March
1995. Mr. Hixon served as General Manager of the Corporation from 1985 until
March 1995.
EXECUTIVE OFFICERS
Steven L. Richardson has been employed by the Corporation since its
inception in 1982, initially as a salesman and, from 1987 to 1991, as director
of operations for the Corporation's Western Division. Mr. Richardson served as
Vice President of Operations from 1991 until March 1997 and has served as
Senior Vice President, Operations since March 1997.
Stanton Keith Pritchard has been employed by the Corporation since
July 1993. He served as Vice President, Corporate Development from April 1996
until March 1997. He has been Secretary and General Counsel since March 1995
and Senior Vice President, Business Development and Administration since March
1997. From 1991 until July 1993, Mr. Pritchard was employed as a Vice
President of First Southeast Corporation, a private real estate and investment
management company.
Edward Schulman has been employed by the Corporation since December
1996 and as Senior Vice President, Sales and Marketing since March 1997. Mr.
Schulman was President of Gateway Healthcare Corporation from May 1994 until
December 1996 when it was acquired by the Corporation. From August 1991 to May
1994, Mr. Schulman was President of Consolidated Consumer Marketing
Corporation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors met nine times, and took action by unanimous
written consent once, during the fiscal year ended December 31, 1996. The
standing committees of the Board of Directors are the Audit Committee, the
Compensation Committee and the Stock Option Committee. The Board of Directors
does not currently have a standing nominating committee.
- 6 -
<PAGE> 10
The Audit Committee is presently comprised of three outside directors of
the Corporation and oversees the accounting and tax functions of the
Corporation, including matters relating to the appointment and activities of
the Corporation's auditors. The Audit Committee met once during the fiscal year
ended December 31, 1996. The Compensation Committee is presently comprised of
three outside directors of the Corporation and Mr. Hixon, President and Chief
Executive Officer of the Corporation, and reviews and makes recommendations
concerning executive cash compensation. The Compensation Committee met twice
during the fiscal year ended December 31, 1996. The Stock Option Committee is
presently comprised of three outside directors of the Corporation and
administers the Corporation's 1992 Stock Plan and the Corporation's 1997 Stock
Plan. The Stock Option Committee met twice during the fiscal year ended
December 31, 1996. Each of the directors attended at least 75% of the
aggregate of all meetings of the Board of Directors and of all committees on
which he serves.
COMPENSATION OF DIRECTORS
Outside directors have been granted stock options by the Corporation
under the 1992 Stock Plan. During 1996, independent directors received an
annual retainer of $5,000 and a participation fee of $1,000 for each Board of
Directors meeting and $500 for each Board committee meeting that they attended.
Beginning March 1997, independent directors will not receive an annual
retainer. Each independent director will, however, receive a participation fee
of $2,500 for each Board of Directors meeting which he attends in person, $250
for each Board of Directors meeting which is called in person but in which he
participates by telephone, $1,000 for each telephonic Board of Directors
meeting in which he participates, $2,500 for attending each meeting of a Board
committee of which he is chairman and $1,000 for attending each meeting of a
Board committee of which he is a member but not chairman. Outside directors
have been and will continue to be reimbursed for their reasonable out-of-pocket
expenses incurred in attending meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1996, certain executive officers of the Corporation who,
together, owned a controlling interest in a company which provides third party
billing services to the long-term care industry, assigned their respective
interests to the Corporation for no consideration. Such company was acquired
in turn by a customer of the Corporation for assumption of such company's debt,
except for indebtedness owing to the Corporation, which was cancelled. In
connection with the sale, the Corporation charged off approximately $160,000 of
an account receivable through existing reserves for the allowance of doubtful
accounts and, in addition, charged off approximately $378,000 of a note
receivable from such company.
- 7 -
<PAGE> 11
COMPENSATION AND OTHER INFORMATION
CONCERNING DIRECTORS AND OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
for services in all capacities paid or accrued by the Corporation for the
fiscal years ended December 31, 1996, 1995 and 1994, for (i) the individual who
served as the Chief Executive Officer for the fiscal year ended December 31,
1996 and (ii) each of the four other most highly compensated executive officers
whose aggregate salary and bonus exceeded $100,000 in the fiscal year ended
December 31, 1996 (with the Chief Executive Officer, collectively, the "Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION (3)
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------------- -------------------------- -----------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING LTIP
NAME AND COMPENSATION STOCK OPTIONS/ PAYOUTS
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) ($)(2) AWARD(S) ($) SARS (#) ($)
- ------------------ ---- ---------- ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas G. Hixon . . . . . . . 1996 180,000 17,400 -- -- 30,000 --
President 1995 180,000 14,500 -- -- 40,000 --
1994 160,000 92,000 -- -- -- --
Guy W. Edwards . . . . . . . 1996 140,000 14,550 -- -- 25,000 --
Chief Financial Officer 1995 140,000 9,700 -- -- 30,000 --
1994 120,000 73,800 -- -- -- --
Steven L. Richardson . . . . 1996 125,000 11,400 -- -- 20,000 --
Vice President of 1995 125,000 9,600 -- -- 20,000 --
Operations 1994 120,000 60,200 -- -- -- --
John C. Piper (5) . . . . . . 1996 125,000 6,925 -- -- 20,000 --
Vice President of 1995 125,000 10,750 -- -- 20,000 --
Sales and Marketing 1994 120,000 60,400 -- -- -- --
Michael C. Tibbitts (6) . . . 1996 125,000 5,438 -- -- -- --
Vice President of 1995 125,000 11,050 -- -- 20,000 --
Business 1994 120,000 60,400 -- -- -- --
Development
<CAPTION>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)(4)
- ------------------ ---------------------
<S> <C>
Thomas G. Hixon . . . . . . . 234
President 234
234
Guy W. Edwards . . . . . . . 234
Chief Financial Officer 234
234
Steven L. Richardson . . . . 234
Vice President of 234
Operations 234
John C. Piper (5) . . . . . . 234
Vice President of 234
Sales and Marketing 234
Michael C. Tibbitts (6) . . . 234
Vice President of 234
Business 234
Development
</TABLE>
- -----------
(1) Bonuses are reported in the year earned, even if actually paid in a
subsequent year.
(2) Excludes perquisites the aggregate annual amount of which for each
officer was less than $50,000 or 10% of the total compensation
reported as salary and bonus.
(3) The Corporation did not grant any restricted stock awards or stock
appreciation rights or make any long term incentive plan payouts
during fiscal 1996, 1995 or 1994.
(4) These amounts indicate the dollar amount of insurance premiums paid by
the Corporation during fiscal 1996, 1995 and 1994 with respect to term
life insurance for the benefit of the Named Executive Officers.
(5) Effective March 3, 1997, Mr. Piper became a Regional Sales Manager of
the Corporation.
(6) Effective March 3, 1997, Mr. Tibbitts became Vice President, National
Accounts of the Corporation.
- 8 -
<PAGE> 12
OPTION GRANTS
The following table sets forth information concerning options granted
during the last fiscal year under the Corporation's 1992 Stock Plan to the
Named Executive Officers. The Corporation did not grant any stock appreciation
rights in 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS/ PRICE APPRECIATION FOR OPTION
UNDERLYING SARS TERM (3)
OPTION/SARS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES OR BASE
------- IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR(2) ($/SH) DATE 5%($) 10%($)
---- ------ ------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Hixon . . . . . . . 30,000 15% 31.35 2/21/2001 150,720.74 436,486.05
Guy W. Edwards . . . . . . . 25,000 13% 28.50 2/21/2006 448,087.42 1,135,541.50
Steven L. Richardson . . . . 20,000 10% 28.50 2/21/2006 358,469.94 908,433.20
John C. Piper . . . . . . . . 20,000 10% 28.50 2/21/2006 358,469.94 908,433.20
Michael C. Tibbitts . . . . . -- -- -- -- -- --
</TABLE>
- -----------------------
(1) The indicated options were granted on February 21, 1996 and become
exercisable at the rate of 20% per annum.
(2) Options to purchase a total of 200,000 shares of Common Stock were
granted to employees in 1996 under the Corporation's 1992 Stock Plan.
(3) Amounts reported in this column represent hypothetical amounts that may
be realized upon exercise of the options immediately prior to the
expiration of their term assuming the specified compounded rates of
appreciation of the Corporation's Common Stock over the term of the
options. These numbers are calculated based on rules promulgated by the
Securities and Exchange Commission and do not reflect the Corporation's
estimate of future stock price growth. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent on the timing of
such exercise and the future performance of the Corporation's Common
Stock. There can be no assurances that the rates of appreciation assumed
in this table can be achieved or that the amounts reflected will be
received by the individuals. This table does not take into account any
appreciation in the price of the Common Stock from the date of grant to
the current date.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to options to purchase the
Corporation's Common Stock granted under the Corporation's 1992 Stock Plan,
including (i) the number of shares of Common Stock received upon exercise of
options in the fiscal year ended December 31, 1996; (ii) the net value realized
upon such exercise; (iii) the number of unexercised options held at December
31, 1996; and (iv) the aggregate dollar value of unexercised options held at
December 31, 1996:
- 9 -
<PAGE> 13
AGGREGATED OPTION/SAR EXERCISES IN THE LAST
FISCAL YEAR AND FY-END
OPTION/SAR VALUES
<TABLE>
<CAPTION> NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS AT OPTIONS/SARS AT
ON VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)(2)
EXERCISE REALIZED -----------------------------------------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- --------------- ----------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas G. Hixon. . . . . 0 0.00 64,840 58,710 1,128,424.75 346,406.19
Guy W. Edwards . . . . . 10,710 408,727.87 28,065 48,710 471,263.06 366,675.37
Steven L. Richardson . . 0 0.00 70,906 38,710 1,538,989.96 335,175.37
John C. Piper. . . . . . 24,065 765,904.93 36,131 28,000 816,551.53 63,000.00
Michael C. Tibbitts . . 25,000 1,125,955.00 28,325 12,000 558,523.29 63,000.00
</TABLE>
- ---------------
(1) Amounts disclosed in this column do not reflect amounts actually received
by the Named Executive Officers, but are calculated based on the difference
between the fair market value of the Corporation's Common Stock on the date
of exercise and the exercise price of the options. Named Executive
Officers will receive cash only if and when they sell the Common Stock
issued upon exercise of the options and the amount of cash received by such
individuals is dependent on the price of the Corporation's Common Stock at
the time of such sale.
(2) Value is based on the difference between the option exercise price and the
fair market value at December 31, 1996 ($25.625 per share) multiplied by
the number of shares of Common Stock underlying the option.
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Corporation's executive compensation program is administered by the
Compensation Committee and the Stock Option Committee of the Board of
Directors. The Compensation Committee is comprised of four directors, three of
whom are independent directors, and it determines salary and bonuses of the
Corporation's executive officers. The Stock Option Committee is comprised of
three independent directors and it administers and makes recommendations and
awards under the Corporation's 1992 Stock Plan and 1997 Stock Plan.
COMPENSATION PHILOSOPHY
The Corporation's executive compensation philosophy is to design a
compensation program that enables the Corporation to (a) attract, motivate and
retain the highest quality executives, (b) provide incentives to achieve
tactical and strategic objectives in a manner consistent with the Corporation's
core values and (c) align the interests of the executives with those of the
Corporation's long-term investors. The Corporation's executive compensation
program for fiscal year 1996 consisted of the following three elements: (1)
base salary; (2) performance-based cash bonuses; and (3) equity incentives in
the form of stock options. Elements (1) and (2) are administered by the
Compensation Committee and element (3) is administered by the Stock Option
Committee.
Section 162(m) of the Internal Revenue Code of 1986, which was enacted as
part of the Revenue Reconciliation Act of 1993, generally limits the
Corporation's ability to deduct for federal income tax purposes compensation in
excess of $1,000,000 per executive for certain executive officers. Qualifying
- 10 -
<PAGE> 14
performance-based compensation, however, will not be subject to the deduction
limit if certain requirements are met. The Committees did not adopt a policy
in 1996 with regard to this limitation because no executive officers were
expected to receive compensation in excess of $1,000,000 during fiscal 1996.
The Stock Option Committee has decided to structure the 1997 Stock Plan so
that compensation attributable to options granted to executive officers
pursuant to the 1997 Stock Plan will qualify as performance-based compensation
for purposes of Section 162(m) and deductions attributable to such options will
therefore not be disallowed by Section 162(m).
BASE SALARY COMPENSATION
The level of base salary compensation for executive officers in 1996 was
determined by the Compensation Committee in light of the increase in base
salary compensation for all of the executive officers in fiscal 1995. Although
the Compensation Committee evaluated each individual executive officer's
performance in his position and competency, skill and experience, the
Compensation Committee determined that the increase in base salary compensation
during the previous year continued to adequately compensate the executive
officers, and none of the base salaries of the executive officers was increased
in 1996.
PERFORMANCE-BASED COMPENSATION
In February of each year, the Compensation Committee sets for each
executive officer the performance targets and cash bonus pool for the year,
which vary from individual to individual to reflect competitive practice, the
executive officer's position and the scope of the executive officer's
responsibility. Determinations of the performance-based cash bonuses earned by
each executive officer are based in part on overall corporate performance,
management performance as a group and individual performance but are subject
entirely to the discretion of the Compensation Committee. The Compensation
Committee may adjust such performance targets and cash bonus pool periodically
during the year. If the Compensation Committee determines that performance
targets were achieved for a specific fiscal quarter and that bonus payments are
appropriate, the bonuses may be paid based in part on estimated performance
targets for the applicable quarterly period and then may be adjusted at fiscal
year-end.
In evaluating bonus awards to individual officers, the Compensation
Committee takes into account several factors, including overall corporate
performance, management performance as a group and whether the individual
executive officer has achieved certain individually weighted corporate
performance targets. Such performance targets for fiscal 1996 included the
following individually weighted corporate performance components: (1) net
sales (weighted between 10% and 80%), (2) income before income taxes (weighted
between 5% and 40%), (3) customer service level/fill rate (weighted between 5%
and 35%), (4) number of days accounts receivable outstanding (weighted between
5% and 20%), and (5) number of inventory turns (weighted between 5% and 20%).
Notwithstanding the foregoing, however, the determination by the Compensation
Committee to award bonuses, and the amount of each individual bonus award, is
in the discretion of the Compensation Committee. In fiscal 1996, the
Compensation Committee in its discretion awarded bonuses to the executive
officers which in the aggregate totaled $55,713.
- 11 -
<PAGE> 15
EQUITY INCENTIVE COMPENSATION
The Stock Option Committee believes that stock options serve both to reward
executive officers and to align their long-term objectives with stockholders'
interests in maximizing the Corporation's value. The stock option awards
reward executive officers only to the extent the Corporation's share price
increases for all stockholders. Generally, each stock option has an exercise
price per share equal to the fair market value per share as of the date of
grant and vests ratable over a five-year period. Each executive officer,
except the Chief Executive Officer, was granted stock options at the inception
of the Corporation's 1992 Stock Plan and certain executive officers, including
the Chief Executive Officer, have been granted stock options periodically
thereafter.
In determining whether to grant additional stock options to executive
officers in fiscal 1996, the Stock Option Committee took into consideration the
aggregate number of options outstanding, the aggregate number of options
previously granted to each executive officer, the amount of time elapsed since
the date of the last option grant and each executive officer's individual
performance during the previous fiscal year, in light of each executive
officer's overall compensation.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Base Salary. The 1996 base salary compensation for Mr. Hixon, the
Corporation's Chief Executive Officer and President, was $180,000. As was each
executive officer's, Mr. Hixon's 1996 base salary was equal to his 1995 base
salary. As discussed above with respect to the Compensation Committee's
decision not to increase the base salary of any of the executive officers, the
Compensation Committee determined that the increase in Mr. Hixon's base salary
compensation during 1995 continued to adequately compensate Mr. Hixon.
Performance-based bonus. In its determination of a bonus award for Mr.
Hixon, the Compensation Committee considered overall corporate performance of
the Corporation, management performance as a group and Mr. Hixon's individual
performance. The corporate components of the performance-based bonus for Mr.
Hixon for fiscal 1996 were weighted as follows: (1) 30%, net sales; (2) 40%,
income before income taxes; (3) 10%, customer service level; (4) 10%, number of
days accounts receivable outstanding; and (5) 10%, number of inventory turns.
This performance-based bonus for Mr. Hixon represented 9.7% of his base salary
and approximately one quarter of his total bonus target.
Stock options. As discussed above, in determining whether to grant
additional stock options to Mr. Hixon in fiscal 1996, the Stock Option
Committee took into consideration the aggregate number of options outstanding,
the aggregate number of options previously granted to Mr. Hixon, the amount of
time elapsed since the date of the last option grant and his individual
performance during the previous fiscal year in light of Mr. Hixon's overall
compensation. In 1996, consistent with the grants of options to the other
executive officers, Mr. Hixon was granted an option to purchase 30,000 shares
of Common Stock which was 10,000 shares fewer than he was granted the previous
year.
Respectfully submitted by the Compensation Respectfully submitted by
Committee the Stock Option Committee
David L. Bogetz David L. Bogetz
Melvin L. Hecktman Melvin L. Hecktman
Thomas G. Hixon William W. McInnes
William W. McInnes
- 12 -
<PAGE> 16
COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Compensation Committee reviews and makes recommendations
concerning executive cash compensation and the Stock Option Committee
administers the Corporation's 1992 Stock Plan and 1997 Stock Plan. No person
who served as a member of the Stock Option Committee was, during the past
fiscal year, an officer or employee of the Corporation, was formerly an officer
of the Corporation, or had any relationship requiring disclosure herein under
the rules of the Securities and Exchange Commission.
No person, other than Mr. Hixon, who served on the Compensation
Committee was during the past fiscal year, an officer or employee of the
Corporation, was formerly an officer of the Corporation or had any relationship
requiring disclosure herein except as set forth below. Mr. Hixon did not
participate in deliberations concerning his own individual cash compensation.
Mr. Hixon and certain other executive officers of the Corporation, who
together owned a controlling interest in a company which provides third party
billing services to the long-term care industry, assigned their respective
interests to the Corporation for no consideration. See full discussion under
"Certain Relationships and Related Transactions" above.
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Corporation's Common Stock during
the period from the Corporation's initial public offering through December 31,
1996 with the cumulative total return on (i) the Nasdaq Market Index, (ii) a
peer group index prepared by Media General Financial Services consisting of the
following publicly-traded distribution companies: Cardinal Health Inc.,
Physicians Sales and Service, Henry Schein, Paterson Dental, Omnicare Inc. and
Viking Office Products (the "Current Peer Group"), and (iii) a peer group index
prepared by Media General Financial Services consisting of the following
publicly-traded distribution companies: Cardinal Health Inc., W.W. Grainger,
Inc., Omnicare Inc., Sigma Aldrich LP, and Viking Office Products (the "Former
Peer Group"). Premier Industrial CP was included in this Former Peer Group in
the Corporation's prior proxy statement; since then, Premier Industrial CP has
been delisted from the Nasdaq National Market and therefore has been omitted
from the Former Peer Group.
The Corporation believes that, prior to this year, the Former Peer Group
included those publicly traded companies which had the most comparable
operating characteristics to the Corporation. The Corporation also believes,
however, that the business activities of certain other companies, the stock of
which has become publicly traded, are closer to that of the Corporation than
some of the companies included in the Former Peer Group, and that as a result,
the Former Peer Group now (i) does not include all of those companies with
which a comparison would be meaningful, and (ii) does include certain companies
with which a comparison is less meaningful. The Corporation has replaced W.W.
Grainger, Inc. and Sigma Aldrich LP with Henry Schein, Physicians Sales and
Service and Paterson Dental in the Current Peer Group. The Corporation
believes that the performances of the members of the Current Peer Group provide
the most meaningful basis for comparison with the Corporation's performance and
intends to include the Current Peer Group for comparison purposes in this and
future proxy statements. The comparison assumes $100 was invested on March 24,
1994 in the Corporation's Common Stock, the foregoing Nasdaq Market Index, the
Current Peer Group Index and the Former Peer Group Index and assumes
reinvestment of dividends, if any.
- 13 -
<PAGE> 17
COMPARISON OF FIVE YEAR* CUMULATIVE TOTAL RETURN** AMONG
GULF SOUTH MEDICAL SUPPLY, INC., NASDAQ MARKET INDEX, CURRENT
PEER GROUP INDEX AND FORMER PEER GROUP INDEX
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
3/24/94 12/30/94 12/29/95 12/31/96
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gulf South Medical Supply, Inc. 100.00 161.96 263.04 222.83
Nasdaq Market Index 100.00 102.34 132.74 164.95
Current Peer Group Index 100.00 116.46 174.72 221.86
Former Peer Group Index 100.00 89.88 121.13 157.57
- ---------------------------------------------------------------------------------------------------------
</TABLE>
__________
* Prior to March 24, 1994 the Corporation's Common Stock was not
publicly traded. Comparative data is provided only for the period
since that date.
** Cumulative Total Return assumes reinvestment of dividends.
The stock price performance shown on the graph above is not
necessarily indicative of future price performance. Information used in the
graph was obtained from Media General Financial Services, a source believed to
be reliable, however, the Corporation is not responsible for any errors or
omissions in such information.
- 14 -
<PAGE> 18
PROPOSAL II
ADOPTION OF THE CORPORATION'S 1997 STOCK PLAN
The Corporation's 1997 Stock Plan (the "1997 Plan") was adopted by the
Board of Directors of the Corporation on March 3, 1997. The complete text of
the 1997 Plan is attached hereto as Exhibit A. The following is a summary of
the major provisions of the 1997 Plan and is qualified in its entirety by the
full text thereof.
The 1997 Plan was adopted by the Board of Directors of the Corporation
as a successor to the Corporation's 1992 Stock Plan. No shares remain
available for the grant of new awards under the 1992 Stock Plan. The
Corporation's management relies on stock options as essential parts of the
compensation packages necessary for the Corporation to attract and retain
experienced officers and employees. The Board of Directors of the Corporation
believes that the adoption of the 1997 Plan is essential to permit the
Corporation's management to continue to provide long-term, equity- based
incentives to present and future key employees.
The Board of Directors recommends a vote FOR Proposal II.
Description of the 1997 Plan
The purpose of the 1997 Plan is to provide incentives to directors,
officers and other employees of the Corporation by providing them with
opportunities to purchase stock of the Corporation and participate in the
ownership of the Corporation.
Under the 1997 Plan, employees and officers of the Corporation may be
awarded incentive stock options ("ISO" or "ISOs"), as defined in Section 422(b)
of the Internal Revenue Code of 1986, as amended, and directors, officers,
employees and consultants of the Corporation may be granted (i) options which
do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"),
(ii) awards of stock in the Corporation ("Awards"), and (iii) opportunities to
make direct purchases of stock in the Corporation ("Purchases"). ISOs,
Non-Qualified Options, Awards and Purchases are sometimes collectively referred
to as "Stock Rights" and ISOs and Non-Qualified Options are sometimes
collectively referred to as "Options." The 1997 Plan provides for the issuance
of a maximum of 850,000 shares of Common Stock of the Corporation pursuant to
the grant of Stock Rights. Currently, approximately 642 employees (including
directors who are also employees and officers of the Corporation), and three
non-employee directors of the Corporation are eligible to participate in the
1997 Plan.
The 1997 Plan is administered by the Stock Option Committee (the
"Committee") of the Board of Directors of the Corporation. The Committee is
currently comprised of three outside directors, David L. Bogetz, Melvin L.
Hecktman and William W. McInnes. Subject to the terms of the 1997 Plan, the
Committee has the authority to determine the persons to whom Stock Rights are
granted, the number of shares covered by each Stock Right, the purchase or
exercise price per share and other terms and provisions governing the Stock
Rights, including restrictions, if any, applicable to the shares of Common
Stock issuable upon exercise of Stock Rights.
Stock Rights may be granted under the 1997 Plan at any time prior to
March 4, 2007. The exercise price per share of Non-Qualified Options granted,
and the purchase price per share of stock granted in any Award or authorized as
a Purchase, under the 1997 Plan cannot be less than the minimum legal
consideration required therefor under the laws of any jurisdiction in which the
Corporation may be
- 15 -
<PAGE> 19
organized. The exercise price per share of each ISO cannot be less than the
fair market value of the Common Stock on the date of grant (or, in the case of
an ISO granted to an employee holding more than ten percent of the voting stock
of the Corporation, 110% of the fair market value of the Common Stock on the
date of grant). The 1997 Plan provides that each option shall expire on the
date specified by the Committee, but not more than ten years from its date of
grant in the case of an ISO, and five years in the case of an ISO granted to an
employee or officer holding more than ten percent of the voting stock of the
Corporation.
Each Option granted under the 1997 Plan may either be fully
exercisable at the time of grant or may become exercisable in such installments
as the Committee may specify. Each Option may be exercised from time to time,
in whole or in part, up to the total number of shares with respect to which it
is then exercisable. The Committee has the right to accelerate the date that
any installment of any Option becomes exercisable (subject to the $100,000 per
year limitation on the fair market value of stock subject to ISOs granted to
any employee which first become exercisable in any calendar year).
Payment of the exercise price of an Option granted under the 1997 Plan
may be made in cash or by check or, if authorized by the Committee in its
discretion in writing at the time of grant, (i) by tendering shares of Common
Stock of the Corporation having fair market value equal as of the date of the
exercise to the cash exercise price of the Option, (ii) in full or in part by a
personal recourse, interest bearing note, or (iii) through the delivery of an
assignment to the Corporation of a sufficient amount of the proceeds from the
sale of the Common Stock acquired upon exercise of the Option.
The 1997 Plan limits to 595,000 shares the number of shares of Common
Stock that any employee may acquire under the 1997 Plan in any one calendar
year.
No assignments or transfers of ISOs are permitted except by will or by
the laws of descent and distribution.
If an ISO optionee ceases to be employed by the Corporation other than
by reason of death or disability, no further installments of his or her ISOs
will become exercisable, and vested ISOs shall terminate after the passage of
three months from the date of termination of employment (but no later than
their specified expiration dates), except to the extent that such ISOs shall
have been converted into Non-Qualified Options. If an optionee ceases to be
employed by the Corporation by reason of disability, or if an optionee dies,
any ISO held by the optionee may be exercised, to the extent exercisable on the
date of disability or death, by the optionee or the optionee's estate, personal
representative or beneficiary, at any time within 180 days from the date of the
optionee's disability or death (but not later than the specified expiration
date of the ISO).
Option holders are protected against dilution in the event of a stock
dividend, stock split, consolidation, merger, recapitalization or similar
transaction. The Board of Directors may from time to time adopt amendments to
the 1997 Plan, certain of which are subject to stockholder approval, and may
terminate the 1997 Plan, at any time (although such action shall not affect
options previously granted). Any shares subject to an option granted under the
1997 Plan, which for any reason expire or terminate unexercised, may again be
available for future option grants. Unless terminated sooner, the 1997 Plan
will terminate on March 4, 2007.
The Corporation has granted, as of the date hereof, ISOs to purchase
an aggregate of 234,000 shares of Common Stock pursuant to the 1997 Plan. If
the stockholders of the Corporation do not approve the 1997 Plan, then all of
the previously granted ISOs shall be automatically converted into
- 16 -
<PAGE> 20
Non-Qualified Options, and no further ISOs will be granted pursuant to the
Plan. In addition, if stockholder approval is not obtained, no Stock Rights
will be granted to any director or officer of the Corporation pursuant to the
1997 Plan unless the Company receives approval therefor from the National
Association of Securities Dealers, Inc. ("NASD") in accordance with the rules
of the NASD.
Certain Federal Tax Considerations
The following discussion of United States federal income tax
consequences of the issuance and exercise of options and stock grants granted
under the 1997 Plan, and certain other rights granted under the 1997 Plan is
based upon the provisions of the Code as in effect on the date of this Proxy
Statement, current regulations, and existing administrative rulings of the
Internal Revenue Service. It is not intended to be a complete discussion of
all of the federal income tax consequences of these plans or of the
requirements that must be met in order to qualify for the described tax
treatment. In addition, there may be foreign, state or local tax consequences
that are not discussed herein.
Incentive Stock Options. The following general rules are applicable
under current United States federal income tax law to ISOs granted under the
1997 Plan:
1. In general, an optionee will not recognize any income upon the
grant of an ISO or upon the issuance of shares to him or her upon the exercise
of an ISO, and the Company will not be entitled to a federal income tax
deduction upon either the grant or the exercise of an ISO.
2. If shares acquired upon exercise of an ISO are not disposed of
within (i) two years from the date the option was granted or (ii) one year
after the date the shares are issued to the optionee pursuant to the ISO
exercise (the "Holding Periods"), the difference between the amount realized on
any subsequent disposition of the shares and the exercise price will generally
be treated as capital gain or loss to the optionee.
3. If shares acquired upon exercise of an ISO are disposed of before
the expiration of one or both of the Holding Periods (a "Disqualifying
Disposition"), then in most cases the lesser of (i) any excess of the fair
market value of the shares at the time of exercise of the ISO over the exercise
price or (ii) the actual gain on dispositions will be taxed to the optionee as
ordinary income in the year of such disposition.
4. In any year that an optionee recognizes ordinary income on a
Disqualifying Disposition of shares acquired upon exercising an ISO, the
Company generally will be entitled to a corresponding federal income tax
deduction.
5. The difference between the amount realized by an optionee as the
result of a Disqualifying Disposition and the sum of (i) the exercise price and
(ii) the amount of ordinary income recognized under the above rules generally
will be treated as capital gain or loss.
6. Capital gain or loss recognized by an optionee on a disposition of
shares will be long-term capital gain or loss if the optionee's holding period
for the shares exceeds one year.
7. An optionee may be entitled to exercise an ISO by delivering
shares of the Company's Common Stock to the Company in payment of the exercise
price, if the optionee's ISO agreement so provides. If an optionee exercises
an ISO in such fashion, special rules will apply.
- 17 -
<PAGE> 21
8. In addition to the tax consequences described above, the exercise
of an ISO may result in an "alternative minimum tax". The "alternative minimum
tax" (the maximum rate is 28%) will be applied against a taxable base which is
equal to "alternative minimum taxable income," reduced by a statutory
exemption. In general, the amount by which the value of the shares received
upon exercise of the ISO exceeds the exercise price is included in the
optionee's alternative minimum taxable income. A taxpayer is required to pay
the higher of his regular tax liability or the alternative minimum tax. A
taxpayer who pays alternative minimum tax attributable to the exercise of an
ISO may be entitled to a tax credit against his or her regular tax liability in
later years.
9. Special rules apply if the shares acquired upon the exercise of an
ISO are subject to vesting, or are subject to certain restrictions on resale
under federal securities laws applicable to directors, officers or 10%
stockholders.
Non-Qualified Stock Options. The following general rules are
applicable under current federal income tax law to Non-Qualified Options
granted under the 1997 Plan:
1. In general, the optionee will not recognize any income upon the
grant of a Non-Qualified Option, and the Company will not be allowed a federal
income tax deduction upon such grant.
2. The optionee generally will recognize ordinary income at the time
of exercise of the Non-Qualified Option in an amount equal to the excess, if
any, of the fair market value of the shares on the date of exercise over the
exercise price. The Company may be required to withhold income tax on this
amount.
3. When the optionee sells the shares acquired through the exercise
of a Non-Qualified Option, he or she generally will recognize capital gain or
loss in an amount equal to the difference between the amount realized upon the
sale of the shares and his or her basis in the stock (generally, the exercise
price plus the amount taxed to the optionee as ordinary income). If the
optionee's holding period for the shares exceeds one year, such gain or loss
will be a long-term capital gain or loss.
4. When the optionee recognizes ordinary income attributable to a
Non-Qualified Option, the Company generally will be entitled to a corresponding
federal income tax deduction.
5. An optionee may be entitled to exercise a Non-Qualified Option by
delivering shares of the Company's Common Stock to the Company in payment of
the exercise price. If an optionee exercises a Non-Qualified Option in such
fashion, special rules apply.
6. Special rules apply if the shares acquired upon the exercise of a
Non-Qualified Option are subject to vesting, or are subject to certain
restrictions on resale under federal securities laws applicable to directors,
officers or 10% stockholders.
Stock Awards. The following general rules are applicable under
current federal income tax law to awards of Restricted Stock and Stock Grants
under the 1997 Plan, if implemented:
Under current federal income tax law, persons receiving shares
pursuant to an award of stock or a grant of an opportunity to purchase stock
under the 1997 Plan will generally recognize ordinary income equal to the fair
market value of the shares received, reduced by any purchase price paid. The
Company generally will be entitled to a corresponding federal income tax
deduction. When such shares are sold, the grantee generally will recognize
capital gain or loss. Special rules apply if the shares acquired are
- 18 -
<PAGE> 22
subject to vesting, or are subject to certain restrictions on resale under
federal securities laws applicable to directors, officers or 10% stockholders.
NEW PLAN BENEFITS
The Stock Rights that have been made to date under the 1997 Plan are
described in the table below. Future awards are in the discretion of the
Committee and cannot be determined at this time.
<TABLE>
<CAPTION>
Number of Shares
Represented
by Options (1)
--------------
<S> <C>
Non-Executive Officer Employee Group . . . . . . . . . . . . . . 234,000
</TABLE>
- --------------
(1) Options vest in five equal annual installments. All Options were
granted with an exercise price equal to the fair market value of the Common
Stock on the date of grant. The ultimate value of the options will depend on
the future market value of the Corporation's stock, which cannot be forecast
with reasonable accuracy.
PROPOSAL III
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP,
independent auditors, to serve as auditors for the fiscal year ending December
31, 1997. Ernst & Young LLP has served as the Corporation's auditors and
outside accountants since 1992. It is expected that a member of the firm will
be present at the Annual Meeting of Stockholders with the opportunity to make a
statement if so desired and will be available to respond to appropriate
questions. The directors recommend a vote FOR ratification of this selection.
The ratification of this selection is not required under the laws of the State
of Delaware, where the Corporation is incorporated, but the results of this
vote will be considered by the Board of Directors in selecting auditors for
future fiscal years.
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires the Corporation's directors, executive officers and holders of more
than 10% of the Corporation's Common Stock (collectively, "Reporting Persons")
to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock of the
Corporation. Such persons are required by regulations of the Commission to
furnish the Corporation with copies of all such filings. Based on its review
of the copies of such filings received by it with respect to the fiscal year
ended December 31, 1996 and written representations from certain Reporting
Persons, the Corporation believes that all Reporting Persons complied with all
Section 16(a) filing requirements in the fiscal year ended December 31, 1996.
- 19 -
<PAGE> 23
STOCKHOLDER PROPOSALS
Proposals of stockholders intended for inclusion in the proxy statement
to be furnished to all stockholders entitled to vote at the next annual meeting
of the Corporation must be received at the Corporation's principal executive
offices no later than November 24, 1997. In order to curtail controversy as to
the date on which a proposal was received by the Corporation, it is suggested
that proponents submit their proposals by Certified Mail -- Return Receipt
Requested.
EXPENSES AND SOLICITATION
Proxies may be solicited by the Corporation, by personal interview, mail
and telephone. The Corporation may request banks, brokers and other
custodians, nominees and fiduciaries to solicit their customers who have stock
of the Corporation registered in the names of a nominee and, if so, will
reimburse such banks, brokers and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket costs. The cost of solicitation of proxies
will be borne by the Corporation.
- 20 -
<PAGE> 24
Exhibit A
GULF SOUTH MEDICAL SUPPLY, INC.
1997 STOCK PLAN
1. PURPOSE. The purpose of the Gulf South Medical Supply, Inc.
1997 Stock Plan (the "Plan") is to encourage key employees of Gulf South
Medical Supply, Inc. (the "Company") and of any present or future parent or
subsidiary of the Company (collectively, "Related Corporations") and other
individuals who render services to the Company or a Related Corporation, by
providing opportunities to participate in the ownership of the Company and its
future growth through (a) the grant of options which qualify as "incentive
stock options" ("ISOs") under Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); (b) the grant of options which do not qualify as
ISOs ("Non-Qualified Options"); (c) awards of stock in the Company ("Awards");
and (d) opportunities to make direct purchases of stock in the Company
("Purchases"). Both ISOs and Non-Qualified Options are referred to hereafter
individually as an "Option" and collectively as "Options." Options, Awards and
authorizations to make Purchases are referred to hereafter collectively as
"Stock Rights." As used herein, the terms "parent" and "subsidiary" mean
"parent corporation" and "subsidiary corporation," respectively, as those terms
are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan
shall be administered by the Board of Directors of the Company
(the "Board") or, subject to paragraph 2(D) (relating to
compliance with Section 162(m) of the Code), by a committee
appointed by the Board (the "Committee"). Hereinafter, all
references in this Plan to the "Committee" shall mean the
Board if no Committee has been appointed. Subject to
ratification of the grant or authorization of each Stock Right
by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the
authority to (i) determine to whom (from among the class of
employees eligible under paragraph 3 to receive ISOs) ISOs
shall be granted, and to whom (from among the class of
individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options and Awards and to make Purchases)
Non-Qualified Options, Awards and authorizations to make
Purchases may be granted; (ii) determine the time or times at
which Options or Awards shall be granted or Purchases made;
(iii) determine the purchase price of shares subject to each
Option or Purchase, which prices shall not be less than the
minimum price specified in paragraph 6; (iv) determine whether
each Option granted shall be an ISO or a Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when
each Option shall become exercisable and the duration of the
exercise period; (vi) extend the period during which
outstanding Options may be exercised; (vii) determine whether
restrictions such as repurchase options are to be imposed on
shares subject to Options, Awards and Purchases and the nature
of such restrictions, if any, and (viii) interpret the Plan
and prescribe and rescind rules and regulations relating to
it. If the Committee determines to issue a Non-Qualified
Option, it shall take whatever actions it deems necessary,
under Section 422 of the Code and the regulations promulgated
thereunder, to ensure that such Option is not treated as an
ISO. The interpretation and construction by the Committee of
any provisions of the Plan or of any Stock Right granted under
it shall be final unless otherwise determined by the Board.
The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem
advisable. No member of the Board or the Committee shall be
liable for any action or determination made in good faith with
respect to the Plan or any Stock Right granted under it.
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B. COMMITTEE ACTIONS. The Committee may select
one of its members as its chairman, and shall hold meetings at
such time and places as it may determine. A majority of the
Committee shall constitute a quorum and acts of a majority of
the members of the Committee at a meeting at which a quorum is
present, or acts reduced to or approved in writing by all the
members of the Committee (if consistent with applicable state
law), shall be the valid acts of the Committee. From time to
time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS.
Stock Rights may be granted to members of the Board. All
grants of Stock Rights to members of the Board shall in all
respects be made in accordance with the provisions of this
Plan applicable to other eligible persons. Members of the
Board who either (i) are eligible to receive grants of Stock
Rights pursuant to the Plan or (ii) have been granted Stock
Rights may vote on any matters affecting the administration of
the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting
to himself or herself of Stock Rights, but any such member may
be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect
to the granting to such member of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board,
in its discretion, may take such action as may be necessary to
ensure that Stock Rights granted under the Plan qualify as
"qualified performance- based compensation" within the meaning
of Section 162(m) of the Code and applicable regulations
promulgated thereunder ("Performance-Based Compensation").
Such action may include, in the Board's discretion, some or
all of the following (i) if the Board determines that Stock
Rights granted under the Plan generally shall constitute
Performance-Based Compensation, the Plan shall be
administered, to the extent required for such Stock Rights to
constitute Performance-Based Compensation, by a Committee
consisting solely of two or more "outside directors" (as
defined in applicable regulations promulgated under Section
162(m) of the Code), (ii) if any Non-Qualified Options with an
exercise price less than the fair market value per share of
Common Stock are granted under the Plan and the Board
determines that such Options should constitute
Performance-Based Compensation, such options shall be made
exercisable only upon the attainment of a pre-established,
objective performance goal established by the Committee, and
such grant shall be submitted for, and shall be contingent
upon stockholder approval and (iii) Stock Rights granted under
the Plan may be subject to such other terms and conditions as
are necessary for compensation recognized in connection with
the exercise or disposition of such Stock Right or the
disposition of Common Stock acquired pursuant to such Stock
Right, to constitute Performance-Based Compensation.
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to
employees of the Company or any Related Corporation. Non-Qualified Options,
Awards and authorizations to make Purchases may be granted to any employee,
officer or director (whether or not also an employee) or consultant of the
Company or any Related Corporation. The Committee may take into consideration
a recipient's individual circumstances in determining whether to grant a Stock
Right. The granting of any Stock Right to any individual or entity shall
neither entitle that individual or entity to, nor disqualify such individual or
entity from, participation in any other grant of Stock Rights.
4. STOCK. The stock subject to Stock Rights shall be authorized
but unissued shares of Common Stock of the Company, par value $.01 per share
(the "Common Stock"), or shares of Common Stock reacquired
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by the Company in any manner. The aggregate number of shares which may be
issued pursuant to the Plan is 850,000, subject to adjustment as provided in
paragraph 13. If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part or shall be repurchased by the
Company, the unpurchased shares of Common Stock subject to such Option shall
again be available for grants of Stock Rights under the Plan.
No employee of the Company or any Related Corporation may be granted
Options to acquire, in the aggregate, more than 595,000 shares of Common Stock
under the Plan during any fiscal year of the Company. If any Option granted
under the Plan shall expire or terminate for any reason without having been
exercised in full or shall cease for any reason to be exercisable in whole or
in part or shall be repurchased by the Company, the shares subject to such
Option shall be included in the determination of the aggregate number of shares
of Common Stock deemed to have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under
the Plan at any time on or after March 3, 1997 and prior to March 4, 2007. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS AND
PURCHASES. Subject to paragraph 2(D) (relating to compliance
with Section 162(m) of the Code), the exercise price per share
specified in the agreement relating to each Non-Qualified
Option granted, and the purchase price per share of stock
granted in any Award or authorized as a Purchase, under the
Plan may not be less than the minimum legal consideration
required therefor under the laws of any jurisdiction in which
the Company or its successors in interest may be organized.
B. PRICE FOR ISOS. The exercise price per share
specified in the agreement relating to each ISO granted under
the Plan shall not be less than the fair market value per
share of Common Stock on the date of such grant. In the case
of an ISO to be granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related
Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten
percent (110%) of the fair market value per share of Common
Stock on the date of grant. For purposes of determining stock
ownership under this paragraph, the rules of Section 424(d) of
the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING.
Each eligible employee may be granted Options treated as ISOs
only to the extent that, in the aggregate under this Plan and
all incentive stock option plans of the Company and any
Related Corporation, ISOs do not become exercisable for the
first time by such employee during any calendar year with
respect to stock having a fair market value (determined at the
time the ISOs were granted) in excess of $100,000. The
Company intends to designate any Options granted in excess of
such limitation as Non-Qualified Options, and the Company
shall issue separate certificates to the optionee with respect
to Options that are Non-Qualified Options and Options that are
ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at
the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be
determined as of the date of grant or, if the prices or quotes
discussed in this sentence are unavailable for such date, the
last business day for which such prices or quotes are
available
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prior to the date of grant and shall mean (i) the average (on
that date) of the high and low prices of the Common Stock on
the principal national securities exchange on which the Common
Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale
price (on that date) of the Common Stock on the Nasdaq
National Market, if the Common Stock is not then traded on a
national securities exchange; or (iii) the closing bid price
(or average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities,
if the Common Stock is not reported on the Nasdaq National
Market. If the Common Stock is not publicly traded at the
time an Option is granted under the Plan, "fair market value"
shall mean the fair value of the Common Stock as determined by
the Committee after taking into consideration all factors
which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided
in paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee owning
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Related Corporation, as
determined under paragraph 6(B). Subject to earlier termination as provided in
paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9
through 12, each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully
exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an
installment becomes exercisable, it shall remain exercisable
until expiration or termination of the Option, unless
otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment
may be exercised at any time or from time to time, in whole or
in part, for up to the total number of shares with respect to
which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall
have the right to accelerate the date that any installment of
any Option becomes exercisable; provided that the Committee
shall not, without the consent of an optionee, accelerate the
permitted exercise date of any installment of any Option
granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting
limitation contained in Section 422(d) of the Code, as
described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
agreement relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his or her
ISOs shall become exercisable, and his or her ISOs shall terminate on the
earlier of (a) three months after the date of termination of his or her
employment, or (b) their specified expiration dates, except to the extent that
such ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to paragraph 16. For purposes of
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this paragraph 9, employment shall be considered as continuing uninterrupted
during any bona fide leave of absence (such as those attributable to illness,
military obligations or governmental service) provided that the period of such
leave does not exceed 90 days or, if longer, any period during which such
optionee's right to reemployment is guaranteed by statute or by contract. A
bona fide leave of absence with the written approval of the Committee shall not
be considered an interruption of employment under this paragraph 9, provided
that such written approval contractually obligates the Company or any Related
Corporation to continue the employment of the optionee after the approved
period of absence. ISOs granted under the Plan shall not be affected by any
change of employment within or among the Company and Related Corporations, so
long as the optionee continues to be an employee of the Company or any Related
Corporation. Nothing in the Plan shall be deemed to give any grantee of any
Stock Right the right to be retained in employment or other service by the
Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY.
A. DEATH. If an ISO optionee ceases to be
employed by the Company and all Related Corporations by reason
of his or her death, any ISO owned by such optionee may be
exercised, to the extent otherwise exercisable on the date of
death, by the estate, personal representative or beneficiary
who has acquired the ISO by will or by the laws of descent and
distribution, until the earlier of (i) the specified
expiration date of the ISO or (ii) 180 days from the date of
the optionee's death.
B. DISABILITY. If an ISO optionee ceases to be
employed by the Company and all Related Corporations by reason
of his or her disability, such optionee shall have the right
to exercise any ISO held by him or her on the date of
termination of employment, for the number of shares for which
he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or
(ii) 180 days from the date of the termination of the
optionee's employment. For the purposes of the Plan, the term
"disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code or any successor
statute.
11. ASSIGNABILITY. No ISO shall be assignable or transferable by
the optionee except by will or by the laws of descent and distribution, and
during the lifetime of the optionee shall be exercisable only by such optionee.
Stock Rights other than ISOs shall be transferable to the extent set forth in
the agreement relating to such Stock Right.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced
by instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. The Committee may specify that any
Non-Qualified Option shall be subject to the restrictions set forth herein with
respect to ISOs, or to such other termination and cancellation provisions as
the Committee may determine. The Committee may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such
instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following
events, an optionee's rights with respect to Options granted to such optionee
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
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A. STOCK DIVIDENDS AND STOCK SPLITS. If the
shares of Common Stock shall be subdivided or combined into a
greater or smaller number of shares or if the Company shall
issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock
deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock
dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is
to be consolidated with or acquired by another entity in a
merger or other reorganization in which the holders of the
outstanding voting stock of the Company immediately preceding
the consummation of such event, shall, immediately following
such event, hold, as a group, less than a majority of the
voting securities of the surviving or successor entity, or in
the event of a sale of all or substantially all of the
Company's assets or otherwise (each, an "Acquisition"), the
Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"),
shall, as to outstanding Options, either (i) make appropriate
provision for the continuation of such Options by substituting
on an equitable basis for the shares then subject to such
Options either (a) the consideration payable with respect to
the outstanding shares of Common Stock in connection with the
Acquisition, (b) shares of stock of the surviving or successor
corporation or (c) such other securities as the Successor
Board deems appropriate, the fair market value of which shall
not materially exceed the fair market value of the shares of
Common Stock subject to such Options immediately preceding the
Acquisition; or (ii) terminate all Options in exchange for a
cash payment to be paid by the entity assuming the obligations
of the Company hereunder equal to the excess of the fair
market value of the shares subject to such Options (to the
extent then exercisable or to be exercisable as a result of
the Acquisition) over the exercise price thereof; or (iii)
take any other action as may be consistent with this Plan, the
original instruments granting such Options and tax and
accounting rules applicable thereto.
C. RECAPITALIZATION OR REORGANIZATION. In the
event of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph B above)
pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares
of Common Stock, an optionee upon exercising an Option shall
be entitled to receive for the purchase price paid upon such
exercise the securities he or she would have received if he or
she had exercised such Option prior to such recapitalization
or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the
foregoing, any adjustments made pursuant to subparagraphs A, B
or C with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in
Section 424 of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs
would constitute a modification of such ISOs or would cause
adverse tax consequences to the holders, it may refrain from
making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of
the proposed dissolution or liquidation of the Company, each
Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such
other conditions as shall be determined by the Committee.
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F. ISSUANCES OF SECURITIES. Except as expressly
provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of
shares subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of
the Company.
G. FRACTIONAL SHARES. No fractional shares
shall be issued under the Plan and the optionee shall receive
from the Company cash in lieu of such fractional shares.
H. ADJUSTMENTS. Upon the happening of any of
the events described in subparagraphs A, B or C above, the
class and aggregate number of shares set forth in paragraph 4
hereof that are subject to Stock Rights which previously have
been or subsequently may be granted under the Plan shall also
be appropriately adjusted to reflect the events described in
such subparagraphs. The Committee or the Successor Board
shall determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination
shall be conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part or
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and specify
the number of shares as to which such Option is being exercised, accompanied by
full payment of the purchase price therefor either (a) in United States dollars
in cash or by check, (b) at the discretion of the Committee, through delivery
of shares of Common Stock having a fair market value equal as of the date of
the exercise to the cash exercise price of the Option, (c) at the discretion of
the Committee, by delivery of the grantee's personal recourse note bearing
interest payable not less than annually at no less than 100% of the lowest
applicable Federal rate, as defined in Section 1274(d) of the Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the proceeds
from the sale of the Common Stock acquired upon exercise of the Option and an
authorization to the broker or selling agent to pay that amount to the Company,
which sale shall be at the participant's direction at the time of exercise, or
(e) at the discretion of the Committee, by any combination of (a), (b), (c) and
(d) above. If the Committee exercises its discretion to permit payment of the
exercise price of an ISO by means of the methods set forth in clauses (b), (c),
(d) or (e) of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in question. The holder of an
Option shall not have the rights of a shareholder with respect to the shares
covered by such Option until the date of issuance of a stock certificate to
such holder for such shares. Except as expressly provided above in paragraph
13 with respect to changes in capitalization and stock dividends, no adjustment
shall be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the
Board on March 3, 1997, subject, with respect to the validation of ISOs granted
under the Plan, to approval of the Plan by the stockholders of the Company at
the next Meeting of Stockholders or, in lieu thereof, by written consent. If
the approval of stockholders is not obtained prior to March 3, 1998, any grants
of ISOs under the Plan made prior to that date will be Non-Qualified Options.
The Plan shall expire at the end of the day on March 3, 2007 (except as to
Options outstanding on that date). Subject to the provisions of paragraph 5
above, Options may be granted under the Plan prior to the date of stockholder
approval of the Plan. The Board may terminate or amend the Plan in any respect
at any time, except that, without the approval of the stockholders obtained
within 12 months before or after the Board adopts a resolution authorizing any
of the following actions: (a) the provisions of paragraph 3 regarding
eligibility for grants of ISOs may not be modified; (b) the provisions of
paragraph 6(B) regarding the
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exercise price at which shares may be offered pursuant to ISOs may not be
modified (except by adjustment pursuant to paragraph 13); and (c) the
expiration date of the Plan may not be extended. Except as otherwise provided
in this paragraph 15, in no event may action of the Board or stockholders alter
or impair the rights of a grantee, without such grantee's consent, under any
Stock Right previously granted to such grantee.
16. MODIFICATIONS OF ISOS; CONVERSION OF ISOS INTO NON-QUALIFIED
OPTIONS. Subject to paragraph 13(D), without the prior written consent of the
holder of an ISO, the Committee shall not alter the terms of such ISO
(including the means of exercising such ISO) if such alteration would
constitute a modification (within the meaning of Section 424(h)(3) of the
Code). The Committee, at the written request or with the written consent of
any optionee, may in its discretion take such actions as may be necessary to
convert such optionee's ISOs (or any installments or portions of installments
thereof) that have not been exercised on the date of conversion into
Non-Qualified Options at any time prior to the expiration of such ISOs,
regardless of whether the optionee is an employee of the Company or a Related
Corporation at the time of such conversion. Such actions may include, but
shall not be limited to, extending the exercise period or reducing the exercise
price of the appropriate installments of such ISOs. At the time of such
conversion, the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the
Committee in its discretion may determine, provided that such conditions shall
not be inconsistent with this Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Committee takes appropriate action. Upon the taking of such action, the
Company shall issue separate certificates to the optionee with respect to
Options that are Non-Qualified Options and Options that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of shares pursuant to Options granted and Purchases authorized
under the Plan shall be used for general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting
an ISO granted under the Plan, each optionee agrees to notify the Company in
writing immediately after such optionee makes a Disqualifying Disposition (as
described in Sections 421, 422 and 424 of the Code and regulations thereunder)
of any stock acquired pursuant to the exercise of ISOs granted under the Plan.
A Disqualifying Disposition is generally any disposition occurring on or before
the later of (a) the date two years following the date the ISO was granted or
(b) the date one year following the date the ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of
a Non-Qualified Option, the transfer of a Non-Qualified Stock Option pursuant
to an arm's-length transaction, the grant of an Award, the making of a Purchase
of Common Stock for less than its fair market value, the making of a
Disqualifying Disposition (as defined in paragraph 18), the vesting or transfer
of restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or other payment with respect to
such stock or securities, the Company may withhold taxes in respect of amounts
that constitute compensation includible in gross income. The Committee in its
discretion may condition (i) the exercise of an Option, (ii) the transfer of a
Non-Qualified Stock Option, (iii) the grant of an Award, (iv) the making of a
Purchase of Common Stock for less than its fair market value, or (v) the
vesting or transferability of restricted stock or securities acquired by
exercising an Option, on the grantee's making satisfactory arrangement for such
withholding. Such arrangement may include payment by the grantee in cash or by
check of the amount of the withholding taxes or, at the discretion of the
Committee, by the grantee's delivery of previously held shares of Common Stock
or the withholding from the shares of Common Stock otherwise deliverable upon
exercise of a Option shares having an aggregate fair market value equal to the
amount of such withholding taxes.
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20. GOVERNMENTAL REGULATION. The Company's obligation to sell and
deliver shares of the Common Stock under this Plan is subject to the approval
of any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on
the Company with respect to the Plan. For example, the Company may be required
to send tax information statements to employees and former employees that
exercise ISOs under the Plan, and the Company may be required to file tax
information returns reporting the income received by grantees of Options in
connection with the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and
the instruments evidencing Stock Rights shall be governed by the laws of
Delaware, or the laws of any jurisdiction in which the Company or its
successors in interest may be organized.
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GULF SOUTH MEDICAL SUPPLY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 1997
The undersigned hereby appoints Thomas G. Hixon and Guy W. Edwards, or
any of them, proxies for the undersigned, each with full power of substitution,
to attend the Annual Meeting of Stockholders of Gulf South Medical Supply,
Inc., to be held on Thursday, April 24, 1997, at 9:00 a.m., at the Harvey Hotel
- -- North, Jackson, Mississippi, and at any adjournments or postponements of the
Annual Meeting, and to vote as specified in the Proxy all the Common Stock of
the Company which the undersigned would be entitled to vote if personally
present. This Proxy when properly executed will be voted in accordance with
your indicated directions. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTORS AND FOR PROPOSALS 2 AND 3.
The Board of Directors recommends a vote FOR the election of the
Directors and FOR proposals 2 and 3.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE
REVERSE SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
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PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [darkened oval]
FOR ALL WITHHOLD ALL For All Except Nominee(s) written below
1. Election of Class III Directors / / / / / /
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Nominees: Melvin L. Hecktman and William W. McInnes
2. Adoption of the Gulf South Medical Supply, Inc. FOR AGAINST ABSTAIN
1997 Stock Plan / / / / / /
3. Ratification of Auditors / / / / / /
for fiscal year 1997
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND OF THE PROXY STATEMENT.
SIGNATURE(S) Dated: , 1997
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Please sign exactly as your name appears. Joint owners should each sign personally. Where applicable, indicate your
official position or representation capacity.
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