<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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
PHYSICIAN SALES & SERVICE, 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)(1) 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
[PSS LOGO]
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 22, 1997
---------------------
The Annual Meeting of Shareholders of Physician Sales & Service, Inc., a
Florida corporation (the "Company"), will be held at 9:00 a.m., local time, on
Tuesday, July 22, 1997, at the Jacksonville Marriott, 4670 Salisbury Road,
Jacksonville, Florida 32256 for the following purposes:
1. To elect three Class I directors for a three-year term;
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on June 16, 1997, are
entitled to notice of and to vote at the Annual Meeting and any and all
adjournments thereof.
All shareholders are invited to attend the Annual Meeting. Those
shareholders who are unable to attend are respectfully urged to sign and return
the enclosed Proxy Card as promptly as possible. Shareholders who sign and
return a Proxy Card may nevertheless attend the Annual Meeting, revoke their
Proxy, and vote their shares in person.
Whether or not you expect to be present, please sign, date and return the
enclosed Proxy Card in the enclosed pre-addressed envelope as soon as possible.
No postage is required if mailed from within the United States.
By Order of the Board of Directors
David A. Smith
Chief Financial Officer
Jacksonville, Florida
June 27, 1997
<PAGE> 3
PHYSICIAN SALES & SERVICE, INC.
4345 SOUTHPOINT BOULEVARD
JACKSONVILLE, FLORIDA 32216
PROXY STATEMENT
INTRODUCTION
The enclosed Proxy is solicited by the Board of Directors of Physician
Sales & Service, Inc., a Florida corporation ("PSS" or the "Company"), for use
at its Annual Meeting of Shareholders scheduled to be held on Tuesday, July 22,
1997 at 9:00 a.m., local time, or at any postponements or adjournments thereof
(the "Annual Meeting"). The purposes of the Annual Meeting are set forth herein
and in the accompanying Notice of Annual Meeting of Shareholders. The Annual
Meeting will be held at the Jacksonville Marriott, 4670 Salisbury Road,
Jacksonville, Florida 32256. The Company's headquarters are located at 4345
Southpoint Boulevard, Jacksonville, Florida 32216. The date of the mailing of
this Proxy Statement and accompanying Proxy is on or about June 27, 1997.
PROCEDURAL MATTERS
Shareholders of record at the close of business on June 16, 1997 are
entitled to notice of and to vote at the Annual Meeting. At the record date,
37,087,601 shares of Common Stock of the Company, $0.01 par value per share (the
"Common Stock"), were issued and outstanding and held by approximately 1,065
shareholders of record. Shareholders are entitled to one vote per share on all
matters voted upon at the Annual Meeting. Shareholders do not have the right to
cumulate their votes for directors. The presence at the Annual Meeting, in
person or by proxy, of a majority of the shares of Common Stock outstanding on
June 16, 1997 will constitute a quorum. If the accompanying Proxy Card is
properly signed and timely returned to the Company and not revoked, it will be
voted in accordance with the instructions contained therein.
Unless contrary instructions are given, the persons designated as proxy
holders on the accompanying Proxy Card will vote: FOR the Board's nominees and
if any other matters properly come before the Annual Meeting, in accordance with
their best judgment on such matters. Each such proxy granted may be revoked by
the shareholder(s) at any time before it is exercised by filing with the
Secretary of the Company a revoking instrument or a duly executed Proxy Card
bearing a later date or by voting in person at the Annual Meeting. The powers of
the proxy holder with respect to a particular proxy will be suspended if the
person executing that proxy attends the Annual Meeting in person and so
requests. Attendance at the Annual Meeting will not in itself constitute
revocation of the proxy. Shareholders have no dissenters' rights of appraisal in
connection with any matter being presented at the Annual Meeting.
Directors will be elected by a plurality of the votes cast by the shares of
Common Stock represented in person or by proxy at the Annual Meeting. The
affirmative votes of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting will be required for
approval of any other matter that may be submitted to a vote of the
shareholders. If less than a majority of the outstanding shares entitled to vote
are represented at the Annual Meeting, a majority of the shares so represented
may adjourn the Annual Meeting to another date, time or place, and notice need
not be given of the new date, time or place if the new date, time or place is
announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more inspectors
of election for the meeting. Such inspector(s) shall determine the number of
shares of Common Stock represented at the meeting, the existence of a quorum and
the validity and effect of proxies, and shall receive, count and tabulate
ballots and votes and determine the results thereof. Abstentions will be
considered as shares present and entitled to vote at the Annual Meeting and will
be counted as votes cast at the Annual Meeting, but will not be counted as votes
cast for or against any given matter.
A broker or nominee holding shares registered in its name, or in the name
of its nominee, which are beneficially owned by another person and for which it
has not received instructions as to voting from the beneficial owner, may have
discretion to vote the beneficial owner's shares with respect to the election of
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directors and other matters addressed at the Annual Meeting. Any such shares
which are not represented at the Annual Meeting either in person or by proxy
will not be considered to have cast votes on any matters addressed at the Annual
Meeting.
PROPOSAL I
ELECTION OF DIRECTORS
BOARD OF DIRECTORS
The Board of Directors currently consists of nine directors who are elected
in three classes, with three Class I members, three Class II members and three
Class III members. Members of each class hold office for three-year terms; the
terms of the classes are staggered so that the term of one class terminates each
year. Each member of the Board of Directors holds office for the term for which
he or she was elected and until his or her successor shall have been duly
elected and qualified, or until the earlier of his or her resignation, removal
from office or death.
Class I Directors. The terms of the Class I directors, T. O'Neal Douglas,
Patrick C. Kelly and James L.L. Tullis, expire at the Annual Meeting of
Shareholders in 1997, or when their successors have been duly elected and
qualified.
Class II Directors. The terms of the Class II directors, Delores P.
Kesler, David A. Smith and William C. Mason, expire at the Annual Meeting of
Shareholders in 1998, or when their successors have been duly elected and
qualified.
Class III Directors. The terms of the Class III directors, Delmer W.
Dallas, Fred Elefant, and John F. Sasen, Sr., expire at the Annual Meeting of
Shareholders in 1999, or when their successors have been duly elected and
qualified.
ELECTION OF CLASS I DIRECTORS
Messrs. Douglas, Kelly and Tullis have been nominated for election at the
1997 Annual Meeting by the Board of Directors to continue as Class I directors
and have informed the Company that they will serve if elected. Proxies may not
be voted for a greater number of persons than the number of nominees named
herein.
Directors will be elected by a plurality of the votes cast by the shares of
Common Stock represented in person or by proxy at the Annual Meeting. The
accompanying proxy, unless otherwise specified, will be voted FOR the election
of Messrs. Douglas, Kelly and Tullis as directors. If any of Messrs. Douglas,
Kelly and Tullis should become unavailable, which is not now anticipated, the
proxy will be voted for the election of such other person as the Board of
Directors may select to replace such nominee, unless the Board of Directors
instead reduces the number of directors comprising the Board. Each such proxy
granted may be revoked by the shareholder at any time before it is exercised by
filing with the Secretary of the Company a revoking instrument or a duly
executed Proxy Card bearing a later date or by voting in person at the Annual
Meeting. Attendance at the Annual Meeting will not in itself constitute
revocation of the proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
NOMINEES FOR DIRECTOR.
EXPERIENCE OF DIRECTORS
NOMINEES FOR DIRECTORS
CLASS I
(WHOSE TERMS, IF ELECTED, WILL EXPIRE
AT THE ANNUAL MEETING OF SHAREHOLDERS IN 2000)
T. O'Neal Douglas has served on the Board of Directors of the Company since
July 1993. Mr. Douglas is the Chairman and Chief Executive Officer of American
Heritage Life Insurance Co. and American Heritage
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<PAGE> 5
Life Investment Company (collectively, "AHL"). He has been with AHL since 1983,
serving as President since 1986 and Chief Executive Officer since 1990. In
addition, Mr. Douglas serves as a director of Barnett Bank of Jacksonville, N.A.
Patrick C. Kelly, a co-founder of the Company, has served as Chairman of
the Board and Chief Executive Officer of the Company since its inception in May
1983 and as President of the Company from May 1983 to August 1995. Prior to
founding the Company, from August 1976 to February 1983, Mr. Kelly served as
Sales Manager, General Manager and Vice President of Intermedco, Inc., a
Houston-based medical supply company. Mr. Kelly also serves as Chairman of the
Board of Diagnostic Imaging, Inc. and WorldMed International, Inc., each wholly
owned subsidiaries of PSS that operate the imaging and international businesses
of PSS.
James L. L. Tullis has served on the Board of Directors of the Company
since November 1989. Mr. Tullis was nominated to serve on the Board of Directors
of the Company for a three year term beginning in 1994 pursuant to an agreement
with the Company. Since September 1987, Mr. Tullis has been a general partner of
Tullis-Dickerson Partners, the general partner of Tullis-Dickerson Capital
Focus, L.P., a venture capital fund that invests in the health care industry and
a shareholder of the Company. Mr. Tullis has served as Chairman of the Board of
Directors and Chief Executive Officer of Tullis-Dickerson & Co., Inc., a venture
capital company which acts as a management company for Tullis-Dickerson Capital
Focus, L.P., since July 1986. Mr. Tullis also serves on the Board of Directors
of American Consolidated Laboratories, Inc., a manufacturer of contact lenses,
Scandipharm, Inc., a developer and manufacturer of pharmaceutical products and
services, and Acme United, Inc., a manufacturer of scissors and other medical
products.
DIRECTORS WHOSE TERMS OF OFFICE
WILL CONTINUE AFTER THE 1997 ANNUAL MEETING
CLASS II
(TERMS EXPIRE AT THE ANNUAL MEETING
OF SHAREHOLDERS IN 1998)
Delores P. Kesler has served on the Board of Directors of the Company since
July 1993. Ms. Kesler has been Chairman and CEO of Kesler, Pass & Associates,
Inc. since 1996. Prior to that, Ms. Kesler was Chairman of AccuStaff,
Incorporated ("AccuStaff"), the successor to ATS Services, Inc. ("ATS"), a
franchisor of temporary employment operations from January until June 1996. She
founded ATS in May 1978 and served as its Chairman and Chief Executive Officer
until its merger with three other temporary employment agencies in May 1992. Ms.
Kesler is a past member of an executive committee with the National Association
of Temporary Services and serves on the Board of Directors of AccuStaff and Clay
County Bank in Orange Park, Florida.
David A. Smith has served on the Board of Directors of the Company since
July 1993 and as Executive Vice President since April 1996 and Chief Financial
Officer of the Company since April 1992. Mr. Smith served as a Vice President of
the Company from April 1992 to April 1996. Prior to serving as Vice President
and Chief Financial Officer, Mr. Smith served the Company as a Regional Manager,
General Manager, Sales Manager and Operations Manager from July 1987 to June
1993. Prior to joining the Company, Mr. Smith was employed by Coopers & Lybrand
from October 1985 through June 1987, and by Smoak, Davis and Nixon, C.P.A., from
May 1983 through September 1985.
William C. Mason has served on the Board of Directors of the Company since
April 1996. Mr. Mason is Vice Chairman and Chief Executive Officer of
Baptist/St. Vincent's Health System, Inc. located in Jacksonville, Florida and
has served in various positions throughout the organization since 1984.
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<PAGE> 6
CLASS III
(TERMS EXPIRE AT THE ANNUAL MEETING
OF SHAREHOLDERS IN 1999)
Delmer W. Dallas has served on the Board of Directors of the Company since
October 1989. Since 1984, Mr. Dallas has been the Chairman of the Board of
Acosta Sales Co., Inc. ("Acosta"), a food brokerage company operating in the
Southeastern United Sates. He has also served on the Board of Directors of
Acosta since 1966.
Fred Elefant has served on the Board of Directors of the Company and as
Secretary of the Company since 1984. Mr. Elefant has been engaged in the private
practice of law in Jacksonville, Florida since 1973. Since January 1989, he has
practiced as Fred Elefant, P.A. He was a member of the law firm of Mahoney,
Adams, Milam, Surface & Grimsley, P.A., now Mahoney Adams & Criser, P.A., from
1983 to 1989.
John F. Sasen, Sr. has served on the Board of Directors of the Company
since July 1993 and as President of the Company since August 1995. Mr. Sasen
served as Chief Operating Officer of the Company from December 1993 to March
1997 and served as Executive Vice President of the Company from December 1993 to
August 1995. From August 1990 to December 1992, he served the Company as Vice
President -- Sales and Marketing; from January 1993 to July 1993, as Regional
Vice President, and from August 1993 to December 1993 as Executive Vice
President. Prior to joining the Company, Mr. Sasen was Vice President -- Sales,
Marketing and Distributor Relations for a division of Becton Dickinson & Company
("Becton Dickinson"), a manufacturer of health care products. In that position,
Mr. Sasen directed product development and marketing efforts, technical
services, product services and customer service. Mr. Sasen was with Becton
Dickinson for over 20 years. In addition, Mr. Sasen serves as a director of
Humascan, Inc., a manufacturer of a breast thermal detection device.
COMMITTEES OF THE BOARD AND BOARD MEETINGS
The Board of Directors has three standing committees, an Executive
Committee, an Audit Committee and a Compensation Committee. There is no
nominating committee for directors.
The Board's Executive Committee, which held six meetings in fiscal year
1997 and acted by written consent on nine occasions, is authorized to act with
the full authority and in place of the Board at such times as members of the
Executive Committee deem necessary and appropriate. Members of the Executive
Committee are Mr. Kelly, Mr. Elefant and Mr. Douglas, with Mr. Kelly acting as
the chairman.
The Board's Audit Committee, which held four meetings in fiscal year 1997,
reviews the scope and results of the audit conducted by the Company's
independent auditors. In addition, it reviews systems of internal controls and
accounting policies and procedures. Members of the Audit Committee are Mr.
Douglas, Ms. Kesler and Mr. Mason, with Mr. Douglas acting as the chairman.
The Board's Compensation Committee, which held five meetings in fiscal year
1997, reviews salary levels of management personnel and makes appropriate
recommendations to the Board with respect thereto. In addition, it makes
recommendations to the Board concerning certain employee benefit plan matters,
including the granting of stock options. Members of the Compensation Committee
are Mr. Dallas, Mr. Elefant and Mr. Tullis. Mr. Dallas is the chairman.
During 1997, the Board held ten meetings. All members of the Board attended
at least 75% of the meetings of the Board and all committees on which they
served in 1997, except for Mr. Mason who attended 71% of the meetings of the
Board and all committees on which he served.
DIRECTOR COMPENSATION; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
In fiscal year 1997, directors who were not employees of the Company
received an annual retainer of $12,500 and $1,000 for each of the meetings of
the Board of Directors which they attended. Members of the Compensation
Committee and Audit Committee received additional fees of $600 for each
committee meeting
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attended ($1,000 in the case of committee chairperson), although members of each
committee receive no compensation for action taken by written consent without a
meeting.
Directors who are employees of the Company are not compensated for Board or
committee meeting attendance. Pursuant to the Company's Directors Stock Plan,
non-employee directors receive an annual grant of an option to purchase 2,000
shares of Common Stock. The exercise price of options granted under this plan
may be no less than the fair market value of the Company's common stock on the
date of grant and all options are fully vested at the date of grant. In
addition, upon election to the Board of Directors by the shareholders, directors
will receive a grant of 2,000 shares of restricted stock. Restrictions on the
restricted stock will lapse upon the expiration of the director's term in
office.
In fiscal year 1997, the Company made payments totaling approximately
$132,000 to Fred Elefant, a director of the Company and a member of the
compensation committee, for legal services rendered to the Company.
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<PAGE> 8
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Patrick C. Kelly(1)........................ 50 Chairman of the Board, Chief Executive Officer and
Director
John F. Sasen, Sr. ........................ 55 President and Director
David A. Smith............................. 37 Executive Vice President, Chief Financial Officer and
Director
James B. Stallings, Jr. ................... 42 Executive Vice President -- Southern Region
Charles E. Alvarez......................... 29 Vice President -- Northern Region
Jeffrey H. Anthony......................... 36 Vice President -- Information Technology
James E. Boyd.............................. 43 Vice President -- Diagnostics Division
Gary A. Corless............................ 32 Vice President -- Western Region
Frederick E. Dell.......................... 36 Executive Vice President; President of Diagnostic
Imaging, Inc.
Edward D. Dienes........................... 36 Vice President -- Central Region
Kathleen H. Fehling........................ 37 Executive Vice President and Chief Operating Officer
of Diagnostic Imaging, Inc.
Douglas Harper............................. 45 Senior Vice President -- Sales and Marketing
Todd M. LaVelle............................ 30 Vice President -- Mid America Region
Delmer W. Dallas(3)........................ 66 Director
T. O'Neal Douglas(1)(2).................... 61 Director
Fred Elefant(1)(3)......................... 50 General Counsel, Secretary and Director
Delores Kesler(2).......................... 56 Director
William C. Mason(2)........................ 59 Director
James L.L. Tullis(3)....................... 50 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
For information pertaining to the experience and background of Patrick C.
Kelly, John F. Sasen, Sr., David A. Smith, Delmer W. Dallas, T. O'Neal Douglas,
Fred Elefant, Delores P. Kesler, William C. Mason and James L.L. Tullis, see
"ELECTION OF DIRECTORS -- Experience of Directors."
James Stallings has served as Executive Vice President -- Southern Region
since March 1997. Prior to this position, Mr. Stallings served as Executive Vice
President -- Sales and Marketing beginning in April 1996. From 1988 to 1996, Mr.
Stallings held several positions with IBM Corporation, including Director of
Worldwide Sales -- AS/400 Division, Director of Business Reengineering and
General Manager. From 1984 to 1987, Mr. Stallings served as a manager of Rohm
Corporation. In addition to his responsibilities with the Company, Mr. Stallings
serves on the Board of Directors for Sun Bank of Northeast Florida.
Charles E. Alvarez has served as Vice President -- Northern Region of the
Company since April 1997. Prior to this position, Mr. Alvarez served as Vice
President -- Eastern Region from April 1995 until April 1997. Mr. Alvarez has
served the Company in various other positions, including Regional Manager of
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<PAGE> 9
the Eastern Region from April 1994 to March 1995, and sales manager and sales
representative from January 1990 to March 1994.
Jeffrey H. Anthony has served the Company as Vice President -- Information
Technology since March 1997. Prior to serving in this capacity, Mr. Anthony was
Director of Information Technology from October 1996 to March 1997, Pacific
Region Operations Leader from April 1996 to October 1996 and General
Leader -- PSS Delray Beach from November 1992 to March 1996.
James E. Boyd has served as the Company's Vice President -- Diagnostics
Division since April 1996. Prior to such position, Mr. Boyd served the Company
as a marketing manager from October 1994 to March 1995 and as the Vice
President -- Central Region from March 1992 to September 1994.
Gary A. Corless has served as Vice President -- Western Region since
October 1996. Prior to serving in this position, Mr. Corless served as Vice
President -- Central Region from April 1996 to September 1996. Mr. Corless has
served the Company as General Manager in various cities since February 1992.
Frederick E. Dell has served as Executive Vice President of the Company and
as President of Diagnostic Imaging, Inc. since November 1996. Prior to these
positions, Mr. Dell served as Senior Vice President Southern Region of the
Company from April 1996 to November 1996 and served as Vice President --
Southern Region from January 1994 to March 1996. Mr. Dell also served as
director of the Company from July 1991 through July 1992. He served as Regional
Manager and Vice President of the Company's Western Region from December 1989 to
January 1994. From April 1984 through November 1989, Mr. Dell served the Company
in various sales and management positions.
Edward D. Dienes has served as Vice President -- Central Region since
October 1996. Prior to this position, Mr. Dienes served as Vice
President -- Pacific Region beginning in April 1995. Prior to such time, Mr.
Dienes served the Company as Director of Marketing from April 1993 to March 1995
and as General Manager, Sales Manager and Operational Manager from August 1988
to March 1993.
Kathleen H. Fehling has served as Executive Vice President and Chief
Operating Officer of Diagnostic Imaging, Inc. since February 1997. Prior to
joining the Company, Ms. Fehling was employed by Picker International from 1983,
serving most recently as Vice President of Marketing & Service from 1994 to 1997
and as National Service Manager from 1992 to 1994.
Douglas Harper has served as Senior Vice President -- Sales and Marketing
since March 1997. Prior to this position, Mr. Harper served as Senior Vice
President -- Northern Region of the Company from April 1996 to March 1997 and
served as Vice President -- Northern Region from August 1995 to March 1996. He
served as the Northeast Regional Manager for Taylor Medical, Inc. ("Taylor"),
which was acquired by the Company in August 1995, from 1990 to August 1995. Mr.
Harper has over 20 years experience in medical supply distribution. Mr. Harper
founded Medco Systems/Quinoy Medical Supply, which was acquired by Taylor in
1990. Prior to such time, Mr. Harper was a General Manager for Foster Medical
Supply.
Todd M. LaVelle has served as Vice President -- Mid America Region since
June 1996. Prior to that time, Mr. LaVelle served as Vice President -- Sales
beginning in April 1996. In addition to these positions, Mr. LaVelle has served
as Vice President -- Sales & Marketing from July 1995 to April 1996, as Regional
Manager for the Pacific Region from July 1994 to June 1995, as Diagnostic Market
Leader from April 1994 to June 1994, and as Sales Manager and sales
representative from August 1990 to March 1994.
Executive officers of the Company are elected annually and serve at the
discretion of the Board. There are no family relationships between or among any
of the Company's directors or executive officers.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of three outside directors of the
Board who are not employees or former employees of PSS. The Committee is
responsible for the approval and oversight of the compensation program for the
Company's officers. In performing these responsibilities, the Committee has
utilized the services of an independent compensation consultant from KPMG Peat
Marwick. This report to
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<PAGE> 10
shareholders addresses the Company's compensation policies for the executive
officers and its basis for determining the compensation of the Chief Executive
Officer for the past fiscal year.
Compensation Committee Charter. In 1994, the Board of Directors adopted a
Charter for the Compensation Committee. The Charter set forth the duties and
responsibilities of the Compensation Committee. Specifically, the Compensation
Committee is responsible for the following:
1. Reviewing annually and approving the Company's stated compensation
strategy to ensure that the management team is rewarded appropriately for
their contributions to growth and profitability and that the executive
compensation strategy supports Company objectives and shareholder
interests.
2. Reviewing annually and determining the individual elements of total
compensation for the Chief Executive Officer and communicating in the
annual Compensation Committee Report to shareholders the factors and
criteria on which the Chief Executive Officer's compensation for the last
year was based. This will also include discussing the relationship between
the Chief Executive Officer's compensation and the Company's performance.
3. Reviewing and approving the individual elements of total
compensation for the executive officers and key management, other than the
Chief Executive Officer, and communicating in the annual Compensation
Committee Report to shareholders the relationship of corporate performance
to executive compensation.
4. Assuring that all compensation plans are administered in a manner
consistent with the Company's compensation strategy.
5. Approving for submission to shareholders all new equity-related
incentive plans for management and administering the Company's long-term
incentive program in a manner consistent with its terms.
6. Reviewing with the Chief Executive Officer compensation matters
relating to management succession.
7. Reviewing the Company's employee benefit programs and approving
changes, subject to shareholder or Board approval.
Compensation Strategy. The Compensation Committee reviewed the Company's
strategy adopted in 1994 and affirmed its continuing appropriateness. The
compensation strategy states that the goals of the executive compensation
program are to:
- enable the Company to attract and retain high quality executives by
providing total compensation opportunities and a compensation mix which
are at, or above, the relevant employment market levels, but with modest
fixed costs and leveraged incentive opportunities; and
- motivate executives to act in the best interests of shareholders by
providing substantial incentive opportunities to be earned through
performance on direct and indirect measures of long-term shareholder
value creation.
Targeted compensation levels are stated below and are followed by a more
detailed discussion of each of the three compensation elements.
- the base salary policy reflects median levels for companies of comparable
revenue size;
- annual incentive plan award opportunities are targeted at median levels
and associated with aggressive earning growth goals. Actual awards are
determined based upon how performance compares to such goals; and
- long-term incentives earned reflect contributions to shareholder value
over a long-term period, both in terms of the absolute growth in value
per share of the Common Stock and relative growth compared to a broad
sample of companies or a composite index (e.g., Nasdaq National Market).
Base Salary. Consistent with this compensation strategy, the Committee
approved at its March 13, 1997 meeting salary ranges for its executive officer
positions consistent with competitive market data for
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<PAGE> 11
companies having the same primary and/or secondary SIC code as PSS. These
companies had annual sales ranging from $400M to $3.0B with the median being
approximately $800M. This data was further supplemented with published survey
information for companies of a similar size to that of PSS. This information was
provided to the Committee and the Chief Executive Officer by our independent
compensation consultants.
The midpoints of the salary ranges were established at essentially the
competitive average. Range minimums were then established at 75% of their
respective midpoints and range maximums were established at 125% of their
respective midpoints. All executive officers were then assigned to a specific
salary amount for fiscal year 1998 within their respective salary ranges. The
approved individual salary amounts were recommended by the Company's Chief
Executive Officer after due consideration of their individual qualifications,
experience and contributions over time. In every instance, the salary assigned
to each executive officer places him/her within their respective salary range.
Annual Incentives. With respect to annual incentive compensation, the
Company has established target annual incentive amounts as a percentage of
salary (i.e., 50% for the Chief Executive Officer Position, 40% for the
executive officer positions, and 30% for officers) for each eligible position.
Actual incentive awards can then range from 0 to 1.5 times the target awards
based upon actual profit performance results.
The profit target was established at the beginning of the 1997 fiscal year
based on a business plan reviewed and approved by the Compensation Committee.
The Compensation Committee also reserved the right to increase or decrease such
incentives by as much as 25% based upon the achievement, or lack thereof, of key
strategic milestones, such as number and cost of new site openings, acquisition
and growth revenues.
While the Chief Executive Officer's annual incentive compensation is based
solely upon profit performance results, other corporate staff officers have up
to 20% of their incentive opportunity based upon their assessed individual
contribution to the Company's success. Incentive amounts listed in the Summary
Compensation Table for the five highest compensated officers were paid for
results achieved during fiscal year 1997.
Long Term Incentives. The Long-Term Stock and Long-Term Incentive Plans
were adopted in March of 1994, and continue to be utilized. These compensation
plans have the following objectives:
- award opportunities are directly linked to shareholder returns;
- award opportunities have upside potential;
- equity is the cornerstone of the program;
- performance-based cash incentives are provided to help executives pay
taxes and exercise stock options; and
- the charge to earnings for financial reporting purposes associated with
these plans is controlled and to be kept to a reasonably low amount.
The Long-Term Stock Plan is primarily composed of non-qualified stock
options to be granted to a broad group of managers and restricted stock, which
can be granted to any employee. As pertains to the granting of stock options to
officers, the Committee has adopted a grant guideline under which a set number
of shares are annually awarded to officers based on their respective base salary
and tier responsibility level within the Company.
The Long-Term Incentive Plan provides contingent cash award opportunities
to eligible participants based upon the Company's relative total shareholder
return results as compared to all other companies on the Nasdaq National Market.
In order to receive any payment, the Company must have at least a 50th
percentile rank on a total shareholder return basis over a three-year time
period. A target award may be paid at the 60th percentile and a scale has been
created whereby a maximum award of three times the target may be earned if the
Company's total shareholder return results would place it among the top 10%
(90th percentile or above) of all Nasdaq National Market companies.
9
<PAGE> 12
New grants are made at the beginning of each calendar year and each is
based upon a three-year performance period. New contingent grants for the
January 1997 through December 1999 performance period were approved by the
Committee for several executive position holders in accordance with the award
guideline adopted in conjunction with the PSS Compensation Strategy.
Compensation of Chief Executive Officer. In fiscal 1997, the Chief
Executive Officer (CEO) received a base salary of $475,000. The Compensation
Committee has approved an increase in the CEO's base salary to $535,000 for
fiscal year 1998. These salary levels were approved by the Compensation
Committee after considering compensation information from the companies in the
Peer Index, the growth of the Company, increased responsibilities and the
specific skills of the CEO as they relate to the needs of the Company, and
increases in the cost of living. Our independent compensation consultants have
confirmed that this salary level is approximately at the third quartile of the
salary range for this position.
The annual incentive award of $76,000 for fiscal year 1997 paid to the CEO
was determined based upon the annual incentive plan profit targets that the
Committee reviewed and approved for fiscal 1997 at its meeting in March of 1996.
In addition, 238 contingent units were granted to Mr. Kelly under the 1994 Long-
Term Incentive Plan. The value of this grant, if any, will be determined as of
December 31, 1999.
Other Considerations. In 1993, the Internal Revenue Code was amended
(Section 162(m)) to limit the deductibility of certain nonperformance based
compensation expenses in excess of $1 million. Section 162(m) generally
disallows a tax deduction for compensation over $1 million paid to an executive
officer named in the Summary Compensation Table, unless such compensation
qualifies as performance-based. The Committee is aware that the compensation
payable for the 1997 fiscal year will not result in any loss of tax deduction
for the Company, since no individual received compensation in excess of $1
million. However, the Company has previously qualified its compensation program,
and any and all amounts paid under it, as performance-based, and therefore,
fully deductible as compensation expense. It is the intent of the Committee that
all future amounts paid under the compensation program will also meet this
performance-based standard.
Respectfully submitted,
The Compensation Committee
Delmer W. Dallas, Chairman
Fred Elefant
James L. L. Tullis
10
<PAGE> 13
EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
Executive Officer Compensation. The following table presents certain
summary information concerning compensation paid or accrued by the Company, for
services rendered in all capacities for the three fiscal years ended March 28,
1997, for its Chief Executive Officer and the four most highly compensated
officers other than the Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------- ----------------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) OPTIONS(3) COMPENSATION(4)
- --------------------------- ---- --------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Patrick C. Kelly.............................. 1997 $475,000 $ 76,000 -- $58,001
Chairman of the Board and Chief............. 1996 360,000 154,800 290,462 30,434
Executive Officer........................... 1995 324,996 128,100 150,000 12,017
John F. Sasen, Sr............................. 1997 300,000 36,000 13,157 46,693
President................................... 1996 212,083 69,300 54,282 4,427
1995 175,008 48,027 30,000 4,424
David A. Smith................................ 1997 235,000 28,200 9,045 7,785
Executive Vice President and Chief.......... 1996 145,799 47,850 31,251 2,628
Financial Officer........................... 1995 135,000 37,049 15,000 2,622
Frederick E. Dell............................. 1997 170,000 21,591 4,217 9,114
Executive Vice President; President......... 1996 138,000 15,660 21,084 2,630
of Diagnostic Imaging, Inc.................. 1995 132,000 50,108 15,000 2,596
James B. Stallings, Jr.(5).................... 1997 160,417 17,500 20,000 11,528
Executive Vice President -- Southern Region
</TABLE>
- ---------------
(1) Total base salary earned during the fiscal years presented. The Company has
established base salaries for its fiscal year ending March 27, 1998 as
follows: Mr. Kelly, $535,000; Mr. Sasen, $330,000; Mr. Smith, $255,000; Mr.
Dell, $200,000; and Mr. Stallings, $190,000.
(2) Annual incentive award earned during the fiscal years presented. Any amounts
deferred at the election of the executive are included in the reported
amounts.
(3) Grants of stock options made during the fiscal years presented. These awards
were made under the Company's 1994 Long Term Incentive Plan and 1994 Long
Term Stock Plan.
(4) All other compensation which is not included in the aforementioned
categories. Amounts shown in this column include the following payments for
fiscal year 1997: (i) for Mr. Kelly, $506 for PSS contributions to the
Employee Stock Ownership Plan (the "ESOP"), $27,765 for total premiums under
a ten year term life insurance policy and $29,730 for total premiums under a
key-man life insurance policy; (ii) for Mr. Sasen, $493 for PSS
contributions to the ESOP and $46,200 for total premiums under a split
dollar life insurance policy; (iii) for Mr. Smith, $500 for PSS
contributions to the ESOP and $7,285 for total premiums under a split dollar
life insurance policy; (iv) for Mr. Dell, $319 for PSS contributions to the
ESOP and $3,795 for total premiums under a split dollar life insurance
policy; and (v) for Mr. Stallings, $11,528 for total premiums under a split
dollar life insurance policy.
(5) Mr. Stallings has been employed by the Company since April 1996.
11
<PAGE> 14
OPTION GRANTS IN FISCAL YEAR 1997
The following table contains information concerning the grant of stock
options made during fiscal year 1997 pursuant to the Company's 1994 Long Term
Incentive Plan and 1994 Long Term Stock Plan:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED
-------------------------------------------------------- VALUE AT ASSUMED
PERCENTAGE OF ACTUARIAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES TERM(3)
OPTIONS IN FISCAL EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED(1) YEAR 1997 ($/SH)(2) DATE 5% 10%
- ---- ---------- ------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Patrick C. Kelly.............. -- --% -- -- -- --
John F. Sasen, Sr. ........... 13,157 4.8 $23.94 7/8/06 $198,088 $501,995
David A. Smith................ 9,045 3.3 23.94 7/8/06 136,179 345,105
Frederick E. Dell............. 4,217 1.6 23.94 7/8/06 63,490 160,896
James B. Stallings, Jr. ...... 20,000 7.4 23.94 7/8/06 301,115 763,084
</TABLE>
- ---------------
(1) Issued from the Long Term Incentive Plan and the Long Term Stock Plan, each
of which became effective in March 1994. The options issued in fiscal year
1997 to the named executive officers are nonqualified stock options for
federal income tax purposes and accordingly are not entitled to special tax
treatment under Section 422 of the Internal Revenue Code of 1986, as
amended. The options granted in fiscal year 1997 to the named executive
officers are exercisable immediately and expire ten years from the date of
grant.
(2) In fiscal year 1997, the named executive officers were granted options to
acquire an aggregate of 46,419 shares of Common Stock at an exercise price
of fair market value as of the date of grant.
(3) The dollar amount under the columns assumes that the market price of the
Common Stock from the date of the option grant appreciates at cumulative
annual rates of 5% and 10%, respectively, over the term of each option
granted in fiscal year 1997. The assumed rates of 5% and 10% were
established by the Securities and Exchange Commission and therefore are not
intended to forecast possible future appreciation, if any, of the price or
value of the Common Stock.
OPTION EXERCISES AND HOLDING AS OF MARCH 28, 1997
The following table sets forth information regarding stock options
exercised in fiscal year 1997 by each of the named executive officers and the
value of the unexercised options held by these individuals as of March 28, 1997,
based on the market value of the Common Stock on that date:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
AND OPTION VALUES AS OF MARCH 28, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED VALUE MARCH 28, 1997 AT MARCH 28, 1997(2)
NAME ON EXERCISE REALIZED EXERCISABLE(1) EXERCISABLE(1)
- ---- ----------- ---------- --------------------- --------------------
<S> <C> <C> <C> <C>
Patrick C. Kelly.................... 110,000 $2,105,625 630,462 $3,190,750
John F. Sasen, Sr. ................. 36,000 777,750 67,439 --(3)
David A. Smith...................... 15,000 296,250 40,296 --(3)
Frederick E. Dell................... 6,000 192,000 40,301 139,995
James B. Stallings, Jr. ............ -- -- 20,000 --(3)
</TABLE>
- ---------------
(1) All options held by the named executive officers are currently exercisable.
(2) Based upon the closing price of $13.00 of the Common Stock on the Nasdaq
National Market on March 27, 1997.
12
<PAGE> 15
(3) Based upon the closing price of $13.00 of the Common Stock on the Nasdaq
National Market on March 27, 1997, the exercise prices for the options held
by these officers exceed the closing price on such date.
LONG TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF NON-STOCK PRICE-BASED PLAN
PERFORMANCE PERIOD UNTIL -------------------------------------
NAME UNITS(1) PAYOUT THRESHOLD(2) TARGET(3) MAXIMUM(4)
- ---- ----------- ----------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Patrick C. Kelly............... 238 1/1/97 - 12/31/99 $119,000 $238,000 $714,000
John F. Sasen, Sr. ............ 150 1/1/97 - 12/31/99 75,000 150,000 450,000
David A. Smith................. 118 1/1/97 - 12/31/99 59,000 118,000 354,000
Frederick E. Dell.............. 85 1/1/97 - 12/31/99 42,500 85,000 255,000
James B. Stallings, Jr. ....... 80 1/1/97 - 12/31/99 40,000 80,000 240,000
</TABLE>
- ---------------
(1) Under the Company's 1994 Long Term Incentive Plan, officers of the Company
may be awarded a certain number of Performance Units each year equal to a
percentage of the officer's salary. Each Performance Unit granted has a
target value of $1,000 assuming the Company's total shareholder return
result is in the 60th percentile of peer group companies. The actual value
of each Performance Unit depends on the Company's performance over a period
of three fiscal years, beginning on the effective date of the award.
(2) The threshold amounts shown are based upon the Company achieving a total
shareholder return result in the 50th percentile of peer group companies, at
which point each Unit granted will have a value of $500.
(3) The target amounts shown are based upon the Company achieving a total
shareholder return result in the 60th percentile of peer group companies, at
which point each Unit granted will have a value of $1,000.
(4) The maximum amounts shown are based upon the Company achieving a total
shareholder return result in the 90th percentile or greater of peer group
companies, at which point each Unit granted will have a value of three times
the target value, or $3,000.
13
<PAGE> 16
PERFORMANCE GRAPH
The following performance graph compares the performance of the Common
Stock to the Nasdaq National Market Composite index and a line-of-business index
of selected peer companies assuming $100 was invested and all dividends, if any,
were reinvested. The graph covers the period from May 5, 1994, the date of the
Company's initial public offering, to the Company's fiscal year ended on March
28, 1997. The Company did not pay dividends during the period covered by this
graph. The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURNS
PHYSICIAN SALES & SERVICE, INC.
<TABLE>
<CAPTION>
PHYSICIAN
SALES & NASDAQ
MEASUREMENT PERIOD SERVICE, OLD PEER STOCK NEW PEER
(FISCAL YEAR COVERED) INC. GROUP MARKET-US GROUP
<S> <C> <C> <C> <C>
5/5/94 100 100 100 100
3/30/95 231 135 112 118
3/29/96 535 185 152 160
3/28/97 281 206 172 181
</TABLE>
- ---------------
(1) The New Peer Group is comprised of Baxter International, Inc., Bergen
Brunswig Corporation -- Class A, Cardinal Health, Inc., Gulf South Medical
Supply, Inc., McKesson Corporation, MicroBioMedics, Inc., Moore Medical
Corporation, Owens & Minor, Incorporated, Patterson Dental Company and
Sullivan Dental Products, Inc.
(2) The Old Peer Group is comprised of the same members as the New Peer Group
listed in footnote 1 above, except it excludes McKesson Corporation.
14
<PAGE> 17
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of its named
executive officers, which include the terms described below:
Term. Mr. Kelly's employment agreement was for an initial period of five
years expiring June 1, 1997, was renewed for a five-year period ending June 1,
2002, and is automatically renewable for additional five year terms. The other
executive officers' employment agreements are for terms of two years and are
automatically renewable for additional two year terms.
Covenants not to compete. Each executive officer has agreed not to compete
with the Company for a period of 18 months following the termination of his
employment within the territory in which the Company is then operating.
The covenants not to compete are not valid upon the occurrence of certain
events. In Mr. Kelly's employment agreement, such events include either Mr.
Kelly not being re-elected to or resigning his position as a director of the
Company or the acquisition of a voting majority of the issued and outstanding
capital stock of the Company by an outside entity. In the other executive
officers' employment agreements, such events include, in addition to those set
forth in the previous sentence, Mr. Kelly no longer being employed by or
resigning his employment with the Company or, following Mr. Kelly's death or
disability, Fred Elefant being removed as a director of the Company.
Termination. Each employment agreement includes several provisions
requiring the Company to make certain payments upon the occurrence of certain
events.
Following Mr. Kelly's termination by the Company for any reason except for
good cause or if Mr. Kelly resigns from the Company for good cause, the Company
is required to pay Mr. Kelly's full salary for 24 months following such
termination or resignation, and to provide Mr. Kelly with insurance coverage
during that period. In addition, the Company is required to repurchase up to 50%
of the Common Stock owned by Mr. Kelly at its market value within 30 days of
demand by Mr. Kelly at any time during the 24 month period. During that period,
Mr. Kelly is entitled to have his shares of Common Stock registered in the event
that securities held by any persons who are at such time members of Board of
Directors are registered. The other executive officers have similar rights as to
payment of salary, provision of insurance benefits, repurchase of up to 20% of
their Common Stock and registration of Common Stock for a period of six months.
Upon a change in control of the Company, if the Company then terminates Mr.
Kelly's employment or if Mr. Kelly resigns, the Company is required to pay Mr.
Kelly's salary and provide Mr. Kelly with insurance coverage for a period of
three years and to repurchase all of Mr. Kelly's Common Stock at its market
value upon demand. A change in control of the Company is defined as the
resignation, removal or failure to re-elect Mr. Kelly as a director of the
Company, or following Mr. Kelly's death or disability, the resignation, removal
or failure to re-elect Fred Elefant as a director of the Company. Mr. Kelly is
also entitled to reimbursement of up to $100,000 per year for office,
secretarial, and related expenses. In this case, Mr. Kelly also has registration
rights as described above during such three year period. The other executive
officers have similar rights for a period of one year in the event of their
termination or resignation following a change in control of the Company.
If the Company terminates Mr. Kelly for cause, or if Mr. Kelly resigns from
the Company without good reason, Mr. Kelly is entitled to receive his salary and
full insurance coverage for a period of 12 months or, if earlier, until his
employment with another company. The other executive officers have similar
rights for a period of three months or, if earlier, until their employment with
another company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fred Elefant, a member of the Board of Directors and Secretary of the
Company, provides legal services as general counsel to the Company. Fees for
such legal services were approximately $132,000 in fiscal year 1997.
15
<PAGE> 18
BENEFICIAL OWNERSHIP OF EQUITY SECURITIES
The following table reflects the number of shares of Common Stock
beneficially owned as of March 28, 1997, by (i) each person who is known by the
Company to beneficially own more than 5% of the outstanding Common Stock, (ii)
each of the executive officers named in the Summary Compensation Table, (iii)
each director, and (iv) all of the Company's executive officers and directors as
a group. Unless otherwise noted, all shares are owned directly with sole voting
and dispositive powers.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES TOTAL(1)
- ---- --------- ----------
<S> <C> <C>
Employee Stock Ownership and Savings Plan(2)................ 2,060,053 5.5%
Putnam Investments, Inc(2).................................. 3,429,284 8.8
Pilgrim Baxter & Associates, Ltd.(2)........................ 3,400,800 9.2
Patrick C. Kelly(3)(4)...................................... 1,335,466 3.5
John F. Sasen, Sr.(3)....................................... 187,177 *
Frederick E. Dell(3)........................................ 213,590 *
David A. Smith(3)........................................... 176,524 *
James B. Stallings, Jr.(3).................................. 23,000 *
Delmer W. Dallas............................................ 131,144 *
T. O'Neal Douglas........................................... 18,000 *
Fred Elefant(3)(5).......................................... 702,616 1.9
Delores P. Kesler........................................... 1,500 *
James L.L. Tullis(6)........................................ 217,860 *
William C. Mason............................................ -- --
All Executive Officers and Directors as a group (19
persons)(3)............................................... 3,300,718 8.7
</TABLE>
- ---------------
* Less than 1%
(1) Based upon 37,061,615 shares of Common Stock outstanding as of March 28,
1997.
(2) The addresses for holders of five percent or more of the Common Stock
outstanding are as follows: Employee Stock Ownership and Savings Plan
("ESOP"), 4345 Southpoint Boulevard, Jacksonville, Florida 32216; Putnam
Investments, Inc., One PO Box Square, Boston, MA 02109; and Pilgrim Baxter &
Associates, Ltd., 1255 Drummers Lane, Suite 300, Wayne Pennsylvania
19087-1590. The trustees of the ESOP are Patrick C. Kelly and David A.
Smith, both of whom are officers and directors of the Company, who have
voting control over the shares of common stock held in the ESOP in certain
situations. All information regarding Putnam Investments, Inc. was obtained
solely from a Schedule 13G filed by Putnam Investments, Inc. on January 31,
1997 and all information regarding Pilgrim Baxter & Associates, Ltd. was
obtained solely from a Schedule 13G/A filed by Pilgrim Baxter & Associates,
Ltd. on March 12, 1997.
(3) Included in such beneficial ownership are shares of Common Stock issuable
upon the exercise of certain options exercisable immediately or within 60
days of March 28, 1997 as follows: Mr. Kelly, 630,462 shares; Mr. Sasen,
67,439 shares; Mr. Dell, 40,301 shares; Mr. Smith, 40,296 shares; Mr.
Stallings, 20,000 shares; Mr. Elefant, 17,539 shares; Mr. Tullis, 14,296
shares; and executive officers and directors as a group, 886,515 shares.
Also included in such beneficial ownership are shares held for the account
of certain individuals by the ESOP as follows: Mr. Kelly, 154,974 shares;
Mr. Sasen, 18,872 shares; Mr. Smith, 25,959 shares; Mr. Dell, 96,420 shares;
and all executive officers and directors as a group, 386,830 shares.
(4) Excludes 600,000 shares held in trust for Mr. Kelly's daughters.
(5) Includes 600,000 shares held in trust for Mr. Kelly's daughters for which
Mr. Elefant serves as co-trustee.
(6) Includes 127,881 shares owned by Tullis Dickerson Capital Focus, L.P. and
11,200 shares owned by Tullis Dickerson Partners. Mr. Tullis is the general
partner of Tullis-Dickerson Partners, the sole general partner of
Tullis-Dickerson Capital Focus, L.P.
16
<PAGE> 19
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP, independent
certified public accountants, as the Company's auditors for the fiscal year
ending March 27, 1998. Representatives of Arthur Andersen LLP will be present at
the Annual Meeting to respond to appropriate questions and to make such
statements as they may desire.
SHAREHOLDER PROPOSALS
Shareholders who wish a proposal to be included in the Company's proxy
statement and form of proxy relating to the 1998 Annual Meeting should deliver a
written copy of their proposal to the Company no later than February 26, 1998.
Proposals should be directed to the Chief Financial Officer, Physician Sales &
Service, Inc., 4345 Southpoint Boulevard, Jacksonville, Florida 32216.
OTHER MATTERS
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to the use of the mail, proxies may be solicited by
directors, officers or other employees of the Company, personally, or by
telephone. The Company does not expect to pay any compensation for the
solicitation of proxies, but may reimburse brokers, custodians or other persons
holding stock in their names or in the names of the nominees for their expenses
in sending proxy materials to principals and obtaining their instructions.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
certain officers of the Company and its directors, and persons who beneficially
own more than ten percent of any registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the Company.
Based solely on a review of the reports provided to the Company by the
above referenced persons, the Company believes that as of the date of this Proxy
Statement all filing requirements applicable to its reporting officers,
directors and greater than ten percent beneficial owners were properly and
timely complied with, except that Patrick Kelly failed to file a Form 4 in
February 1997 but filed a timely Form 5 in May 1997.
MISCELLANEOUS
Management does not know of any matters to be brought before the Annual
Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Annual Meeting, the persons designated as
proxies will vote in their sole discretion on such matters.
17
<PAGE> 20
APPENDIX
PHYSICIAN SALES & SERVICE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Fred Elefant and David A. Smith as Proxies,
each with the power to appoint his substitute, and hereby authorizes either one
or both of them to represent and to vote, as designated below, all the shares of
Common Stock of Physician Sales & Service, Inc. held of record by the
undersigned on June 16, 1997, at the Annual Meeting of Shareholders to be held
on July 22, 1997.
1. ELECTION OF DIRECTORS:
<TABLE>
<CAPTION>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed below
</TABLE>
(INSTRUCTION TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW)
- --------------------------------------------------------------------------------
T. O'Neal Douglas, Patrick C. Kelly, James L.L. Tullis
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be dated and signed on reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL NOMINEES FOR DIRECTOR LISTED ABOVE.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign
in full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
DATED: , 1997
------------------
------------------------------
Signature
------------------------------
Signature if held jointly
