UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 2000 Commission File Number 0-23832
PSS WORLD MEDICAL, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2280364
(State of (I.R.S. Employer
Incorporation) Identification No.)
4345 Southpoint Boulevard
Jacksonville, Florida 32216
(Address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code: (904) 332-3000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d)of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. |_|
The aggregate market value of common stock, par value $0.01 per share (the
"Common Stock") held by nonaffiliates, based upon the closing sales price, was
approximately $432,024,560 as of July 28, 2000. In the determination of this
amount, affiliates include all of the Company's officers, directors and persons
known to the Company to be beneficial owners of more than five percent of the
Company's Common Stock. This amount should not be deemed conclusive for any
other purpose. As of July 28, 2000, a total of 71,069,181 shares of the
Company's Common Stock were outstanding.
<PAGE>
The Form 10-K of PSS World Medical, Inc. filed with the Commission on
June 23, 2000 is hereby amended as follows to include the information required
by Part III of Form 10-K, which information shall be included in the Company's
Proxy Statement for its 2000 Annual Meeting in the event that the Company's
proposed merger with Fisher Scientific International, Inc. is not consummated by
the third quarter of the Company's fiscal year 2001. In such event, the Company
will call an Annual Meeting to be held in the third quarter of its fiscal year
2001.
Item 10. Directors and Executive Officers of the Registrant.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Patrick C. Kelly(1)(4)............... 53 Chairman of the Board, Chief Executive Office and Director
David A. Smith....................... 40 Executive Vice President, Chief Financial Officer and Director
John F. Sasen, Sr.................... 58 Executive Vice President and Chief Marketing Officer
Frederick E. Dell.................... 39 Chief Executive Officer of Physician Sales & Service
Kirk A. Zambetti..................... 32 Chief Executive Officer of Diagnostic Imaging, Inc.
Gary A. Corless...................... 35 Chief Executive Officer of Gulf South Medical Supply, Inc.
Hugh M. Brown (1)(2)................. 64 Director
Melvin L. Hecktman(1)(3)(4).......... 60 Director
Clark A. Johnson (2) (3)............. 69 Director
Delores P. Kesler(2)................. 59 Director
Donna C.E. Williamson(3)(4).......... 49 Director
Charles R. Scott (1) (2) (3) (4)..... 72 Director
.........
(1)......Member of the Executive Committee.
(2)......Member of the Audit Committee.
(3)......Member of the Compensation Committee.
(4)......Member of the Nominating Committee.
</TABLE>
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.
David A. Smith has served on the Board of Directors of the Company
since July 1993, as Executive Vice President since April 1996 and as Chief
Financial Officer since April 1992. Mr. Smith also 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 worked in public accounting from
1983 to 1987
John F. Sasen, Sr. has served as Executive Vice President and Chief
Marketing Officer of the Company since April 1998. From July 1993 to April 1998,
Mr. Sasen served as a Director of the Company, and from August 1995 to April
1998, as President and Chief Operating Officer of the Company. Mr. Sasen served
as the Chief Operating Officer of the Company from December 1993 to March
1997 and served as Executive Vice President from August 1993 to August 1995.
Prior to joining the Company in 1993, 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.
2
<PAGE>
Frederick E. Dell has served as Chief Executive Officer of Physician
Sales & Service, a division of the Company, since April 2000. From April 1998 to
April 2000, Mr. Dell served as President and Chief Executive Officer of the
Company. Mr. Dell served as Executive Vice President of the Company and as
President of Diagnostic Imaging, Inc. ("Diagnostic Imaging"), a wholly owned
subsidiary of the Company, from November 1996 to April 1998. 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.
Kirk A. Zambetti has served as Chief Executive Officer of Diagnostic
Imaging since April 1998. Prior to that time, Mr. Zambetti served as Vice
President for the Southern Region of Diagnostic Imaging in 1997 and 1998 and as
the General Leader in Atlanta for Diagnostic Imaging in 1997. From 1993 to 1997,
Mr. Zambetti served the Company as a branch manager and a sales manager.
Gary A. Corless has served as Chief Executive Officer of Gulf South
since July 1999. From April 1998 to July 1999, Mr. Corless served as Senior
Vice President--Eastern Region of Diagnostic Imaging. Prior to that position,
he served as the Company's Vice President--Southern Region from June 1997 to
March 1998. From 1990 to 1996, Mr. Corless held various leadership positions
with the Company, and from 1996 to 1998, he served the Company as a regional
vice president of sales and operations.
Hugh M. Brown has served on the Board of Directors of the Company since
March 1998. He serves as the Chairman of the Audit Committee of the Board of
Directors. Mr. Brown has served as Chairman of the Board and Chief Executive
Officer of BAMSI, Inc., an engineering and technical services company, since he
founded the company in 1978. From 1990 to 1997, Mr. Brown served as a director
for the Federal Reserve Bank of Atlanta and has served as Chairman since January
1996. He has been a director of SunTrust Bank, N.A. since January 1998.
Melvin L. Hecktman has served on the Board of Directors of the Company
since March 1998. From May 1993 through March 1998, Mr. Hecktman served on the
Board of Directors of Gulf South Medical Supply, Inc., a distributor of medical
supplies to the long-term care industry ("Gulf South"), which was acquired by
the Company in March 1998. Since 1993, Mr. Hecktman has served as President of
Hecktman Management, an investment management and consulting firm, and as a
partner of Commonwealth Capital Partners, a merchant banking group. Mr.
Hecktman was associated with United Stationers, Inc., a wholesaler of general
business products, as an employee or director for 33 years and served as its
Vice-Chairman from 1989 through August 1993.
Clark A. Johnson has served on the Board of Directors of the Company
since September 1999. From August 1988 to June 1998, Mr. Johnson served as
Chairman of the Board and Chief Executive Officer of Pier 1 Imports, Inc., a
specialty retailer of imported decorative home furnishings, gifts and related
items. Prior to these positions, Mr. Johnson served as President of the Company
from May 1985 to August 1988. Mr. Johnson currently serves on the boards of
Niagra-Mohawk Power, Albertson's Inc., Interton, Inc., Metromedia
International Group and Refco, Inc.
Delores P. Kesler has served on the Board of Directors of the Company
since July 1993. Ms. Kesler has been Chairman and Chief Executive Officer
of Adium, Inc., a capital investment company since 1997. Ms. Kesler is also a
founder of AccuStaff, Incorporated, a strategic staffing, consulting and
outsourcing venture, and served as its Chairman and Chief Executive Officer
from 1978 until 1997. Ms. Kesler currently serves on the boards of Thermoview
Industries, Inc., Clay County Bank in Orange Park, Florida, Automation, Inc.,
Alliance for World Class Education, The Hospice Foundation for Caring of
Community Hospice Northeast Florida, Inc., Florida Council of 100, St.
Luke's/Mayo Foundation and the Horatio Alger Association of Distinguished
Americans, Inc. Mr. Kesler has also been a member of Founders Group, LLC since
1997.
3
<PAGE>
Donna C.E. Williamson has served on the Board of Directors of the
Company since March 1998. Since May 1999, Ms. Williamson has been Managing
Director for ABN AMRO Private Equity. From October 1996 to May 1999, Ms.
Williamson had been an independent consultant. From July 1993 to September 1996,
Ms. Williamson served as Senior Vice President for Caremark International, Inc.,
a provider of healthcare services. From 1983 to 1992, she served as a
Corporate Vice President at Baxter International, a medical products and
services company. She has served on the boards of: (i) Haemonetics Corporation,
a manufacturer of automated systems for collection, processing and surgical
salvage of blood, since 1993; (ii) A.G. Edwards, Inc., a financial services
company, from 1988 to 1997; and (iii) Gulf South from July 1997 to March 1998.
Charles R. Scott has served on the Board of Directors of the Company
since March 1998. Currently, Mr. Scott is the Chairman and Chief Executive
Officer of Leadership Centers, USA d/b/a TEC Florida, which provides continuing
education for executives of Florida based companies. From February 1991 to
December 1996, Mr. Scott was President and Chief Executive Officer of The Actava
Group, Inc. (formerly Fuqua Industries, Inc.), an operating holding company.
Mr. Scott also served as Chairman and Chief Executive Officer of Intermark,
Inc., an operating holding company, from 1970 to 1991.
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.
Item 11. Executive 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 31, 2000, for its Chief
Executive Officer and the four most highly compensated officers other than the
Chief Executive Officer.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
-----------------------------
Securities Long-Term
Annual Compensation Underlying Incentive All Other
Name and Principal Position Year Salary($)(1) Bonus($)(2) Options(#)(3) Plan($)(4) Compensation($)(5)
--------------------------- ---- -------------- ------------- ------------- ----------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Patrick C. Kelly................ 2000 $635,000 $120,000 97,830 -- $21,773
Chairman of the Board and 1999 511,250 278,313 112,081 -- 11,500
Chief Executive Officer 1998 535,000 128,400 506,575(6) $487,500 12,006
David A. Smith.................. 2000 350,000 70,000 47,864 -- 607
Executive Vice President and 1999 304,166 139,157 45,455 -- 385
Chief Financial Officer 1998 255,000 45,880 42,015(7) 101,250 870
Frederick E. Dell............... 2000 353,125 70,625 44,937 -- 585
Chief Operating Officer 1999 277,082 96,250 39,897 -- 385
Chief Executive Officer of 1998 200,000 48,000 30,076(8) 70,380 689
Physician Sales & Service
Division
John F. Sasen, Sr............... 2000 275,000 55,000 38,433 -- 1,720
Executive Vice President and 1999 254,167 115,964 42,666 -- 1,260
Chief Marketing Officer 1998 330,000 52,800 55,824(9) 173,250 1,753
Chief Marketing Officer
Kirk A. Zambetti................ 2000 230,000 46,000 21,617 -- 134
Chief Executive Officer of 1999 160,000 58,320 11,600 -- --
Diagnostic Imaging, Inc. 1998 117,500 31,955 1,500(10) -- --
(as of April, 1998)
</TABLE>
4
<PAGE>
(1) Total base salary earned during the fiscal years presented.
(2) Annual incentive award paid for results achieved 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 1999 Long Term Incentive Plan
Amended and Restated 1994 Long Term Incentive Plan, and Amended and
Restated 1994 Long Term Stock Plan.
(4) Reflects payouts for the second performance period which ended December
31, 1998 under the Company's 1994 Amended and Restated Long-Term
Incentive Plan.
(5) All other compensation which is not included in the aforementioned
categories. Amounts shown in this column include the following payments
for fiscal year 2000:(i)for Mr. Kelly, $20,000 for total premiums under
a key-man life insurance policy and $1,773 imputed income under a
split-dollar life insurance policy; (ii) for Mr. Smith, $607 for
imputed income under a split dollar life insurance policy; (iii) for
Mr. Dell, $585 for imputed income under a split dollar life insurance
policy; (iv) for Mr. Sasen, $1,702 for imputed income under a
split dollar life insurance policy; and (v) for Mr. Zambetti,
$134 for imputed income under a split dollar life insurance policy.
(6) Includes 33,333 options granted in fiscal year 1996 and 70,000 options
granted in fiscal year 1997 that were repriced in fiscal year 1998.
(7) Includes 9,045 options granted in fiscal year 1997 that were repriced
in fiscal year 1998.
(8) Includes 4,217 options granted in fiscal year 1997 that were repriced
in fiscal year 1998.
(9) Includes 13,157 options granted in fiscal year 1997 that were repriced
in fiscal year 1998.
(10) Includes 1,000 options granted in fiscal year 1997 that were repriced
in fiscal year 1998.
Option Grants in Fiscal Year Ended March 31, 2000
The following table sets forth summary information concerning
individual grants of stock options made during the fiscal year ended March 31,
2000 to each of the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------------
Percentage
of Total
Number of Options Potential Realized Value at
Securities Granted to Assumed Actuarial Rates of
Underlying Employees Exercise Stock Price Appreciation For
Options in Fiscal Price Expiration Option Term (2)
Name Granted(#) Year 2000 ($/Sh)(1) Date 5%($) 10%($)
----- -------------- ------------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Patrick C. Kelly....... 72,966 11.6% $ 8.688 9/15/09 $398,764 $1,010,319
24,864 4.0 10.620 9/15/09 166,063 420,837
David A. Smith......... 34,051 5.4 8.688 9/15/09 186,049 471,485
13,813 2.2 10.620 9/15/09 92,255 233,793
Frederick E. Dell...... 35,267 5.6 8.688 9/15/09 192,693 488,322
9,670 1.5 10.620 9/15/09 64,585 163,670
John F. Sasen, Sr...... 26,754 4.3 8.688 9/15/09 146,179 370,448
11,679 1.9 10.620 9/15/09 78,002 197,673
Kirk A. Zambetti....... 16,792 2.7 8.688 9/15/09 91,694 232,371
4,835 0.8 10.620 9/15/09 32,292 81,835
</TABLE>
5
<PAGE>
(1) The options granted in fiscal year 2000 at an exercise price of $8.688
per share to Messrs. Kelly, Smith, Dell, Sasen and Zambetti are
exercisable immediately and expire ten years from the date of grant.
(2) The dollar amounts reported in the "Potential Realized Value" at
"Assumed Actuarial Rates of Stock Price Appreciation" columns represent
hypothetical amounts that may be realized on exercise of options
immediately prior to the expiration of their term assuming the
specified compounded rates of appreciation of the Common Stockholder
the term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and are not
intended to forecast possible future appreciation, if any, of the price
or value of the Common Stock.
Option Holdings as of March 31, 2000
The following table sets forth information regarding the value of the
unexercised options held by each of executive officers named in the Summary
Compensation Table as of March 31, 2000, based on the market value of the Common
Stock on that date:
Option Values as of March 31, 2000
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Options at In-the-Money Options at
March 31, 2000 March 31, 2000(1)
---------------- ------------------
Shares
Acquired Value
Name on Exercise (#) Realized ($) Exercisable(#) Unexercisable(#) Exercisable(#) Unexercisable(#)
---- --------------- ------------ -------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Patrick C. Kelly...... -- -- 866,717 31,722 111,825 --
David A. Smith........ -- -- 166,585 17,877 -- --
Frederick E. Dell..... -- -- 135,994 15,258 -- --
John F. Sasen, Jr..... -- -- 191,205 18,399 -- --
Kirk A. Zambetti...... -- -- 39,217 9,478 -- --
-----------------------------
</TABLE>
(1) Based upon the closing price of $6.781 of the Common Stock on the
Nasdaq National Market on March 31, 2000.
Long-Term Incentive Plans--Awards in Last Fiscal Year
<TABLE>
<CAPTION>
Number of Estimated Future Payouts Under Non-Stock
Performance Period Until Price-Based Plan
Name Units(1)(#) Payout Threshold(2)($) Target(3)($) Maximum(4)($)
---- ------------- ------------ --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Patrick C. Kelly............. 381 1/1/00-12/31/02 $190,500 $381,000 $1,143,000
David A. Smith............... 140 1/1/00-12/31/02 70,000 140,000 420,000
Frederick E. Dell............ 130 1/1/00-12/31/02 65,000 130,000 390,000
John F. Sasen, Sr............ 110 1/1/00-12/31/02 55,000 110,000 330,000
Kirk A. Zambetti............. 69 1/1/00-12/31/02 34,500 69,000 207,000
</TABLE>
6
<PAGE>
(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.
Employment Agreements
The Company has entered into employment agreements with each of its
named executive officers, which include the terms described below. Mr. Kelly's
current employment agreement will be replaced with a new employment agreement
upon the effective date of the proposed merger (the "Merger") with Fisher
Scientific International, Inc. ("Fisher").
Term. Mr. Kelly's current employment agreement has an initial term of
five years expiring March 3, 2003, and automatically extends by one-year on each
March 3, beginning in 1999, unless either party elects not to extend. Upon the
occurrence of a change in control of the Company (as defined in the agreement),
the term will automatically extend for a period of three years from that date.
Mr. Kelly's employment agreement currently extends to March 3, 2005. The other
executive officers' employment agreements are for initial terms of three years
and automatically extend by one-year on each anniversary of the effective date,
unless either party elects not to extend. Upon the occurrence of a change in
control of the Company, the term will automatically extend for a period of three
years from that date (or two years, in the case of Mr. Zambetti). The
agreements of Messrs. Smith, Dell, Sasen and Zambetti currently extend to
March 4, 2003, March 1, 2003, March 1, 2003, and March 1, 2003, respectively.
Salary and Benefits. Under the terms of his current employment
agreement, each of the executive officers is entitled to a minimum annual salary
and is entitled to participate in all incentive, savings, retirement and welfare
benefit plans generally made available to employees or other senior executives
of the Company. The current annual salaries of the Executive officers are as
follows: Mr. Kelly - $660,000; Mr. Smith - $364,000; Mr. Dell - $377,000; Mr.
Sasen - $286,000; and Mr. Zambetti - $240,000.
Termination. Each of the employment agreements may be terminated by the
Company at any time with or without "cause" (as defined therein), or by the
executive with or without "good reason" (as defined therein). The agreement will
also be terminated upon the death, disability or retirement of the executive.
Depending on the reason for the termination and when it occurs, the executive
will be entitled to certain severance benefits, as described below.
7
<PAGE>
If Mr. Kelly's employment is terminated by the Company without cause or
he resigns for good reason, the Company will be required to pay him his accrued
salary and benefits through the date of termination, plus a severance amount
equal to two times his base salary. The Company would also provide him with
health insurance coverage for two years following such termination and
reimbursement of up to $150,000 over a two-year period for office, secretarial
and related expenses. If any of the other executive officers is terminated under
similar circumstances, he will be entitled to his accrued salary and benefits
through the date of termination, plus a severance amount equal to one times his
base salary (or one-half times salary in the case of Mr. Zambetti). The
Company would also provide him with health insurance coverage for one year
following such termination (or six months in the case of Mr. Zambetti)
and reimbursement of up to $30,000 for outplacement services (or $15,000 in the
case of Mr. Zambetti).
If Mr. Kelly is terminated without cause or resigns for good reason
after or in connection with a change in control of the Company (including a
termination for any reason or no reason during the one-year period following
such change in control), the Company will be required to pay him his accrued
salary and benefits through the date of termination, a pro rata payment of his
annual bonus for the year of termination, and a severance amount equal to four
times his base salary. The Company would also provide Mr. Kelly with health
insurance coverage for a period of four years following such termination and
reimbursement of up to $300,000 over a three-year period for office, secretarial
and related expenses. In addition, the Company would forgive repayment of all
principal and interest on that certain loan to Mr. Kelly in the original
principal amount of $3,000,000.
If any of the other executive officers is terminated with cause or
resigns for good reason after or in connection with a change of control of the
Company (including a termination for any reason or no reason during the 30-day
period beginning on the first anniversary of such change in control), the
Company will be required to pay him his accrued salary and benefits through the
date of termination, a prorata payment of his annual bonus for the year of
termination, and a severance amount equal to two times his base salary. The
Company would also provide him with health insurance coverage for a period of
two years following such termination and reimbursement for outplacement services
as described above. For purposes of the employment agreements, a change in
control of the Company is generally defined as (i) the acquisition by a third
party of 35% or more of the voting power of the Company; (ii) a change in a
majority of the board of directors to persons who were not incumbent directors
at the effective date of the agreement or persons whose nomination or election
was not approved by a majority of such incumbent directors; and (iii) the
consummation of certain mergers, asset sales or other major business
combinations.
If the employment of any of the executive officers (including Mr.
Kelly) is terminated by reason of his disability or retirement, he will be
entitled under his employment agreement to his accrued salary and benefits and
any disability or retirement benefits that may apply, but no additional
severance amount. If such employment is terminated by reason of his death, the
executive officer's estate will be entitled to accrued salary and benefits and
any death benefits that may apply, plus a lump sum payment equal to 90 days'
salary (or 60 days' salary in the case of Messrs. Smith, Dell and Sasen, or 45
days' salary in the case of Mr. Zambetti).
If at any time the Company terminates Mr. Kelly for cause, or if he
resigns from the Company without good reason, the Company will be required to
pay him his accrued salary through the date of termination, plus a severance
amount equal to one-half times his base salary. The Company would also provide
him with health insurance coverage for a period of six months following such
termination. If any of the other executive officers is terminated under similar
circumstances, he will be entitled to his accrued salary through the date of
termination, plus a severance amount equal to 30 days' base salary and health
insurance coverage for 30 days following such termination.
8
<PAGE>
Each of the employment agreements provides that the executive officer
will be entitled to a tax gross-up payment from the Company to cover any excise
tax liability he may incur as a result of payments or benefits contingent on a
change in control, but such gross-up payment will be made only if the after-tax
benefit to the executive of such tax gross-up is at least $50,000. If not, the
benefits would be reduced to an amount that would not trigger the excise tax.
Replacement Employment Agreement. As mentioned above, Mr. Kelly has
entered into an employment agreement that will be effective only upon
consummation of the Merger and will replace his existing employment agreement
with the Company. The new agreement calls for the nomination of Mr. Kelly to
Fisher's board of directors for a term of three years. Under the terms of his
new employment agreement, Mr. Kelly will be guaranteed a minimum annual salary
of $660,000 and he will be entitled to participate in all incentive, savings,
retirement and welfare benefit plans generally made available to employees or
other senior executives of the Company. Under the agreement, the Company will
continue certain benefits currently in place for Mr. Kelly, including the
payment of premiums on certain life insurance policies, payment of membership
dues at certain private clubs, and annual payment, on a tax grossed-up basis, of
an amount necessary to cover the Florida intangibles tax with respect to Mr.
Kelly's ownership of employer securities. In addition, the Company will continue
to include $200,000 in its annual budget each year, which Mr. Kelly may direct
to be donated to such charitable organizations as he shall designate and are
reasonably acceptable to Fisher. If Mr. Kelly is terminated without for "cause"
as defined in the new employment agreement, or if he resigns under certain
circumstances deemed to be a constructive termination without cause, he would
receive his accrued salary and benefits through the date of termination, his pro
rata target bonus for the year of termination, a lump-sum severance payment
equal to six months' salary, and up to three years' continued welfare insurance
coverage, and he would be permitted to buy from the Company at book value the
company car and computer equipment he is using at the time of termination. In
addition, the Company would transfer to Mr. Kelly's name any corporate club
memberships in which he is then participating and make a final allocation of
$300,000 to the Company's charitable donation pool which Mr. Kelly would have
the ability to direct. If Mr. Kelly chooses to resign (absent certain specified
events of good reason), or if he is terminated for cause, the Company would have
no further obligations to Mr. Kelly other than the payment of accrued
obligations and any vested rights. As a condition to his entry into his
employment agreement, Mr. Kelly will wave any rights he might have (including,
but not limited to, rights to severance payments) under his existing employment
agreement with the Company, as described above. Consistent with his existing
employment agreement, the new employment agreement provides that Mr. Kelly will
be entitled to a tax gross-up payment from the Company to cover any excise tax
liability he may incur as a result of payments or benefits contingent on a
change in control, but such gross-up payment will be made only if the after-tax
benefit to Mr. Kelly of such tax gross-up is at least $50,000. If not, the
benefits would be reduced to an amount that would not trigger the excise tax.
Restrictive Covenants. Each executive officer has agreed in his
employment agreement not to disclose confidential information or compete with
the Company, and not to solicit the Company's customers or recruit its
employees, for a period of 18 months following the termination of his employment
or the earlier occurrence of a change of control of the Company. Although these
employment agreement covenants would expire upon consummation of the Merger,
each of the executive officers has entered into a Restrictive Covenants
Agreement, as described below, that would provide similar restrictive covenants
for a period of time following the Merger.
Restrictive Covenants Agreements
Mr. Kelly has entered into a restrictive covenants agreement with the
Company that will go in to effect at the time of the Merger, pursuant to which
he has agreed not to divulge confidential information or trade secrets, solicit
customers or employees of the Company or compete with the Company in the United
States for a period of seven years following termination of his employment. In
consideration for this agreement:
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o Mr. Kelly will receive $2,310,000, payable in five installments of
$462,000 each, beginning on the merger date.
o The promissory note between Mr. Kelly and the Company in the original
face amount of $3,000,000 will be amended to provide that principal and
interest is due and payable only upon his death. The Company will
purchase and pay the premiums on a life insurance policy in a face
amount that can be purchased with $1,600,000 in premiums. Mr. Kelly can
designate the beneficiary of such life insurance policy; however, the
Company must be designated a beneficiary to the extent of the amount of
the principal outstanding and the accrued and unpaid interest unpaid on
the note at the time of Mr. Kelly's death.
o The Company will purchase and pay the premiums on a split-dollar life
insurance policy for Mr. Kelly in a face amount that can be purchased
with premiums of $2,600,000. Premiums will be returned to the Company
upon the earlier of the surrender of the policy or Mr. Kelly's death,
and any remaining benefits from the policy will be paid to Mr. Kelly's
estate or his designated beneficiaries. Mr. Kelly will be permitted to
borrow from the cash surrender value of the policy, but only to the
extent the cash surrender value is in excess of the premiums to be
repaid to the Company.
Each of the other executive officers of the Company has entered into a
restrictive covenants agreement that will go in to effect at the time of the
Merger, pursuant to which he has agreed not to divulge confidential information
or trade secrets, solicit customers or employees of the Company or compete with
the Company in the United States for a period of two years following termination
of his employment (in the case of Mr. Zambetti, eighteen months). In
consideration for this agreement, one half of the retention bonus payable
to such executive officer, as discussed below, will accelerate and become
payable upon consummation of the Merger ($225,000, $200,000, $175,000, and
$175,000 in the case of Messrs. Smith, Dell, Sasen, and Zambetti, respectively),
and the Company will purchase and pay the premiums on a split-dollar life
insurance policy for such executive in a face amount that can be purchased with
premiums of $500,000 (or $240,000 in the case of Mr. Zambetti). Premiums will
be returned to the Company upon the earlier of the surrender of the policy or
the executive's death, and any remaining benefits from the policy will be paid
to the executive's estate or his designated beneficiaries. The executive will
be permitted to borrow from the cash surrender value of the policy, but only to
the extent the cash surrender value is in excess of the premiums to be repaid to
the Company.
Retention Bonuses
Each of the executive officers other than Mr. Kelly is a participant in
the Company's Officer Retention Bonus Plan, which provides a retention bonus,
payable 50% on February 1, 2001, 30% on February 1, 2002 and 20% on February 1,
2003, provided the executive is employed by the Company on such dates. As
described above, as partial consideration for entering into restrictive
covenants agreements with the Company, the payments that would otherwise be
payable on February 1, 2002 and 2003 will be payable to the executive officers
upon consummation of the Merger. The 50% that would be payable on February 1,
2001 will be accelerated if, after the Merger, the executive is terminated
without "cause" or resigns for "good reason" as such terms are defined in the
retention bonus plan. The full retention bonuses payable under the bonus plan to
Messrs. Smith, Dell, Sasen, and Zambetti are $450,000, $400,000,
$350,000, and $350,000, respectively.
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Item 12 Security Ownership of Certain Beneficial Owners and Management.
The following table reflects the number of shares of Common Stock
beneficially owned as of March 31, 2000, 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, the address of the following beneficial owners
is 4345 Southpoint Boulevard, Jacksonville, Florida 32216. Also unless otherwise
noted, all shares are owned directly with sole voting and dispositive powers.
<TABLE>
<CAPTION>
Name Number of Shares Percent of Total(1)
------ ------------------ -------------------
<S> <C> <C>
Patrick C. Kelly(2)........................................... 1,583,550 2.2%
David A. Smith(2)............................................. 343,841 *
John F. Sasen(2).............................................. 342,231 *
Frederick E. Dell(2).......................................... 330,851 *
Kirk A. Zambetti(2)........................................... 52,823 *
Hugh M. Brown(2).............................................. 28,100 *
Melvin L. Hecktman(2)......................................... 65,860 *
Clark Johnson(2).............................................. 13,076 *
Delores P. Kesler(2).......................................... 76,399 *
Donna C. E. Williamson(2)..................................... 35,998 *
Charles R. Scott(2)........................................... 39,739 *
All Executive Officers and Directors as a group (12 persons)(2) 2,969,471 4.2%
------------------------------------
</TABLE>
* Less than 1%
(1) Based upon 71,096,181 shares of Common Stock outstanding as of July 28,
2000.
(2) 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 31, 2000 as follows: Mr. Kelly, 834,995
shares; Mr. Smith, 148,708 shares; Mr. Sasen, 172,806 shares;
Mr. Dell, 120,736 shares; Mr. Zambetti 29,739 shares; Mr. Brown, 28,100
shares; Mr. Hecktman, 39,610 shares; Mr. Johnson, 3,076 shares; Ms.
Kesler, 48,399 shares; Ms. Williamson, 35,998 shares; Mr. Scott, 24,739
shares; and executive officers and directors as a group, 1,518,196
shares. Also included in such beneficial ownership are shares held for
the account of certain individuals by the ESOP and 401(k) as follows:
Mr. Kelly, 78,803 shares; Mr. Smith, 29,987 shares; Mr. Sasen, 20,160
shares; Mr. Dell, 97,988 shares; Mr. Zambetti 11,606 shares; and all
executive officers and directors as a group, 244,393 shares.
Item 13. Certain Relationships and Related Transactions.
During fiscal year 1998, the Company loaned Mr. Kelly, its Chairman of
the Board and Chief Executive Officer, $3,000,000 to consolidate debt incurred
in relation to certain real estate activities, as well as to provide the cash
needed to pay off personal debt. During fiscal year 1999, the principal amount
of the loan increased approximately $585,000. The loan is unsecured, bears
interest at the applicable federal rate for long-term obligations (5.74% at
April 2, 1999), and is due September 2007. The remaining principal amount
outstanding as of March 31, 2000 was approximately $2,985,000.
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OTHER MATTERS
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 Form
10-K/A, all filing requirements applicable to its reporting officers, directors
and greater than ten percent beneficial owners were properly and timely complied
with.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on July 31, 2000.
PSS WORLD MEDICAL, INC.
By: /s/ David A. Smith
--------------------------------
David A. Smith
Executive Vice President and Chief Financial Officer
