10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

        [X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

        For the quarterly period ended       October 3, 2003

        [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

        For the transition period from ___________ to ____________

Commission File Number 0-23832

PSS WORLD MEDICAL, INC.
(Exact name of Registrant as specified in its charter)

Florida	59-2280364
(State or other jurisdiction of incorporation or organization)	(IRS Employer  Identification Number)
4345 Southpoint Blvd.           Jacksonville, Florida  (Address of principal executive offices)	32216  (Zip code)
Registrant's telephone number	(904) 332-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X] Yes [ ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

[X] Yes [ ] No

The number of shares of common stock, par value $.01 per share, of the registrant outstanding as of November 10, 2003 was 67,046,373 shares.

PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

OCTOBER 3, 2003

TABLE OF CONTENTS

Item		Page
	Information Regarding Forward-Looking Statements	3
	Part I--Financial Information
1.	Financial Statements:
	Consolidated Balance Sheets--October 3, 2003 and March 28, 2003	4
	Consolidated Statements of Operations for the Three and Six Months Ended October 3,
	2003 and September 27, 2002	5
	Consolidated Statements of Cash Flows for the Three and Six Months Ended October 3,
	2003 and September 27, 2002	6
	Notes to Consolidated Financial Statements	7
	Independent Accountants' Review Report	21
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
3.	Quantitative and Qualitative Disclosures About Market Risk	40
4.	Controls and Procedures	40
	Part II--Other Information
1.	Legal Proceedings	41
2.	Changes in Securities and Use of Proceeds	41
3.	Defaults Upon Senior Securities	41
4.	Submission of Matters to a Vote of Security Holders	41
5.	Other Information	41
6.	Exhibits and Reports on Form 8-K	42
	Signature	43

Page 2

CAUTIONARY STATEMENTS

Forward-Looking Statements

This Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements regarding the Company’s, and its subsidiaries’ (including subsidiaries that are limited liability companies and limited partnerships), expected future financial position, results of operations, cash flows, funds from operations, financing plans, business strategy, budgets, projected costs, capital expenditures, competitive positions, growth opportunities, plans and objectives of management for future operations, and statements that include words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” “may,” “could,” and other similar expressions are forward-looking statements. Such forward-looking statements are inherently uncertain, and stockholders must recognize that actual results may differ from the Company’s expectations.

Actual future results and trends for the Company may differ materially depending on a variety of factors discussed in the Company’s Annual Report on Form 10-K for the year ended March 28, 2003, this Form 10-Q, and elsewhere in the Company’s filings with the Securities and Exchange Commission (the “Commission”). Factors that may affect the plans, financial condition, or results of operations of the Company include, without limitation, those listed in the Company’s Annual Report on Form 10-K for the year ended March 28, 2003 under the heading “Factors That May Affect Future Results,” (refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations) and (i) the ability of the Company to successfully implement its strategic business plan; (ii) the availability of sufficient capital with satisfactory terms to finance the Company’s business plans; (iii) competitive factors; (iv) the ability of the Company to adequately defend or reach a settlement of threatened or outstanding litigation; (v) changes in labor, equipment, and capital costs; (vi) changes in regulations affecting the Company’s business; (vii) changes in Medicare supplemental reimbursements for services provided by long-term care providers and physicians; (viii) future acquisitions or strategic partnerships; and (ix) general business and economic conditions. Many of these factors are outside the control of the Company and its management. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. The Company undertakes no duty to update such forward-looking statements.

Page 3

PART I--FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
OCTOBER 3, 2003 AND MARCH 28, 2003
(Dollars in Thousands, Except Share Data)

ASSETS

	October 3, 2003		March 28, 2003
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	9,612	$	19,171
Accounts receivable, net		185,486		154,393
Inventories		96,633		79,747
Employee advances		47		90
Deferred tax assets		28,539		27,312
Prepaid expenses and other		12,855		16,277
Total current assets		333,172		296,990
Property and equipment, net		61,270		61,336
Other Assets:
Goodwill		67,614		61,128
Intangibles, net		9,911		5,783
Employee advances		--		62
Deferred tax assets		17,748		26,000
Other		23,981		20,564
Total assets	$	513,696	$	471,863

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	90,470		$	90,635
Revolving line of credit		111,949			83,000
Accrued expenses		27,211			27,162
Other		8,811			7,273
Total current liabilities		238,441			208,070
Other noncurrent liabilities		22,637			18,607
Total liabilities		261,078			226,677
Shareholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares issued and outstanding		--			--
Common stock, $.01 par value; 150,000,000 shares authorized, 67,028,150 and 67,870,561 shares issued       and outstanding at October 3, 2003 and March 28, 2003, respectively		670			678
Additional paid-in capital		320,600			325,578
Accumulated deficit		(68,448	)		(81,070	)
Accumulated other comprehensive income		16			--
Unearned compensation		(220	)		--
Total shareholders' equity		252,618			245,186
Total liabilities and shareholders' equity	$	513,696		$	471,863

The accompanying notes are an integral part of these consolidated statements.

Page 4

PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 3, 2003 AND SEPTEMBER 27, 2002
(Unaudited)
(Dollars in Thousands, Except Per Share Data)

	Three Months Ended						Six Months Ended
	October 3, 2003			September 27, 2002			October 3, 2003			September 27, 2002
Net sales	$	346,655		$	289,116		$	655,945		$	575,898
Cost of goods sold		248,582			206,659			469,988			412,569
Gross profit		98,073			82,457			185,957			163,329
General and administrative expenses		60,284			56,463			119,717			109,935
Selling expenses		24,054			20,871			45,743			41,211
Income from operations		13,735			5,123			20,497			12,183
Other (expense) income:
Interest expense		(1,346	)		(2,592	)		(2,460	)		(4,891	)
Interest and investment income		152			176			155			397
Other income (expense)		1,143			(257	)		3,243			145
		(51	)		(2,673	)		938			(4,349	)
Income from continuing operations before provision
for income taxes		13,684			2,450			21,435			7,834
Provision for income taxes		5,395			869			8,489			2,903
Income from continuing operations		8,289			1,581			12,946			4,931
Discontinued operations:
Loss from discontinued operations (net of
benefit for income taxes of $745, and
$1,209, respectively)		--			(1,109	)		--			(1,907	)
Loss on disposal of discontinued operations
(net of benefit for income taxes of $206,
$34,654, $206, and $34,654, respectively)		(324	)		(55,642	)		(324	)		(55,642	)
Total loss from discontinued operations		(324	)		(56,751	)		(324	)		(57,549	)
Net income (loss)	$	7,965		$	(55,170	)	$	12,622		$	(52,618	)
Earnings (loss) per share - Basic:
Income from continuing operations	$	0.12		$	0.02		$	0.19		$	0.07
Total loss from discontinued operations		0.00			(0.80	)		0.00			(0.81	)
Net income (loss)	$	0.12		$	(0.78	)	$	0.19		$	(0.74	)
Earnings (loss) per share - Diluted:
Income from continuing operations	$	0.12		$	0.02		$	0.19		$	0.07
Total loss from discontinued operations		0.00			(0.79	)		0.00			(0.80	)
Net income (loss)	$	0.12		$	(0.77	)	$	0.19		$	(0.73	)

The accompanying notes are an integral part of these consolidated statements.

PSS WORLD MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 3, 2003 AND SEPTEMBER 27, 2002

(Unaudited) (Dollars in Thousands, Except Per Share Data)

	Six Months Ended
	October 3, 2003			September 27, 2002
Operating Activities:
Net income (loss)	$	12,622		$	(52,618	)
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Loss from discontinued operations		324			57,549
Depreciation		6,310			5,827
Amortization of intangible assets		1,100			1,188
Amortization of debt issuance costs		505			983
Provision for doubtful accounts		3,350			1,712
Provision for notes receivable		--			2,939
Provision (benefit) for deferred income taxes		8,500			(1,518	)
Provision for deferred compensation		426			422
Noncash compensation expense		(27	)		--
Loss on sales of property and equipment		25			18
Changes in operating assets and liabilities:
Accounts receivable		(30,701	)		(6,947	)
Inventories		(15,548	)		(4,690	)
Prepaid expenses and other current assets		3,573			5,349
Other assets		(4,495	)		(6,103	)
Accounts payable		(2,367	)		9,412
Accrued expenses and other liabilities		3,439			5,403
Net cash provided by discontinued operations		--			1,639
Net cash (used in) provided by operating activities		(12,964	)		20,565
Investing Activities:
Payment for business combinations		(13,452	)		(4,464	)
Capital expenditures		(6,300	)		(6,160	)
Payment of transaction costs for sale of Imaging Business		(1,478	)		--
Payments on noncompete agreements		(221	)		(423	)
Proceeds from sales of property and equipment		31			10
Net cash used in discontinued operations		--			(1,113	)
Net cash used in investing activities		(21,420	)		(12,150	)
Financing Activities:
Net proceeds from the revolving line of credit		28,949			--
Proceeds from note receivable		1,190			--
Proceeds from issuance of common stock		329			200
Purchase of treasury stock		(5,643	)		(9,518	)
Repayment of Senior Subordinated Notes		--			(19,000	)
Payment of premiums for retirement of Senior Subordinated Notes		--			(665	)
Net cash provided by (used in) financing activities		24,825			(28,983	)
Net decrease in cash and cash equivalents		(9,559	)		(20,568	)
Cash and cash equivalents, beginning of period		19,171			53,574
Cash and cash equivalents, end of period	$	9,612		$	33,006

The accompanying notes are an integral part of these consolidated statements.

Page 6

PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)
(Dollars in Thousands, Except Share and Per Share Data, Unless Otherwise Noted)

1. BACKGROUND AND BASIS OF PRESENTATION

Nature of Operations

PSS World Medical, Inc. (the “Company” or “PSSI”), a Florida corporation, is a specialty marketer and distributor of medical products to alternate-site healthcare providers including physician offices, long-term care facilities, and home care providers through 46 full-service distribution centers, which serve all 50 states throughout the United States of America. The Company currently conducts business through two operating segments, the Physician Business and the Elder Care Business. These strategic segments serve a diverse customer base. A third reporting segment, titled Corporate Shared Services, includes allocated and unallocated costs of corporate departments that provide services to the operating segments and overhead associated with the Imaging Business, which was sold on November 18, 2002.

The Physician Business, or the Physician Sales & Service division, is the leading distributor of medical supplies, equipment, and pharmaceuticals to primary care office-based physicians in the United States of America. The Physician Business currently operates 33 full-service distribution centers, 19 break-freight locations, and 4 other strategic facilities serving physician offices in all 50 states.

The Elder Care Business, or the Gulf South Medical Supply, Inc. subsidiary, is a leading national distributor of medical supplies and related products to the long-term and elder care industry in the United States of America. The Elder Care Business currently operates 13 full-service distribution centers and 1 break-freight location serving independent, regional, and national skilled nursing facilities, assisted living centers, and home care providers in all 50 states.

Historically, the Company conducted business under a third operating segment, the Imaging Business. On November 18, 2002, the Company completed the sale of the Imaging Business, or the Diagnostic Imaging, Inc. subsidiary (“DI”), a distributor of medical diagnostic imaging supplies, chemicals, equipment, and services to the acute and alternate-care markets in the United States of America. As a result, DI’s results of operations for the three and six months ended September 27, 2002 have been classified as discontinued operations. Refer to Note 12, Discontinued Operations, for a further discussion.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to the SEC rules and regulations. The consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations for the periods indicated.

The accompanying consolidated financial statements have been prepared in accordance with GAAP and include the consolidated accounts of PSS World Medical, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The consolidated balance sheet as of March 28, 2003 has been derived from the Company’s audited consolidated financial statements for the year ended March 28, 2003. The financial statements and related notes included in this report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended March 28, 2003.

Page 7

The Company reports its year-end financial position, results of operations, and cash flows on the Friday closest to March 31. Fiscal year 2004 consists of 53 weeks or 258 selling days whereas fiscal year 2003 consisted of 52 weeks or 253 selling days. As a result of the increase in selling days during fiscal year 2004, the Company changed the reporting of its quarter-end financial results to distribute the 5 additional selling days among all four quarters. During fiscal year 2004, the Company will report its quarter-end financial position, results of operations, and cash flows on the calendar month-end for those quarters in which physical inventories are not taken and on the Friday closest to month-end for those quarters in which physical inventories are taken. During fiscal year 2003, the Company reported its quarter-end financial position, results of operations, and cash flows on the Friday closest to June 30, September 30, and December 31. The following table summarizes the number of selling days in each period presented.

	Three Months Ended		Six Months Ended
	October 3, 2003	September 27, 2002	October 3, 2003	September 27, 2002
Number of selling days	67	63	132	127

The results of operations for the interim periods covered by this report may not be indicative of operating results for the full fiscal year.

Reclassification

Certain amounts reported in prior years have been reclassified to conform to the fiscal year 2004 presentation. The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, on March 29, 2003, the first day of fiscal year 2004. As a result, the loss from the early extinguishment of the 8 ½% Senior Subordinated Notes (the “Notes”), which was reported as an extraordinary loss during fiscal year 2003, was reclassified to income from continuing operations. The premiums paid to retire the Notes early, the accelerated amortization of debt issuance costs, and the related income tax benefit were reclassified to other income (expense), interest expense, and provision for income taxes, respectively, in the consolidated statements of operations. The following tables summarize the impact of this reclassification.

	Three Months Ended September 27, 2002
	As Previously Reported			Reclassification			As Reported
Interest expense	$	(2,167	)	$	(425	)	$	(2,592	)
Other income (expense)		408			(665	)		(257	)
Provision for income taxes		1,293			(424	)		869

	Six Months Ended September 27, 2002
	As Previously Reported			Reclassification			As Reported
Interest expense	$	(4,466	)	$	(425	)	$	(4,891	)
Other income (expense)		810			(665	)		145
Provision for income taxes		3,327			(424	)		2,903

Page 8

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectibility is reasonably assured. The Company assesses collectibility based upon a thorough evaluation of current and prospective customers’ credit history and ability to pay. The Company establishes and adjusts credit terms and limits to reflect customer credit worthiness based upon this evaluation. Customer credit evaluations are updated periodically and for specific events or circumstances such as, deterioration in the aging of balances due, bankruptcy filings, or notice of financial difficulties.

There are two primary sources of revenue: the sale of consumable products and equipment. Revenue from the sale of consumable products is recognized when products are shipped or delivered. Revenue from the sale of single deliverable equipment is generally recognized when the equipment is shipped, unless there are multiple deliverables, in which case revenue is recognized when all obligations to the customer are fulfilled and when installation and training are complete.

The Company’s customers have the right to return consumable products and equipment. Sales are reported net of returns. The Company maintains an allowance for potential product returns and records a provision for estimated product returns, which is based on historical experience as well as specific identification of significant returns, as a reduction to net sales.

Recent Accounting Pronouncements

Financial Accounting Standards Board Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities (“FIN 46”), clarified the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is applicable immediately for variable interest entities created after January 31, 2003. For variable interest entities created prior to January 31, 2003, the provisions of FIN 46 are applicable no later than July 1, 2003. This Interpretation will not have an effect on the Company’s consolidated financial statements.

In April 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (“SFAS 149”). SFAS 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. In particular, this Statement clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative and when a derivative contains a financing component that warrants special reporting in the statement of cash flows. This Statement is generally effective for contracts entered into or modified after June 30, 2003 and is not expected to have a material impact on the Company’s financial statements.

The FASB recently issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (“SFAS 150”). This Statement requires issuers to classify as liabilities (or assets in some circumstances) three classes of freestanding financial instruments that embody obligations for the issuer. Previously, many such instruments had been classified as equity. A freestanding financial instrument is an instrument that is entered into separately and apart from any of the entity’s other financial instruments or equity transactions, or that is entered into in conjunction with some other transaction and is legally detachable and separately exercisable, such as certain put and call options. These provisions are effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the second quarter. The Company does not currently have any financial instruments that are affected by this statement.

2. EARNINGS PER SHARE

In accordance with SFAS No. 128, Earnings Per Share, the calculation of basic earnings per common share and diluted earnings per common share is presented below (amounts in thousands, except per share data):

Page 9

	Three Months Ended						Six Months Ended
	October 3, 2003			September 27, 2002			October 3, 2003			September 27, 2002
Income from continuing operations	$	8,289		$	1,581		$	12,946		$	4,931
Total loss from discontinued operations
(net of benefit for income taxes of
$206, $35,399, $206, and $35,863)		(324	)		(56,751	)		(324	)		(57,549	)
Net income (loss)	$	7,965		$	(55,170	)	$	12,622		$	(52,618	)
Earnings (loss) per share - Basic:
Income from continuing operations
before extraordinary loss	$	0.12		$	0.02		$	0.19		$	0.07
Total loss from discontinued
operations		0.00			(0.80	)		0.00			(0.81	)
Net income (loss)	$	0.12		$	(0.78	)	$	0.19		$	(0.74	)
Earnings (loss) per share - Diluted:
Income from continuing operations	$	0.12		$	0.02		$	0.19		$	0.07
Total loss from discontinued
operations		0.00			(0.79	)		0.00			(0.80	)
Net income (loss)	$	0.12		$	(0.77	)	$	0.19		$	(0.73	)
Weighted average shares outstanding:
Common shares		66,984			70,913			67,316			71,092
Assumed exercise of stock options		736			623			525			861
Assumed vesting of restricted stock .		2			--			23			--
Diluted shares outstanding		67,722			71,536			67,864			71,953

Diluted earnings per share assumes options to purchase shares of common stock have been exercised using the treasury stock method. The following table summarizes the options to purchase common stock that were outstanding and not included in the computation of diluted earnings per share for each of the periods because the options’ exercise prices exceeded the fair market value of the Company’s common stock.

	Three Months Ended		Six Months Ended
(shares in millions)	October 3, 2003	September 27, 2002	October 3, 2003	September 27, 2002
Out-of-the-money options outstanding	4.0	5.1	4.5	4.5

On December 17, 2002, the Company’s Board of Directors approved a stock repurchase program authorizing the Company, depending upon market conditions and other factors, to repurchase up to a maximum of 5% of its common stock, or approximately 3.4 million common shares, in the open market, in privately negotiated transactions, or otherwise. During the six months ended October 3, 2003, the Company repurchased approximately 1.0 million shares of common stock under this program at an average price of $5.92 per common share. During the six months ended September 27, 2002, the Company repurchased approximately 1.3 million shares of common stock at an average price of $7.72 per common share under a separate share repurchase program that authorized the Company to repurchase up to a maximum of 5% or 3.6 million common shares, which was completed in December 2002.

Page 10

3. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is defined as net income (loss) plus direct adjustments to shareholders’ equity. The following details the components of comprehensive income (loss) for the periods presented.

	Three Months Ended					Six Months Ended
	October 3, 2003		September 27, 2002			October 3, 2003		September 27, 2002
Net income (loss)	$	7,965	$	(55,170	)	$	12,622	$	(52,618	)
Other comprehensive income, net of tax:
Unrealized gain on interest rate swap		248		--			16		--
Comprehensive income (loss)	$	8,213	$	(55,170	)	$	12,638	$	(52,618	)

4. STOCK-BASED COMPENSATION

The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FIN No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeds the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS 123, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has only adopted the disclosure requirements of SFAS 123. The following table illustrates the effect on net income and earnings per share if the fair-value-based method had been applied to all outstanding and unvested awards in each period.

	Three Months Ended						Six Months Ended
	October 3, 2003			September 27, 2002			October 3, 2003			September 27, 2002
Net income (loss), as reported	$	7,965		$	(55,170	)	$	12,622		$	(52,618	)
Total stock-based employee
compensation expense determined
under fair value based method
for all awards, net of related
tax effects		(733	)		(392	)		(1,270	)		(1,003	)
Pro forma net income (loss)	$	7,232		$	(55,562	)	$	11,352		$	(53,621	)
Earnings per share - Basic:
As reported	$	0.12		$	(0.78	)	$	0.19		$	(0.74	)
Pro forma	$	0.11		$	(0.78	)	$	0.17		$	(0.75	)
Earnings per share - Diluted
As reported	$	0.12		$	(0.77	)	$	0.19		$	(0.73	)
Pro forma	$	0.11		$	(0.77	)	$	0.17		$	(0.74	)

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5. INTANGIBLES

The following table summarizes the gross carrying amount and accumulated amortization for existing intangible assets subject to amortization by business segment and major asset class.

	As of October 3, 2003							As of March 28, 2003
	Gross Carrying Amount		Accumulated Amortization			Net		Gross Carrying Amount		Accumulated Amortization			Net
Noncompetition Agreements:
Physician Business	$	3,517	$	(2,750	)	$	767	$	3,752	$	(2,762	)	$	990
Elder Care Business		2,435		(1,096	)		1,339		1,835		(949	)		886
Corporate Shared Services		417		(104	)		313		417		(34	)		383
		6,369		(3,950	)		2,419		6,004		(3,745	)		2,259
Signing Bonuses:
Physician Business		2,182		(636	)		1,546		1,690		(492	)		1,198
Elder Care Business		50		(16	)		34		250		(197	)		53
		2,232		(652	)		1,580		1,940		(689	)		1,251
Other Intangibles:
Physician Business		2,463		(1,579	)		884		2,463		(1,482	)		981
Elder Care Business		5,329		(301	)		5,028		1,429		(137	)		1,292
		7,792		(1,880	)		5,912		3,892		(1,619	)		2,273
Total	$	16,393	$	(6,482	)	$	9,911	$	11,836	$	(6,053	)	$	5,783

Total amortization expense for intangible assets for the three months ended October 3, 2003 and September 27, 2002 was $599, and $570, respectively. Total amortization expense for intangible assets for the six months ended October 3, 2003 and September 27, 2002 was $1,100 and $1,188, respectively. The estimated amortization expense for the next five fiscal years is as follows:

Fiscal Year:
2004 (remaining 6 months)	$1,425
2005	2,590
2006	1,685
2007	990
2008	611
Thereafter	2,610
Total	$9,911

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The remaining weighted-average amortization period, in total and by major asset class, is as follows:

(in years)	October 3, 2003	March 28, 2003
Noncompetition Agreements	6.6	7.0
Signing Bonuses	4.2	4.2
Other Intangibles	8.9	10.8
Total weighted-average period	7.4	7.8

Future minimum payments required under noncompetition agreements at October 3, 2003 are as follows:

Fiscal Year:
2004 (remaining 6 months)	$289
2005	219
2006	36
2007	35
2008	28
Thereafter	114
Total	$721

6. REVOLVING LINE OF CREDIT

On May 20, 2003, the Company entered into an amended and restated Credit Agreement (the “Credit Agreement”), by and among the Company, as borrower thereunder (the “Borrower”), the subsidiaries of the Borrower party thereto, the lenders from time to time party thereto (the “Lenders”), and Bank of America, N.A., as Agent for the Lenders. The Credit Agreement provides for a three-year credit facility consisting of an aggregate $150 million revolving line of credit and letters of credit (the “Credit Facility”). Availability of borrowings under the Credit Facility depends upon the amount of a borrowing base consisting of accounts receivable and, upon satisfaction of certain requirements, inventory. The Credit Facility bears interest at the Bank’s prime rate plus a margin of between 0.00% and 1.00% based on the Company’s ratio of funded debt to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the Credit Agreement, or at LIBOR plus a margin of between 1.75% and 3.00% based on the Company’s ratio of funded debt to EBITDA. Under the Credit Agreement, the Company and its subsidiaries are subject to certain covenants, including but not limited to, limitations on (i) paying dividends and repurchasing stock, (ii) selling or transferring assets, (iii) making certain investments (including acquisitions), (iv) incurring additional indebtedness and liens, and (v) annual capital expenditures. Initial proceeds from the Credit Facility were used to refinance existing indebtedness outstanding under the original credit facility and future proceeds will be used to issue letters of credit and finance the ongoing working capital requirements of the Company. The Credit Facility matures on March 28, 2006. At October 3, 2003 and March 28, 2003, there was $111,949 and $83,000, respectively, outstanding under the revolving line of credit.

During the three months ended June 28, 2003, the Company entered into an interest rate swap agreement to hedge the variable interest rate debt of its revolving line of credit. Under the terms of the interest rate swap agreement, the Company makes payments based on the fixed rate and will receive interest payments based on the 1-month LIBOR. The changes in market value of this financial instrument are highly correlated with changes in market values of the hedged item both at inception and over the life of the agreement. Amounts received or paid under the interest rate swap agreement are recorded as reductions or additions to interest expense. In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133, the Company’s interest rate swap agreement has been designated as a cash flow hedge with changes in fair value recognized in accumulated other comprehensive income in the accompanying consolidated balance sheets.

Page 13

The swap carries a notional principal amount of $35.0 million and effectively fixes the interest rate on a portion of the revolving line of credit to 2.195%, prior to applying the funded debt to EBITDA margin discussed above. The swap agreement expires on March 28, 2006 and settles monthly until expiration. At October 3, 2003, the Company recorded an unrealized gain, net of taxes, of $16 for the estimated fair value of the swap agreement in accumulated other comprehensive income in the accompanying balance sheet.

7. PURCHASE BUSINESS COMBINATIONS

The following acquisitions were accounted for under the purchase method of accounting in accordance with SFAS No. 141, Business Acquisitions (“SFAS 141”); accordingly, the operations of the acquired company have been included in the Company’s results of operations subsequent to the date of acquisition. The assets acquired and liabilities assumed were recorded at their estimated fair values at the date of the acquisition as determined by management based on information currently available. Supplemental unaudited pro forma information, assuming these acquisitions were made at the beginning of the immediate preceding period, is not presented as the results would not differ materially from the amounts reported in the accompanying consolidated statements of operations.

Fiscal Year 2004

On September 4, 2003, the Company acquired certain assets and assumed certain liabilities of a long-term care medical supply distributor. The aggregate purchase price was $13,452. The Company obtained independent valuations of certain intangible assets; however, the allocation of the purchase price is subject to revision. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

Accounts receivable	$  3,743
Inventory	1,339
Other current assets	915
Goodwill	6,486
Intangibles	4,600
Total assets acquired	17,083
Current liabilities	3,631
Net assets acquired	$13,452

The $6,486 of goodwill was assigned to the Elder Care Business and is expected to be nondeductible for tax purposes. Of the $4,600 of acquired intangible assets, $700 and $3,900 was assigned to noncompete agreements and customer relationships, respectively. The acquired intangible assets have a weighted-average useful life of approximately 6.2 years.

Fiscal Year 2003

On September 16, 2002, the Company acquired certain assets and assumed certain liabilities of a long-term care medical supply distributor. The aggregate purchase price was $4,464. The Company obtained independent valuations of certain intangible assets and finalized the allocation of the purchase price during the three months ended December 27, 2002. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

Accounts receivable	$1,230
Inventory	671
Goodwill	1,893
Intangibles	1,694
Total assets acquired	5,488
Current liabilities	1,024
Net assets acquired	$4,464

Page 14

The $1,893 of goodwill was assigned to the Elder Care Business and is expected to be deductible for tax purposes. Of the $1,694 of acquired intangible assets, $265, $538, and $891 was assigned to noncompete agreements, customer contracts, and customer relationships, respectively. The acquired intangible assets have a weighted-average useful life of approximately 5.6 years.

8. GOODWILL

In accordance with SFAS 142, Goodwill and Other Intangible Assets, the changes in the carrying value of goodwill for the six months ended October 3, 2003 are as follows:

	Physician Business		Elder Care Business		Total
Balance as of March 28, 2003	$	9,788	$	51,340	$	61,128
Purchase business combination		--		6,486		6,486
Balance as of October 3, 2003	$	9,788	$	57,826	$	67,614

The Company performs its annual impairment test for each reporting unit on the last day of each fiscal year.

9. NOTE RECEIVABLES

At March 28, 2003, the Company had three note receivables (the “Loans”) outstanding from its former Chairman and Chief Executive Officer. The Loans, which bear interest at the applicable Federal rate for long-term obligations, were issued to the former Chairman and Chief Executive Officer in order to consolidate debt incurred in relation to certain real estate activities, as well as to provide the cash needed to pay-off personal debt. One Loan is unsecured, one Loan is secured by common stock of the Company, and the other Loan is secured by a split-dollar life insurance policy. As part of the Company’s ongoing review of the realization of the Loans during fiscal year 2003, during the three months ended September 27, 2002, the Company recorded an allowance for doubtful accounts of $2,939 against the unsecured Loan. This allowance did not represent a forgiveness of debt.

On October 2, 2003 the Loan secured by common stock matured. As a result, the Company received a cash payment of $1,190, which consisted of principal and interest payments of $997 and $193, respectively.

10. SEGMENT INFORMATION

The Company’s reportable segments are strategic businesses that offer different products and services to different segments of the healthcare industry, and are the basis for which management regularly evaluates the Company. These segments are managed separately because of different customers and products. The Company primarily evaluates the operating performance of its segments based on net sales and income from operations. The following table presents financial information about the Company’s business segments:

Corporate Shared Services, includes allocated and unallocated costs of corporate departments that provide services to the operating segments and overhead associated with the Imaging Business, which was sold on November 18, 2002.

Page 15

	Three Months Ended						Six Months Ended
	October 3, 2003			September 27, 2002			October 3, 2003			September 27, 2002
NET SALES:
Physician Business	$	225,349		$	184,415		$	421,800		$	367,604
Elder Care Business		121,306			104,701			234,145			208,294
Total net sales	$	346,655		$	289,116		$	655,945		$	575,898
INCOME FROM OPERATIONS:
Physician Business	$	12,198		$	5,697		$	19,408		$	11,219
Elder Care Business		5,151			4,749			9,307			8,572
Corporate Shared Services		(3,614	)		(5,323	)		(8,218	)		(7,608	)
Total income from operations	$	13,735		$	5,123		$	20,497		$	12,183
DEPRECIATION:
Physician Business	$	2,337		$	2,191		$	4,705		$	4,240
Elder Care Business		382			392			750			858
Corporate Shared Services		439			369			855			729
Total depreciation	$	3,158		$	2,952		$	6,310		$	5,827
AMORTIZATION OF INTANGIBLE ASSETS:
Physician Business	$	317		$	434		$	599		$	832
Elder Care Business		247			136			432			356
Corporate Shared Services		35			--			69			--
Total amortization of intangible assets	$	599		$	570		$	1,100		$	1,188
PROVISION FOR DOUBTFUL ACCOUNTS:
Physician Business	$	563		$	402		$	713		$	451
Elder Care Business		1,510			588			2,637			1,261
Total provision for doubtful accounts	$	2,073		$	990		$	3,350		$	1,712
INTEREST EXPENSE:
Physician Business	$	993		$	996		$	1,893		$	1,970
Elder Care Business		1,319			1,226			2,495			2,458
Corporate Shared Services		(966	)		370			(1,928	)		463
Total interest expense	$	1,346		$	2,592		$	2,460		$	4,891
PROVISION (BENEFIT) FOR INCOME TAXES:
Physician Business	$	4,488		$	1,972		$	7,072		$	3,829
Elder Care Business		1,494			1,389			2,684			2,379
Corporate Shared Services		(587	)		(2,492	)		(1,267	)		(3,305	)
Total provision for income taxes	$	5,395		$	869		$	8,489		$	2,903
CAPITAL EXPENDITURES:
Physician Business	$	1,615		$	2,843		$	2,753		$	4,867
Elder Care Business		1,322			107			2,368			313
Corporate Shared Services		734			358			1,179			980
Total capital expenditures	$	3,671		$	3,308		$	6,300		$	6,160

	As of
	October 3, 2003	March 28, 2003
ASSETS:
Physician Business	$254,763	$228,435
Elder Care Business	185,953	157,458
Corporate Shared Services	72,980	85,970
Total assets	$513,696	$471,863

11. COMMITMENTS AND CONTINGENCIES

Litigation

The Company, through its Elder Care Business, its Physician Supply Business, and/or predecessor companies, has been named as one of many defendants in latex glove product liability claims in various Federal and state courts. The defendants are primarily distributors of certain brands of latex gloves. Currently, state litigation exists in New Hampshire and California, while Federal litigation is present in Washington, New Hampshire, and Ohio. Defense costs are currently allocated by agreement between a consortium of insurers on a pro rata basis for each case depending upon policy years and alleged years of exposure. All of the insurance carriers are defending subject to a reservation of rights. The Company intends to vigorously defend the proceedings; however, there can be no assurance that this litigation will be ultimately resolved on terms that are favorable to the Company.

The Company and certain of its current and former officers and directors are named as defendants in a purported securities class action lawsuit entitled Jack Hirsch v. PSS World Medical, Inc., et al., Civil Action No. 3:98-CV 502-J-32TEM. The action, which was filed in May 1998, is pending in the United States District Court for the Middle District of Florida, Jacksonville Division. The plaintiff seeks indeterminate damages, including costs and expenses. The plaintiff initially alleged, for himself and for a purported class of similarly situated stockholders who purchased the Company’s stock between December 23, 1997 and May 8, 1998 that the defendants engaged in violations of certain provisions of the Exchange Act, and Rule 10b-5 promulgated there under. The allegations were based upon a decline in the Company’s stock price following an announcement by the Company in May 1998 regarding the Gulf South Medical Supply, Inc. merger, which resulted in earnings below analysts’ expectations. By order dated December 18, 2002, the Court granted the Company’s motion to dismiss the plaintiff’s second amended complaint with prejudice with respect to the Section 10(b) claims. The plaintiffs filed their third amended complaint in January 2003 alleging claims under Sections 14(a) and 20(a) of the Exchange Act on behalf of a putative class of all persons who were shareholders of the Company as of March 26, 1998. In May 2003, the Court denied the defendants’ motion to dismiss. The Court will conduct a hearing on class certification on December 5, 2003. Mediation is to occur during the week of June 15, 2004. The case is set for trial in April 2005. The Company intends to vigorously defend the proceedings; however, there can be no assurance that this litigation will be ultimately resolved on terms that are favorable to the Company.

The Company has been named as a defendant in ten related class action complaints, the first of which was filed on July 13, 2001, in the United States District Court for the Middle District of Florida. Those ten actions were consolidated into a single action under the caption “In Re PSS World Medical Inc. Securities Litigation.” Following that consolidation, on March 22, 2002, lead plaintiffs served their amended class action complaint for violation of securities laws. After denial of their motion to dismiss the amended complaint, the Company and the other defendants served their answer to the amended complaint on August 12, 2002, and the parties are now engaged in discovery. The amended complaint named the Company along with certain present and former directors and officers. The amended complaint was filed as a purported class action on behalf of persons who purchased or acquired PSS World Medical, Inc. common stock at various times during the period between October 26, 1999 and October 3, 2000. The amended complaint alleges, among other things, violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under, and seeks indeterminate damages. The plaintiffs allege that the Company

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issued false and misleading statements and failed to disclose material facts concerning, among other things, the Company’s financial condition. The plaintiffs further allege that because of the issuance of false and misleading statements and/or failure to disclose material facts, the price of PSS World Medical, Inc. common stock was artificially inflated during the class period. The Court granted plaintiff’s motion for class certification on November 14, 2002. On December 10, 2002, the Court entered an order approving plaintiff’s method of notifying class members that a class has been certified and further set a schedule of dates for such notice. On December 10, 2002, the court also entered an order setting forth a schedule of dates for pre-trial procedures and trial. Pursuant to that order, a jury trial in the case is scheduled for the trial term commencing October 18, 2004. The Company believes that the allegations contained in the amended complaint are without merit and intends to defend vigorously against the claims. There can be no assurance that this litigation will be ultimately resolved on terms that are favorable to the Company.

The Company has been named as a defendant in a suit brought by three former and present employees of the Company, entitled Angione, et al. v. PSS World Medical, Inc., which was filed on or about June 4, 2002 in the U.S. District Court for the Central District of California, Santa Ana Division. The court approved the transfer of venue, and the case is now pending in the United States Court for the Middle District of Florida, Jacksonville Division, Case Number 02-CV-854. The plaintiffs allege that the Company wrongfully classifies its purchasers, operations leader trainees, and accounts receivable representatives as exempt from the overtime requirements imposed by the Fair Labor Standards Act and the California Wage Orders. The California state law claims apply to only 11 of the plaintiffs. The plaintiffs seek to recover back pay, interest, costs of suit, declaratory and injunctive relief, and applicable statutory penalties. On February 21, 2003, the court conditionally allowed the case to proceed as a collective action under the Fair Labor Standards Act. Following a series of amended complaints, a total of 57 plaintiffs are now parties to the action. Two of the three original named plaintiffs also brought, but subsequently have settled, individual claims for gender discrimination and retaliation under Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963. Limited discovery is underway following mediation on May 20, 2003. The Court has approved a “two-tiered” approach to discovery in the case. There will be a “first trial” on claims of 13 of the plaintiffs. These plaintiffs are from each of the three challenged categories. The trial of these “first trial” plaintiffs is scheduled for June 2004. The results of that trial will be binding on the 13 plaintiffs. Following that trial, the claims of the remaining plaintiffs will be mediated. If those claims are not settled the claims of the remaining plaintiffs will proceed through discovery and ultimately trial. The Company is vigorously defending against the claims; however, there can be no assurance that this litigation will be ultimately resolved on terms that are favorable to the Company.

The Company is also a party to various other legal and administrative proceedings and claims arising in the normal course of business. While any litigation contains an element of uncertainty, the Company, after consultation with outside legal counsel, believes that the outcome of such other proceedings or claims which are pending or known to be threatened will not have a material adverse effect on the Company’s consolidated financial position, liquidity, or results of operations.

The Company has various insurance policies, including product liability insurance, covering risks and in amounts it considers adequate. In many cases in which the Company has been sued in connection with products manufactured by others, the Company is provided indemnification by the manufacturer. There can be no assurance that the insurance coverage maintained by the Company is sufficient or will be available in adequate amounts or at a reasonable cost, or that indemnification agreements will provide adequate protection for the Company.

Commitments and Other Contingencies

The Company has employment agreements with certain executive officers which provide that in the event of their termination or resignation, under certain conditions, the Company may be required to pay severance to the executive officers in amounts ranging from one to two times their base salary and target annual bonus. In the event that a termination or resignation follows or is in connection with a change in control, the Company may be required to pay severance to the executive officers in amounts ranging from two to three times their base salary and target annual bonus. The Company may also be required to continue welfare benefit plan coverage for the executive officers following a termination or resignation for a period ranging from one to three years.

On September 2, 2003, the Elder Care Business entered into an exclusive distribution agreement with a strategic vendor. Under the agreement, the Elder Care Business is required to purchase a minimum of $7,000 of product by September 30, 2004. For each one-year period thereafter through September 2008, the purchases shall not be less than the sum of $7,000 plus 7.0% compounded annually.

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12. DISCONTINUED OPERATIONS

On September 26, 2002, the Company’s Board of Directors adopted a plan to dispose of the Imaging Business, reflecting a strategic decision by management to focus the Company’s efforts on its Physician and Elder Care Businesses, which offer attractive opportunities for growth and profitability.

On November 18, 2002, the Company completed the sale of DI to Imaging Acquisition Corporation (the “Buyer”), a wholly owned subsidiary of Platinum Equity, LLC, a private equity firm (“Platinum”). The sale was completed pursuant to a Stock Purchase Agreement, dated as of October 28, 2002, among the Company, the Buyer, and Platinum, as amended on November 18, 2002 (the “Stock Purchase Agreement”). Under the Stock Purchase Agreement, the purchase price was $45,000 less (i) an adjustment for any change in net asset value from the initial net asset value target date and (ii) an adjustment for any change in the net cash from the initial net cash target date (the “Purchase Price”). The cash proceeds received during fiscal year 2003 were reduced by approximately $4,343 for transaction costs. In connection with the closing of the transaction, the Company and the Buyer entered into a transitional services agreement, pursuant to which the Company will provide certain reimbursable services to the Buyer for a period not to exceed one year. The costs incurred related to providing services under the transition services agreement are included in general and administrative expenses and the reimbursement for these expenses are included in other income in the accompanying statements of operations. During the three and six months ended October 3, 2003, the Company recognized approximately $895 and $2,750, respectively, of other income related to the transition services agreement.

The results of operations of the Imaging Business and the estimated loss on disposal have been classified as “discontinued operations” in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The estimated loss on disposal is subject to change based on the final Purchase Price adjustments that will be recorded in the period in which they become known. The accompanying financial statements have been restated to conform to discontinued operations treatment for all historical periods presented.

Net sales and total loss from discontinued operations of the Imaging Business are as follows:

	Three Months Ended September 27, 2002			Six Months Ended September 27, 2002
Net sales	$	175,704		$	352,469
Pretax loss from operations		(1,854	)		(3,116	)
Pretax loss on disposal of
discontinued operations		(90,296	)		(90,296	)
Benefit (provision) for income taxes		35,399			35,863
Total loss from discontinued operations	$	(56,751	)	$	(57,549	)

In accordance with Emerging Issues Task Force Issue No. 87-24, Allocation of Interest to Discontinued Operations (“EITF 87-24”), a portion of the Company’s interest expense that is not directly attributable to or related to other operations of the Company has been allocated to discontinued operations based upon the ratio of net assets to be sold to the sum of consolidated net assets plus consolidated debt. In addition, in accordance with EITF 87-24, general corporate overhead was not allocated to discontinued operations. Interest expense allocated to discontinued operations was $873 and $1,703 during the three and six months ended September 27, 2002, respectively. The provision for income taxes related to continuing operations has been calculated for the periods presented. The difference between this amount and the total provision for income taxes, as previously reported, has been allocated to discontinued operations.

On March 14, 2003, the Company received a letter from the Buyer claiming a purchase price adjustment of $32,257. The claimed purchase price adjustment is based on an accounting of the net asset statement as of the closing date, which was delivered to the Buyer in January 2003. Pursuant to the terms of the Stock Purchase Agreement, the matter has been referred to an independent accounting firm of national reputation for arbitration. The Company intends to defend vigorously against these claims; however, there can be no assurance that this claim will be ultimately resolved on terms that are favorable to the Company.

Page 19

13. SUBSEQUENT EVENT

On October 31, 2003, the Company acquired certain assets and assumed certain liabilities of ProClaim, Inc. (“ProClaim”), a Franklin, Tennessee-based business service company providing ancillary billing services to the long-term care industry. ProClaim provides services to more than 750 skilled nursing facilities in 46 states. The acquisition will be accounted for under the purchase method of accounting in accordance with SFAS 141; accordingly, the operations of the acquired company will be included in the Company’s results of operations subsequent to the date of acquisition.

Page 20

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and ShareholdersPSS
World Medical, Inc.:

We have reviewed the consolidated balance sheet of PSS World Medical, Inc. and subsidiaries as of October 3, 2003 and the related consolidated statements of operations and cash flows for the three- and six- month periods ended October 3, 2003. These consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of PSS World Medical, Inc. and subsidiaries as of March 28, 2003, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated May 22, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of March 28, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

KPMG LLP

Jacksonville, Florida
November 7, 2003

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE COMPANY

PSS World Medical, Inc. (the “Company” or “PSSI”), a Florida corporation, is a specialty marketer and distributor of medical products to alternate-site healthcare providers including physician offices, long-term care facilities, and home care providers through 46 full-service distribution centers, which serve all 50 states throughout the United States of America. Since its inception in 1983, PSSI has become a leader in the two market segments it serves as a result of value-added, solution-based marketing programs, a customer differentiated distribution and service model, a consultative sales force with extensive product knowledge, unique arrangements with product manufacturers, innovative information systems, acquisitions, and a culture of performance. During fiscal years 2000 through 2003, the Company has focused on business operations, growing through innovative solution-based marketing programs, maximizing its core distribution capability and efficiency, and improving management business processes.

The Company currently conducts business through two operating segments, the Physician Business and the Elder Care Business. These strategic segments serve a diverse customer base. A third reporting segment, titled Corporate Shared Services, includes allocated and unallocated costs of corporate departments that provide services to the operating segments and overhead associated with the Imaging Business, which was sold on November 18, 2002.

Historically, the Company conducted business under a third operating segment, the Imaging Business. On November 18, 2002, the Company completed the sale of the Imaging Business, or the Diagnostic Imaging, Inc. subsidiary (“DI”), a distributor of medical diagnostic imaging supplies, chemicals, equipment, and services to the acute and alternate-care markets in the United States of America. As a result, DI’s results of operations have been classified as discontinued operations for all periods presented. Refer to Note 12, Discontinued Operations, in the accompanying financial statements for a further discussion.

THE INDUSTRY

According to industry estimates, the medical supply and equipment segment of the healthcare industry in the United States of America represents an approximate $34 billion market. This market is comprised of medical products and equipment that are distributed to alternate-site healthcare providers, including physician offices, long-term care and assisted living facilities, home healthcare agencies, dental offices, and other alternate-site providers, such as outpatient surgery centers, podiatrists, and veterinarians. The Company’s primary focus is the distribution of medical products and equipment to physician offices, long-term care and assisted living facilities, and home healthcare providers, which represents an approximate $10 billion market.

The medical products distribution industry continues to experience growth due to the aging population, increased healthcare awareness, the proliferation of medical technology and testing, new pharmacology treatments, and expanded third-party insurance coverage. In addition, the physician market continues to benefit from the shift of procedures and diagnostic testing in hospitals to the alternate site, particularly physician offices, despite significantly lower pricing of hospital medical products. As the cosmetic surgery and elective procedure markets continue to grow, physicians are increasingly performing more of these procedures in their offices. The elder care market continues to benefit from the increasing growth rate of the population of elderly Americans. The January 2000 U.S. Bureau of the Census estimates that the elderly population in America will more than double by the year 2040. In 2000, four million Americans were age 85 years and older, the part of the population most in need of long-term care and elder care services. By the year 2040, that number is projected to more than triple to over 14 million. The population age 65 to 84 years is projected to more than double in the same time period. As of December 31, 2002, the estimated growth rate for the physician and elder care markets was approximately 3.8% and 2.3%, respectively.

As a result of these market dynamics, the annual expenditures for healthcare services continues to increase in the United States of America. The Centers for Medicaid and Medicare Services (CMS), Office of the Actuary, National Health Statistics Group, cited in its 2002 study, Trends and Indicators in the Changing Health Care Marketplace, that total national health care spending reached $1.3 trillion in 2000, or 13.2% of the nation’s gross domestic product. Health care spending is projected to reach $2.6 trillion in 2010, an estimated 16.8% of the gross domestic product, the benchmark measure for annual production of goods and services in the United States of America.

Page 22

The healthcare industry is subject to extensive government regulation, licensure, and operating compliance procedures. National healthcare reform has been the subject of a number of legislative initiatives by Congress. Additionally, government and private insurance programs fund a large portion of the total cost of medical care. During 1997, the Balanced Budget Act passed by Congress significantly reduced reimbursement rates for nursing homes and home healthcare providers, affecting spending levels and overall financial viability of these institutions. The Company has responded by tightening credit policies and increasing its allowance for doubtful accounts. While there have been recent announcements from Washington, DC of increases in Medicaid funding and reimbursement rates for long-term care facilities, there can be no assurances that such relief will increase the level of spending of these institutions, or improve their overall financial condition.

OPERATING HIGHLIGHTS AND TRENDS

The following tables set forth certain financial information by business segment and give retroactive effect to the restatement of the Imaging Business as discontinued operations. All dollar amounts presented below are in thousands unless otherwise indicated.

	Three Months Ended						Six Months Ended
	October 3, 2003			September 27, 2002			October 3, 2003			September 27, 2002
Net Sales:
Physician Business	$	225,349		$	184,415		$	421,800		$	367,604
Elder Care Business		121,306			104,701			234,145			208,294
Total Company	$	346,655		$	289,116		$	655,945		$	575,898
Income from Operations:
Physician Business	$	12,198		$	5,697		$	19,408		$	11,219
Elder Care Business		5,151			4,749			9,307			8,572
Corporate Shared Services		(3,614	)		(5,323	)		(8,218	)		(7,608	)
Total Company	$	13,735		$	5,123		$	20,497		$	12,183
Days Sales Outstanding:(a)
Physician Business		40.3			44.5
Elder Care Business		51.8			52.4
Days On Hand:(b)
Physician Business		38.3			42.0
Elder Care Business		26.4			32.6
Days in Accounts Payable:(c)
Physician Business		38.8			44.8
Elder Care Business		26.4			34.0
Cash Conversion Days:(d)
Physician Business		39.8			41.7
Elder Care Business		51.8			51.0
Inventory Turnover:(e)
Physician Business		9.4	x		8.6	x
Elder Care Business		13.6	x		11.0	x

Page 23

	Three Months Ended				Six Months Ended
	October 3, 2003		September 27, 2002		October 3, 2003		September 27, 2002
Cash Flow Information:
Net cash (used in) provided by
operating activities	(19,696	)	459		(12,964	)	20,565
Net cash used in investing
activities	(17,671	)	(8,746	)	(21,420	)	(12,150	)
Net cash provided by (used in)
financing activities	30,846		(29,053	)	24,825		(28,983	)

	As of
	October 3, 2003			March 28, 2003
Net Debt:
Bank debt	$	111,949		$	83,000
Cash and cash equivalents		(9,612	)		(19,171	)
Net bank debt	$	102,337		$	63,829
Asset Management:
Operational working capital (f)	$	191,649		$	143,505
Working capital (g)		94,731			88,920

(a) Days sales outstanding (“DSO”) is average accounts receivable divided by average net sales. Average accounts receivable is the sum of accounts receivable, net of allowance for doubtful accounts, at the beginning and ending of the second quarter divided by two. Average net sales is the sum of net sales for each of the three months in the second quarter divided by ninety.

(b) Days on hand (“DOH”) is average inventory divided by average cost of goods sold (“COGS”). Average inventory is the sum of inventory at the beginning and ending of the second quarter divided by two. Average COGS is COGS for each of the three months in the second quarter divided by ninety.

(c) Days in accounts payable (“DIP”) is average accounts payable divided by average COGS. Average accounts payable is the sum of accounts payable at the beginning and ending of the second quarter divided by two.

(d) Cash conversion days is the sum of DSO and DOH, less DIP.

(e) Inventory turnover is 360 divided by DOH.

(f) Operational working capital is the sum of accounts receivable and inventory, less accounts payable.

(g) Working capital is current assets less current liabilities.

Page 24

THREE MONTHS ENDED OCTOBER 3, 2003 VERSUS THREE MONTHS ENDED SEPTEMBER 27, 2002

NET SALES

	For the Three Months Ended
(dollars in millions)	October 3, 2003		September 27, 2002		Increase		Percent Change
Physician Business	$	225.4	$	184.4	$	41.0		22.2	%
Elder Care Business		121.3		104.7		16.6		15.9	%
Total Company	$	346.7	$	289.1	$	57.6		19.9	%

The comparability of net sales quarter over quarter was impacted by the number of selling days in each quarter. The three months ended October 3, 2003 and September 27, 2002 consisted of 67 and 63 selling days, respectively. The following table summarizes the impact of the number of selling days on net sales quarter over quarter.

	Average Daily Net Sales
(dollars in millions)	October 3, 2003		September 27, 2002		Increase		Percent Change
Physician Business	$	3.4	$	2.9	$	0.5		14.9	%
Elder Care Business		1.8		1.7		0.1		8.9	%
Total Company	$	5.2	$	4.6	$	0.6		12.7	%

Physician Business

The change in net sales is primarily attributable to (i) an increase in branded consumable product sales of approximately $19.0 million, (ii) an increase in private label consumable product sales of approximately $2.9 million, (iii) an increase in pharmaceutical sales of approximately $12.2 million, of which approximately $3.4 million was attributable to seasonal flu vaccine sales, and (iv) an increase in equipment sales of approximately $7.0 million. Net sales continued to be positively impacted by the following revenue growth programs focused on consumable products, pharmaceuticals, and equipment.

• Advantage Club is the Physician Business' customer membership club that enables customers to participate in exclusive promotions for a broad selection of commonly used products. Advantage Club was launched in June 2003.
  
  
• Rx Extreme is the Physician Business' comprehensive program offering pharmaceutical, vaccine and general injectibles products to office-based physicians in all 50 states. The term "Extreme" symbolizes the Physician Business' significant commitment to its customers to become the leading provider of these products and related services to the U.S. physician market. Rx Extreme was launched in June 2003.
  
  
• Can-Do is the Physician Business' equipment marketing program that enables customers to access a broad portfolio of industry-leading laboratory and diagnostic equipment, as well as certain exclusive products available only through the Physician Business.

Page 25

Elder Care Business

During the three months ended October 3, 2003, net sales to nursing home facilities increased $6.6 million, of which approximately $4.4 million was attributable to regional nursing home facilities. In addition, net sales to homecare providers increased $6.8 million, while housekeeping product sales increased approximately $1.1 million. This growth in net sales resulted from new customers, increased penetration in existing customer facilities, and the introduction of new product lines. However, the growth was partially offset by the loss of revenues attributable to national chain customers divesting unprofitable nursing home facilities and the loss of Integrated Health Services, Inc. (“IHS”), a national chain customer. The net sales growth was achieved through the continued implementation of the following innovative customer solutions:

• ANSWERS and ANSWERS Housekeeping (“ANSWERS HK”) are marketing programs that align improved business processes typically in the ordering process of nursing home operations and purchasing, with efficient distribution activities of the Elder Care Business. The goals of the programs are to produce savings for the customer, vendor, and distributor. In addition to reducing distribution costs by encouraging more efficient buying patterns, ANSWERS and ANSWERS HK provide opportunities for manufacturing partners to increase sales volume of category-leading, name-brand products while providing customers the opportunity to purchase higher quality products at reduced prices.
  
  
• Partners in Efficiency (“P.I.E.”) is a product program designed to reduce customers' product procurement costs and drive operating efficiencies in their businesses by committing to certain purchasing levels and standardized ordering procedures.
  
  
• Fast Accurate Supply Technology (“F.A.S.T”) is an ordering, bar-code scanning, inventory management system that utilizes a Palm Pilot-based operating platform.

In addition, on September 4, 2003, the Company acquired certain assets and assumed certain liabilities of a long-term care medical supply distributor, which positively impacted net sales. The acquired company provided approximately $2.0 million of additional net sales during the three months ended October 3, 2003.

During the three months ended October 3, 2003, the Company signed an exclusive distribution agreement with Graham Field Health Products, Inc. (“Graham Field”) to market durable medical equipment (“DME”) to the long-term care, assisted living, and home care markets. Management expects to begin selling DME equipment under this agreement beginning in the third quarter of fiscal year 2004.

GROSS PROFIT

Gross profit for the three months ended October 3, 2003 totaled $98.1 million, an increase of $15.6 million, or 18.9%, from gross profit of $82.5 million for the three months ended September 27, 2002. Gross profit as a percentage of net sales decreased 20 basis points to 28.3% during the three months ended October 3, 2003 from 28.5% during the three months ended September 27, 2002. Gross profit increased primarily due to the growth in net sales discussed above. Gross profit as a percentage of net sales slightly decreased as a result of the increased sales volume of pharmaceutical products and equipment in the Physician Business, which generate lower gross profit. In addition, gross profit was positively impacted by higher discounts earned due to increased volume purchasing as a result of centralizing the purchasing function.

Page 26

GENERAL AND ADMINISTRATIVE EXPENSES

	For the Three Months Ended
	October 3, 2003					September 27, 2002
(dollars in millions)	Amount		% of Net Sales			Amount		% of Net Sales			Increase (Decrease)
Physician Business	$	36.5		16.2	%	$	33.6		18.2	%	$	2.9
Elder Care Business		20.2		16.7	%		17.5		16.8	%		2.7
Corporate Shared Services		3.6		--			5.4		--			(1.8	)
Total Company	$	60.3		17.4	%	$	56.5		19.5	%	$	3.8

Physician Business

General and administrative expenses decreased 2.0% as a percentage of net sales quarter over quarter. This decrease in percentage is attributable to leveraging the net sales growth associated with various fixed costs and the benefit of cost savings as a result of completing the Rationalization Programs. Warehouse expenses increased $1.1 million period over period while warehouse expense as a percent of net sales decreased. This decrease is a result of a reduction in the Company’s delivery fleet and optimization of shipments between branches, offset by an increase in salary expenses for two positions that were created as a result of the centralization of the purchasing function and the consolidation of the distribution centers. The following details other significant dollar increases or decreases in various components of general and administrative expenses: (i) incentive compensation increased approximately $0.5 million as a result of improved branch profitability, (ii) employee benefits and insurance increased approximately $0.5 million as a result of increased medical claims quarter over quarter, (iii) other general and administrative expenses decreased approximately $0.7 million which is discussed below under the caption Other General and Administrative Expenses, and (iv) salary expenses decreased approximately $0.6 million related to lower head count as a result of the Rationalization Programs and the centralization of the accounts payable function to corporate headquarters in Jacksonville, Florida, offset by general wage increases.

Elder Care Business

General and administrative expenses as a percentage of net sales remained relatively constant quarter over quarter. Warehouse expenses increased $0.8 million period over period while warehouse expense as a percent of net sales decreased. This decrease is a result of leveraging the net sales growth across the fixed payroll costs for warehouse personnel and delivery costs. The following details other significant dollar increases in various components of general and administrative expenses: (i) the provision for bad debt expense increased approximately $0.9 million primarily due to an increase in the overall accounts receivable base of approximately $10.0 million resulting from the net sales growth discussed above and an increase in past due amounts, and (ii) salary expense increased approximately $0.3 million for general wage increases and additional employees as a result of the long-term care distributor acquisition on September 4, 2003.

Corporate Shared Services

The decrease in general and administrative expenses is primarily attributable to (i) a decrease in other general and administrative expenses of approximately $4.5 million which is discussed below under the caption Other General and Administrative Expenses, (ii) a decrease in the cost of the private data network of approximately $0.3 million as a result of reducing the number of service center locations and the conversion to a virtual private network for data transmission, offset by (iii) an increase in incentive compensation of approximately $0.5 million which is primarily related to the adoption of the Shareholder Value Plan during fiscal year 2003, (iv) an increase in legal and professional fees of approximately $0.6 million, and (v) an increase in franchise tax expense of approximately $0.5 million.

Page 27

The comparability of general and administrative expenses period over period is impacted by (i) the accounting for the disposition of the Imaging Business and (ii) the costs incurred in connection with providing certain services to the buyer under the transition services agreement. In accordance with Emerging Issues Task Force (“EITF”) Issue No. 87-24, Allocation of Interest to Discontinued Operations (“EITF 87-24”), the Company is permitted to allocate corporate overhead expenses to discontinued operations that are directly attributable to the operations of the Imaging Business. EITF 87-24 specifically states that indirect expenses are not allocable to discontinued operations. During the three months ended September 27, 2002, the Company incurred approximately $2.8 million of general and administrative expenses, which included both direct and indirect overhead expenses that were attributable to the Imaging Business. However, the Company only allocated approximately $2.1 million of these expenses to discontinued operations, which represented direct overhead expenses for the period from June 29, 2002 to September 27, 2002. Subsequent to the sale of the Imaging Business, expenses continued to be incurred by the Company for services provided to the buyer under a transition services agreement and were no longer allocated to discontinued operations. These expenses are recorded as a component of general and administrative expenses and the reimbursement is recorded in other income in the accompanying statements of operations.

Other General and Administrative Expenses

General and administrative expenses include charges related to restructuring activity, merger activity, and other items. These charges decreased approximately $5.2 million during the three months ended October 3, 2003 compared to the same period in the prior fiscal year. The following tables summarize other general and administrative expenses (in millions) by business segment:

	Three Months Ended October 3, 2003
	Physician Business		Corporate Shared Services			Total
Reversal of operational tax charge	$	--	$	(1.3	)	$	(1.3	)
Rationalization expenses		0.1		--			0.1
Total	$	0.1	$	(1.3	)	$	(1.2	)

	Three Months Ended September 27, 2002
	Physician Business			Corporate Shared Services			Total
Restructuring costs and expenses	$	(0.2	)	$	--		$	(0.2	)
Merger costs and expenses		--			0.4			0.4
Reversal of operational tax charge		--			(0.1	)		(0.1	)
Rationalization expenses		0.8			--			0.8
Other		0.2			2.9			3.1
Total	$	0.8		$	3.2		$	4.0

Page 28

The Elder Care Business recorded charges totaling $9.5 million during fiscal years 1998, 1997, and 1996 primarily related to state and local, sales and use, unclaimed property, and property tax payments that were not remitted on a timely basis to taxing authorities. These charges related to periods prior to the acquisition of Gulf South Medical Supply, Inc. in March, 1998. The Company reviewed all available information, including tax exemption notices received, and recorded charges to general and administrative expenses during the period in which the tax noncompliance issues arose. On a quarterly basis, management performs an analysis of the estimated remaining exposure and records adjustments to general and administrative expenses based on the expiration of various states statutes of limitations, the resolution of compliance audits, and current available information. During the three months ended October 3, 2003 and September 27, 2002, the Company reversed $1.3 million and $0.1 million of the previously recorded operating tax charge reserve, respectively. At October 3, 2003, there was no remaining balance in the reserve.

Rationalization expenses are costs incurred as a result of the conversion to the new ERP system, the centralization of the purchasing function, and a restructuring plan that was adopted during the fourth quarter of fiscal year 2002.

Restructuring costs and expenses for the three months ended September 27, 2002 primarily relate to charges recorded for the plans adopted by the Physician Business during the fourth quarter of fiscal year 2002. During the three months ended September 27, 2002, the Physician Business recorded charges of $0.5 million. In addition, during the quarter, management re-evaluated its estimates for previously adopted plans and reversed approximately $0.7 million of previously recorded charges.

During the three months ended September 27, 2002, the Company recorded an allowance for doubtful accounts of $2.9 million against the unsecured note receivable from the Company’s former Chairman and Chief Executive Officer. This allowance did not represent a forgiveness of debt.

SELLING EXPENSES

	For the Three Months Ended
	October 3, 2003					September 27, 2002
(dollars in millions)	Amount		% of Net Sales			Amount		% of Net Sales			Increase
Physician Business	$	20.1		8.9	%	$	17.8		9.7	%	$	2.3
Elder Care Business		3.9		3.2	%		3.1		2.9	%		0.8
Total Company	$	24.0		6.9	%	$	20.9		7.2	%	$	3.1

Physician Business and Elder Care Business

Overall, the change in selling expenses is primarily attributable to an increase in commission expense due to the growth in net sales discussed above. Commissions are generally paid to sales representatives based on gross profit dollars and gross profit as a percentage of net sales. The Physician Business’ selling expenses as a percentage of net sales decreased 80 basis points due to a decrease in gross profit as a percentage of net sales resulting from an increased sales volume of pharmaceutical products and equipment, which generate lower gross profit. The Elder Care Business’ selling expenses as a percentage of net sales increased 30 basis points due to the addition of sales representatives and regional account executives who receive guaranteed salaries and the launch of commission promotion programs to support the sales initiatives discussed above.

Page 29

INCOME FROM OPERATIONS

	For the Three Months Ended
	October 3, 2003						September 27, 2002
(dollars in millions)	Amount			% of Net Sales			Amount			% of Net Sales			Increase
Physician Business	$	12.2			5.4	%	$	5.7			3.1	%	$	6.5
Elder Care Business		5.1			4.2	%		4.7			4.5	%		0.4
Corporate Shared Services		(3.6	)		--			(5.3	)		--			1.7
Total Company	$	13.7			4.0	%	$	5.1			1.8	%	$	8.6

Income from operations for each business segment changed due to the factors discussed above.

INTEREST EXPENSE

Interest expense for the three months ended October 3, 2003 totaled $1.3 million, a decrease of $1.3 million, or 48.1%, from interest expense of $2.6 million for the three months ended September 27, 2002. In accordance with EITF 87-24, a portion of the Company’s interest expense that is not directly attributable to or related to other operations of the Company has been allocated to discontinued operations based upon the ratio of net assets to be sold to the sum of consolidated net assets plus consolidated debt. Interest expense allocated to discontinued operations was $0.9 million during the three months ended September 27, 2002. In addition, interest expense for the three months ended September 27, 2002 includes $0.4 million of accelerated amortization of debt issuance costs related to retiring $19.0 million of the 8 ½% Senior Subordinated Notes (the “Notes”). Excluding the effects of the allocation of interest expense to discontinued operations and the accelerated amortization of debt issuance costs, interest expense decreased approximately $1.8 million due to a lower average total debt outstanding and a general reduction in interest rates as a result of refinancing the Notes. The average interest rate for the three months ended October 3, 2003 was approximately 5.5% compared to 9.0% for the three months ended September 27, 2002.

OTHER INCOME (EXPENSE)

Other income for the three months ended October 3, 2003 totaled $1.1 million, an increase of $1.4 million from other expense of $0.3 million for the three months ended September 27, 2002. During the three months ended October 3, 2003, approximately $0.9 million of other income was recorded as a result of the transition services agreement associated with the sale of the Imaging Business. The Company expects such transitional services to decrease during the third quarter of fiscal year 2004. Other expense for the three months ended September 27, 2002 includes $0.7 million of redemption premiums that were paid as a result of the early extinguishment of the Notes.

PROVISION FOR INCOME TAXES

Provision for income taxes was $5.4 million for the three months ended October 3, 2003, an increase of $4.5 million from the provision for income taxes of $0.9 million for the three months ended September 27, 2002. The effective income tax rate was approximately 39.4% and 35.5% for the three months ended October 3, 2003 and September 27, 2002, respectively. The increase in the effective rate is primarily attributable to the expected increase in annual income from continuing operations before provision for income taxes. The provision for income taxes increased approximately $4.4 million as a result of an increase in income from continuing operations before provision for income taxes. The provision for income taxes for the three months ended September 27, 2002 is net of a benefit of approximately $0.4 million related to the loss on extinguishment of the Notes of $1.1 million.

Page 30

During fiscal year 2002, the Internal Revenue Service (“IRS”) notified the Company that the income tax returns for the fiscal years ended March 31, 2000 and March 30, 2001 would be examined. During the three months ended October 3, 2003, fieldwork was completed and the Company received the IRS’s report related to the fiscal years ended March 31, 2000 and March 30, 2001. The Company intends to appeal certain findings, which primarily relate to timing of tax deductions, with the Appeals Office of the IRS. Management does not anticipate the results of the audit to have a material impact on the financial condition or consolidated results of operations of the Company.

TOTAL LOSS FROM DISCONTINUED OPERATIONS

Net sales for the Imaging Business were $175.7 million for the three months ended September 27, 2002. The pretax loss from operations was $1.9 million for the three months ended September 27, 2002. An estimated pretax loss on disposal of approximately $90.3 million was recorded during the three months ended September 27, 2002, the period in which management adopted a formal plan to dispose of the Imaging Business. The Imaging Business was sold on November 18, 2002.

The Company recorded a $35.4 million income tax benefit related to the operations and disposal of the Imaging Business during the three months ended September 27, 2002. As a result of the sale of the Imaging Business, the Company recorded a total deferred tax asset of approximately $56.5 million, which represents the tax effect of the anticipated income tax net operating loss (“NOL”) generated from the transaction. Under the terms of the Stock Purchase Agreement, the Company made a joint election with the buyer to treat the transaction as a sale of assets in accordance with §338(h)(10) of the Internal Revenue Code. Management estimates that this NOL will be carried forward and applied against regular taxable income in future years. In future periods, the provision for income taxes will be recorded in the statements of operations at the appropriate effective tax rate based on income generated by the Company.

During the three months ended October 3, 2003, the Company recorded a charge of approximately $0.3 million, net of a benefit of income taxes of $0.2 million, for additional legal and professional fees associated with the arbitration proceedings. (Refer to Note 12, Discontinued Operations.)

NET INCOME

Net income for the three months ended October 3, 2003 totaled $8.0 million compared to a net loss of $55.2 million for the three months ended September 27, 2002. The net loss for the three months ended September 27, 2002 included a charge of $56.8 million for the loss from discontinued operations. Otherwise, variances are due to the factors discussed above.

SIX MONTHS ENDED OCTOBER 3, 2003 VERSUS SIX MONTHS ENDED SEPTEMBER 27, 2002

NET SALES

	For the Six Months Ended
(dollars in millions)	October 3, 2003		September 27, 2002		Increase		Percent Change
Physician Business	$	421.8	$	367.6	$	54.2		14.7	%
Elder Care Business		234.1		208.3		25.8		12.4	%
Total Company	$	655.9	$	575.9	$	80.0		13.9	%

The comparability of net sales period over period was impacted by the number of selling days in each period. The six months ended October 3, 2003 and September 27, 2002 consisted of 132 and 127 selling days, respectively. The following table summarizes the impact of the number of selling days on net sales period over period.

Page 31

	For the Six Months Ended
(dollars in millions)	October 3, 2003		September 27, 2002		Increase		Percent Change
Physician Business	$	3.2	$	2.9	$	0.3		10.4	%
Elder Care Business		1.8		1.6		0.2		8.2	%
Total Company	$	5.0	$	4.5	$	0.5		9.6	%

Physician Business

The change in net sales is primarily attributable to (i) an increase in branded consumable product sales of approximately $28.1 million, (ii) an increase in private label consumable sales of approximately $5.0 million, (ii) an increase in pharmaceutical sales of approximately $15.8 million, of which approximately $3.4 million was attributable to seasonal flu vaccine sales, (iii) an increase in equipment sales of approximately $7.8 million, offset by (iv) a decrease in immunoassay sales of approximately $2.2 million, of which approximately $1.2 million was related to the United States Food and Drug Administration recall of glycated hemoglobin in July 2002. Net sales continued to be positively impacted by the launch of the revenue growth programs during June 2003, which were discussed in the three-month net sales discussion above.

Elder Care Business

During the six months ended October 3, 2003, net sales to nursing home facilities increased approximately $10.8 million, of which approximately $7.6 million was attributable to regional nursing home facilities. In addition, net sales to homecare providers increased approximately $10.1 million, while housekeeping product sales increased approximately $2.9 million. This growth in net sales resulted from new customers, increased penetration in existing customer facilities, and the introduction of new product lines. However, the growth was partially offset by the loss of revenues attributable to national chain customers divesting unprofitable nursing home facilities and the loss of IHS. This sales growth was achieved through the continued implementation of the innovative customer solutions discussed in the three-month net sales discussion above.

In addition, on September 4, 2003, the Company acquired certain assets and assumed certain liabilities of a long-term care medical supply distributor, which positively impacted net sales. The acquired company provided approximately $2.0 million of additional net sales during the six months ended October 3, 2003. Furthermore, on September 16, 2002, the Company acquired a long-term care medical supply distributor, which contributed to an increase in net sales of approximately $4.5 million period over period.

GROSS PROFIT

Gross profit for the six months ended October 3, 2003 totaled $186.0 million, an increase of $22.7 million, or 13.9%, from gross profit of $163.3 million for the six months ended September 27, 2002. Gross profit as a percentage of net sales decreased 10 basis points to 28.3% during the six months ended October 3, 2003 from 28.4% during the six months ended September 27, 2002. Gross profit increased primarily due to the growth in net sales discussed above and gross profit as a percentage of net sales remained relatively constant period over period. Gross profit during the six months ended October 3, 2003 was positively impacted by higher discounts earned due to increased volume purchasing as a result of centralizing the purchasing function. Gross profit during the six months ended September 27, 2002 was negatively impacted by a charge of approximately $1.4 million recorded by the Physician Business to terminate the Candela Corporation distribution agreement. Gross profit as a percentage of net sales may decrease during the remainder of fiscal year 2004 due to an expected increased sales volume of pharmaceutical products and equipment in the Physician Business, which generate lower gross profit.

Page 32

GENERAL AND ADMINISTRATIVE EXPENSES

	For the Six Months Ended
	October 3, 2003					September 27, 2002
(dollars in millions)	Amount		% of Net Sales			Amount		% of Net Sales			Increase
Physician Business	$	72.1		17.1	%	$	67.2		18.3	%	$	4.9
Elder Care Business		39.4		16.8	%		35.1		16.9	%		4.3
Corporate Shared Services		8.2		--			7.6		--			0.6
Total Company	$	119.7		18.3	%	$	109.9		19.1	%	$	9.8

Physician Business

General and administrative expenses decreased 1.2% as a percentage of net sales period over period. This decrease in percentage is attributable to leveraging the net sales growth associated with various fixed costs and the benefit of cost savings as a result of completing the Rationalization Programs. Warehouse expenses increased $2.4 million period over period while warehouse expense as a percent of net sales decreased. This decrease is a result of a reduction in the Company’s delivery fleet and optimization of shipments between branches, offset by an increase in salary expenses for two positions that were created as a result of the centralization of the purchasing function and the consolidation of the distribution centers. The following details other significant dollar increases or decreases in various components of general and administrative expenses: (i) depreciation expense increased approximately $0.5 million for completed phases of the ERP system, myPSS.com electronic commerce platform, and supply chain initiatives, (ii) incentive compensation increased approximately $0.6 million as a result of improved branch profitability, (iii) employee benefits and insurance increased approximately $0.8 million as a result of increased medical claims quarter over quarter, (iv) meeting expenses increased approximately $1.0 million primarily as a result of the two regional sales meetings held to launch the new sales growth programs, offset by (v) a decrease in other general and administrative expenses of approximately $1.4 million which is discussed below under the caption Other General and Administrative Expenses, and (vi) a decrease in salary expenses of approximately $1.3 million related to lower head count as a result of the Rationalization Programs and the centralization of the accounts payable function to corporate headquarters in Jacksonville, Florida, offset by general wage increases.

Elder Care Business

General and administrative expenses as a percentage of net sales remained relatively constant period over period. Warehouse expenses increased $1.8 million period over period while warehouse expense as a percent of net sales was relatively constant. The following details the significant dollar increases in various components of general and administrative expenses: (i) the provision for bad debt expense increased approximately $1.4 million primarily due to an overall increase in the accounts receivable base of approximately $12.0 million resulting from the net sales growth discussed above, an increase in past due amounts, and a customer filing for bankruptcy during the three months ended June 30, 2003, and (ii) salary expense increased approximately $0.4 million due to general wage increases.

Corporate Shared Services

The increase in general and administrative expenses is primarily attributable to (i) an increase in incentive compensation of approximately $1.2 million which is primarily related to the adoption of the Shareholder Value Plan during fiscal year 2003, (ii) an increase in business insurance expense of approximately $0.7 million due to rate increases on the corporate umbrella and director and officer policies, offset by (iii) a decrease in other general and administrative expenses of approximately $4.9 million which is discussed below under the caption Other General and Administrative Expenses, and (iv) a decrease in the cost of the private data network of approximately $0.7 million as a result of reducing the number of service center locations and the conversion to a virtual private network for data transmission.

Page 33

As discussed above, the comparability of general and administrative expenses period over period is impacted by (i) the accounting for the disposition of the Imaging Business and (ii) the costs incurred in connection with providing certain services to the buyer under the transition services agreement. During the six months ended September 27, 2002, the Company incurred approximately $5.7 million of general and administrative expenses, which included both direct and indirect overhead expenses that were attributable to the Imaging Business. However, the Company only allocated approximately $4.3 million of these expenses to discontinued operations, which represented direct overhead expenses for the period from March 30, 2002 to September 27, 2002. The expenses associated with providing services under the transition services agreement are recorded as a component of general and administrative expenses and the reimbursement is recorded in other income in the accompanying statements of operations.

Other General and Administrative Expenses

General and administrative expenses include charges related to restructuring activity, merger activity, and other items. These charges decreased approximately $6.3 million period over period. The following tables summarize other general and administrative expenses (in millions) by business segment:

	Six Months Ended October 3, 2003
	Physician Business		Corporate Shared Services			Total
Restructuring costs and expenses	$	0.4	$	--		$	0.4
Accelerated depreciation		0.1		--			0.1
Reversal of operational tax charge		--		(1.4	)		(1.4	)
Rationalization expenses		0.6		--			0.6
Other		0.2		--			0.2
Total	$	1.3	$	(1.4	)	$	(0.1	)

	Six Months Ended October 3, 2003
	Physician Business		Corporate Shared Services			Total
Restructuring costs and expenses	$	0.5	$	--		$	0.5
Merger costs and expenses		--		0.7			0.7
Accelerated depreciation		0.1		--			0.1
Reversal of operational tax charge		--		(0.1	)		(0.1	)
Rationalization expenses		1.8		--			1.8
Other		0.3		2.9			3.2
Total	$	2.7	$	3.5		$	6.2

Restructuring costs and expenses for the six months ended October 3, 2003 and September 27, 2002 primarily relate to charges recorded for the plans adopted by the Physician Business during the fourth quarter of fiscal year 2003 and the fourth quarter of fiscal year 2002. Management does not expect material charges related to these plans during the remainder of fiscal year 2004. During the six months ended September 27, 2002, the Physician Business recorded charges of $1.0 million related to the plan that was adopted during the fourth quarter of fiscal year 2002. In addition, during the quarter, management re-evaluated its estimates for previously adopted plans and reversed approximately $0.7 million.

During the six months ended October 3, 2003 and September 27, 2002, the Company reversed $1.4 million and $0.1 million of the previously recorded operating tax charge reserve, respectively. At October 3, 2003, there was no remaining balance in the reserve.

Rationalization expenses are costs incurred as a result of the conversion to the new ERP system, the centralization of the purchasing function, and a restructuring plan that was adopted during the fourth quarter of fiscal year 2002.

Merger costs and expenses for the six months ended September 27, 2002 include costs related to employee retention bonuses to retain certain officers and key employees that were fully paid during fiscal year 2003.

During the six months ended September 27, 2002, the Company recorded an allowance for doubtful accounts of $2.9 million against the unsecured note receivable from the Company’s former Chairman and Chief Executive Officer.

SELLING EXPENSES

	For the Six Months Ended
	October 3, 2003					September 27, 2002
(dollars in millions)	Amount		% of Net Sales			Amount		% of Net Sales			Increase
Physician Business	$	38.4		9.1	%	$	35.1		9.6	%	$	3.3
Elder Care Business		7.3		3.1	%		6.1		2.9	%		1.2
Total Company	$	45.7		7.0	%	$	41.2		7.2	%	$	4.5

Physician Business and Elder Care Business

Overall, the change in selling expenses is primarily attributable to an increase in commission expense due to the growth in net sales discussed above. Commissions are generally paid to sales representatives based on gross profit dollars and gross profit as a percentage of net sales. The Physician Business’ selling expenses as a percentage of net sales decreased 50 basis points due to a decrease in gross profit as a percentage of net sales resulting from an increased sales volume of pharmaceutical products and equipment, which generate lower gross profit. The Elder Care Business’ selling expenses as a percentage of net sales increased 20 basis points due to the addition of sales representatives and regional account executives who receive guaranteed salaries and the launch of commission promotion programs to support the sales initiatives discussed above.

INCOME FROM OPERATIONS

	For the Six Months Ended
	October 3, 2003						September 27, 2002
(dollars in millions)	Amount			% of Net Sales			Amount			% of Net Sales			Increase (Decrease)
Physician Business	$	19.4			4.6	%	$	11.2			3.1	%	$	8.2
Elder Care Business		9.3			4.0	%		8.6			4.1	%		0.7
Corporate Shared Services		(8.2	)		--			(7.6	)		--			(0.6	)
Total Company	$	20.5			3.1	%	$	12.2			2.1	%	$	8.3

Income from operations for each business segment changed due to the factors discussed above.

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INTEREST EXPENSE

Interest expense for the six months ended October 3, 2003 totaled $2.5 million, a decrease of $2.4 million, or 49.7%, from interest expense of $4.9 million for the six months ended September 27, 2002. Interest expense allocated to discontinued operations was $1.7 million during the six months ended September 27, 2002. In addition, interest expense for the six months ended September 27, 2002 includes $0.4 million of accelerated amortization of debt issuance costs related to retiring $19.0 million of the Notes. Excluding the effects of the allocation of interest expense to discontinued operations and the accelerated amortization of debt issuance costs, interest expense decreased approximately $3.7 million due to lower average total debt outstanding and a general reduction of interest rates primarily due to refinancing the Notes. The average interest rate for the six months ended October 3, 2003 was approximately 5.1% compared to 8.5% for the six months ended September 27, 2002.

OTHER INCOME

Other income for the six months ended October 3, 2003 totaled $3.2 million, an increase of $3.1 million from other income of $0.1 million for the six months ended September 27, 2002. During the six months ended October 3, 2003, approximately $2.8 million of other income was recorded as a result of the transition services agreement associated with the sale of the Imaging Business. The Company expects such transitional services to decrease during the third quarter of fiscal year 2004. The increase in other income was offset by a decrease in the amount of customer finance charge income of approximately $0.2 million on the Physician Business’ customer accounts. Other income for the six months ended September 27, 2002 includes $0.7 million of redemption premiums that were paid as a result of the early extinguishment of the Notes.

PROVISION FOR INCOME TAXES

Provision for income taxes was $8.5 million for the six months ended October 3, 2003, an increase of $5.6 million from the provision for income taxes of $2.9 million for the six months ended September 27, 2002. The effective income tax rate was approximately 39.6% and 37.1% for the six months ended October 3, 2003 and September 27, 2002, respectively. The increase in the effective rate is primarily attributable to the expected increase in annual income from continuing operations before provision for income taxes. The provision for income taxes increased approximately $4.9 million as a result of an increase in income from continuing operations before provision for income taxes. The provision for income taxes for the six months ended September 27, 2002 is net of a benefit of approximately $0.4 million related to the loss on extinguishment of the Notes of $1.1 million.

TOTAL LOSS FROM DISCONTINUED OPERATIONS

Net sales for the Imaging Business were $352.5 million for the six months ended September 27, 2002. The pretax loss from operations was $3.1 million for the six months ended September 27, 2002. An estimated pretax loss on disposal of approximately $90.3 million was recorded during the three months ended September 27, 2002, the period in which management adopted a formal plan to dispose of the Imaging Business. The Imaging Business was sold on November 18, 2002.

The Company recorded a $35.9 million income tax benefit related to the operations and disposal of the Imaging Business during the six months ended September 27, 2002. As a result of the sale of the Imaging Business, the Company has recorded a total deferred tax asset of approximately $56.5 million, which represents the tax effect of the anticipated income tax NOL to be generated from the transaction.

During the six months ended October 3, 2003, the Company recorded a charge of approximately $0.3 million, net of a benefit of income taxes of $0.2 million, for additional legal and professional fees associated with the arbitration proceedings. (Refer to Note 12, Discontinued Operations.)

NET INCOME

Net income for the six months ended October 3, 2003 totaled $12.6 million compared to a net loss of $52.6 million for the six months ended September 27, 2002. The net loss for the six months ended September 27, 2002 included a charge of $57.5 million for the loss from discontinued operations. Otherwise, variances are due to the factors discussed above.

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LIQUIDITY AND CAPITAL RESOURCES

As the Company’s business grows, its cash and working capital requirements will also continue to increase as a result of the anticipated growth of the Company’s operations. The Company expects the overall growth in the business will be funded through a combination of cash flows from operating activities, borrowings under the revolving line of credit, and other financing arrangements.

Cash Flows From Operating, Investing, and Financing Activities

	Six Months Ended
(dollars in millions)	October 3, 2993			September 27, 2002
Operating activities	$	(13.0	)	$	20.6
Investing activities		(21.4	)		(12.2	)
Financing activities		24.8			(29.0	)

Cash used in operations during the six months ended October 3, 2003 was primarily related to an increase in accounts receivable and inventories and a decrease in accounts payable. Accounts receivable increased approximately $30.7 million as a result of the successful sales growth initiatives launched during the first quarter of fiscal year 2004 in the Physician and Elder Care Businesses. Inventories increased approximately $15.5 million primarily related to support the Physician Business’ pharmaceutical sales initiative, the Elder Care Business’ DME sales initiative as a result of the Graham Field exclusive distribution agreement, and the Elder Care Business’ investment in the housekeeping product line. In an effort to recognize additional cash discounts, the Company accelerated its payments to selected vendors to take advantage of more favorable discount terms, which decreased accounts payable approximately $2.4 million.

Days sales outstanding for the Physician and Elder Care Businesses decreased quarter over quarter and inventory turnover increased quarter over quarter. However, days in accounts payable decreased quarter over quarter, which reflected the Company accelerating payments to take advantage of early pay discounts.

Cash provided by operations during the six months ended September 27, 2002 was positively impacted by the continued implementation of working capital reduction initiatives that started in the last half of fiscal year 2001 and continued into fiscal year 2003. During the six months ended September 27, 2002, accounts payable increased approximately $9.4 million, accounts receivable increased approximately $6.9 million, and inventories decreased approximately $4.7 million, resulting in a net $7.2 million decrease in operating working capital, which positively impacted operating cash flows.

Cash used in investing activities was higher during the six months ended October 3, 2003 compared to the six months ended September 27, 2002 primarily due to the payment for the acquired company and the payment of transaction costs related to the sale of the Imaging Business. Capital expenditures during the six months ended October 3, 2003 and September 27, 2002 totaled $6.3 million and $6.2 million, respectively, of which approximately $3.6 million and $2.1 million related to the continued development and enhancement of the Company’s ERP system, electronic commerce platforms, and supply chain integration. Capital expenditures related to the distribution center expansions as a result of the Rationalization Programs were approximately $1.3 million and $2.8 million during the six months ended October 3, 2003 and September 27, 2002, respectively.

Cash provided by financing activities during the six months ended October 3, 2003 was primarily a result of increasing the amount outstanding under the revolving line of credit. These proceeds were used to fund the purchase of the long-term care medical supply distributor and the growth in the overall business. Cash used for the repurchase of the Company’s common stock was $5.6 million and $9.5 million during the six months ended October 3, 2003 and September 27, 2002, respectively. Repurchases of common stock were made under the approved share repurchase programs. The repurchases were primarily funded by cash flows from operations. During the six months ended October 3, 2003, the Company repurchased approximately 1.0 million shares of common stock at an average price of $5.92 per common share. During the six months

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ended September 27, 2002, the Company repurchased approximately 1.3 million shares of the Company’s common stock at an average price of $7.72 per common share. Cash used to retire the Notes was approximately $19.7 million during the six months ended September 27 2002. The Company used its availability under the revolving line of credit to retire the Notes. In addition, on October 1, 2003, the Company received approximately $1.2 million from the former Chairman and Chief Executive Officer for full payment of one of his outstanding notes receivable.

Revolving Credit Agreement

On May 20, 2003, the Company entered into an amended and restated Credit Agreement (the “Credit Agreement”), by and among the Company, as borrower thereunder (the “Borrower”), the subsidiaries of the Borrower party thereto, the lenders from time to time party thereto (the “Lenders”), and Bank of America, N.A., as Agent for the Lenders. The Credit Agreement provides for a three-year credit facility consisting of an aggregate $150 million revolving line of credit and letters of credit (the “Credit Facility”). Availability of borrowings under the Credit Facility depends upon the amount of a borrowing base consisting of accounts receivable and, upon satisfaction of certain requirements, inventory. The Credit Facility bears interest at the Bank’s prime rate plus a margin of between 0.00% and 1.00% based on the Company’s ratio of funded debt to earnings before interest, taxes, depreciation, and amortization (“EBITDA”), as defined in the Credit Agreement, or at LIBOR plus a margin of between 1.75% and 3.00% based on the Company’s ratio of funded debt to EBITDA. Under the Credit Agreement, the Company and its subsidiaries are subject to certain covenants, including but not limited to, limitations on (i) paying dividends and repurchasing stock, (ii) selling or transferring assets, (iii) making certain investments (including acquisitions), (iv) incurring additional indebtedness and liens, and (v) annual capital expenditures. Initial proceeds from the Credit Facility were used to refinance existing indebtedness outstanding under the original credit facility and future proceeds will be used to issue letters of credit and finance the ongoing working capital requirements of the Company. The Credit Facility matures on March 28, 2006. At October 3, 2003 and March 28, 2003, there was $111.9 million and $83.0 million, respectively, outstanding under the revolving line of credit.

During the three months ended June 28, 2003, the Company entered into an interest rate swap agreement to hedge the variable interest rate debt of its revolving line of credit. Under the terms of the interest rate swap agreement, the Company makes payments based on the fixed rate and will receive interest payments based on the 1-month LIBOR. The changes in market value of this financial instrument are highly correlated with changes in market values of the hedged item both at inception and over the life of the agreement. Amounts received or paid under the interest rate swap agreement are recorded as reductions or additions to interest expense. In accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133, the Company’s interest rate swap agreement has been designated as a cash flow hedge with changes in fair value recognized in accumulated other comprehensive loss in the accompanying consolidated balance sheets.

The swap carries a notional principal amount of $35.0 million and effectively fixes the interest rate on a portion of the revolving line of credit to 2.195%, prior to applying the funded debt to EBITDA margin discussed above. The swap agreement expires on March 28, 2006 and settles monthly until expiration. At October 3, 2003, the Company recorded an unrealized gain, net of taxes, for the estimated fair value of the swap agreement in accumulated other comprehensive loss in the accompanying balance sheet.

Future Minimum Obligations

In the normal course of business, the Company enters into obligations and commitments that require future contractual payments. The commitments primarily result from repayment obligations for borrowings under the revolving line of credit, as well as contractual lease payments for facility, vehicle, and equipment leases, and contractual payments under noncompetition agreements and employment agreements. The following table presents, in aggregate, scheduled payments under contractual obligations for the Physician Business, the Elder Care Business, and Corporate Shared Services (in thousands):

Page 38

	Fiscal Years
	2004 (remaining 6 months)		2005		2006		2007		2008		Thereafter		Total
Revolving line of credit(a)	$	111,949	$	--	$	--	$	--	$	--	$	--	$	111,949
Operating leases:
Operating		10,560		17,669		12,518		9,185		4,493		6,294		60,719
Restructuring		536		596		243		19		--		--		1,394
Noncompetition agreements		289		219		36		35		28		114		721
Employment agreements		--		162		--		--		--		--		162
Purchase commitments(b)		3,550		7,350		7,868		8,350		8,876		4,588		40,582
Total	$	126,884	$	25,996	$	20,665	$	17,589	$	13,397	$	10,996	$	215,527

(a) The revolving line of credit is classified as a current liability in accordance with EITF No. 95-22, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements That Include both a Subjective Acceleration Clause and a Lock-Box Arrangement; however, the New Credit Facility does not expire until March 26, 2006. The Company is not obligated to repay the amount outstanding under the revolving line of credit during fiscal year 2004.

(b) The purchase commitments primarily relate to an exclusive distribution agreement entered into by the Elder Care Business, whereby a minimum purchase of $7.0 million of product by September 30, 2004 is required. For each one year period thereafter through September 2008, the purchases shall not be less than the sum of $7.0 million plus 7.0% compounded annually.

Other

As of March 28, 2003, the Company has not entered into any material working capital commitments that require funding. The Company believes that the expected cash flows from operations, availability under the revolving line of credit, and capital markets are sufficient to meet the Company’s anticipated future requirements for working capital, capital expenditures, and acquisitions for the foreseeable future. Currently, the Company is in the process of increasing its revolving line of credit from $150 million to $200 million. The Company believes this will be completed during the quarter ended December 31, 2003.

The Company may, from time-to-time, seek to retire its outstanding debt or equity through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The consolidated financial statements require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. Management evaluates the estimates, judgments and the policies underlying these estimates on a periodic basis as situations change, and regularly discusses financial events, policies, and issues with members of our audit committee and our independent accountants. The significant accounting policies, which management and the audit committee believe are the most critical to fully understand and evaluate the Company’s financial position and results of operations, include those detailed in the Company’s Annual Report on Form 10-K for the year ended March 28, 2003 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. During the three months ended October 3, 2003, the following disclosure was updated to reflect changes in the long-term care industry.

Page 39

Estimating Allowances for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability to collect outstanding amounts due from its customers. The allowances include specific amounts for those accounts that are likely to be uncollectible, such as bankruptcies, and general allowances for those accounts that management currently believes to be collectible but later become uncollectible. Estimates are used to determine the allowances for bad debts and are based on historical collection experience, current economic trends, credit-worthiness of customers, changes in customer payment terms, and percentages applied to the accounts receivable aging categories. The percentage of each aging category that is reserved is determined by analyzing historical write-offs and current trends in the credit quality of the customer base. Management performs ongoing credit evaluations by reviewing the customer’s current financial information. A credit review is performed on new customers in the Physician Business and an annual credit review is performed on all major customers in the Elder Care Business. At a minimum, each Elder Care customer account is reviewed annually. Adjustments to credit limits and allowances for bad debts are made based upon payment history and the customer’s current credit worthiness. If the financial condition of the Company’s customers were to deteriorate or improve, allowances may be adjusted which will impact general and administrative expenses and accounts receivable.

The United States Federal Government recently enacted changes to the Medicare Prospective Pay System (“PPS”) that became effective October 1, 2003. PPS, originally enacted in July 1998, limited government payments to long-term care providers to federally established cost levels. The recent changes to Medicare resulted in an approximate $850 million addition to reimbursement funding for providers of elder care services that are part of the federal Medicare annual budget. In addition, the United States Federal Government also increased state Medicaid funding by $10 billion for providers of elder care services. As a result of the recent Medicare changes, providers of elder care services and the elder care industry are anticipated to receive increased reimbursement from these sources. However, there can be no assurances that the elder care industry will gain greater financial stability or that these levels of reimbursement will continue in future periods.

No material revisions have been made to the allowance methodology for the Elder Care Business subsequent to the quarter ended December 29, 2000. However, management believes that the recent change to PPS that became effective October 1, 2003, may positively impact the financial condition for elder care providers and financial strength of the entire elder care industry. Therefore, adjustments to the allowance methodology may be required during the remainder of fiscal year 2004 as management expects improvement in the credit quality of the customer base and less bad debt write-offs as a result of the recent Medicare changes. Any adjustments will be considered a change in accounting estimate and will be recorded prospectively in accordance with Accounting Principles Board Opinion No. 20, Accounting Changes.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 1, Background and Basis of Presentation, for a discussion of recent accounting pronouncements and their impact on the Company’s financial condition and results of operations.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes there has been no material change in its exposure to market risk from that discussed in Item 7A in the Annual Report on Form 10-K for the fiscal year ended March 28, 2003.

ITEM 4.     CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures. The Company’s Principal Executive Officer and Principal Financial Officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as of the end of the period covered by this report (the “Evaluation Date”). Based on that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that the Company’s current disclosure controls and procedures are effective, providing them with material information relating to the Company, including its consolidated subsidiaries, as required to be disclosed in the reports the Company files or submits under the Exchange Act on a timely basis.

Changes in internal controls. There has been no significant change in the Company’s internal controls over financial reporting identified in connection with the foregoing evaluation that occurred during the last quarter and that has materially affected, or is reasonably likely to material affect, the Company’s internal controls over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

See Note 11, Commitments and Contingencies, of this Form 10-Q and Item 3 of the Company’s Annual Report on Form 10-K for the year ended on March 28, 2003.

ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The 2003 Annual Meeting of Stockholders was held on September 4, 2003.

(b) The following directors were elected to serve a three-year term of office until the 2006 Annual Meeting of Stockholders or until their successors have been duly elected and qualified. Of the 57,398,803 shares (1 vote per share) of common stock represented at the meeting, the directors were elected by the following votes:

	Votes Received
Name	For	Against	Abstentions	Broker Non-votes
T. O'Neal Douglas	55,124,174	2,274,629	--	--
Clark A. Johnson	56,764,173	634,630	--	--

Immediately following the meeting, the directors of the Company consisted of the following:

Name

 Charles E. Adair
 T. O'Neal Douglas
 Melvin L. Hecktman
 Clark A. Johnson
 Delores P. Kesler
 Charles R. Scott
 David A. Smith

ITEM 5.     OTHER INFORMATION

Not applicable.

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ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits required by Item 601 of Regulation S-K:

Exhibit Number	Description
10.1	Distributorship Agreement between Abbott Laboratories and the Company (Portions omitted pursuant to a request for confidential treatment - Separately filed with the SEC)
10.2	Fourth Amendment to the Amended and Restated Savings Plan
15	Awareness Letter from KPMG LLP
31.1	Rule 13a-14(a) Certification of the Chief Executive Officer
31.2	Rule 13a-14(a) Certification of the Chief Financial Officer
32.1	Section 1350 Certification of the Chief Executive Officer
32.2	Section 1350 Certification of the Chief Financial Officer
	* Represents a management contract or compensatory plan or arrangement

(b)      Reports on Form 8-K:

        The following current reports on Form 8-K were furnished during the quarter ended October 3, 2003:

Date of Report	Item Reported
July 30, 2003	Furnished to announce the Company’s financial   results for the quarter ended June 30, 2003.
August 28, 2003	Furnished to announce the new, three-year   distribution agreement with Abbott Laboratories.
September 8, 2003	Furnished to announce the Company acquired   Highpoint Healthcare Distribution.
September 9, 2003	Furnished to announce the formation of an   exclusive five-year distribution alliance between   the Company and Graham Field Health Products, Inc.
September 9, 2003	Furnished to announce that Integrated Health   Services notified the Elder Care Business that   they would discontinue their medical products   supply contractual relationship.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jacksonville, State of Florida, on November 13, 2002.

PSS WORLD MEDICAL, INC

By:   /s/ David_M. Bronson
         David M. Bronson
         Executive Vice President and Chief Financial Officer
         (Duly Authorized Officer and Principal Financial and
         Accounting Officer

Page 43

EX-15

The Board of Directors
PSS World Medical, Inc.

Re: Registration Statement File Nos. 33-80657, 33-90464, 333-15043, 333-64185, 33-85004, 33-97756, 33-99046, 33-97754, 333-30427, 333-50526, and 333-58272 on Form S-8

With respect to the subject registration statements, we acknowledge our awareness of the use therein of our report dated November 7, 2003 related to our review of interim financial information.

Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an accountant, or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act.

KPMG LLP

Jacksonville, Florida
November 7, 2003

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, David A. Smith, President and Chief Executive Officer of PSS World Medical, Inc. (the “Company”), hereby certify that the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 3, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David A. Smith
David A. Smith
President and Chief Executive Officer

November 13, 2003

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, David M. Bronson, Executive Vice President and Chief Financial Officer of PSS World Medical, Inc. (the “Company”), hereby certify that the Company’s Quarterly Report on Form 10-Q for the quarterly period ended October 3, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David M. Bronson
David M. Bronson
Executive Vice President and Chief Financial Officer

November 13, 2003

EX-31

EXHIBIT 31.1

CERTIFICATION

I, David A. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PSS World Medical, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 13, 2003

 /s/ David A. Smith
 David A. Smith
 President and Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATION

I, David M. Bronson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PSS World Medical, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 13, 2003

 /s/ David M. Bronson
David M. Bronson
Executive Vice President and Chief Financial Officer

EX-10

FOURTH AMENDMENT
TO THE
PSS WORLD MEDICAL, INC. SAVINGS PLAN
AS AMENDED AND RESTATED

        This Fourth Amendment to the PSS World Medical, Inc. Savings Plan, as amended and restated, is made effective as of October 1, 2003.

W I T N E S S E T H:

        WHEREAS, the Company has previously adopted the PSS World Medical, Inc. Savings Plan (the “Plan”), which has been amended from time to time; and

        WHEREAS, the Company is authorized and empowered to further amend the Plan; and

        WHEREAS, the Company desires to change the eligibility requirements with respect to participation in the Plan.

        NOW THEREFORE, the Plan is hereby amended as follows:

        Section 5.2 of Article V is hereby deleted in its entirety and the following is substituted in lieu thereof:

        5.2        Eligibility and Participation.

    (a)        Thereafter, any Employee of an Employer shall be eligible to become a Participant in the Plan if he has been credited with thirty (30) days of continuous service as an Employee of an Employer or an Affiliate (or, before completing thirty (30) days of continuous service, has completed twelve months of service as an Employee of his Employer or an Affiliate and has been credited with not less than 1,000 Hours of Service during his first twelve months of service or during any Plan Year). Any such eligible Employee shall enter the Plan as a Participant, if he is still an Employee of an Employer, on the first Eligibility Date occurring thereafter. An Employee who has been credited with thirty (30) days of continuous service with an Affiliate (or has completed twelve months of service with the Affiliate and has been credited with 1,000 Hours of Service during his first twelve months of service or during any Plan Year) prior to becoming an Employee of an Employer shall enter the Plan as a Participant on the date he becomes an Employee of an Employer (or, if later, on the first Eligibility Date following the completion of his age and service requirements).

    (b)        For each Employee previously employed by a business acquired by an Employer (directly or through the Employer’s purchase of all or substantially all of the assets of the business), the days of employment taken into account, for purposes of the thirty (30) day eligibility requirement set forth in section 5.2(a), shall include service with the Employee’s predecessor employer if:

    (1)        the Employee was employed by the business on the date it was acquired by the Employer; and

    (2)        the Employee’s predecessor employer employed not less than twenty (20) employees on the date it was acquired by the Employer.

        All the provisions of the Plan not specifically mentioned in this Fourth Amendment shall be considered modified to the extent necessary to be consistent with the changes made in this Fourth Amendment.

        IN WITNESS WHEREOF, this Fourth Amendment has been executed this 4^th day of September, 2003.

       
      (Corporate Seal)
       
       
       
        PSS WORLD MEDICAL, INC.


By: /s/ David D. Klarner

Its: Vice President

EX-10

DISTRIBUTORSHIP AGREEMENT

        THIS DISTRIBUTORSHIP AGREEMENT (“Agreement”) is made and entered into by and between ABBOTT LABORATORIES INC., a Delaware corporation with offices located at 100 Abbott Park Road, Abbott Park, Illinois 60064 (“Abbott”) and a wholly owned subsidiary of Abbott Laboratories, an Illinois corporation, and PSS WORLD MEDICAL, INC., a Florida corporation with offices located at 4345 Southpoint Boulevard, Jacksonville, Florida 32216 (“PSS”), and effective as of September 1, 2003 (“Effective Date”).

RECITALS

        WHEREAS, Abbott markets a broad line of diagnostic and other health care products manufactured by its parent company, Abbott Laboratories, throughout the world;

        WHEREAS, PSS is a physician supply company which distributes various diagnostic and other health care products to physicians in the United States;

        WHEREAS, Abbott desires to renew the appointment of PSS as an exclusive distributor (with certain exceptions) of certain Abbott diagnostic products in the United States under the terms and conditions stated below; and

        WHEREAS, PSS desires to accept such appointment from Abbott under the terms and conditions stated below;

        NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein, the parties agree as follows:

ARTICLE 1
DEFINITIONS

        As used in this Agreement, the following terms shall have the meanings set forth below:

    1.1        “Abbott Trademarks/Trade Names” shall mean the Abbott-owned trademarks and trade names used by Abbott, its Affiliates (as defined in Section 1.2) and authorized distributors with the Products (as defined in Section 1.8). A current list of such Abbott Trademarks/Trade Names is included within Exhibit 1.1 attached hereto and incorporated herein.

    1.2        “Affiliate” shall mean, with respect to a party, any other business entity which directly or indirectly controls, is controlled by, or is under common control with, such party. A business entity or party shall be regarded as in control of another business entity if it owns, or directly or indirectly controls, at least thirty percent (30%) of the voting stock or other ownership interest of the other business entity, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other business entity by any means whatsoever.

    1.3        “Contract Quarter” shall be consistent with calendar quarters during the Initial Term or any Renewal Term (as defined in Section 8.1).

    1.4        “Contract Year” shall mean the twelve (12) month period beginning on the Effective Date and each subsequent twelve (12) month period during the Term.

    1.5        "FDA" shall mean the United States Food and Drug Administration and any successor agency thereto.

    1.6        "Instruments" shall mean Abbott diagnostic instruments included within the list of Products.

     1.7        "Physician Customers" shall mean all physicians in the Territory (as defined in Section 1.9) practicing in offices located at a single geographic office site, excluding those listed in Exhibit 1.7. The Physician Customers covered by this Agreement shall also be subject to change by mutual agreement of the parties pursuant to Section 2.3.

    1.8        “Products” shall mean the Abbott diagnostic products listed in Exhibit 1.1, which may be amended from time to time by the addition or deletion of new or existing Abbott diagnostic products to such list, upon prices and terms to be mutually agreed upon pursuant to Sections 2.3 or 3.12(f).

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    1.9        “Territory” shall mean the fifty (50) United States of America and the District of Columbia. Additional terms used in specific Sections of this Agreement shall be defined in such Sections.

ARTICLE 2
APPOINTMENT AND AUTHORIZATION

    2.1        Appointment. During the Term, Abbott hereby appoints PSS as its exclusive distributor of Products to Physician Customers, subject to the other terms and conditions of this Agreement, and PSS hereby accepts such appointment from Abbott, provided that Physician Customers in the Territory may contract and have Products shipped to them directly from Abbott or through redistribution agreements or arrangements directly with or directly by hospitals or healthcare institutions formally affiliated with such Physician Customers (but not by non-hospital owned distribution companies which service hospitals or healthcare institutions and other than by such Physician Customers having admitting or staff privileges at such hospitals or institutions). In the event any Physician Customer(s) is purchased by or becomes affiliated with a third party, Abbott and PSS shall use commercially reasonable best efforts to maintain PSS as the distributor of Products to such Physician Customer. During the Term, PSS may also sell Products to the Non-Exclusive Physicians listed on Exhibit 1.7 on a non-exclusive basis. Abbott and PSS shall take all steps Abbott deems reasonably necessary to prevent unauthorized parties from distributing Products to Physician Customers.

    2.2        Authorization. Abbott hereby authorizes PSS to represent itself as Abbott’s exclusive authorized distributor of Products to Physician Customers in the Territory using Abbott Trademarks/Trade Names, provided that PSS shall not disseminate or publish any written promotional materials or advertisements intended for customer distribution representing itself as such without Abbott’s prior written approval, which approval shall not be unreasonably withheld. PSS shall forward any written promotional materials or advertisements requiring Abbott’s approval pursuant to the terms of this Section 2.2 to the attention of PSS National Account Manager, Dept. 939 Bldg. AP6C5 100 Abbott Park Road Abbott Park IL 60064. Abbott shall review and comment on such written promotional materials or advertisements within forty-five (45) days after receipt thereof from PSS. If Abbott does not respond during such forty-five (45) day period, such promotional materials shall be deemed approved.

    2.3        Changes to Physician Customers and Products. The Physician Customers to be supplied with Products by PSS hereunder shall be subject to adjustment by mutual written agreement of the parties upon review during the Annual Goal Setting Meeting (as hereinafter defined) of the status of current Abbott direct accounts as well as to reflect changes in market conditions, including, but not limited to, legal or regulatory changes, health care reform, and expansion or contraction of integrated health networks. The parties acknowledge that one purpose of such annual review of market conditions shall be to address and correct issues which may arise if consolidation in the physician market occurs to an extent that the total market of Physician Customers materially decreases. During each Annual Goal Setting Meeting, the parties shall also discuss in good faith whether to add or delete any new or existing Abbott diagnostic products to the list of Products, with the objective of Abbott providing the longest practicable lead-time before such diagnostic products are added to or deleted from the list of Products to facilitate PSS’s compliance with its obligations under Section 3.12. If the parties mutually agree to any changes in the Physician Customers or Products subject to this Agreement, the parties shall take such changes into consideration in establishing the annual goals, compensation plans and promotional funding at the Annual Goal Setting Meeting.

    2.4        Abbott’s Direct Accounts. Notwithstanding any other provision of this Agreement to the contrary, commencing on the Effective Date, Abbott shall transfer to PSS Abbott’s direct accounts identified in Exhibit 2.4 (the “Direct Accounts”), provided that any Direct Account that rejects a transfer to PSS for any reason shall remain an Abbott account unless and until such customer subsequently agrees to transfer to PSS. Commencing on the Effective Date and for a period of one (1) year thereafter, PSS shall be entitled to fifty percent (50%) of the margins set forth in Exhibit 3.4(a) on all Products sold by PSS to Direct Accounts. Commencing one (1) year after the Effective Date and continuing through the term of this Agreement, PSS shall be entitled to one hundred percent (100%) of the margins set forth in Exhibit 3.4(a) on all Products sold by PSS to Direct Accounts. Upon execution of this Agreement, the parties shall work together and cooperate with each other in good faith to develop the process, procedures and strategies pursuant to which the Direct Accounts will be approached concerning the transfer to PSS.

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ARTICLE 3
PSS OBLIGATIONS

    3.1        FDA Registration. During the Term, subject to the provisions of Section 4.5, PSS shall apply for, shall use commercially reasonable best efforts to obtain and shall maintain any FDA registrations or approvals and other regulatory registrations and approvals that are required for the performance of its obligations under this Agreement, including but not limited to an FDA Medical Device Registration Certificate if the FDA requires medical device distributors to maintain such certificates. Upon Abbott’s request, PSS shall provide Abbott with copies of all such registrations and approvals. The parties acknowledge their mutual belief that PSS is not required to be registered as a medical device distributor with the FDA as of the Effective Date. If PSS should be required to be registered as a medical device distributor because of its distribution of Products, then PSS and Abbott shall share equally in the cost of such registration. If either Abbott or PSS determines that such registration costs are unacceptable, such party shall give written notice of its intent to terminate this Agreement within thirty (30) days of the effective date of such registration requirement, such termination to take effect sixty (60) days after the effective date of such requirement.

    3.2        Promotional Activities. During the Term, PSS shall use its commercially reasonable best efforts to promote Products to Physician Customers in the Territory, including, but not limited to, the following activities:

    (a)         Product Promotional Materials. PSS shall make reasonably diligent use of such promotional materials for the Products as Abbott may furnish to PSS from time to time pursuant to Section 4.1. In addition, PSS may, at its own expense, develop and use its own promotional materials for the Products, provided such promotional materials are reviewed and approved in writing by Abbott prior to use pursuant to Section 2.2.

    (b)         Sales Force. PSS shall retain an adequately sized, trained and motivated sales force to promote the Products to Physician Customers in the Territory.

    (c)         Compensation of Sales Force. PSS shall maintain a separate sales force commission/compensation program for the immunoassay Products in accordance with Section 3.3(a), and any changes to such program shall be reviewed by the parties at the applicable Annual Goal Setting Meeting (as hereinafter defined). PSS and Abbott shall use their commercially reasonable best efforts promptly to develop a marketing program(s) that emphasizes retention and growth in high volume immunoassay Physician Customer accounts.

    (d)         Sales Calls. PSS sales representatives shall make adequate sales calls to Physician Customers to promote actively the Products in a manner consistent with PSS’s current call frequency with the objective of maintaining a high level of Physician Customer satisfaction.

    (e)        Trade Shows. Upon Abbott’s request, PSS shall provide personnel to assist Abbott in Abbott’s participation in conferences, conventions, exhibits and trade shows promoting the Products to Physician Customers in the Territory in such manner as may be mutually agreed upon. Abbott shall provide PSS with appropriate prior written notice of such conferences, conventions, exhibits and trade shows.

    (f)         Degree of Efforts. PSS shall use a degree of effort in promoting the Products to Physician Customers in the Territory that is at least as high as the degree of effort PSS uses to promote its most important products to Physician Customers in the Territory, including but not limited to designating Abbott as a preferred supplier of selected products in PSS’s “CAN DO” and SRX Sales Promotion Programs or any equivalent supplier emphasis programs and placing a high degree of PSS leadership emphasis on the sale of Products, subject to the terms and conditions of such programs.

    (g)         Placement of Instruments. PSS shall use its commercially reasonable best efforts to place Instruments with Physician Customers by (i) sale, (ii) lease/rental, or (iii) participation in the Abbott Diagnostics Purchase Plan (“APP Program”), whereby Physician Customers shall be allowed the use of an Abbott Instrument in consideration for purchasing from PSS certain minimum quantities of Reagent Products, as the case may be. PSS shall be responsible for making any necessary contractual arrangements with Physician Customers for the sale or lease/rental of Instruments, and Physician Customers who elect to receive an Abbott Instrument by participation in the APP Program shall enter into a written agreement with Abbott in the form of Exhibit 3.2 attached hereto and incorporated herein or in any other form approved in advance and in writing by Abbott, under the APP Program participation criteria and conditions set forth in Exhibit 3.2.

3

    (h)         Abbott Presence at Sales Meetings. PSS shall allow Abbott representatives to attend all PSS national sales/marketing meetings. PSS’s charge to Abbott to attend national sales/marketing meetings has been included in Abbott’s promotional/sales support payment set forth in Section 4.4. PSS shall allow Abbott representatives to attend all PSS regional and branch sales/marketing meetings. The charge for Abbott sales representatives to attend PSS regional and branch sales/marketing meetings is included in the Activity-Specific Funding payments made in accordance with Section 4.4. PSS shall provide Abbott with appropriate prior written notice of all such national, regional and district branch meetings.

    3.3        Sale and Distribution of Products. During the Term, Abbott shall sell to PSS and PSS shall purchase from Abbott PSS’s total requirements of Products for distribution to Physician Customers, subject to the following conditions:

    (a)         Annual Goal Setting. Abbott and PSS shall meet no later than February 15 of each calendar year during the Initial Term and any Renewal Term to establish annual goals, review compensation plans for each party, mutually agree on rules for use of promotional funding as set in Section 4.4, set dates for Quarterly Reviews and discuss any Physician Customer and/or Product changes (the “Annual Goal Setting Meeting”). Each party shall be responsible for insuring the attendance at each Annual Goal Setting Meeting of its personnel necessary to fulfill the objectives of the Annual Goal Setting Meeting, including, for example, its operations, finance, e-commerce and training personnel. PSS shall review its sales force commission/compensation program, particularly as it relates to the sale of Products, during the Annual Goal Setting Meeting. The strategic intent of the PSS sales force compensation program for Products, as set forth in this Section, is to achieve the objectives of this Agreement. Moreover, sales of Instruments shall be a condition to PSS sales representatives participating in PSS’s “CAN DO” sales force commission/compensation equipment program.

                PSS shall not impose new customer fees or increase existing fees that disproportionately burden Product sales without the prior written approval of Abbott. PSS shall not alter its commission structure or otherwise revise any of its policies, procedures or processes in any manner that disadvantages Products. The following issues shall also be discussed at the Annual Goal Setting Meeting (i) perceived gaps in product availability, including plans to pursue alternative vendors and new and/or alternative Abbott products, (ii) internal accounting and/or financial policy changes that may materially affect the other party, (iii) appropriate responses to declining or obsolete Products, and (iv) any other topic a party deems relevant.

                Prior to each April 1 following an Annual Goal Setting Meeting during the Term, Abbott and PSS shall enter into a letter agreement setting forth sales goals, amounts and forms of marketing/promotional funds to be paid by Abbott, including conditions thereto, and minimum numbers of Abbott sales support representatives and PSS sales representatives. In the event that PSS and Abbott are unable to agree upon sales goals for any Contract Year within thirty (30) days of the applicable Annual Goal Setting Meeting, the sales goals for such Contract Year shall be set at five percent (5%) in excess of the actual sales for the prior Contract Year, on a category-by-category basis.

    (b)         Biannual Reviews. PSS shall review the status of its activities under this Agreement with Abbott twice per Contract Year at mutually agreed upon times and locations (the “Biannual Review”). At each Biannual Review, the parties shall review PSS’s performance under this Agreement and factors contributing to PSS’s progress on the goals set at the Annual Goal Setting Meeting (the “Annual Goals”), including but not limited to delays in Product launches, major competitive changes and market conditions. At each Biannual Review, the parties shall also review Abbott’s field sales performance, customer service performance and overall Product quality. The Biannual Review shall also serve as the forum for the parties to present and propose alternative strategies necessary to achieve the Annual Goals and for the Parties to discuss future product development needs and opportunities.

     (c)                Product Adjustments. [****************************************]

    (d)               Purchase of Products for Resale. [********************************]

4

     3.4        Purchase Prices. [***************************************************]

     (a)        Price Adjustments. [*******************************************]

    (b)        Resale Prices. [***********************************************]

     3.5        Other Terms and Conditions of Sale. PSS's purchase of Products from Abbott hereunder shall also be subject to the following terms and conditions of sale:

    (a)        Payment Terms. Payment terms for all shipments of Products to PSS shall be net thirty (30) days from the date of Abbott’s invoice to PSS for each shipment of Products, provided that Abbott shall not invoice PSS until the date of actual Product shipment.

    (b)        Order Entry. PSS shall use its normal purchase order forms to order Products from Abbott hereunder, provided that such purchase orders may specify only the description and quantities of Products ordered (including identification of Products by the appropriate Abbott product list numbers), the requested shipment date, and the shipment destination. Any other terms and conditions stated on such purchase orders shall not be applicable to purchases hereunder.

    (c)         Delivery. Abbott shall use its commercially reasonable best efforts to ship Products to PSS, F.O.B. Abbott’s manufacturing facilities in accordance with PSS’s requested delivery dates, except as otherwise provided in Exhibit 3.5(c) attached hereto and incorporated herein. Such shipments shall be sufficient in amount and sufficiently timely to permit PSS to meet its customer order fill rate standards set forth in Section 3.6 hereof. Except as otherwise mutually agreed, Abbott shall ship Instruments directly to Physician Customers. Abbott shall select the carriers for all shipments of Products hereunder, provided that (i) Abbott shall use its commercially reasonable best efforts to select carriers offering competitive prices with reasonably satisfactory quality and reliability standards and (ii) PSS may suggest alternate carriers for Abbott’s consideration if PSS believes cost savings can be achieved with alternate carriers having comparable quality and reliability to Abbott’s designated carrier(s). Except as provided in Exhibit 3.5(c), PSS shall be responsible for shipping charges for the Products (including any Products shipped directly to Physician Customers), which shall be added to Abbott’s invoices to PSS, provided that PSS shall be entitled to shipping charge discounts in accordance with Exhibit 3.5(c). Title and risk of loss shall pass to PSS upon delivery of the Products to the carrier for shipment.

    (d)         Returns. Except for return of any defective Products which do not comply with the applicable warranty for repair or replacement by Abbott and other returns authorized in accordance with the Returned Goods Policy set forth in Exhibit 3.5(d) attached hereto and incorporated herein, all sales of the Products are final and no Products may be returned without Abbott’s prior written consent. Upon PSS’s request, and with Abbott’s approval, which approval shall not be unreasonably withheld, Abbott shall refurbish Instruments that are returned hereunder for resale by PSS to Physician Customers in such a manner as may be mutually agreed upon in accordance with applicable laws and regulations. Except as otherwise mutually agreed, the cost of such refurbishment shall be Abbott’s standard refurbishment cost and such cost shall be borne by PSS.

    (e)        Warranty. Abbott warrants that (i) Instruments (excluding refurbished Instruments) shall comply with Abbott’s standard warranty therefor set forth in the applicable Operator’s Manual, (ii) refurbished Instruments shall comply with Abbott’s standard warranty therefor for a period of six (6) months from the date of shipment by Abbott, and (iii) Products other than Instruments shall comply with Abbott’s standard warranty therefor set forth in the then current Abbott Diagnostics Division Price Catalog. ABBOTT MAKES NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND ABBOTT EXCLUDES AND DISCLAIMS ANY OTHER WARRANTIES INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. EXCEPT AS PROVIDED IN SECTION 7.3, ABBOTT SHALL HAVE NO LIABILITY FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RELATING TO THE SALE OR USE OF THE PRODUCTS, AND ABBOTT’S LIABILITY THEREFOR SHALL BE LIMITED TO THE COST OF REPAIR OR REPLACEMENT OF DEFECTIVE PRODUCTS.

5

    3.6        Inventory. PSS shall use commercially reasonable best efforts to maintain a level of inventory of all Products that PSS distributes in the Territory (excluding Instruments) sufficient to ensure that PSS is able to fill at least ninety-five percent (95%) of Physician Customers’ orders within one (1) business day of PSS’s receipt of such orders. At PSS’s request, Abbott operations personnel shall discuss with PSS Product distribution related to Product flow. PSS shall store Product inventory in its distribution centers in a manner appropriate for maintaining such Products in good and saleable condition as required on Product labeling and consistent with the Product dating and storage conditions specified by Abbott. All PSS distribution centers shall conform to the temperature control requirements set forth on Product labeling, and shall be subject to periodic audit by Abbott by no more than three (3) Abbott representatives per audit at mutually agreeable reasonable times and upon reasonable prior notice. PSS’s current list of distribution centers is set forth in Exhibit 3.6, attached hereto and incorporated herein, and PSS shall promptly notify Abbott in writing of any changes to this list at least once per Contract Quarter. PSS shall maintain a distribution record system reasonably sufficient to enable Abbott and/or PSS to promptly notify Physician Customers of Product safety information or issues. If required by applicable laws or regulations, PSS shall establish and maintain an auditable distribution record system including an accurate, traceable lot number control system which is traceable to Physician Customers for such Products purchased from PSS. In the event that compliance with applicable laws and regulations requires PSS to make significant modification to the record system in place on the Effective Date, then PSS and Abbott shall share equally in the documented cost of such modifications. If either Abbott or PSS determines that such modification costs are unacceptable, such party shall give written notice to the other party of its intent to terminate this Agreement within thirty (30) days of such determination, such termination to take effect sixty (60) days after such notice.

    3.7        Records. PSS shall maintain complete and accurate records of Products delivered hereunder, inventory and sales to Physician Customers. PSS shall make such records available to Abbott within fifteen (15) days after the end of each calendar month in an automated format to be mutually agreed upon and Abbott may utilize such records in its Quality Field Watch Program in the Abbott Customer Support Center.

     3.8        Reports and Customer Lists. [***************************************]

    3.9        Product Recalls and Complaints. Upon Abbott’s request to the PSS Regulatory Affairs and Marketing Departments, PSS shall assist Abbott in identifying Physician Customers for notification in connection with any Product recalls. Within twenty-four (24) hours of PSS’s own receipt of notice (at PSS headquarters) of any Physician Customer technical questions, complaints or actual or alleged Product defects, PSS shall notify Abbott thereof orally, followed promptly by a written notice using the “Abbott Laboratories Product Complaint Inquiry Form”, the current form of which is set forth in Exhibit 3.9, attached hereto and incorporated herein.

    3.10        Billing and Collections. PSS shall have sole responsibility for billings to and collections from Physician Customers for PSS’s sales of Products to Physician Customers.

    3.11        Use of Abbott Trademarks/Trade Names. PSS shall promote the Products to Physician Customers in the Territory using Abbott Trademarks/Trade Names and PSS shall not use any name, mark or style to identify the Products other than Abbott Trademarks/Trade Names without Abbott’s prior written consent. PSS acknowledges that Abbott Trademarks/Trade Names are valid trademarks and trade names and the sole property of Abbott, and PSS shall not disparage or challenge the validity of Abbott Trademarks/Trade Names during the Term. PSS shall promptly notify Abbott of any actual or alleged infringements of Abbott Trademarks/Trade Names of which PSS becomes aware during the Term. Nothing contained herein shall be construed to authorize PSS: (a) to use any Abbott Trademarks/Trade Names as a style or name, or as a part of the style or name, of any firm, partnership or corporation; (b) to apply Abbott Trademarks/Trade Names to any goods other than the Products; or (c) at any time after the termination of this Agreement, to apply Abbott Trademarks/Trade Names to goods or to any other use whatsoever.

     3.12         Non-Competition Obligations. [*************************************]

     (a)        Competitive Products. [***************************************]

     (b)        Excluded Competitive Products. [*****************************]

     (c)        Exception for Recall or Withdrawal. [*****************************]

     (d)        Compliance Audit. [*****************************************]

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ARTICLE 4
ABBOTT OBLIGATIONS

    4.1        Promotional Materials. At no cost to PSS, Abbott shall provide PSS with such promotional materials relating to the Products as Abbott deems appropriate in such quantities as may be mutually agreed for PSS’s use hereunder.

    4.2        Training. At no cost to PSS, during the Initial Term and any Renewal Term Abbott shall provide PSS and Physician Customers with appropriate training in the use and operation of Products.

    4.3        Service. Unless otherwise mutually agreed in writing, Abbott or its designees shall use its commercially reasonable best efforts to perform all warranty service on Products and maintenance service for Instruments within seventy-two (72) hours of proper notification to Abbott of such service request. Unless otherwise mutually agreed by the parties in writing, PSS shall not perform any such warranty or maintenance services for any Products (including Instruments) and PSS shall refer all Physician Customer service inquiries to Abbott.

    4.4        Advertising/Promotional Support. During each Contract Year, Abbott shall pay PSS an advertising/promotional support payment to be used by PSS to support its national sales meeting and promotional programs relating to the Products, including but not limited to “CAN DO” and Product promotional programs (including regional, local, university and other programs). Except as provided below, the amount of the advertising/promotional support payment shall be Eight Hundred Thousand Dollars ($800,000) per Contract Year, such payment to be made prior to the beginning of such Contract Year. The parties acknowledge that the advertising/promotional support payment for the first Contract Year has been partially paid prior to the Effective Date and that the remaining portion of such payment, in the amount of Two Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars ($266,667), shall be paid within ten (10) business days of the Effective Date.

                In addition to the advertising/promotional support payment referenced above, Abbott shall provide funding to PSS to support expenses incurred by PSS in connection with specified PSS promotional activities (“Activity-Specific Funding”), including, but not limited to, local PSS branch meetings, appropriate local PSS branch sales incentives, local PSS product fairs and regional PSS meetings. The parties acknowledge that the Activity-Specific Funding for the first Contract Year is One Hundred Eighty-Six Thousand Dollars ($186,000) and that such payment shall be paid within ten (10) business days of the Effective Date. The parties shall mutually agree on the amount of the Activity-Specific Funding for subsequent Contract Years. Abbott shall pay the Activity-Specific Funding to PSS within ten (10) business days of the parties’agreement on the amount of the funding for any Contract Year. Upon receipt, PSS shall hold the Activity-Specific Funding and shall release Activity-Specific Funding amounts only at the request of an Abbott District Manager to fund PSS branch expenses approved by Abbott.

    4.5        Assistance with PSS Legal Compliance. If the FDA or any other regulatory agency institutes any new registration or approval requirements during the Initial Term or any Renewal Term and PSS is not able to comply immediately with such requirements, then for a period of up to three (3) months from the effective date of such requirements Abbott shall, upon PSS’s request and if Abbott itself is able to comply with such requirements, supply Physician Customers with Products directly until such time as PSS complies with such requirements. PSS shall receive contract credit for all such sales and all shipping charges for such direct shipments shall be paid by PSS or the Physician Customers receiving such shipments.

    4.6        Field Sales Force. Abbott will maintain a field sales force adequate to support PSS in the attainment of its sales quotas.

    4.7        Voluntary Product Withdrawals and Discontinuations. To the extent practicable, Abbott will provide PSS advance written notice of any voluntary Product withdrawal or significant Product change. Abbott will provide PSS with written notice as soon as practicable of any Product discontinuation.

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ARTICLE 5
CONFIDENTIALITY AND PUBLICITY

    5.1        Confidentiality. During the Initial Term and any Renewal Term and for a period of ten (10) years thereafter, each party shall keep in confidence any information and/or documentation received from the other (“Confidential Information”), and each party shall use the Confidential Information only for purposes of this Agreement. Except as expressly provided in this Agreement, neither party shall at any time use or permit others to use any Confidential Information for any purposes. The foregoing obligations shall not apply to, and the definition of “Confidential Information” does not include:

    (a)         Publicly Available Information — information that was already in the public domain or subsequent to disclosure to a party becomes part of the public domain other than through the fault of such party;

    (b)         Previously Known Information — information that was rightfully known (as evidenced by written records) prior to the date of disclosure by the other party;

    (c)         Subsequently Disclosed Information — information that was received from a third party having a lawful right to disclose the same; or

    (d)         Legally Required Disclosures of Information — information that, in the opinion of a party’s counsel, is required to be disclosed to comply with any applicable law, regulation or order of a government authority or court of competent jurisdiction, in which event the party required to make such disclosure shall advise the other party in advance of the need for such disclosure and use its best efforts to obtain confidential treatment of such information.

                 Notwithstanding the foregoing, any party may disclose Confidential Information to its employees and agents to the extent reasonably necessary for the performance of this Agreement, provided that such recipients are subject in writing to obligations of confidentiality and non-use with respect to such information to the same extent as each party is obligated hereunder.

    5.2        Publicity. Neither party may disclose the existence or terms of this Agreement, or make any public relations announcement concerning this Agreement or the Abbott-PSS business relationship, without the prior written consent of the other party, except as may be legally required in the determination of the disclosing party’s legal counsel. If either party desires to or believes it is legally required to announce the execution of this Agreement, the parties shall cooperate in determining the date and format of such announcement, giving consideration to the requirements of any applicable laws and regulations. Abbott acknowledges that PSS may discuss this Agreement generally with securities analysts and that this Agreement will be disclosed and generally described in PSS securities law filings, provided that PSS shall give Abbott reasonable advance notice of any such public disclosure, to the extent reasonably practicable and legally permissible. Abbott also acknowledges that this Agreement must be filed by PSS with the Securities and Exchange Commission (the “SEC”) as a “material contract.” PSS agrees to seek “confidential treatment” of certain pricing information contained in this Agreement in any such SEC filing.

ARTICLE 6
CERTAIN REPRESENTATIONS AND WARRANTIES

Each party hereby represents and warrants to the other party as follows:

    6.1        Corporate Existence and Power. Such party (a) is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, (b) has the corporate power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted and as it is proposed to be conducted hereunder, and (c) is in compliance with all requirements of applicable laws and regulations, except as previously disclosed to the other party or to the extent that any noncompliance would not have a material adverse effect on the properties, business, or financial condition of such party and would not materially and adversely affect such party’s ability to perform its obligations under this Agreement.

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    6.2        Authorization and Enforcement of Obligations. Such party (a) has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and (b) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such party, and constitutes a legal, valid, binding obligation, enforceable against such party in accordance with its terms.

    6.3        Consents. All necessary consents, approvals and authorizations of all governmental authorities and other persons required to be obtained by such party in connection with the execution, delivery and performance of this Agreement have been obtained.

    6.4        No Conflict. The execution and delivery of this Agreement and the performance of such party’s obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations and (b) do not conflict with, violate or breach or constitute a default or require any consent under, any contractual obligation of such party.

    6.5        Compliance With Laws. Such party shall perform its obligations hereunder in compliance with all applicable federal, state and local laws, regulations and accepted industry guidelines.

ARTICLE 7
INDEMNIFICATION AND INSURANCE

    7.1        PSS Indemnification. PSS shall defend, indemnify and hold harmless Abbott, its Affiliates, and the officers, directors, employees and agents of Abbott and its Affiliates, from and against any and all liabilities, damages, claims, demands, costs, or expenses (including reasonable attorneys’ fees) claimed by any third party for any property or other economic loss or damage or injury or death suffered by it to the extent the same is determined to have been caused by PSS’s negligence, willful misconduct or breach of this Agreement.

    7.2        PSS Insurance. During the Term, PSS and Abbott shall maintain general business liability insurance coverage, including, if applicable, self-insurance, in the minimum aggregate amount of Five Million Dollars ($5,000,000).

    7.3        Abbott Indemnification. Abbott shall defend, indemnify and hold harmless PSS, its Affiliates, and the officers, directors, employees and agents of PSS and its Affiliates, from and against any and all liabilities, damages, claims, demands, costs, or expenses (including reasonable attorneys’ fees) claimed by any third party for any property or other economic loss or damage or injury or death suffered by it to the extent the same is determined to have arisen out of or been attributable to: (i) any defect in the design or manufacture of the Products; (ii) any violation of any proprietary right of such third party relating to the use of a Product in accordance with the procedures and for the uses set forth in the operator’s manual, product insert or other instructions setting forth the intended use for the applicable Product; or (iii) Abbott’s negligence, willful misconduct or breach of this Agreement. Abbott’s obligations hereunder will apply only when the applicable Product is lawfully used, lawfully dispensed or lawfully distributed and used in accordance with the applicable operator’s manual, product insert or as otherwise instructed in writing by Abbott. Any other use of the applicable Product will not be subject to this indemnity.

    7.4        Conditions of Indemnifications. If Abbott seeks indemnification from PSS pursuant to Section 7.1 or PSS seeks indemnification from Abbott pursuant to Section 7.3, the party seeking indemnification shall (a) notify the other party in writing of the claim or suit for which indemnification is sought within fifteen (15) days after the date the party seeking indemnification itself receives notice of such claim or suit and (b) allow the other party to control the defense or settlement of such claim or suit, provided that the party seeking indemnification may, at its own option and expense, participate in the defense or settlement of such claim or suit, and provided further that the indemnifying party shall not enter into any binding settlement, consent to any judgment or otherwise resolve any such claim or suit pursuant to which the other party would be obligated to take or refrain from taking any action or to make any payments or admissions, without the other party’s prior written consent.

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ARTICLE 8
TERM AND TERMINATION

    8.1        Expiration. Unless terminated earlier by written agreement of the parties or pursuant to Sections 3.1, 3.6, 3.12(c), 3.12(d), 8.2, 8.3 or 8.4, the term of this Agreement shall commence on the Effective Date and continue until three (3) years thereafter (“Initial Term”). Upon expiration of the Initial Term, the Agreement shall continue automatically for additional successive one (1) year periods (each one (1) year period a “Renewal Term”) unless terminated by either party by giving written notice to the other party not less six (6) months prior to expiration of the Initial Term or any Renewal Term.

    8.2        Early Termination by Either Party. Either party shall have the right, without prejudice to any other rights or remedies available to it, to terminate this Agreement for cause by written notice to the other party in any of the following events:

    (a)        Bankruptcy. A party may terminate this Agreement if the other party becomes insolvent, is adjudged bankrupt, applies for judicial or extra-judicial settlement with its creditors, makes an assignment for the benefit of its creditors, voluntarily files for bankruptcy or has a receiver or trustee (or the like) in bankruptcy appointed by reason of its insolvency, or in the event an involuntary bankruptcy action is filed against the other party and not dismissed within sixty (60) days, or if the other party becomes the subject of liquidation or dissolution proceedings or otherwise discontinues business.

    (b)         Default. A party may terminate this Agreement if the other party commits a material breach of this Agreement and the party alleged to be in breach fails to (i) cure such breach or (ii) commence dispute resolution proceedings under Section 9.11 contesting whether a breach has occurred and/or whether such breach is a material breach within sixty (60) days after receipt of written notice from the party asserting the breach. For purposes of this Section, a material breach by PSS shall include, but is not limited to, any material breach by PSS of its non-competition obligations pursuant to Section 3.12.

    8.3        Termination for Business Combination. Each party shall have the right, without prejudice to any other rights or remedies available to it, to terminate this Agreement for cause by written notice to the other party, to be given as soon as ten (10) days after such party has received written notice from such other party that a Business Combination has occurred. For purposes of this Section 8.3, a “Business Combination” shall mean a transaction in which a controlling interest in a party is acquired in a merger, share exchange, sale of assets or otherwise by any third party.

    8.4        Other Termination by Abbott. In addition to Abbott’s termination rights pursuant to Sections 3.1, 3.6, 3.12(c), 3.12(d), 8.1, 8.2 and 8.3, Abbott shall have the right, without prejudice to any other rights or remedies available to it, to terminate this Agreement for cause by giving PSS ninety (90) days’ prior written notice in the event that Products are no longer serviced and delivered from dedicated PSS warehouses which maintain same day and/or next day service and delivery.

    8.5        PSS Obligations Upon Termination. [***********************************]

    8.6        Effect of Termination. Termination or expiration of this Agreement through any means and for any reason shall not relieve the parties of any obligations accruing prior thereto, and shall be without prejudice to the rights and remedies of either party with respect to any breach of any of the provisions of this Agreement.

ARTICLE 9
MISCELLANEOUS

    9.1        Entire Agreement; Amendment. This Agreement contains the entire understanding of the parties with respect to the subject matter thereof and supersedes all previous verbal and written agreements, representations and warranties with respect to such subject matter, including the Distributorship Agreements between the parties dated as of April 1, 1995 and December 1, 2000, provided that the confidentiality provisions of such Distributorship Agreements shall continue to survive for ten (10) years after the term of such agreements, as contemplated in Sections 6.1 and 5.1 thereof, respectively. This Agreement may be amended only by a written agreement signed by authorized representatives of both parties.

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    9.2        Force Majeure. Failure of either party to perform its obligations under this Agreement (except the obligation to make payments) shall not subject such party to any liability or constitute a breach of this Agreement if such failure is caused by any event or circumstances beyond the reasonable control of such nonperforming party, including without limitation acts of God, fire, explosion, flood, drought, war, riot, sabotage, embargo, strikes or other labor trouble, failure in whole or in part of suppliers to deliver on schedule materials, equipment or machinery, interruption of or delay in transportation (unless caused by the party so affected), a national health emergency or compliance with any order or regulation of any government entity. A party whose performance is affected by a force majeure event shall take prompt action to remedy the effects of the force majeure event.

    9.3        Waiver. A failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of such rights nor shall a waiver by either party in one or more instances by construed as constituting a continuing waiver or as a waiver in other instances. Any waiver of breach executed by either party shall affect only the specific breach and shall not operate as a waiver of any subsequent or preceding breach.

    9.4        No Assignment. Except as otherwise expressly provided herein, neither party may sell, assign, pledge, subcontract or otherwise dispose of all or any portion of its rights or obligations under this Agreement except, in the case of Abbott, to an Affiliate; provided, however, that Abbott may assign all of its rights and obligations under this Agreement to the extent relating to the Rapid Diagnostic Products to any successor to all or substantially all of Abbott’s Rapid Diagnostic Products business. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.

    9.5        Severability. If any clause or provision of this Agreement is declared invalid or unenforceable by a court of competent jurisdiction, such provision shall be severed and the remaining provisions of the Agreement shall continue in full force and effect. The parties shall use all commercially reasonable best efforts to agree upon a valid and enforceable provision as a substitute for the severed provision, taking into account the intent of this Agreement.

    9.6        Relationship of Parties. The parties shall have the status of independent contractors under this Agreement and nothing in this Agreement shall be construed as authorization for either of the parties to act as a joint venturer with, agent for, or partner of, the other party.

    9.7        Non-Solicitation. During the Initial Term and any Renewal Term and for a period of six (6) months thereafter, neither party nor their Affiliates shall solicit for employment or employ any employee of the other party without the other party’s prior written consent.

    9.8        Notices. Any notice, request or other communication required to be given pursuant to the provisions of this Agreement shall be in writing and shall be deemed to be given when delivered in person or five (5) days after being deposited in the United States mail, postage prepaid, certified, return receipt requested, or by overnight courier (return receipt requested), to the parties addressed as follows:

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    (a)                If to Abbott to:

PSS National Account Manager
Abbott Diagnostics Division
Abbott Laboratories
100 Abbott Park Road
D-02FC, AP6C
Abbott Park, Illinois 60064-3500
Tel: (847) 935-5775
Fax: (847) 935-0633

With a copy to:

Abbott Laboratories
Domestic Legal Operations
100 Abbott Park Road D-322, AP6D
Abbott Park, Illinois 60064-6049
Attention: Divisional Vice President
Tel: (847) 937-5032
Fax: (847) 938-1206

    (b)               If to PSS to:

Executive Vice President
PSS World Medical, Inc.
4345 Southpoint Boulevard
Jacksonville, Florida 32216
Tel: (904) 281-0011
Fax: (904) 281-9555

With a copy to:

Chanley T. Howell, Esq.
Foley & Lardner
200 Laura Street
Jacksonville, Florida 32202
Tel: (904) 359-8745
Fax: (904) 359-8700

Either party may change its address or its fax number by giving the other party written notice, delivered in accordance with this Section 9.8.

    9.9        Further Instruments. Each party shall execute and deliver such further instruments and do such further reasonable acts and things as reasonably may be required to carry out the intent and purpose of this Agreement.

    9.10        Governing Law. The validity, performance, construction, and effect of this Agreement shall be governed by the laws of the State of Illinois, without giving effect to conflict of law rules.

    9.11        Alternative Dispute Resolution. All disputes arising out of or in connection with this Agreement (except those involving actions commenced by or involving third parties) shall be resolved by Alternative Dispute Resolution (“ADR”) proceedings in accordance with Exhibit 9.11, attached hereto and incorporated herein.

    9.12        Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original as against the party whose signature appears thereon, but all of which taken together shall constitute one and the same instrument, and signatures received by facsimile transmission shall constitute legal and valid signatures hereto.

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IN WITNESS WHEREOF, each party has caused this Agreement to be signed by its duly authorized representative as of the Effective Date.

ABBOTT LABORATORIES INC.	PSS WORLD MEDICAL, INC.
By: __________________________                                  Title: _______________________	By: /s/ John F. Sasen       John F. Sasen       Title: Executive Vice President and       Chief Marketing Officer

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EXHIBIT 1.1

PRODUCTS

• Rapid Diagnostic products including
  • Test kits
  • Controls
• Diagnostic EIA Products
  • Quantum(TM) analyzer
  • Reagents
  • Calibrators
  • Controls
  • Instrument accessories
• Cell-Dyn(R)System including
  • Cell-Dyn Analyzers: 1700/CD 1700CS/
  • CD 3000CS/CD 3000SL/CD 3200CS/ CD 3200SL/CD 3500CS/CD 3500SL/CD3700CS/CD 3700SL/CD4000SL/CD1800
  • Reagents
  • Calibrators
  • Controls
  • Instrument accessories
  • Reagent accessories
  • Instrument disposables
• IMx(R)System including
  • IMx analyzer
  • Reagents
  • Calibrators
  • Controls
  • Instrument accessories
  • Reagent accessories
  • Instrument disposables
• AxSYM(R)System including
  • AxSYM analyzer
  • Reagents
  • Calibrators
  • Controls
  • Instrument accessories
  • Reagent accessories
  • Instrument disposables
• Aeroset(R)System including
  • Aeroset analyzer
  • Reagents
  • Calibrators
  • Controls
  • Instrument accessories
  • Reagent accessories
  • Instrument disposables
• c-8000 System including
  • c-8000 Analyzer
  • Reagents
  • Calibrators
  • Controls
  • Instrument accessories
  • Reagent accessories
  • Instrument disposables
• Abbott Spectrum(R)System including
  • Spectrum Analyzer
  • Reagents
  • Calibrators
  • Controls
  • Instrument accessories
  • Reagent accessories
  • Instrument disposables

The ILC, currently in development by Abbott as a new Immunoassay analyzer, shall be a Product upon release.

GUIDE TO SPELLING OF U.S. TRADEMARKS

ADD

A-CHAT(TM) A-GENT(R) AARTS (with design)(R)                                                     ABBOTT ADVANTAGE(TM)                                                     ABBOTT ALCYON(R)                                                     ABBOTT ALLIANCE(R)                                                     ABBOTT BBS(TM)                                                     ABBOTT DMS(TM)                                                     ABBOTT EXTEND(TM)                                                     ABBOTT MATRIX(R)                                                     ABBOTT PRISM(R) ABBOTT SPECTRUM(R) ABBOTT SPECTRUM EPX(R) ABBOTT SYNETIICS(TM) ABBOTT TESTPACK(R)  ABBOTT VP(TM) ABBOTTBASE(R)                                                     ABT(R)                                                     ADX(R)                                                     ADX (stylized)(R)                                                     AEROSET(R)                                                     AIS(TM)                                                     ALCYON(R)                                                     AMPLIONC(R) ARCHITECT(R) ARCHITECT ARM(TM) ASIST(TM) AUSAB(R) AUSCELL(R) AUSRIA(R) AUSZYME(R) AXSYM(R) AXSYM2(TM) AXSYM CORE(TM) AXSYM CORE-M(TM) AXSYM EXTEND(R) C 1600(TM) C 8000(TM) CCX (stylized)(TM) CDIM(R) CELL-DYN(R) CELL-DYN DIFFERENTIATOR(TM) CELL-DYN HEMAFLEX(TM) CELL-DYN HEMCAL(R) CELL-DYN(R)NAVIGATOR CELL-DYN(R)WORKCELL CHEMIFLEX(R) CHLAMYDIAZYME(R) CI 8200(TM) CLEARMEASURE(TM) CLEARSENSE(TM) COMMANDER(R) CONSULTIVITY(TM) CORAB(R) CORZYME(R) CLEARMEASURE(TM) CLEARSENSE(TM) DATATRAC(TM) DATAWAY(TM) DIABETES NOW(R)                                                     DIAGNOSTICSSERVICE.COM(TM)                                                     DRUG ID(TM)                                                     DRUG TRACE(TM)                                                     DYNA-LYTE(R)                                                     EASYSENSE(TM)                                                     EDI(TM)                 EI (DESIGN)(TM)                                                     EPX(R) ERGODYNAMIC(TM) EXACTECH(R) EXPECT MORE. DEMAND MORE.(with Corporate Logo)(TM) EXPLORATIONS AND INNOVATIONS(TM)                                 FASTTRACK(TM)                                 FIREFLY(TM)                                 FLEX PROTOCOL(TM)                                 FLEXIBLE PLATFORM(TM)                                 FLEXRATE(TM)                                 FPC(TM)                                 GLYCORACK(TM)                                 GO(TM)                                 HAVAB(TM)                                 HAVAB(TM)-M                                 HEMATOLOGY.COM(TM)              HIVAB(TM)                                HIVAG with Corporate Logo(TM)                                HTDX(TM)

I 500(TM) I 1000(TM) I 2000(R)                                   I 2000 SR(R)                                   I 4000(TM)                                   I 6000(TM)                                   I 8000(TM)                                   IIMPACT(TM)                                   IMMEDIATE CARE DIAGNOSTICS(R)                                   IMMUNO PLT(TM) IMX (stylized)(R) IMX CORE(TM) IMX CORE-M(TM) IMX SELECT(R) INVITRODIAGNOSTICS.COM(TM) LSI(R)                         LYSOR(R)                         M 1000 (AND DESIGN)(TM)                         MAPSS(TM)                         MASTERCHECK(R)                         MEDISENSE(R)                         MEDISENSE and design(TM)                                 MEDISENSE FRIENDS FOR LIFE(TM) MICROFLO(TM) MTDX(TM) MULTIGENT(TM) MUREX LOGO(R) NO LINE. THEY MIGHT DO TIME.(TM) NUMBER WISE(TM) OBC(R) OMEC(TM) OPENCODE(TM) OPTIMIZED MEC(TM) PENTAWASH(R) PMTS(R) PPC(TM) PRECISION(TM) PRECISION A1C(TM) PRECISIONoG (stylized)(R) PRECISION LINK(R) PRECISION OPTIUM(TM) PRECISION PCX(TM) PRECISION QoIoD (stylized)(R) PRECISION SOFTSHIELD(TM) PRECISION XCEED(TM) PRO-FILES(TM) PROQUANTUM(R) PROTECX(TM) QC Manager(TM) QCP(TM) QUANTUM(TM) QUANTUMATIC(TM) QWIKWASH(R) R.S.G.(R) RAB(R) RAPIDDIAGNOSTICS.COM(TM) REA(R) REAGENT MAPPING(TM) RETIC-RITE(R) RIABEAD(R)                           SCIENCE YOU CAN HUG(TM)                           SENSITACT(TM)                           SERA-SEAL(R)                          SERIES II(TM)                          SIGNIFY(R) SMARTWASH(TM) SMS(TM) SOFTACT(TM) SOLARIS(TM) SOLARTEK(TM) SOLECT(TM) SOLUTIONS SOURCE(TM) SONUS PHARMACEUTICALS AND DESIGN(R) SPA(TM) STAT-1(TM) SYNETIICS(TM) TDX FLX(R) TDX (stylized)(R) TETRABEAD(R) THYMUNE(R) THYPINONE(R) THYROGRAPH(R) TOTAL PROCESS CONTROL(TM) TOXO G-EIA(TM) TOXO-G(TM) TOXO-M(TM) TPC(TM) TRIOBEAD(R) TRUECONTROL(TM) TRUEMEASURE(R) TRUESENSE(TM) TURBO (with design)(R) ULTRA TLC(R) URIPROBE(R) VISIONAID(TM) WITHEASE(TM) WORKING SMART(TM)    XSYSTEMS(TM)                ZERO PLUS(TM)

IMPORTANT: There should be no display of a trademark in the plural form, no possessives, or removal or addition of hyphens. Trademarks are to be spelled with initial capitals, all capital letters, or in a distinctive manner.

EXHIBIT 1.7

NON-EXCLUSIVE PHYSICIANS

[***************************************]

EXHIBIT 2.4

DIRECT ACCOUNTS

[***************************************]

EXHIBIT 3.2

APP PARTICIPATION CRITERIA

Physicians Office Customers desiring to participate in the Diagnostics Purchase Plan to receive the use of any Abbott –Owned Equipment shall be required to enter into a written agreement with PSS in a form approved in writing by Abbott. At minimum, such agreement (the current form of which is included on this Schedule) shall contain the following terms:

1. The participating Physicians Office Customers shall be required to purchase minimum quantities of Abbott reagents from PSS equivalent to $750, $750 or $2,500 per month for Quantum, IMx or AxSYM Instruments, respectively (measured on the basis of Abbott’s prices to PSS hereunder for such reagents). (See Diagnostics Purchase Plan, General Terms and Conditions, Section 1.)

2. The participating Physicians Office Customers shall be required to comply with the Equipment Terms and Conditions Exhibit to the Abbott Diagnostics Purchase Plan. Any modifications to such terms shall require Abbott’s prior written approval.

3. Abbott shall be specifically identified as the owner of the Abbott Instruments and a third party beneficiary of the PSS-Physicians Office Customer agreement with the express right for Abbott to enforce the agreement directly against the Physicians Office Customer by legal action and/or repossession of the Abbott Instruments. (See Diagnostics Purchase Plan, Equipment Terms and Conditions Exhibit, Section 4. Title to Equipment.) PSS shall promptly notify Abbott of any Physicians Office Customer breaches of such agreements.

ABBOTT DIAGNOSTICS PURCHASE PLAN
ABBOTT DIAGNOSTICS DIVISION, ABBOTT LABORATORIES INC., D-943 AP6C, 100 ABBOTT PARK ROAD,ABBOTT PARK, ILLINOIS 60064-6095

Shipping Address ("Customer"):	Billing Address:
Name	Name
Address	Address
City, State, ZIP	City, State, ZIP
Number of Doctors / Beds	Phone
Customer Number (s)	Lab  Director/Manager
Type of Practice	Sales Rep /   Territory
Purchase Order No.	Plan Term

GENERAL TERMS AND CONDITIONS

1. Customer agrees to purchase, each quarter, the products on the Price Exhibit (“Products), at the prices and volumes indicated, for the period shown as “Plan Term” above in the header of this page (collectively referred to hereinafter as the “Purchase Commitment”). Customer agrees to meet the Purchase Commitment by purchasing Products from Abbott Diagnostics Division (“Abbott”) or its authorized distributor, Physician Sales and Service (“PSS”).

2. If Customer elects to receive Abbott-Owned equipment, Abbott will supply, for the laboratory’s use, the equipment listed on the attached Price Exhibit (“Equipment”). Abbott retains title to the Equipment provided to Customer hereunder. In addition to the terms and conditions referred to in this Plan, the terms and conditions set forth in the attached Equipment Terms and Conditions Exhibit shall also be applicable and shall be incorporated herein by reference. Should Customer fail to meet ninety percent (90%) of the Purchase Commitment for Products as defined on the Price Exhibit for any two consecutive calendar quarters, Abbott or PSS, as applicable, may at its election, either (a) adjust Customer’s Product volume price discount accordingly based upon the difference in actual Product purchased versus Purchase Commitment, or (b) terminate this Plan.

3. Prices set forth on the Price Exhibit are guaranteed for one year. Abbott or PSS, as applicable, may increase prices by an amount not to exceed five percent (5%) or the then current National Consumer Price Index (CPI), whichever is lower, in any year beyond the initial year of the Plan.

4. Disclosure. The purchase prices under this Plan (including the value of any discounts, rebates, prepaid allowances, or price concessions) are intended to reflect discounts or other reductions in price within the meaning of 42 U.S.C. § 1320a-7b(b)(3)(A) and may reflect a bundled discount pricing arrangement. With regard to any bundled discount pricing arrangement, Abbott shall timely provide Customer further detail pertaining to the allocation of such discounted purchase prices to equipment, service and products. Customer may have an obligation to report such discounts (as appropriately allocated among equipment, service and products, if part of a bundled discount pricing arrangement) to any State or Federal Program that provides reimbursement to the Customer for the items to which the discount applies and, if so, Customer must fully and accurately report such discounts. Further, Customer shall retain invoices and other price documentation and make them available to federal or state officials upon request.

5. Shipping charges for the Equipment and suppies are prepaid and added to the invoice. Customer is responsible for paying the shipping charges. Purchase Order Number shown in header above shall apply to equipment shipment charges.

6. Payment terms are net thirty (30) days. Unless Customer is tax exempt any excise or other taxes applicable to accepted orders as well as shipping charges will be added to the invoice. Past due balances are subject to a service charge of 1 ½% per month (or the highest rate allowed by law, if lower than 1 ½% per month).

7. Customer may not assign or transfer this Plan and / or Equipment without Abbott’s prior written consent.

8. Should Customer terminate this Plan prior to the expiration of the Plan term by giving Abbott ninety (90) days written notice to the address listed at the top of this document, Customer is required to pay Abbott a fee which covers the costs associated with initial Equipment operator training, costs Abbott may have incurred on the behalf of Customer at the time of Equipment installation, and costs associated with Equipment re-certification (collectively referred to as “Equipment Recovery Fee’s). Customer’s Equipment Recovery Fee is fifty percent (50%) of the then-current published list price of Equipment.

9. Abbott warrants and represents that products and/or items of equipment delivered to carrier for shipment to Customer, or delivered directly to Customer, will at the time of such delivery: (a) conform to published specifications set forth in the applicable Abbott package insert(s) for such product and/or item of equipment; (b) not be adulterated or misbranded within the meaning of the U.S. Food, Drug and Cosmetic Act; and (c) be of good quality and free from defects in materials and workmanship. The only other warranties made by Abbott with respect to products and/or equipment are those specifically and expressly stated as warranties in the Abbott package insert specifications and manuals. ABBOTT MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, WARRANTIES AS TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ANY OTHER MATTER. Notwithstanding the foregoing, any warranties provided by Abbott will not apply to any product and/or item of equipment delivered to Customer facility hereunder, if it has been misused, altered, damaged or used other than in accordance with the applicable Abbott package insert and/or manual for such product and/or item of equipment (including the substitution of any reagent not authorized by Abbott) or any applicable operator manual so as to affect its stability or reliability; if the serial or lot number of any product and/or item of equipment has been altered, defaced, or removed; or if any repair is attempted by personnel unauthorized by Abbott to perform such repair.

Customer assumes all risk for the suitability of the test results obtained by using any item of equipment and/or product hereunder, and the consequences which flow therefrom when such item(s) of equipment and/or product(s) are used other than in accordance with the applicable Abbott package insert for such item of equipment or product(s) or any applicable operator manual so as to effect its stability or reliability, and is used either: (i) alone; or (ii) in combination with other articles, substances or reagents (or any combination thereof) not provided or recommended for use with each such equipment and product(s). IN NO EVENT SHALL ABBOTT BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, INCIDENTAL OR SPECIAL DAMAGES OR LOSSES OF ANY NATURE WHATSOEVER (INCLUDING WITHOUT LIMITATION, LOST REVENUE, LOST PROFITS, OR LOST BUSINESS, OR LIABILITY OR INJURY TO THIRD PERSONS) ARISING OUT OF THIS PLAN OR THE USE OF EQUIPMENT OR PRODUCTS OR ABBOTT’S NON-WILLFUL FAILURE TO SUPPLY EQUIPMENT AND PRODUCTS HEREUNDER.

10. Customer acknowledges that Products purchased hereunder are not for resale or distribution to any third party. Customer agrees not to resell Products on a retail basis. At Abbott’s request, Customer will permit Abbott to review Customer’s records to verify compliance with this “own use” requirement. Further, Customer represents and warrants that Customer shall use Equipment and Product only for business purposes and not for personal, household or family use. Customer represents and warrants that Customer shall use Equipment and Product only in accordance with the operator’s manual and/or instructions for use provided by Abbott for use with such Equipment and Product.

11. Force Majeure. None of Customer, Abbott or PSS shall not be liable for any failure to perform hereunder (other than the payment of money) due to strikes (legal or illigal), lockouts, fires, floods, or water damage, riots, government acts or orders, interruption of transporation, inability to obtain material upon reasonable prices or terms, or any other causes beyond its control.

12. By signing and accepting this Plan, Customer acknowledges that prior to the execution of this Plan, Abbott and PSS offered to sell Products to Customer, and/or sell or lease the Equipment to Customer, seprately, and that Customer has declined those offers, and accepted the terms of this Plan instead.

13. This Plan is only complete and in effect, including any addenda or modifications made to this Plan, if accepted and signed by a duly authorized signatory from Abbott. Any modification made to this Plan by the Customer including, but not limited to, handwritten changes whether on this document or through a Price Exhibit, an Addendum or an Amendment, shall constitute a counteroffer by the Customer to Abbott. Abbott reserves the right to accept, reject or make a counteroffer to Customer with alternative language that is deemed acceptable by Abbott. Abbott will use commercially reasonable efforts to reach an agreement with the Customer on any reasonable modifications requested in the Customer’s counteroffer. If Customer makes any modifications to this Plan, as stated above, such Plan shall not be deemed a valid and binding agreement and shall automatically become a working draft to be used by both parties to reach terms for a definitive purchasing agreement.

AGREED TO AND ACCEPTED THIS:

CUSTOMER:	ABBOTT LABORATORIES INC.:
Signature/Date:________________________ Print Name/Title: ______________________	Signature/Effective Date:_______________________ Print Name/Title:__________________________

EQUIPMENT TERMS AND CONDITIONS EXHIBIT

1.     Place of Equipment

For the term of this Plan, Customer shall use the Equipment only at Customer’s address specified in this Plan and Customer shall not remove, transfer, or alter the Equipment without Abbott’s prior written consent.

2.     Installation and Servicing of the Equipment

2.1 Only Abbott or Abbott-appointed personnel shall service, alter or replace the Equipment and/or any accessories therefore which are necessary to keep the Equipment in good working order, excluding items which require replacement with normal use.

2.2 Customer shall reimburse Abbott or pay for the entire cost of repairing any damage or alteration to the Equipment caused by Customer, its employees, agents, or contractors or by any service performed by unauthorized personnel. Abbott shall determine such cost.

2.3 Customer shall use only Abbott reagents, test strips, calibrators, iSTAT® cartridges cartridge verification kits, and accessories on the Equipment during the term of this Plan.

3.     Service Considerations of Equipment

3.1 On-site service coverage is Monday — Friday, 8:30 a.m. — 5:00 p.m. (excluding holidays). The standard service program includes a maximum number of annual on-site service calls per Equipment platform: AxSYM®: six (6) service calls; IMx®: three (3) service calls; TDx® /TDxFLx®: three (3) service calls; ADx®: three (3) service calls; for ARCHITECT® i2000, ARCHITECT® i4000 and Aeroset®, Abbott reserves the right to establish a maximum number of annual on-site service calls and amend this Plan to include this maximum. Service calls beyond the annual limit will be invoiced at a set charge of six hundred dollars ($600.00) per call. For i-STAT® Equipment, technical support on service issues can be reached at 1-800-366-8020.

3.2 Service coverage includes all parts (excluding consumables and disposables), travel, and labor.

3.3 If the Equipment being maintained has preventative maintenance requirements, the procedures will be performed during the service call.

3.4 Customer agrees to perform all required operator maintenance as listed in the applicable Abbott operator’s manual. If it is determined by Abbott that Customer failed to perform required maintenance, Abbott reserves the right to charge Customer, and Customer agrees to pay for any resulting service calls at Abbott’s current published time and material service rates. If Customer requires a service call to provide and/or replace any consumable parts, they will be charged, and Customer agrees to pay for the call at Abbott’s current published time and material service rate.

4.     Title to the Equipment

4.1 Abbott is the owner of, and retains title to, the Equipment except to the extent of Equipment purchases required under Section 5 Risk of Loss or affected under paragraph 4.4 of this section. These terms and conditions shall terminate automatically with respect to any such Equipment purchased by Customer.

4.2 Customer shall not permit or suffer any attachment, encumbrance, lien, or security interest to be filed against Equipment, shall promptly notify Abbott if any of the foregoing is filed or claimed, and shall indemnify Abbott for any loss or damage including attorneys’ fees resulting from any of the foregoing.

4.3 Customer authorizes Abbott and its agents to execute on Customer’s behalf and to file UCC financing statement(s) describing any Equipment provided to Customer under this Plan, including any replacement or substitutions thereof, and amendment(s) to such financing statements(s) and ratifies any such financing statement(s) or amendment(s) filed prior to the date of the Plan.

4.4 Customer may, at any time, purchase the Equipment from Abbott upon terms and conditions of sale established by Abbott.

5.     Risk of Loss

So long as Abbott retains title to the Equipment pursuant to Paragraph 4.1, above, Abbott shall be responsible for any loss or damage resulting from the use of the Equipment in accordance with the package inserts, operator manuals and other technical documents provided to Customer by Abbott; however, if such loss or damage is due to Customer’s negligence of willful misconduct or the performance of service by personnel not authorized by Abbott, including, but not limited to, improper storage, unauthorized transfer or removal of Equipment or unsecured or inconsistent power supply, unauthorized modification or misuse or failure to comply with installation operational and maintenance requirements and specifications, all as set forth in the package inserts and operators manual and other technical documents provided to Customer by Abbott, then Customer is responsible for such loss or damage, and if Abbott determines the damaged Equipment is irreparable, Customer shall pay Abbott the then-current catalog trade price for such Equipment less depreciation determined on a ten (10) year straight line basis (prorated monthly) and, thereupon, Customer will own such Equipment “AS IS” with all faults and defects. Additionally, Customer shall be responsible for any loss or damage to Equipment due to flooding, fire or other natural disasters.

6.     Labels

Customer shall not remove any labels, symbols or serial numbers that are or may be affixed to any items of Equipment, except as required or approved by Abbott in writing.

7.     Taxes

Unless Customer is fully exempt from all taxes, Customer shall pay all taxes, federal, state and local, which may be imposed upon use, possession, ownership, or lease of Equipment. Customer shall reimburse Abbott for any such taxes paid by Abbott.

8.     Landlord’s Waiver

Unless Customer owns the facility (and any other facility to which the Equipment may be transferred with Abbott’s prior written consent), Customer shall, upon Abbott’s request, furnish a waiver signed by Customer’s landlord by which the landlord waives all rights to seize, possess or withhold any item of the Equipment by reason of Customer’s failure to pay its rent to the landlord.

9.     Redelivery and Renewal

Upon at least ninety (90) days written notice to Abbott prior to the expiration of the initial or any renewal term of this Plan, Customer shall advise Abbott of Customer’s intention to return the Equipment to Abbott at the end of the initial or renewal term of this Plan. The Customer shall return the Equipment freight and insurance prepaid, to Abbott in good repair, condition and working order, ordinary wear and tear excepted, in a manner and to a location designated by Abbott. IF CUSTOMER FAILS TO RETURN THE EQUIPMENT AS PROVIDED HEREIN, THIS PLAN SHALL RENEW FOR ADDITIONAL TERMS OF TWELVE (12) MONTHS EACH.

10.     Equipment Shipping Charges

Customer acknowledges and agrees that Abbott shall invoice Customer directly for Equipment shipping charges and Customer shall pay such invoice within 30 days of receipt of such invoice.

11.     These Equipment Terms and Conditions are hereby incorporated into and made part of this Plan.

________________
Customer Initial

IMMUNOASSAY PRICE EXHIBIT
ABBOTT DIAGNOSTICS DIVISION, ABBOTT LABORATORIES INC., D-943 AP6C, 100 ABBOTT PARK ROAD,ABBOTT PARK, ILLINOIS 60064-6095

Shipping Address ("Customer"):	Billing Address:
Name	Name
Address	Address
City, State, ZIP	City, State, ZIP
Number of Doctors/Beds	Phone
Customer Number (s)	Purchase Order No.
National Account   Affiliation:	Sales Rep /   Territory
Customer Point of Contact	Contract Term

Customer Equipment commitment

Type Quantity AOE/COE* PO Number (as required)

*Abbott Owned Equipment / Customer Owned Equipment

Customer Product Commitment
Some Products listed herein are currently not available for sale ("Unavailable Products"). The Unavailable Products are listed on the last page of this Price Exhibit.

List No.	Product**	Qtr.Volume	Price per Unit	Quarterly $	Comment
	Purchase Committment

** As applicable, if Equipment Usage Fee line item(s) appear above and contain a dollar amount in "Quarterly $" column, Customer agrees to pay the Equipment Usage Fee as a separate charge each month. If the Equipment Usage Fee line item(s) show no dollar amount, Customer has elected to have the Equipment Usage Fee included in Product price per unit.

Additional New Products
List Products that are not listed above. Products will be applied to Purchase Commitment of the Agreement.

List No. Product** Qtr.Volume Price per Unit Quarterly $

Unavailable Products
The following Products are currently unavailable. The volume Commitment and prices will become applicable upon Product availability. Unavailable Products are not applied to the Purchase Commitment of the Agreement..

List No. Product** Qtr.Volume Price per Unit

Equipment Shipping Charges				Sample Segment Kit (AxSYM)
Equipment	Quantity	Charge (each)	Charge (total)	Type	List No.	No.of
Architect i2000		$1,700		Primary	6C74-02
Architect i2000 SR		$1,700		Aliquot	6C73-02
AxSYM Plus		$1,600		Sample Cup	9A74-02
AxSYM		$1,600		Multi Segment	5C79-01
ADx		$300		Total (No more than 4 kits)
IMx		$300
TDx/FLx		$300
Quantum II		$50		Waste Option (AxSYM)
Qwik Wash		$15		Type	List No.	(x)
Flexible Pippetting Center		$410		Standard	N/A
Parallel Processing Center		$200		Extended	4B09-01
Dynamic Incubator		$100
Total

Usage Charges

Instrument	Equipment	Service	Monthly Usage Charge
Architect i2000	$1,400	$1,100	$2,500
Architect i2000 SR	$1,200	$1,050	$2,250
AxSYM Plus	$345	$680	$1,025
AxSYM Classic	$305	$680	$985
IMx / ADx / TDx / FLx	$100	$100	$200
FPC	$390	$100	$490
PPC	$350	$140	$490

AGREED TO AND ACCEPTED THIS:
_________________________________________
CUSTOMER:

DRAFT - NOT FOR CUSTOMER SIGNATURE

Signature/Date: _____________________________________

Print Name/Title: ___________________________________

 _______________________________________________________
 ABBOTT LABORATORIES INC. DIAGNOSTIC DIVISION



 Signature/Date:_______________________________________

 Print Name/Title: ____________________________________

EXHIBIT 3.3(b)

AUDIT PROCEDURES

        Pursuant to Article 3: Upon PSS’s receipt of written notice from Abbott of at least five (5) business days prior notice, PSS shall permit Abbott internal auditors or its third party designee access to each facility where Product is stored in order to verify that storage conditions consistent with product requirements and labeling are being met, provided that any such audit shall not exceed five (5) business days. PSS agrees to maintain an adequate inventory record system capable of tracing the receipt, storage, resale and ultimate disposition of Product. PSS agrees to permit said auditors access to various books, records, files and other materials pertaining to the resale, transfer or exchange of Products and agrees to make such records, files and other materials available for inspection during regular business hours by Abbott or its designee. PSS shall permit Abbott to conduct such audits once per calendar year per distribution site except that Abbott may conduct such audits once per calendar quarter in so far as they have a reasonable concern that (a) sales records and/or chargeback requests reported to Abbott by PSS may contain errors whether intentional or unintentional (b) a PSS facility has sold, transferred or exchanged Product to customers other than those authorized or, (c) a PSS facility has stocked or is stocking non-excluded Competitive Product.

        Abbott or its designated auditors shall treat all information gathered or observed during such audits as confidential as previously defined in this agreement.

EXHIBIT 3.4(a)

PURCHASE PRICES

[***************************************]

EXHIBIT 3.5(c)

SHIPPING CHARGES AND DISCOUNTS

Weekly Free Freight Order

• Each week every branch may place a stock order that ships to the branch without freight charges. There is no minimum value for the order.
  
  
• All free freight orders ship by a refrigerated truck and take three to five business days to deliver.
  
  
• All refrigerated truck deliveries should be counted and inspected. If there is any damage to the stretch-wrap, document the damage when the packages/delivery is signed for. Call Distributor Service the same day you receive the delivery to document the situation.

Shipping Charges

• Orders shipped directly to PSS customers are charged shipping.
  
  
• Any order shipping to a PSS branch that is not part of a weekly free freight order will be charged shipping.
  
  
• Shipping charges are based on the weight of each order.
  
  
• Current Rates are in the attached Tables, these rates are subject to change without notice and not fixed by this Agreement.

[**************************************************************************]

Also please refer to PSS Branch Leader Manual for Abbott Products

These rates are subject to change without notice and are not guaranteed with this Agreement.

EXHIBIT 3.5(d)

RETURNED GOODS (DISTRESSED INVENTORY) POLICY

• All credit requests must be called into Distributor Service: 800-872-1387.
  
  
• Do not create a Vendor Charge Back (VCB). Abbott does not accept VCB's.
  
  
• Product returns must be authorized by and returned to Distributor Service. Call Distributor Service to document the situation and authorize the credit, replacement or return. 800-872-1387.

Also please refer to PSS Branch Leader Manual for Abbott Products

EXHIBIT 3.6

PSS CURRENT DISTRIBUTION CENTERS

PHYSICIAN SALES & SERVICE, INC.
4345 Southpoint Boulevard, Jacksonville, Florida 32216 (904)332-3000
Accounting (904)332-3305/Fax (904)332-3070 IT (904)332-3300/Fax (904)332-3200 CED (904)332-3369/Fax (904)332-3207 CCD (904)332-3093/
Fax (904)332-3162 Marketing (904)332-3310/Fax (904 332-3205 OPS (904)332-3146/Fax (904)380-4507 A/P (904)332-3315/Fax (904)332-3217
HR (904)332-3320/Fax (904)332-3213 Volume Purchasing Dept. (904)260-3282/Fax (904)260-1495     Pharmacy Depot (949)250-3067/Fax (949)250-3088

(904)332-3042	Gary Corless, President		(904)380-4507(F)
(904)332-3146	Deborah Johansen, Assistant
(904)332-3329	Eric Miller, Vice President, Finance		(904)332-3214(F)
(904)332-3270	Brad Hilton, Senior Vice President, Operations	Deborah Johansen - Assistant	(904)380-4507(F)
(904)332-3061	Joanie Booker, Vice President, Operations	Susan Scott, Assistant	(904)332-3172(F)
(904)332-3039	Eddie Dienes, National Vice President, Sales	Susan Scott, Assistant	(904)332-3172(F)
(904)332-3189	Scott Helfrich, Vice President, Strategic Sales	Jessie Ahrens, Assistant	(904)332-3144(F)
(904)332-4145	Bob Gibson, Vice President, Marketing	Deborah Hampton, Assistant	(904)332-3207(F)
(904)332-3045	Bob McCart, Vice President, Corporate Accounts	Karol Bowers, Assistant	(904)332-3190(F)
(904)332-4157	Steve Martin, Vice President, Vendor Relations		(904)332-3204(F)

(904)332-3459 (904)332-3040	MID-AMERICA REGION Jim Evans, VP Operations Susan Scott, Assistant		(904)332-3172(F)
PSS BIRMINGHAM(15) 602 Cahaba Valley Circle Pelham, AL 35124 (205)985-8800 FAX (205)985-4300 Chris Day(G) Mike Hallman(O)	PSS HEARTLAND(54) Sales Office 6818 Grover St. #301B Omaha, Nebraska 68106 (402)398-5441 FAX (402)398-5431 Cliff Ira(S) Tom McClure(O)	PSS LITTLE ROCK(22) Sales Office 1515 Bowman Road, Suite F Little Rock, AR 72211 (501)228-6981 FAX (501)219-1644 Brian Daniels(S) Tim Diver(O)	PSS SAN ANTONIO(29) 4646 Perrin Creek, #280 San Antonio, Texas 78217 (210)655-4009 FAX (210)655-4399 Phillip Wood(S) Rick Graham(O)
PSS CHICAGO (53) 1450 N. McLean Blvd. Elgin, IL 60123 (847)760-3500 FAX (847)429-9772 Greg Cressman(S) Tim Lyons(O)	PSS HOUSTON (27) 15550 Vickery Dr., Suite 200 Houston, TX 77032 (281)765-3100 FAX (281)765-3145 Clint Bennett(G) Anthony Conner(O)	PSS MEMPHIS (21) 5950 Freeport Avenue, Ste 109 Memphis, TN 38141 (901)366-3100 FAX (901)366-3295 Jeremy Ross(S) Tim Diver(O)	PSS ST. LOUIS (48) 11877 Adie Road Maryland Hgts, MO 63043 (314)991-0084 FAX (314)991-4402 John Osdieck(S) Ted Hirsch(O)
PSS DALLAS (25) 1419 Dunn Drive Carrollton, Texas 75006 (972)245-0908 FAX (972)446-4325 Lee Majerus(G) Tim Browning(O)	PSS JACKSON(20) Sales Office 173 E. Market Ridge Ridgeland, MS 39157 (601)856-5900 FAX(800)827-2002 Terry Hartley(S) Tim Diver(O)	PSS MINNEAPOLIS (57) 141 Cheshire Lane, Ste 700 Minneapolis, MN 55441 (763)559-3333 FAX(763)476-1438 Eric Kindgren(S) Arlene Dickey(O)	PSS TULSA (34) 2349 West Vancouver Broken Arrow, Oklahoma 74012 (918)251-7778 FAX (918)251-7999 Bryan Massey(S) Scott Nall(O)
PSS HEARTLAND (47) 14601 West 112th Street Lenexa, KS 66215 (913)491-3337 FAX (913)491-3383 Cliff Ira(G) Tom McClure(O)	PSS LAFAYETTE (73) 3130 N.E. Evangeline Thruway Lafayette, LA 70507 (337)237-5049 FAX (337)237-5866 Nick Pecoraro(G) Cyndi Aszklar(O)	PSS NEW ORLEANS (16) 5600 Jefferson Highway W4#150 New Orleans, LA 70123 (504)733-0223 FAX (504)733-4511 Nick Pecoraro(G) Josh Horton(O)	PSS WEST TEXAS (70) 530 32nd Street Lubbock, Texas 79404 (806)765-6270 FAX (806)765-6273 Brad Heitzmann(S)   Victor Mondragon(O)

(904)332-3131 (904)332-3235 (502)810-2875 or (904)332-8056	NORTHERN REGION Mark Steele,Regional VP Lee Huffman, VP Operations Sandy Woody, Assistant		(502)810-9145(F)
PSS BALTIMORE/ WASHINGTON (41)Sales Office 7520 Connelly Drive, Suite B Hanover, MD 21076 (410)582-9542 FAX (410)582-9560 Mike Scott(S) Steve Tarantino(O)	PSS LOUISVILLE (56) 5150 Interchange Way, Suite B Louisville, KY 40229 (502)810-2800 Fax (502)810-9145 Richard Shadwick(S) Robert Ozenbaugh(O)	PSS NORFOLK(39)Sales Office 206 Research Drive, Suite 103 Chesapeake, VA 23320 (757)547-0217 FAX (757)547-0216 Billy Boros(S) Steve Tarantino(O)	PSS ROCHESTER (63) 3335 Brighton Town Line Road Rochester, NY 14623 (585)427-8240 FAX (585)427-7933 Jim MacKenzie(S) Julie Byrne (0)
PSS CINCINNATI(43)Sales Office 11121 Kenwood Road Cincinnati, OH 45242 (513)985-0525 FAX (513)985-0236 Kelly Guerin(S)Robert Ozenbaugh(O)	PSS MID ATLANTIC (59) 208 Passaic Avenue Fairfield, New Jersey 07004 (973)775-8600 FAX (973)775-8521 Jeff Plumb(G) 8359   Jeff Cavaliere(S) 8259 Patrick Dunigan(S) 8267	PSS PITTSBURGH (60) 1030 McKee Road Oakdale, PA 15071  (412)494-7610 FAX (412)494-7620 Mark McKenna(S) Dave Lamb(O)
PSS CLEVELAND (72) 2003-3 Case Parkway South Twinsburg, OH 44087 (330)425-3832 FAX (330)425-3836 Tim Buchanan(S) John Hollis(O)	PSS NEW ENGLAND (58) Wareham Industrial Park, #4 Thacher Lane Wareham, MA 02571 (508)291-2800 FAX (508)291-2392 John Brophy(S) Steve Kiewiet(O)	PSS RICHMOND (45) 1950 Ruffin Mill Road Colonial Heights, VA 23834 (804)253-1500 FAX (804)253-9230 Billy Boros(S) Steve Tarantino(O)

(904)332-3009 (904) 332-3381 (904) 332-3055	SOUTHERN REGION Tom Fitzgerald, Regional VP Nick Stark, VP Operations Priscilla Green, Assistant		(904) 332-3349 (F)
PSS ATLANTA (11) 4105 Royal Drive, Suite 600 Kennesaw, Georgia 30144 (678)813-4000 FAX (678)813-4195 Lee Smith(G) Steve Brooks(O)	PSS COLUMBIA(14)Sales Office 8901 Farrow Road, Suite 104 Columbia, South Carolina 29203 (803)865-0074 FAX (803)699-5227 Mike Bliss(S) Matt Reid(O)	PSS KNOXVILLE(23)Sales Office 3010 Industrial Parkway East Knoxville, TN 37921 (865)546-7771 FAX (865)523-1476 Keith Dell(G) Steve Brooks(O)	PSS ST. PETERSBURG (02) 9843 18th Street N. #1200 St. Petersburg, FL 33716 (727)577-4387 FAX (727)577-4767 Joe Kelliher(S) Bill Keller(O)
PSS CAROLINAS (31) 6701 Northpark Blvd, Suite A. Charlotte, N.C. 28216 (704)916-3800 FAX (704)916-3995 Richard Bigham(S) Matt Reid(O)	PSS FLORIDA (06) 9695 Delegates Drive, Suite 503 Orlando, FL 32837 (407)563-5770 FAX (407)563-5799 Bill Alexander(S) 8206 Bill Goyette(S) 8208 Jeff Lavelle(O) - 8306	PSS RALEIGH(32)Sales Office 533 Dynamic Drive Garner, NC 27529 (919)773-2006 FAX (919)773-3798 Jeff Perkinson(S) Matt Reid(O)	PSS TALLAHASSEE(04)Sales Office 2735 Power Mill CT. Tallahassee, Florida 32301 (850)422-3800 FAX (850)422-3807 Steve Shavlik(S) Mike Weise(O)
PSS CHATTANOOGA(18)Sales Office 3720 Amnicola Highway, Suite 131 Chattanooga, Tennessee 37406 (423)894-8872 FAX (423)698-4960 Keith Dell(G) Steve Brooks(O)	PSS JACKSONVILLE (01) 7018 A.C. Skinner Parkway, #220 Jacksonville, Florida 32256 (904)380-5900 FAX (904)281-0752 Jeff Lott(S) Mike Weise(O)	PSS ROANOKE (71) 1549 Lynn Brae Dr. Roanoke, VA 24012 (540)342-2633 FAX (540)342-2470 Michael Roberts(S) Jerome Frederick(O)

(904)332-3128 (904)332-4644 (904)332-4699	WESTERN REGION Jay Monaco, Regional VP David Marriott, VP Operations Katina Etheredge, Assistant		(407)540-9509 (F)
PSS DENVER (50) 11175 East 55th Avenue, #106 Denver, CO 80239 (303)375-7774 FAX (303)373-1607 Aaron Rhoades(S) Bill Randolph(O)	PSS PACIFIC NORTHWEST (69) 1704 B Street, Suite 120 Auburn, WA 98001 (253)929-1700 FAX (253)929-1795 Mark Bluem(S) Danny Rich(O)	PSS PORTLAND(38)Sales Office 5227 NE 152nd Place Portland, OR 97230 (503)253-6404 FAX (503)253-0730 Eddie Lamotta(S) Danny Rich(O)	PSS SAN DIEGO(28)Sales Office 9520 Chesapeake Drive, #605 San Diego, California 92123 (858)292-1758 FAX(858)292-1670 Robbie Siegel(S) 8255 Andy Woods(O) 8328
PSS HAWAII (81) 99-1434 Koaha Place Aiea, HI 96701 (808)488-2666 FAX (808)488-0923 Debby Simpliciano(G)	PSS PHOENIX (33) 3103 E. Broadway Rd. #100 Phoenix, Arizona 85040 (602)232-4899 FAX(602)232-4876 Brad Sinclair(S) Gil Howie(O)	PSS SALT LAKE CITY (66) 3044 South 1030 West Salt Lake City, UT 84119 (801)977-0848 FAX (801)908-0562 Greg Dorius(S) Nora Lasky(O)	PSS SOUTHERN CALIFORNIA (28) 1938 Malvern Avenue Fullerton, CA 92833 (714)459-4000(P) (714)459-4095 FAX Jeff Woodroof(S) 8228 Dan Murphy(S) 8264 Robbie Siegel(S) 8255 Andy Woods(O) 8328
PSS NORTHERN CALIFORNIA (49) 20991 Cabot Blvd Hayward, California 94545 (510)785-1790(P) (510)785-7322 FAX Jon Ashworth(S) 8228 Scott Hebisen(O) Randy Stader (S) 7875

Note: Unless specified above, in order to leave a message for any leader in corporate voicemail, dial 83 + Branch # for Ops Leaders, and dial 82 + Branch # for Sales Leaders. Dial 10 + Branch # to get main office. 10/06/03

EXHIBIT 3.9

ABBOTT DIAGNOSTICS
PRODUCT COMPLAINT FORM

DATE____/_____/

DISTRIBUTOR INFORMATION:

Company Name ________________________________________Abbott
Customer Number ______________________________Representative
Name _________________________________Representative
Name _________________________________

ACCOUNT INFORMATION:

Name ________________________________________________Street
Address ______________________________________City
________________________State____Zip Code_______

Phone ___________________

Contact Name ________________________________________

PRODUCT INFORMATION:

Description ____________________________List #__________________Date of Complaint _______/______/Serial
Number __________________________or Lot Number ___________________________Nature
of Complaint __________________________________________________________________________

Call the appropriate Abbott Diagnostics Customer Support Center to report product concerns or questions. If the Support Center is not available, the Distributor Representative must complete all areas of this form and FAX it to the appropriate Customer Support Center. A customer Support Specialist will call the account between 7:30am and 6:00pm Central time.

Customer Support Center	1-800-#	FAX
Cell-Dyn	1-800-235-5396	1-408-982-4866
IMx/Spectrum	1-800-527-1869	1-214-518-7476
Vision/TestPack	1-800-323-9100	1-708-938-6255

Abbott LaboratoriesDept.
34G, Bldg. AP6CCustomer
Support Center

100 Abbott Park Road, Abbott Park, IL 60064-3500

004.370277.1

EXHIBIT 3.12(b)

EXCLUDED COMPETITIVE PRODUCTS

[**************************************************************************]

EXHIBIT 9.11

ALTERNATIVE DISPUTE RESOLUTION

The parties recognize that bona fide disputes as to certain matters may arise from time to time during the term of this Agreement which relate to either party’s rights and/or obligations under this Agreement. To have such a dispute resolved by this Alternative Dispute Resolution (“ADR”) provision, a party first must send written notice, as provided in Section 9.8 of the Agreement, of the dispute to the other party for attempted resolution by good faith negotiations between their respective presidents (or their designees) of the affected subsidiaries, divisions, or business units within twenty-eight (28) days after such notice is received (all references to “days” in this ADR provision are to calendar days).

If the matter has not been resolved within twenty-eight (28) days of the notice of dispute, if the parties fail to meet within such twenty-eight (28) days, or if the parties have not agreed in writing to extend the time for good faith negotiations beyond the twenty-eight (28) day period, either party may initiate an ADR proceeding as provided herein. The parties shall have the right to be represented by counsel in such a proceeding.

1. To begin an ADR proceeding, a party shall provide written notice to the other party of the issues to be resolved by ADR, including the specific provisions of the Agreement in issue. Within fourteen (14) days after its receipt of such notice, the other party may, by written notice to the party initiating the ADR, add additional issues to be resolved within the same ADR.

2. Within twenty-one (21) days following receipt of the original ADR notice, the parties shall select a mutually acceptable neutral to preside in the resolution of any disputes in this ADR proceeding. If the parties are unable to agree on a mutually acceptable neutral within such period, either party may request the President of the CPR Institute for Dispute Resolution (“CPR”), 366 Madison Avenue, 14th Floor, New York, New York 10017, to select a neutral pursuant to the following procedures:

(a) The CPR shall submit to the parties a list of not less than five (5) candidates within fourteen (14) days after receipt of the request, along with a Curriculum Vitae for each candidate. No candidate shall be an employee, director, or shareholder of either party or any of their subsidiaries or affiliates.

(b) Such list shall include a statement of disclosure by each candidate of any circumstances likely to affect his or her impartiality.

(c) Each party shall number the candidates in order of preference (with the number one (1) signifying the greatest preference) and shall deliver the list to the CPR within seven (7) days following receipt of the list of candidates. If a party believes a conflict of interest exists regarding any of the candidates, that party shall provide a written explanation of the conflict to the CPR along with its list showing its order of preference for the candidates. Any party failing to return a list of preferences on time shall be deemed to have no order of preference.

(d) If the parties collectively have identified fewer than three (3) candidates deemed to have conflicts, the CPR immediately shall designate as the neutral the candidate for whom the parties collectively have indicated the greatest preference, excluding any candidate deemed by a party to have conflicts. If a tie should result between two candidates, the CPR may designate either candidate. If the parties collectively have identified three (3) or more candidates deemed to have conflicts, the CPR shall review the explanations regarding conflicts and, in its sole discretion, may either (i) immediately designate as the neutral the candidate for whom the parties collectively have indicated the greatest preference, or (ii) issue a new list of not less than five (5) candidates, in which case the procedures set forth in subparagraphs 2(a) — 2(d) shall be repeated.

3. No earlier than twenty-eight (28) days or later than fifty-six (56) days after selection, unless otherwise agreed to in writing by the parties, the neutral shall hold a hearing to resolve each of the issues identified by the parties. The ADR proceeding shall take place at a location agreed upon by the parties. If the parties cannot agree, the neutral shall designate a location other than the principal place of business of either party or any of their subsidiaries or affiliates.

4. At least seven (7) days prior to the hearing, each party shall submit the following to the other party and the neutral:

(a) a copy of all exhibits on which such party intends to rely in any oral or written presentation to the neutral;

(b) a list of any witnesses such party intends to call at the hearing, and a short summary of the anticipated testimony of each witness;

(c) a proposed ruling on each issue to be resolved, together with a request for a specific damage award or other remedy for each issue. The proposed rulings and remedies shall not contain any recitation of the facts or any legal arguments and shall not exceed one (1) page per issue.

(d) a brief in support of such party’s proposed rulings and remedies, provided that the brief shall not exceed twenty (20) pages. This page limitation shall apply regardless of the number of issues raised in the ADR proceeding.

Except as expressly set forth in subparagraphs 4(a) — 4(d), no discovery shall be required or permitted by any means, including depositions, interrogatories, requests for admissions, or production of documents.

5. The hearing shall be conducted on two (2) consecutive days and shall be governed by the following rules:

(a) Each party shall be entitled to five (5) hours of hearing time to present its case. The neutral shall determine whether each party has had the five (5) hours to which it is entitled.

(b) Each party shall be entitled, but not required, to make an opening statement, to present regular and rebuttal testimony, documents or other evidence, to cross-examine witnesses, and to make a closing argument. Cross-examination of witnesses shall occur immediately after their direct testimony, and cross-examination time shall be charged against the party conducting the cross-examination.

(c) The party initiating the ADR shall begin the hearing and, if it chooses to make an opening statement, shall address not only issues it raised but also any issues raised by the responding party. The responding party, if it chooses to make an opening statement, also shall address all issues raised in the ADR. Thereafter, the presentation of regular and rebuttal testimony and documents, other evidence, and closing arguments shall proceed in the same sequence.

(d) Except when testifying, witnesses shall be excluded from the hearing until closing arguments.

(e) Settlement negotiations, including any statements made therein, shall not be admissible under any circumstances. Affidavits prepared for purposes of the ADR hearing also shall not be admissible. As to all other matters, the neutral shall have sole discretion regarding the admissibility of any evidence.

6. Within seven (7) days following completion of the hearing, each party may submit to the other party and the neutral a post-hearing brief in support of its proposed rulings and remedies, provided that such brief shall not contain or discuss any new evidence and shall not exceed ten (10) pages. This page limitation shall apply regardless of the number of issues raised in the ADR proceeding.

7. The neutral shall rule on each disputed issue within fourteen (14) days following completion of the hearing. Such ruling shall adopt in its entirety the proposed ruling and remedy of one of the parties on each disputed issue but may adopt one party’s proposed rulings and remedies on some issues and the other party’s proposed rulings and remedies on other issues. The neutral shall not issue any written opinion or otherwise explain the basis of the ruling.

8. The neutral shall be paid a reasonable fee plus expenses. These fees and expenses, along with the reasonable legal fees and expenses of the prevailing party (including all expert witness fees and expenses), the fees and expenses of a court reporter, and any expenses for a hearing room, shall be paid as follows:

(a) If the neutral rules in favor of one party on all disputed issues in the ADR, the losing party shall pay 100% of such fees and expenses.

(b) If the neutral rules in favor of one party on some issues and the other party on other issues, the neutral shall issue with the rulings a written determination as to how such fees and expenses shall be allocated between the parties. The neutral shall allocate fees and expenses in a way that bears a reasonable relationship to the outcome of the ADR, with the party prevailing on more issues, or on issues of greater value or gravity, recovering a relatively larger share of its legal fees and expenses.

9. The rulings of the neutral and the allocation of fees and expenses shall be binding, non-reviewable, and non-appealable (except in the case of fraud or bad faith on the part of the neutral), and may be entered as a final judgment in any court having jurisdiction.

10. Except as provided in paragraph 9 or as required by law, the existence of the dispute, any settlement negotiations, the ADR hearing, any submissions (including exhibits, testimony, proposed rulings, and briefs), and the rulings shall be deemed Confidential Information (except for information contained in exhibits or testimony that is already public or later becomes public through no fault of the parties or which is lawfully disclosed to a party through an independent third party). The neutral shall have the authority to impose sanctions for unauthorized disclosure of Confidential Information.