EXHIBIT 10.2

EXECUTION VERSION

 

PSS World Medical, Inc.

3.125% Convertible Senior Notes due August 1, 2014

 

 

Purchase Agreement

July 29, 2008

Goldman, Sachs & Co.,

85 Broad Street,

New York, New York 10004

Ladies and Gentlemen:

PSS World Medical, Inc., a Florida corporation (the “Company”), proposes,
subject to the terms and conditions stated herein, to issue and sell to Goldman,
Sachs & Co. (the “Purchaser”) an aggregate of $200,000,000 principal amount of
the Convertible Senior Notes due August 1, 2014, convertible into common stock,
par value $0.01 (“Stock”), of the Company, specified above (the “Firm
Securities”) and, at the election of the Purchaser, up to an aggregate of
$30,000,000 additional aggregate principal amount (the “Optional Securities”)
(the Firm Securities and the Optional Securities which the Purchaser elects to
purchase pursuant to Section 2 hereof are herein collectively called the
“Securities”). In connection with the offering of the Securities, the Company is
entering into convertible note hedge and warrant transactions with Goldman,
Sachs & Co. (the “Convertible Note Hedge and Warrant Counterparty”) pursuant to
confirmation letters, dated July 29, 2008, subject to an agreement in the form
of the ISDA 2002 Master Agreement (collectively, the “Convertible Note Hedge and
Warrant Transaction Documentation”, and the confirmation letter relating to the
convertible note hedge transaction, the “Convertible Note Hedge Confirmation”
and the confirmation letter relating to the warrant transaction, the “Warrant
Confirmation”).

 

1.

The Company represents and warrants to, and agrees with, the Purchaser that:

 

 

(a)

A preliminary offering circular, dated July 28, 2008 (the “Preliminary Offering
Circular”), and an offering circular, dated July 29, 2008 (the “Offering
Circular”), have been prepared in connection with the offering of the Securities
and the shares of Stock issuable upon conversion thereof. The Preliminary
Offering Circular, as amended and supplemented immediately prior to the
Applicable Time (as defined in Section 1(b)), is hereinafter referred to the
“Pricing Circular”. Any reference to the Preliminary Offering Circular, the
Pricing Circular or the Offering Circular shall be deemed to refer to and
include the Company’s most recent Annual Report on Form 10-K and all subsequent
documents filed with the United States Securities and Exchange Commission (the
“Commission”) pursuant to Section 13(a), 13(c), 14 or 15(d) of the United States
Securities Exchange Act of 1934, as amended (the “Exchange Act”) on or prior to
the date of such circular and any reference to the Preliminary Offering
Circular, the Pricing Circular or the Offering Circular, as the case may be, as

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

 

amended or supplemented, as of any specified date, shall be deemed to include
(i) any documents filed with the Commission pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of the Preliminary Offering
Circular, the Pricing Circular or the Offering Circular, as the case may be, and
prior to such specified date and (ii) any Additional Issuer Information (as
defined in Section 5(f)) furnished by the Company prior to the completion of the
distribution of the Securities; and all documents filed under the Exchange Act
and so deemed to be included in the Preliminary Offering Circular, the Pricing
Circular or the Offering Circular, as the case may be, or any amendment or
supplement thereto are hereinafter called the “Exchange Act Reports”. The
Exchange Act Reports, when they were or are filed with the Commission, conformed
or will conform in all material respects to the applicable requirements of the
Exchange Act and the applicable rules and regulations of the Commission
thereunder; and no such documents were filed with the Commission since the
Commission’s close of business on the business day immediately prior to the date
of this Agreement and prior to the execution of this Agreement, except as set
forth on Schedule I(a) hereof. The Preliminary Offering Circular or the Offering
Circular and any amendments or supplements thereto and the Exchange Act Reports
did not and will not, as of their respective dates, contain an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the Purchaser
for use therein;

 

 

(b)

For the purposes of this Agreement, the “Applicable Time” is 5:30 p.m. (Eastern
time) on the date of this Agreement; the Pricing Circular as supplemented by the
information set forth in Schedule II hereto, taken together (collectively, the
“Pricing Disclosure Package”) as of the Applicable Time, did not include any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and each Company Supplemental Disclosure
Document (as defined in Section 6(a)) listed on Schedule I(b) hereto does not
conflict with the information contained in the Pricing Circular or the Offering
Circular and each such Company Supplemental Disclosure Document, as supplemented
by and taken together with the Pricing Disclosure Package as of the Applicable
Time, did not include any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to statements or
omissions made in a Company Supplemental Disclosure Document in reliance upon
and in conformity with information furnished in writing to the Company by the
Purchaser expressly for use therein;

 

 

(c)

Neither the Company nor any of its subsidiaries has sustained since the date of
the latest audited financial statements included or incorporated by reference in
the Pricing Circular any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Pricing Circular; and, since
the respective dates as of which information is given in the Pricing Circular,
there has not been any change in the capital stock or long-term debt of the
Company or any of its subsidiaries (other than stock option transactions, normal
debt payments and other such

 

2

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

 

transactions in the normal course of business) or any material adverse change,
or any development involving a prospective material adverse change (other than
general economic and industry conditions that would not disproportionately
affect the Company), in or affecting the general affairs, management, financial
position, shareholders’ equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Pricing
Circular;

 

 

(d)

The Company and its subsidiaries have good and marketable title in fee simple to
all real property and good and marketable title to all material personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects except (i) as set forth in the Pricing Circular, or (ii) as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its subsidiaries;

 

 

(e)

The Company (i) has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Florida, with power
and authority (corporate and other) to own its properties and conduct its
business as described in the Pricing Circular, and (ii) has been duly qualified
as a foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, except where the
failure to be so qualified or in good standing under the laws of such other
jurisdiction would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole;

 

 

(f)

Each subsidiary of the Company (i) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation with power and authority (corporate and other) to own its
properties and conduct its business as described in the Pricing Circular, and
(ii) has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification, except where the failure to be so qualified or in good
standing under the laws of such other jurisdiction would not, singly or in the
aggregate, have a material adverse effect on the Company and its subsidiaries,
taken as a whole;

 

 

(g)

Gulf South Medical Supply, Inc. is the only subsidiary of the Company that is a
significant subsidiary of the Company’s within the meaning of Section 1-02(w) of
Regulation S-X under the Securities Act of 1933, as amended (the “Act”);

 

 

(h)

The Company has an authorized capitalization as set forth in the Pricing
Circular, and all of the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and non-assessable;
the shares of Stock initially issuable upon conversion of the Securities have
been duly and validly authorized and reserved for issuance and, when issued and
delivered in accordance with the provisions of the Securities and the Indenture
referred to below, will be duly and validly issued, fully paid and
non-assessable and will conform to the description of the Stock contained in the
Pricing

 

3

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

 

Disclosure Package and the Offering Circular; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and (except for
directors’ qualifying shares) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims except as set
forth in the Pricing Circular;

 

 

(i)

The Securities have been duly authorized by the Company and, when issued and
delivered pursuant to this Agreement, when authenticated by the Trustee in
accordance with the Indenture (as defined below), and when paid for by the
Purchaser in accordance with the terms hereof, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Company entitled to the benefits provided by the
indenture to be dated as of August 4, 2008 (the “Indenture”) between the Company
and U.S. Bank National Association, as Trustee (the “Trustee”), under which they
are to be issued and will be convertible into Stock in accordance with their
terms and the Indenture; the Securities will rank equal in right of payment with
all of the Company’s other unsecured and unsubordinated indebtedness; the
Indenture has been duly authorized and, when executed and delivered by the
Company and the Trustee, the Indenture will constitute a valid and legally
binding instrument of the Company, enforceable against the Company in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors’ rights and to general equitable principles (regardless of whether
such enforcement is considered in a proceeding at law or in equity); and the
Securities and the Indenture will conform to the descriptions thereof in the
Pricing Disclosure Package and the Offering Circular and will be in
substantially the form previously delivered to you;

 

 

(j)

This Agreement has been duly authorized, executed and delivered by the Company;

 

 

(k)

None of the transactions contemplated by this Agreement (including, without
limitation, the use of the proceeds from the sale of the Securities) will
violate or result in a violation of Section 7 of the Exchange Act, or any
regulation promulgated thereunder, including, without limitation, Regulations T,
U, and X of the Board of Governors of the Federal Reserve System;

 

 

(l)

Prior to the date hereof, neither the Company nor any of its “affiliates” (as
defined in Rule 144 under the Act) has taken any action that is prohibited by
Section 9(a) of the Exchange Act or any applicable state securities laws;

 

 

(m)

The issue and sale of the Securities and the compliance by the Company with all
of the provisions of the Securities, the Indenture and this Agreement and the
consummation of the transactions herein and therein contemplated (including,
without limitation, the use of proceeds from the sale of the Securities) will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject except for such conflicts, breaches or
violations which would not, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole, nor will such
action result in any violation of the provisions of

 

4

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

 

the Articles of Incorporation or By-laws of the Company or any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Securities or the consummation by the
Company of the transactions contemplated by this Agreement or the Indenture,
except such consents, approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Securities by the Purchaser;

 

 

(n)

Neither the Company nor any of its subsidiaries (i) is in violation of its
Articles of Incorporation or By-laws or (ii) in default in the performance or
observance of any obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound,
except for such defaults that would not, singly or in the aggregate, have a
material adverse effect on the Company and its subsidiaries, taken as a whole;

 

 

(o)

The statements set forth in the Pricing Circular and the Offering Circular under
the caption “Description of Notes” and “Description of Capital Stock”, insofar
as they purport to constitute a summary of the terms of the Securities and the
Stock, under the caption “Certain United States Federal Income Tax
Considerations”, and under the caption “Plan of Distribution”, insofar as they
purport to describe the provisions of the laws and documents referred to
therein, are accurate and complete in all material respects;

 

 

(p)

Other than as set forth in the Pricing Circular, there are no legal or
governmental proceedings pending nor, to the knowledge of the Company,
threatened, to which the Company or any of its subsidiaries is or would be a
party or of which any property of the Company or any of its subsidiaries is or
would be the subject which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a material adverse
effect on the current or future financial position, shareholders’ equity or
results of operations of the Company and its subsidiaries or on the power or
ability of the Company to perform its obligations under this Agreement, the
Indenture or the Securities or to consummate the transactions contemplated
herein and therein;

 

 

(q)

The Company and its subsidiaries (i) are in compliance with any and all
applicable foreign federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses and
(iii) are in compliance with all terms and conditions of any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries, taken as a whole;

 

 

(r)

There are no costs or liabilities associated with Environmental Laws (including,
without limitation, any capital or operating expenditures required for clean-up,
closure of properties or compliance with Environmental Laws or any permit,
license or approval, any related

 

5

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

 

constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries, taken as a whole;

 

 

(s)

When the Securities are issued and delivered pursuant to this Agreement, the
Securities will not be of the same class (within the meaning of Rule 144A under
the Act) as securities which are listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system;

 

 

(t)

The Company is subject to Section 13 or 15(d) of the Exchange Act;

 

 

(u)

The Company is not, and after giving effect to the offering and sale of the
Securities and the application of the net proceeds thereof, will not be an
“investment company”, as such term is defined in the United States Investment
Company Act of 1940, as amended (the “Investment Company Act”);

 

 

(v)

Neither the Company, any of its affiliates nor any person acting on its or their
behalf has offered or sold the Securities by means of any general solicitation
or general advertising within the meaning of Rule 502(c) under the Act;

 

 

(w)

Within the preceding six months, neither the Company, any of its affiliates nor
any other person acting on its or their behalf has offered or sold to any person
any Securities, or any securities of the same or a similar class as the
Securities, other than Securities offered or sold to the Purchaser hereunder.
The Company will take reasonable precautions designed to insure that any offer
or sale, direct or indirect, in the United States or to any U.S. person (as
defined in Rule 902 under the Act) of any Securities or any substantially
similar security issued by the Company, within six months subsequent to the date
on which the distribution of the Securities has been completed (as notified to
the Company by the Purchaser), is made under restrictions and other
circumstances reasonably designed not to affect the status of the offer and sale
of the Securities in the United States and to U.S. persons contemplated by this
Agreement as transactions exempt from the registration provisions of the Act;

 

 

(x)

KPMG LLP, which has audited certain financial statements of the Company and its
subsidiaries and has audited the Company’s internal control over financial
reporting, is an independent registered public accounting firm as required by
the Act and the rules and regulations of the Commission thereunder;

 

 

(y)

It is not necessary in connection with the offer, sale and delivery of the
Securities to the Purchaser in the manner contemplated by this Agreement to
register the Securities under the Act or to qualify the Indenture under the
Trust Indenture Act of 1939, as amended;

 

 

(z)

The Company and its subsidiaries have and will maintain insurance covering their
respective properties, operations, personnel and businesses, which insurance is
in amounts and insures against such losses and risks, in each case as the
Company believes is in accordance with customary industry practice for companies
of similar size and operations, except where the failure to maintain such
insurance would not, singly or in the aggregate, have a material adverse effect
on the Company and its subsidiaries, taken as a whole;

 

6

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

 

(aa)

The Company and each of its subsidiaries possess all licenses, certificates,
approvals and permits issued by, and has made all declarations and filings with,
the appropriate federal, state or foreign regulatory agencies or bodies
(including, without limitation, the Federal Food and Drug Administration, the
Federal Drug Enforcement Administration and comparable state agencies) necessary
for the ownership of the Company’s and its subsidiaries’ properties or the
conduct of its and their businesses (including, without limitation, the
marketing of the products that the Company and its subsidiaries currently
market) as described in the Pricing Circular, except where the failure to
possess or make the same would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole; and none
of the Company or its subsidiaries have received notification of any revocation
or modification of any such license, certificate, authorization or permit where
the revocation or modification would result in a material adverse effect on the
Company and its subsidiaries, taken as a whole, or have any reason to believe
that any such license, certificate, authorization or permit will not be renewed
where the failure to renew would have a material adverse effect on the Company
and its subsidiaries, taken as a whole;

 

 

(bb)

The Company maintains a system of internal control over financial reporting (as
such term is defined in Rule 13a-15(f) of the Exchange Act) that complies with
the requirements of the Exchange Act and has been designed by the Company’s
principal executive officer and principal financial officer, or under their
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The
Company’s internal control over financial reporting is effective and the Company
is not aware of any material weaknesses in its internal control over financial
reporting;

 

 

(cc)

Since the date of the latest audited financial statements included or
incorporated by reference in the Pricing Circular, there has been no change in
the Company’s internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting; and

 

 

(dd)

The Company maintains disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) of the Exchange Act) that comply with the requirements
of the Exchange Act; such disclosure controls and procedures have been designed
to ensure that material information relating to the Company and its subsidiaries
is made known to the Company’s principal executive officer and principal
financial officer by others within those entities; and such disclosure controls
and procedures are effective.

 

2.

Subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, at a purchase price of 98.00% of the principal amount thereof, the Firm
Securities.

The Company hereby grants to the Purchaser the right to purchase at its election
up to $30,000,000 aggregate principal amount of Optional Securities, at the
purchase price for the Firm Securities set forth in the first paragraph of this
Section 2. Any such election to purchase Optional Securities may be exercised in
whole or from time to time in part by written notice from you to the Company,
setting forth the aggregate principal amount of Optional Securities to be
purchased and the date on which such Optional Securities are to be delivered, as
determined by

 

7

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

you but in no event earlier than the First Time of Delivery (as defined in
Section (4) hereof) or, unless you and the Company otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.

 

3.

Upon the authorization by you of the release of the Securities, the Purchaser
proposes to offer the Securities for sale upon the terms and conditions set
forth in this Agreement and the Offering Circular and the Purchaser hereby
represents and warrants to, and agrees with, the Company that:

 

 

(a)

It will offer and sell the Securities only to persons who it reasonably believes
are “qualified institutional buyers” (“QIBs”) within the meaning of Rule 144A
under the Act in transactions meeting the requirements of Rule 144A;

 

 

(b)

It is an institutional accredited investor as set forth in subsections (1), (2),
(3) or (7) of Rule 501(a) under the Act; and

 

 

(c)

It will not offer or sell the Securities by any form of general solicitation or
general advertising, including but not limited to the methods described in Rule
502(c) under the Act.

 

4.    

  (a)     

The Securities to be purchased by the Purchaser hereunder will be represented by
one or more definitive global Securities in book-entry form which will be
deposited by or on behalf of the Company with The Depository Trust Company
(“DTC”) or its designated custodian. The Company will deliver the Securities to
the Purchaser against payment by the Purchaser of the purchase price therefor by
wire transfer to an account designated by the Company in Federal (same day)
funds, by causing DTC to credit the Securities to the account of the Purchaser.
The Company will cause the certificates representing the Securities to be made
available for checking at least twenty-four hours prior to the Time of Delivery
(as defined below) at the office of Cleary Gottlieb Steen & Hamilton LLP, One
Liberty Plaza, New York, NY 10006 (the “Closing Location”). The time and date of
such delivery and payment shall be 9:30 a.m., New York City time, on August 4,
2008 or such other time and date as the Purchaser and the Company may agree upon
in writing and, with respect to the Optional Securities, 9:30 a.m., New York
City time, on the date specified in the written notice given by the Purchaser of
its election to purchase such Optional Securities, or such other time and date
as the Purchaser and the Company may agree upon in writing, provided that any
Subsequent Time of Delivery (as defined below), if any, shall not be more than
30 calendar days from and including the First Time of Delivery (as defined
below). The time and date for delivery of the Firm Securities is herein called
the “First Time of Delivery”, the time and date for delivery of any Optional
Securities, if not the First Time of Delivery, is herein called the “Subsequent
Time of Delivery”, and each such time and date for delivery is herein called a
“Time of Delivery”.

 

 

(b)

The documents to be delivered at the Time of Delivery by or on behalf of the
parties hereto pursuant to Section 8 hereof, including the cross-receipt for the
Securities and any additional documents requested by the Purchaser pursuant to
Section 8(l) hereof, will be delivered at such time and date at the Closing
Location, and the Securities will be delivered at the office of DTC or its
designated custodian, all at the Time of Delivery. A meeting will be held at the
Closing Location at 5:00 p.m., New York City time, on the New York Business Day
next preceding the Time of Delivery, at which meeting the final drafts of the
documents

 

8

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

 

to be delivered pursuant to the preceding sentence will be available for review
by the parties hereto. For the purposes of this Section 4, “New York Business
Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.

 

5.

The Company agrees with the Purchaser:

 

 

(a)

To prepare the Preliminary Offering Circular and the Offering Circular in a form
approved by you; to make no amendment or any supplement to the Offering Circular
to which you have not consented promptly after reasonable notice thereof; and to
furnish you with copies thereof;

 

 

(b)

Promptly from time to time to take such action as you may reasonably request to
qualify the Securities and the shares of Stock issuable upon conversion of the
Securities for offering and sale under the securities laws of such jurisdictions
as you may request and to comply with such laws so as to permit the continuance
of sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Securities, provided that in
connection therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;

 

 

(c)

To furnish the Purchaser with written and electronic copies of the Preliminary
Offering Circular and the Offering Circular and each amendment and supplement
thereto in such quantities as you may from time to time reasonably request, and
if, at any time prior to the expiration of nine months after the date of the
Offering Circular, any event shall have occurred as a result of which the
Offering Circular as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made when such Offering Circular is delivered, not misleading,
or, if for any other reason it shall be necessary or desirable during such same
period to amend or supplement the Offering Circular, to notify you and upon your
request to prepare and furnish without charge to the Purchaser and to any dealer
in securities as many written and electronic copies as you may from time to time
reasonably request of an amended Offering Circular or a supplement to the
Offering Circular which will correct such statement or omission or effect such
compliance;

 

 

(d)

During the period beginning from the date hereof and continuing until the date
90 days after the date hereof, not to offer, sell contract to sell or otherwise
dispose of, except as provided hereunder any securities of the Company that are
substantially similar to the Securities or the Stock, including but not limited
to any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to equity compensation plans existing on, or
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement), without your prior written
consent;

 

 

(e)

Not to be or become, at any time prior to the expiration of three years after
the latest Time of Delivery, an open-end investment company, unit investment
trust, closed-end investment company or face-amount certificate company that is
or is required to be registered under Section 8 of the Investment Company Act;

 

9

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

 

(f)

At any time when the Company is not subject to Section 13 or 15(d) of the
Exchange Act, for the benefit of holders from time to time of Securities, to
furnish at its expense, upon request, to holders of Securities and prospective
purchasers of securities information satisfying the requirements of subsection
(d)(4)(i) of Rule 144A under the Act (the “Additional Issuer Information”);

 

 

(g)

If requested by you, to use its best efforts to cause the Securities to be
eligible for the PORTAL Market trading system;

 

 

(h)

To furnish to the holders of the Securities (such obligation to be satisfied by
publicly-available filings with the Commission if the Company is then subject to
Section 13 or 15(d) under the Exchange Act) an annual report (including a
balance sheet and statements of income, shareholders’ equity and cash flows of
the Company and its consolidated subsidiaries certified by independent public
accountants) and, after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of the
Offering Circular), to make available to its shareholders consolidated summary
financial information of the Company and its subsidiaries for such quarter in
reasonable detail, all in accordance with the timing requirements of the
Exchange Act for a company subject to Section 13 or 15(d) under the Exchange
Act;

 

 

(i)

During a period of five years from the date of the Offering Circular, provided
that the Securities remain outstanding, to furnish to you copies of all reports
or other communications (financial or other) furnished to shareholders of the
Company and copies of any reports and financial statements furnished to or filed
with the Commission or any securities exchange on which the Securities or any
class of securities of the Company is listed (such obligations to be satisfied
by publicly-available filings with the Commission if the Company is then subject
to Section 13 or 15(d) under the Exchange Act); and to deliver to you such
additional information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
shareholders generally or to the Commission), except to the extent the provision
of such information would be prohibited by any applicable laws or would require
public disclosure thereof pursuant to Regulation FD;

 

 

(j)

During the period of one year after the latest Time of Delivery, the Company
will not, and will not permit any of its affiliates to, resell any of the
Securities that have been reacquired by any of them;

 

 

(k)

To use the net proceeds received by it from the sale of the Securities pursuant
to this Agreement in the manner specified in the Pricing Circular under the
caption “Use of Proceeds”;

 

 

(l)

To reserve and keep available at all times shares of Stock on the same terms as
the Company’s authorized and issued common stock, for the purpose of enabling
the Company to satisfy any obligations to issue shares of its Stock upon
conversion of the Securities; and

 

10

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

 

(m)

To use its best efforts to list, subject to notice of issuance, the shares of
Stock issuable upon conversion of the Securities on The NASDAQ Global Select
Market.

 

6.    

  (a)       

The Company represents and agrees that, without the prior consent of the
Purchaser, it has not made and will not make any offer relating to the
Securities that, if the offering of the Securities contemplated by this
Agreement were conducted as a public offering pursuant to a registration
statement filed under the Act with the Commission, would constitute an “issuer
free writing prospectus,” as defined in Rule 433 under the Act (any such offer
is hereinafter referred to as a “Company Supplemental Disclosure Document”);

 

 

(b)

the Purchaser represents and agrees that, without the prior consent of the
Company, other than one or more term sheets relating to the Securities
containing customary information and conveyed to purchasers of securities, it
has not made and will not make any offer relating to the Securities that, if the
offering of the Securities contemplated by this Agreement were conducted as a
public offering pursuant to a registration statement filed under the Act with
the Commission, would constitute a “free writing prospectus,” as defined in Rule
405 under the Act (any such offer (other than any such term sheets), is
hereinafter referred to as a “Purchaser Supplemental Disclosure Document”); and

 

 

(c)

any Company Supplemental Disclosure Document or Purchaser Supplemental
Disclosure Document the use of which has been consented to by the Company and
the Purchaser is listed on Schedule I(b) hereto.

 

7.

The Company covenants and agrees with the Purchaser that the Company will pay or
cause to be paid the following: (i) the fees, disbursements and expenses of the
Company’s counsel and accountants in connection with the issue of the Securities
and the shares of Stock issuable upon conversion of the Securities and all other
expenses in connection with the preparation and printing of the Preliminary
Offering Circular and the Offering Circular and any amendments and supplements
thereto and the mailing and delivering of copies thereof to the Purchaser and
dealers; (ii) the cost of printing or producing this Agreement, the Indenture,
the Blue Sky and Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Securities; (iii) all expenses in connection
with the qualification of the Securities and the shares of Stock issuable upon
conversion of the Securities for offering and sale under state securities laws
as provided in Section 5(b) hereof, including the fees and disbursements of
counsel for the Purchaser in connection with such qualification and in
connection with the Blue Sky and legal investment surveys; (iv) any fees charged
by securities rating services for rating the Securities; (v) the cost of
preparing the Securities; (vi) the fees and expenses of the Trustee and any
agent of the Trustee and the fees and disbursements of counsel for the Trustee
in connection with the Indenture and the Securities; (vii) any cost incurred in
connection with the designation of the Securities for trading in PORTAL and the
listing of the shares of Stock issuable upon conversion of the Securities; and
(viii) all other costs and expenses of the Company incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that, except as provided in this
Section and Sections 9 and 11 hereof, the Purchaser will pay all of its own
costs and expenses, including the fees of its counsel, transfer taxes on resale
of any of the Securities by it, and any advertising expenses connected with any
offers it may make.

 

11

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

8.

The obligations of the Purchaser hereunder at any Time of Delivery shall be
subject, in its discretion, to the condition that all representations and
warranties and other statements of the Company herein are, at and as of such
Time of Delivery, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and the
following additional conditions:

 

 

(a)

Cleary Gottlieb Steen & Hamilton LLP, counsel for the Purchaser, shall have
furnished to you such opinion or opinions, dated such Time of Delivery, with
respect to the matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably request to
enable them to pass upon such matters;

 

(b)

     (i)     

Alston & Bird LLP, counsel for the Company, shall have furnished to the
Purchaser and the Convertible Note Hedge and Warrant Counterparty their written
opinion, dated such Time of Delivery, in form and substance satisfactory to you,
to the effect that:

 

 

(1)

Gulf South Medical Supply, Inc. is validly existing as a corporation and in good
standing under the laws of the State of Delaware; and all of the issued shares
of capital stock of Gulf South Medical Supply, Inc. have been duly and validly
authorized and issued, are fully paid and non assessable, and are owned of
record by the Company;

 

 

(2)

To the knowledge of such counsel, other than as set forth in the Offering
Circular, there are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party which seek to restrain, enjoin,
prevent the consummation of or otherwise challenge the transactions contemplated
hereby or the issuance or sale of the Securities or issuance of the Stock upon
conversion of the Securities;

 

 

(3)

The Securities have been duly authorized for issuance under the provisions of
the Indenture and when executed by the Company and authenticated by the Trustee
in accordance with the provisions of the Indenture and delivered to and paid for
by the Purchaser in accordance with the terms of the Purchase Agreement, will
constitute valid and binding obligations of the Company entitled to the benefits
provided by the Indenture, enforceable against the Company in accordance with
their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors’ rights and to general equitable principles (regardless of whether
such enforcement is considered in a proceeding at law or in equity); and the
Securities and the Indenture conform to the descriptions thereof in the Offering
Circular;

 

 

(4)

Assuming the due authorization, execution, delivery and authentication by the
other parties thereto, the Convertible Note Hedge and Warrant Transaction
Documentation and the Indenture constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors’ rights and to
general equitable principles (regardless of whether such enforcement is
considered in a proceeding at law or in equity);

 

12

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

 

(5)

The issue and sale of the Securities and the execution, delivery and performance
by the Company of the Securities, the Indenture and this Agreement and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument filed as an exhibit to
the Company’s Annual Report on Form 10-K for the fiscal year ended March 28,
2008, or filed as an exhibit to any subsequently filed Form 10-Q or Form 8-K,
nor will such actions result in any violation of the provisions of any statute,
rule or regulation of the State of New York or the United States of America, or
the Delaware General Corporation Law, or, to such counsel’s knowledge, any
judgment, order or decree binding upon the Company or any of its subsidiaries or
any of their properties;

 

 

(6)

No consent, approval, authorization, registration or qualification of or with
any court or governmental agency or body of the State of New York or the United
States of America, or under the Delaware General Corporation Law, is required
for the issue and sale of the Securities or the consummation by the Company of
the transactions contemplated by this Agreement, the Securities, the Indenture
or the Convertible Note Hedge and Warrant Transaction Documentation, except such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Purchaser;

 

 

(7)

The statements set forth in the Pricing Circular and the Offering Circular under
the captions “Description of Notes” and “Description of Capital Stock”, insofar
as they purport to constitute a summary of the terms of the Securities and the
Stock, under the caption “Certain United States Federal Tax Considerations”, and
under the caption “Plan of Distribution”, insofar as they purport to describe
the provisions of the laws and documents referred to therein, are accurate,
complete and fair;

 

 

(8)

The Exchange Act Reports (other than the financial statements and related
schedules therein, as to which such counsel need express no opinion), when they
were filed with the Commission, complied as to form in all material respects
with the requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder;

 

 

(9)

No registration of the Securities under the Act, and no qualification of an
indenture under the United States Trust Indenture Act of 1939 with respect
thereto, is required for the offer, sale and initial resale of the Securities by
the Purchaser in the manner contemplated by this Agreement; and

 

 

(10)

The Company is not, and after giving effect to the offering and sale of the
Securities and the application of the net proceeds thereof as described in the
Offering Circular under the caption “Use of Proceeds” will not be, an
“investment company”, as such term is defined in the Investment Company Act.

 

13

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

Such counsel has no reason to believe that (A) the Pricing Disclosure Package,
as of the Applicable Time (other than the financial statements and other
financial data therein or omitted therefrom, as to which such counsel need
express no opinion), contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (B) the Offering Circular and any further amendments or
supplements thereto made by the Company prior to the Time of Delivery (other
than the financial statements and other financial data therein or omitted
therefrom, as to which such counsel need express no opinion) contained as of its
date or contains as of the Time of Delivery an untrue statement of a material
fact or omitted or omits, as the case may be, to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

Such counsel may limit its opinions to the laws of the State of New York, the
Delaware General Corporation Law and the federal laws of the United States of
America. In rendering such opinions, such counsel may assume any matters
governed by the laws of the State of Florida, and, as to matters of fact, may
rely upon certificates of officers of the Company and of governmental officials.

 

 

(ii)

Holland & Knight LLP, special counsel for the Company, shall have furnished to
the Purchaser and the Convertible Note Hedge and Warrant Counterparty their
written opinion, dated such Time of Delivery, in form and substance satisfactory
to you, to the effect that:

 

 

(1)

The Company is duly incorporated and validly existing as a corporation and in
good standing under the laws of the State of Florida, with the corporate power
and authority to (a) own its properties and conduct its business as described in
the Offering Circular and (b) enter into and perform its obligations under this
Agreement, the Indenture, and the Convertible Note Hedge and Warrant Transaction
Documentation;

 

 

(2)

The Company has authorized capital stock as set forth in the Offering Circular;
and the shares of Stock initially issuable upon conversion of the Securities
have been duly and validly authorized and, reserved for issuance and, when
issued and delivered in accordance with the provisions of the Securities, will
be duly and validly issued and fully paid and non-assessable, and will conform
to the description of the Stock contained in the Offering Circular;

 

 

(3)

This Agreement, the Indenture, the Convertible Note Hedge Confirmation and the
Warrant Confirmation have been duly authorized, executed and delivered by the
Company;

 

 

(4)

The Securities have been duly authorized and executed by the Company;

 

14

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

 

(5)

The issue and sale of the Securities and the execution, delivery and performance
by the Company of the Securities, the Indenture, this Agreement, the Convertible
Note Hedge Confirmation and Warrant Confirmation and the consummation of the
transactions herein and therein contemplated will not result in any violation of
the provisions of the Articles of Incorporation or By-laws of the Company, any
statute, rule or regulation of the State of Florida;

 

 

(6)

No consent, approval, authorization, registration or qualification of or with
any court or governmental agency or body of the State of Florida is required for
the issue and sale of the Securities or the consummation by the Company of the
transactions contemplated by this Agreement, the Securities, the Indenture or
the Convertible Note Hedge and Warrant Transaction Documentation, except such
consents, approvals, authorizations, registrations or qualifications as may be
required under state securities or Blue Sky laws in connection with the purchase
and distribution of the Securities by the Purchaser;

 

 

(7)

The provisions contained in Section 15.01(c) of the Indenture that restrict the
ability of the holder of the Notes to exercise and receive delivery of shares of
common stock, par value $.01 per share, of the Company underlying the Notes are
effective, in accordance with the terms of the Notes, to limit the beneficial
ownership (for purposes of Article IX of the Company’s Amended and Restated
Articles of Incorporation and Section 607 of the Florida Business Corporation
Act) attributable to ownership of the Notes to the limit set forth in such
provisions contained in Section 15.01(c) of the Indenture; and

 

 

(8)

The provisions contained in Section 8(d) of the Warrant Confirmation that
restrict the ability of the Dealer (as defined in the Warrant Confirmation) as
holder of the Warrants (as defined in the Warrant Confirmation) to exercise and
receive delivery of shares of common stock, par value $.01 per share, of the
Company underlying the Warrants, are effective, in accordance with the terms of
the Warrants, to limit the beneficial ownership (for purposes of Article IX of
the Company’s Amended and Restated Articles of Incorporation and Section 607 of
the Florida Business Corporation Act) attributable to ownership of the Warrants
to the limit set forth in such provisions contained in Section 8(d) of the
Warrant Confirmation.

Such counsel may limit its opinions to the laws of the State of Florida. In
rendering such opinions, such counsel may rely as to matters of fact upon
certificates of officers of the Company and of governmental officials.

 

 

(c)

On the date of the Offering Circular prior to the execution of this Agreement
and also at each Time of Delivery, KPMG LLP shall have furnished to you a letter
or letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex I hereto;

 

 

(d)

(i) Neither the Company nor any of its subsidiaries shall have sustained since
the date of the latest audited financial statements included or incorporated by
reference in the Pricing Circular any loss or interference with its business
from fire, explosion, flood or other

 

15

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

 

calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth or
contemplated in the Pricing Circular, and (ii) since the respective dates as of
which information is given in the Pricing Circular there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
shareholders’ equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the Pricing
Circular, the effect of which, in any such case described in clause (i) or (ii),
is in your judgment so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities on
the terms and in the manner contemplated in this Agreement and in the Offering
Circular;

 

 

(e)

On or after the Applicable Time (i) no downgrading shall have occurred in the
rating accorded the Company’s debt securities by any “nationally recognized
statistical rating organization”, as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall
have publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company’s debt securities;

 

 

(f)

On or after the Applicable Time there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on The NASDAQ Global Select Market; (ii) a suspension or material
limitation in trading in the Company’s securities on The NASDAQ Global Select
Market; (iii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities or a material disruption in
commercial banking or securities settlement or clearance services in the United
States; (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency or war or
(v) the occurrence of any other calamity or crisis or any change in financial,
political or economic conditions in the United States or elsewhere, if the
effect of any such event specified in clause (iv) or (v) in your judgment makes
it impracticable or inadvisable to proceed with the offering or the delivery of
the Securities on the terms and in the manner contemplated in this Agreement and
the Offering Circular;

 

 

(g)

The Securities have been designated for trading on the PORTAL Market;

 

 

(h)

The shares of Stock issuable upon conversion of the Securities shall have been
duly listed, subject to notice of issuance, on The NASDAQ Global Select Market;

 

 

(i)

The Purchaser shall have received “lock-up” letters to the effect set forth in
Section 5(d) hereof, in form and substance satisfactory to it, from executive
officers and directors of the Company on or prior to the date hereof, and such
letters shall be in full force and effect on such Time of Delivery;

 

 

(j)

The Indenture shall be executed in a form satisfactory to the Purchaser; and

 

 

(k)

The Company shall have furnished or caused to be furnished to you at such Time
of Delivery certificates of officers of the Company satisfactory to you as to
the accuracy of the representations and warranties of the Company herein at and
as of such Time of Delivery,

 

16

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

 

as to the performance by the Company of all of its obligations hereunder to be
performed at or prior to such Time of Delivery, as to the matters set forth in
subsection (d) of this Section and as to such other matters as you may
reasonably request.

 

9.    

  (a)       

The Company will indemnify and hold harmless the Purchaser against any losses,
claims, damages or liabilities, joint or several, to which the Purchaser may
become subject, under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Company’s Current Report on Form 8-K furnished to
the Commission on July 23, 2008, any Preliminary Offering Circular, the Pricing
Circular, the Offering Circular, or any amendment or supplement thereto, any
Company Supplemental Disclosure Document, or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading, and will reimburse the Purchaser for any
legal or other expenses reasonably incurred by the Purchaser in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Circular, the Pricing
Circular, the Offering Circular or any such amendment or supplement, or any
Company Supplemental Disclosure Document, in reliance upon and in conformity
with written information furnished to the Company by the Purchaser expressly for
use therein.

 

 

(b)

The Purchaser will indemnify and hold harmless the Company against any losses,
claims, damages or liabilities to which the Company may become subject, under
the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular, the Pricing Circular, the Offering Circular, or
any amendment or supplement thereto, or any Company Supplemental Disclosure
Document, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Offering Circular, the Pricing Circular, the Offering
Circular or any such amendment or supplement, or any Company Supplemental
Disclosure Document in reliance upon and in conformity with written information
furnished to the Company by the Purchaser expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by the
Company in connection with investigating or defending any such action or claim
as such expenses are incurred.

 

 

(c)

Promptly after receipt by an indemnified party under subsection (a) or (b) above
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party shall not relieve
it from any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it shall

 

17

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

 

wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.

 

 

(d)

If the indemnification provided for in this Section 9 is unavailable to or
insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Purchaser on the other from the offering
of the Securities. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
the Purchaser on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Purchaser on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear to the total
underwriting discounts and commissions received by the Purchaser, in each case
as set forth in the Offering Circular. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the Purchaser
on the other and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Purchaser agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d),

 

18

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

 

the Purchaser shall not be required to contribute any amount in excess of the
amount by which the total price at which the Securities were offered to
investors exceeds the amount of any damages which the Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.

 

 

(e)

The obligations of the Company under this Section 9 shall be in addition to any
liability which the Company may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls the Purchaser within
the meaning of the Act or the Exchange Act; and the obligations of the Purchaser
under this Section 9 shall be in addition to any liability which the Purchaser
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act or the Exchange Act.

 

10.

The respective indemnities, agreements, representations, warranties and other
statements of the Company and the Purchaser, as set forth in this Agreement or
made by or on behalf of either of them, pursuant to this Agreement, shall remain
in full force and effect, regardless of any investigation (or any statement as
to the results thereof) made by or on behalf of the Purchaser or any controlling
person of the Purchaser, or the Company, or any officer or director or
controlling person of the Company, and shall survive delivery of and payment for
the Securities.

 

11.

If for any reason the Securities are not delivered by or on behalf of the
Company as provided herein (except for failure of the condition set forth in
clauses (i), (iii), (iv) or (v) of Section 8(f) hereof or default by the
Purchaser in its obligation to purchase the Securities), the Company will
reimburse the Purchaser for all out of pocket expenses, including fees and
disbursements of counsel, reasonably incurred by the Purchaser in making
preparations for the offer, sale, purchase and delivery of the Securities, but
the Company shall then be under no further liability to the Purchaser except as
provided in Sections 7 and 9 hereof.

 

12.

All statements, requests, notices and agreements hereunder shall be in writing,
and if to the Purchaser shall be delivered or sent by mail, telex or facsimile
transmission to you at 85 Broad Street, 20th Floor, New York, New York 10004,
Attention: Registration Department; and if to the Company shall be delivered or
sent by mail, telex or facsimile transmission to the address of the Company set
forth in the Offering Circular, Attention: Chief Financial Officer. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.

In accordance with the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)), the Purchaser is required to obtain,
verify and record information that identifies its clients, including the
Company, which information may include the name and address of its clients, as
well as other information that will allow the Purchaser to properly identify its
clients.

 

13.

This Agreement shall be binding upon, and inure solely to the benefit of, the
Purchaser, the Company and, to the extent provided in Sections 9 and 10 hereof,
the officers and directors of the Company and each person who controls the
Company or the Purchaser, and their respective heirs, executors, administrators,
successors and assigns, and except as set forth in Section 5(f), no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Securities from the Purchaser shall be deemed a
successor or assign by reason merely of such purchase.

 

19

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

14.

Time shall be of the essence of this Agreement.

 

15.

The Company acknowledges and agrees that (i) the purchase and sale of the
Securities pursuant to this Agreement is an arm’s-length commercial transaction
between the Company, on the one hand, and the Purchaser, on the other, (ii) in
connection therewith and with the process leading to such transaction the
Purchaser is acting solely as a principal and not the agent or fiduciary of the
Company, (iii) the Purchaser has assumed no advisory or fiduciary responsibility
in favor of the Company with respect to the offering contemplated hereby or the
process leading thereto (irrespective of whether the Purchaser has advised or is
currently advising the Company on other matters) and no other obligation to the
Company except the obligations expressly set forth in this Agreement and
(iv) the Company has consulted its own legal and financial advisors to the
extent it deemed appropriate. The Company agrees that it will not claim that the
Purchaser has rendered advisory services of any nature or respect, or owes a
fiduciary or similar duty to the Company, in connection with such transaction or
the process leading thereto.

 

16.

This Agreement supersedes all prior agreements and understandings (whether
written or oral) between the Company and the Purchaser with respect to the
subject matter hereof.

 

17.

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York.

 

18.

The Company and the Purchaser hereby irrevocably waive, to the fullest extent
permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.

 

19.

This Agreement may be executed by any one or more of the parties hereto in any
number of counterparts, each of which shall be deemed to be an original, but all
such respective counterparts shall together constitute one and the same
instrument.

 

20.

Notwithstanding anything herein to the contrary, the Company (and the Company’s
employees, representatives, and other agents) are authorized to disclose to any
and all persons, the tax treatment and tax structure of the potential
transaction and all materials of any kind (including tax opinions and other tax
analyses) provided to the Company relating to that treatment and structure,
without the Purchaser’s imposing any limitation of any kind. However, any
information relating to the tax treatment and tax structure shall remain
confidential (and the foregoing sentence shall not apply) to the extent
necessary to enable any person to comply with securities laws. For this purpose,
“tax treatment” means U.S. federal and state income tax treatment, and “tax
structure” is limited to any facts that may be relevant to that treatment.

[Remainder of this page intentionally left blank]

 

20

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

EXECUTION VERSION

If the foregoing is in accordance with your understanding, please sign and
return to us four counterparts hereof, and upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
between the Purchaser and the Company.

 

Very truly yours,

PSS World Medical, Inc.

By:

 

/s/ David M. Bronson

 

Name:

 

David M. Bronson

 

Title:

 

Executive Vice President and CFO

 

Accepted as of the date hereof:

   

Goldman, Sachs & Co.

      

/s/ Goldman, Sachs & Co.

       (Goldman, Sachs & Co.)