PSSI Pss World Medical Inc. (MM)

PROPOSAL 1: APPROVAL OF THE MERGER AGREEMENT AND THE PLAN OF MERGER

PARTIES INVOLVED IN THE MERGER

PSS World Medical, Inc.

PSS World Medical, Inc. markets and distributes medical products and services to front-line caregivers throughout the United States. With approximately 4,000 team members, PSS is a leader in the businesses it serves with innovative approaches to customer service and operational excellence. Its stated purpose is to strengthen the clinical success and financial health of caregivers by solving their biggest problems. The Company is focused in four industry segments—Physician, Laboratory, Dispensing, and Home Care & Hospice—with products and solutions that deliver high quality, cost effective, and convenient patient care.

The Company’s principal executive offices are located at 4345 Southpoint Blvd., Jacksonville, Florida 32216, and its telephone number is (904) 332-3000.

McKesson Corporation

McKesson Corporation, currently ranked 14 ^th on the FORTUNE 500, is a healthcare services and information technology company dedicated to making the business of healthcare run better. McKesson partners with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in every setting. McKesson helps its customers improve their financial, operational, and clinical performance with solutions that include pharmaceutical and medical-surgical supply management, healthcare information technology, and business and clinical services.

Parent’s principal executive offices are located at One Post Street, San Francisco, California 94104, and its telephone number is (415) 983-8300.

Palm Merger Sub, Inc.

Palm Merger Sub, Inc. is a Florida corporation formed by Parent solely for purposes of entering into the merger agreement and effecting the merger. Subject to the terms and conditions of the merger agreement and in accordance with Florida law, at the effective time of the merger, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the merger agreement.

Merger Sub’s principal executive offices are located at One Post Street, San Francisco, California 94104, and its telephone number is (415) 983-8300.

THE MERGER

Effects of the Merger

If the merger is consummated, Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent. At the effective time of the merger, the following will occur:

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If the merger is completed, all of the equity interests in the Company will be owned by Parent. No current shareholder of the Company will have any ownership interest in, and will no longer be a shareholder of, the Company immediately following the completion of the merger. As a result, the Company’s shareholders will no longer benefit from any increase in the Company’s value, nor will they bear the risk of any decrease in the Company’s value.

The Company’s common stock is currently registered under the Exchange Act and is listed on the NASDAQ Global Market under the symbol “PSSI.” As a result of the merger, the Company will become a privately held corporation without a public market for its common stock, Company common stock will no longer be listed or traded on any exchange, including the NASDAQ Global Market, and price quotations for Company common stock will no longer be available. In addition, the registration of Company common stock under the Exchange Act will be terminated following the merger. Therefore, the provisions of the Exchange Act will no longer apply to the Company, including the requirement that the Company furnish a proxy or information statement to its shareholders in connection with meetings of its shareholders. The Company will also no longer be required to file periodic reports with the SEC.

At the effective time of the merger, the articles of incorporation and bylaws of the Company will be amended and restated to be the same as the articles of incorporation and bylaws of Merger Sub in effect immediately prior to the effective time of the merger and will become the articles of incorporation and bylaws of the Company as the surviving corporation, except to reflect that the name of the surviving corporation will remain as “PSS World Medical, Inc.”

Upon the completion of the merger, unless otherwise determined by Parent prior to the effective time of the merger, the directors of Merger Sub immediately prior to the merger will become the directors of the Company and the officers of the Company immediately prior to the merger will continue to serve as the officers of the Company.

Background of the Merger

As part of the ongoing strategic evaluation of PSS’s business, PSS’s senior management and Board of Directors periodically review and assess the Company’s operations, financial performance, and industry conditions and related regulatory developments as they may impact PSS’s long-term strategic goals and plans, including potential opportunities to enhance shareholder value through business combinations, acquisitions, and other financial and strategic alternatives.

On March 13, 2012, as a result of this process, the Strategic Planning Committee of the Board of Directors comprised of Stephen T. Halverson, Jeffrey C. Crowe, and Stephen H. Rogers held a meeting with Gary Corless, President and Chief Executive Officer, David Bronson, Executive Vice President and Chief Financial Officer, and other members of senior management to discuss a potential restructuring of PSS, including, among other things, a sale of PSS’s skilled nursing facility and assisted living business, which we refer to as the “Gulf South SNF business,” and a sale of PSS’s specialty dental business. PSS was considering the sale of the Gulf South

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SNF business, which represented approximately 24% of PSS’s total fiscal 2012 revenue and approximately 13% of PSS’s fiscal 2012 EBITDA, because it anticipated that business would continue to grow more slowly and generate lower operating margins than the other industry sectors on which PSS was focused at the time, and that redeploying proceeds from a sale of the Gulf South SNF business would allow PSS to invest in its faster growing and more profitable businesses, including pursuing additional acquisitions in those industry sectors.

On March 27 and 28, 2012, at a meeting of the Board of Directors, the Strategic Planning Committee summarized its recent discussions with senior management regarding a potential restructuring of PSS. The Board of Directors then discussed the various options, and related opportunities and risks, for a potential restructuring to better align PSS’s strategies with recent changes in the healthcare industry and PSS’s customers. Following these discussions, the Board of Directors determined to explore a potential restructuring of PSS, including a sale of the Gulf South SNF business and PSS’s specialty dental business.

On April 18, 2012, PSS selected, subject to our Board of Directors’ approval, Goldman Sachs to serve as its exclusive financial advisor with respect to a potential sale of the Gulf South SNF business as a result of Goldman Sachs’ previous experience with PSS and in the healthcare sector.

On May 2, 2012, during a special meeting of the Board of Directors, the Board of Directors again reviewed the potential restructuring of PSS and, following discussion, approved a strategic restructuring plan, which we refer to as “Healthcare 2.0,” that was designed to enhance shareholder value by focusing PSS’s efforts on areas of core competency in growing areas of the industry—physician, laboratory, in-office dispensing and home care and hospice. Healthcare 2.0 also included plans to divest the Gulf South SNF business and PSS’s specialty dental business, as well as a plan to integrate the Company’s warehouse operations into one common distribution infrastructure and redesign the Company’s shared service and field support functions. In connection with its discussion and approval of Healthcare 2.0 at the meeting, the Board of Directors discussed the possibility that the public announcement of Healthcare 2.0 could lead to the receipt of third party proposals to acquire PSS. At this meeting, the Board of Directors also approved the engagement of Goldman Sachs for the Gulf South SNF sale and to assist the Board of Directors in preparing for potential acquisition proposals it might receive in connection with the announcement of Healthcare 2.0 or other potential attempts to acquire or influence control of PSS.

On May 10, 2012, PSS publicly announced the launch of Healthcare 2.0, as well as three strategic acquisitions of two laboratory service companies and one physician office dispensing company, which were consistent with the Healthcare 2.0 initiative, as well as fourth quarter and full year fiscal 2012 results.

On May 24, 2012, PSS conducted its annual investor day presentation, at which it provided additional information about Healthcare 2.0.

From June through early August 2012, PSS entered into confidentiality agreements with 48 potential buyers, including McKesson, with respect to the potential sale of the Gulf South SNF business. Between August 3 and August 7, 2012, PSS received initial indications of interest for the sale of the Gulf South SNF business from seven financial buyers and two strategic buyers, including McKesson.

On August 7, 2012, at a special telephonic meeting of the Board of Directors, Mr. Corless provided an update on PSS’s implementation of Healthcare 2.0 and discussed environmental trends affecting the Company’s business model of servicing independent caregivers, including the consolidation of independent caregivers into integrated health systems. The Board of Directors then engaged in a lengthy discussion of the healthcare market and PSS’s business strategy, including the ongoing consolidation of independent caregivers and the potentially negative implications of such consolidation on its ability to successfully implement its Healthcare 2.0 initiative, as well as potential opportunities to enhance shareholder value, including a potential sale of the entire Company, in light of the risks and strategic opportunities for PSS in the present healthcare market. As a result of these discussions, the Board of Directors determined to further discuss these matters in depth at a regularly scheduled meeting to be held the following week and instructed the Executive Committee of the Board of Directors,

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consisting of Charles E. Adair, Chairman, Alvin R. Carpenter, Mr. Corless, and Delores M. Kesler, to coordinate with management in connection with the preparations for the Board meeting, including obtaining advice from Goldman Sachs.

During August and September 2012, the six parties that had submitted preliminary proposals for the Gulf South SNF business with the highest offer price, including McKesson, were allowed to conduct further due diligence on the Gulf South SNF business, including access to an extensive online data room and due diligence conference calls with PSS representatives on topics including operations, finance, and legal.

On August 9, 2012, the Executive Committee held a meeting to discuss Goldman Sachs’ initial views with respect to PSS’s exploration of additional strategic alternatives, including a sale of the entire Company, as well as Goldman Sachs’ preliminary views regarding potentially interested parties and process considerations in light of the pending divestiture process of the Gulf South SNF business and the specialty dental business.

On August 15 and 16, 2012, in connection with our annual shareholders meeting, the Board of Directors held its regularly scheduled meeting, during which it continued its discussions regarding the current environment in which PSS operates and the implications of that environment for PSS’s business, as well as whether to explore a sale of the entire Company. A representative of PSS’s outside legal counsel, Alston & Bird LLP, which we refer to as “Alston & Bird,” advised the members of the Board of Directors regarding their fiduciary duties under Florida law when considering a possible sale of the Company. A representative of Goldman Sachs gave a presentation to the Board of Directors regarding the current market environment, strategic landscape and a potential sale of the entire Company, including a preliminary financial analysis. The Board of Directors engaged in a lengthy discussion of PSS’s future prospects if it remained independent, the preliminary information provided by Goldman Sachs, and the potential process for exploring a sale of the entire Company. Following extensive discussion, the Board of Directors determined to explore a sale of the entire Company, because it believed a sale of PSS could present the best opportunity to enhance shareholder value given the risks and strategic opportunities in the healthcare market. The Board of Directors also determined to continue pursuing the potential sale of the Gulf South SNF business and the specialty dental business in order to maximize the number of strategic alternatives available to PSS. The Board of Directors authorized the Executive Committee to work with management, Alston & Bird, and Goldman Sachs to proceed with contacting two parties—McKesson and another industry participant that we refer to as Company A—to discuss a potential sale of the entire Company. These two companies were selected by the Board of Directors based on several factors, including strategic fit with PSS’s businesses, their familiarity with PSS’s business, their perceived capacity to pay a higher value, including by virtue of their potential ability to achieve synergies from a combination with PSS, and their ability to evaluate and consummate a transaction in a timely manner, which was important given the process for the sale of the Gulf South SNF business that was already in progress. The Board of Directors concluded, after consultation with Goldman Sachs, that there was a low likelihood that other parties might be interested in acquiring, or would be able to acquire, PSS on terms more attractive than those that could be offered by McKesson or Company A or on a timeframe that would not require significant delays in the ongoing Gulf South SNF business divestiture process, and without a material increase in the risk of a premature public disclosure of the process, and, therefore, that it was preferable to contact only these two companies on a confidential basis, rather than conduct a broader solicitation process.

Also at the August 15 and 16, 2012 meeting, following earlier discussions between Goldman Sachs, Mr. Bronson, and a representative of Alston & Bird, Goldman Sachs disclosed to the Board of Directors a conflict of interest that might arise if Goldman Sachs were to be engaged to advise PSS in the evaluation of strategic alternatives, including the consideration of a potential sale of the entire Company. The conflict arises out of the convertible bond hedge transaction between PSS and Goldman Sachs, which we refer to as the “Convertible Bond Hedge Transaction,” and the issuer warrant transaction between PSS and Goldman Sachs, which we refer to as the “Issuer Warrant Transaction” and collectively with the Convertible Bond Hedge Transaction, as the “Call Spread Transactions.” PSS entered into the Call Spread Transactions in connection with its issuance in 2008 of $230.0 million aggregate principal of 3.125% senior convertible notes due 2014, which we refer to as the “3.125% Convertible Notes,” to reduce the potential dilution to PSS’s shareholders upon the

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conversion of the 3.125% Convertible Notes, as described below under the heading “—Opinions of the Company’s Financial Advisors—Goldman, Sachs & Co.” At the Board meeting, Goldman Sachs also disclosed to the Board of Directors its publicly disclosed existing and prior investment banking relationships with McKesson during the past two years. A representative of Alston & Bird then reviewed legal matters relating to the Call Spread Transactions in the event Goldman Sachs were engaged in connection with a potential sale of the entire Company and the Board of Directors’ fiduciary duties in a change in control context. The Board of Directors and management, including Mr. Bronson and Joshua DeRienzis, Vice President, General Counsel and Secretary, discussed various factors to consider in determining which financial advisor or advisors to engage, including, among others, the nature of any conflicts and whether such conflicts could be addressed, the Board of Directors’ and management’s view as to the importance of having Goldman Sachs serve as a financial advisor in light of its experience with PSS and in the healthcare sector (including the fact that it was already engaged for the Gulf South SNF business transaction), the advantages and disadvantages involved with engaging multiple financial advisors, including the cost, and alternative methods to compensate such financial advisors. The Board of Directors also discussed possible ways in which to address this issue, including engaging a financial advisor other than Goldman Sachs or engaging another investment banking firm to serve as a co-financial advisor with Goldman Sachs. Following these extensive discussions, given the Board of Directors’ and management’s view of the importance of having Goldman Sachs serve as financial advisor because of its experience with PSS and in the healthcare sector and the fact that it was already engaged for the Gulf South SNF business sale, as well as the Board’s belief that it could address the conflict of interest by engaging a co-financial advisor, the Board of Directors determined to engage both Goldman Sachs and a co-financial advisor in connection with a potential sale of the entire Company. The Board of Directors then authorized the Executive Committee to work with management to engage Credit Suisse as PSS’s co-financial advisor to share roles and responsibilities with Goldman Sachs, in connection with a potential sale of PSS, given Credit Suisse’s familiarity with PSS, experience and reputation, and the absence of conflicts of interest with respect to the potential sale of PSS (subject to confirmation of the absence of such conflicts of interest), or otherwise to identify and retain on behalf of PSS another appropriate investment banking firm. Subsequently, and following discussions between Mr. Adair, as Chair of the Executive Committee, and Credit Suisse to confirm the absence of conflicts of interest with Credit Suisse, Credit Suisse was selected as co-financial advisor in connection with a potential sale of the entire Company.

On August 15, 2012, at the request of PSS and Alston & Bird, Goldman Sachs provided Mr. Bronson and Alston & Bird with a preliminary analysis of the financial implications of the Call Spread Transactions. Goldman Sachs provided PSS with the preliminary analysis to allow the Company to be fully informed regarding any conflict that might arise from the Call Spread Transactions if Goldman Sachs were to be engaged to advise PSS with respect to the evaluation of strategic alternatives, including a potential sale of the entire Company. The analysis noted that, in connection with certain strategic alternatives, including a sale of PSS for cash,

In addition, the analysis included the following preliminary estimates of Goldman Sachs’ Investment Banking Division (without consultation with personnel in Goldman Sachs’ Securities Division because of institutional

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information barriers), based on a range of specified assumptions disclosed to PSS, including an assumed closing date of September 1, 2012 and assumed transaction prices ranging from $22.00 per share to $40.00 per share:

Also on August 16, 2012, PSS and Company A entered into a confidentiality agreement with respect to the potential sale of the Gulf South SNF business and PSS proceeded to provide confidential information to Company A regarding the Gulf South SNF business.

Between August 16 and September 5, 2012, Mr. Corless and Mr. Bronson and other members of senior management conducted presentations on the Gulf South SNF business to the potential buyers of the Gulf South SNF business, including McKesson and Company A.

On or about August 20, 2012, Mr. Corless, in accordance with the Board of Directors’ directive, contacted the Chief Executive Officers of both McKesson and Company A to notify them that PSS was interested in discussing a possible sale of the entire Company. In response, representatives from both McKesson and Company A expressed interest in participating in a process to potentially acquire PSS. On August 21, 2012, at the request of PSS, representatives from Goldman Sachs then contacted representatives from McKesson and Company A to inform them that PSS was interested in exploring opportunities with respect to the sale of the entire Company.

PSS and Credit Suisse and Goldman Sachs then engaged in discussions with each of McKesson and Company A regarding their interest in submitting an indication of interest to potentially acquire the entire Company. In connection with these discussions, the parties amended their confidentiality agreements, which were previously executed with respect to the possible sale of the Gulf South SNF business, to also apply with respect to a potential acquisition of the entire Company.

On August 27, 2012, the Executive Committee held a meeting, with representatives of Goldman Sachs and Alston & Bird present, during which it discussed, among other things, the conversations between Mr. Corless and Goldman Sachs and representatives of each of McKesson and Company A.

On August 29, 2012, at the request of PSS, representatives of Goldman Sachs provided McKesson and Company A with certain historical and projected financial information regarding the Company, as described below under the heading “—Certain Projected Financial Information.” Between August 24 and September 3, 2012, PSS provided McKesson and Company A with certain additional information about the Company in response to their requests. On August 30 and September 4, 2012, Mr. Corless and Mr. Bronson held separate teleconferences with representatives from McKesson and Company A to discuss PSS’s financial projections provided to them on August 29, 2012 and to respond to certain additional due diligence inquiries from each.

On September 4, 2012, the Board of Directors received an update on the status of the strategic process. On September 5, 2012, the Executive Committee conducted a conference call to discuss the update made to the Board of Directors the prior day and to provide further direction to PSS’s co-financial advisors, Credit Suisse and Goldman Sachs, in connection with the Company’s sale process.

On September 5, 2012, in accordance with the Board of Directors’ and Executive Committee’s directives, representatives from PSS’s financial advisors contacted representatives from McKesson and Company A to communicate that preliminary indications of interest for a potential acquisition of PSS would be due on September 10, 2012.

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On September 6, 2012, the Executive Committee met with representatives of Alston & Bird, Credit Suisse and Goldman Sachs to again discuss the respective roles of Credit Suisse and Goldman Sachs as co-financial advisors to PSS in connection with the potential sale of the entire Company and to reiterate that Credit Suisse and Goldman Sachs would share roles and responsibilities as co-financial advisors.

On September 10, 2012, the date on which preliminary indications of interest for a sale of the entire Company were due, Company A declined to submit a bid for the purchase of the entire Company and withdrew from the process based on a perceived lack of synergies in a transaction and other strategic priorities. On the same day, Company A submitted a preliminary indication of interest to acquire the Gulf South SNF business. The Executive Committee held a conference call to discuss Company A’s withdrawal from the process with respect to the potential acquisition of the entire Company.

On September 11, 2012, McKesson submitted a written, non-binding preliminary indication of interest to acquire 100% of the outstanding capital stock of PSS for $25.50 to $27.00 in cash. McKesson’s indication of interest also noted that it was prepared to move forward promptly. McKesson subsequently indicated that its proposal did not include any assumed net cash proceeds from the sale of PSS’s specialty dental business.

Also on September 11, 2012, the Board of Directors held a special meeting, with representatives of PSS’s management, including Mr. Bronson and Mr. DeRienzis, and legal and financial advisors present, to discuss the ongoing process to divest PSS’s specialty dental business, McKesson’s proposal to acquire the entire Company, and Company A’s decision to submit a proposal to acquire the Gulf South SNF business but not the entire Company. Prior to the meeting, PSS’s directors were informed of Company A’s decision and received copies of McKesson’s initial indication of interest. A representative of Alston & Bird advised the members of the Board of Directors regarding their fiduciary duties under Florida law when considering a possible sale of the Company. The directors then engaged in a discussion with PSS’s management and legal and financial advisors regarding McKesson’s proposal and the sale exploration process, including Company A’s withdrawal from the process, whether to engage other potential bidders in the process, the potential strategic benefits of an acquisition of PSS that other third parties could realize relative to McKesson, and whether other third parties would be able to acquire PSS in a timely manner on terms more attractive than those offered by McKesson. The directors also discussed PSS’s ability to continue on an independent basis and the challenges associated with execution of PSS’s implementation of Healthcare 2.0. Following its discussion, the directors determined that it would not be in the best interests of PSS or its shareholders to contact additional potential acquirors because of the directors’ belief, among other things, that timeliness was important given the status of the potential sale of the Gulf South SNF business and the challenges associated with the implementation of Healthcare 2.0 and that McKesson was more likely than other third parties to be able to acquire PSS in a timely manner on attractive terms given McKesson’s familiarity with PSS’s business and perceived capacity to pay, including by virtue of the potential synergies in may be able to achieve. The Board of Directors then determined to allow McKesson to move forward in the process to potentially sell the entire Company. In addition, in light of the Board of Director’s determination to continue to explore a potential sale of the entire Company, the Board of Directors again discussed the conflict of interest with respect to Goldman Sachs. A representative of Alston & Bird reminded the directors of their fiduciary duties to be fully informed of the scope and impact of the conflict and, following discussion, the Board of Directors determined that Goldman Sachs should again discuss the implications of its role as both financial advisor to PSS and counterparty to the Call Spread Transactions at the next meeting of the Board of Directors.

Following the September 11, 2012 meeting of the Board of Directors, McKesson was allowed to conduct further due diligence on PSS, including access to an extensive online data room; follow-up diligence conference calls on topics including operations, technology, human resources, finance, tax, legal, real estate and sales and supplier relations; detailed information requests; and audit workpaper review.

On September 14, 2012, John H. Hammergren, Chairman, President and Chief Executive Officer of McKesson, called Mr. Corless to reaffirm McKesson’s interest in participating in the process to potentially acquire PSS.

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On September 24, 2012, the Executive Committee conducted a meeting during which it further discussed Goldman Sachs’ role as both financial advisor to PSS and counterparty to the Call Spread Transactions. A representative of Alston & Bird again advised the members of the Executive Committee of their fiduciary duties in a change in control context.

On September 26, 2012, Mr. Corless, Mr. Bronson and other members of senior management of PSS, with representatives of Credit Suisse and Goldman Sachs present, held an in-person meeting to discuss PSS’s business with representatives of McKesson and its financial advisor at Goldman Sachs’ offices in Chicago, Illinois. From late September through mid-October 2012, Mr. Corless, Mr. Bronson and other members of senior management of PSS, with the assistance of PSS’s advisors, held numerous additional telephonic discussions with representatives of McKesson and its advisors to discuss the Company’s business as part of McKesson’s due diligence process.

On September 27, 2012, PSS announced a definitive agreement for the sale of its specialty dental business to Beecken Petty O’Keefe & Company for $68 million in cash.

On September 28, 2012, the Board of Directors, with representatives of PSS’s management, including Mr. Bronson and Mr. DeRienzis, and legal and financial advisors present, conducted a special telephonic meeting, at which it discussed Goldman Sachs’ conflict of interest. In advance of the meeting, directors were provided with copies of presentation materials prepared by Goldman Sachs with respect to its conflict of interest, which updated the analysis previously provided to Mr. Bronson and Alston & Bird in mid-August. During the special meeting, Goldman Sachs presented its prepared materials to the Board of Directors and responded to questions from the Board of Directors regarding the implications of its conflict of interest. Representatives of Goldman Sachs were then excused from the special meeting. The Board of Directors then discussed with Credit Suisse the Call Spread Transactions. The representatives of Credit Suisse were then excused from the special meeting. A representative of Alston & Bird again reviewed legal matters relating to the Call Spread Transactions and the Board of Directors’ fiduciary duties in a change in control context. After extended discussion, the Board of Directors again confirmed the engagement of both Credit Suisse and Goldman Sachs as co-financial advisors with respect to a sale of the Company, as well as the fact that they would share roles and responsibilities as co-financial advisors.

On October 3, 2012, in accordance with the Board of Directors’ directives, PSS’s financial advisors delivered a letter to McKesson confirming the timing and bidding procedures for the final phase of the process to potentially sell the entire Company. The letter invited McKesson to submit, by October 16, 2012, a written, binding proposal for the acquisition of 100% of the issued and outstanding shares of common stock of PSS and included a proposed form of merger agreement prepared by PSS’s legal counsel.

On October 8, 2012, PSS distributed letters to the potential buyers of the Gulf South SNF business, including both McKesson and Company A, describing the process to submit a final bid for the Gulf South SNF business.

On October 11, 2012, Mr. Bronson called McKesson to discuss PSS’s preliminary second quarter fiscal 2013 results, which were materially consistent with PSS’s subsequently publicly reported second quarter fiscal 2013 results.

On October 16, 2012, McKesson submitted a written proposal to acquire 100% of the outstanding capital stock of PSS for $27.80 per share in cash, which price included the incremental value that McKesson ascribed to PSS’s sale of its specialty dental business, as well as a marked merger agreement that proposed, among other things, a termination fee payable by PSS under certain circumstances and a reverse termination fee payable by McKesson under other circumstances, in each case equal to 4% of the equity value of the transaction. McKesson’s proposal did not include a financing contingency and stated that McKesson anticipated no difficulty in accessing or arranging for the required funds to consummate the proposed transaction. McKesson also stated in its proposal that it believed that a definitive agreement could be executed in advance of the market opening on October 25, 2012, the date of PSS’s planned earnings release.

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On October 16, 2012, the Executive Committee, with representatives of PSS’s management, including Mr. Bronson and Mr. DeRienzis, and legal and financial advisors present, met to discuss McKesson’s proposal to acquire the entire Company.

On October 17, 2012, the Board of Directors held a special telephonic meeting, with representatives of PSS’s management, including Mr. Bronson and Mr. DeRienzis, and legal and financial advisors present, to discuss McKesson’s proposal. Prior to the special meeting, the directors had received, among other things, copies of McKesson’s proposal letter and McKesson’s proposed revisions to the draft merger agreement. A representative of Alston & Bird advised the members of the Board of Directors regarding their fiduciary duties under Florida law when considering a possible sale of the Company and highlighted the key non-financial issues raised by McKesson’s revisions to the merger agreement, including McKesson’s proposed changes to representations and warranties, closing conditions, and the provisions of the merger agreement relating to antitrust risk allocation, non-solicitation of competing offers, termination and termination fees. During the meeting, Credit Suisse and Goldman Sachs each reviewed with the Board of Directors financial terms of McKesson’s proposal and financial aspects of a potential sale of PSS, including an overview of the process, public market perspectives on PSS, and PSS’s financial projections prepared by Company management, as described below under the heading “—Certain Projected Financial Information.” After extensive discussion, the Board of Directors determined to continue discussions with McKesson and to seek a higher price for PSS pending receipt of bids for its Gulf South SNF business, with the objective of seeking to reach a conclusion with respect to either a sale of the Gulf South SNF business or a sale of the entire Company and, if proceeding with a sale of the entire Company, publicly announcing such transaction before or simultaneously with announcement of PSS’s second fiscal quarter financial results.

On October 18, 2012, the date on which final bids for the Gulf South SNF business were due, PSS received proposals to acquire the Gulf South SNF business from three potential buyers, including McKesson and Company A. The highest proposal received for the Gulf South SNF business was materially consistent with the proceeds assumed by Company management in the development of the final projections reviewed at the October 17, 2012 Board meeting, as described below under the heading “—Certain Projected Financial Information.”

On October 18, 2012, the Executive Committee met with Mr. Bronson and Mr. DeRienzis and PSS’s legal and financial advisors to discuss McKesson’s proposal and the recently received proposals for the Gulf South SNF business. The Executive Committee discussed a strategy for responding to McKesson’s bid and, consistent with the discussions at the October 17 Board meeting, directed PSS’s financial advisors to contact McKesson to request a higher price and certain changes to the antitrust risk allocation, termination and termination fee provisions of the merger agreement.

On October 19, 2012, in accordance with the Board of Directors’ directives, PSS’s financial advisors contacted Brian Tyler, Executive Vice President of McKesson, to request that McKesson increase its proposed purchase price for PSS to at least $30.00 per share and to consider changes to the antitrust risk allocation, termination and termination fee provisions of the merger agreement. Later that day, Mr. Tyler contacted Goldman Sachs and responded that McKesson was willing to increase its proposal to $29.00 per share in cash.

Also on October 19, 2012, the Executive Committee held a meeting via teleconference, at which it discussed the revised proposal from McKesson of $29.00 per share. After thorough discussion, the Executive Committee determined that the appropriate response was for Mr. Corless to call Mr. Hammergren to reiterate the request that McKesson increase its proposed purchase price to at least $30.00 per share.

Later on October 19, 2012, Mr. Corless called Mr. Hammergren to again request that McKesson increase its proposed purchase price. Mr. Corless also indicated that the Board of Directors was concerned with certain terms of McKesson’s revised draft merger agreement, specifically the proposed termination and termination fees.

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Mr. Hammergren indicated that McKesson was unwilling to increase its purchase price above $29.00 per share but that there was potential flexibility on the termination fees and proposed that PSS’s representatives contact Mr. Tyler to discuss potential revisions.

On October 19, 2012, the Executive Committee reconvened to discuss McKesson’s response to PSS’s request for the increased price per share and changes to the proposed termination and termination fee provisions. After lengthy discussion, the Executive Committee directed PSS’s senior management, with the assistance of PSS’s legal and financial advisors, to work with McKesson and its advisors to attempt to reach a definitive merger agreement and complete confirmatory due diligence.

On October 19 and 20, 2012, PSS and McKesson, together with their respective legal and financial advisors, discussed various provisions of the merger agreement, including McKesson’s proposed changes to representations and warranties, closing conditions, and the provisions of the merger agreement relating to antitrust risk allocation, non-solicitation of competing offers, termination and termination fees.

On October 20, 2012, the Board of Directors held a meeting to discuss the status of negotiations with McKesson and provide direction to PSS’s management and legal and financial advisors. Subsequently, at the request of PSS, Goldman Sachs contacted Mr. Tyler to discuss the amounts of the termination and reverse termination fees. Mr. Tyler indicated that McKesson was willing to accept a termination fee payable by PSS of $50 million and a reverse termination fee payable by McKesson of $100 million. Following those conversations, Alston & Bird delivered a revised draft of the merger agreement to McKesson.

From October 20 to October 24, 2012, McKesson and its outside legal counsel, Simpson Thacher & Bartlett LLP, which we refer to as “Simpson Thacher,” negotiated the terms of a definitive merger agreement with PSS and Alston & Bird. During this time, McKesson also engaged in confirmatory due diligence and had numerous telephonic conversations with members of Company management regarding PSS’s business.

On October 23, 2012, the Board of Directors held a special meeting, with representatives of PSS’s management, including Mr. Bronson and Mr. DeRienzis, and legal and financial advisors present, to discuss the proposed transaction with McKesson. Prior to the special meeting, the directors received copies of the then current draft merger agreement. At the meeting, the Board of Directors reviewed the proposed terms of the transaction, including the termination fee of $50 million, the reverse termination fee of $100 million, and the ability for a third party to submit an unsolicited proposal to acquire PSS following the signing of a definitive merger agreement with McKesson, and discussed the resolution of the remaining open points in the merger agreement. A representative of Alston & Bird advised the members of the Board of Directors regarding their fiduciary duties under Florida law when considering a possible sale of the Company. Credit Suisse and Goldman Sachs each reviewed with the Board of Directors financial matters relating to the proposed transaction. In addition, Goldman Sachs delivered an updated analysis of the financial implications of the Call Spread Transactions, including updated estimates of Goldman Sachs’ Investment Banking Division (without consultation with personnel in Goldman Sachs’ Securities Division because of institutional information barriers). These updated estimates were based on assumptions disclosed to the Board of Directors and consistent with those described above with respect to hedging, including an assumed closing date of December 1, 2012 and an assumed transaction price equal to the proposed transaction price of $29.00 per share. These updated estimates, based on these assumptions, included: (i) the estimated amount payable by Goldman Sachs to PSS upon the exercise of the Convertible Bond Hedge Transaction, which was $84.4 million; (ii) the estimated amount payable by PSS to Goldman Sachs upon the cancellation of the Issuer Warrant Transaction, which was $89.1 million; and (iii) the estimated net gain that Goldman Sachs might realize with respect to the Call Spread Transactions as a result of the proposed transaction, after taking into account any hedging gains or losses, which was estimated to be $37.1 million (which amount was within the preliminary range of estimated net gains disclosed by Goldman Sachs on August 15, 2012).

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In the morning on October 24, 2012, Simpson Thacher delivered to PSS and Alston & Bird a revised draft of the merger agreement. Later that afternoon, following further discussions with Simpson Thacher, Alston & Bird delivered a substantially final draft of the merger agreement to McKesson and Simpson Thacher.

On October 24, 2012, the Board of Directors reconvened its meeting, with representatives of PSS’s management, including Mr.Bronson and Mr.DeRienzis, and legal and financial advisors present. Representatives from Alston & Bird described the resolution of the remaining open items in the merger agreement. The directors also received an update on any events that had occurred since the prior call on October 23, 2012. Credit Suisse reviewed with the Board of Directors its financial analysis of the $29.00 per share merger consideration and rendered to the Board of Directors an oral opinion, confirmed by delivery of a written opinion dated October 24, 2012, to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken as more fully described in its opinion the merger consideration to be received by holders of PSS common stock was fair, from a financial point of view, to such holders. Also at this meeting, representatives of Goldman Sachs orally delivered to the Board of Directors the opinion of Goldman Sachs, which was subsequently confirmed in writing, that, as of October 24, 2012, and based upon and subject to the factors, assumptions and limitations set forth in its opinion, as more fully described below under the heading “—Opinions of the Company’s Financial Advisors—Goldman, Sachs & Co.”, the $29.00 per share in cash to be paid to the holders of shares of PSS common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The Board of Directors then considered and discussed various factors regarding the proposed merger, including the factors summarized below under the heading “Reasons for the Recommendation of our Board of Directors.” After thorough review and consideration, the Board of Directors unanimously determined that the terms of the merger agreement and the transactions contemplated thereby, including the merger, are fair to, advisable and in the best interests of PSS and its shareholders. The Board of Directors then unanimously approved and adopted the merger agreement and the transactions contemplated thereby, directed that the merger agreement be submitted to the shareholders of PSS for approval, and recommended that PSS’s shareholders vote in favor of the approval of the merger agreement.

On October 24, 2012, following the adoption of the merger agreement by the Board of Directors, PSS, McKesson, and Merger Sub executed and delivered the merger agreement. On the morning of October 25, 2012, PSS and McKesson issued a joint press release announcing the execution of the merger agreement.

Required Vote and Recommendation of our Board of Directors

Approval of the merger agreement requires the affirmative vote of at least a majority of all votes entitled to be cast on the on the merger agreement by the holders of the Company’s common stock as of the record date. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the approval of the merger agreement.

Our Board of Directors has unanimously determined that the merger agreement and the plan of merger included therein are advisable, fair to and in the best interests of the Company and our shareholders, and has unanimously approved and adopted the merger agreement, including the plan of merger, and the transactions contemplated thereby. In addition, the Board of Directors has unanimously recommended that our shareholders vote in favor of approval of the merger agreement, including the plan of merger, and has directed that the merger agreement, including the plan of merger, be submitted to our shareholders for approval in accordance with the FBCA.

Our Board of Directors considered a number of factors in determining to approve the merger agreement, the plan of merger included therein and the transactions contemplated thereby and to recommend that our shareholders approve the merger agreement, including the plan of merger, as more fully described above under “—Background of the Merger” and below under “—Reasons for the Recommendation of our Board of Directors.”

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Our Board of Directors unanimously recommends that you vote “FOR” the approval of the merger agreement, including the plan of merger included in the merger agreement.

Reasons for the Recommendation of our Board of Directors

In the course of reaching its determination that the merger agreement and the merger are advisable, fair to and in the best interests of the Company and our shareholders, our Board of Directors considered a number of factors, including the following material factors:

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Our Board of Directors also considered a variety of uncertainties, risks and other countervailing factors concerning the merger agreement and the merger, including the following:

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After considering the foregoing potentially negative and potentially positive factors, our Board of Directors concluded that the potentially positive factors relating to the merger agreement and the merger substantially outweighed the potentially negative factors.

The foregoing discussion of the information and factors considered by our Board of Directors is not intended to be exhaustive, but includes the material factors considered by the Board of Directors. In view of the wide variety of factors considered by the Board of Directors in evaluating the merger agreement and the merger, the Board of Directors did not find it practicable, and did not attempt to, quantify, rank or otherwise assign relative weights to the specific factors considered in reaching its conclusion. In addition, individual members of the Board of Directors may have given different weights to different factors and may have viewed some factors more positively or negatively than others. The Board of Directors approved the merger agreement and the merger based upon the totality of the information it considered.

Opinions of the Company’s Financial Advisors

Credit Suisse Securities (USA) LLC

The Company retained Credit Suisse to act as its financial advisor in connection with the merger. In connection with Credit Suisse’s engagement, the Board of Directors requested that Credit Suisse evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of Company common stock. On October 24, 2012, at a meeting of the Board of Directors held to evaluate the proposed merger, Credit Suisse rendered to the Board of Directors an oral opinion, confirmed by delivery of a written opinion dated October 24, 2012, to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations on the review undertaken, the merger consideration to be received by holders of Company common stock was fair, from a financial point of view, to such holders.

The full text of Credit Suisse’s written opinion, dated October 24, 2012, to the Board of Directors, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Credit Suisse in connection with such opinion, is attached to this Proxy Statement as Appendix B and is incorporated into this Proxy Statement by reference in its entirety. The description of Credit Suisse’s opinion set forth in this Proxy Statement is qualified in its entirety by reference to the full text of Credit Suisse’s opinion. Credit Suisse’s opinion was provided to the Board of Directors (in its capacity as such) for its information in connection with its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the proposed merger, including the relative merits of the merger as compared to alternative transactions or strategies that might be available to the Company or the underlying business decision of the Company to proceed with the merger. The opinion does not constitute advice or a recommendation to any shareholder as to how such shareholder should vote or act on any matter relating to the proposed merger or otherwise.

In arriving at its opinion, Credit Suisse reviewed a draft, dated October 24, 2012, of the merger agreement and certain publicly available business and financial information relating to the Company. Credit Suisse also reviewed certain other information relating to the Company, including financial forecasts, provided to or

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discussed with Credit Suisse by the Company, and met with Company management to discuss the business and prospects of the Company. Credit Suisse also considered certain financial and stock market data of the Company, and compared that data with similar data for other publicly held companies in businesses it deemed similar to that of the Company, and Credit Suisse considered, to the extent publicly available, the financial terms of certain other business combinations and transactions which have been effected or announced. Credit Suisse also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which it deemed relevant.

In connection with its review, Credit Suisse did not independently verify any of the foregoing information and Credit Suisse assumed and relied upon such information being complete and accurate in all material respects. With respect to the financial forecasts for the Company that Credit Suisse was directed to utilize for purposes of its analyses, Company management advised Credit Suisse, and Credit Suisse assumed, with the Company’s consent, that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of Company management as to the future financial performance of the Company. Credit Suisse also relied upon, with the Company’s consent and without independent verification, the assessments of Company management as to the Company’s proposed strategic restructuring, including, without limitation, the pending sale of its specialty dental business and a planned divestiture of its skilled nursing business (which businesses such management indicated currently were classified as discontinued operations), the estimated proceeds to be received and the proposed redeployment of capital by the Company for future acquisitions, in each case as reflected in such financial forecasts. Credit Suisse assumed, with the Company’s consent, that there would be no developments with respect to any such matters that would be meaningful to Credit Suisse’s analyses or opinion.

Credit Suisse assumed, with the Company’s consent, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Company or the merger and that the merger would be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term, condition or agreement. Representatives of the Company advised Credit Suisse, and Credit Suisse also assumed, that the terms of the merger agreement, when executed, would conform in all material respects to the terms reflected in the draft reviewed by Credit Suisse. In addition, Credit Suisse was not requested to make, and it did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company, nor was Credit Suisse furnished with any such evaluations or appraisals.

Credit Suisse’s opinion addressed only the fairness, from a financial point of view and as of the date of its opinion, of the merger consideration to be received by holders of Company common stock and did not address any other aspect or implication of the merger or any other securities of the Company, including, without limitation, the form or structure of the merger or any other agreement, arrangement or understanding entered into in connection with the merger or in respect of certain debt securities, hedging arrangements and other instruments as a result of the merger or otherwise. Credit Suisse’s opinion also did not address the fairness of the amount or nature of, or any other aspect relating to, any compensation to any officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration or otherwise. The issuance of Credit Suisse’s opinion was approved by Credit Suisse’s authorized internal committee.

Credit Suisse’s opinion was necessarily based on information made available to it as of the date of its opinion and financial, economic, market and other conditions as they existed and could be evaluated on that date. Credit Suisse did not express any opinion as to the prices at which shares of Company common stock would trade at any time. Except as described in this summary, the Company imposed no other limitations on Credit Suisse with respect to the investigations made or procedures followed in rendering its opinion.

In preparing its opinion to the Board of Directors, Credit Suisse performed a variety of financial and comparative analyses. Set forth below is a summary of the material financial analyses performed and factors considered by Credit Suisse in connection with its opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis

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and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. Credit Suisse arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In its analyses, Credit Suisse considered industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the Company’s control. No company, transaction or business used in Credit Suisse’s analyses is identical to the Company or the proposed merger, and an evaluation of the results of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed. The estimates contained in Credit Suisse’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

Credit Suisse was not requested to, and it did not, recommend the specific consideration payable in the proposed merger, which merger consideration was determined through negotiations between the Company and McKesson, and the decision to enter into the merger agreement was solely that of the Board of Directors. Credit Suisse’s opinion and financial analyses were only one of many factors considered by the Board of Directors in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Board of Directors or Company management with respect to the merger or the merger consideration.

The following is a summary of the material financial analyses reviewed with the Board of Directors on October 24, 2012 in connection with Credit Suisse’s opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Credit Suisse’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Credit Suisse’s financial analyses. As directed by Company management, Credit Suisse’s financial analyses relating to the Company as summarized below reflect the pending divestiture of the Company’s specialty dental business, a hypothetical divestiture of the Company’s skilled nursing business (which the Company was pursuing prior to signing the merger agreement) and proposed capital redeployment from such divestitures for future acquisitions.

Selected Companies Analysis. Credit Suisse reviewed financial and stock market information of the Company and the following six selected publicly traded companies, referred to as the selected companies, three of which operate in the alternate site healthcare product distribution industry, referred to as the selected alternate site distribution companies, and three of which operate in the healthcare drug distribution industry, referred to as the selected drug distribution companies, which companies generally were selected because they are publicly traded healthcare companies that have operations primarily in the industries in which the Company operates:

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Credit Suisse reviewed, among other things, enterprise values of the selected companies, calculated as equity values based on closing stock prices on October 23, 2012, plus debt, less cash and cash equivalents, as a multiple of calendar years 2012 and 2013 estimated earnings before interest, taxes, depreciation and amortization, referred to as EBITDA. Credit Suisse also reviewed equity values of the selected companies, based on closing stock prices on October 23, 2012, as a multiple of calendar year 2013 estimated earnings per share, referred to as EPS. The overall low, mean, median and high estimated EBITDA multiples observed for the selected alternate site distribution companies were 7.7x, 9.1x, 9.5x and 10.2x, respectively, for calendar year 2012 and 7.2x, 8.5x, 8.9x and 9.6x, respectively, for calendar year 2013. The overall low, mean, median and high estimated EBITDA multiples observed for the selected drug distribution companies were 6.6x, 7.2x, 7.4x and 7.6x, respectively, for calendar year 2012 and 6.3x, 6.9x, 7.0x and 7.3x, respectively, for calendar year 2013. The overall low, mean, median and high calendar year 2013 estimated EPS multiples observed for the selected alternate site distribution companies were 13.3x, 14.5x, 14.7x and 15.4x, respectively, and for the selected drug distribution companies were 11.3x, 11.7x, 11.4x and 12.4x, respectively. Credit Suisse then applied selected ranges of calendar years 2012 and 2013 estimated EBITDA multiples of 7.5x to 9.5x and 7.0x to 9.0x, respectively, and calendar year 2013 estimated EPS multiples of 14.0x to 17.0x derived from the selected companies to corresponding data of the Company. Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings and other publicly available information. Financial data of the Company were based on internal estimates of Company management. This analysis indicated the following approximate implied equity value per share reference range for the Company, as compared to the merger consideration:

Selected Precedent Transactions Analysis. Credit Suisse reviewed publicly available financial information of the following 17 selected transactions with transaction values of between approximately $93 million and $5,320 million involving companies with operations in the healthcare product distribution industry:

Credit Suisse reviewed, among other things, transaction values, calculated as the purchase prices paid for the target companies in the selected transactions plus debt, less cash and cash equivalents, as a multiple of such target companies’ latest 12 months EBITDA. The overall low, mean, median and high latest 12 months EBITDA multiples observed for the selected transactions were 7.4x, 12.6x, 12.6x and 19.3x, respectively. Credit Suisse

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then applied a selected range of latest 12 months EBITDA multiples of 9.0x to 13.0x derived from the selected transactions to the Company’s latest 12 months (as of September 30, 2012) EBITDA. Financial data of the selected transactions were based on publicly available research analysts’ estimates, public filings and other publicly available information. Financial data of the Company were based on the Company’s public filings and internal estimates of Company management. This analysis indicated the following approximate implied equity value per share reference range for the Company, as compared to the merger consideration:

Discounted Cash Flow Analysis. Credit Suisse performed a discounted cash flow analysis of the Company to calculate the estimated present value of the standalone unlevered, after-tax free cash flow that the Company was forecasted to generate during the second half of fiscal year ending March 31, 2013 through the full fiscal year ending March 31, 2017 based on internal estimates of Company management. Credit Suisse calculated terminal values for the Company by applying to the Company’s estimated EBITDA for the fiscal year ending March 31, 2017 a range of terminal value EBITDA multiples of 7.5x to 9.5x. The present value (as of September 30, 2012) of the cash flows and terminal values was then calculated using discount rates ranging from 8.0% to 10.5%, which range was selected after taking into consideration a weighted average cost of capital calculation. This analysis indicated the following approximate implied equity value per share reference range for the Company, as compared to the merger consideration:

Other Information. Credit Suisse also noted for the Board of Directors certain additional factors that were not considered part of Credit Suisse’s financial analyses with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

Miscellaneous

The Company selected Credit Suisse to act as its financial advisor in connection with the merger based on Credit Suisse’s qualifications, experience, reputation and familiarity with the Company. Credit Suisse is an internationally recognized investment banking firm and is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes.

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The Company has agreed to pay Credit Suisse for its financial advisory services to the Company in connection with the proposed merger an aggregate fee currently estimated to be approximately $ 9.5 million, a portion of which was payable upon delivery of Credit Suisse’s opinion and approximately $ 7.5 million of which is contingent upon completion of the merger. In addition, the Company has agreed to reimburse Credit Suisse for its expenses, including fees and expenses of legal counsel, and to indemnify Credit Suisse and related parties for certain liabilities and other items, including liabilities under the federal securities laws, arising out of or related to its engagement. Credit Suisse and its affiliates in the past have provided investment banking and other financial services to the Company for which Credit Suisse and its affiliates have received compensation, including during the two-year period prior to the date of Credit Suisse’s opinion having received aggregate fees of approximately $2.4 million for acting as (i) initial purchaser for a $250 million senior notes offering by the Company in February 2012 and (ii) agent in connection with certain share repurchases by the Company in 2012, 2011 and 2010. Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for Credit Suisse’s and its affiliates own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of the Company, McKesson and their respective affiliates and any other company that may be involved in the merger, as well as provide investment banking and other financial services to such companies.

Goldman, Sachs & Co.

Goldman Sachs rendered its opinion to the Board of Directors of PSS that, as of October 24, 2012 and based upon and subject to the factors and assumptions set forth therein, the $29.00 per share in cash to be paid to the holders (other than McKesson and its affiliates) of shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Goldman Sachs, dated October 24, 2012, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Appendix C . Goldman Sachs provided its opinion for the information and assistance of the Board of Directors of PSS in connection with its consideration of the merger. The Goldman Sachs opinion does not constitute a recommendation as to how any holder of shares of Company common stock should vote with respect to the merger or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

Goldman Sachs also held discussions with members of Company senior management regarding their assessment of the past and current business operations, financial condition and future prospects of the Company; reviewed the reported price and trading activity for shares of Company common stock; compared certain

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financial and stock market information for the Company with similar information for certain other companies the securities of which are publicly traded; reviewed the financial terms of certain recent business combinations in the drug / diversified wholesale and med-surg distribution industries and in other industries; and performed such other studies and analyses, and considered such other factors, as it deemed appropriate.

For purposes of rendering the opinion described above, Goldman Sachs, with the consent of the Board of Directors of PSS, relied upon and assumed the accuracy and completeness of all of the financial, legal, accounting, tax and other information provided to, discussed with or reviewed by it, without assuming any responsibility for independent verification thereof. In that regard, Goldman Sachs assumed with the consent of the Board of Directors of PSS that the Forecasts were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Company management. Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of the Company or any of its subsidiaries, nor was any evaluation or appraisal of the assets or liabilities of the Company or any of its subsidiaries furnished to Goldman Sachs. Goldman Sachs assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on the expected benefits of the merger in any way meaningful to its analysis. Goldman Sachs has also assumed that the merger will be consummated on the terms set forth in the merger agreement, without the waiver or modification of any term or condition the effect of which would be in any way meaningful to its analysis.

Goldman Sachs’ opinion does not address the underlying business decision of the Company to engage in the transaction, or the relative merits of the merger as compared to any strategic alternatives that may be available to the Company; nor does it address any legal, regulatory, tax or accounting matters. Goldman Sachs’ opinion addresses only the fairness from a financial point of view to the holders (other than McKesson and its affiliates) of the shares of Company common stock, as of the date of the opinion, of the $29.00 per share of Company common stock in cash to be paid to such holders pursuant to the merger agreement. Goldman Sachs’ opinion does not express any view on, and does not address, any other term or aspect of the merger agreement or the merger or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger, including the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors, or other constituencies of the Company; nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of the Company or class of such persons, in connection with the merger, whether relative to the $29.00 per share in cash to be paid to the holders (other than McKesson and its affiliates) of shares of Company common stock pursuant to the merger agreement or otherwise. Goldman Sachs did not express any opinion as to the impact of the merger on the solvency or viability of the Company or McKesson or the ability of the Company or McKesson to pay their respective obligations when they come due. Goldman Sachs’ opinion was necessarily based on economic, monetary market and other conditions, as in effect on, and the information made available to it as of, the date of its opinion and Goldman Sachs assumed no responsibility for updating, revising or reaffirming its opinion based on circumstances, developments or events occurring after the date of its opinion. Goldman Sachs’ advisory services and the opinion expressed in its opinion were provided for the information and assistance of the Board of Directors of PSS in connection with its consideration of the merger and such opinion does not constitute a recommendation as to how any holder of shares of Company common stock should vote with respect to the merger or any other matter. Goldman Sachs’ opinion was approved by a fairness committee of Goldman Sachs.

The following is a summary of the material financial analyses delivered by Goldman Sachs to the Board of Directors of PSS in connection with rendering the opinion described above. The following summary, however, does not purport to be a complete description of the financial analyses performed by Goldman Sachs, nor does the order of analyses described represent relative importance or weight given to those analyses by Goldman Sachs. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the full text of each summary and are alone not a complete description of Goldman Sachs’ financial analyses. Except as otherwise noted, the following quantitative information, to the

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extent that it is based on market data, is based on market data as it existed on or before October 22, 2012, which was the second to last trading day before the public announcement of the merger, and is not necessarily indicative of current market conditions.

Implied Premia Analysis

Goldman Sachs calculated that the $29.00 per share in cash to be paid to the holders of shares of Company common stock pursuant to the merger agreement represented premia to the historical closing prices for the shares of Company common stock:

Selected Companies Analysis

Goldman Sachs reviewed and compared certain financial information for the Company to corresponding financial information, ratios and public market multiples for the following selected companies in each of the drug / diversified wholesaler and med-surg distribution sub-sectors of the healthcare services supply chain sector:

Drug / Diversified Wholesalers

Med-Surg Distribution Companies

Although none of the selected companies is directly comparable to the Company, the companies included were chosen because they are publicly traded companies in the drug / diversified wholesaler and med-surg distribution sub-sectors of the healthcare services supply chain sector with operations that, for purposes of analysis, may be considered similar to certain operations of the Company. With respect to each of the selected companies, Goldman Sachs calculated the following multiples and compared them to the results for the Company:

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For purposes of these calculations, Goldman Sachs utilized an equity value for each company derived by multiplying the number of diluted outstanding shares of that company as reported in its most recent SEC filings by the company’s closing share price on October 22, 2012. By adding the net debt amount (defined as total debt, non-controlling interests and preferred stock, less unrestricted cash) of each company as most recently publicly reported by the company to the equity value of such company derived from the foregoing calculations, Goldman Sachs determined an enterprise value for each company. The multiples for the selected companies were calculated using IBES estimates as of October 22, 2012. In addition, Goldman Sachs calculated these multiples for the Company based on the value of the merger consideration and using the Forecasts. The following table presents the results of these calculations:

Illustrative Discounted Cash Flow Analysis

Goldman Sachs performed an illustrative discounted cash flow analysis on the Company using the Forecasts. Goldman Sachs calculated net present values of unlevered free cash flows for the Company for the years 2013 through 2017 using discount rates ranging from 6.25% to 8.25%, reflecting an estimate of the Company’s weighted average cost of capital, derived by application of the Capital Asset Pricing Model, which takes into account certain Company-specific metrics, including the Company’s target capital structure, the cost of long-term debt, after-tax yield on permanent excess cash, if any, forecast tax rate and historical beta, as well as certain financial metrics for the United States financial markets generally. The applied discount rates ranging from 6.25% to 8.25% were based upon Goldman Sachs’ judgment of an illustrative range based upon the above analysis. Goldman Sachs then calculated the present value of illustrative terminal values in the year 2017 based on perpetuity growth rates ranging from 1.0% to 2.5% and discount rates ranging from 6.25% to 8.25%. The range of perpetuity growth rates was estimated by Goldman Sachs utilizing its professional judgment and experience, taking into account the Forecasts and market expectations regarding long-term growth of the United States, generally, including gross domestic product and inflation. Goldman Sachs also reviewed the terminal EBITDA multiples that are implied by such growth rates and a range of discount rates to be applied to the Company’s future unlevered cash flow forecasts. The perpetuity growth rates ranging from 1.0% to 2.5% and discount rates ranging from 6.25% to 8.25% implied terminal values equivalent to multiples of 2017 EBITDA ranging from 6.4x to 12.6x. Goldman Sachs then added the net present values of the unlevered free cash flows for the years 2013 through 2017 to the present value of the illustrative terminal value, in each case discounted to September 30, 2012, to derive a range of illustrative implied enterprise values. Goldman Sachs then calculated an illustrative range of present values per share of Company common stock by subtracting the Company’s net debt amount as of September 30, 2012 (as adjusted for the proceeds from the sale of the Company’s specialty dental business and the assumed proceeds from a hypothetical divestiture of the Company’s skilled nursing business) per information provided by Company management, from the illustrative range of implied enterprise values that it derived for the Company, and divided the results by the number of diluted shares of Company common stock as of September 30, 2012 per information provided by Company management. This analysis resulted in a range of illustrative values per share of Company common stock from $23.13 to $45.05.

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Illustrative Present Value of Future Share Price Analysis

Goldman Sachs performed illustrative analyses of the present value of the future price per share of common stock of the Company, using the Forecasts. Goldman Sachs calculated an illustrative range of implied present values per share of Company common stock based on hypothetical future share prices for Company common stock. For purposes of this analysis, Goldman Sachs derived hypothetical future share prices for Company common stock by applying next twelve month P/E multiples ranging from 13.0x to 17.0x to the Company’s estimated EPS (per the Forecasts) for each calendar year from 2013 through 2016 (which were estimated to be $1.29, $1.77, $2.13 and 2.45 for each respective calendar year). The next twelve month P/E multiples ranging from 13.0x to 17.0x were derived by Goldman Sachs utilizing its experience and professional judgment, taking into account current and historical trading data of the Company and selected companies which exhibited similar business and financial characteristics to the Company. Goldman Sachs then discounted these future share prices to December 31, 2012 using a discount rate of 8.6%, reflecting an estimate of the Company’s cost of equity, derived by application of the Capital Asset Pricing Model, which takes into account certain Company-specific metrics, including the Company’s target capital structure and historical beta, as well as certain financial metrics for the United States financial markets generally. This analysis resulted in a range of illustrative present values per share of Company common stock of $16.78 to $32.52.

While none of the businesses or companies that participated in these selected transactions is directly comparable to the proposed merger, the target companies in the selected transactions are such that, for the purposes of analysis, the selected transactions may be considered similar to the proposed merger.

For each of the selected transactions for which relevant information was publicly available, Goldman Sachs calculated and reviewed the enterprise value of the target company based on the announced transaction price, as a multiple of the target company’s EBITDA for the last twelve month period, or “LTM,” prior to the announcement of the transaction.

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For purposes of this analysis, the target companies’ enterprise values were generally calculated by adding, to the total equity consideration paid in the transaction, the target company’s net debt amount based on publicly available information. In addition, Goldman Sachs calculated this multiple for the Company on a standalone basis and based on the value of the merger consideration and using the LTM EBITDA as of September 30, 2012. The following table presents the results of this analysis:

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs’ opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered by it. Rather, Goldman Sachs made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the above analyses as a comparison is directly comparable to the Company or the merger.

Goldman Sachs prepared these analyses for purposes of providing its opinion to the Board of Directors of PSS that, as of October 24, 2012 and based upon and subject to the factors and assumptions set forth therein, the $29.00 per share in cash to be paid to the holders (other than McKesson and its affiliates) of shares of Company common stock pursuant to the merger agreement was fair from a financial point of view to such holders. These analyses do not purport to be appraisals nor do they necessarily reflect the prices at which businesses or securities actually may be sold. Analyses based upon forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by these analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, none of the Company, Goldman Sachs or any other person assumes responsibility if future results are materially different from those forecast.

The merger consideration was determined through arm’s-length negotiations between McKesson and the Company and was approved by the Board of Directors of PSS. Goldman Sachs provided advice to the Company during these negotiations. Goldman Sachs did not, however, recommend any specific amount of consideration to the Company or its Board of Directors or that any specific amount of consideration constituted the only appropriate consideration for the merger.

As described above, Goldman Sachs’ opinion to the Board of Directors of PSS was one of many factors taken into consideration by the Board of Directors of PSS in making its determination to approve the merger agreement. The foregoing summary does not purport to be a complete description of the analyses performed by Goldman Sachs in connection with the fairness opinion and is qualified in its entirety by reference to the written opinion of Goldman Sachs attached as Appendix C .

Goldman Sachs and its affiliates are engaged in commercial and investment banking and financial advisory services, market making and trading, research and investment management (both public and private investing), principal investment, financial planning, benefits counseling, risk management, hedging, financing, brokerage activities and other financial and non-financial activities and services for various persons and entities. Goldman Sachs and its affiliates, and funds or other entities in which they invest or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company, McKesson and any of their respective affiliates and third parties, or any currency or commodity that may be involved in the merger for the accounts of Goldman Sachs and its affiliates and their customers. Goldman Sachs has acted as financial advisor to the Company in connection with, and has participated in certain of the negotiations leading to, the merger. In addition, Goldman Sachs has provided certain investment banking services to the Company and

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its affiliates from time to time for which Goldman Sachs’ Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to the Company in connection with the potential divestiture of its skilled nursing business since May 2012. During the two year period ended October 24, 2012, the Investment Banking Division of Goldman Sachs has received no compensation for services provided to the Company and its affiliates. Goldman Sachs also has provided certain investment banking services to McKesson and its affiliates from time to time for which its Investment Banking Division has received, and may receive, compensation, including having acted as financial advisor to McKesson in connection with its acquisition of U.S. Oncology in December 2010 and acting as a participant in McKesson’s revolving credit facility since September 2011. During the two year period ended October 24, 2012, the Investment Banking Division of Goldman Sachs has received compensation for services provided to McKesson and its affiliates of approximately $7,200,000. Goldman Sachs may also in the future provide investment banking services to the Company, McKesson and their respective affiliates for which its Investment Banking Division may receive compensation.

Further, concurrently with the Company’s issuance in August 2008 of $230,000,000 aggregate principal amount of 3.125% Convertible Notes, the Company entered into the Convertible Bond Hedge Transaction and the Issuer Warrant Transaction with Goldman Sachs acting as principal for its own account. The Convertible Bond Hedge Transaction consisted of the purchase by the Company from Goldman Sachs of call options relating to all of the 3.125% Convertible Notes (convertible into approximately 10.8 million shares of Company common stock) and having a strike price equal to the initial conversion price of the 3.125% Convertible Notes ($21.2160). The Issuer Warrant Transaction consisted of the sale by the Company to Goldman Sachs of warrants with respect to the number of shares of Company common stock underlying the 3.125% Convertible Notes and having a strike price of $28.2880. If, as currently expected by the Company, the merger is consummated prior to August 1, 2014, which is the maturity date for the 3.125% Convertible Notes and the expiration date for the Convertible Bond Hedge Transaction, the Convertible Bond Hedge Transaction would likely be exercised. Upon exercise in full of the Convertible Bond Hedge Transaction following consummation of the merger, Goldman Sachs would be required to pay to the Company an aggregate amount of cash equal to the intrinsic value thereof (i.e., the product of the number of shares of Company common stock underlying the 3.125% Convertible Notes and the excess of the $29.00 per share in cash that will be paid to the holders of the shares of Company common stock pursuant to the merger agreement over the strike price of the Convertible Bond Hedge Transaction). Under the terms of the Issuer Warrant Transaction, if, as currently expected by the Company, the merger is consummated prior to the initial expiration date of the warrants in November 2014, all of the warrants would be cancelled and Goldman Sachs would be entitled to receive a cash payment from the Company in respect of the cancelled warrants. The Issuer Warrant Transaction provides that Goldman Sachs and the Company would seek to agree on the amount of such cancellation payment by the fifth business day following such cancellation and, if Goldman Sachs and the Company were unable to agree on such an amount, Goldman Sachs, as calculation agent under the Issuer Warrant Transaction, would determine such amount in a commercially reasonable manner. Although the amount of any such cancelation payment cannot be determined at this time, and may be greater than, equal to or less than the value that Goldman Sachs would have received from exercise of the warrants in the absence of the merger, such amount will depend on a variety of factors including, among others, the $29.00 in cash paid to the holders of shares of Company common stock pursuant to the merger agreement, the closing date of the merger and applicable interest rates, and will include both the intrinsic value of the warrants (i.e., the product of the number of outstanding warrants and the excess of the $29.00 per share in cash that will be paid to holders of shares of Company common stock pursuant to the merger agreement over the strike price of the Issuer Warrant Transaction) and the time value of the warrants lost in connection with the proposed merger. For illustrative purposes, if the merger were to have been consummated on December 20, 2012 in accordance with its terms, Goldman Sachs estimates that the amount payable to the Company upon exercise of the Convertible Bond Hedge Transaction would have been approximately $84.4 million and the amount payable by the Company to Goldman Sachs upon cancellation of the Issuer Warrant Transaction would have been approximately $91.9 million. The actual amount of any such cancellation payment would be subject to the determination process described above.

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As a result of the Call Spread Transactions, Goldman Sachs has exposure to market fluctuations in the price of Company common stock. Goldman Sachs’ ordinary practice is to hedge its net market exposure to the price of the common stock underlying private derivative transactions with issuers of such common stock such as the Call Spread Transactions. In connection with the Call Spread Transactions, Goldman Sachs and its affiliates have engaged, and will continue to engage, in hedging and other market transactions (which may include the purchasing or selling of shares of Company common stock or the 3.125% Convertible Notes or the entering into or unwinding of various derivative transactions with respect to shares of Company common stock) that are generally intended to substantially neutralize Goldman Sachs’ exposure as a result of the Call Spread Transactions to changes in the Company’s common stock price. Prior to December 21, 2012, Goldman Sachs, as part of its ongoing hedging activities to mitigate its exposure to the Call Spread Transactions, sold most of the shares of Company common stock that it previously held as part of its hedging activities, leaving it with fewer than 100,000 shares. Goldman Sachs is expected to continue to engage in hedging activities to mitigate its exposure to market fluctuations in the price of Company common stock resulting from the Call Spread Transactions.

Such hedging activity has been, and will be, at Goldman Sachs’ own risk and may result in a gain or loss to Goldman Sachs that may be greater than or less than the contractual benefit to Goldman Sachs under the Call Spread Transactions. The amount of any such gain or loss will not be known until the Convertible Bond Hedge Transaction and the Issuer Warrant Transaction have been exercised, expired or cancelled in accordance with their terms and Goldman Sachs and its affiliates have completed all of their unwind activities. In accordance with industry practice, Goldman Sachs maintains customary institutional information barriers reasonably designed to prevent the unauthorized disclosure of confidential information by personnel in its Investment Banking Division to the personnel in its Securities Division who are undertaking these hedging and other market transactions.

Goldman Sachs estimates as of December 20, 2012 , and has so advised the Company, that, as a result of the proposed merger, Goldman Sachs expects to realize a gain of approximately $38.8 million on the Call Spread Transactions, after giving effect to its hedging activities based on the ordinary hedging practices described above, and an assumed closing date of December 20, 2012.

The indenture governing the Convertible Notes and the confirmations containing the terms of the Call Spread Transactions were included as exhibits to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2008.

The Board of Directors of PSS selected Goldman Sachs as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in transactions similar to the transaction. Pursuant to a letter agreement dated October 10, 2012, the Company engaged Goldman Sachs to act as its financial advisor in connection with the possible sale of all or a portion of the Company. Pursuant to the terms of this engagement letter, the Company has agreed to pay Goldman Sachs a transaction fee of approximately $14 million, all of which is contingent upon consummation of the merger, and the Company has agreed to reimburse Goldman Sachs for its expenses arising, and indemnify Goldman Sachs against certain liabilities that may arise, out of its engagement.