SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from ___________________ to ______________________
Commission file Number 1-9810
OWENS & MINOR, INC.
(Exact name of Registrant as specified in its charter)
Virginia 54-01701843
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4800 Cox Road, Glen Allen, Virginia 23060
Address of principal executive offices (Zip Code)
Registrant's telephone number, including Area Code - (804) 747-9794
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $2 par value New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None __________________________________________________________________________
(Title of Class)
_______________________________________________________________________________
(Title of Class)
Indicate by check mark whether the Registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in any definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates
(based upon the closing sales price) was approximately $245,644,134 as of May
17, 1996. In determining this figure, the Company has assumed that all of its
officers, directors and persons known to the Company to be the beneficial owners
of more than five percent of the Company's Common Stock are affiliates. Such
assumption shall not be deemed conclusive for any other purpose.
The number of shares of the Company's Common Stock outstanding as of
May 17, 1996 was 31,857,560 shares.
<PAGE>
The purpose of this Form 10-K/A is to replace Exhibit 10(m) to the
Annual Report on Form 10-K for the fiscal year ended December 31, 1995 of Owens
& Minor, Inc.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
OWENS & MINOR, INC.
By /s/ DREW ST.J. CARNEAL
Drew St.J. Carneal
Senior Vice President,
General Counsel
Date: 5/20/96
3
Exhibit 10 (m)
November 10, 1995
Mr. Hue Thomas III
Vice President
Owens & Minor, Inc.
The Innsbrook Corporate Center
4800 Cox Road
Glen Allen, VA 23060
Dear Hue,
Attached are the amendments to the Enhanced Authorized Distribution Agency
Agreement, dated as of November 16, 1993, which will be effective as on November
1, 1995. In addition the affected Schedules will be replaced and/or added
effective November 1, 1995:
1) Schedule 1 Reflecting assigned health care
organizations
2) Schedule 6 Base Cost + Plus Matrix
6A Payment Terms Outline
6B System Definition and Pricing
6BI System Definition Blended Worksheet
6C EOE/EDI Requirements
6D Initial Implementation Process
3) Schedule 7 ADA Utilization Acknowledgement Form
7A ADA Notification Form Changes to the
Services Menu
4) Schedule 8 Payment Terms Options
5) Schedule 12A Distribution and Pricing of
Non-Traditional Products
12B List of Non-Traditional
Manufacturers and Products
6) Schedule 15 Service Menu
15A Service Menu Definitions
7) Schedule 20 ADA Responsibilities
8) Schedule 22A Service Requirements
22B Service Requirements Notification
In the past, VHA has developed action plans with ADA's to address issues of non
performance or breach of the ADA Agreement terms. VHA no longer intends to
utilize such an action plan process and will simply provide notice of breach in
accordance with Section 12 of the ADA Agreement.
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Please sign the original of this letter to acknowledge your agreement and
acceptance of these amendments and return the originals to my attention. If you
have any questions or need additional information please do not hesitate in
contacting me at your convenience.
Sincerely,
Larry Dooley
Senior Director, Distribution Services
cc: Bill Elliott
Richard Heard
AGREED and ACCEPTED as of this ______ day of November _______, 1995
Owens and Minor, Inc.
By: ___________________________________
Title: ________________________________
Date: _________________________________
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NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Replace Section 1 (7) in its entirety as follows:
(7) "Cost" refers to the lowest of (a) (in the case
of a Contract Product) the amount provided in the
applicable Purchasing Agreement as the price to be
billed to the Designated VHA Member and Affiliates
without subtraction for cash discounts allowed by
Vendors for prompt payment and prior to the addition
of the Base Price Matrix, (b) ADA's [this
confidential information has been omitted and filed
separately with the Commission] in obtaining the
products, including actual inbound freight charges
not paid or credited by manufacturer and actually
paid by ADA not reflected on invoices from
manufacturers, distributors or others (such [this
confidential information has been omitted and filed
separately with the Commission] shall be reduced to
reflect proportionately: [this confidential
information has been omitted and filed separately
with the Commission] and, except for (i) [this
confidential information has been omitted and filed
separately with the Commission] allowed and rebates
paid or credited by vendors for prompt payment and
(ii) [this confidential information has been omitted
and filed separately with the Commission] provided by
ADA to Vendors, any and all value received by ADA or
from which ADA derives any direct or indirect benefit
related in any way to the product where ADA's cost
affected), or (c) the net distributor cost of any
product pursuant to any agreement between the
Designated VHA Member or Affiliate and the Vendor of
such products. In addition to the foregoing, after
October 31, 1995, Cost for any product may be
increased by the amount equal to the decrease in
prompt payment or cash payment discount terms offered
by a manufacturer and actually taken on a consistent
basis by ADA.
In Section (6) (A) in the last sentence in Section (A) change
[this confidential information has been
omitted and filed separately with the
Commission] to [this confidential
information has been omitted and filed
separately with the Commission]
Delete Section (6) (A) (1) Initial Implementation: in its entirety and
replace with the following:
(1) Initial Implementation:
See Schedule 6D for
implementation process for new Designated
VHA Members or Affiliates
In Section (6) (A) (2) Annual Price Matrix Slotting; replace
------ ----- ------ --------
"On or before April 1 of each year after
1994 during the term of this Agreement"
with
"On or before July 1 of each year after
1995 during the term of this Agreement"
6
NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Delete Section (6) (A) (3) Quarterly Performance Bonus: in its
entirety with the following:
(3) Semiannual Performance Bonus:
Commencing with June 30, 1996, and for each six
month period thereafter, each Designated VHA
Member or Affiliate whose performance qualifies
for a lower cost + plus in the Price Matrix than
its current Annual Slotting will receive a
Semiannual Performance Bonus from the ADA within
thirty (30) days after final sales figures are
available from the prior semiannual period in the
form of either a check or a credit to the
account, at the Designated VHA Member or
Affiliate's election. The amount of Semiannual
Performance Bonus shall be calculated by taking
the difference between the cost + plus percentage
of the Designated VHA Member or Affiliate's
current Annual Slotting and the cost + plus
percentage applicable to the Designated VHA
Member or Affiliate's actual performance for the
semiannual period multiplied by the total amount
of purchases through ADA for that quarter.
Semiannual Performance Bonus will not be
available for Hospitals who are on a
fixed-fee-for-service basis. In these cases, the
Pricing Matrix will be used for the purpose of
determination of the VHA fee only.
Replace Section 6 (A) (4) "Failure to Maintain Slotting: in its entirety
with the following:
(4) Failure to Maintain Slotting"
Any Designated VHA Member or Affiliate which
fails to maintain actual semiannual performance
at least equal to its current Annual Slotting for
any semiannual period shall have its Price Matrix
location adjusted immediately to reflect actual
performance for the most recently completed
semiannual period.
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NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Replace Section 6 (E) Fill Rate, in its entirety with the following:
(E) Fill Rate, ADA shall maintain for each Designated
VHA Member or Affiliate an unadjusted fill rate
of 96% for all "A" items. "A" items are defined
as those items that are stock items and are
ordered by the Designated VHA Member or Affiliate
not less than two times per month in accordance
with the usage guidelines provided in Schedule
22A. ADA will provide to VHA Member or Affiliate
by 2/1 of each year commencing with 2/1/96 and
each year after the VHA Members or Affiliate's
"A" items list and the ADA and VHA Member or
Affiliate will mutually agree to the "A" list by
3/15 of same year. ADA shall maintain for such
Designated VHA Member or Affiliate an unadjusted
fill rate of 92% on all "Formulary Items."
"Formulary Items" are defined as mutually agreed
upon stock items ordered by Designated VHA
Members or Affiliates at least once per month
(other than "A" Items" and in accordance with
usage guidelines provided in Schedule 22A. needs
to be provided to the VHA Member or Affiliate by
the ADA by 2/1/96 and each year after and agreed
to by the ADA and VHA Member of Affiliate by 3/15
of same year.
Unadjusted fill rate shall be calculated by total
number of lines ordered fully delivered, divided
by total number of lines ordered.
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NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Replace Section 6 (J) Delivery of Non-Traditional Products, in its entirety with
the following:
(J) Delivery of Non-Traditional Products, See
Schedule 12, 12A and 12B for additional terms of
including Non-Traditional Products. "The
inclusion of Non-Traditional Products if agreed
to be distributed by the ADA to a Designated VHA
Member or Affiliate the volume is mandatory and
the price is determined as follows:
- VHA Members or Affiliate's base cost
+ plus +
- Mandatory Non-Traditional Service Fee
of [this confidential information has
been omitted and filed separately
with the Commission]
+
- Service Matrix Fees (if applicable)
=
- Effected Cost + Plus
+
- Actual inbound freight if not paid by
manufacturer
The Non-Traditional Product List is in Schedule
12B, Each ADA must provide a list of
Non-Traditional Manufacturer's and their
products. Each month a separate line item report
due on the 10th with all other reports, ADA shall
provide to VHA and VHA Member or Affiliate with
the following detail:
- Manufacturer Name
- Product Name and Description
- Price Charged to VHA Member
or Affiliate
- How price was derived to VHA
Member or Affiliate
See Schedule 12, 12A and 12B for Delivery of
Non-Traditional Products
9
NOVEMBER 1, 1995
AMENDMENT TO
ENHANCED AUTHORIZED DISTRIBUTION AGENCY AGREEMENT
DATED AS OF NOVEMBER 16, 1993
Add a new Section 6 (M) as follows:
(M) ADA Service Responsibilities as set forth
in Schedule 22, lists the responsibilities
of the ADA and the requirements of the
Designated VHA Member of Affiliate, with
Penalties and rewards for the ADA upon
failure to perform or for exceeding service
responsibilities expectation.
Replace Section (7) (B) Patient Charge-Item Labelling, in its entirety with the
following:
(B) Patient Charge Labelling ADA shall charge [this
confidential information has been omitted and
filed separately with the Commission] per label
regardless who supplies the label.
In Section 7 (E) Emergency Deliveries, at the end of the paragraph add
the following:
"ADA may charge [this confidential
information has been omitted and filed
separately with the Commission] for
providing product for emergency deliveries"
In Section 7 (F) Barcoding, at the end of the paragraph add the
following:
"ADA may charge [this confidential
information has been omitted and filed
separately with the Commission] it occurs
in providing Barcoding labels"
In Section 11 (R) Favored Customer Pricing, at the end of the paragraph
add the following:
"Upon written request by VHA, each ADA
shall provide written verification that the
terms and conditions of the ADA Agreement,
and in particular the cost + plus and
service matrix pricing, provides value to
VHA Members of Affiliates no less than the
lowest price and greatest value offered by
ADA to any other customer other than the
government. As competitive situations arise
during the term of this Agreement, it will
be necessary for VHA and ADA to mutually
agree on meeting specific competitive
situations that are strategically important
to VHA and ADA, in particular with regards
to Designated VHA Members or Affiliates
request for proposal (RFP), VHA and ADA
mutually agree to notify each other within
five (5) business days upon receipt of RFP
from Designated VHA Member or Affiliate and
ADA agrees that any response to the RFP
shall be in the context of and pursuant to
the terms of this Agreement.
10
<PAGE>
SCHEDULE 1
DESIGNATED VHA MEMBERS AND AFFILIATES
[List of Members and Affiliates assigned to ADA]
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SCHEDULE 6
COST-PLUS MATRIX
(Medical/Surgical Distribution)
Monthly $ Volume of Purchases
Utilization 0- 150,001- 400,001- 750,001-
150,000 400,000 750,000 And >
31- [*] [*] [*] [*]
84%
85-
100% [*] [*] [*] [*]
All Health Care Organizations participating at or below 30% utilization
will be charged cost + [this confidential information has been omitted
and filed separately with the Commission] notwithstanding performance
for monthly volume.
* [This confidential information has been omitted and filed separately
with the Commission.]
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SCHEDULE 6A
Payment Terms Outline
Payment Terms
15-Day Prepay: [*] Credit
Net 0 Days: [*] Credit
Standard Terms: [*] purchases due [*]
[*] purchases due [*]
Net 30 Days: Add [*]
Net 45 Days: Add [*]
Net 60 Days: Add [*]
Over 60 Days: Add additional [*] for each
15 days beyond [*] days
No Designated VHA Member or Affiliate can be put on credit hold by
their ADA without the ADA notifying in writing the Designated VHA
Member or Affiliate and VHA fifteen (15) days prior to credit hold. VHA
and ADA will work collectively to remedy the issue with the Designated
VHA Member or Affiliate prior to loss of credit privileges. If credit
privileges are rescinded to the Designated VHA Member or Affiliate, the
Designated Member or Affiliate may be entitled to a C.O.D. relationship
with their ADA.
Days Sales Outstanding ("DSO") is reviewed quarterly and all
adjustments to the base cost+plus will be made prospectively on a
quarterly basis. DSO is based on the previous quarter's actual
quarterly DSO average. No Designated VHA Member or Affiliate will be
assessed to a higher DSO charge if the disputed portion of an invoice
is not paid due to invoice discrepancies. All invoice discrepancies
noted by the Designated VHA Member or Affiliate must be brought to the
attention of the ADA by the Designated VHA Member or Affiliate within
three (3) business days of receipt of invoice.
A service charge is due at a monthly rate of the lesser of 1.5% (18%
annual) or the maximum legally allowable rate by state/local law on all
invoices not paid within the agreed upon payment terms.
* [This confidential information has been omitted and filed separately
with the Commission.]
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SCHEDULE 6B
System Definition Pricing
The following system definitions and pricing scenarios are for
acute-care systems. Systems cannot add their other health-care provider sites'
utilization and volume into the pricing equation. Designated VHA Members or
Affiliates that are not part of a system as defined below will otherwise be
slotted pursuant to the Agreement.
(1) If a VHA Shareholder/Partner controls (owns, manages or
leases) the related VHA institutions in its system and the
system has a minimum utilization of [this confidential
information has been omitted and filed separately with the
Commission] , and if the system offers centralized ordering
and billing, the system may combine its utilization and dollar
volume as long as it meets the minimum stated above and may be
slotted according to its actual combined utilization and
volume.
The system will be entitled to [this confidential information
has been omitted and filed separately with the Commission]
deliveries per week to each institution up to a maximum of
[this confidential information has been omitted and filed
separately with the Commission] per week per system. All other
deliveries will be charged as per the service menu. All other
service fees will be charged according to the system's actual
combined utilization and volume slot. Delivery sites of the
system that are further than one hundred (100) miles from the
ADA branch will pay a [this confidential information has been
omitted and filed separately with the Commission] per-mile,
one-way surcharge on all deliveries.
(2) If a VHA Shareholder/Partner controls (owns, manages or
leases) the related VHA institutions in its system and the
system has a combined minimum utilization of [this
confidential information has been omitted and filed separately
with the Commission], and if the system does not offer
centralized ordering and billing, then the system may be
slotted by its combined utilization and dollar volume;
however, the system will add a [this confidential information
has been omitted and filed separately with the Commission]
charge to its combined base matrix slot if it does not have
centralized ordering and [this confidential information has
been omitted and filed separately with the Commission] if it
does not have centralized billing, for all institutions in the
system.
The system will be entitled to [this confidential information
has been omitted and filed separately with the Commission]
deliveries per week to each institution up to a maximum of
[this confidential information has been omitted and filed
separately with the Commission] per week per system. All other
deliveries will be charged according to the service menu. All
other service fees will be charged according to the system's
combined actual slotted position. Delivery sites of the system
that are further than one hundred (100) miles from the ADA
branch will pay a [this confidential information has been
omitted and filed separately with the Commission] per-mile,
one-way surcharge on all deliveries.
(3) If a VHA Shareholder/Partner does not control (own, manage or
lease) the related VHA institutions, then the system cannot
combine its utilization and dollar volume to be slotted.
However, it may blend its utilization and volume to be
slotted.
Blended slotting occurs by each VHA health-care organization
("HCO") in the system being slotted by its own utilization and
dollar volume. Then the base matrix mark up for each VHA HCO
is averaged together on a weighted basis to give the system
its actual slot. If the system does not offer centralized
ordering, it must add [this confidential information has been
omitted and filed separately with the Commission] to its base
cost+plus slot; and if it does not have centralized billing,
then the system will add a [this confidential information has
been omitted and filed separately with the Commission] onto
its base cost+plus slot.
The system will receive [this confidential information has
been omitted and filed separately with the Commission]
deliveries per week to each organization up to a maximum of
[this confidential
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information has been omitted and filed separately with the
Commission] per week per system. All other deliveries will be
charged according to the service menu. All other service
charges will be based on the individual organization's
pre-blended base matrix mark up. All Delivery sites that are
further than one hundred (100) miles from the ADA branch will
pay a [this confidential information has been omitted and
filed separately with the Commission] per-mile, one-way
surcharge on all deliveries.
(4) For free-standing VHA HCOs or systems that need to develop a
different type of relationship with their ADA partners, the
VHA HCO, ADA and VHA will work together to develop the
relationship outside of the existing matrix concept. This
process will be in lieu of the "Distribution Supply Chain
Containment Program" that was on the base matrix. Examples of
this are Fee-For-Service Programs and Activity-Based Costing
Programs. No ADA can enter into an off-matrix program without
prior approval from VHA.
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SCHEDULE 6B1
Med/Surg ADA System Blending Fee Worksheet
System Name: ______________________________________________________________
================================================================================
(1) (2) (3) (4) (5) (6) (7) (8)
MONTHLY
MONTHLY BASE DISTRIBUTION
FACILITY NAME CITY VOLUME DSO EOE UTILIZATION COST PLUS CHARGE [*]
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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--------------------------------------------------------------------------------
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================================================================================
Centralized Ordering? If no, add [*]. Centralized Billing? If no, add [*]
Divide total for Column (7) ________________________ by total for Column (3)
____________________________.
The result is the blended cost+plus __________________ plus added charges for
entralized ordering and billing __________________.
The result is the System monthly blended cost+plus of ___________________.
Affiliates which are located further than 100 miles from the ADA branch will
incur a [*] per-mile surcharge on all deliveries.
Monthly volume, DSO, EOE and utilization will be reviewed quarterly.
* [This confidential information has been omitted and filed separately
with the Commission.]
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SCHEDULE 6C
EOE/EDI Requirements
EOE: All Designated VHA Members or Affiliates must be at [this
confidential information has been omitted and filed separately
with the Commission] electronic order entry ("EOE") for all
their orders. EOE is calculated as number of lines ordered by
EOE, divided by number of lines ordered. If the Designated VHA
Member or Affiliate is not at [this confidential information
has been omitted and filed separately with the Commission],
the following charges will be added to the Designated VHA
Member or Affiliate's base cost+plus:
- EOE [*] [*] add-on to base cost+plus
- EOE [*] [*] add-on to base cost+plus
EOE is reviewed quarterly and is determined by the previous
quarterly average.
EDI: Effective July 1, 1996, all Designated VHA Members and
Affiliates will be required to use the following EDI
transaction sets:
- Electronic Invoices (810)
- Electronic Fund Transfer (820 and 823)
- Electronic Price Catalog (832)
For each of the above three EDI transaction sets that the
Designated VHA Member or Affiliate does not perform, a [this
confidential information has been omitted and filed separately
with the Commission] charge will be added to the base
cost+plus for each of the EDI transaction sets up to a total
of [this confidential information has been omitted and filed
separately with the Commission]. This will be measured on a
quarterly basis and calculated based on the previous quarterly
averages for the three transaction sets. A 95% quarterly
average must be maintained on all three transaction sets.
* [This confidential information has been omitted and filed separately with the
Commission].
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SCHEDULE 6D
Revised Initial Implementation
Each Designated VHA Member or Affiliate will go through a revised
initial implementation process, outlined as follows:
1) Each ADA will report the following information to VHA for each
Designated VHA Member or Affiliate:
a) hospital name/LIC #
b) complete address
c) utilization based on Distributor Profile Form on file with
VHA (1995)
d) volume
e) current slot from original base cost+plus matrix
f) current EOE (Electronic Order Entry)
g) current DSO (Days Sales Outstanding) exclusive of invoices
that are in discrepancy
h) number of deliveries and current charge if over two per
week
i) complete list of other distribution services and the
current charges for those services
j) current total cost+plus price inclusive of base, EOE, DSO
and additional services
k) new base cost+plus matrix price as determined by revised
base cost+plus matrix in Schedule 6
l) total new cost+plus inclusive of all add-on fees
2) VHA, upon receipt of Designated VHA Member or Affiliate
information, will verify information for accuracy and make any
necessary changes per the revised Enhanced ADA Agreement.
3) VHA, upon completion of each Designated VHA Member or
Affiliate's information, will send out a re-launch package
that will provide each Designated VHA Member or Affiliate with
all the details on how the Designated VHA Member or
Affiliate's distribution service costs were determined.
4) VHA will, upon revision of Designated VHA Member or
Affiliate's distribution cost structure, notify the Designated
VHA Member or Affiliate's ADA, who will immediately load the
revised Designated VHA Member or Affiliate's distribution cost
structure into the ADA's systems and prepare revised price
books that will be inclusive of all changes that the revised
Enhanced ADA Agreement contains.
5) Revised distribution cost structure for each Designated VHA
Member and Affiliate will go into effect on December 1, 1995.
6) Any new Designated VHA Member or Affiliate that joins VHA or
the medical-surgical ADA program after the completion of the
roll out of the revised Enhanced ADA Agreement will follow the
steps as outlined here:
a) If the Designated VHA Member or Affiliate is currently
using its declared ADA partner, the Designated VHA Member
or Affiliate will follow steps 1-5 as outlined in the
revised initial implementation process.
b) If the Designated VHA Member or Affiliate is not currently
using its declared ADA partner, then it must follow these
steps:
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(1) declare an ADA partner from the ADAs that serve the
Designated VHA Member or Affiliate's marketplace
(2) complete a Distributor Profile Form and return it to
VHA
(3) complete a Utilization Acknowledgment Form
(4) follow steps 2-5 of the revised initial
implementation process
c) Any requests for variation to the steps outlined in the
revised initial implementation need to be reviewed and
approved by VHA.
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SCHEDULE 7
Med/Surg ADA Utilization Acknowledgment Form
Hospital:
LIC #
City: ST
Declared ADA:
Branch/DC:
HCO PURCHASING INFORMATION
Annualized Total Distribution:
Annualized 3rd Quarter through ADA:
Monthly Volume:
HCO Base Cost Plus: Utilization Percentage:
3rd QTR DSO: Days 3rd QTR DSO Charge:
3rd QTR EOE: 3rd QTR EOE Charge:
HCO SERVICE MENU INFORMATION
Service Menu Fee Charge
Customized Invoices:
Customized Packing Slip:
Combined Packing Slip and Invoice:
Custom Pallet Architecture-Basic:
Custom Pallet Architecture-Expanded:
Extra Weekly Deliveries (each):
Bulk Picked by Department, Delivered to Dock:
LUM Picked by Department, Delivered to Dock*:
LUM Picked by Department, Delivered to Dept*:
LUM Picked by Department, Put Away*:
Total Service Menu Fees:
TOTAL HCO COST PLUS FEE: *cumulative services, applied to affected sale
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SCHEDULE 7A
ADA Notification Form: Changes to the Service Menu
<TABLE>
<CAPTION>
HCO COST PLUS FEE INFORMATION Current Slotting Information New Slotting Information
ACTUAL COST PLUS FEE ACTUAL COST PLUS FEE
<S> <C> <C> <C> <C> <C>
Cost Plus Customized YES or NO [*] YES or NO [*]
Service Menu Invoices
Options:
Customized YES or NO [*] YES or NO [*]
Packing Slips
Combined YES or NO [*] YES or NO [*]
Packing/Invoice
Custom Pallet YES or NO [*] YES or NO [*]
Architecture-
Basic
Custom Pallet YES or NO [*] YES or NO [*]
Architecture-
Expanded
Extra Weekly YES or NO YES or NO
Deliveries (.25%)
Bulk pick/dept., YES or NO [*] YES or NO [*]
dlvr/dock
*cumulative LUM pick/dept., YES or NO [*] YES or NO [*]
(applies to dlvr/dock*
affected sales)
LUM pick/dept., YES or NO [*] YES or NO [*]
dlvr/dock*
LUM pick/dept., YES or NO [*] YES or NO [*]
put away*
TOTAL SERVICE MENU % %
COST PLUS FEES
</TABLE>
ADDITIONAL SERVICES BILLED SEPARATELY BY ADA
Affix Patient Charge Labels @ [*] per label
Bar Coded Shelf Labels @ [*]
Emergency Delivery @ [*]
Line Charge of [*] per line, if average order is less than [*] per line
Note: All of the above charges are in addition to the base pricing matrix
charges.
_____________________________________ ______________________________
Health Care Organization VHA - System Services
_____________________________________ _______________________________
ADA VHA - Distribution Services
* [This confidential information has been omitted and filed separately with the
Commission.]
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<PAGE>
SCHEDULE 8
Payment Terms Options
ADA shall invoice each Designated VHA Member and Affiliate once each
month, unless more frequent invoices are requested by Designated VHA Member or
Affiliate. Each Designated VHA Member or Affiliate shall select from the
following payment options (all deductions or additions are made to the annual
slotting locations on the price matrix for that Designated VHA Member or
Affiliate):
_______ 15-day prepay: [*] credit
_______ Net 0 days: [*] credit
_______ Standard terms: [*] purchases due [*]
[*] purchases due [*]
_______ Net 30 days: Add [*]
_______ Net 45 days: Add [*]
_______ Net 60 days: Add [*]
_______ Over 60 days: Add additional [*] for each
15 days beyond [*] days
All invoice terms run from the date of invoice. Credit for prepay shall
be no more than the percent of the amount on deposit with ADA, not the percent
of the total monthly/quarterly purchases.
Taxes, where applicable, will be added to the invoice price of
products.
No Designated VHA Member or Affiliate can be put on credit hold by
their ADA without the ADA notifying the Designated VHA Member or Affiliate and
VHA in writing fifteen (15) days prior to credit hold. VHA and the ADA will work
collectively to remedy the issue with the Designated VHA Member or Affiliate
prior to loss of credit privileges. If credit privileges are rescinded to the
Designated VHA Member or Affiliate, then the Designated VHA Member or Affiliate
is entitled to continue to purchase their products and services from the ADA on
a C.O.D. basis.
DSO is reviewed quarterly, and all adjustments to the base cost+plus
will be made only on a quarterly basis. The DSO will be determined by the
previous quarter's average DSO, excluding any disputed portions of invoices
noted by the Designated VHA Member or Affiliate as in discrepancy. No Designated
VHA Member or Affiliate will be charged a higher cost+plus for DSO due to
invoices that are in discrepancy. All invoice discrepancies need to be reported
to the ADA by the Designated VHA Member or Affiliate within three (3) business
days of receipt of the invoice.
A service charge may be added by the ADA to the Designated VHA Member
or Affiliate's monthly outstanding balance of the lesser of 1.5% (18% annually)
or the maximum legally allowable rate by local law, on all invoices not paid
within the agreed-upon payment terms.
*[This confidential information has been omitted and filed separately with the
Commission.]
22
<PAGE>
SCHEDULE 12A
Distribution of Non-traditional Products
When ADAs are requested to distribute Non-traditional Products for the
Designated VHA Member or Affiliate, the process for distributing these Products
is as follows:
1) The Designated VHA Member or Affiliate requests the ADA to
distribute a Non-traditional Product.
2) The ADA and Non-traditional Product manufacturer agree to put
the Non-traditional Product through distribution.
3) If the ADA agrees to distribute the Non-traditional Product,
the process for pricing the Non- traditional Product will be
as follows:
a) Non-traditional Product volume is added to Price
Matrix.
b) Non-traditional Product assumes the Designated VHA
Member or Affiliate's base cost+plus.
c) A Non-traditional Product service charge of [this
confidential information has been omitted and filed
separately with the Commission] is added to the base
cost+plus.
d) All applicable service fees are added.
e) Actual inbound freight is added, if not prepaid by
manufacturer.
4) The ADA must provide a list of Non-traditional Product
manufacturers and their products, product descriptions and
prices charged to each Designated VHA Member or Affiliate and
how the prices were determined.
5) Each month, the ADA must provide VHA with a line-item-detail
report on all Non-traditional Products sold and prices charged
to each Designated VHA Member or Affiliate.
6) A list of Non-traditional Product manufacturers and Products
is in Schedule 12B.
7) VHA determines that Non-traditional Products are those
products of which sixty percent (60) of the products are sold
on a direct basis from the manufacturer to the Designated VHA
Member or Affiliate.
23
<PAGE>
SCHEDULE 12B
Non-Traditional Product Manufacturers and Products
[This list will be sent to each VHA organization at a later date.]
24
<PAGE>
SCHEDULE 15
Service Menu
================================================================================
SERVICE CHARGE
--------------------------------------------------------------------------------
Customized Invoices [*]
--------------------------------------------------------------------------------
Customized Packing Slip [*]
--------------------------------------------------------------------------------
Combined Packing Slip and Invoice [*]
--------------------------------------------------------------------------------
Custom Pallet Architecture, Basic [*]
--------------------------------------------------------------------------------
Custom Pallet Architecture, Expanded [*]
--------------------------------------------------------------------------------
Extra Weekly Deliveries [*] per extra delivery
--------------------------------------------------------------------------------
Bulk Picked by Department, Delivered to Dock [*]
--------------------------------------------------------------------------------
LUM Picked by Department, Delivered to Dock* [*]
--------------------------------------------------------------------------------
LUM Picked by Department, Delivered to Dept* [*]
--------------------------------------------------------------------------------
LUM Picked by Department, Put Away* [*]
--------------------------------------------------------------------------------
Affix Patient Charge Labels [*] per label
--------------------------------------------------------------------------------
Bar Coded Shelf Labels [*]
--------------------------------------------------------------------------------
Emergency Delivery [*]
--------------------------------------------------------------------------------
Line Charge [*] per line, if average line
order is less than [*]
per line
================================================================================
NOTE: Service charges can be included in the HCO's base cost+plus or billed as
a separate line item or invoice.
*[This confidential information has been omitted and filed separately with the
Commission.]
25
<PAGE>
SCHEDULE 15A
Custom Pallet Architecture
Custom pallet architecture is separated into two types of services:
basic and expanded. The defined activities included under these two services
are:
Custom Pallet Architecture - Basic
- items separated on pallet by department or purchase
order
- items arranged in purchase order input sequence
Custom Pallet Architecture - Expanded
- items palletized in reverse storeroom location
- separate pallet for each department
- separate pallet for non-stock items
- separate pallet for stock items
- pallet clearly marked with description and internal
routing information
The following services are provided free of charge and are not included
in custom pallet architecture:
- box/case labels facing out on pallet
- shrink-wrapped pallets
- pallets arranged to meet HCO weight and/or dimension
requirements
26
<PAGE>
SCHEDULE 20
Products on Which No VHA Fee is Due
1. All VHA PLUS(R) products
2. Abbott I.V. solutions and sets, if distributed by the ADA
27
<PAGE>
SCHEDULE 22A
ADA Service Levels and Responsibilities
<TABLE>
<CAPTION>
====================================================================================================================================
SERVICE ADA PERFORMANCE VHA HCO PERFORMANCE ADA PENALTY FOR FAILURE ADA REWARD FOR
RESPONSIBILITY REQUIREMENTS REQUIREMENTS TO MEET PERFORMANCE EXCEEDING
REQUIREMENTS PERFORMANCE
REQUIREMENTS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1) FILL 1) "A" LIST 96% FILL 1) "A" LIST 96% FILL 1) "A" LIST 96% FILL 1) "A" LIST FILL 96% FILL
RATES --- ---- --- ---- --- ---- --- ---- --- ---- --- ---- --- ---- ---- --- ----
a) ADA needs to provide "A" a) Needs to be approved by a) 1 point 94.0 - 95.5% a) 1 point 96.1 - 97.5%
List by 2/1 of each year. Designated VHA Member or
Affiliate by 3/15 of each b) 2 points 92.0 - 93.5% b) 2 points >98.0%
b) ADA needs to provide year.
Designated VHA Member or c) 3 points < 91.5%
Affiliate with fill report b) All usage for new products
by 15th of each month. or changes to current d) ADA will reimburse
products must be provided Designated VHA Member or
c) ADA is responsible for to ADA 30 days in advance. Affiliate for every product
keeping the List current. from "A" List that the
c) All usage provided must be Designated VHA Member or
d) "A" Items are those that within 10%+/- of actual Affiliate needs to purchase
Designated VHA Member or usage. from alternative sources, to
Affiliate and ADA mutually include product price and
agree upon; "A" items are d) If "A" List is not provided distribution service costs if
defined as those items that to ADA by 3/15, Designated different than purchased
are stock items and are VHA Member or Affiliate from ADA.
ordered by the Designated needs to notify VHA.
VHA Member or Affiliate
not less than two times per e) All product numbers must be
month. provided to ADA at time of
order.
e) Measured lines ordered vs.
lines filled (unadjusted). f) All orders need to include
correct product numbers.
f) Measured on a monthly
average. g) All orders must be placed
prior to normal order cutoff
time as communicated by
local ADA branch to the
Designated VHA Member or
Affiliate.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SERVICE ADA PERFORMANCE VHA HCO PERFORMANCE ADA PENALTY FOR FAILURE ADA REWARD FOR
RESPONSIBILITY REQUIREMENTS REQUIREMENTS TO MEET PERFORMANCE EXCEEDING
REQUIREMENTS PERFORMANCE
REQUIREMENTS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2) FORMULARY 2) FORMULARY ITEM FILL 2) FORMULARY ITEM FILL 2) FORMULARY ITEM FILL 2) FORMULARY ITEM FILL
--------- --------- ---- ---- --------- ---- ---- --------- ---- ---- --------- ---- ----
ITEM FILL
____ ____ a) 92% Fill on Formulary a) Needs to be approved by a) 1 point 90 - 91.5% a) 1 point 92.5 - 94.0%
Items Designated VHA Member or
b) Fill will be measured Affiliate by 3/15 of each b) 2 points 88 - 89.5% b) 2 points >94.0%
monthly based on lines year.
ordered vs. lines fill c) 3 points <87.5%
(unadjusted) b) All usage for new products,
additional products or
c) ADA responsible for changes to existing products
keeping the Formulary Items must be submitted 30 days
current. in advance with usage
10%+/-.
d) Formulary Items are defined
as mutually agreed upon c) Designated VHA Member or
stock items that the Affiliate must notify VHA
Designated VHA Member or by 3/15 if list has not been
Affiliate orders at least received or accepted.
once per month (other than
"A" Items). d) All product numbers must be
provided to ADA at the time
of order.
e) All orders need to include
correct product numbers.
f) All orders need to be placed
prior to normal ADA branch
cutoff time as provided to
Designated VHA Member
or Affiliate by ADA branch.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SERVICE ADA PERFORMANCE VHA HCO PERFORMANCE ADA PENALTY FOR FAILURE ADA REWARD FOR
RESPONSIBILITY REQUIREMENTS REQUIREMENTS TO MEET PERFORMANCE EXCEEDING
REQUIREMENTS PERFORMANCE
REQUIREMENTS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3) INVOICE ACCURACY 3) INVOICE ACCURACY 3) INVOICE ACCURACY 3) INVOICE ACCURACY 3) INVOICE ACCURACY
ACCURACY ------- -------- ------- -------- ------- -------- ------- --------
a) 98% of all invoices (100% a) Designated VHA Member or a) 1 point 96 - 97.5% a) 1 point 98.5 -
after 810 and 832 go into Affiliate needs to provide 99.0%
effect). to ADA with correct b) 2 points 94.5 - 96.0%
information 30 days in b) 2 points 99.1 -
b) Measured on a monthly advance on all non-contract c) 3 points <94.0% 100%
average of line items product pricing.
ordered versus line items
invoiced correctly. b) All product numbers must be
provided to ADA at time of
order.
c) All orders need to include
the correct product numbers.
d) All orders need to be placed
prior to normal ADA branch
cutoff time. Normal ADA
branch cutoff time needs to
be provided to Designated
VHA Member or Affiliate
by ADA branch.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
SERVICE ADA PERFORMANCE VHA HCO PERFORMANCE ADA PENALTY FOR FAILURE ADA REWARD FOR
RESPONSIBILITY REQUIREMENTS REQUIREMENTS TO MEET PERFORMANCE EXCEEDING
REQUIREMENTS PERFORMANCE
REQUIREMENTS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4) PICKING 4) PICKING ERRORS 4) PICKING ERRORS 4) PICKING ERRORS 4) PICKING ERRORS
ERRORS ------- ------ ------- ------ ------- ------ ------- ------
a) 98% of all orders received. a) Designated VHA Member or a) 1 point 96 - 97.5% a) 1 point 98.1 -
Affiliate needs to provide 99.0%
b) Measured monthly based on product numbers at time of b) 2 points 94.5 - 95.5%
line items ordered versus order. b) 2 points 99.1 -
line items picked correctly. c) 3 points <94.4% 100%
b) All orders need to provide
correct product numbers.
c) Designated VHA Member or
Affiliate needs to report
to ADA by end of same
business day order errors,
and ADA cannot take orders
into system prior to product
numbers being received.
d) All orders must be placed
prior to normal ADA branch
cutoff time. ADA branch
needs to provide to
Designated VHA Member or
Affiliate the order cutoff
time.
====================================================================================================================================
</TABLE>
The ponit system works as follows:
1) Each point is worth [this confidential information has been omitted and
filed separately with the Commission]; points are not rolled from month
to month.
2) Measurement is as follows:
a) "A" Fill Rate is measured on monthly average.
b) "Formulary Fill Rate" is measured on monthly average.
c) Invoice Accuracy is measured as a monthly average of line items
ordered versus line items invoiced correctly.
d) Picking Errors are measured as a monthly average of line items
ordered versus line items picked correctly.
3) Each Category is measured on its own merit.
4) Invoice Accuracy and Picking Errors measurements begin on 12/1/95.
5) "A" and Formulary Item Fill Rate measurement will begin based on time
line established in Schedule 22A.
31
<PAGE>
SCHEDULE 22B
ADA Service Responsibilities
Penalty Notification
HEALTH CARE ORGANIZATION _____________________________________________
CITY, STATE _____________________________________________
ADA PARTNER _____________________________________________
ADA BRANCH/DC _____________________________________________
This serves as official 30-day notification that the HCO intends to monitor the
ADA under Schedule 22 of the VHA ADA agreement for service responsibilities.
Specifically, the HCO is concerned with the following service responsibility
criteria (check all that apply):
__________ "A" Item Fill Rate
__________ Formulary Fill Rate
__________ Invoice Accuracy
__________ Picking Errors
The ADA partner will be accountable to the HCO for the service penalties
outlined in Schedule 22A beginning the first month after the 30-day
notification.
-------------------------------- ------------------
Health Care Organization Date
--------------------------------
Effective Date
32
