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AGREEMENT

Supply Agreement

AGREEMENT 

 | Document Parties: IDEXX LABORATORIES INC /D | IDEXX Europe B.V.,  | Ortho-Clinical Diagnostics, Inc., You are currently viewing:
This Supply Agreement involves

IDEXX LABORATORIES INC /D | IDEXX Europe B.V., | Ortho-Clinical Diagnostics, Inc.,

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Title: AGREEMENT
Governing Law: New York     Date: 3/3/2004
Industry: Biotechnology and Drugs    

AGREEMENT 

, Parties: idexx laboratories inc /d , idexx europe b.v.   , ortho-clinical diagnostics  inc.
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Exhibit 10.8

Confidential Materials omitted and filed separately with the

Securities and Exchange Commission. Asterisks denote omissions.

AGREEMENT

THIS AGREEMENT is made effective as of the 17 th day of October, 2003, between IDEXX Europe B.V., a corporation organized under the law of The Netherlands whose principal place of business is at Koolhovenlaan 20, 1119 NE - Schiphol-Rijk, The Netherlands (“ IDEXX ”) and Ortho-Clinical Diagnostics, Inc., a New York corporation with offices at 100 Indigo Creek Drive, Rochester, New York, U.S.A. (“ OCD ”), and amends and restates the supply agreement effective as of January 1, 1999 between IDEXX and OCD (the “ Prior Europe Agreement ”).

WHEREAS, OCD has been a supplier of analyzers for human applications and dry slides, and IDEXX has been a supplier of analyzers for animal applications; and

WHEREAS, OCD and IDEXX Operations, Inc. (“ IDEXX US ”) have entered into an agreement in the United States (the “ US Agreement ”) to (a) combine certain of their respective skills and intellectual property and to invest significant capital to create a New Analyzer (as defined below) and related panel holder design for animal applications, which is expected to provide a superior analyzer offering to customers, expand the sales of OCD dry slides and IDEXX analyzers, and make IDEXX products more competitive and (b) ensure IDEXX US a continuing supply of Dry Slides necessary for its continued sale of analyzers, including the New Analyzer; and

WHEREAS, in the United States and in the Territory (as defined herein) different market conditions as well as regulatory differences prevail, for which reasons OCD and IDEXX desire to enter into a separate agreement for the supply of Dry Slides in the European market and the other regions in the Territory; and as is the case with the US Agreement, OCD and IDEXX desire to reflect herein their mutual investments and exchange of know-how in connection with the supply of Dry Slides as well as their desire to enter into new arrangements for the supply of diagnostic slides and analyzers for Europe and the other regions in the Territory, the terms and conditions of which are documented herein;

NOW THEREFORE, the parties hereby agree as follows:

 


 

1.

 

DEFINITIONS

In this Agreement the following expressions shall have the meaning set opposite them.

 

 

 

“Agreements”

 

This Agreement and the US Agreement.

 

 

 

“Analyzers”

 

The VETTEST Analyzer and the New Analzyer.

 

 

 

“Commencement Date”

 

October 17, 2003.

 

 

 

“Dry Slide”

 

A chemical composition, comprising a layered, coated dry film, specifically formulated to analyze for a body constituent, which composition is immediately hydrated by any undiluted bodily fluid, including without limitation a VITROS slide. For avoidance of doubt, the term “Dry Slide” shall not include any assay based on immunomagnetic particle technology or any assay for which the analyte is DNA or RNA.

 

 

 

“Effective Rebate Rate”

 

For any year, the weighted average percentage reduction in the purchase price of any slides purchased in such year that IDEXX is entitled to receive pursuant to Section 7.03 hereunder. The calculation of the Effective Rebate Rate is illustrated in Schedule 7 .

 

 

 

“Exclusivity Territory”

 

Austria, Belgium, France, Germany, Italy, Netherlands, Portugal, Spain, Switzerland and the United Kingdom.

 

 

 

“Existing Special [**] Slides”

 

VETTEST slides that have been [**], as of the date of this Agreement, pursuant to Section 4 of the Operations Agreement.

 

 

 

“IDEXX Parent”

 

IDEXX Laboratories, Inc., a Delaware, USA corporation, the parent company of IDEXX.

 

 

 

“IDEXX US”

 

IDEXX Operations, Inc., a Delaware, USA corporation.

 

 

 

“New Analyzer”

 

A new chemistry analyzer that uses OCD Dry Slides for veterinary applications, as contemplated by

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Article 3 of the US Agreement, and any updates or modifications to such analyzer.

 

 

 

“New Chemistry Slides”

 

As defined in Section 5.06.

 

 

 

“New Slide/Panel Design”

 

A new slide format for VETTEST slides to be used in conjunction with the New Analyzer, as well as a panel holder for such slides, as contemplated by Article 3 of the US Agreement, and any updates or modifications to such design.

 

 

 

“New Slides”

 

VETTEST slides that are formatted and packaged in accordance with the New Slide/Panel Design, as contemplated by Article 3 of the US Agreement.

 

 

 

“New Special [**] Slides”

 

VETTEST slides that have been [**] pursuant to Section 7.04 of this Agreement.

 

 

 

“Operations Agreement”

 

The Operations Agreement effective as of January 1, 1999 among OCD, IDEXX Parent and IDEXX.

 

 

 

“PANELS/PROFILES”

 

Packages of VETTEST slides for VETTEST Analyzers consisting of two or more sets of slides of specified chemistries. The initial PANEL and the initial PROFILES shall consist of the slides set forth on Schedule 3 attached hereto, with any changes or additional PANELS/PROFILES to be mutually agreed upon by the parties as specified in Schedule 3 .

 

 

 

“Prime Rate”

 

For any day in any calendar month, the prime rate of interest as published in the Wall Street Journal on the last business day of the immediately preceding month.

 

 

 

“Proportionate Share”

 

The percentage obtained by dividing (i) the number of VETTEST slides purchased by IDEXX in a given period, by (ii) the total number of VETTEST slides purchased by IDEXX and its affiliates during such period.

 

 

 

“Settlement Agreement”

 

The Amendment, Release and Settlement Agreement dated as of September 12, 2002 among OCD, IDEXX Parent and IDEXX.

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“Special [**] Slides”

 

Existing Special [**] Slides and New Special [**] Slides.

 

 

 

“Term” 

 

As defined in Section 18.01.

 

 

 

“Territory”

 

The European Union, Africa, and the countries listed on Schedule 10 attached hereto.

 

 

 

“VETTEST Analyzer”

 

The analyzer currently marketed as the VETTEST VT 8008 analyzer and any updates or modifications to such analyzer.

 

 

 

“VETTEST slides”

 

Dry Slides currently manufactured by OCD, specially designed, bar coded, labeled, and/or packaged for one or more of the Analyzers in accordance with the terms of this Agreement or the US Agreement and supplied by OCD in accordance with the terms and conditions of this Agreement.

 

 

 

“VETTEST tips”

 

Metering tips sourced by OCD for use with the VETTEST Analyzer, specially packaged and supplied to IDEXX in accordance with the terms of this Agreement.

 

 

 

“VITROS slides”

 

The Dry Slides currently manufactured by OCD for use in any current VITROS analyzer, including without limitation the DT60.

All references to currency in this Agreement shall mean U.S. Dollars unless otherwise specifically indicated.

2.

 

EFFECTIVE DATE OF AGREEMENT

 

 

 

 

2.01

 

This Agreement shall become effective upon the Commencement Date. This Agreement shall apply solely within the Territory.

 

3.

 

NEW SLIDES AND THE NEW SLIDE/PANEL DESIGN

 

 

 

 

3.01

 

Notwithstanding any other provision of this Agreement, OCD’s obligations hereunder to supply, format or package New Slides hereunder shall be conditioned upon the successful development of the New Slides, the New Analyzer and the New Slide/Panel Design in accordance with Article 3 of the US Agreement.

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3.02

 

If IDEXX US elects under Section 3.08 of the US Agreement to perform the formatting and packaging of the New Slides independently of OCD, then (1) in lieu of New Slides, OCD shall supply IDEXX with VITROS slides in the format currently manufactured for the VITROS mainframe analyzers and/or the VETTEST Analyzer (i.e., VITROS slides packaged in 50-count cartridges, before further formatting and packaging for VETTEST Analyzer requirements), as applicable for New Slides, for the Term as provided in this Agreement, and all references in this Agreement to New Slides or to VETTEST slides, to the extent referring to OCD’s obligation to supply New Slides, shall mean such VITROS slides packaged in 50-count cartridges and (2) solely with respect to New Slides, the prices for Tiers 2 and 3 in the table set forth in Section 7.02 shall be reduced by $[**] per New Slide.

 

4.

 

AGREEMENT TO SUPPLY

 

 

4.01

 

Subject to the terms and conditions of this Agreement, OCD undertakes to manufacture for IDEXX and to supply to IDEXX VETTEST slides, VETTEST tips and Vetrol controls. OCD shall supply VETTEST slides in compliance with the VETTEST Slide Quality Assurance Procedures set out in Schedule 1 . All slides supplied to IDEXX hereunder are supplied solely for sale within the Territory; provided that IDEXX may make limited sales to IDEXX US solely for purposes of adjusting inventory levels according to unanticipated changes in regional demand. For the avoidance of doubt, nothing in this Agreement shall obligate OCD, with respect to any particular chemistry, to furnish IDEXX with slides for such chemistry in any slit format that OCD does not currently manufacture for such chemistry, or that would otherwise be uneconomical for OCD to supply to IDEXX (other than the slit formats for such chemistry that OCD then sells or has agreed in writing to sell to IDEXX).

 

 

 

 

 

4.02

 

(a) Notwithstanding any other provision of this Agreement, if after [**] the annual volume of VETTEST slides purchased by IDEXX and IDEXX US is less than [**] slides, then OCD may in its sole discretion elect to be released from any obligation to format and package the New Slides and/or package other VETTEST slides, in which event IDEXX’s sole options hereunder shall be either (x) to accept an increase in slide prices for New Slides and/or other VETTEST slides that is adequate to compensate OCD for any increase in its costs due to such reduction in volume, or (y) with respect to slides for which IDEXX does not accept a price increase under the preceding clause (x), but which IDEXX US has elected to format and/or package independently of OCD as provided in Section 4.02 of the US Agreement, to obtain such slides from IDEXX US.

 

 

 

 

(b) If IDEXX US elects under Section 4.02 of the US Agreement to perform the formatting and packaging of New Slides, then (1) in lieu of New Slides OCD shall supply IDEXX with VITROS slides in the format currently manufactured for the VITROS mainframe analyzers and/or the VETTEST Analyzer (i.e., VITROS

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slides packaged in 50-count cartridges, before further formatting and packaging for VETTEST Analyzer requirements), as applicable for New Slides, for the Term as provided in this Agreement, and all references in this Agreement to New Slides or to VETTEST slides, to the extent referring to OCD’s obligation to supply New Slides, shall mean such VITROS slides packaged in 50-count cartridges, and (2) the prices for Tiers 2 and 3 in the table set forth in Section 7.02 shall be reduced by $[**] per New Slide.

 

 

 

 

 

 

 

(c) If IDEXX US elects under Section 4.02 of the US Agreement to perform the packaging of VETTEST slides other than New Slides, then (1) in lieu of such other VETTEST slides OCD shall supply IDEXX with VITROS slides in the format currently manufactured for the VETTEST Analyzer (i.e., VITROS slides packaged in 50-count cartridges, before further formatting and packaging for VETTEST Analyzer requirements) for the Term as provided in this Agreement, and all references in this Agreement to VETTEST slides, to the extent referring to OCD’s obligation to supply such slides (other than New Slides), shall mean such VITROS slides packaged in 50-count cartridges, and (2) the prices for Tiers 1, 2 and 3 in the table set forth in Section 7.02 shall be reduced by $[**]per slide for VETTEST slides (other than New Slides).

 

5.

 

FORECASTS, COMMITMENTS AND ORDERS

 

 

5.01

 

Attached hereto as Schedule 4 are aggregate Purchase Commitments by IDEXX and IDEXX US for VETTEST slides for the VETTEST Analyzer for calendar years 2003 through and including 2010. The Purchase Commitments constitute the aggregate anticipated minimum aggregate purchase quantities by IDEXX and IDEXX US for single chemistry VETTEST slides and PANELS/PROFILES slides in the indicated calendar years.

 

 

 

 

 

 

 

Existing Special [**] Slides, New Special [**] Slides and New Chemistry Slides shall be excluded from the determination of IDEXX’s and IDEXX US’s slide purchases for purposes of achieving their aggregate Purchase Commitments under Section 5.01 of this Agreement or the US Agreement, as the case may be.

 

 

 

 

 

 

 

Failure by IDEXX and IDEXX US to purchase, in the aggregate, at least the indicated Purchase Commitment quantities of each type of slides in any year may subject IDEXX to the requirement to make a payment to OCD as set forth in Section 5.02 below, but such failure shall in no event otherwise be deemed to be a breach of this Agreement.

 

 

 

 

 

 

 

 

 

 

 

 

 

5.02

 

If IDEXX and IDEXX US fail to purchase in the aggregate the quantities of slides for the VETTEST Analyzer set forth as Purchase Commitments on Schedule 4 in a particular calendar year, unless there has been a Material Adverse Change (as defined in the following paragraph), IDEXX shall pay, or shall cause IDEXX US to pay, to OCD within 30 days after the end of such calendar year [**]% of the

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product of (i) the number of each type of slides (single or PANELS/PROFILES) by which IDEXX and IDEXX US have in the aggregate fallen short of the Purchase Commitment and (ii) the lowest per-slide price for the applicable type of slides under either of the Agreements.

 

 

 

 

 

 

 

For the purposes of this Section 5.02, “ Material Adverse Changes ” shall mean material changes in the veterinary clinical chemistry markets which result from (a) the commercial introduction into the veterinary market, other than by IDEXX or its affiliates, of a technology not previously available in the veterinary clinical chemistry market, (b) the eradication of one or more diseases, or the development of new disease therapies, treatments or diagnostics, which significantly reduces demand for veterinary clinical chemistry testing or (c) the inability or unwillingness of OCD to supply VETTEST or VITROS slides in accordance with IDEXX’s Annual Purchase Forecasts pursuant to Section 5.04 below. Whether a Material Adverse Change has occurred will be determined by reference to the effect of a change in the veterinary clinical chemistry market on IDEXX and IDEXX US taken as a whole, and not on either individually.

 

 

 

 

 

 

 

The parties shall discuss in good faith any assertion by IDEXX or IDEXX US that a Material Adverse Change has occurred or is continuing. If the parties agree that a Material Adverse Change has occurred or is continuing, they shall negotiate in good faith with respect to appropriate reductions in Purchase Commitments, VETTEST slide prices (including single and PANELS/PROFILES slides) and/or amounts which would otherwise be payable pursuant to the first sentence of this Section 5.02 to appropriately allocate the effects of such Material Adverse Change on the parties.

 

 

 

 

 

5.03

 

Order and delivery of VETTEST slides (including PANELS/PROFILES) shall be made in multiples of 100 boxes. Unless otherwise agreed between the parties in any particular case, IDEXX shall place orders for slides four times per calendar year, for delivery in each calendar quarter of the year. Each order shall specify a business day delivery date for each delivery, which shall be not less than three months after the order date. Unless otherwise agreed between the parties in any particular case the number of deliveries shall be limited to four per year. IDEXX shall order quantities for delivery in any quarter in accordance with its good faith estimates of actual demand, with allowance for reasonable inventory management requirements and consistent with IDEXX’s stated desire to minimize its inventory levels.

 

 

 

 

 

 

 

Order and delivery of the VETTEST tips shall be made in multiples of 10,000 tips (20 cartons each containing 500 tips). Unless otherwise agreed between the parties in any particular case, the number of orders and deliveries of the VETTEST tips and Vetrols shall be limited to two in each year. OCD shall deliver the VETTEST tips and Vetrols in the ordered quantities in each year.

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5.04

 

Not later than October 1 of each year, commencing October 1, 2003, IDEXX shall notify OCD of the aggregate forecasted requirements of IDEXX for the subsequent calendar year for each of the VETTEST slides (single slides and PANELS/PROFILES slides for the VETTEST Analyzer and New Slides) (each such notification, an “ Annual Purchase Forecast ”). The aggregate order quantities in the subsequent year for each of the VETTEST slides shall be within ±25% of such aggregate Annual Purchase Forecast unless the parties otherwise agree. As long as slide orders do not exceed the applicable Annual Purchase Forecast by more than 25%, OCD shall deliver the slides in accordance with the orders. The Annual Purchase Forecasts constitute non-binding forecasts for OCD’s planning purposes and shall also be the basis for determining estimated slide pricing pursuant to Section 7.02 below and the cash rebate pursuant to Section 7.03 below.

 

 

 

 

 

 

 

In addition to the Annual Purchase Forecast, IDEXX shall furnish to OCD updated quarterly forecasts of the aggregate requirements of IDEXX for VETTEST slides in the four succeeding calendar quarters. The parties understand that such forecasts are merely estimates to assist OCD in production planning and are not to be considered orders or binding in any way.

 

 

 

 

 

 

 

For production planning purposes, the parties shall further coordinate with one another to keep OCD apprised of IDEXX’s current and anticipated inventories of stock keeping units and relevant conditions in the veterinary market. The provisions of this paragraph shall terminate immediately upon any termination of the corresponding provisions of Section 5.04 of the US Agreement.

 

 

 

 

 

5.05

 

In the event that IDEXX in any year notifies OCD that it wishes to order quantities which exceed the quantities mentioned in Section 5.04 above by more than 25%, OCD will endeavor to supply the excess quantities and notify IDEXX of the extent of its ability to so supply.

 

 

 

 

 

5.06

 

It is understood and agreed that orders for the VETTEST slides shall include only those chemistries set forth in Schedule 5 hereto, as amended from time to time by agreement of the parties. IDEXX may at any time request that the additional chemistries listed on Schedule 8 hereof, in the form they are available at the Commencement Date to the human market on VITROS slides, be added as VETTEST slides to Schedule 5 (any VETTEST slides so added, containing such additional chemistries, are referred to herein as “ New Chemistry Slides ”). Prior to adding a New Chemistry Slide on Schedule 5 , the parties will negotiate in good faith to determine the initial price for such slides in accordance with the immediately following paragraph and shall set forth such price on Schedule 6 . IDEXX shall have the right, from time to time, to elect to remove any New Chemistry Slides from Schedule 5 , and Schedule 5 and Schedule 6 shall be updated to reflect such removal. IDEXX acknowledges that neither this nor any other provision of this Agreement shall obligate OCD to supply IDEXX with any

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slide or other product based on any technology that is not incorporated in the VITROS slides or VETTEST slides that OCD sells as of the date hereof.

 

 

 

 

 

 

 

Until [**], the price per slide for any New Chemistry Slides shall be the greater of $[**] and [**] (as determined by OCD in good faith and taking into account IDEXX’s and IDEXX US’s good faith forecast for the quantity of the chemistry in question). For orders placed for delivery during each calendar year beginning with [**], if [**] of any New Chemistry Slide is determined to be greater than $[**] (as determined by OCD in good faith and taking into account IDEXX’s and IDEXX US’s good faith forecast for the quantity of the chemistry in question), then the minimum price per slide for such New Chemistry Slides shall be [**]; provided, that so long as IDEXX and IDEXX US order [**] or more of such slides in the aggregate in any calendar year, the minimum price per slide for such New Chemistry Slides shall not exceed $[**]. OCD shall have the right, from time to time and in good faith, to revise its determination of [**] of any New Chemistry Slide that is priced on Schedule 6 if IDEXX’s and IDEXX US’s aggregate actual annual orders of such slide fall below [**], and Schedule 6 shall be updated to reflect such revised [**].

 

 

 

 

 

 

 

In the event that a chemistry listed in Schedule 5 should become known by OCD to be unavailable at any future date during the Term, OCD will so notify IDEXX at the earliest practicable date, and the parties shall cooperate to determine an appropriate course of action.

 

6.

 

DELIVERY

 

 

6.01

 

Following acknowledgement by OCD of each order placed by IDEXX and on or before the delivery due date, OCD shall complete delivery of the appropriate quantity of slides and tips within ± 10%. Deviations of delivery quantities from order quantities within the ± 10% range may be compensated by IDEXX in the first subsequent order placed, subject to Section 5. In the event of a price increase for one or more of the VETTEST slides, such compensating quantity of such slides shall be processed at the previous lower price.

 

 

 

 

 

6.02

 

Order and delivery for all purchases hereunder shall be F.O.B. OCD’s facility in the U.S.A.

 

 

 

 

 

6.03

 

Unless otherwise advised in writing by OCD to IDEXX, OCD shall pack the VETTEST slides in accordance with OCD’s standard shipping configuration which is known to IDEXX and which at the Commencement Date contains approximately 60 cases per pallet, each case containing 100 boxes of slides.

 

 

 

 

 

6.04

 

The parties shall reasonably cooperate to identify and implement potential savings for both parties, consistent with the principles of lean manufacturing across the value chain, in all processes in their relationship, including without limitation

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improvements relating to slide manufacturing, packaging, ordering, build schedules, component purchasing, delivery schedules, quality testing and calibration processes, and product distribution processes (including direct shipment to IDEXX distributors and end-users), and including without limitation, identifying and implementing processes to reduce the number of slide lots supplied to IDEXX and to reduce IDEXX calibration time; provided, that neither party shall be obligated to implement a process change for which its net costs exceed its net benefits.

 

7.

 

PRICES

 

 

7.01

 

Subject to the provisions of Sections 3.02 and 4.02 that contemplate OCD’s delivery of slides in 50-count cartridges if IDEXX US elects to format and/or package slides independently, all references to pricing for VETTEST slides in this agreement refer to the completed and packaged product in form ready for delivery to an end-user. The initial prices for each of the VETTEST slides (including the PANELS/ PROFILES) shall be as set forth in Schedule 5 hereto.

 

 

 

 

 

7.02

 

(a) The prices set forth in Schedule 5 shall remain in effect for orders placed through December 31, [**].

 

 

 

 

 

 

 

(b) For orders placed for delivery during each calendar year beginning with [**], the price for each VETTEST slide listed on Schedule 5 (whether New Slides, single chemistry VETTEST slides for the VETTEST Analyzer, or per slide in PANELS/PROFILES, and, for avoidance of doubt, including New Chemistry Slides, subject to Section 5.06), within the respective volume tiers set forth below (aggregating for this purpose purchases by IDEXX and IDEXX US) shall be as set forth for such volume tier; provided , that Existing Special [**] Slides and New Special [**] Slides shall not be priced by reference to the volume tiers but will be priced as otherwise set forth below. For purposes of determining purchase volumes, up to [**] Existing Special [**] Slides shall be included in the determination, and all other Existing Special [**] Slides and New Special [**] Slides shall be excluded from the determination. The stated price shall apply only to slides purchased within the corresponding volume tier, and only with respect to the quantities within such tier.

 

 

 

 

 

 

Annual Volume Tier

 

Price per Slide


 

 


 

Tier 1: Up to [**]

 

$

[**]

 

Tier 2: In excess of [**] but not exceeding [**]

 

$

[**]

 

Tier 3: In excess of [**]

 

$

[**]

 

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For all orders for Existing Special [**] Slides, the price per slide shall be as agreed between the parties pursuant to Section 4 of the Operations Agreement.

 

 

 

 

 

 

 

For all orders for New Special [**] Slides, the price per slide shall be as agreed between the parties pursuant to Section 7.04 of this Agreement.

 

 

 

 

 

 

 

Notwithstanding the foregoing, the price per slide for any New Chemistry Slide that is priced on Schedule 6 shall never be lower than the greater of (a) the minimum price as determined in accordance with Section 5.06 and identified on Schedule 6 as amended from time to time and (b) the price that would otherwise apply pursuant to the pricing tiers set forth above.

 

 

 

 

 

 

 

Promptly after IDEXX and IDEXX US provide their aggregate Annual Purchase Forecast for a calendar year pursuant to Section 5.04 and Section 5.04 of the US Agreement, the parties shall calculate the weighted average price of slides included in such forecast (the “ First Estimated Blended Price ”).

 

 

 

 

 

 

 

Upon determination of the First Estimated Blended Price applicable to a calendar year, for each order placed by IDEXX for delivery during the first three calendar quarters of such year, the amount invoiced and paid per slide listed on Schedule 5 shall be the First Estimated Blended Price .

 

 

 

 

 

 

 

Before IDEXX places its order for the fourth calendar quarter of the year, the parties shall review IDEXX’s and IDEXX US’s respective fourth-quarter orders and re-calculate the weighted average price of slides based on IDEXX’s and IDEXX US’s aggregate actual orders for the first three quarters and their orders for the fourth quarter (the “ Second Estimated Blended Price ”). If the Second Estimated Blended Price is different than the First Estimated Blended Price, the amount invoiced and paid per slide listed on Schedule 5 shall be the Second Estimated Blended Price. In addition, either party may calculate the resulting adjustment (up or down) for each slide delivered for the first three quarters to reflect the difference between the First Estimated Blended Price and the Second Estimated Blended Price, such that the amount paid by IDEXX for all slides delivered during the first three calendar quarters shall equal the Second Estimated Blended Price. If the adjustment is an upwards adjustment, then IDEXX shall pay OCD the aggregate amount of such adjustment, together with interest on such amount (calculated as set forth below), within 30 days of OCD’s request for such payment. If the adjustment is a downwards adjustment, then OCD shall pay IDEXX the aggregate amount of such adjustment, together with interest on such amount (calculated as set forth below), within 30 days of IDEXX’s request for such payment (or, at IDEXX’s option, apply such amount as a credit against IDEXX’s third or fourth quarter invoice).

 

 

 

 

 

 

 

Within 30 days after the end of the year (or 30 days after IDEXX and IDEXX US complete payment in full for all slides purchased during the year, if later), the

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parties shall perform a final calculation of the weighted average price based on all slides ordered by IDEXX and IDEXX US and delivered during the year (the “ Final Blended Price ”). If the Final Blended Price is different than the Second Estimated Blended Price, then IDEXX or OCD, as the case may be, shall make a final payment to the other, so that the final amount paid by IDEXX per slide for all slides ordered and delivered during the year shall equal the Final Blended Price. The party obligated to make such final payment shall do so within 30 days after the determination of the Final Blended Price.

 

 

 

 

 

 

 

Any adjustment payments made pursuant to either of the immediately preceding paragraphs, and any overdue payments by OCD or IDEXX of any amounts owed to the other pursuant to this Section 7.02, shall bear interest at a rate per annum equal to the Prime Rate. Such interest shall be calculated based on a 365-day year and the actual number of days elapsed since the due date for the applicable payment to which it relates.

 

 

 

 

 

 

 

For avoidance of doubt, the blended price calculations of this Section 7.02 shall apply only to chemistries listed on Schedule 5 , and only after calendar year [**].

 

 

 

 

 

 

 

(c) OCD may, at its option, increase all prices for slides ordered for delivery (i) on or after January 1, [**] by an amount not to exceed [**]% of the “PPI Increase” (as defined below), provided that OCD may not increase prices under this clause (i) unless the PPI Increase is greater than [**]%; and (ii) on or after January 1, [**] by an amount (x) as provided in the preceding clause (i) or (y) by an amount not to exceed [**]% of the PPI Increase, provided that OCD may not increase prices under this subclause (y) unless the PPI Increase is greater than [**]%. OCD may calculate the PPI Increase each year beginning in [**], and any resulting price increase shall be effective for orders placed for delivery during the following calendar year and thereafter, unless and until increased again in accordance with the procedures set forth in this paragraph. For purposes of this Agreement, the “ PPI Increase ” shall be calculated by dividing (x) the average monthly “ PPI ” level for the most recent 12-month period ending with and including June of the year in which the PPI Increase is being calculated (each such period, a “ Measurement Period ”), by (y) the average monthly PPI level for the 12-month period immediately preceding that described in clause (x) (the “ Baseline Period ” with respect to such Measurement Period), then subtracting 1 and converting the remaining fraction into a percentage. All calculations shall be based on the latest version of the PPI level published as of the date the calculation is made. For purposes of this Agreement, “ PPI ” means the United States Producer Price Index – [**] (not seasonally adjusted), current series identification [**], as published by the Bureau of Labor Statistics on its Web site (www.bls.gov/ppi), or if not available from such Web site, then as published by the Bureau of Labor Statistics in its monthly periodical “ Producer Price Indexes .” OCD shall give IDEXX written notice of any price increase pursuant to this paragraph 7.02(c) at least 120 days before the beginning of the calendar year for which a price increase

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is to take effect; otherwise, the prices shall remain unaffected by such increase for such year.

 

 

 

 

 

 

 

(d) With respect to slides ordered for delivery on or after January 1, [**], if OCD’s aggregate cost of [**] (as defined below) for the most recent Measurement Period has increased on a per VETTEST slide basis as compared with the applicable Baseline Period by an amount that exceeds the PPI Increase for such Measurement Period as applied to the [**] for such Baseline Period, on a per VETTEST slide basis, then OCD shall be permitted to increase the price of each slide sold to IDEXX by the amount of such excess. “[**]” means [**] that are [**]. Schedule 9 attached hereto contains an example, for illustration purposes only, of the calculations described in this paragraph 7.02(d) and in paragraph 7.02(e).

 

 

 

 

 

 

 

(e) With respect to slides ordered for delivery on or after January 1, [**], if IDEXX’s share of Special Event Costs (as defined below) for the most recent Measurement Period has increased on a per VETTEST slide basis as compared with the applicable Baseline Period by an amount that exceeds [**] above the PPI Increase for such Measurement Period as applied to IDEXX’s share of Special Event Costs for such Baseline Period, on a per VETTEST slide basis, then OCD shall be permitted to increase the price of each slide sold to IDEXX by the amount of such excess. “ Special Event Costs ” means the aggregate net amount of (i) [**] with respect to [**] on which [**], (ii) [**] in the [**], and (iii) [**] as a result of [**]. “ IDEXX’s share ” of any of the foregoing shall mean the [**] that is attributable to the [**].

 

 

 

 

 

 

 

(f) OCD shall give IDEXX written notice of any price increase pursuant to paragraph 7.02(d) or 7.02(e) at least 120 days before the beginning of the calendar year for which a price increase is to take effect; otherwise, the prices shall remain unaffected by such increase for such year. Any price increase pursuant to paragraph 7.02(d) or 7.02(e) shall be effective for orders placed for delivery during the following calendar year and thereafter, unless and until (i) increased again in accordance with the procedures set forth in such paragraphs or (ii) there occurs a decrease in any of the costs upon which the price increase was based (or any such cost that was relevant in one measuring period is not relevant in subsequent periods, for example, certain validation or other one-time costs incurred for compliance purposes), in which event IDEXX’s price per slide shall be reduced to the extent of such decrease (or one-time cost). In addition, OCD agrees to consider in good faith any request by IDEXX to reimburse OCD pursuant to paragraph 7.02(e) by a process other than an increase in slide prices, such as a lump sum payment or series of payments. Furthermore, with respect to any one-time cost or other temporary cost lasting no more than one year, IDEXX shall have the right to make such reimbursement in equal periodic payments (no less frequently than quarterly) over a period that is no longer than one year.

13


 

 

 

 

(g) OCD shall give IDEXX reasonable detail as to its incremental [**] costs and incremental Special Event Costs on which it seeks to base a price increase pursuant to paragraph 7.02(d) or 7.02(e) or otherwise pass on to IDEXX pursuant to paragraph 7.02(f); provided, however, that IDEXX shall not have any right to obtain any details concerning OCD’s actual costs (other than such incremental cost differences used in such calculation).

 

 

 

 

 

 

 

(h) At any time after OCD’s aggregate annual sales volume of VITROS slides and VETTEST slides shall have declined more than [**]% from [**], the parties shall, at OCD’s request, discuss appropriate pricing of slides under this Agreement. Neither party shall be obligated to agree to any price change under this Section 7.02(h).

 

 

 

 

 

 

 

(i) OCD agrees that IDEXX shall have the right, no more than once per calendar year, to cause an internationally recognized independent accounting firm to conduct an audit, on reasonable advance notice and during normal business hours, of OCD’s books and records to the extent reasonably necessary to confirm OCD’s price increase calculations under this Section 7.02. Any report prepared by such independent accounting firm shall contain such firm’s conclusion concerning the validity of OCD’s price increase; provided, however, that such report shall not contain, and IDEXX shall not have any right to obtain, any details concerning OCD’s actual costs (other than incremental cost differences used in the calculation of OCD price increases).

 

 

 

 

 

 

 

(j) IDEXX agrees that OCD may audit IDEXX’s books and records relating to orders of VETTEST slides to confirm the pricing calculations under this Section 7.02.

 

 

7.03

 

The provisions of this Section 7.03 shall apply only to purchases of VETTEST slides for the VETTEST Analyzer during calendar years [**]. IDEXX shall be entitled to receive its Proportionate Share (based on sales during a calendar year) of a cash rebate in the amount set forth below if the total aggregate slide purchases by IDEXX and IDEXX US, in calendar yea


 
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