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:
In this Agreement the following
expressions shall have the meaning set opposite them.
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“Agreements”
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This Agreement
and the US Agreement.
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“Analyzers”
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The VETTEST
Analyzer and the New Analzyer.
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“Commencement Date”
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October 17, 2003.
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“Dry
Slide”
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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.
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“Effective Rebate Rate”
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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
.
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“Exclusivity Territory”
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Austria,
Belgium, France, Germany, Italy, Netherlands, Portugal, Spain,
Switzerland and the United Kingdom.
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“Existing
Special [**] Slides”
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VETTEST slides
that have been [**], as of the date of this Agreement, pursuant to
Section 4 of the Operations Agreement.
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“IDEXX
Parent”
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IDEXX
Laboratories, Inc., a Delaware, USA corporation, the parent company
of IDEXX.
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“IDEXX
US”
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IDEXX
Operations, Inc., a Delaware, USA corporation.
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“New
Analyzer”
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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.
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“New
Chemistry Slides”
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As defined in
Section 5.06.
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“New
Slide/Panel Design”
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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.
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“New
Slides”
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VETTEST slides
that are formatted and packaged in accordance with the New
Slide/Panel Design, as contemplated by Article 3 of the US
Agreement.
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“New
Special [**] Slides”
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VETTEST slides
that have been [**] pursuant to Section 7.04 of this
Agreement.
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“Operations Agreement”
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The Operations
Agreement effective as of January 1, 1999 among OCD, IDEXX Parent
and IDEXX.
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“PANELS/PROFILES”
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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 .
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“Prime
Rate”
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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.
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“Proportionate Share”
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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.
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“Settlement Agreement”
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The Amendment,
Release and Settlement Agreement dated as of September 12,
2002 among OCD, IDEXX Parent and IDEXX.
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“Special
[**] Slides”
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Existing
Special [**] Slides and New Special [**] Slides.
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“Term”
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As defined in
Section 18.01.
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“Territory”
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The European
Union, Africa, and the countries listed on Schedule 10
attached hereto.
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“VETTEST
Analyzer”
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The analyzer
currently marketed as the VETTEST VT 8008 analyzer and any updates
or modifications to such analyzer.
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“VETTEST
slides”
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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.
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“VETTEST
tips”
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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.
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“VITROS
slides”
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The Dry Slides
currently manufactured by OCD for use in any current VITROS
analyzer, including without limitation the DT60.
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All references to currency in
this Agreement shall mean U.S. Dollars unless otherwise
specifically indicated.
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2.
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EFFECTIVE
DATE OF AGREEMENT
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2.01
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This Agreement
shall become effective upon the Commencement Date. This Agreement
shall apply solely within the Territory.
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3.
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NEW SLIDES
AND THE NEW SLIDE/PANEL DESIGN
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3.01
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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
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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.
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4.01
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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).
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4.02
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(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.
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(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.
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(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).
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5.
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FORECASTS,
COMMITMENTS AND ORDERS
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5.01
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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.
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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.
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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.
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5.02
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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.
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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.
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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.
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5.03
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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.
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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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7
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5.04
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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.
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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.
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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.
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5.05
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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.
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5.06
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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.
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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
[**].
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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.
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6.01
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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.
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6.02
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Order and
delivery for all purchases hereunder shall be F.O.B. OCD’s
facility in the U.S.A.
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6.03
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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.
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6.04
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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.
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7.01
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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.
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7.02
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(a) The
prices set forth in Schedule 5 shall remain in effect
for orders placed through December 31, [**].
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(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.
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Annual Volume Tier
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Price per Slide
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$
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[**]
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Tier 2: In excess of [**] but not exceeding
[**]
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$
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[**]
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Tier 3: In excess of [**]
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$
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[**]
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10
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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.
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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.
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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.
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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 ”).
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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 .
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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).
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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.
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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.
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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 [**].
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(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.
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(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).
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(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 [**].
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(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.
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(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).
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(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).
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(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).
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(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.
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7.03
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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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