FOURTH AMENDMENT TO SUPPLY AGREEMENT
Published on July 26, 1996
CONFIDENTIAL MATERIAL OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION (# Denotes Omissions)
EXHIBIT 10.1
Fourth Amendment to the IDEXX Laboratories, Inc.
and Johnson & Johnson Clinical Diagnostics, Inc.
(as successor in interest to Eastman Kodak Company)
Supply Agreement dated January 15, 1992 (the "Supply Agreement")
This Amendment (the "Amendment") is effective as of January 1, 1996, by and
between Johnson & Johnson Clinical Diagnostics, Inc., a New York corporation
with offices at 100 Indigo Creek Drive, Rochester, N.Y. ("JJCD"), and IDEXX
Laboratories, Inc., a Delaware corporation, with offices at One IDEXX Drive,
Westbrook, Maine, 04092 ("IDEXX").
WHEREAS JJCD and IDEXX desire to amend the Supply Agreement, as amended on
November 16, 1993, November 19, 1993 and March 15, 1994 (such amendments are
collectively referred to as the "Original Amendments") as provided herein:
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree as follows:
1. All references to the Eastman Kodak Company or Kodak shall be deemed to be
replaced by reference to Johnson & Johnson Clinical Diagnostics Systems, Inc. or
JJCD.
2. All references to EKTACHEM slides shall be deemed to be replaced by reference
to VITROS slides.
3. Each of the Original Amendments, including the Schedules thereto, is hereby
superseded by this Amendment and shall hereafter be null and void and of no
further effect.
4. In Clause 1, the definition of "the Term" is hereby deleted in its entirety
and replaced with the following:
"The period from the Commencement date until December 31, 2006."
5. In Clause 1, insert the following terms:
"Applicable Percentage" The percentage for each Corresponding Slide
as set forth on Schedule 9, as revised
pursuant to sub-Clause 7.04 below.
"Benchmark" The Weighted Average List Price as set forth
on Schedule 9, as it may be revised pursuant
to sub-Clause 7.04.
"Corresponding Slide" Any VITROS slide which provides the same
blood chemistry measurement as a particular
VETTEST slide (e.g., a DT60 Glucose slide is
a Corresponding Slide for a VETTEST Glucose
slide).
"the PANELS/PROFILES" Packages of VETTEST slides 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 6 attached hereto, with
any changes or additional PANELS/PROFILES to
be mutually agreed upon by the parties as
specified in Schedule 6.
"Weighted Average List Price" As set forth on Schedule 9, as it may be
revised pursuant to sub-Clause 7.04.
6. In sub-Clause 4.01, in the third line after the words "the VETTEST slides"
insert the words ", including slides packaged as PANELS/PROFILES,".
7. Clause 5 is hereby deleted in its entirety and replaced with the following:
5. FORECASTS, COMMITMENTS AND ORDERS
---------------------------------
5.01 Attached hereto as Schedule 7 are Purchase Forecasts and Purchase
Commitments by IDEXX for VETTEST slides, including slides packaged as
PANELS/PROFILES, for the period 1996 to 2006. The Purchase Forecasts
constitute non-binding forecasts which shall be the basis for
determining IDEXX's eligibility for rebates pursuant to sub-Clause
7.03 below. The Purchase Commitments constitute IDEXX's anticipated
minimum purchase quantities for single chemistry VETTEST slides and
PANELS/PROFILES slides in the indicated calendar years. For calendar
years beginning with 1999, IDEXX shall provide to JJCD the anticipated
Purchase Forecasts and Purchase Commitments by type of VETTEST slides
(single chemistry or PANELS/PROFILES) at least two years in advance,
and upon receipt by JJCD such Purchase Forecasts and Purchase
Commitments shall be deemed to be incorporated into Schedule 7. The
total single and PANEL/PROFILE slides reflected in such updated
Purchase Forecasts and Purchase Commitments shall be equal to the
respective totals set forth in Schedule 7. Failure by IDEXX to
purchase 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 JJCD as set forth in sub-Clause 5.02 below, but such
failure shall in no event be deemed to be a breach of this Agreement.
5.02 If IDEXX fails to purchase the quantities of slides set forth as
Purchase Commitments on Schedule 7 in a particular calendar year,
unless there has been a Material Adverse Change" (as defined below)
IDEXX shall pay to JJCD within
2
30 days after the end of such calendar year #########################
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For the purposes of this sub-Clause 5.02, Material Adverse Changes
shall mean material changes in the veterinary clinical chemistry
markets which result from (a) non-invasive diagnostic testing other
than any such testing which is introduced by IDEXX, (b) invasive
diagnostic testing other than any such testing which is introduced by
IDEXX, (c) 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, (d) decreased commitment by or ability of Johnson & Johnson
to supply VETTEST or VITROS slides, and (e) the availability in one or
more significant markets of slides compatible with the VETTEST
analyzer from sources other than IDEXX, which availability is not
promptly enjoined or otherwise terminated by JJCD.
The parties shall discuss in good faith any assertion by IDEXX 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 sub-Clause
5.02 to appropriately allocate the effects of such Material Adverse
Change on the parties.
5.03 IDEXX shall place orders for slides at least three calendar months
prior to the required delivery date. Unless otherwise agreed between
the parties in any particular case, orders for slides shall be placed
by IDEXX three times per year and each order shall specify a business
day delivery date for each delivery.
5.04 Not later than October 1 of each calendar year commencing with 1996,
IDEXX shall notify JJCD of quantity requirements for the subsequent
year for each of the VETTEST slides, and IDEXX order quantities in the
subsequent year for each of the VETTEST slides shall be within
+/- 25% of such notification unless the parties otherwise agree. As
long as slide orders are within the indicated range of +/- 25% of
the applicable notification, JJCD shall deliver the slides in
accordance with the orders.
5.05 In the event that IDEXX in any year notifies JJCD that it wishes to
order quantities which exceed the quantities mentioned in sub-Clause
5.04 above by more than 25%, JJCD 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 It is understood and agreed that orders for the VETTEST slides shall
include only those chemistries set forth in Schedule 8 hereto. In the
event that a chemistry listed in Schedule 8 should become known by
JJCD to be unavailable at any future date during the Term, JJCD will
so notify IDEXX at the earliest practicable date and will cooperate
with IDEXX to ameliorate the possible adverse effects upon IDEXX of
such unavailability.
5.07 Order and delivery of VETTEST slides (including PANELS/PROFILES) shall
be made in multiples of 100 boxes. The number of orders and deliveries
shall be limited to three in each year unless otherwise agreed to in
writing by the parties. Order and delivery of the VETTEST tips shall
be made in multiples of 10,000 tips (20 cartons each containing 500
tips). The number of orders and deliveries of the VETTEST tips and
Vetrols shall be limited to two in each year. JJCD shall deliver the
VETTEST tips and Vetrols in the ordered quantities in each year.
8. Sub-Clause 6.02 is deleted in its entirety and is replaced by the following:
"6.02. Order and delivery for all purchases hereunder shall be FOB
Rochester, New York."
9. Sub-Clause 6.03 is amended by deleting the first sentence thereof in its
entirety.
10. Clause 7 is hereby deleted in its entirety and is replaced by the following:
7. PRICES
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7.01 The initial prices for each of the VETTEST slides (including the
PANELS/PROFILES) shall be as set forth in Schedule 8 hereto. Such
prices are broken out to provide prices for each individual product
code for each of the three following geographic regions (additional
regions may be added, and changes within regions may be agreed to,
from time to time in writing by the parties):
US--United States, Canada and all other countries not identified
in this sub-Clause 7.01;
European--Australia, Europe, New Zealand, South Africa;
Asian--Brunei, China, Hong Kong, Indonesia, Japan, Korea,
Malaysia, Philippines, Singapore, Taiwan, Thailand, Viet Nam.
IDEXX agrees that JJCD may audit IDEXX books and records to verify
sales of VETTEST slides in each region.
7.02 The prices set forth in Schedule 8 shall remain in effect for orders
placed through December 31, 1996. Thereafter, the prices may be
adjusted, subject to the next
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sentence of this sub-Clause 7.02, effective as of January 1 of each
year for orders placed on or after that date by an amount not to
exceed ##############################################################
################################################## for the calendar
year since the immediately preceding price adjustment. Notwithstanding
the preceding sentence, if the aggregate quantities of IDEXX's single
slide and PANELS/PROFILES slide purchases exceed #### of the Purchase
Forecasts for a particular year as set forth on Schedule 7, there
shall be no price increase for the immediately succeeding year.
7.03 In the event IDEXX purchases more than #### of the Purchase Forecasts
for each of (i) single slides and (ii) PANELS/PROFILES slides, IDEXX
shall be entitled to a credit rebate based on the amount by which
IDEXX exceeds the Purchase Forecasts for each category (single or
PANELS/PROFILES slides) as follows:
Purchases by Category Rebate Schedule for total
% above applicable Purchase Category purchases above
Forecast applicable Purchase Forecast
#### ####
######### ####
######### ####
#### ####
Notwithstanding the termination or expiration of, or anything to the
contrary in, this Agreement, IDEXX shall be entitled to receive a cash
refund, rather than a credit rebate, from JJCD if IDEXX is entitled to
a rebate pursuant to the preceding sentence immediately prior to the
expiration or termination of this Agreement.
7.04 JJCD agrees to provide to IDEXX on a regular basis during the Term
current list prices for all Corresponding Slides. Each revised
Corresponding Slide price list shall be used by the parties to
calculate an updated Weighted Average List Price for all Corresponding
Slides. In the event that the Weighted Average List Price for
Corresponding Slides is less than ### of the Benchmark in effect
immediately prior to the effectiveness of the new Corresponding Slide
price list, (i) all of the VETTEST single and PANELS/PROFILES slide
prices to IDEXX shall be ############################################
##############################, effective for all orders after the new
JJCD Corresponding Slide prices which give rise to the reduction in
the Weighted Average List Price go into effect, and (ii) a new
Benchmark shall be established at the new Weighted Average List Price.
If IDEXX elects to add to, or delete from, the list of available
VETTEST slides set forth on Schedule 8 one or more of the slide
chemistries offered by JJCD, the parties agree to revise Schedule 9 as
necessary to add or delete the appropriate Corresponding Slide(s) and
its list price, and to recalculate the Applicable Percentages so that
such percentages on the revised Schedule 9 reflect the actual unit
volume sales percentages of each Corresponding Slide. Applicable
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Percentages of unit volume sales shall be determined based on JJCD's
sales for its most recently completed fiscal quarter, and the sum of
the Applicable Percentages shall always be 100%. In the case of any
revision to Schedule 9, the Weighted Average List Price shall be
recalculated by multiplying the Applicable Percentage for each
Corresponding Slide by its list price and aggregating the total of
such multiplication calculations.
JJCD and IDEXX agree that IDEXX may request that a Big 6 accounting
firm, other than the principal accounting firm of either party, audit
JJCD's books and records to verify the Weighted Average List Price and
actual unit volume sales of Corresponding Slides. Such auditor shall
report to the parties only (a) JJCD's Weighted Average List Price and
(b) the Applicable Percentage for each Corresponding Slide. The prices
and percentages contained in such auditor's report shall be deemed to
be the Weighted Average List Price and Applicable Percentages for
Corresponding Slides, respectively, hereunder until modified in
accordance with this sub-Clause 7.04. The fees and expenses of such
auditor shall be borne equally by the parties.
7.05 If JJCD is entitled to a price increase pursuant to sub-Clause 7.02
and IDEXX is entitled to a price decrease pursuant to sub-Clause 7.04,
the net percentage increase or decrease in price shall be used to
calculate slide prices for the next calendar year.
11. In Clause 9, insert the following as sub-Clause 9.09:
9.09 JJCD shall use all commercially reasonable efforts to (i) ensure that
neither VITROS slides (including without limitation VITROS slides to
which bar coding for use in the VETTEST analyzer has been added) nor
any other product manufactured by or for Johnson & Johnson is
supplied, marketed, distributed or sold for use in the VETTEST
analyzer and (ii) promptly enjoin or otherwise terminate any such
supplying, marketing, distribution or sale. The commercial
reasonableness of JJCD's efforts shall be determined solely with
regard to the relationship between the parties set forth in this
Agreement, and not with regard to JJCD's or Johnson & Johnson's
business as a whole. Notwithstanding the foregoing, JJCD's obligation
to use commercially reasonable efforts for the purposes of this
sub-Clause 9.09 shall not include any obligation to reduce non-VETTEST
VITROS slide prices.
JJCD shall include a provision in future supply and distributor
contracts that if a customer opens a mainframe slide cartridge and
uses the slides individually, or otherwise repackages or modifies JJCD
slides for a use other than for which the slides are sold by JJCD,
such activity, if not ceased upon notice, shall give JJCD the right to
terminate such contract. JJCD will exercise such right where the
customer does not cease such activity after due notice. JJCD and IDEXX
shall also reasonably cooperate in efforts to stop any such
unauthorized slide
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repackaging or modification, where the modified or repackaged slides
are supplied, marketed or sold for use in VETTEST analyzer. The
failure of JJCD to exert commercially reasonable efforts as
contemplated by this sub-Clause 9.09 shall in no event be deemed to be
a breach of this Agreement by JJCD but shall give IDEXX the right, as
its exclusive remedy for such failure, to terminate any obligations it
may have pursuant to sub-Clause 5.01, the first two of paragraphs of
sub-Clause 5.02 and Schedule 7 of this Agreement, effective
immediately upon written notice to JJCD.
12. In Clause 19, insert the following as sub-Clauses 19.03 and 19.04:
19.03 JJCD shall have the right to terminate this Agreement upon five years'
prior written notice to IDEXX in the event JJCD elects to cease the
manufacture and sale of dry slide diagnostic products. The minimum
purchase obligations of IDEXX shall terminate upon delivery of such a
notice of termination.
19.04 IDEXX shall have the right to terminate any obligations it may have
pursuant to sub-Clauses 5.01 and 5.02 and Schedule 7 of this Agreement
upon prior written notice to JJCD of either (a) two full calendar
years, if IDEXX commits to JJCD that IDEXX shall not supply competing
clinical chemistry diagnostic products to the veterinarian's office
market, or (b) four full calendar years. Upon the commencement of the
first full calendar year of a notice period pursuant to the preceding
sentence, sub-Clauses 7.03, 7.04 and 7.05 and the last sentence of
sub-Clause 7.02 shall be terminated, except for any previously accrued
obligation of JJCD to provide a credit rebate pursuant to sub-Clause
7.03 for the immediately preceding calendar year.
13. Sub-Clause 29.01 is amended by deleting in their entirety the two addresses
for Eastman Kodak Company and replacing them with the following:
Johnson & Johnson Clinical Diagnostics, Inc.
100 Indigo Creek Drive
Rochester, New York 14650
For the attention of: Vice President, Marketing
with a copy to:
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, New Jersey 08933
For the attention of: Office of General Counsel
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14. Clause 30 is hereby added to the Agreement as follows:
30. DISPUTES
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Any and all disputes, controversies or differences between the parties
hereto arising out of or in relation to or in connection with this
Agreement, or the breach hereof, which cannot be settled amicably
through negotiations between the parties hereto, shall be submitted to
and settled by arbitration. Such arbitration shall be conducted in New
York, New York in accordance with the rules then obtaining of the
American Arbitration Association ("AAA") by a panel of three
arbitrators selected from the National Panel of Arbitrators of the
AAA. If the parties cannot agree on three arbitrators, the AAA shall
select one or more arbitrators as necessary to complete the panel.
Reasonable discovery shall be permitted in connection with the
arbitration proceeding, and the arbitrators shall apply the
substantive laws of the State of New York except that the
interpretation and enforcement of this arbitration provision shall be
governed by the Federal Arbitration Act. Any award rendered in any
such arbitration shall be final and binding upon both parties hereto
and judgment upon the award rendered by the panel of arbitrators may
be entered in any court having jurisdiction over the party against
whom the award is to be enforced. Each party shall bear its own costs
in connection with any such arbitration, and any costs of the
arbitrators or the AAA shall be borne equally by the parties. The
arbitrators shall have no authority to assess or award punitive,
incidental or consequential damages, and each party hereby waives its
rights to any such damages.
15. Schedules 6, 7, 8 and 9 to the Agreement are hereby deleted in their
entirety and replaced by Schedules 6, 7, 8 and 9 attached hereto.
16. Except as modified by this Fourth Amendment, all terms and conditions of the
Agreement shall continue in full force and effect.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
executed by its duly authorized officer to be effective as of the date first
above written.
JOHNSON & JOHNSON CLINICAL IDEXX LABORATORIES, INC.
DIAGNOSTICS, INC.
By: /s/ Jose Coronas By: /s/ Brad R. MacKinnon
---------------------- ----------------------
Name: Jose Coronas Brad R. MacKinnon
Title: President, President, Veterinary Products Division
Johnson & Johnson
Clinical Diagnostics
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SCHEDULE 6
PANELS/PROFILES
The initial PANEL shall be the "Young Presurgical Panel" consisting of four sets
of the following six VETTEST slides:
BUN Urea Nitrogen
ALT Alanine aminotransferase
GLU Glucose
TP Total protein
CREA Creatinine
ALKP Alkaline phosphatase
The initial PROFILES shall be the "General Health Profile" and the "Large Animal
Profile", each consisting of two sets of 12 VETTEST slides as follows:
General Health Profile Large Animal Profile
ALB Albumin ALB Albumin
ALKP Alkaline phosphatase ALKP Alkaline phosphatase
ALT(SGPT) Alanine aminotransferase AST AST
AMYL Amylase Ca2+ Calcium
Ca2+ Calcium CK CK
CHOL Cholesterol GGT Gamma GT
CREA Creatinine GLU Glucose
GLU Glucose PHOS Inorganic phosphate
PHOS Inorganic phosphate LDH LDH
TBIL Total bilirubin MG Magnesium
TP Total protein TP Total Protein
BUN Urea Nitrogen BUN Urea Nitrogen
Packaging for the Young Presurgical Panels, the General Health Profiles and the
Large Animal Profiles has been previously agreed upon by the parties, and any
changes to the slide composition or packaging of the initial PANEL or the
initial PROFILES shall be negotiated in good faith and mutually agreed upon by
JJCD and IDEXX. The slide composition, packaging and initial pricing of any
additional PANELS/PROFILES shall be mutually agreed upon by JJCD and IDEXX.
Unless otherwise agreed by the parties in writing with respect to one or more
specific PANELS or PROFILES, all IDEXX purchases of VETTEST slides packaged as
PANELS/PROFILES shall be credited against the Purchase Forecasts and Purchase
Commitments for such slides under this Agreement.
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