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CONFIDENTIAL MATERIAL OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION (*Denotes Omission)
EXHIBIT 10.6d (REDACTED)
Fifth Amendment to the IDEXX Laboratories, Inc.
and Ortho-Clinical Diagnostics, Inc.
(as successor in interest to Eastman Kodak Company)
Supply Agreement dated January 15, 1992
This Amendment (the "AMENDMENT") is effective as of January 1, 1999, by and
between Ortho-Clinical Diagnostics, Inc. (formerly known as Johnson & Johnson
Clinical Diagnostics, Inc.), a New York corporation with offices at 100 Indigo
Creek Drive, Rochester, N.Y. ("OCD"), and IDEXX Laboratories, Inc., a Delaware
corporation, with offices at One IDEXX Drive, Westbrook, Maine, 04092 ("IDEXX").
WHEREAS OCD and IDEXX desire to amend the Supply Agreement dated January 15,
1992, as amended on November 16, 1993, November 19, 1993, March 15, 1994 and
January 1, 1996 (such Supply Agreement as so amended being hereinafter referred
to as the "SUPPLY AGREEMENT") 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 Johnson & Johnson Clinical Diagnostics Systems, Inc. or
JJCD shall be deemed to be replaced by reference to Ortho-Clinical Diagnostics,
Inc. or OCD.
2. In Clause 1, the following definitions are hereby deleted in their entirety
and replaced with the following:
"the Term" The period from January 1, 1999 until December 31,
2010.
"the VETTEST analyzer" The VETTEST VT 8008 analyzer developed by or on
behalf of VETTEST S.A., predecessor of IDEXX, for
veterinary purposes and using VITROS slides;
including (i) any updates or modifications to such
analyzer, or (ii) other chemistry testing
instrument which, in the case of clause(i) and
(ii), is designed by IDEXX to be the bridging
instrument to a next-generation veterinary
chemistry analyzer ***********
***********************************
"the VETTEST slides" VITROS or other OCD chemistry slides specially bar
coded, labeled, and/or packaged for the VETTEST
analyzer in
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accordance with the terms of this Agreement and
supplied by OCD in accordance with the terms and
conditions of this Agreement.
3. In Clause 1, insert the following terms:
"the 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 10.
"the 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.
********************* *****************************
*********************************
********
4. Sub-Clause 5.01 is hereby deleted in its entirety and is replaced by the
following:
5.01 Attached hereto as SCHEDULE 7 are Purchase Commitments by IDEXX
for VETTEST slides for calendar years 1999 through and including
2006. The Purchase Commitments constitute IDEXX's anticipated
minimum aggregate purchase quantities for single chemistry
VETTEST slides and PANELS/PROFILES slides in the indicated
calendar years. For calendar years 2007 through and including
2010, IDEXX shall advise OCD of the Purchase Commitment for each
such year not later than October 1 of the preceding year, and
upon receipt by OCD, such Purchase Commitments shall be deemed
to be incorporated into SCHEDULE 7. IDEXX's aggregate Purchase
Commitment for the period 2007 through and including 2010 shall
be not less than ********** slides.
During each of calendar years 2000 through and including 2002,
IDEXX shall purchase not less than ***************** single
slides; during each of calendar years 2003 through and including
2006, IDEXX shall purchase not less than *************** single
slides; and during each of the calendar years 2007 through and
including 2010, IDEXX shall purchase a minimum number of single
slides egual to *** of the total Purchase Commitment for such
year.
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
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requirement to make a payment to OCD as set forth in sub-Clause
5.02 below, but such failure shall in no event otherwise be
deemed to be a breach of this Agreement.
5. Sub-Clause 5.04 is hereby deleted in its entirety and is replaced by the
following:
5.04 Not later than October 1 of each calendar year commencing
October 1, 1999, IDEXX shall notify OCD of forecasted
requirements for the subsequent year for each of the VETTEST
slides (single slides and PANELS/PROFILES slides) (each such
notification, a "PURCHASE FORECAST"), and the order quantities
in the subsequent year for each of the VETTEST slides shall be
within+/-25% of the such Purchase Forecast unless the parties
otherwise agree. As long as slide orders are within the
indicated range of+/-25% of the applicable Purchase Forecast,
OCD shall deliver the slides in accordance with the orders. The
Purchase Forecasts constitute non-binding forecasts which shall
be the basis for determining IDEXX's quarterly cash rebate
pursuant to sub-Clause 7.03 below.
6. Sub-Clause 7.03 is hereby deleted in its entirety and is replaced by the
following:
7.03 Beginning with slide purchases made during calendar year 2000
(which, for the avoidance of doubt, shall not include any slides
shipped by OCD in calendar year 2000 to fulfill IDEXX's total
1999 purchase order for ********* slides), IDEXX shall be
entitled to receive a cash rebate in the amounts set forth below
for total slide purchases that, in any year, exceed the
quantities set forth below as follows:
Annual Slide Purchases Incremental Cash Rebate -
% Off Purchase Price
************** **
********************** ***
********************** ***
********************** ***
********************** ***
********************** ***
********************** ***
The rebate amounts set forth above constitute a percentage
reduction in the purchase price of any slides (including both
single slides and PANELS/PROFILES slides) purchased above the
corresponding quantity. The percentage amounts are incremental
(as opposed to cumulative) and relate only to the quantities set
forth opposite it. For example, if IDEXX were to purchase **
**** in any one calendar year, it would not be entitled to
a *** price reduction on all slides that it purchased in such
year, rather, it would be entitled to receive (i) ** purchase
price reduction on the first ********* slides purchased,
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(ii) a *** purchase price reduction on all slides purchased over
********** up to and including ********* (iii) an *** purchase
price reduction on all slides purchased over ************* up to
and including ********** and (iv) a return *** purchase price
reduction on all slides purchased over **************** up to
and including the ********** slides that it purchased. The
foregoing notwithstanding, it is understood and agreed that if
IDEXX does not achieve the Purchase Commitments set forth above
in any calendar year, then IDEXX shall not be entitled to
receive a rebate for such year.
In the beginning of each calendar year, beginning with calendar
year 2000, OCD shall calculate an estimated Effective Rebate
Rate (the "ESTIMATED REBATE RATE") based on the lesser of (i)
IDEXX's Purchase Forecast for such year and (ii) **** of the
total number of slides that IDEXX purchased in the immediately
preceding calendar year. Not later than thirty (30) days after
the end of each of the first three calendar quarters in any
calendar year (or thirty days after IDEXX completes payment in
full for slides purchased during such quarter, if later), OCD
shall pay to IDEXX an amount equal to the estimated rebate
payment that IDEXX would be entitled to receive in such quarter
(the "ESTIMATED REBATE PAYMENT"). The Estimated Rebate Payment
for any quarter shall be calculated by (i) multiplying the
Estimated Rebate Rate in effect during such quarter by the total
purchase price for the VETTEST slides purchased by IDEXX during
such quarter and (ii) subtracting from such amount an amount
equal to *** of the total calculated in clause (i) above. The
foregoing notwithstanding, if, in any calendar year, (i) IDEXX's
total slide orders for the immediately preceding calendar year
were less than *** of its Purchase Forecast for such preceding
calendar year or (ii) OCD determines, in its reasonable
discretion, at anytime after the end of the second calendar
quarter of such calendar year, that IDEXX is reasonably unlikely
to meet its Purchase Forecast for such year, then OCD shall have
the right to recalculate the Estimated Rebate Rate based on
IDEXX's Purchase Commitment for such year (such recalculated
rate being hereinafter referred to as the "New Estimated Rebate
Rate"). If OCD elects to recalculate the Estimated Rebate Rate
pursuant to the immediately preceding sentence, (i) OCD shall
notify IDEXX in writing which notice shall set forth the New
Estimated Rebate Rate, (ii) OCD shall calculate all remaining
quarterly Estimated Rebate Payments (which may include the
Estimated Rebate Payment for the second calendar quarter) using
the New Estimated Rebate Rate and (iii) all such Estimated
Rebate Payments shall be made in accordance with this sub-clause
7.03, except that such Estimated Rebate Payments shall be less
the amount by which the Estimated Rebate Payments received by
IDEXX during the then current calendar year exceed the Estimated
Rebate Payments IDEXX would have received during such calendar
year if the New Estimated Rebate Rate were in effect from the
first day of such calendar year. Notwithstanding any provision
in this Agreement to the contrary, OCD shall not be required to
make any Estimated Rebate Payments to IDEXX in any calendar
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year if (A) any amounts payable to OCD from IDEXX pursuant to
this Agreement are overdue, unless such amounts are being
disputed in good faith by IDEXX, or (B) OCD determines in its
reasonable judgment that IDEXX is reasonably unlikely to meet
its Purchase Commitments for such year. In the case of clause
(B) above, OCD shall have the right to make such determination
at any time after the end of the second calendar quarter of any
calendar year (or at the beginning of such calendar year if
IDEXX's Purchase Forecast for such year is less than its
Purchase Commitment for such year) provided that OCD has
consulted with IDEXX and given IDEXX an opportunity (which
opportunity shall be available for a period of not less than 5
business days nor more than 10 business days) to demonstrate its
intent and ability to meet its Purchase Commitments for such
year. For the avoidance of doubt, OCD's obligation to make any
Estimated Rebate Payments shall be suspended during the period
referred to in the immediately preceding sentence and the days
in such period shall not be counted when determining the date by
which the next scheduled Estimated Rebate Payment is due and
payable. If, after fulfilling the requirements set forth in this
paragraph, OCD makes the determination described in clause (B)
above, OCD (i) shall promptly notify IDEXX in writing of its
determination and (ii) shall thereafter have the right to cease
making Estimated Rebate Payments for the remainder of such
calendar year.
Not later than thirty (30) business days after the end of the
last calendar quarter of any calendar year (or thirty days after
IDEXX completes payment in full for slides purchased during such
quarter, if later), OCD shall pay to IDEXX the amount by which
(i) the Effective Rebate Rate multiplied by the total purchase
price for VETTEST slides purchased by IDEXX during such calendar
year exceeds (ii) the aggregate amount of the Estimated Rebate
Payments made by OCD to IDEXX during such calendar year. If the
amount in clause (ii) above exceeds the amount in clause (i)
above, OCD shall deliver to IDEXX a written notice of such fact
(a "Reimbursement Notice") and IDEXX shall pay to OCD, within
thirty (30) days of receipt of such notice an amount in cash
equal to the amount of such excess.
Notwithstanding the foregoing, (i) if any amounts payable to OCD
from IDEXX pursuant to this Agreement are overdue, other than
amounts that are being disputed in good faith by IDEXX, then OCD
shall be entitled to withhold such overdue amount (plus any
accrued interest) from any rebate payments to which IDEXX may be
entitled and (ii) if IDEXX does not achieve its Purchase
Commitment in any given calendar year, then IDEXX shall return
all Estimated Rebate Payments received from OCD for such year no
later than thirty (30) days after the end of such calendar year.
Any overdue payments by OCD or IDEXX of any amounts owed to the
other pursuant to this sub-clause 7.03 shall bear interest at a
rate per annum equal to*** **********. Such interest shall be
payable at the same time as the payment to
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which it relates and shall be calculated daily on the basis of a
year of 365 days and the actual number of days elapsed.
OCD shall prepare a remittance advice to accompany each rebate
payment (or Reimbursement Notice), which shall set forth the
reporting period for which the payment is made (or demanded) and
a summary sheet which shall detail OCD's calculation of the
rebate (or reimbursement). If IDEXX disagrees with the rebate or
reimbursement calculation, IDEXX shall promptly notify OCD, and
the parties shall review the calculations together in good faith
to agree on any appropriate corrections or adjustments.
An illustrative representation of the foregoing rebate
calculation methodology is attached hereto as SCHEDULE 10.
7. SCHEDULE 7 to the Agreement is hereby deleted in its entirety and
replaced by SCHEDULE 7 attached hereto.
8. Clause 31 is hereby added to the Agreement as follows:
31. 1999 REBATE
If during calendar year 1999 IDEXX sells worldwide any of the
total slide volumes set forth below (counting both single slides
and PANELS/PROFILES slides), IDEXX shall be entitled to a cash
rebate in the amount set forth opposite such sales volume:
1999 Worldwide Slide Sales Total Cash Rebate
*********** **
*********************** ************
*********************** ************
*********** ************
The cash rebates above are not incremental or cumulative. For
the avoidance of doubt, the maximum rebate payment that IDEXX
could qualify for under this Clause 31 is *********. IDEXX shall
provide OCD with estimated sales volume information for calendar
year 1999 not later than December 15, 1999. Not later than
January 31, 2000, IDEXX shall provide OCD with 1999 actual slide
sales volume information and, at any time that OCD may
reasonably request, any other supporting information or
documentation that OCD may reasonably request. OCD shall
calculate IDEXX's rebate accordingly, and shall remit to IDEXX
the total rebate amount not later than (i) February 15, 2000 or,
if later, (ii) five (5) business days after receipt by OCD, to
its reasonable satisfaction, of all information which it
requested pursuant to the immediately preceding sentence. Any
overdue payments by OCD shall bear interest at a rate per annum
equal to
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***********. Such interest shall be payable at the same time as
the payment to which it relates and shall be calculated daily on
the basis of a year of 365 days and the actual number of days
elapsed.
9. Clause 32 is hereby added to the Agreement as follows:
32. PACKAGING LINE CAPACITY
The parties agree that OCD shall make a capital investment to
increase the through-put capacity of the Individual Slide
Packaging ("ISP") line. OCD estimates the total capital and
validation costs to increase the capacity of the ISP line to be
***********. If at any time OCD has reason to believe that the
total capital and validation costs will exceed its estimate by
more than ***, OCD shall promptly notify IDEXX and thereafter,
OCD and IDEXX shall form a joint team, consisting of two
representatives from each party. Such team will cooperate in
determining the most efficient and cost effective way to
increase the capacity of the ISP line taking into account the
measures that have been taken, and the costs that have been
incurred, up to that time. The parties agree to implement the
recommendations of the joint team.
The capital and validation costs to increase the capacity of the
ISP line shall be borne by OCD. If, however, IDEXX does not
achieve, during the combined calendar years 2000 and 2001, its
aggregate Purchase Commitments for such years, then IDEXX shall
reimburse OCD ******************** of such costs within thirty
(30) days after receipt of reasonably detailed documentation
supporting such costs. Any overdue payments by IDEXX shall bear
interest at a rate per annum equal to ************. Such
interest shall be payable at the same time as the payment to
which it relates and shall be calculated daily on the basis of a
year of 365 days and the actual number of days elapsed. IDEXX
shall have the right to assume responsibility for packaging
PANELS/PROFILES slides.
If IDEXX elects to exercise such right, then (i) IDEXX shall
notify OCD in writing that it proposes to assume such
responsibility and (ii) thereafter, the parties shall cooperate
in developing and implementing a plan to effect such a
transition in a mutually acceptable timeframe, which timeframe
shall in no event be less than six (6) months from the date OCD
receives the notice described in clause (i) above.
10. Clause 33 is hereby added to the Agreement as follows:
33. COST SAVING INITIATIVES
The parties will form a joint team prior to March 31, 2000,
consisting of two representatives from each party. Such team
will cooperate to identify potential savings for both parties
relating to slide manufacturing, post-cartridge packaging,
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purchasing, delivery schedules and quality testing processes. If
this team identifies cost reduction opportunities, and both
parties reasonably and mutually agree to implement such cost
reductions, then the parties shall share equally in any cost
savings.
The parties shall form an additional joint team prior to March
31, 2000, consisting of two representatives from each party.
Such team will cooperate to identify areas of potential savings
for IDEXX in the distribution process. If this team identifies
distribution cost reduction opportunities, and both parties
reasonably and mutually agree to implement such cost reductions,
then the parties shall share in any cost savings in such
proportion as they mutually and in good faith agree. The parties
agree that if OCD distributes slides directly to IDEXX's
distributors or end-user customers, OCD would invoice IDEXX for
distribution services in the same manner that billing for slide
products is currently administered under sub-Clause 8.01 of this
Agreement.
11. Clause 34 is hereby added to the Agreement as follows:
*** *******************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
***************************************************************
****************************************
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12. Clause 35 is hereby added to the Agreement as follows:
35. INCREMENTAL SALES OPPORTUNITIES
If IDEXX provides OCD with specific documentation regarding
******************************* that would require IDEXX to
purchase a number of slides over and above its Purchase
Commitments for any year and would **************************
***************************************************************,
OCD agrees, upon receipt of any additional information
that OCD may reasonably request regarding such
*****************, to negotiate in good faith to reach agreement
with IDEXX on *************************************************
****************** and any other related terms and conditions.
It is understood and agreed that any slides which IDEXX
purchases from OCD ********************************************
*************************, shall be excluded from the
determination of IDEXX's slide purchases for purposes of
achieving its Purchase Committments and the determination of any
rebate entitlement under sub-Clause 7.03 of the Agreement.
13. Except as modified by this Fifth Amendment, all terms and conditions of
the Supply Agreement shall continue in full force and effect.
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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.
ORTHO-CLINICAL IDEXX LABORATORIES, INC.
DIAGNOSTICS, INC.
By: /s/ David A. Rowan By: /s/ Louis W. Pollock
---------------------------------- -------------------------------
David A. Rowan, Louis W. Pollock,
Vice President, Corporate Accounts President,
Professional Office Diagnostics
Division
By: /s/ Cathy Burzik
----------------------------------
Cathy Burzik
President,
Ortho-Clinical Diagnostics, Inc.
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SCHEDULE 7 - PURCHASE COMMITMENTS
- ------------------------------------ ------------------------------------
YEAR MINIMUM SLIDE PURCHASE
COMMITMENT (IN MILLIONS)
- ------------------------------------ ------------------------------------
1999 **
- ------------------------------------ ------------------------------------
2000 **
- ------------------------------------ ------------------------------------
2001 **
- ------------------------------------ ------------------------------------
2002 **
- ------------------------------------ ------------------------------------
2003 **
- ------------------------------------ ------------------------------------
2004 **
- ------------------------------------ ------------------------------------
2005 **
- ------------------------------------ ------------------------------------
2006 **
- ------------------------------------ ------------------------------------
2007 See Agreement Section 5.01
- ------------------------------------
2008
- ------------------------------------
2009
- ------------------------------------
2010
- -------------------------------------------------------------------------
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SCHEDULE 10 - ILLUSTRATIVE REBATE CALCULATIONS
The Estimated Rebate Payments will be calculated for each of the first three
calendar quarters using the Effective Rebate Rate, as described more fully in
sub-clause 7.03 of the Agreement. Any required adjustments will be made at the
end of the fourth calendar quarter, in accordance with sub-clause 7.03 of the
Agreement.
EXAMPLE: THE PURCHASE FORECAST FOR A GIVEN YEAR IS ** MILLION SLIDES; PRICING IS
****/SLIDE; BLENDED REBATE PERCENTAGE RATE IS ****, AS FOLLOWS:
********************** million slides * *** = *** million slides
********************** million slides * *** = *** million slides
********************** million slides * *** = *** million slides
********************** million slides * *** = *** million slides
********************** million slides * *** = *** million slides
----------------------------------------------------------------
Total Slides Eligible for Rebate = ***** million slides
EFFECTIVE REBATE = TOTAL SLIDES ELIGIBLE FOR REBATE / TOTAL PURCHASES = ******
**********
ACTUAL VOLUME PURCHASED EQUALS VOLUME PROJECTED AT THE BEGINNING OF THE YEAR.
------------------------------------------------------------------------------------------------------------
Actual Qtrly. Effective Rebate Calculated
Vol. Purchases % (80MM Rebate Each 20% Holdback Rebate Paid
(millions) ($MM) Vol.) Qtr. (millions) (millions) (millions)
-------------------------------------------------------------------------------------------------------------
1st Qtr ** *** **** **** **** ****
2nd Qtr ** ***** **** **** **** ****
3rd Qtr ** ***** **** **** **** ****
4th Qtr ** ***** **** **** **** ****
-- ----- ---- ---- ----
** ***** **** **** ****
True-up: **** ****
--------------- ---------------
Total: **** ****
================ ================
ACTUAL VOLUME PURCHASED IS GREATER THAN VOLUME PROJECTED AT THE BEGINNING OF THE
YEAR.
--------------------------------------------------------------------------------------------------------------
Actual Qtrly. Effective Rebate Calculated
Vol. Purchases % (80MM Rebate Each 20% Holdback Rebate Paid
(millions) ($MM) Vol.) Qtr. (millions) (millions) (millions)
-------------------------------------------------------------------------------------------------------------
1st Qtr * **** **** **** **** ****
2nd Qtr ** ***** **** **** **** ****
3rd Qtr ** ***** **** **** **** ****
4th Qtr ** ***** **** **** **** ****
-- ----- ---- ---- ----
** ***** **** **** ****
True-up: **** ****
---------------- ----------------
Total: **** ****
================ ================
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ACTUAL VOLUME PURCHASED IS LOWER THAN VOLUME PROJECTED AT THE BEGINNING OF THE
YEAR.
-------------------------------------------------------------------------------------------------
Effective Calculated
Actual Qtrly. Rebate Rebate Each 20%
Vol. Purchases % (80MM Qtr. Holdback Rebate Paid
(millions) ($MM) Vol.) (millions) (millions) (millions)
-------------------------------------------------------------------------------------------------
1st Qtr ** **** **** **** **** ****
2nd Qtr ** ***** **** **** **** ****
3rd Qtr ** ***** **** **** **** ****
4th Qtr ** ***** **** **** **** ****
-- ----- ------ ---- ----
** ***** **** **** ****
True-up: ****** ****
------ ----
Total: **** ****
================ =================
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