[* = CONFIDENTIAL TREATMENT REQUESTED]
AMENDED AND RESTATED
BOVINE VACCINE DISTRIBUTION AGREEMENT
This Agreement ("Agreement") is entered as of the 30th day of September,
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2002 (the "Effective Date"), by and between DIAMOND ANIMAL HEALTH, INC., an Iowa
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corporation with offices at 2538 S.E. 43rd Street, Des Moines, Iowa, 50317,
("Diamond") and AGRI LABORATORIES, LTD., a Delaware corporation, with offices at
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20927 State Route K, St. Joseph, Missouri, 64505 ("Distributor").
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RECITALS
A. Diamond has the right to certain bovine antigens described in Exhibits
attached hereto and certain USDA and other licenses (and applications therefor)
for the manufacture of such antigens and the right to enter into this
distribution agreement as to them.
B. Distributor desires to purchase Products from Diamond, to be marketed
under private label brand names as Distributor deems appropriate pursuant to the
terms of this Agreement.
C. Diamond and Distributor are parties to that certain Bovine Vaccine
Distribution Agreement dated as of February 13, 1998 (the "Original Agreement"),
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as previously amended by that certain Amendment No. 1 dated July 13, 1998
("Amendment No. 1"), that certain Amendment No. 2 dated as of December 13, 1999
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("Amendment No. 2"), that certain Amendment No. 3 dated as of July 12, 2001
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("Amendment No. 3"), and that certain Amendment No. 4 dated as of April 15, 2002
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("Amendment No. 4") (collectively, the "Prior Agreement").
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D. Diamond and Distributor desire to amend and restate the Prior
Agreement in accordance with the terms and conditions set forth in this
Agreement, which amends, restates and supercedes the Prior Agreement in its
entirety.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. PRODUCTION, SALE AND DISTRIBUTION
1.01 Manufacture and Sale. Diamond agrees to manufacture and sell
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to Distributor, and Distributor agrees to purchase from Diamond, Products
and additional products as referenced herein for distribution in the
Territory pursuant to and in accordance with the terms and conditions of
this Agreement.
1.02 Exclusivity. Distributor's distribution rights under this Agreement shall
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be exclusive worldwide for all Products identified on Exhibit A attached
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hereto and additional Products added pursuant to Section 2, except as set
forth in this paragraph. Notwithstanding the foregoing, (i)
Distributor's rights under this Agreement shall be non-exclusive for
distribution in Canada for all Products; (ii) Distributor shall have no
distribution rights outside the United States for any Products containing
[ *** ] antigens listed on Exhibit C, without the prior written consent
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and agreement of [ *** ] (it being understood that Diamond does not have
rights to such [ *** ] antigens outside the United States); (iii)
Distributor shall not have any right to distribute products consisting of
the [ *** ] antigens listed on Exhibit C in combination with any antigens
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other than the viral antigens listed on Exhibit A, without the prior
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written consent and agreement of [ *** ]; (iv) Distributor acknowledges
that [ *** ] has exclusive rights to distribute in Canada the
product combinations (and lesser fallout products containing [ *** ]
antigens) described in Exhibit C;(v) Diamond and its Affiliates may sell,
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have sold and otherwise distribute to [ *** ] without restriction the
individual [ *** ] antigens listed in Exhibit C; (vi) Diamond and its
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Affiliates may sell, have sold and otherwise distribute to [ *** ]
without restriction the individual antigens and monovalent vaccines
(i.e., a vaccine containing a single bovine antigen) listed on Exhibit B;
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and (vii) Diamond and its Affiliates may sell, have sold and otherwise
distribute to [ *** ] without any restriction biological veterinary
products containing antigens specified in Exhibit D to be used in solid
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dose configurations or using [ *** ] technologies.
It is furthermore recognized by the parties hereto that the parties will
make good faith efforts to hereafter negotiate fair and equitable
agreements as between them for the sale of bulk antigens to other vaccine
companies which sales should be included in the Qualified Revenue
requirements as set forth in Section 1.04(ii). If the parties hereto
cannot agree for the sale of Bulk Antigens to other vaccine companies,
then Diamond shall be prohibited from making any Bulk Sales, except as set
forth in Section 1.02.
1.03 Territory. Distributor is authorized to sell, have sold and otherwise
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distribute Products and additional products added pursuant to Section 2
hereafter collectively referred to as "All Products" worldwide, limited
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only as provided in Section 1.02. Diamond acknowledges that Distributor
has satisfied the registration and marketing requirements set forth in
Section 1.02 of the Original Agreement for establishing exclusivity rights
in all foreign markets under Section 1.02 of this Agreement. If Diamond
receives an opportunity to sell Products in any foreign jurisdiction(s)
where Distributor does not have Product registration, then Diamond shall
notify Distributor of its intent to pursue said opportunity in writing
(the "Foreign Notice"). Upon Distributor's receipt of the Foreign Notice,
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Distributor shall have thirty (30) days to respond in writing to Diamond
of its acquiescence to Diamond pursuing said opportunity.
1.04 Purchase of Requirements; Minimum Purchases.
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(i) Requirements. Distributor agrees to purchase its total
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requirements of Products from Diamond for bovine veterinary
biologic products of the type described on Exhibit A but only to
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the extent Diamond has the Products reasonably available for
Distributor's delivery directions that conform to Section 4
hereof. Distributor may purchase any additional requirement from
any source, but only during such period that Diamond is unable to
meet such requirements and the reasonable costs thereof shall be
included in Minimum Qualified Revenues and to the extent
contemplated by Section 13.08, Minimum Initial Product Revenue, for
purposes of Section 1.04(ii)(A) and Section 1.04(ii)(B),
respectively.
(ii) Minimums.
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(A) All Products.
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(1) During the term of this Agreement Distributor shall cause
the Qualified Revenues for each Contract Year to equal or exceed the
following amounts (the "Minimum Qualified Revenue"):
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<table>
<caption>
Contract Year Ending December 15, Minimum Qualified Revenue
--------------------------------- -------------------------
<s> <c>
2002 $[ *** ]
2003 $[ *** ]
2004 $[ *** ]
2005 $[ *** ]
2006 $[ *** ]
2007 $[ *** ]
2008 $[ *** ]
2009 $[ *** ]
2010 $[ *** ]
2011 $[ *** ]
2012 $[ *** ]
2013 $[ *** ]
</table>
provided, however, that Distributor may permit the Qualified Revenues to
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be less than the Minimum Qualified Revenue in any Contract Year and in
lieu thereof pay to Diamond an amount ("Additional Payment") equal to (x)
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the difference between such Minimum Qualified Revenue and the actual
Qualified Revenues for such Contract Year, multiplied by (y) the
Contract Year Factor. If an Additional Payment is due hereunder for any
Contract Year, and not paid by Distributor within (30) days after the end
of such Contract Year, Distributor's exclusivity rights under Section 1.02
of this Agreement shall automatically terminate with respect to all
Products; provided, however, that nothing in this Agreement shall
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impair or terminate Distributor's exclusivity rights with respect to any
antigens supplied to Diamond by Distributor or through Distributor's
agreements with third party suppliers of antigens and included in
Products. Distributor's distribution rights shall then continue on a
non-exclusive basis consistent with the terms of this Section, subject
to all the remaining terms of this Agreement not inconsistent therewith,
which shall remain in full force and effect.
(2) Notwithstanding Section 1.04(ii)(A)(1), however, the
Minimum Qualified Revenue shall be equal to the following amounts during
any Sterile Filled Facility Period for purposes of determining
Distributor's exclusivity rights and applicable Additional Payment amounts
under Section 1.04(ii)(A)(1):
<table>
<caption>
Contract Year Ending December 15, Minimum Qualified Revenue
--------------------------------- -------------------------
<s> <c>
2005 $[ *** ]
2006 $[ *** ]
2007 $[ *** ]
2008 $[ *** ]
2009 $[ *** ]
2010 $[ *** ]
2011 $[ *** ]
2012 $[ *** ]
2013 $[ *** ]
</table>
provided, however, that the Minimum Qualified Revenue amount specified in
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the foregoing table for the first Contract Year of any Sterile Filled
Facility Period shall be prorated based on the number of days in such
Contract Year remaining after the commencement of the Sterile Filled
Facility Period. Diamond shall have the right, but not the obligation, in
its discretion, to develop a Sterile Filled Facility at any time during
the term of this Agreement. This Section shall not be construed as
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notice by Diamond to Distributor of its intention to develop a sterile
filled facility under Section 13.17 of this Agreement.
(B) Initial Products. During the term of this Agreement, Distributor
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shall cause the Initial Product Qualified Revenues for each Contract Year
to equal or exceed the following amounts ("Minimum Initial Product
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Revenue"):
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<table>
<caption>
Contract Year Ending December 15, Minimum Initial Product Revenue
--------------------------------- -------------------------------
<s> <c>
2002 $[ *** ]
2003 $[ *** ]
2004 $[ *** ]
2005 $[ *** ]
2006 $[ *** ]
2007 $[ *** ]
2008 $[ *** ]
2009 $[ *** ]
2010 $[ *** ]
2011 $[ *** ]
2012 $[ *** ]
2013 $[ *** ]
</table>
Notwithstanding the foregoing, however, Distributor may permit the Initial
Product Qualified Revenues to be less than the Minimum Initial Product
Revenue in any Contract Year and in lieu thereof pay to Diamond an amount
("Additional Initial Product Payment") equal to (x) the difference between
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such Minimum Initial Product Revenue and the actual Initial Product
Qualified Revenues for such Contract Year, multiplied by (y) the Contract
Year Factor. If an Additional Initial Product Payment is due hereunder for
any Contract Year, and not paid by Distributor within thirty (30) days
after the end of such Contract Year, Distributor's exclusivity rights
under Section 1.02 of this Agreement shall automatically terminate with
respect to all Initial Products (but not other Products, subject to
Section 1.04(ii)(A) of this Agreement). Distributor's distribution
rights shall then continue with respect to all Initial Products on a
non-exclusive basis consistent with Section 1.04(ii)(A) subject to all
the remaining terms of this Agreement not inconsistent therewith, which
shall remain in full force and effect.
(C) Counting Revenues. Qualified Revenues attributable to Initial
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Products and counted for purposes of Section 1.04(ii)(B) of this Agreement
shall also count for purposes of determining Minimum Qualified Revenues
under Section 1.04(ii)(A) of this Agreement. Any Additional Initial
Product Payment paid for any Contract Year shall be credited against
Distributor's obligation to pay an Additional Payment pursuant to
Section 1.04(ii)(A) of this Agreement for such Contract Year (but not for
any other Contract Year). An example of these calculations is set forth in
Exhibit E to this Agreement.
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1.05 Responsibilities of Distributor; Diamond Technical Support. Distributor
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shall use reasonable efforts to market and sell Products in the Territory
and shall adhere to reasonable industry practice in connection
therewith. Distributor shall be responsible, at its sole expense, for
advertising and promotion, technical support and customer service. At
Distributor's request, Diamond shall provide reasonable technical support
for Distributor's marketing, sales and customer service efforts, and shall
pay the support costs thereof.
1.06 Registration and Licensing. Diamond shall use reasonable efforts to
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obtain Licenses in the United States with respect to all Products and will
pay all Registration Costs associated with obtaining and maintaining such
Licenses, except as set forth in Section 2.02. Diamond will use
reasonable efforts to assist Distributor in the registration of Products
(bulk or packed form) outside the United States at Distributor's expense.
Distributor shall pay all Registration Costs associated with obtaining
and maintaining any Licenses required in the Territory outside the United
States and said cost shall be included in the Qualified Revenue
requirements as set forth in Section 1.04(ii)(A) and, to the extent
contemplated by Section 13.08, the requirements of Section 1.04(ii)(B).
1.07 Specifications. Diamond and Distributor agree that all Products will be
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manufactured in accordance with the Specifications and applicable USDA
regulations. The Specifications may be changed at any time by mutual
agreement of the parties, subject to applicable regulatory requirements,
notices and approvals. Any disagreement concerning revisions to the
Specifications shall be first addressed by mutual discussion and
negotiation. Except to the extent the parties may otherwise agree in
writing, any increases in costs resulting from Specification changes
(including, but not limited to, those relating to packaging and raw
materials) may be reflected in a direct cost increase to the Purchase.
1.08 Labeling: Trademarks. Diamond shall affix labeling to all Products, such
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labeling to bear one or more Distributor trademarks, as specified in
writing by Distributor. Nothing contained herein shall give Diamond any
right to use any Distributor trademark except on all Products manufactured
and delivered for Distributor. Diamond shall not obtain any right; title
or interest in any Distributor trademark by virtue of this Agreement
Distributor shall not use, nor shall Distributor obtain any right, title
or interest in, any Diamond trademark or any [ *** ] trademark,
including without limitation "Pneumo-Star," "Somnu-Star" and "Somnu-Star
----------- ---------- ----------
PH." All Product labeling shall in addition to the Distributor trademark,
--
contain the notation "Manufactured by Diamond Animal Health, Inc." with
its address, or such similar notation as may be necessary or advisable
under applicable law, and shall contain the notation "Distributed by Agri
Laboratories, Inc.," with its address. Distributor shall cause All Product
labeling to contain only such claims as are permitted under applicable
Licenses for such Products and to otherwise comply with applicable law.
All labeling and packaging of All Products shall be subject to the prior
written approval of both parties, which shall not be unreasonably
withheld. Diamond will order quantities of labeling and packaging
sufficient to perform its obligations hereunder in its reasonable
discretion. Distributor shall be responsible for the costs of developing
and changing packaging for All Products, including costs of obsolete
labeling and packaging due to changes requested by Distributor but only
those occurring after initial License for the same. Furthermore, Diamond
shall be responsible for the cost occasioned by any changes required by a
government agency.
1.09 Location of Manufacture. All Products shall be manufactured by Diamond at
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its plant located in Des Moines, Iowa.
1.10 [ *** ]
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(i) [ *** ]
(ii) [ *** ]
(A) [ *** ]
(B) [ *** ]
(C) [ *** ]
(D) [ *** ]
(E) [ *** ]
SECTION 2. ADDITIONAL PRODUCTS
2.01 Additional Products. At Distributor's request, additional Products may be
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added to Exhibit A to this Agreement, providing for additional
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combinations of the antigens listed in Exhibit A and/or combinations of
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such antigens and new antigens specified by Distributor. Diamond shall
have the right, in its discretion, to approve or disapprove any such
additional Products and if approved, to establish reasonable Purchase
Prices therefor. Any such approved additional Products and the Purchase
Prices therefor shall be set forth in an amended Exhibit A signed by both
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parties to be collectively known as "All Products". Any such approved
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additional Product shall be included in the requirements of Section 1.04
(ii)(A) and, to the extent contemplated by Section 13.08, the requirements
of Section 1.04(ii)(B).
2.02 Registration Costs: Ownership. Distributor shall advance to Diamond the
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Registration Costs for any additional Products approved pursuant to
Section 2.01, which are added at Distributor's request. Each of
Distributor and Diamond shall retain ownership of any antigens it supplies
for any such additional Products and the addition of additional Products
to Exhibit A shall not be deemed to transfer any right, title, interest or
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license in or to the antigens supplied by either party to the other party
for such Products, except as necessary to manufacture and sell Products
under this Agreement. Each of Distributor and Diamond shall retain joint
ownership of any jointly produced antigens developed by the parties
hereto, and the addition of said Products to Exhibit A shall not be deemed
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to transfer any right, title, interest or license in or to the jointly
developed antigens or Products, except as necessary to manufacture and
sell Products under this Agreement. It is contemplated that a separate
agreement would be entered into for the joint development of antigens or
Products between the parties hereto.
2.03 Additional Products Previously Added to Agreement. Distributor and
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Diamond acknowledge and agree that certain additional Products identified
in Appendix 1 (but not other Products) shall be subject to the respective
terms and conditions set forth in such Appendix, which are incorporated by
reference in this Agreement.
SECTION 3. PRICE; PAYMENT; LOAN
3.01 Purchase Prices. Distributor agrees to purchase the Products at prices
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shown in Exhibit A hereto, subject to adjustment from time to time as
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specified below (the "Purchase Price"). All prices are F.O.B. Diamond's
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manufacturing plant and are exclusive of taxes, freight and insurance, if
any, which shall be invoiced to and paid by Distributor.
3.02 Annual Price Adjustment. Purchase Prices for each Product set forth in
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Exhibit A shall be in effect for Products having specified delivery dates
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during Contract Years [ *** ] and [ *** ]. Purchase Prices to be in
effect for Products to be delivered in each subsequent Contract year
shall be negotiated by the parties in good faith, taking into account
factors including, but not limited to, cost changes, volume changes and
plant utilization. In the event that Purchase Price changes are not agreed
upon as a result of such good faith negotiations, then the Purchase Prices
in effect for the preceding Contract Year shall remain in effect.
3.03 Cost Increases. Diamond may also notify Distributor in writing during any
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Contract Year of any cost increases for raw materials and packaging
components for All Products to the extent such increases, individually or
in the aggregate, would cause total finished cost of goods of such Product
to increase by more than 2%. Upon Distributor's request, Diamond will
furnish reasonable supporting documentation therefor. Upon such
notification, the parties shall negotiate in good faith to adjust the
applicable Purchase Prices to account for such increases. In the event
that Purchase Price changes are not agreed upon as a result of such good
faith negotiations, then the Purchase Prices then in effect shall remain
in effect.
3.04 Payment Terms.
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(i) In General. Diamond shall notify Distributor of the date when
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Products are ready for shipment. Diamond shall invoice the
Distributor for Products on the later of (i) the date Diamond
notifies Distributor that the Products are ready for shipment or (ii)
the delivery date specified in Distributor's purchase order accepted
by Diamond. Diamond shall invoice Distributor for the Additional
Payment, if any, within thirty (30) days after the end of any
Contract Year for which it is due. Diamond shall invoice
Distributor for Registration Costs, Support Costs and other amounts
payable by Distributor under this Agreement, if applicable, monthly
as incurred. Payment terms shall be net 30 days from the date of
each such invoice. An interest charge of one and one-half percent
(1 1/2%) per month or portion of a month shall be charged for late
payments. Diamond shall be entitled to place Distributor on shipment
hold and otherwise suspend performance under this Agreement if
Distributor shall be materially late or in default of its payment
obligations.
(ii) Prepayments. On or before [ *** ], Distributor shall pay to
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Diamond an amount equal to [ *** ], which amount shall
be credited against the invoice prices for Products to be shipped on
or after October 1, 2003. On or before [ *** ], Distributor
shall pay to Diamond an amount equal to (A) [ *** ],
minus (B) the quotient determined by dividing (x) the amount, if any,
by which Qualified Revenues for Contract Year 2003 exceeded the
Minimum Qualified Revenue for Contract Year 2003, if any, by (y)
[ *** ] (the "2004 Prepayment"). The 2004 Prepayment shall be
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credited against the invoice prices for Products to be shipped on or
after October 1, 2004.
3.05 Packaging. Purchase Prices include packaging for bulk palletized shipment
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for Distributor by common carrier for next-day delivery. Distributor shall
pay to Diamond the additional charges for labor and materials costs for
special or additional packaging or shipping requested by Distributor.
3.06 Distributor Loan to Diamond.
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(i) The parties acknowledge that pursuant to Amendment No. 4,
Distributor advanced to Diamond an amount equal to One Million
Dollars ($1,000,000.00) ("Loan Proceeds") as a loan ("Loan") on the
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terms and conditions of a promissory note dated as of April 15, 2002
(the "Original Note"). Upon execution and delivery of this
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Agreement, the parties shall cancel the Original Note and execute
and deliver a substitute note in the form attached hereto as
Exhibit F (the "New Note") to evidence the Loan. The Original Note
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is secured, and the New Note shall be secured, by a subordinated
security interest in certain assets of Diamond on the terms and
conditions of that certain security agreement dated as of April 15,
2002 (the "Security Agreement"), those certain mortgages dated as
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of April 15, 2002 ("Mortgages") and that certain subordination
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agreement dated as of April 15, 2002 (the "Subordination Agreement")
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(the Security Agreement, Mortgages and Subordination Agreement
collectively referred to as the "Security Documents").
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(ii) Distributor acknowledges that Diamond has supplied the receipts
required by Amendment No. 4 evidencing that Diamond has applied the
Loan Proceeds toward the uses set forth on Exhibit G attached
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hereto.
(iii) Diamond agrees to obtain lien releases from all contractors,
subcontractors or vendors who provide services and/or materials in
accordance with Exhibit G. In the event any lien is filed against
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the property secured by the Security Agreement and Mortgages,
Distributor shall have the right to pay said lien amount and seek
immediate repayment of said amount with interest at the statutory
rate from Diamond. Diamond hereby agrees to indemnify and hold
Distributor harmless for any and all claims by contractors,
subcontractors and vendors providing services to Diamond for the
improvements listed on Exhibit G.
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SECTION 4. FORECASTS; ORDER PROCEDURES; DELIVERIES
4.01 Firm Orders. Except to the extent that the parties otherwise agree
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in writing with regard to a particular order, Distributor shall submit
to Diamond a firm written purchase order or orders specifying the types,
quantities and delivery dates and instructions of Products that it desires
to purchase at least five (5) months prior to the requested delivery
date(s). Diamond will review each purchase order within five (5) business
days of receipt and either issue in writing its confirmation or its
proposal for changes and modifications for delivery to accommodate, to
the extent reasonable, Diamond's scheduling requirements. Diamond will
use reasonable commercial efforts to accommodate and to minimize changes
and modifications to the delivery dates requested by Distributor. Each
purchase order shall be binding on Distributor upon written confirmation
by Diamond or, if Diamond has made a proposal for changes or
modifications to delivery, upon Distributor's written acceptance of such
changes or modifications; provided, that no material modification or
change will become effective after confirmation without the written
approval of both parties. Diamond agrees that with respect to Products
covered by a purchase order confirmed by it in writing, the Products shall
be available for shipment on the specified delivery dates, except to the
extent it is prevented from doing so due to conditions beyond its
reasonable control as provided in Section 8. The applicable delivery
schedules shall be suspended during any period that Products have been
selected for testing by a regulatory authority.
4.02 Standard Batch Size. Distributor will order Products in standard batch
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sizes as shown on Exhibit A. If specified order amounts for Distributor
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would result in a batch which is thirty percent (30%) or more below the
applicable standard batch size set forth in Exhibit A, Diamond will so
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notify Distributor and at Distributor's option (i) the parties will
mutually agree to an increased Purchase Price for such Products; (ii)
Distributor will agree to accept and pay for the entire standard batch
size of the ordered Products or (iii) Distributor may submit a revised
purchase order for a quantity of Products within the permitted parameters.
4.03 Forecasts. Within fifteen (15) days after the first day of each calendar
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quarter during the term of this Agreement, Distributor will furnish
Diamond a revised written forecast of the quantities and types of Products
that the Distributor anticipates it will order from Diamond during each
month of the succeeding twelve (12) month period. Such forecasts will not
be deemed binding commitments, but are for the purpose of enabling Diamond
to more effectively schedule the use of its facilities.
4.04 Delivery; Title. Diamond shall ship the Products at the Distributor's
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expense and in accordance with Distributor's written instructions.
Written shipping instructions shall be provided by Distributor in each
purchase order or not later than two (2) days prior to the specified
delivery date. Title and risk of loss of the Products shall pass to the
Distributor upon receipt of the Products at the location directed by
Distributor.
4.05 Warehousing. Diamond agrees to store the Products as required by the
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Distributor for a period of not to exceed thirty (30) days from the later
of (i) the date Diamond notifies Distributor the Products are ready for
shipment or (ii) the delivery date specified in Distributor's purchase
order accepted by Diamond. With respect to Products that are not picked
up by the common carrier designated by Distributor's shipping instructions
within thirty (30) days from the date Diamond notifies Distributor the
Products are ready for shipment, Diamond shall charge a warehousing fee of
one and one-half percent (1 1/2%) of the invoice amount per month or
portion thereof until such Products are shipped.
4.06 Order of Precedence. In the event of conflict between the typewritten
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terms of Distributor's purchase orders and the terms and conditions of
this Agreement, the order of precedence shall be first, the typewritten
terms of Distributor's accepted purchase orders and then this Agreement.
All other terms and conditions contained in Distributor's and Diamond's
standard form purchasing and selling documents shall be disregarded.
SECTION 5. LABEL CODES: QUALITY ASSURANCE; DATING
5.01 Label Codes. Diamond shall code all labels affixed to each unit of the
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packaged Products to identify the Product batch. Distributor shall not
remove or obliterate label codes or patent marking on any Products.
5.02 Product Analysis. Prior to shipping any Product for the Distributor,
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Diamond shall analyze the Product for the purpose of determining whether
it conforms with the Specifications.
5.03 Audit. Once during each Contract Year, Diamond shall provide to
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Distributor reasonable access, during normal business hours, upon
reasonable notice to Diamond's manufacturing facilities to permit
Distributor to examine, audit and copy Diamond's records with respect to
manufacture, quality control and regulatory compliance of the Products, at
Distributor's sole expense. Such audit rights shall not extend to
financial and other records of Diamond not pertinent hereto.
5.04 Dating. Unless otherwise approved by Distributor prior to shipment,
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Products will have a dating at time of shipment as follows; provided, that
in the event that retesting is required for a Product, the minimum dating
otherwise required shall be reduced by a period of sixty (60) days:
(i) Products released for sale with twenty-four (24) months dating will
be shipped for Distributor with a minimum of twenty (20) months
dating remaining.
(ii) Products released for sale with eighteen (18) months dating will be
shipped for Distributor with a minimum of fourteen (14) months
dating remaining.
(iii) Products released for sale with twelve (12) months dating will be
shipped for Distributor with a minimum of eight (8) months dating
remaining.
5.05 Outdates. Should Product remain undistributed beyond the date permitted
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by regulation or other government agency requirement, Diamond will accept
redelivery to it at Distributor's shipping costs, with Distributor to
receive credit for same at the price paid to Diamond up to a maximum
cumulative credit of 1% of the aggregate Purchase Prices of the products
ordered for shipment within a Contract Year, to be included in the
calculation of the Qualified Revenue Requirement in Section 1.04(A) and,
to the extent contemplated by Section 13.08, the requirements of Section
1.04(ii)(B). Diamond agrees to destroy said returned Product at its cost
and in compliance with all regulatory requirements.
SECTION 6. TERM; TERMINATION
6.01 Term. The initial term of this Agreement shall be for a period commencing
----
on the Effective Date and ending on December 15, 2013. This Agreement
shall automatically renew thereafter for additional renewal terms of one
year each, unless either party gives at least twelve (12) months prior
written notice to the other that it does not wish to renew this Agreement.
6.02 Extension Fee Paid to Diamond. The parties acknowledge that pursuant to
-----------------------------
Amendment No. 4, Distributor paid in full to Diamond an amount equal to
[ *** ] as a non-refundable fee for extending the term
of this Agreement.
6.03 Termination for Breach. Subject to the provisions of Section 8, if either
----------------------
party shall breach any material obligation required under this Agreement
the other party may give written notice of its intention to terminate this
Agreement describing in reasonable detail the breach. If the breaching
party fails to remedy such material breach within thirty (30) days (ninety
(90) days in the case of any failure by Diamond to deliver any Product)
following such written notice, or if such breach is not reasonably capable
of cure within such thirty (30)-day or ninety (90)-day period, as the case
may be, and the breaching party fails to commence cure procedures within
such thirty (30)-day or ninety (90)-day period and diligently prosecute
such procedures until the breach is cured, then the non-breaching party
may, in addition to all other remedies available at law or in equity,
terminate this Agreement forthwith upon written notice.
6.04 Performance on Termination. Upon termination of this Agreement,
--------------------------
(i) Products manufactured pursuant to confirmed purchase orders shall be
delivered no later than the requested delivery dates in the approved
purchase order and Distributor shall pay Diamond therefor as provided in
Section 3.04 (provided, that prepayment shall be required upon termination
due to Distributor's payment default); (ii) all raw materials furnished by
Distributor shall be returned at Distributor's expense; and (iii) all
reasonable costs of unused raw materials, containers, labeling and
packaging previously ordered by Diamond in its reasonable discretion and
not reusable for other purposes by Diamond shall be paid by Distributor.
SECTION 7. REPRESENTATIONS AND WARRANTIES; NOTIFICATIONS
7.01 Of Diamond. Diamond represents and warrants to Distributor that:
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(i) the Products delivered to Distributor hereunder shall conform to the
Specifications and all other requirements and shall be free from
material defects in workmanship and materials through their
respective expiration dates;
(ii) the execution and delivery of this Agreement by Diamond, and the
performance of its obligations hereunder, do not require the consent
of any third party and will not violate, with or without notice, the
lapse of time or both, any agreement, contract, license or permit to
which Diamond is a party or its organizational documents; and
(iii) prior to delivery of any Product hereunder it will have, and will
thereafter maintain, all required manufacturing establishment
designations, permits and Licenses required to perform its
obligations with respect to such Product under this Agreement.
7.02 Of Distributor. Distributor represents and warrants to Diamond that:
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(i) the execution and delivery of this Agreement by Distributor, and the
performance of its obligations hereunder, do not require the consent
of any third party and will not violate, with or without notice, the
lapse of time or both, any agreement, contract, license or permit to
which Distributor is a party or its organizational documents; and
(ii) it has, and will maintain, all permits and licenses required to
perform its obligations under this Agreement and Products
distributed hereunder will bear labels conforming to the
requirements of this Agreement.
7.03 Non-Conforming Products. The Distributor shall have 30 days after receipt
-----------------------
of the Product to inspect the Product for gross visual defects and reject
the same. If the Product is rejected, written notice must be given to
Diamond no later than 30 days after receipt by the Distributor. The
parties within 30 days after rejection will endeavor in good faith
negotiations to determine whether or not the Product conforms to Diamond's
warranties. If the parties conclude it does conform, it will be treated
as conforming in all respects under this Agreement with time requirements
to be adjusted to cover the time required by this process. If the
parties conclude it does not conform with Diamonds warranties in Section
7.01(i), at the Distributor's option, (i) Diamond shall be relieved of any
obligation to deliver any Product with respect to the non-conforming
shipment and in such case Diamond shall credit against future purchases
by Distributor the purchase price of such non-conforming Product paid by
Distributor together with any shipping costs paid by the Distributor for
delivery of such non-conforming Product, or (ii) Diamond shall replace the
non-conforming Product with substitute Product which conforms with said
warranties, within the time agreed to by both parties, in which case the
Distributor shall pay to Diamond amounts in accordance with Section 3
hereof based on the substitute shipment, net of the purchase price and
shipping costs, if any, previously paid by Distributor for such non-
conforming Products. The non-conforming Product shall become the
property of and be returned to Diamond at Diamond's expense. Diamond
shall dispose of such Product at its own expense according to all
appropriate regulations. The Purchase Price of non-conforming product
shall be treated as Minimum Qualified Revenue in the Contract Year the
product is ordered for shipment.
7.04 Recall. Diamond shall replace Product at no cost to the Distributor to
------
complete any Product recall or stop-sale required by a subsequent
determination that the Product (i) was not produced in accordance with
Specifications when released to the Distributor, (ii) failed to remain in
compliance with Specifications through the dating period of such Product,
(iii) contained any material defect in workmanship and materials not
detectable by Distributor's inspection testing, or (iv) was not produced
in compliance with applicable USDA regulations. The reasonable costs of
any such recall or stop-sale shall be borne by Diamond. Any such recall
or stop-sale shall be conducted in accordance with USDA Veterinary
Services Memorandum No. 800.57 or any successor regulations. The
Distributor shall be responsible for all other recalls related to
marketing, handling or storage of Product by Distributor or its agents,
including voluntary recalls made by Distributor. Minimum Qualified
Revenue and, to the extent contemplated by Section 13.08, Minimum Initial
Product Revenue, for any Contract Year shall include the Purchase Price
for product recalled under the first sentence of this Section 7.04.
7.05 Exclusive Remedy. THE REMEDIES DESCRIBED IN THIS AGREEMENT ARE EXCLUSIVE
----------------
AND IN LIEU OF ANY OTHER REMEDY DISTRIBUTOR WOULD OTHERWISE HAVE AGAINST
DIAMOND WITH RESPECT TO DEFECTIVE PRODUCTS OR ANY BREACH OF DIAMOND'S
LIMITED WARRANTY UNDER SECTION 7.01(i) OF THIS AGREEMENT; PROVIDED, THAT
THIS SECTION SHALL NOT LIMIT DIAMOND'S INDEMNITY OBLIGATION SET FORTH IN
SECTION 11 WITH RESPECT TO THIRD PARTY CLAIMS.
7.06 Limitations.
-----------
(i) EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 7, DIAMOND MAKES NO
WARRANTIES, EXPRESSED OR IMPLIED, CONCERNING TECHNOLOGY, GOODS,
SERVICES, RIGHTS OR THE MANUFACTURE, AND SALE OF PRODUCTS, AND
HEREBY DISCLAIMS ALL WARRANTIES, INCLUDING WITHOUT LIMITATION ANY
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR USE OR
PURPOSE OR NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE
FOREGOING.
(ii) IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY
THIRD PARTY FOR LOST PROFITS, LOSS OF GOODWILL, OR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED,
ARISING UNDER ANY THEORY OF LIABILITY. THIS LIMITATION SHALL APPLY
EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES,
AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY.
(iii) THE WARRANTY IN SECTION 7.01(i) WILL NOT APPLY TO THE EXTENT OF ANY
DEFECTS CAUSED BY IMPROPER OR INADEQUATE HANDLING OR STORAGE OF
PRODUCTS AFTER SHIPMENT BY DIAMOND OR FAILURE OF ANY RAW MATERIALS
SUPPLIED BY DISTRIBUTOR.
7.07 Notifications.
-------------
(i) Of Diamond. Diamond agrees that it will promptly notify the
----------
Distributor in writing of any contact, claim or other communication
by any entity or agency that relates to, or may relate to,
Diamond's ability to perform its responsibilities herein. Any
communication (other than routine regulatory filings, notices and
reports and other non-adverse communications), either initiated by
Diamond or by the USDA, that references a Product in this Agreement
or the submission of any such Product will immediately be brought in
writing to the attention of the Distributor.
(ii) Of Distributor. Distributor agrees that it will promptly notify
--------------
Diamond in writing of any contact, claim or other communication by
any entity or agency that relates to, or may relate to,
Distributor's ability to perform its responsibilities herein. Any
communication (other than routine regulatory filings, notices and
reports and other non-adverse communications), either initiated by
Distributor or by the USDA, that references a Product in this
Agreement or the submission of any such Product will immediately be
brought in writing to the attention of Diamond.
SECTION 8. FORCE MAJEURE
8.01 Force Majeure. No party shall be held liable or responsible for failure
-------------
or delay in fulfilling or performing any obligation of this Agreement in
case such failure or delay is due to Acts of God, strikes or other labor
disputes, governmental regulations or actions (not otherwise the
responsibility of the parties), inability to obtain material, labor,
equipment or transportation, or any other condition beyond the
reasonable control of the affected party, provided such party has taken
reasonable steps to avert such causes or conditions. Each party agrees
to give the other party prompt written notice of the occurrence and the
nature of any such condition or act, and the extent to which the affected
party will be unable to fully perform its obligation hereunder. Each
party further agrees to use all reasonable efforts to correct the
condition as quickly as possible.
8.02 Right to Terminate. If, as a result of causes or conditions described in
------------------
this Section, either party is unable to perform substantially all of its
material obligations hereunder for any consecutive period of three (3)
months, the other party shall have the right to terminate this Agreement
upon at least thirty (30) days prior written notice.
SECTION 9. CONFIDENTIAL INFORMATION
9.01 Non-Disclosure. All Confidential Information disclosed hereunder shall
--------------
remain the property of the disclosing party and shall be maintained in
confidence and not disclosed by the receiving party to any person except
to officers, employees, and consultants to whom it is necessary to
disclose the information for the purpose of performing and enforcing this
Agreement. Each party shall take all steps it would normally take to
protect its own Confidential Information to ensure that the received
Confidential Information shall be maintained in confidence and not
disclosed, but in no event less than reasonable care.
9.02 Use. Unless otherwise agreed in writing, all Confidential Information
---
disclosed hereunder shall be used by the parties only pursuant to and in
accordance with this Agreement.
9.03 Exceptions. The obligations of Diamond and Distributor under this
----------
paragraph shall not apply to:
(i) Information which, at the time of disclosure, is in the public
domain or thereafter comes within the public domain other than as a
result of breach of this Agreement; or
(ii) Information which either party can establish was in its possession
at the time of disclosure; or
(iii) Information which was received from a third party not under an
obligation of confidentiality; or
(iv) Information which either party can establish was independently
developed without reference to the information received hereunder.
9.04 Termination: Survival. Upon termination of this Agreement, Diamond and
-----------------------
Distributor agree upon written request to return to the other all written
or other physical embodiments of the other's Confidential Information,
except for one record copy. The obligations under this paragraph shall be
binding on any affiliate, parent, subsidiary, successor or assign of
Diamond or Distributor as if a party to the Agreement. The obligations of
confidentiality and non-use of the Confidential Information under this
Agreement shall, continue throughout the term of this Agreement and for
a period of two (2) years following the termination or expiration of this
Agreement.
9.05 Confidentially of Agreement. Except to the extent required by law,
---------------------------
neither party shall disclose to third parties the terms of this Agreement
or the negotiations giving rise to this Agreement. If either party
("Disclosing Party") determines that it is required by law to disclose any
----------------
provisions of this Agreement, it will provide reasonable notice to the
other party ("Non-Disclosing Party") and will consult and cooperate with
--------------------
the Non-Disclosing Party, to permit the Non-Disclosing Party to seek a
protective order or other confidential treatment, to the extent permitted
by law.
SECTION 10. OWNERSHIP OF INTELLECTUAL PROPERTY
Any and all design, patent, copyright and other relevant ownership and other
rights in and to the intellectual property aspects of the Products which are the
subject of this Agreement and all modifications, adjustments, changes and
derivatives thereto and thereof (collectively, the "Rights") shall belong
------
exclusively to Diamond, except as otherwise agreed in writing with respect to
additional Products added to this Agreement pursuant to Section 2. Distributor
agrees that it does not have, and will not claim, any Rights in any Product
delivered pursuant to this Agreement or aspect thereof, except as so agreed in
writing. Diamond shall own the raw materials and Products, subject to any
security interest, until title passes pursuant to Section 4.04.
SECTION 11. INDEMNIFICATION
11.01 By Diamond. Diamond hereby agrees to defend, indemnify and hold
-----------
Distributor, its directors, officers, employees, agents and Affiliates
harmless from and against any loss, claim, action, damage, expense or
liability (including defense costs and attorneys' fees) resulting from any
third party claim or suit arising out of or relating to Diamond's failure
to manufacture a Product in compliance with its Specifications; provided,
however, that the foregoing indemnity obligations shall not apply where
such claim is the result of the willful misconduct or negligent act of
Distributor or its Affiliates, and there shall be apportionment in
accordance with responsibility when such obligation derives in part from
such acts of Diamond and in part from such acts of Distributor and its
Affiliates.
11.02 By Distributor. Distributor hereby agrees to defend, indemnify and
--------------
hold Diamond, its directors, officers, employees, agents and Affiliates
harmless from and against any loss, claim, action, damage, expense or
liability (including defense costs and attorneys' fees) resulting from any
third party claim or suit arising out of or relating to the use, sale or
distribution of any of the Product manufactured in conformity with the
Specifications, including, but not limited to any warranty for the
Products extended by Distributor other than the warranties given by
Diamond in Section 7.01(i) above and any of the claims identified in
Section 7.06(i) above; provided, however, that the foregoing indemnity
obligation shall not apply where such claim is solely the result of the
willful misconduct or negligent act of Diamond or its Affiliates and there
shall be apportionment in accordance with responsibility when such
obligation derives in part from acts of Distributor and in part from such
acts of Diamond and its Affiliates.
11.03 Procedures. In the event that a third-party claim is made or third-
----------
party suit is filed for which either party intends to seek indemnification
from the other party pursuant to this Section 11, the party seeking
indemnification (the "Indemnitee") shall promptly notify the other party
----------
(the "Indemnitor") of said claim or suit. The Indemnitor shall have the
----------
right to control, through counsel of its choosing, the defense of such
third-party claim or suit, but may compromise or settle the same only with
the consent of the Indemnitee, which consent shall not be unreasonably
withheld. The Indemnitee shall promptly consult in good faith with the
Indemnitor with respect to any proposed settlement. The Indemnitee shall
cooperate fully with the Indemnitor and its counsel in the defense of any
such claim or suit and shall make available to the Indemnitor any books,
records or other documents necessary or appropriate for such defense. The
Indemnitee shall have the right to participate at the Indemnitee's expense
in the defense of any such claim or suit through counsel chosen by the
Indemnitee.
11.04 Insurance. Diamond and Distributor will each Maintain product liability
---------
insurance covering their individual performance of their obligations
hereunder with a minimum limit of liability of Two Million Dollars
($2,000,000) in the aggregate. Each party will maintain insurance to
protect themselves and the other from claims under any workers
compensation acts and from any other damages from personal injury
including death, which may be sustained by the said parties, their agents,
servants or employees and the general public and/or claims of property
damage which might be sustained from any one of them due to the negligence
of the parties. Each party shall furnish the other with a certificate of
insurance.
11.05 Survival. The provision of Sections 11.01 through 11.03 shall survive
--------
the expiration or termination of this Agreement.
SECTION 12. MISCELLANEOUS
12.01 Notices. All notices or other communications provided for in this
-------
Agreement shall be in writing and shall be considered delivered upon the
earliest of actual receipt, or personal or courier delivery, or sending
by facsimile with confirmation of receipt in good order requested and
received, or on the fourth business day after they are deposited in the
United States mail, certified first class or air mail postage prepaid,
return receipt requested, addressed to the respective parties as follows:
(i) If to Diamond: (ii) If to Distributor:
Diamond Animal Health, Inc. AGRI Laboratories, ltd.
2538 S.E. 43rd Street 20927 State Route K
Des Moines, Iowa 50317 St. Joseph, MO 64505
ATTN: President ATTN: President
Fax: (515) 263-8661 Fax: (816) 233-9546
Copies to: Copy to:
Heska Corporation Edward S. Sloan
1613 Prospect Parkway Niewald, Waldeck & Brown
Fort Collins, CO 80525 120 W. 12th Street
ATTN: Chief Financial Officer Kansas City, MO 64105
Fax: (970) 484-9505 Fax: (816) 474-0872
William M. Hardin
Osborn Maledon, P.A.
2929 North Central Avenue
Suite 2100
Phoenix, AZ 85012
Fax: (602) 640-6068
The parties may, at any time, change their addresses or other information
in this section by written notice under this section.
12.02 Independent Contractors. The parties are and shall always remain
------------------------
independent contractors as to the other in their performances of this
Agreement. The provisions of this Agreement shall not be construed as
authorizing or reserving to either party any right to exercise any control
or direction over the operations, activities, employees, or agents of the
other in connection with this Agreement except to the extent required by
law, it being understood and agreed that the control and direction of such
operations, activities, employees, or agents shall otherwise remain with
each party. Neither party to this Agreement shall have any authority to
employ any person as an employee or agent for or on behalf of the other
party to this Agreement, nor shall any person performing any duties or
engaging in any work at the request of such party, be deemed to be an
employee or agent of the other party to this Agreement.
12.03 Governing Law. The validity, interpretation and performance of this
-------------
Agreement shall be governed and construed in accordance with the internal
laws of the State of Iowa.
12.04 Severability. Whenever possible, each provision of this Agreement
------------
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision hereof shall be prohibited by or be
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.
12.05 Modification. No modification or waiver of any provision of this
------------
Agreement shall be effective unless the modification is made in writing
and signed by the party sought to be charged, and the same shall then be
effective only for a period and on the conditions and for the specific
instances and purposes specified in such writing. No course of dealing
between Diamond and the Distributor or delay or failure to exercise any
rights hereunder shall operate as a waiver of such rights or preclude the
exercise of any other rights hereunder.
12.06 Survival. Termination or expiration of this Agreement shall not
--------
relieve either party from any obligation under this Agreement which may
have accrued prior thereto or which survives by its terms.
12.07 Captions. The captions set forth in this Agreement are for convenience
--------
only and shall not be used in any way to construe or interpret this
Agreement.
12.08 Assignment. Neither party to this Agreement may assign this Agreement or
----------
its rights or obligations hereunder without the prior written consent of
the other party; except that either party may assign its right and
delegate its obligations hereunder without prior consent of the other
party to any successor entity by way of merger, consolidation, or
reorganization or to the purchaser of all or substantially all of its
assets. Any permitted assignee shall assume all obligations of its
assignor under this Agreement. No assignment shall relieve either party
of responsibility for the performance of any accrued obligation which it
has hereunder. Any consent required shall not be unreasonably withheld.
12.09 Entire Agreement. This Agreement (including the Exhibits hereto) and the
----------------
New Note constitute the entire understanding of the parties with respect
to the subject matter hereof and supersede all prior documents,
instruments, negotiations or communications, however given, regarding the
subject matter hereof, including but not limited to the Original Note, the
Original Agreement, Amendment No. 1, Amendment No. 2, Amendment No. 3 and
Amendment No. 4; provided, that the Security Documents shall continue in
full force and effect to secure the Loan and the New Note. There are no
other understandings, representations or warranties of any kind, express
or implied.
12.10 Arbitration. Should the parties hereto be unable to amicably resolve
-----------
between themselves any disagreements relating to or arising from any one
or more of the provisions of this Agreement, which does not involve
injunctive or equitable relief, both parties shall submit such
disagreement to arbitration under the Commercial Rules of the
American Arbitration Association in Kansas City, Missouri, with any
hearing to be held in St. Joseph, Missouri. Neither party shall have the
right to further appeal or redress an arbitration award in any other
court or tribunal except solely for the purpose of obtaining execution of
the judgment rendered by the American Arbitration Association.
SECTION 13. DEFINITIONS
13.01 "Affiliate" shall mean with respect to any person or entity (i) any
---------
other person or entity that controls, is controlled by or is under common
control with such first person or entity, with "control" meaning direct or
indirect beneficial ownership of more than fifty percent (50%) of the
equity interest of an entity or more than a fifty percent (50%) interest
in the decision making authority of an entity, and (ii) an entity in which
the maximum equity interest permitted by law to be held by another entity
is held by such other entity.
13.02 "[ *** ]" shall mean [ *** ]
--------
13.03 "Biostar" shall mean Novartis Animal Health, Inc. and its predecessor,
-------
Biostar, Inc., a corporation organized under the laws of Canada.
13.04 "[ *** ]" shall mean [ *** ], a Delaware
-----------------
corporation.
13.05 "Confidential Information" shall, mean all information disclosed in
------------------------
writing, or by oral communication if reduced to writing and confirmed as
confidential within (30) days of disclosure, by either party to the other
relating to raw materials, product specifications, formulations and
compositions, scientific know-how, chemical compound and composition
data, manufacturing processes, analytical methodology, product
applications, including safety and efficacy data, current and future
product and marketing plans and projections, and other information of a
technical or economic nature related to the Products and/or Diamond's
manufacture of the Products.
13.06 "Contract Year" shall mean each successive 12-month period ending on
-------------
December 15 in each calendar year and beginning on December 16 in the
previous calendar year, during the term of this Agreement. For example,
Contract Year 2002 began on December 16, 2001 and ends on December 15,
2002.
13.07 "Contract Year Factor" shall mean (i) [ *** ] for Contract Year 2003,
--------------------
(ii) [ *** ] for Contract Year 2004 and (iii) 1.00 for all other Contract
Years.
13.08 "Initial Products" shall mean the products that are subject to this
----------------
Agreement on the Effective Date, all of which are expressly set forth in
Exhibit A attached hereto. Initial Products shall also include additional
---------
products added to this Agreement in accordance with Section 2 of this
Agreement that consist of one or more antigens set forth on Exhibit A and
---------
Exhibit AA on the Effective Date (i) in combination with antigens not set
----------
forth on Exhibit A and Exhibit AA on the Effective Date and/or (ii) for
--------- ----------
which additional claims are obtained by Diamond or the supplier of such
antigen (including but not limited to the potential additional products
described on Exhibit AA).
----------
13.09 "Initial Product Qualified Revenues" shall mean, for any Contract Year,
----------------------------------
an amount equal to (i) the Qualified Revenues attributable to Initial
Products (Exhibit A and AA) for such Contract Year, plus (ii) any amounts
--------- --
paid by Distributor to Diamond in such Contract Year for Registration
Costs and Support Costs attributable to Products other than Initial
Products, plus (iii) any other amounts paid or advanced by Distributor to
Diamond in such Contract Year for research and development or other
services not contemplated by this Agreement that are attributable to
Products other than Initial Products.
13.10 "License" shall mean a veterinary biologic license issued to Diamond by
-------
the United States Department of Agriculture or other regulatory agency
with jurisdiction in the Territory for a Product to be manufactured by
Diamond pursuant to this Agreement.
13.11 "Minimum Qualified Revenue" and "Minimum Initial Product Revenue" shall
------------------------- -------------------------------
mean the minimum amounts of Qualified Revenue and Initial Product
Qualified Revenues, per Contract Year, respectively, as specified in
Section 1.04(ii)(A) above, and Section 1.04(ii)(B) above, respectively.
13.12 "Products" shall mean the Initial Products, together with any additional
--------
antigens and new products added to this Agreement pursuant to Section
2.01 of this Agreement.
13.13 "Qualified Revenue" shall mean, for any Contract Year, an amount equal to
-----------------
(i) the Purchase Price of Products ordered for shipment in such Contract
Year by Distributor, plus (ii) any amounts paid by Distributor to Diamond
in such Contract Year for Registration Costs and Support Costs, plus
(iii) any other amounts paid or advanced by Distributor to Diamond
in such Contact Year for research and development or other services not
contemplated by this Agreement, as adjusted for (iv) all other
adjustments to Minimum Qualified Revenue expressly as provided in this
Agreement.
13.14 "Registration Costs" shall mean all costs and expenses associated with
------------------
obtaining Licenses, including without limitation clinical trial costs,
assay development and validation, development of seed stocks, production
processes scale-up, formulation development, production of pre-licensing
serials, conduct of field safety trials, application fees and other costs
and expenses reasonably incidents thereto. As between the parties,
Registration Costs shall include labor and service charges at Diamond's
standard hourly rates, as amended from time to time, direct cost of
materials, and out-of-pocket and third-party expenditures.
13.15 "Specifications" shall mean, as the context may require, either one or
--------------
both of the following, which have been mutually agreed upon by the
parties: (i) vendor-certified appropriate quantitative and qualitative
particulars for all raw materials including active and non-active
excipients that are used to prepare all components represented in and by
final Products, and (ii) a filed and approved USDA Outline of Production
describing in detail the manufacturing process applicable for each
Product and the testing and release criteria applicable to each Product.
13.16 "Sterile Filled Facility" shall mean a sterile filled manufacturing
-----------------------
facility meeting the CGMP requirements of the FDA.
13.17 "Sterile Filled Facility Period" shall mean any period during which a
------------------------------
Sterile Filled Facility is operational at Diamond, beginning on the later
of (i) the 36-month anniversary of the date Diamond notifies Distributor
in writing of its intention to develop a Sterile Filled Facility and (ii)
the 18-month anniversary of the date that the first product license is
granted by the FDA for a product produced in such Sterile Filled
Facility.
13.18 "Support Costs" shall mean all costs and expenses of Diamond associated
-------------
with providing technical support to Distributor under this Agreement,
including without limitation labor and service charges at Diamond's
standard hourly rates, as amended from time to time, direct cost of
materials, and out-of-pocket and third-party expenditures.
13.19 "Territory" shall mean the territory specified in Section 1.03.
---------
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly-authorized representatives as of the date first written above.
<table>
<caption>
<s> <c>
DIAMOND ANIMAL HEALTH, INC. AGRI LABORATORIES, LTD.
By: /s/ Michael McGinley By: /s/ Steve Schram
------------------------------- -----------------------------
Title: Vice President - Operations Title: President/CEO
& Technical Affairs and --------------------------
General Manager
----------------------------
</table>
EXHIBITS
- --------
A - Products and Prices
AA - Potential Additional Antigens
B - [ *** ]
C - [ *** ]
D - [ *** ]
E - Example Calculations of Minimums
F - Form of New Note
G - Uses of Loan Proceeds
APPENDICES
- ----------
1 - Additional Product
EXHIBIT A
INITIAL PRODUCTS
----------------
I. Modified Live Products:
<table>
<caption>
PRICING
-------
<s> <c> <c> <c> <c>
TRADENAME ANTIGENS [ *** ] [ *** ] [ *** ]
- --------- -------- ------- ------ ------
Titanium BRSV BRSV $[ *** ] $[ *** ]
Titanium BRSV Vac3 BRSV, PI3, IBR $[ *** ] $[ *** ]
Titanium 5 BRSV, PI3, IBR, BVD1, BVD2 $[ *** ] $[ *** ] $[ *** ]
Titanium 5 L5 BRSV, PI3, IBR, BVD1, BVD2, Lepto 5 $[ *** ] $[ *** ] $[ *** ]
Titanium 3 + BRSV LP BRSV, PI3, IBR, BVD1, BVD2, L.pomona $[ *** ] $[ *** ]
Titanium IBR IBR $[ *** ] $[ *** ]
Titanium IBR LP IBR, L.pomona $[ *** ] $[ *** ]
Titanium 3 IBR, BVD1, BVD2 $[ *** ] $[ *** ]
Titanium 4 IBR, PI3, BVD1, BVD2 $[ *** ] $[ *** ]
Titanium 4 L5 IBR, PI3, BVD1, BVD2, Lepto 5 $[ *** ] $[ *** ]
</table>
Above Pricing based on Standard Batch Sizes:
<table>
<caption>
<s> <c> <c>
[ *** ] dose Large Freeze Dryer- [ *** ]/ Small Freeze Dryer- [ *** ]/
[ *** ] [ *** ]
[ *** ] dose Large Freeze Dryer- [ *** ]/ Small Freeze Dryer- [ *** ]/
[ *** ] [ *** ]
[ *** ] dose Large Freeze Dryer- [ *** ]/ Small Freeze Dryer- [ *** ]/
[ *** ] [ *** ]
</table>
Any product combinations of the above antigens not listed above, including but
not limited to previously-produced combinations or other products listed on
Exhibit A of the Original Agreement that are no longer carried by Distributor or
that have never been marketed by Distributor, are not included in the above
price structure. Any combinations not listed above that are desired by
Distributor subsequent to April 15, 2002 may be added to this Exhibit pursuant
to Section 2 of this Agreement and new pricing will be established; provided,
that such additional Products shall qualify as "Initial Products" only if they
meet the definition of "Initial Products" set forth in this Agreement.
II. Killed Products:
<table>
<caption>
PRICING
-------
<s> <c> <c> <c>
TRADENAME ANTIGENS [ *** ] [ *** ]
- --------- -------- ------- -------
MasterGuard Preg.5 KIBR, KBVD1, KBVD2, MLV BRSV, PI3 $[ *** ] $[ *** ]
MasterGuard 10 KIBR, KBVD1, KBVD2, MLV BRSV, PI3, L5 $[ *** ] $[ *** ]
MasterGuard 10 CF KIBR, KBVD1, KBVD2, MLV BRSV, PI3, L5, C.fetus $[ *** ] $[ *** ]
</table>
* Currently, Intervet will ship to Diamond and bill Distributor directly for
the cost of the [ *** ] antigen. Distributor will continue to have
responsibility to provide [ *** ]s component to Diamond for labeling and
final packaging at no cost to Diamond. Final product [ *** ] potency
testing will be performed by Intervet (or any future supplier) and is
incorporated into the antigen cost to Distributor
Above Pricing based on Standard Batch Sizes:
[ *** ] dose [ *** ] units / [ *** ] doses
[ *** ] dose [ *** ] units / [ *** ] doses
III. Additional Cattle Products- Titanium 5 + Once PMH (MLV IBR, BVD1,
BVD2, BRSV, PI3 + Intervet Live avirulent P. haemolytica / multocida):
<table>
<caption>
PRICING
-------
<s> <c> <c> <c>
Product Form [ *** ] [ *** ] [ *** ]
- ------------ ------- ------- -------
Intervet, Unlabelled Titanium 5 $[ *** ] $[ *** ] $[ *** ]
AgriLabs, Final Package $[ *** ] $[ *** ] $[ *** ]
</table>
Above Pricing based on Standard Batch Sizes:
[ *** ] dose [ *** ] units/[ *** ] doses
[ *** ] dose [ *** ] units/[ *** ] doses
[ *** ] dose [ *** ] units/[ *** ] doses
All prices include viricidal testing performed at Diamond.
Bactericidal testing is performed by Intervet and is incorporated into the
OncePMH cost to Distributor.
Currently, Intervet will ship to Diamond and bill Distributor directly for the
OncePMH component. Distributor will continue to have responsibility to provide
OncePMH component to Diamond for labeling and final packaging at no cost to
Diamond.
EXHIBIT AA
POTENTIAL ADDITIONAL ANTIGENS THAT QUALIFY TO BE
------------------------------------------------
CLASSIFIED AS "INITIAL PRODUCTS" PER SECTION 13.08
--------------------------------------------------
1. [ *** ]
2. [ *** ]*
3. [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
4. [ *** ]*
5. [ *** ]
* Supplied by Novartis (Biostar). Novartis has the right to terminate
supply of all Biostar antigens to Diamond after December 31, 2007, after
which Distributor shall have the responsibility to provide such antigens to
Diamond if Distributor desires to add and/or maintain them as Products
under this Agreement.
EXHIBIT B
[ *** ]
-----------------------
[ *** ] Antigens or [ *** ] Vaccine
Infectious Bovine [ *** ]
Bovine [ *** ]
>[ *** ]
>[ *** ]
Bovine [ *** ]
[ *** ]
[ *** ]
(Master Cell Stock)
EXHIBIT C
[ *** ]
-----------------------
<table>
<caption>
[ *** ] [ *** ]
----------------------- -----------------------
<s> <c>
1. [ *** ] [ *** ]
2. [ *** ] [ *** ]
3. [ *** ] [ *** ]
</table>
[ *** ]
-----------------------
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]
EXHIBIT D
[ *** ]
-----------------------
Diamond antigens to be incorporated into the [ *** ]
or Solid Dose Technologies:
[ *** ]
[ *** ]
[ *** ]
[ *** ]
[ *** ]
NOTE: [ *** ] component contains both Type I and Type II
----
EXHIBIT E
EXAMPLE CALCULATIONS OF MINIMUMS
--------------------------------
EXAMPLE 1
- ---------
- - Example is for Contract Year ending 12/15/04
- - Qualified Revenues for all Products total [ *** ], consisting of the
following components:
<table>
<caption>
<s> <c>
A. Product sales, R&D, Support & Registration [ *** ]
attributable to Initial Products only (Section
13.08(i) of Agreement)
B. Sales of Products other than Initial [ *** ]
Products (Section 13.12(i) of Agreement)
C. R&D, Support and Registration for Products [ *** ]
other than Initial Products (Section 13.08(ii)
and (iii) of Agreement)
</table>
- - [ *** ] in Qualified Revenue exceeds [ *** ] Minimum Qualified
Revenue requirement under 1.04(ii)(A): No Additional Payment required to
maintain exclusivity on Products other than Initial Products for 2004 CY.
- - [ *** ] in Initial Product Qualified Revenue (A + C above) does not
meet [ *** ] Minimum Initial Product Revenue requirement under
1.04(ii)(B).
- - If Distributor makes timely [ *** ] Additional Initial Product
Payment([ *** ] per Section 13.07), exclusivity is maintained for
all Products; if not, Initial Products become non-exclusive and other
Products remain exclusive.
EXAMPLE 2
- ---------
- - Same facts as Example 1, except as follows:
- - Sales of Products other than Initial Products (B in Example 1) is
[ *** ], instead of [ *** ]
- - [ *** ] in Qualified Revenue does not meet [ *** ] Minimum
Qualified Revenue requirement under 1.04(ii)(A).
- - [ *** ] in Initial Product Qualified Revenue (A + C above) does
not meet [ *** ] Minimum Initial Product Revenue requirement
under 1.04(ii)(B).
- - If Distributor makes [ *** ] Additional Initial Product Payment
under 1.04(ii)(B) ([ *** ] per Section 13.07), such payment will
also count as an Additional Payment under 1.04(ii)(A), and exclusivity
is maintained for all Products; if not, all Products become
non-exclusive.
EXHIBIT F
FORM OF NEW NOTE
AMENDED AND RESTATED
PROMISSORY NOTE
$1,000,000.00 as of April 15, 2002
Des Moines, Iowa
FOR VALUE RECEIVED, the undersigned DIAMOND ANIMAL HEALTH, INC., an Iowa
corporation ("MAKER"), promises to pay to AGRI LABORATORIES, LTD., a Delaware
-----
corporation ("HOLDER"), or order, at such place as the Holder of this Note shall
------
designate in writing, the sum of One Million Dollars ($1,000,000.00) in lawful
money of the United States of America. Beginning from the date hereof interest
shall accrue on the outstanding principal balance at the "prime rate" plus one
quarter percent (0.25%) per annum. Accrued interest shall be paid quarterly on
each quarterly anniversary of the date of this Note, and shall accrue based upon
a thirty-day month and a 360-day year. Principal under this Note shall be paid
in three (3) annual installments on the first, second and third anniversaries of
the date of this Note as follows:
<table>
<caption>
<s> <c>
April 15, 2003 $250,000
April 15, 2004 $250,000
April 15, 2005 $500,000
</table>
All principal and any accrued but unpaid interest shall be due and payable on
the third anniversary of the date of this Note.
Notwithstanding any provision of this Note to the contrary, all principal
and unpaid accrued interest shall be due and payable on the ninetieth (90th) day
following the date that either (i) Holder's exclusivity rights under that
certain Amended and Restated Bovine Vaccine Distribution Agreement dated as of
September 30, 2002, (the "Distribution Agreement") are terminated due to
----------------------
Distributor's nonpayment of any Additional Payment under the Distribution
Agreement or (ii) in the event of a merger, sale or fifty percent (50%) change
in ownership of Maker; provided, however, that no such amounts shall be due and
payable under clause (i) of this paragraph prior to January 1, 2005.
The "prime rate" shall be the annual rate of interest announced from time
to time by Wells Fargo Business Credit, Inc. ("WELLS FARGO") as its prime rate.
-----------
The interest accruing on the principal balance of this Note shall fluctuate from
time to time concurrently with changes in the prime rate, effective as of the
date any change in the prime rate is publicly announced. If Wells Fargo ceases
to announce the prime rate, the prime rate as published in the Wall Street
Journal in its "Money Rates" section or a similar financial publication shall be
used, as reasonably determined by Maker.
Maker shall have the right at any time or from time to time to prepay all
or a portion of the principal or interest without premium or penalty, and such
prepayments shall be applied first to accrued interest and then to principal.
If default be made in the payment of any of the installments of principal,
interest, or other amounts when due under this Note, the entire principal sum
and accrued interest and all other amounts due hereunder shall become due at the
option of Holder if not paid within ten (10) days of written notice to Maker.
In the event garnishment, attachment, levy or execution is issued against
any substantial or material portion of the property or assets of Maker, or any
of them if more than one, or upon the happening of any event which constitutes a
default pursuant to the terms of any agreement or other instrument entered into
or given in connection herewith, or upon the adjudication of Maker, or any of
them if more than one, a bankrupt, such event shall be deemed a default
hereunder and Holder may declare this Note immediately due and payable without
notice to Maker or exercise any of its remedies hereunder or at law or equity.
Should suit be brought to recover on this Note, or should the same be placed in
the hands of an attorney for collection, Maker promises to pay all reasonable
attorneys' fees and costs incurred in connection therewith.
Failure of Holder to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default,
or in the event of continuance of any existing default.
Maker waives demand, diligence, presentment for payment, protest and notice
of demand, protest, nonpayment and exercise of any option hereunder. Maker
agrees that the granting without notice of any extension or extensions of time
for payment of any sum or sums due hereunder, or for the performance of any
covenant, condition or agreement hereof shall in no way release or discharge the
liability of Maker hereof.
This Note shall be governed by the laws of the State of Iowa.
Time is of the essence of this Note and each and every term and provision
hereof.
This Note is secured by that certain Security Agreement, dated as of even
date herewith, by and between Maker and Holder. Debtor and its affiliates are
parties to that certain Second Amended and Restated Credit and Security
Agreement by and between Debtor and Wells Fargo Business Credit, Inc., fka
Norwest Business Credit, Inc., a Minnesota corporation ("WELLS FARGO"),
------------
originally dated June 4, 2000, as amended, that certain Loan Agreement dated as
of April 4, 1994 and related Promissory Note between the City of Des Moines,
Iowa and Debtor, as amended, and that certain CEBA Loan Agreement dated January
20, 1994 and related Promissory Notes between Iowa Department of Economic
Development and Debtor, as amended (collectively, the "SENIOR LOAN AGREEMENTS
-----------------------
and the lender parties thereto collectively, the "SENIOR LENDERS"). This Note
--------------
and Maker's obligations hereunder shall be junior and subordinated to all any
and all indebtedness and obligations for borrowed money (including, without
limitation, principal, premium (if any), interest, fees, charges, expenses,
costs, professional fees and expenses, and reimbursement obligations)
("INDEBTEDNESS") at any time owing by Debtor to the Senior Lenders, their
------------
successors and assigns under the Senior Loan Agreements or otherwise, and the
extension, renewal or refinancing (including without limitation any additional
advances made in connection therewith) of all or any portion of such
Indebtedness by any of the Senior Lenders or any successor lender and any and
all security interests securing any portion of such Indebtedness and additional
advances from time to time (such Indebtedness, additional advances and security
interests, the "SENIOR INDEBTEDNESS"). Holder hereby agrees to take such
--------------------
actions, and to execute and deliver such documents and instruments, as shall be
requested from time to time by any holder of Senior Indebtedness to confirm and
further implement such subordination. In addition, this Note is subject to the
terms and conditions of that certain Subordination Agreement dated as of even
date herewith by and among Maker, Holder and Wells Fargo.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED ON OR PERTAINING TO THIS NOTE.
DIAMOND ANIMAL HEALTH, INC., an Iowa
corporation, Maker
By: /s/ Robert B. Grieve
--------------------------------
Its: Chief Executive Officer
--------------------------------
THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION AGREEMENT BY AGRI
LABORATORIES, LTD. IN FAVOR OF WELLS FARGO BUSINESS CREDIT, INC. DATED AS OF
APRIL 15, 2002.
EXHIBIT G
USES OF LOAN PROCEEDS
---------------------
1. [ *** ]
2. [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
- [ *** ]
APPENDIX NO. 1
TO AMENDED AND RESTATED
BOVINE VACCINE DISTRIBUTION AGREEMENT
This Appendix No. 1 ("Appendix") supplements the attached Amended and
--------
Restated Bovine Vaccine Distribution Agreement between Diamond and Distributor
dated as of September 30, 2002 (the "Distribution Agreement"), in order to set
----------------------
forth additional terms and conditions applicable to the additional Products
identified below.
WHEREAS, Diamond and Distributor are parties to the Distribution Agreement
providing for the distribution of certain bovine antigens; and
WHEREAS, Diamond, Distributor and [ *** ] have entered
into a "Bovine Testing Agreement" for the Product Titanium 5 + OncePMH.
WHEREAS, Section 2.01 of the Distribution Agreement contemplates that
additional products may be added to the Products subject to the Distribution
Agreement; and
WHEREAS, Diamond and Distributor desire to provide for the development and
licensure of additional Products (defined below) and if licensed, to add them as
Products under the Distribution Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Definitions.
(1) In General. Capitalized terms used herein shall have the
----------
meanings ascribed to them in the Distribution Agreement, unless otherwise
defined herein.
(2) "Additional Products" shall mean, for purposes of this Appendix
-------------------
only, the following Products packaged in [ *** ] dose, [ *** ] dose and [ *** ]
dose packages:
Additional Products - Titanium 5 + OncePMH (MLV IBR,
BVD1, BVD2, BRSV, PI3 + Intervet Live avirulent P.
haemolytica / multocida)
2. Development and Registration of Additional Products. In consideration
---------------------------------------------------
of Distributor's payment of the fees provided in the Bovine Vaccine
Testing Agreement, Diamond agrees to and hereby grants to Distributor
exclusive world wide marketing rights to the product identified on Exhibit A
---------
attached hereto and incorporated herein for a period of five (5) years from the
License Date by United States Department of Agriculture ("USDA"). Diamond shall
----
use reasonable efforts to assist distributor in the registration of such
Additional Products (bulk or packed form) outside the United States at
Distributor's expense. Distributor shall pay all Registration Costs
associated with obtaining and maintaining any Licenses required in the
Territory outside the United States and said Registration Costs shall be
included in the Qualified Revenue requirements as set forth in Section 1.04(ii)
(A) and, to the extent contemplated by Section 13.08 of the Distribution
Agreement, the requirements set forth in Section 1.04(ii)(B) of the
Distribution Agreement. This Section 2 of this Appendix shall supersede any
and all inconsistent provisions of Section 1.06, and the first sentence of
Section 2.02, of the Distribution Agreement.
3. Development and Registration Fees. Amounts paid by Distributor under
---------------------------------
the Bovine Testing Agreement to Diamond shall constitute Qualified Revenue
under the Distribution Agreement, be credited to Distributor's Minimum
Qualified Revenue obligations under the Distribution Agreement, beginning with
the Second Contract Year's Minimum Qualified Revenue, under the Distribution
Agreement.
4. Additional Product Subject to Distribution Agreement. If a License is
----------------------------------------------------
issued to Diamond, [ *** ], Distributor or any combination of the three (3)
named parties for the Additional Products by the United States Department of
Agriculture, and effective upon the date of such issuance (the "License Date")
------------
such Additional Products shall be added as a "Product" under the Distribution
-------
Agreement. All provisions of the Distribution Agreement relating to Products
shall apply to the Additional Product, except as expressly provided in this
Appendix.
5. Ownership. Section 2.02 of the Distribution Agreement shall not
---------
apply to the Additional Products. Diamond shall retain ownership of (i) the
Additional Products developed pursuant to this Appendix and (ii) any antigens
it supplies for such Additional Products, and the addition of the Additional
Products as Products under the Distribution Agreement shall not be deemed to
transfer any right, title, interest or license in or to such Additional
Products and/or antigens to Distributor, except for the distribution rights
expressly granted in the Distribution Agreement and this Appendix.
6. Term. With respect to all Additional Products (but not other
----
Products, with respect to which Section 6.01 of the Distribution Agreement
shall control): (i) the initial term of this Appendix shall be for a period
commencing on the License Date and ending on the fifth (5th) anniversary of
the end of the Contract Year during which the License Date occurs and (ii)
this Appendix shall automatically renew thereafter for additional renewal
terms of one year each, unless either party gives at least twelve (12) months
prior written notice to the other that it does not wish to renew this Appendix
with respect to such Additional Products.
7. Effect of Appendix. This Appendix is hereby incorporated by
------------------
reference into the Distribution Agreement as if fully set forth therein, and
in the event of any conflict between the terms and conditions of the
Distribution Agreement and this Appendix, the terms and conditions of this
Appendix shall control.