<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 7, 1999.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------
PROFESSIONAL VETERINARY PRODUCTS, LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MISSOURI 5047 37-1119387
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
10100 J STREET, OMAHA, NE 68127
(402) 331-4440
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
LIONEL L. REILLY, D.V.M.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PROFESSIONAL VETERINARY PRODUCTS, LTD.
10100 J STREET, OMAHA, NE 68127
(402) 331-4440
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES OF COMMUNICATIONS TO:
RICHARD E. PUTNAM, ESQ.
Baird, Holm, McEachen, Pedersen, Hamann & Strasheim
1500 Woodmen Tower, Omaha, Nebraska 68102-2068
(402) 636-8254
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock............................... 500 $3,000.00 $1,500,000 $417
</TABLE>
--------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
500 SHARES
PROFESSIONAL VETERINARY PRODUCTS, LTD.
COMMON STOCK
---------------
PROFESSIONAL VETERINARY PRODUCTS, LTD. IS OFFERING 500 SHARES OF ITS COMMON
STOCK.
---------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
---------------------
PRICE $3,000 A SHARE
------------------
<TABLE>
<CAPTION>
PRICE TO
QUALIFIED PROCEEDS TO
SHAREHOLDERS* COMPANY
------------- ------------
<S> <C> <C>
Per Share............................................................................ $ 3,000 $ 3,000
Total................................................................................ $ 1,500,000 $ 1,500,000
</TABLE>
- ------------------------
* Ownership of common stock is limited to licensed, practicing veterinarians
(or businesses comprised of veterinarians). Each veterinarian shareholder is
limited to ownership of one share of stock. There is no trading market for
the common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 5
Forward-Looking Statements..................... 7
Use of Proceeds................................ 7
Dividend Policy................................ 7
Capitalization................................. 8
Dilution....................................... 8
Selected Financial Data........................ 9
Management's Discussion and Analysis of
Financial Condition and
Results of Operations........................ 10
Business....................................... 13
<CAPTION>
PAGE
---------
<S> <C>
Management..................................... 17
Principal Shareholders......................... 20
Description of Common Stock.................... 20
Shares are not Eligible for Future Sale........ 22
Subscription to Company Stock.................. 22
Legal Matters.................................. 22
Experts........................................ 23
Additional Information......................... 23
Index to Financial Statements.................. F-1
Exhibit A1 (Instruction to Subscribers)........ A1-1
Exhibit A2 (Purchaser Questionnaire)........... A2-1
Exhibit A3 (Subscription Agreement)............ A3-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
Professional Veterinary Products, Ltd. was organized as a Missouri
corporation on August 2, 1982 with the sole purpose of acting as a wholesale
buyer of pharmaceuticals, vaccines, supplies, equipment and other items related
to the practice of veterinary medicine so that it might sell such items at a
reduced cost to its shareholders.
Ownership of stock in our Company is limited to licensed, practicing
veterinarians (or businesses comprised of veterinarians such as a partnership or
corporation). Each veterinarian shareholder is limited to ownership of one share
of stock, which is purchased at the fixed price of $3,000. The share of stock
may not be sold or transferred, except back to the Company at the same $3,000
price.
Our business purpose has been to provide services and products to our
veterinarian shareholders at competitive prices to assist them in being more
competitive within their practice areas. As part of these cooperative efforts,
we annually provide rebates to our shareholders based on their purchases of
goods from the Company. Our shareholders place product orders with our offices
in Omaha, Nebraska, which are filled from our warehouse facilities in Omaha and
then promptly shipped to our customers. As a wholesaler, we acquire our products
from original manufacturers of the products.
We do not manufacture, relabel, or in any other manner alter packaged goods
or products. We sell and distribute nearly 18,000 different items designed to
meet nearly every veterinary practitioner's product needs. Both our
shareholders' business and our business continues to change. Continual
integration of the large food animal producers has changed the method of
distribution of animal health products. We are experiencing increasing interest
by companion animal veterinarians which has led to more shareholders in the
metropolitan areas.
We have never paid dividends on our stock, and we do not anticipate paying
any dividends in the near future. We will use the funds from our sale of shares
for working capital. There is no market for our shares.
Our Board of Directors is comprised of eight veterinarian shareholders who
are elected on staggered terms from eight geographic districts. Our Chief
Executive Officer, Dr. Lionel L. Reilly, is also our President and answers
directly to the Board of Directors. Dr. Reilly is not a shareholder of the
Company.
In 1996 the Company obtained a no-action letter from the Securities and
Exchange Commission (SEC) permitting the sale of our shares without registration
based on a number of factual representations concerning our company and common
stock. In obtaining this SEC no-action letter, we confirmed that we would not
deviate from our previous practice of selling our products primarily to
shareholders, limiting any economic benefit received from sales to
non-shareholders. While our efforts have continued to be focused on providing to
our shareholders products at the lowest possible cost to them, we have
determined that it will be beneficial to our shareholders to sell products not
only to them, but also to non-shareholders. It is principally this change--the
desired expansion of sales of products to non-shareholders which we believe will
enhance the benefit of owning our shares--that requires SEC registration.
However, even after this change, our shares will continue to have the following
unique characteristics:
- Our shares will continue to be sold for a fixed price of $3,000 per share.
- Our shares will continue to be redeemed for a fixed price of $3,000 per
share. Shareholders may only sell their shares back to the Company. They
cannot sell shares to other persons or entities.
- Only one class of stock will continue to be issued, and each shareholder
is limited to ownership of one share of stock.
- Shares will continue to be issued only to licensed individual
veterinarians/veterinary clinics.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered shares
Common Stock to be outstanding
after the offering 1646 shares, based on 1,146 shares outstanding as of
July 1, 1999.
Price per Share $3,000 per share, which is fixed in our Articles of
Incorporation
Use of Proceeds For working capital and general corporate purposes. See
"Use of Proceeds."
Dividend Policy We do not anticipate paying cash dividends in the
foreseeable future. See "Dividend Policy."
</TABLE>
4
<PAGE>
RISK FACTORS
BEFORE YOU INVEST IN OUR COMMON STOCK, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY CONSIDER
THESE RISK FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED IN THIS
PROSPECTUS.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS. THESE STATEMENTS RELATE
TO FUTURE EVENTS OR FUTURE FINANCIAL PERFORMANCE. IN SOME CASES, YOU CAN
IDENTIFY FORWARD-LOOKING STATEMENTS BY TERMINOLOGY SUCH AS "MAY," "WILL,"
"SHOULD," "COULD," "EXPECTS," "PLANS," "ANTICIPATES," "BELIEVES," "ESTIMATES,"
"PREDICTS," "POTENTIAL," OR "CONTINUE" OR THE NEGATIVE OF SUCH TERMS AND OTHER
COMPARABLE TERMINOLOGY. THESE STATEMENTS ARE ONLY PREDICTIONS. IN EVALUATING
THESE STATEMENTS, YOU SHOULD SPECIFICALLY CONSIDER VARIOUS FACTORS, INCLUDING
THE RISKS OUTLINED BELOW. THESE FACTORS MAY CAUSE OUR ACTUAL RESULTS TO DIFFER
MATERIALLY FROM ANY FORWARD-LOOKING STATEMENT.
FAILURE TO MANAGE GROWTH COULD IMPAIR OUR BUSINESS
Our business has grown rapidly. Our sales increased from $62.6 million in
fiscal 1995 to $90.6 million in 1998. During that same period we have
significantly expanded our operations in the United States. Our number of
employees increased by approximately 44 individuals during this period.
It is difficult to manage this rapid growth, and our future success depends
on our ability to implement and/or maintain:
<TABLE>
<CAPTION>
<S>
- - Sales and marketing programs
- - Customer support programs
- - Operational and financial control systems
<CAPTION>
<S>
- - Recruitment and training of new personnel
- - Technological support which equals or exceeds our
competitors
</TABLE>
Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We expect that we will need to continue to improve our
financial and managerial controls, reporting systems and procedures and to
expand the training of our work force.
LOSS OF KEY PERSONNEL COULD HURT OUR BUSINESS
Our future success depends to a significant extent on the skills, experience
and efforts of company President and Chief Executive Officer Dr. Lionel Reilly
and key members of his staff. The loss of any or all of these individuals could
damage our business.
In addition, our products and services are specialized in nature. In general
only highly qualified and trained individuals have the necessary skills to
market our products and provide our services. We face intense competition for
the hiring of these professionals. Any failure on our part to hire, train and
retain a sufficient number of qualified professionals would damage our business.
We do not generally enter into employment agreements requiring these employees
to continue in our employment for any period of time.
THERE IS NO MARKET FOR OUR STOCK AND THE VALUE OF THE STOCK WILL NOT INCREASE
There has been no market for our common stock prior to this offering, and
there will be no market after this offering. Sales are limited to licensed
veterinarians/veterinary practices--our common stock will not be sold to anyone
else. The price of each share is fixed at $3,000, as provided in our Articles of
Incorporation. A share will not increase in value. If a shareholder wishes to
redeem his/her share, the shareholder must sell it to the Company and will
receive only $3,000. Shares may not be transferred or sold by a shareholder to
anyone other than the Company.
5
<PAGE>
IT IS UNLIKELY WE WILL PAY DIVIDENDS
Some investors favor companies that pay dividends, particularly in market
downturns. We have never declared or paid any cash dividends on our common
stock, and, in fact, our Articles of Incorporation and Bylaws have in the past
prohibited the payment of dividends. While the amendments to our Articles of
Incorporation and Bylaws approved by the Company shareholders at the Company's
1999 annual meeting do allow the payment of dividends, we currently intend to
retain any future earnings for funding growth of our business and therefore we
do not currently anticipate paying cash dividends on our common stock in the
foreseeable future.
WE RELY ON STRATEGIC RELATIONSHIPS TO GENERATE REVENUE
To be successful, we must establish and maintain strategic relationships
with leaders in the manufacturing industry. This is critical to our success
because we believe that these relationships will enable us to:
- Extend the reach of our distribution and services to the various
participants in the veterinary industry
- Obtain specialized expertise
- Generate revenue
Entering into strategic relationships is complicated because some of our
current and future partners may decide to compete with us. In addition, we may
not be able to establish relationships with key participants in the veterinary
distribution industry if we have established relationships with competitors of
these key participants. Consequently, it is important that we are perceived as
independent of any particular customer or partner.
Most of our agreements with manufacturers run for one year. We may not be
able to renew our existing agreements on favorable terms, or at all. If we lose
the right to distribute products under such agreements, we may lose access to
certain of our products and lose a competitive advantage. Potential competitors
could sell products from manufacturers that we fail to continue with and erode
our market share.
PERFORMANCE OR SECURITY PROBLEMS WITH OUR SYSTEMS COULD DAMAGE OUR BUSINESS
Our customer satisfaction and our business could be harmed if we or our
suppliers experience any system delays, failures or loss of data. We currently
process all our customer transactions and data at our facilities in Omaha,
Nebraska. Although we have safeguards for emergencies, the occurrence of a major
catastrophic event or other system failure at our Omaha facility could interrupt
data processing or result in the loss of stored data.
WE FACE SIGNIFICANT COMPETITION
The market for veterinary distribution services is intensely competitive,
rapidly evolving and subject to rapid technological change. Some of our
competitors have comparable product lines, technical experience and financial
resources. These organizations may be better known and have more customers than
us. We may be unable to compete successfully against these organizations.
Many of our competitors have distribution strategies that directly compete
with us. We have many competitors including:
- Walco International
- Lextron
- J. A. Webster, Inc.
- The Butler Company
6
<PAGE>
In addition, we expect that companies and others specializing in the veterinary
products industry will offer competitive products. Some of our large
manufacturers/suppliers may also compete with us through direct marketing and
sales of their products.
CHANGES IN THE VETERINARY DISTRIBUTION INDUSTRY COULD ADVERSELY AFFECT OUR
BUSINESS
The veterinary distribution industry is subject to changing political,
economic and regulatory influences. These factors affect our purchasing
practices and operation of our business. Some of our competitors are
consolidating to create integrated delivery systems with greater market
presence. These competitors may try to use their market power to negotiate price
reductions with the manufacturers. If we were forced to reduce our prices, our
operating results would suffer. As the veterinary distribution industry
consolidates, competition for customers will become more intense and the
importance of acquiring each customer will become greater.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus including the above risk factors
section, contains forward-looking statements that involve substantial risks and
uncertainties. You can identify these statements by forward-looking words such
as "may," "will," "expect," "anticipate," "believe," "estimate," "project," and
"continue" or similar words. You should read statements that contain these words
carefully because they:
- Discuss our future expectations
- Contain projections of our future results of operations or of our
financial condition
- State other "forward-looking" information
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors listed above, as
well as any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Before you
invest in our common stock you should be aware that the occurrence of the events
described in these risk factors and elsewhere in this prospectus could have a
material adverse effect on our business, operating results and financial
condition.
USE OF PROCEEDS
The net proceeds from the sale of shares of common stock, after estimated
offering expenses, and assuming the sale of all shares, will be $ . We will
use the net proceeds from the sale of the common stock for general corporate
purposes. These purposes may include paying costs/expenses associated with our
new facility as well as general operating expenses including working capital. As
of the date of this prospectus, we cannot specify with certainty the particular
uses for the net proceeds to be received as shares are sold in this offering.
Accordingly, our management will have broad discretion in the application of the
net proceeds. Pending their application, the net proceeds may be invested in
certificates of deposit or other short term, investment grade, interest-bearing
securities.
DIVIDEND POLICY
The Company shareholders approved Amended and Restated Articles of
Incorporation and Bylaws at the Company's Annual Meeting held in August, 1999 to
permit the Company to pay dividends. Any such payment of dividends would be
solely in the discretion of the Board of Directors, and at this time, we do not
anticipate that a dividend will be paid in the foreseeable future. We intend to
retain future earnings, if any, to finance the expansion of our business.
7
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of April 30, 1999 and
as adjusted to reflect the sale of 500 shares of common stock we are offering
and application of the estimated net proceeds from the offering. This table
should be read in conjunction with our financial statements and notes thereto
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AT APRIL 30, 1999
--------------------------
ACTUAL AS ADJUSTED
------------ ------------
<S> <C> <C>
Short-term debt (including current portion of long term debt)......................... $ 955,000 $ 955,000
------------ ------------
Long-term debt (excluding current portion)............................................ $ 0 $ 0
Stockholders' equity:
Common stock, no par value per share
Authorized 30,000 shares; 1,118 shares issued and outstanding; and shares
issued and outstanding adjusted................................................... $ 3,283,000 $ 4,783,000
Retained earnings................................................................... $ 1,410,772 1,410,772
------------ ------------
Total stockholders' equity.......................................................... $ 4,696,772 6,193,772
------------ ------------
Total capitalization................................................................ $ 5,651,772 $ 7,148,772
------------ ------------
</TABLE>
DILUTION
The price for a share of Company common stock is set in our Articles of
Incorporation at $3,000 per share, or such lesser amount as determined by the
Board of Directors in its discretion. Therefore, unless the Board of Directors
lowers the future price of common stock, an event which we do not currently
anticipate occurring, the price will remain at $3,000 per share and there will
be no dilution of existing shareholders' interests. The price for a share of
common stock may not be increased without an amendment to our Articles of
Incorporation.
8
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected financial data for the Company for
each of the years in the five-year period ended July 31, 1998 and for the
nine-month periods ended April 30, 1999 and 1998. The data set forth below as
of, and for the nine-month periods ended April 30, 1999 and 1998 is unaudited
and, in the opinion of Company management, reflects all adjustments considered
necessary for a fair presentation of the results for such interim periods. The
interim results are not necessarily indicative of results which may be expected
for future periods, including the year ending July 31, 1999.
The historical selected financial data set forth below for the five years
ended July 31, 1998 are derived from the Company's Financial Statements included
elsewhere in this prospectus and should be read in conjunction with those
financial statements and notes thereto. These financial statements have been
audited by Marvin E. Jewell & Co., P.C. independent public accountants, whose
report with respect thereto appears elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ------------------------
--------------------------------------------------------------- APRIL 30, APRIL 30,
STATED IN DOLLARS 1994 1995 1996 1997 1998 1998 1999
- ----------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF DATA
Revenues..................... $53,439,630 $63,536,749 $67,999,340 $80,938,835 $94,245,375 $70,722,129 $88,011,648
Cost of goods sold........... 50,352,152 59,038,665 62,103,482 73,701,533 85,261,574 63,633,830 80,404,318
Gross profit................. 3,087,478 4,498,084 5,895,858 7,237,302 8,983,801 7,088,299 7,607,330
Operating, general and
administrative expenses.... 2,974,477 4,392,557 5,794,348 7,077,385 8,725,912 5,477,266 6,775,297
Operating income............. 113,001 105,527 101,510 159,917 257,889 1,611,033 832,033
Other income................. 80,125 101,890 120,787 125,256 161,205 111,823 377,659
Other expenses............... (47,286) (105,631) (148,291) (208,407) (244,111) (204,085) (223,178)
Income before income taxes... 145,840 101,786 74,006 76,766 174,983 1,518,771 986,514
Income taxes................. 51,496 39,132 28,469 30,736 73,440 599,546 395,232
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income................... $ 94,344 $ 62,654 $ 45,537 $ 46,030 $ 101,543 $ 919,225 $ 591,282
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income per share:
Basic earnings per share..... $ 145.37 $ 76.40 $ 50.30 $ 47.65 $ 96.89 $ 901.20 $ 528.87
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Basic common shares
outstanding used in the
calculation................ 649 820 906 966 1,048 1,020 1,118
SUPPLEMENTAL OPERATING DATA
Net cash provided by (used
in) operating activities... $ 37,940 $ (409,507) $ (320,149) $ (647,441) $(2,115,978) $(1,077,414) $ 4,139,477
Net cash provided by (used
in) investing activities... (273,680) (1,172,433) (610,821) (194,181) (442,604) (313,424) 317,897
Net cash provided by (used
in) financing activities... 290,699 1,624,817 745,938 721,767 1,317,233 1,187,057 (2,115,032)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ------------------------
--------------------------------------------------------------- APRIL 30, APRIL 30,
STATED IN DOLLARS 1994 1995 1996 1997 1998 1998 1999
- ----------------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital.............. $ 1,460,898 $ 2,119,581 $ 2,106,023 $ 2,456,944 $ 2,698,906 $ 3,459,324 $ 2,621,984
Total Assets................. 7,928,644 11,151,627 12,859,118 14,175,862 20,007,753 22,211,190 27,412,209
Total long-term
obligations................ 338,343 1,422,320 1,364,594 1,301,609 1,225,089 1,244,535
**Total short-term
borrowings................. 51,044 52,907 557,726 1,062,985 3,285,273 2,148,394 1,048,850
Shareholder equity........... 2,437,726 3,013,380 3,316,917 3,542,947 3,891,490 4,625,172 4,693,772
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE
INDICATED IN SUCH FORWARD-LOOKING STATEMENTS. THE FOLLOWING DISCUSSION OF THE
FINANCIAL CONDITION AND RESULTS OF OUR OPERATIONS SHOULD BE READ IN CONJUNCTION
WITH THE FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN
THIS PROSPECTUS.
OVERVIEW
The Company was chartered on August 2, 1982 as a Missouri corporation. Since
January 1, 1983 the Company has operated from various facilities in Omaha,
Nebraska. The Company's fiscal year begins on August 1 and concludes on July 31
of the following year.
The Company is one of the largest distributors of animal health products to
veterinarians who practice food animal medicine in the United States. The
Company was founded in 1982 by veterinarians whose primary interests were "food
animal" related. The changing trends of veterinary medicine has resulted in a
gradual shift toward the sale of more "companion animal" products.
The Company's sales have increased from $62.6 million in fiscal year 1995 to
$90.6 million in fiscal year 1998, and we expect this trend of increases in
sales to continue. We will continue our strategy of supporting the food animal
veterinarian with a broad range of products and value-added services. However,
sales in the food animal sector are subject to very low margins. In view of the
increasing maturity of the food animal market the Company must continue to look
for future growth in the companion animal sector.
Historically companion animal product related transactions have enjoyed
higher margins than sales of food animal products. However, as competition
increases in the companion animal sector it is likely that margins will begin to
erode. We believe there is likely to be consolidation of the many small
privately owned veterinary clinics, which will result in an increasing number of
larger veterinary practice business units. As a result, the larger veterinary
practices will have increased purchasing leverage and will negotiate for lower
product costs which will reduce margins at the distribution level and impact
Company revenue and net income.
There are two major types of transactions that affect the flow of products
to the Company's customers. Traditional "buy/sell" transactions account for over
eighty percent of the Company's business. In this type of transaction the
customer places an order with the Company, which is then picked, packed,
shipped, invoiced to the customer, followed by payment from the customer to the
Company. There are several product lines where the Company provides all
transactional activities described above, except that the manufacturer retains
title to the product.
A second transaction model used by the Company is termed the "agency
agreement". Under this approach, the Company receives orders for products from
its customer. The Company transmits the order to the manufacturer who than
picks, packs, ships, invoices and collects payment from the customer. The
Company receives a commission payment for soliciting the order as well as other
customer service activities. The Company's operating expenses associated with
this type of sale may be lower than the traditional buy/sell transaction. Agency
selling allows the manufacturer and the Company to immediately react to market
conditions. This arrangement allows the manufacturer to establish and
standardize price of its products in the market. This current information often
is used by the Company and the various manufacturers to develop data based
marketing programs.
The mode of selling products to veterinarians is dictated by the
manufacturer. There has been a recent slight shift away from agency agreements
returning to the traditional buy/sell transactional business model.
10
<PAGE>
Product returns from our customers and to our suppliers occur in the
ordinary course of business. The Company extends to its customers the same
return of goods policies as extended to the Company by the various
manufacturers. The Company does not believe its operations will be adversely
impacted due to the return of products.
RESULTS OF OPERATIONS
The following discussion is based on the historical results of operations
for fiscal 1996, 1997 and 1998 and the nine months ended April 1998 and 1999.
FISCAL 1997 COMPARED TO FISCAL 1996
Net sales for the fiscal year ending July 31, 1997 increased by 18.8% or
$12.3 million for the year. Sales for the 1997 fiscal year totaled $78.3 million
compared to $66.0 million for the previous fiscal year. The growth was
attributable to increased sales to existing veterinary shareholders and also the
addition of new shareholders.
During the year 60 veterinary practices became shareholders of the Company.
On July 31, 1997 there were 966 shareholders of the Company.
Gross profit increased by $1.3 million to $7.2 million compared to $5.9
million for the previous fiscal year. Gross profit as a percentage of total
revenues was 9.0% in fiscal 1997 compared to 9.0% in fiscal 1996.
Operating, general and administrative expenses increased by $1.3 million to
$7.1 million in fiscal year 1997 compared to $5.8 million for the previous
fiscal year. Such operating, general and administrative expenses as a percentage
of total revenues fiscal 1997 were 8.7% vs. 8.8% in fiscal 1996.
FISCAL 1998 COMPARED WITH FISCAL 1997
Net sales for the fiscal year ended July 31, 1998 increased by 15.7% or
$12.3 million for the year. Sales for the 1998 fiscal year totaled $90.6 million
compared to $78.3 for the previous fiscal year. The growth was attributable to
increased sales to existing veterinary shareholders and also the addition new
shareholders. During the year 82 veterinary practices became shareholders of the
Company. On July 31, 1998 there were 1,048 shareholders of the Company.
Gross profit increased by $1.8 million to $9.0 million compared to $7.2
million for the previous fiscal year. Gross profit as a percentage of total
revenues was 9.5% in fiscal 1998 compared to 9.0% in fiscal 1997.
Operating, general and administrative expenses increased by $1.6 million to
$8.7 million in fiscal year 1998 compared to $7.1 million for the previous
fiscal year. Such operating, general and administrative expenses as a percentage
of total revenues fiscal 1998 was 9.3% vs. 8.7% in fiscal 1997.
NINE MONTHS ENDED APRIL 1999 COMPARED TO NINE MONTHS ENDED APRIL 1998
Net sales for nine months ending April 30, 1999 increased by 25.4% or $17.3
million over the comparable nine-month period ended April 30, 1998. Sales
totaled $85.6 million compared to $68.3 million for the previous nine months
ending April 30, 1998. The growth was attributable to increased sales to
existing veterinary shareholders and also the addition of new shareholders.
During this period 70 veterinary practices became shareholders of the Company.
On April 30, 1999 there were 1,118 shareholders of the Company.
Gross profit increased by $500 thousand to $7.6 million for the nine-month
period ended April 30, 1999, compared to $7.1 million for the nine-month period
ended April 30, 1998. Gross profit as a
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<PAGE>
percentage of total revenues was 8.6% for the nine-month period ended April 30,
1999, compared to 10.0% for the nine-month period ended April 30, 1998.
Operating, general and administrative expenses increased by $1.3 million to
$6.8 million for the nine-month period ended April 30, 1999, compared to $5.5
million for the nine-month period ended April 30, 1998. Such operating, general
and administrative expenses as a percentage of total revenues nine months ending
April 30, 1999 was 7.7% vs. 7.7% the previous nine months ending April 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Our capital requirements relate primarily to working capital and the
expansion of our operations to accommodate sales growth. We maintain significant
inventory levels to fulfill our operating commitment to our customers.
Historically, we have financed our cash requirements primarily from short-term
bank borrowings and cash from operations.
Net cash used by operating activities of $320,149 in fiscal year ending July
1996 was primarily attributable to increases of $140,367 in accounts receivable
and $1,535,369 in inventories. These were partially offset by an increase of
$934,492 in accounts payable. For the fiscal year ending July 1997, net cash
used by operating activities of $647,441 was primarily attributable to increases
of $525,777 in accounts receivable and $1,207,904 in inventories. These were
partially offset by an increase of $492,484 in accounts payable. Net cash used
by operating activities of $2,115,978 in fiscal year ending July 1998 was
primarily attributable to increases of $1,493,853 in accounts receivable and
$4,473,791 in inventories. These were partially offset by an increase of
$2,594,480 in accounts payable. For the nine months ending April 1999, net cash
provided by operating activities of $4,139,477 was primarily attributable to an
increase of $5,020,029 in accounts receivable and $1,523,450 in inventories. It
was partially offset by an increase of $10,707,167 in accounts payable.
Net cash used by investing activities of $610,821 in fiscal year ending July
1996 was primarily attributable to investments in property and equipment. Net
cash used by investing activities of $194,181 in fiscal year ending July 1997
was primarily attributable to investments in property and equipment. In the
fiscal year ending July 1998, net cash used by investing activities of $442,604
was primarily attributable to investments in property and equipment. Net cash
provided by investing activities of $317,897 for nine months ending April 1999
was primarily attributable to the sale in property and equipment.
Net cash provided by financing activities of $745,938 in fiscal year ending
July 1996 was primarily attributable to increases of $500,000 in loan proceeds
and $298,845 from net proceeds from issuance of common stock. In the fiscal year
ending July 1997, net cash provided by financing activities of $721,767 was
primarily attributable to increases of $500,000 in loan proceeds and $279,493
from net proceeds from issuance of common stock. Net cash provided by financing
activities of $1,317,233 in fiscal year ending July 1998 was primarily
attributable to increases of $1,035,913 in loan proceeds and $281,320 from net
proceeds from issuance of common stock. For the nine months ending April 1999,
net cash used by financing activities of $2,115,032 was primarily attributable
to reduction of $2,351,657 in loan proceeds and an increase of $236,625 from net
proceeds from issuance of common stock.
SEASONALITY IN OPERATING RESULTS
The Company's quarterly sales and operating results have varied
significantly in the past and will likely continue to do so in the future.
Historically, our sales are seasonal with peak sales in the late spring and
early fall. The cyclical nature is directly tied to the significant amount of
business the Company does in the livestock sector. Product use cycles are
directly related to certain medical procedures performed by veterinarians on
livestock during the late spring and early fall.
In the last few years the Company has been selling more companion animal
related products. These products tend to have a seasonal nature which minimally
overlaps the livestock business cycles. The net
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<PAGE>
result is a reduction of the cyclical seasonal nature of the business.
Minimizing the cyclical nature of the Company's business has allowed for more
efficient utilization of all resources.
YEAR 2000
In late 1995 the Company conducted an overall assessment of its computer
systems, including Year 2000 readiness. Based on this assessment, the Company
determined that the system was not Y2K compliant and was inadequate to support
the projected growth of the Company. A consultant was hired to analyze the
Company's operations and then assisted management to determine the software
system which best suited its needs.
The selected system became operational in late 1996. All aspects of the
business are driven by this modern application system. The Company continually
installs hardware and software updates and upgrades to the latest versions
applicable. Certain licenses and registrations with expiration dates well into
the next millennium have been accepted and are currently operational by the
system.
With respect to non-information technology systems, the Company has nearly
completed the inventory and assessment of known embedded systems. The Company's
telecommunications hardware and software system will be the latest technology
when installed in the Company's new facility later in 1999. A new security
system also will be installed.
The Company has begun the process of initiating formal communications with
significant vendors and customers to determine the extent to which the Company
may be vulnerable to failure by any of these third parties to remedy their own
Year 2000 Issues. The Company also relies upon governmental agencies, utility
companies, telecommunication service companies and other service providers. If
such governmental agencies or other third parties suffer a Year 2000 business
disruption it could have a material adverse effect on the Company's results of
operations or financial position.
BUSINESS
The Company is a leading wholesale distributor of animal health products to
practicing veterinarians. We also offer a broad array of prescription,
non-prescription and sundry items to assist veterinarians in their practice. The
Company does not sell pet foods. A small quantity of feed additive type products
are sold by the Company.
The Company distributes approximately 18,000 different items including
biologicals, pharmaceuticals, parasiticides, instruments and equipment.
Routinely some 11,000 items are inventoried for immediate shipment. The balance
of items are either drop-shipped from the manufacturer to the customer or are
special order items.
As of July 1, 1999, the Company had 1,146 shareholder veterinary clinics.
These shareholders are principally located from the Rocky Mountains to the
Atlantic Seaboard with some presence in the South. The following describes the
ten states with the highest concentration of shareholders (with the number of
shareholders in such state shown in parentheses): Missouri (140), Iowa (116),
Illinois (112), Nebraska (104), Pennsylvania (101), Kansas (94), Minnesota (41),
Kentucky (40), Ohio (39) and Indiana (36). No shareholder/customer represented
more than 1% of the Company's total revenues during the past fiscal year.
Due to the geographical location of the majority of its shareholders nearly
65% of the Company's gross sales are related to products used for the treatment
and/or prevention of diseases in food animals. The balance of product sales are
for the treatment and/or prevention of diseases in companion animals and equine.
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<PAGE>
The Company primarily sells branded products as marketed by the major animal
health manufacturers and suppliers. The Company does not currently private label
any products, but would consider a private label product agreement if there was
a decisive competitive advantage for doing such.
The Company's business strategy is to be the leading supplier of animal
health products to veterinary clinics by offering a complete assortment of items
at competitive prices which are supported by superior levels of customer
service. The Company believes that this strategy provides it with a competitive
advantage by combining the broad product selection with everyday low prices and
support from very efficient operations. The shareholder veterinary clinics are
able to lower their product acquisition costs which both increases profitability
and gives them a competitive market advantage.
The Company has heavily invested in electronic information systems to
maximize efficiencies. All phases of the transactional process are
electronically driven. The Company believes this advanced electronic technology
will assist in earlier adoption of electronic commerce through the internet by
both its customers and suppliers.
VALUE-ADDED SERVICES
The Company offers its customers and suppliers a comprehensive menu of
value-added services. These services allow individual customers various
selections based on their individual needs. The Company manages a database of
all transactions so that its customers may maximize their participation in
promotions frequently offered by suppliers. The customer is periodically
apprised, either by phone or mailings, of their level of participation in these
promotions. This promotional tracking service gives the customer the option to
maximize their participation in a promotion which can ultimately increase their
profitability and allow them to more effectively compete in certain markets.
The Company has developed a multi-day inventory management and purchasing
techniques seminar for its customers. This seminar is held at the Company's
headquarters. The customer is trained to better use the Company's resources and
also be increasingly efficient in managing their product and inventory
activities.
The Company has Electronic Data Interchange (EDI) capability which provides
the supplier with product sales and movement. The supplier is able to monitor
sales activities, advertising effectiveness and market trends in an efficient
manner. The Company also assists the manufacturer in the design of effective
promotions. The historical transactional database and the promotional tracking
service are unique tools to assist the manufacturer in tailoring effective
promotions.
REBATES TO SHAREHOLDERS
The Company and its shareholders are in a contractual relationship evidenced
in the Company's Articles of Incorporation which requires that all sales of
Company products to Company shareholders be at no more than 5% over the cost of
the Company as determined by the Company's certified public accountant. Based on
this requirement, the Company's certified public accounting firm annually makes
a determination of the Company's product costs. This valuation of product costs
is then multiplied by 105% and compared to the Company's product sales. Amounts
in excess of the 105% computation are overcharges which are then rebated back to
shareholders by credit memo. Such rebates are made on a pro rata basis to
shareholders, based on the aggregate amount of products purchased by each
shareholder during the year for which the rebate is made. Rebates are included
in the Company's financial statements and are netted against sales on the
Company's income statement/balance sheet.
THE ANIMAL HEALTH INDUSTRY
A recent survey by a national veterinary organization lists over 25,000
veterinary practices in the United States. There are some 43,000 veterinarians
practicing in the various disciplines of veterinary
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<PAGE>
medicine. This survey indicated nearly 71% of the veterinarians in private
clinical practice predominately specialize in companion animal medicine.
The U.S. animal health manufacturer sales of biologicals, pharmaceuticals,
insecticides and other packaged goods was approximately $2.75 billion for 1998.
This segment of business in which the Company participates is intended to meet
the product and supply needs of the private clinical practice.
Sundry items such as collars, leashes, cages, books, aquatic supplies and
equine tack are primarily sold through retail pet supply outlets. These products
typically are not purchased from veterinary practices. The Company makes a few
of these items available, however annual sales are very minimal.
Consolidation is a primary force reshaping the animal health industry. Sales
by the top ten animal health product manufacturers account for over 75% of the
U.S. market. At this time the top five U.S. animal health product companies have
a market share that exceeds 50% of the total animal health business.
Livestock production continues the consolidation trend that started a number
of years ago. Agribusiness integrators continue to build larger livestock
raising facilities. Improved management systems coupled with new preventative
products have resulted in an ongoing reduction in food animal product sales for
the past several years. There also has been a loss of market share in several
key product groups due to generic competition. The generic products generally
sell for lower prices which causes a pricing deflation in the market.
The companion animal market is experiencing considerable growth. Several new
therapeutic and preventative products have contributed to most of this increased
sales volume. Nutraceuticals (nutritional pharmaceuticals) have an increasing
presence in the companion animal market. During the past five years companion
animal product sales have grown from 25% to 35% of the total U.S. market.
COMPETITION
Distribution of animal health products is characterized by either "ethical"
or "OTC" channels of product movement. Ethical distribution is defined as those
sales of goods to licensed veterinarians for use in their professional practice.
Many of these products are prescription and must only be sold to a licensed
professional. OTC (over-the-counter) distribution is the movement of those goods
to the animal owner or the end user of such products. Many of these products
will also be purchased by the licensed veterinarian for professional use or for
resale to their client.
There are numerous ethical distribution companies operating in the same
geographical regions as the Company and competition in this distribution
industry is intense. Most of the competitors generally offer a similar range of
products at prices often comparable to the Company's. The Company seeks to
distinguish itself from its competitors by offering a higher level of customer
service as well as having its principal customers also as its
shareholders/owners. In addition to competition from other distributors, the
Company also faces existing and potentially increased competition from
manufacturers and suppliers who distribute some percentage of their products
directly to veterinarians. Although the Company competes against direct sales by
manufacturers and suppliers, it is often able to compete with such direct sales
by adding new value-added services and pricing differentiation.
The Company's customers, licensed practicing veterinarians, compete with the
OTC distributors for the sale of products to the animal owner. Several large OTC
distributors sell products directly to the large agribusiness integrator or the
livestock owner. Pet food and supplies are sold by a highly fragmented industry
which includes supermarkets, discount stores and other mass merchandisers,
specialty pet stores, direct mail houses and veterinarians. The Company does not
sell products directly to the animal owner and therefore does not compete with
its customer for the sale of such product.
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<PAGE>
The role of the animal health distributor has changed dramatically during
the last decade. Successful distributors have shifted from a selling mentality
to providing products and services in a consultative environment. Declining
profit margins typify current financial trends. Currently there is an over
capacity in the animal health distribution network, although there have been few
animal health distributor mergers or acquisitions. We believe the Company must
continue to add value to the distribution channel, and reduce the redundancies
that exist, while removing unnecessary costs associated with product movement.
GOVERNMENT REGULATION
Both state and federal government agencies regulate the distribution of
certain animal health products. The Company is subject to regulation by the US
Department of Agriculture, the Food and Drug Administration and the Drug
Enforcement Administration. Several State Boards of Pharmacy require the Company
to be licensed in their state for the sale of animal health products with their
jurisdiction. Each state (as well as certain cities and counties) requires the
Company to collect sales taxes/use taxes on differing types of animal health
products.
The Company is subject to laws governing its relationship with employees,
including minimum wage requirements, overtime, working conditions and
citizenship requirements.
ENVIRONMENTAL CONSIDERATIONS
The Company does not manufacture, re-label or in any way alter the
composition or packaging of products. All products are distributed in compliance
with the relevant rules and regulations as approved by various State and Federal
Regulatory Agencies. The Company's distribution business practices create no or
minimal impact on the environment.
EMPLOYEES
As of June 1, 1999 the Company had 120 employees. We are not subject to any
collective bargaining agreements and have not experienced any work stoppages. We
consider our relationship with our employees to be good.
PROPERTIES
The Company leases the distribution facility and the offices it currently
occupies in Omaha, Nebraska. This property was purchased by the Company in 1991,
with a large addition built in 1994. The Company sold this property in April
1999 and negotiated a short-term lease with the purchaser that expires December
31, 1999. The Company also leases a small offsite warehouse bay for the storage
of products. This lease also expires late in 1999. The Company also stores some
of its products at a public warehouse facility.
The Company purchased 9.6 acres of land in a newly developed industrial
subdivision in Omaha, Nebraska in September 1998 for the purpose of building a
larger and more efficient distribution center. This new facility will contain
nearly 100,000 square feet of open warehouse space and some 30,000 square feet
of finished office area. In late 1999, the Company plans to move to the new
facility, which will be encumbered by a deed of trust. The latest in technology
is being incorporated into the design of the new facility to maximize
distribution efficiencies.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The Company's day-to-day affairs are managed by its executive officers who
are appointed by the Board of Directors for a one-year term. Our Board of
Directors is composed of eight (8) shareholders who are elected for 3-year
staggered terms from eight geographic districts. All Directors are practicing
veterinarians, and are not eligible to continue on the Board beyond their
initial three-year term, unless they have been off the Board for at least one
year. Each Director, or the practice of which he is a member, owns one share of
Company common stock.
Each director's professional practice must be located in the district in
which he or she is elected from at the time of the election. Under our Bylaws,
our Board of Directors, at its discretion, and no more frequently than annually,
may alter the boundaries of each geographic district to more accurately
represent an equitable number of shareholders.
Our Board of Directors is divided into three staggered classes of directors.
The appropriate class of directors is elected at each annual meeting of our
shareholders.
<TABLE>
<CAPTION>
NAME AGE POSITION DISTRICT CLASS
- ------------------------------------------------ --- ----------------------------------------- ------------- -----
<S> <C> <C> <C> <C>
Lionel L. Reilly, D.V.M......................... 56 President, CEO, non-voting Director
Neal B. Soderquist.............................. 43 Controller
Eric R. Phillips................................ 50 Director of Logistics and Product
Management
Kenneth R. Liska, D.V.M......................... 55 Director 1 II
Wayne E. Rychnovsky, D.V.M...................... 42 Director 2 II
Russ R. Weston, D.V.M........................... 49 Chairman, Director 3 I
Raymond C. Ebert II, D.V.M...................... 53 Director 4 III
Michael L. Whitehair, D.V.M..................... 49 Director 5 III
Mark A. Basinger, D.V.M......................... 51 Director 6 II
Timothy P. Trayer, D.V.M........................ 46 Secretary, Director 7 I
Fred G. Garrison, D.V.M......................... 54 Vice-Chairman, Director 8 III
</TABLE>
Class I directors currently serve until the 2000 annual meeting of
shareholders; Class II directors serve until the 2001 annual meeting of
shareholders; and Class III directors serve until the 2002 annual meeting.
17
<PAGE>
The following map illustrates the geographic breakdown of the eight
districts.
[MAP]
Lionel L. Reilly, D.V.M. has served as President and CEO of the Company
since 1994. Prior to that he was Vice President, Business Operations and
functioned as the CEO. He has been with the Company since 1983, shortly after
its founding. Dr. Reilly spent several years as a military veterinarian, over
five years in private clinical veterinary practice and five years in industry as
a researcher and technical services veterinarian. He has a degree from Kansas
Wesleyan University in Salina, Kansas. Dr. Reilly graduated in 1970 from the
College of Veterinary Medicine, Kansas State University, Manhattan, Kansas.
Neal B. Soderquist was appointed Controller in 1994. From 1989 to 1994 he
served in that position as well as managed much of the human resources
functions. For the previous 14 years Mr. Soderquist was controller/officer
manager for Lincoln Lumber Co., Lincoln, NE. In 1975 he received an Associates
Degree from Lincoln School of Commerce, Lincoln, Nebraska.
Eric R. Phillips has served as Director of Logistics and Product Management
of the Company since July, 1999. Prior to that he was the part owner of Olson
Phillips Wassinger Financial Services, where he was responsible for insurance
and mutual funds investments.
Kenneth R. Liska, D.V.M., has served as a Director of the Company since
1997. He is the owner of a veterinary clinic located in Wayne, Nebraska. Dr.
Liska received a Doctor of Veterinary Medicine degree from Iowa State University
in 1969.
Wayne E. Rychnovsky, D.V.M., has served as a Director of the Company since
1998. He is the owner of a three person veterinary practice in Southwest Iowa.
Dr. Rychnovsky has a degree in Animal Science from Iowa State University. In
1978 he graduated with a Doctor of Veterinary Medicine degree, also from Iowa
State University.
Russ R. Weston, D.V.M., has served as Chairman since 1999 and has been a
member of the Company's Board of Directors since 1997. He is the
secretary-treasurer of a mixed animal veterinary clinic
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<PAGE>
in Stephenson County, Illinois. Dr. Weston received a Doctor of Veterinary
Medicine degree from Iowa State University in 1973.
Raymond C. Ebert II, D.V.M., has served as a Director of the Company since
1999. He is the owner of an animal clinic located in Pleasant Hill, Missouri.
Dr. Ebert received a Doctor of Veterinary Medicine degree from the University of
Missouri in 1970.
Michael L. Whitehair, D.V.M., has served as a Director of the Company since
1999. He is a partner of an animal hospital located in Abilene, Kansas. Dr.
Whitehair received a Doctor of Veterinary Medicine degree from Kansas State
University in 1974.
Mark A. Basinger, D.V.M., has served as a Director of the Company since
1997. He is the owner of a veterinary clinic located in Ottawa, Ohio. Dr.
Basinger has a degree in Agriculture from Ohio State University. In 1973 he
graduated with a Doctor of Veterinary Medicine degree, also from Ohio State
University.
Timothy P. Trayer, D.V.M., has served as Secretary since 1998 and has been a
member of the Company's Board of Directors since 1997. He is the founder and
partner of a five person food animal practice located in Denver, Pennsylvania.
Dr. Trayer has a degree in Biology Chemistry from Wilmington College and
graduated in 1979 with a Doctor of Veterinary Medicine degree from Ohio State
Veterinary College.
Fred G. Garrison, D.V.M., has served as Vice-Chairman since 1999 and has
been a Director of the Company since 1998. He is the president of a three person
veterinary clinic located in Centreville, Virginia. Dr. Garrison received a
degree in Animal Science from Pennsylvania State University. He graduated from
Cornell University in 1971 with a Doctor of Veterinary Medicine degree.
The Executive Committee, which makes recommendations to the Board concerning
salaries and incentive compensation for our officers and employees, is comprised
of Dr. Garrison, Dr. Liska and Dr. Weston.
COMPENSATION
Directors are paid $500 per day for attendance at the Company's Mid-Year and
Annual Meetings, and any specially-called Board meetings where attendance is
required. In addition, Directors are reimbursed for their expenses, including
meeting related travel and lodging at the meeting location. Directors are paid
$750 annually for participation in Board teleconference meetings and $250 for
attendance at each District meeting they attend. No other compensation is paid
to Directors without further action by the Board.
The following table represents the cash compensation paid by the Company to
the named executive officer for the years 1996 through 1998 whose compensation
from the Company exceeded $100,000 for these years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- ----------------------------------------------------------------- --------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Lionel L. Reilly................................................. 1998 $ 186,000 $ 8,300 20,200
President and Chief Executive Officer and Non-Voting Director 1997 177,100 0 14,600
1996 169,300 12,900 17,155
</TABLE>
- ------------------------
(1) These amounts represent contributions by the Company to Dr. Reilly's 401(k)
Plan and profit-sharing Plan.
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<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Nebraska Business Corporation Act, the Company's
Articles of Incorporation provide that no director will be personally liable to
the Company or its shareholders for monetary damages for any action taken, or
for any failure to take action as a director except for liability
- for the amount of a financial benefit received by a director to which he
or she is not entitled
- for intentional infliction of harm on the Company or its shareholders
- for a violation of Section 21-2096 of the Nebraska Business Corporation
Act
- for an intentional violation of criminal law
The Company's Articles of Incorporation provide that the Company must
indemnify its directors, officers, employee or agent to the fullest extent
permitted by law. Generally under Nebraska law, a director or officer may be
indemnified if that individual acted in good faith and had reasonable basis to
believe that (1) in the case of conduct in the individual's official capacity
with the company, that the individual's conduct was in the company's best
interests; (2) in all other cases, that the individual's conduct was at least
not opposed to the company's best interest; and (3) regarding any criminal
proceedings, the individual had no reasonable cause to believe the individual's
conduct was unlawful.
There is no pending litigation or proceeding involving a director, officer,
employee or agent of the Company as to which indemnification is being sought.
The Company is not aware of any other threatened litigation that may result in
claims for indemnification by any director, officer, employee or agent.
PRINCIPAL SHAREHOLDERS
The Company's Articles and Bylaws specifically provide that each shareholder
is entitled to own only a single share of stock. Thus, there is no shareholder
that has more than one share currently or will own more than one share in the
future and no shareholder owns less than or a fractional portion of the single
share. No single shareholder owns more than 5 percent of the outstanding common
stock. Each director is also a holder of one share of stock. None of the
executive officers are shareholders.
DESCRIPTION OF COMMON STOCK
The Company has total authorized capital stock of 30,000 shares of common
stock, with a par value of $1.00 per share. Our shareholders approved the change
from no par value at the annual meeting held
on August 20, 1999. As of July 1, 1999, 1146 shares of common stock were
outstanding held by 1146 shareholders.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. The holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the board out of funds legally available therefor. The
Company does not anticipate paying dividends on the common stock in the
foreseeable future. See "Dividend Policy."
In the event of a liquidation, dissolution or winding up of the Company, the
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities. Holders of common stock have no preemptive rights
or rights to convert their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock. All shares
of common stock are, and the share of common stock to be outstanding upon
completion of this offering will be, fully paid and non-assessable. The Company
does not have any preferred stock authorized, and has not issued any stock
options, stock option plans, warrants, or other outstanding rights or
entitlements to common stock.
Our stock has several ownership restrictions. Under Article V of our
Articles of Incorporation, unless otherwise approved by our Board of Directors,
the Company can sell shares of stock only to: 1) individual
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<PAGE>
licensed veterinarians; or 2) any lawful form of business entity established to
deliver veterinary services and/or products in which all medical decisions are
made by licensed veterinarians. Additionally, the Company may also sell shares
to veterinary practices which are locally operated but owned by a non-local
entity. No solo practitioner nor practice with multiple veterinarians may own
more than one share and veterinarians involved in a multiple veterinary practice
may not own stock if the practice itself already owns one share or if any of
that veterinarian's fellow practitioners own a share.
In the event that a shareholder is no longer qualified to own the Company
stock, the shareholder must sell the share of stock back to the Company, which
will repurchase the share at the price paid by the shareholder for such share of
stock. The Company also has the option, for a period of six months after the due
date of the debt, to repurchase its stock if a shareholder owes money to the
Company and fails to make payments by the due date, at the price the shareholder
paid for the stock.
As a shareholder you are not permitted to sell, assign, or otherwise
transfer (including through any pledge or hypothecation) your share of stock
except in compliance with the Company's Articles and Bylaws, which permit a sale
only back to the Company. The shareholder must give the Company written notice
of the proposed sale and the Company will repurchase the share of stock within
ninety (90) days of receiving such written notice, at a price of $3,000.00. The
Company must also repurchase the share of stock in the event of the death of a
shareholder, at the price the deceased shareholder paid for such share of stock.
Our Board of Directors is composed of eight (8) shareholders who are elected
for 3-year staggered terms from eight geographic districts. Each director's
professional practice must be located in the district in which he or she is
elected from at the time of the election. Under our Bylaws, our Board of
Directors, at its discretion, and no more frequently than annually, may alter
the boundaries of each geographic district to more accurately represent an
equitable number of shareholders.
Our Board of Directors is divided into three staggered classes of directors.
The appropriate class of directors is elected at each annual meeting of our
shareholders. Each director serves a three year term and cannot be re-elected
unless that director has been off the Board for at least one year.
Our Articles of Incorporation may be amended by the affirmative vote of more
than 60% of the members of the Board of Directors unless either one of the
following is applicable: 1) if half or more of the seats of the Board of
Directors are vacant, then 75% or more affirmative vote of the remaining sitting
members shall be required; or 2) the Nebraska Business Corporation Act requires
otherwise. Under the Nebraska Business Corporation Act, the Board of Directors
may adopt the following amendments without shareholder action: 1) to extend the
duration of the Company; 2) to delete the names and addresses of the initial
directors; 3) to delete the name and address of the initial registered agent or
registered office; 4) to change each issued and unissued authorized share of an
outstanding class into a greater number of whole shares if the Company has only
shares of that class outstanding; 5) to change the Company name by substituting
the word corporation, incorporated, company, or limited, or the abbreviation
corp., inc., co., or ltd., for a similar word or abbreviation in the name, or by
adding, deleting, or changing a geographical attribution for the name; or 6) to
make any other change expressly permitted by the Nebraska Business Corporation
Act to be made without shareholder action. Otherwise, an amendment must be
approved by a majority of shareholder votes entitled to be cast unless the
amendment would create dissenters' rights, in which case a two-thirds majority
of the votes entitled to be cast on the amendment is required.
Our Articles and Bylaws prevent a change in control of the Company, as they
specifically provide that each shareholder is entitled to own only a single
share of stock. Therefore, there is no shareholder that has more than one share
or can own more than one share.
21
<PAGE>
SHARES ARE NOT ELIGIBLE FOR FUTURE SALE
As a shareholder you are not permitted to sell, assign, or otherwise
transfer (including through any pledge or hypothecation) your share of stock
except in compliance with the Company's Articles and Bylaws, which permit a sale
only back to the Company. The shareholder must give the Company written notice
of the proposed sale and the Company will repurchase the share of stock within
ninety (90) days of receiving such written notice, at a price of $3,000.00. The
Company must also repurchase the share of stock in the event of the death of a
shareholder, at the price the deceased shareholder paid for such share of stock.
In the event that a shareholder is no longer qualified to own the Company
stock, the shareholder must sell the share of stock back to the Company, which
will repurchase the share at the price paid by the shareholder for such share of
stock. We also have the option, for a period of six months after the due date of
the debt, to repurchase our stock if a shareholder owes money to us and fails to
make payments by the due date, at the price the shareholder paid for the stock.
SUBSCRIPTION TO COMPANY STOCK
PLAN OF DISTRIBUTION
The Company intends to offer the stock directly by the Company, and no
underwriting fees, finder's fees or commissions will be paid in connection with
such offers and sales.
METHOD OF SUBSCRIBING
Subscription to the share of Company Common Stock offered hereby may be
exercised by completing and signing the attached Subscription Agreement
(Exhibit A3) and related Exhibit A documents in accordance with the accompanying
Instruction Packet (Exhibit A1) and this Prospectus, and mailing or delivering
such Subscription Agreement and related documents together with payment to the
Company as designated in the Instruction Packet.
An investor may choose from three payment plans: (1) one payment for the
full $3000 cost of the share; (2) three installments of $1000 each, with the
second and third installments due thirty and sixty days after the first
installment is paid; and (3) an initial payment of $500 with the $2500 balance
paid on a 12 month installment payment schedule with 8% interest. Under the
third payment plan, each month the Company will send an invoice to you
reflecting the principal and interest of $217.43 due. Payment is due 10 days
following the date of such invoice and the Company's stated finance charge is
assessed for any payments received thereafter. There is no prepayment penalty.
By executing and submitting the Subscription Agreement, each subscriber
agrees to be bound by all the terms and conditions thereof.
All Subscription Agreements are subject to acceptance by the Company and may
be rejected by the Company in its sole discretion.
LEGAL MATTERS
The validity of the shares of common stock being offered by the Company will
be passed upon for the Company by Baird, Holm, McEachen, Pedersen, Hamann &
Strasheim, which has acted as counsel to the Company in connection with this
offering.
22
<PAGE>
EXPERTS
The financial statements of the Company as of July 31, 1997 and July 31,
1998 included in this prospectus have been audited by Marvin E. Jewell & Co.,
P.C. as stated in the report appearing herein and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
shares of common stock offered hereby. This prospectus does not contain all of
the information set forth in the registration statement and the exhibits
thereto. For further information with respect to Professional Veterinary
Products, Ltd. and the common stock offered hereby, reference is made to the
registration statement and the exhibits thereto. Statements contained in this
prospectus regarding the contents of any contract or any other document to which
reference is made are not necessarily complete, and, in each instance where a
copy of such contract or other document has been filed as an exhibit to the
registration statement, reference is made to the copy so filed, each such
statement being qualified in all respects by such reference. A copy of the
registration statement and the exhibits thereto may be inspected without charge
at the Public Reference Room of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and copies of all or any part of the
registration statement may be obtained from the Public Reference Section of the
Commission upon the payment of the fees prescribed by the Commission. The public
may obtain information on the operation of the Public Reference Room by calling
the Commission at 1-800-SEC-0330. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
We intend to provide our shareholders with annual reports containing
financial statements audited by an independent accounting firm and make
available upon request quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is an offer to sell, or a
solicitation of offers to buy, shares of common stock only in jurisdictions
where offers and sales are permitted. The information contained in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus or any sale of common stock.
23
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
INDEPENDENT AUDITOR'S REPORT............................................................................... F-2
ACCOUNTANT'S COMPILATION REPORT............................................................................ F-3
Balance Sheets at April 30, 1999, July 31, 1998 and 1997................................................... F-4
Statements of Income for nine months ended April 30, 1999 and 1998 and
years ended July 31, 1998, 1997 and 1996................................................................. F-5
Statements of Retained Earnings for nine months ended
April 30, 1999 and 1998 and years ended July 31, 1998, 1997 and 1996..................................... F-6
Statements of Cash Flows for the nine months ended
April 30, 1999 and 1998 and years ended July 31, 1998, 1997 and 1996..................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
Schedule of Operating, General and Administrative Expenses................................................. F-13
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Professional Veterinary Products, Ltd.
Omaha, Nebraska
We have audited the accompanying balance sheets of Professional Veterinary
Products, Ltd., a corporation, as of July 31, 1998 and 1997, and the related
statements of income, retained earnings, cash flows and accompanying schedule
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Professional Veterinary
Products, Ltd. as of July 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
MARVIN E. JEWELL & CO., P.C.
Lincoln, Nebraska
September 24, 1998
F-2
<PAGE>
ACCOUNTANT'S COMPILATION REPORT
Board of Directors
Professional Veterinary Products, Ltd.
Omaha, Nebraska
We have compiled the accompanying balance sheets of Professional Veterinary
Products, Ltd. as of April 30, 1999 and 1998, and the related statements of
income, retained earnings, and cash flows for the nine months then ended, and
accompanying schedule in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and schedule and, accordingly, we
do not express an opinion or any other form of assurance on them.
<TABLE>
<S> <C> <C>
By: /s/ MARVIN E. JEWELL & CO., P.C.
-----------------------------------------
Marvin E. Jewell & Co., P.C.
</TABLE>
Lincoln, Nebraska
June 4, 1999
F-3
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
YEARS ENDED JULY 31, NINE MONTHS
---------------------------- ENDED
1998 1997 APRIL 30,
------------- ------------- 1999
-------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash.............................................................. $ -- $ 131,494 $ 1,232,487
Accounts receivable, trade, less allowance for doubtful accounts
(0)............................................................. 4,497,433 3,004,580 9,517,607
Accounts receivable, stock........................................ 78,334 112,654 52,709
Accounts receivable, other........................................ 9,000 8,000 8,855
Inventory......................................................... 13,005,313 8,531,522 14,528,763
------------- ------------- -------------
Total current assets.......................................... 17,590,080 11,788,250 25,340,421
------------- ------------- -------------
Property and equipment.............................................. 3,934,491 3,491,886 3,289,491
Less accumulated depreciation..................................... 1,730,215 1,334,456 1,586,252
------------- ------------- -------------
2,204,276 2,157,430 1,703,239
------------- ------------- -------------
Other assets:
Organization expense less accumulated amortization $15,188 (1998),
$54 (1997), $26,544 (1999)...................................... 211,610 46 200,254
Loan origination fee less accumulated amortization
$6,463 (1998), $4,812 (1997), $333 (1999)....................... 1,787 3,438 19,667
Trademark, less accumulated amortization
$222 (1999), $-0- (1998)........................................ 4,778
Investments....................................................... -- 226,698 143,850
------------- ------------- -------------
213,397 230,182 368,549
------------- ------------- -------------
$ 20,007,753 $ 14,175,862 $ 27,412,209
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft.................................................... $ 1,109,855 -- $ --
Notes payable, bank............................................... 2,100,000 1,000,000 955,000
Notes payable, other.............................................. 93,850
Current portion of long-term debt................................. 75,418 62,985 --
Accounts payable, trade........................................... 10,440,227 7,845,747 21,147,394
Accrued interest.................................................. 17,140 11,880 7,031
Accrued expenses.................................................. 471,963 89,105 176,180
Accrued wages..................................................... 383,402 171,727
Accrued profit-sharing............................................ 250,729 149,326
Accrued income taxes.............................................. 42,440 536 338,982
------------- ------------- -------------
Total current liabilities..................................... 14,891,174 9,331,306 22,718,437
------------- ------------- -------------
Long-term debt...................................................... 1,225,089 1,301,609 --
------------- ------------- -------------
Stockholders' equity:
Common stock, no par value per share. Authorized 30,000 shares;
issued and outstanding 1,048 shares (1998), 966 shares (1997),
1,118 shares (1999)............................................. 3,072,000 2,825,000 3,283,000
Retained earnings................................................. 819,490 717,947 1,410,772
------------- ------------- -------------
3,891,490 3,542,947 4,693,772
------------- ------------- -------------
$ 20,007,753 $ 14,175,862 $ 27,412,209
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements and independent auditor's report.
F-4
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
AMOUNT PERCENT
------------------------------------- ----------------------
YEARS ENDED JULY 31, YEARS ENDED JULY 31,
------------------------------------- ----------------------
1998 1997 1996 1998 1997 1996
----------- ----------- ----------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales................... $90,641,232 $78,335,182 $65,956,339 96.18 96.78 96.77
Shipping.................... 82,252 76,045 77,350 .09 .09 .09
Commissions................. 1,778,811 1,278,033 1,145,519 1.89 1.58 1.58
Sales promotion............. 1,699,626 1,214,982 771,132 1.80 1.50 1.51
Annual meeting
reimbursement............. 12,055 16,685 12,136 .01 .02 .02
Miscellaneous............... 31,399 17,908 36,864 .03 .03 .03
----------- ----------- ----------- ------ ------ ------
94,245,375 80,938,835 67,999,340 100.00 100.00 100.00
----------- ----------- ----------- ------ ------ ------
Cost of sales:
Net purchases............... 86,689,358 74,140,723 62,650,224 91.98 91.60 91.58
Freight out................. 1,974,411 1,589,930 1,244,041 2.09 1.96 1.97
Less--Vendor rebates........ (3,402,195) (2,029,120) 1,790,783 (3.60) (2.51) (2.51)
----------- ----------- ----------- ------ ------ ------
85,261,574 73,701,533 62,103,482 90.47 91.05 91.04
----------- ----------- ----------- ------ ------ ------
Gross profit............ 8,983,801 7,237,302 5,895,858 9.53 8.95 8.96
Operating, general and
administrative expenses
(Schedule).................. 8,725,912 7,077,385 5,794,348 9.26 8.74 8.77
----------- ----------- ----------- ------ ------ ------
Operating income........ 257,889 159,917 101,510 .27 .21 .19
Other income:
Interest.................... 161,205 125,256 120,787 .17 .15 .16
Gain on sale of property and
equipment.................
----------- ----------- ----------- ------ ------ ------
----------- ----------- ----------- ------ ------ ------
419,094 285,173 222,297 .44 .36 .35
Other expenses--Interest...... 244,111 208,407 148,291 .25 .26 .26
----------- ----------- ----------- ------ ------ ------
Income before income
taxes................. 174,983 76,766 74,006 .19 .10 .09
Income taxes.................. 73,440 30,736 28,469 .08 .04 .04
----------- ----------- ----------- ------ ------ ------
Net income.............. $ 101,543 $ 46,030 $ 45,537 .11 .06 .05
----------- ----------- ----------- ------ ------ ------
----------- ----------- ----------- ------ ------ ------
<CAPTION>
AMOUNT PERCENT
------------------------ --------------
NINE MONTHS NINE MONTHS
ENDED ENDED
APRIL 30, APRIL 30,
------------------------ --------------
1999 1998 1999 1998
----------- ----------- ------ ------
<S> <C> <C> <C> <C>
Revenues:
Net sales................... $85,575,966 $68,252,153 97.23 96.51
Shipping.................... 97,420 60,533 .11 .09
Commissions................. 1,250,157 1,097,550 1.42 1.55
Sales promotion............. 1,049,187 1,292,723 1.19 1.83
Annual meeting
reimbursement............. 16,609 683 .02 --
Miscellaneous............... 22,309 18,487 .03 .02
----------- ----------- ------ ------
88,011,648 70,722,129 100.00 100.00
----------- ----------- ------ ------
Cost of sales:
Net purchases............... 81,655,340 64,463,366 92.78 91.15
Freight out................. 1,773,804 1,462,847 2.02 2.07
Less--Vendor rebates........ (3,024,826) (2,292,383) (3.44) (3.24)
----------- ----------- ------ ------
80,404,318 63,633,830 91.36 89.98
----------- ----------- ------ ------
Gross profit............ 7,607,330 7,088,299 8.64 10.02
Operating, general and
administrative expenses
(Schedule).................. 6,775,297 5,477,266 7.70 7.74
----------- ----------- ------ ------
Operating income........ 832,033 1,611,033 .94 2.28
Other income:
Interest.................... 140,447 111,823 .16 .16
Gain on sale of property and
equipment................. 237,212 -- .27 --
----------- ----------- ------ ------
377,659 111,823 .43 .16
----------- ----------- ------ ------
1,209,692 1,722,856 1.37 2.44
Other expenses--Interest...... 223,178 204,085 .25 .29
----------- ----------- ------ ------
Income before income
taxes................. 986,514 1,518,771 1.12 2.15
Income taxes.................. 395,232 599,546 .45 .85
----------- ----------- ------ ------
Net income.............. $ 591,282 $ 919,225 .67 1.30
----------- ----------- ------ ------
----------- ----------- ------ ------
</TABLE>
See accompanying notes to financial statements and independent auditor's report.
F-5
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL
YEARS ENDED JULY 31, 30,
---------------------------------- --------------------------
1998 1997 1996 1999 1998
---------- ---------- ---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Balance at beginning of year..................... $ 717,947 $ 671,917 $ 626,380 $ 819,490 $ 717,947
Net income....................................... 101,543 46,030 45,537 591,282 919,225
---------- ---------- ---------- ------------ ------------
Balance at end of year........................... $ 819,490 $ 717,947 $ 671,917 $ 1,410,772 $ 1,637,172
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
</TABLE>
See accompanying notes to financial statements and independent auditor's report.
F-6
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
------------------------------------------------------------------------
1998 1997 1996
------------------------ ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.................. $ 101,543 $ 46,030 $ 45,537
Adjustments for reconcile
net income to net cash
provided (used) by
operating activities:
Depreciation and
amortization............ $ 412,543 $ 382,057 $ 351,452
Gain on sale of
property................
Adjustments for working
capital changes:
(Increase) decrease in:
Receivables........... (1,493,853) (525,777) (140,367)
Inventories........... (4,473,791) (1,207,904) (1,535,369)
Prepaid income
taxes............... -- 9,713 1,737
Increase (decrease) in:
Accounts payable...... 2,594,480 492,484 934,492
Accrued expenses...... 701,196 155,420 22,369
Income taxes.......... 41,904 536 --
----------- ----------- -----------
Total adjustments... (2,217,521) (693,471) (365,686)
----------- --------- ---------
Net cash provided
(used) by
operating
activities........ (2,115,978) (647,441) (320,149)
Cash flows from investing
activities:
Purchase of property and
equipment................. (442,604) (194,181) (618,421)
Purchase of trademark.......
Sale (acquisition) of
investments............... 7,600
Proceeds from sale of
property..................
-----------
Net cash provided
(used) by
investing
activities........ (44,609) (194,171) (610,821)
Cash flows from financing
activities:
Loan proceeds............... 1,100,000 500,000 500,000
Reduction of loans.......... (64,087) (57,726) (52,907)
Net proceeds from issuance
of common stock........... 281,320 279,493 298,845
----------- ----------- -----------
Net cash provided
(used) by
financing
activities........ 1,317,233 721,767 745,938
----------- --------- ---------
Net increase (decrease) in
cash........................ (1,241,349) (119,855) (185,032)
Cash (deficit) at beginning of
year........................ 131,494 251,349 436,381
----------- --------- ---------
Cash (deficit) at end of
year........................ $(1,109,855) $ 131,494 $ 251,349
----------- --------- ---------
----------- --------- ---------
Supplement disclosure of cash
flow information:
Interest paid............... $ 238,851 $ 207,919 $ 147,656
----------- --------- ---------
----------- --------- ---------
Income taxes paid........... $ 31,536 $ 20,487 $ 27,332
----------- --------- ---------
----------- --------- ---------
<CAPTION>
NINE MONTHS ENDED APRIL 30,
--------------------------------------------------
1999 1998
------------------------ ------------------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income.................. $ 591,282 $ 919,225
Adjustments for reconcile
net income to net cash
provided (used) by
operating activities:
Depreciation and
amortization............ $ 265,200 $ 290,653
Gain on sale of
property................ (237,212) --
Adjustments for working
capital changes:
(Increase) decrease in:
Receivables........... (5,020,029) (4,252,533)
Inventories........... (1,523,450) (3,959,527)
Prepaid income
taxes...............
Increase (decrease) in:
Accounts payable...... 10,707,167 5,590,144
Accrued expenses...... (940,023) (241,136)
Income taxes.......... 296,542 575,760
----------- -----------
Total adjustments... 3,548,195 (1,996,639)
----------- -----------
Net cash provided
(used) by
operating
activities........ 4,139,477 (1,077,414)
Cash flows from investing
activities:
Purchase of property and
equipment................. (1,411,475) (313,424)
Purchase of trademark....... (5,000) --
Sale (acquisition) of
investments............... (143,850) --
Proceeds from sale of
property.................. 1,878,222 --
----------- -----------
Net cash provided
(used) by
investing
activities........ 317,897 (313,424)
Cash flows from financing
activities:
Loan proceeds............... 953,279
Reduction of loans.......... (2,351,657)
Net proceeds from issuance
of common stock........... 236,625 233,778
----------- -----------
Net cash provided
(used) by
financing
activities........ (2,115,032) 1,187,057
----------- -----------
Net increase (decrease) in
cash........................ 2,342,342 (203,781)
Cash (deficit) at beginning of
year........................ (1,109,855) 131,494
----------- -----------
Cash (deficit) at end of
year........................ $ 1,232,487 $ (72,287)
----------- -----------
----------- -----------
Supplement disclosure of cash
flow information:
Interest paid............... $ 233,287 $ 189,421
----------- -----------
----------- -----------
Income taxes paid........... $ 98,690 $ 23,786
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements and independent auditor's report.
F-7
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JULY 31, 1998 (AUDITED) AND THE
NINE MONTHS ENDED APRIL 30, 1999 (UNAUDITED))
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
Professional Veterinary Products, Ltd. was incorporated in the State of
Missouri in 1982. The corporation was formed to buy, sell and warehouse
pharmaceuticals and other veterinary related items. The purpose of the
corporation is to act as a wholesale distributor primarily to shareholders.
Shareholders are limited to the ownership of one share of stock and must be a
licensed veterinarian or business entity comprised of licensed veterinarians.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) BASIS OF ACCOUNTING:
The corporation uses the accrual method of accounting for financial
statement and income tax purposes.
(B) CONCENTRATION OF CASH BALANCES:
The Company's cash funds are located in a single financial institution. The
amount on deposit at April 30, 1999 and 1998; and July 31, 1998 and 1997
exceeded the $100,000 federally insured limit.
(C) ACCOUNTS RECEIVABLE:
Management considers accounts receivable to be fully collectible,
accordingly, no allowance for doubtful accounts is required.
(D) INVENTORY:
Inventory is valued at the lower of cost or market on the first-in,
first-out basis.
(E) PROPERTY AND EQUIPMENT AND DEPRECIATION:
Property and equipment are stated at cost. For financial reporting purposes
and income tax purposes, the company uses accelerated depreciation methods over
the estimated useful lives of the assets.
(F) CASH AND CASH EQUIVALENTS:
The corporation considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
(G) AMORTIZATION:
Organizational costs are being amortized over sixty months on a
straight-line basis.
Financing costs are being amortized over the term of the notes on a
straight-line basis. This amortization is included in interest expense in the
income statement.
The intangible costs are being amortized over fifteen years on a
straight-line basis.
See independent auditor's report.
F-8
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JULY 31, 1998 (AUDITED) AND THE
NINE MONTHS ENDED APRIL 30, 1999 (UNAUDITED))
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(H) USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
(I) INCOME TAXES:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due. The amount of
income taxes paid or payable for a year is determined by applying the provisions
of the enacted tax law to the taxable income for that year.
(2) For the years ended July 31, the Company recognized liabilities for
overcharges on sales in excess of an agreed to profit margin of 5% totaling
$3,565,009 (1998), $2,390,451 (1997). For the nine months ended April 30, the
Company recognized liabilities for overcharges on sales in excess of an agreed
to profit margin of 5% totaling $3,276,011 (1999), $1,595,888 (1998).
(3) PROPERTY AND EQUIPMENT:
For the years ended July 31, 1998 and 1997:
<TABLE>
<CAPTION>
BOOK VALUE
ACCUMULATED --------------------------
COST DEPRECIATION 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Land................................. $ 15,455 $ -- $ 15,455 $ 15,455
Buildings............................ 1,942,904 258,960 1,683,944 1,546,381
Equipment............................ 1,976,132 1,471,255 504,877 595,594
------------ ------------ ------------ ------------
$ 3,934,491 $ 1,730,215 $ 2,204,276 $ 2,157,430
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
For the nine months ended April 30, 1999 and 1998:
<TABLE>
<CAPTION>
BOOK VALUE
ACCUMULATED --------------------------
COST DEPRECIATION 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Land................................. $ 953,780 $ -- $ 953,780 $ 15,455
Buildings............................ 346,087 -- 346,087 1,699,723
Equipment............................ 1,989,624 1,586,252 403,372 477,617
------------ ------------ ------------ ------------
$ 3,289,491 $ 1,586,252 $ 1,703,239 $ 2,192,795
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See independent auditor's report.
F-9
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JULY 31, 1998 (AUDITED) AND THE
NINE MONTHS ENDED APRIL 30, 1999 (UNAUDITED))
(4) LONG-TERM DEBT:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Note payable, bank, 8.25% interest................ $ 1,300,507 $ 1,364,594
Less current portion due within one year........ 75,418 62,985
------------ ------------
$ 1,225,089 $ 1,301,609
------------ ------------
------------ ------------
</TABLE>
NOTE PAYABLE, BANK, 8.25% INTEREST:
Monthly installments of principal and interest of $14,992 commencing
February 1, 1995 with final installment and entire unpaid principal balance due
on January 1, 2000. The loan may be prepaid with early redemption premiums of
3%, 2% and 1% in years two, three and four respectively. Principal payments of
up to $150,000 will be accepted without prepayment penalty. Loan is
collateralized by land and building.
Total yearly payments of long-term debt are due as follows:
<TABLE>
<S> <C>
1999........................................................ $ 75,418
2000........................................................ 1,225,089
------------
$ 1,300,507
------------
------------
</TABLE>
(5) COMMITMENTS AND CONTINGENT LIABILITIES--LEASES:
On February 1, 1996, the company entered into a lease with Nebraska Leasing
Services, Inc. for the purpose of leasing a vehicle. The lease minimum rentals
are $431.36 per month for a term of 48 months with a final rental installment of
$11,000. The lease expires February 1, 2000.
On October 16, 1996, the company entered into a lease with IBM Credit
Corporation for the purpose of leasing related computer hardware. The lease
minimum rentals are $7,000 per month. The lease expires October 30, 1999.
On July 28, 1997, the company entered into a lease with IBM Credit
Corporation for the purpose of leasing related computer hardware. The lease
minimum rentals are $6,541 per month. The lease expires July 30, 2002.
February 4, 1998, the company entered into a lease with Nebraska Leasing
Services, Inc. for the purpose of leasing a vehicle. The lease minimum rentals
are $649.92 per month for a term of 36 months with a final rental installment of
$19,500. The lease expires January 4, 2001.
February 18, 1998, the company entered into a lease with Nebraska Leasing
Services, Inc. for the purpose of leasing a truck. The lease minimum rentals are
$451.13 per month for a term of 36 months with a final rental installment of
$12,000. The lease expires January 18, 2001.
See independent auditor's report.
F-10
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JULY 31, 1998 (AUDITED) AND THE
NINE MONTHS ENDED APRIL 30, 1999 (UNAUDITED))
(5) COMMITMENTS AND CONTINGENT LIABILITIES--LEASES: (CONTINUED)
Minimum future obligations on operating leases in effect on July 31, 1998
are:
<TABLE>
<CAPTION>
COMPUTER VEHICLE COMPUTER VEHICLE TRUCK
HARDWARE LEASE HARDWARE LEASE LEASE
EXPENSE EXPENSE EXPENSE EXPENSE EXPENSE
---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Year ended July 31, 1999...................... $ 84,000 $ 5,176 $ 78,492 $ 7,799 $ 5,414
Year ended July 31, 2000...................... 21,000 13,588 78,492 7,799 5,414
Year ended July 31, 2001...................... -- -- 78,492 23,399 14,707
Year ended July 31, 2002...................... -- -- 78,492 -- --
---------- ----------- ---------- --------- ---------
$ 105,000 $ 18,764 $ 313,968 $ 38,997 $ 25,535
---------- ----------- ---------- --------- ---------
---------- ----------- ---------- --------- ---------
</TABLE>
Minimum future obligations on operating leases in effect on April 30, 1999
are:
<TABLE>
<CAPTION>
VEHICLE COMPUTER VEHICLE COMPUTER TRUCK
LEASE HARDWARE LEASE HARDWARE LEASE
EXPENSE EXPENSE EXPENSE EXPENSE EXPENSE
---------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Period ended April 30, 2000.................. $ 14,882 $ 42,000 $ 78,492 $ 7,799 $ 5,414
Period ended April 30, 2001.................. -- -- 78,492 25,348 16,060
Period ended April 30, 2002.................. -- -- 78,492 -- --
Period ended April 30, 2003.................. -- -- 19,623 -- --
---------- ----------- ---------- ----------- ---------
$ 14,882 $ 42,000 $ 255,099 $ 33,147 $ 21,474
---------- ----------- ---------- ----------- ---------
---------- ----------- ---------- ----------- ---------
</TABLE>
(6) TRANSACTIONS BETWEEN BOARD OF DIRECTORS, KEY EMPLOYEES AND THE COMPANY:
Professional Veterinary Products, Ltd. had sales to the Board of Directors
and key employees for the year ended July 31, 1998 as follows:
<TABLE>
<S> <C>
Members of the Board of Directors................. $ 2,082,418
Key employees..................................... 2,636
------------
$ 2,085,054
------------
------------
</TABLE>
Professional Veterinary Products, Ltd. had sales to the Board of Directors
and key employees for the period ended April 30 as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Members of the Board of Directors................................. $ 2,012,101 $ 1,562,374
Key employees..................................................... 4,143 939
------------ ------------
$ 2,016,244 $ 1,563,313
------------ ------------
------------ ------------
</TABLE>
See independent auditor's report.
F-11
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO JULY 31, 1998 (AUDITED) AND THE
NINE MONTHS ENDED APRIL 30, 1999 (UNAUDITED))
(7) PROFIT-SHARING AND 401-K RETIREMENT PLANS:
The Company provides a non-contributory profit-sharing plan covering all
full-time employees who qualify as to age and length of service. It has been the
Company's policy to make contributions to the plan as provided annually by the
Board of Directors. The total provision for the contribution to the plan was
$250,728 for 1998 and $149,326 for 1997.
The Company also provides a contributory 401-K retirement plan covering all
full-time employees who qualify as to age and length of service. It is the
Company's policy to match a maximum 10% employee contribution with a 3%
contribution. The total provision to the plan was $67,942 for 1998 and $62,745
for 1997. The total provision to the plan was $68,052 and $50,479 for the period
ended April 30, 1999 and 1998, respectively.
See independent auditor's report.
F-12
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
SCHEDULE OF OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
PERCENT
PERCENT AMOUNT --------------
AMOUNT -------------- ----------------------
---------------------- NINE MONTHS
YEARS ENDED NINE MONTHS ENDED ENDED APRIL
YEARS ENDED JULY 31, JULY 31, APRIL 30, 30,
---------------------- -------------- ---------------------- --------------
1998 1997 1998 1997 1999 1998 1999 1998
---------- ---------- ------ ------ ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries........................... $4,107,946 $3,200,806 4.36 3.95 $2,977,840 $2,490,406 3.38 3.52
Directors' fees.................... 30,750 25,000 .03 .03 34,250 30,750 .04 .04
Annual meeting..................... 39,582 43,994 .04 .05 44,939 36,617 .05 .05
Convention and seminars............ 53,377 26,990 .07 .03 57,955 43,204 .07 .06
Insurance.......................... 291,761 219,969 .30 .27 287,128 221,082 .33 .31
Life Insurance..................... 15,875 15,422 .02 .02 11,800 12,063 .01 .02
Office supplies and expense........ 289,608 328,010 .30 .41 164,301 159,934 .19 .23
Operating supplies................. 545,764 431,840 .58 .53 590,376 390,815 .67 .55
Equipment rent..................... 192,541 168,989 .20 .21 172,068 144,790 .20 .20
Telephone.......................... 155,783 176,354 .17 .22 164,935 120,899 .19 .17
Utilities.......................... 49,743 51,861 .05 .06 38,031 37,145 .04 .05
Accounting fees.................... 28,770 28,582 .03 .04 28,105 25,625 .03 .04
Legal fees......................... 46,524 51,409 .05 .06 43,063 31,959 .05 .05
Taxes, payroll..................... 261,996 234,126 .28 .29 234,210 179,016 .27 .25
Taxes, general..................... 46,748 37,823 .05 .05 43,366 26,526 .05 .04
Repairs and maintenance............ 101,492 66,163 .11 .08 171,436 54,224 .19 .08
Depreciation....................... 395,758 380,389 .42 .48 251,509 278,059 .29 .39
Amortization....................... 15,134 -- .02 -- 11,578 11,356 .01 .02
Contract labor..................... 44,903 201,494 .05 .25 11,451 29,201 .01 .04
Advertising........................ 7,764 4,161 .01 .01 3,926 6,002 -- .01
Postage............................ 35,447 40,117 .04 .05 37,257 30,287 .04 .04
Travel and promotion............... 272,043 237,749 .29 .29 264,843 209,087 .30 .30
Dues and subscriptions............. 19,456 19,984 .02 .02 22,469 16,072 .03 .02
Profit-sharing and pension
contribution..................... 318,670 212,071 .34 .26 68,052 50,479 .08 .07
Sales promotion.................... 936,201 411,938 .99 .51 619,297 528,073 .70 .75
Marketing services................. -- 59,020 -- .07
Equipment maintenance.............. 45,559 42,251 .05 .05 31,753 30,288 .04 .04
Bad debts.......................... -- 13,744 -- .02
Bank fees.......................... 297,323 212,784 .32 .26 286,311 214,686 .33 .30
Miscellaneous...................... 79,394 134,345 .07 .17 103,048 68,621 .11 .10
---------- ---------- ------ ------ ---------- ---------- ------ ------
$8,725,912 $7,077,385 9.26 8.74 $6,775,297 $5,477,266 7.70 7.74
---------- ---------- ------ ------ ---------- ---------- ------ ------
---------- ---------- ------ ------ ---------- ---------- ------ ------
</TABLE>
See accompanying notes to financial statements and independent auditor's report.
F-13
<PAGE>
EXHIBIT A1
INSTRUCTIONS TO SUBSCRIBERS
Qualified persons wishing to subscribe for one share of Common Stock (the
"Stock"), par value $1.00, of Professional Veterinary Products, Ltd. (the
"Company") are required to complete the documents in this Subscription Booklet.
PLEASE DO NOT REMOVE ANY OF THE DOCUMENTS. An additional copy of the documents
in this Subscription Booklet is included with the Prospectus of the Company
delivered to you.
1. PURCHASER QUESTIONNAIRE. (Exhibit A2) Please provide all information
requested on the Purchaser Questionnaire.
2. SUBSCRIPTION AGREEMENT. (Exhibit A3) Please complete the Subscription
Agreement in the following manner:
a. Complete the appropriate signature page.
b. If the subscriber is a partnership, corporation, or other business
entity the appropriate signature page and acknowledgment in the
Subscription Agreement should be completed. Special procedures are
required for execution and additional documentation may be required
as set forth in the Subscription Agreement.
3. DELIVERY INSTRUCTIONS. After you have completed the Purchaser
Questionnaire and Subscription Agreement, please deliver or mail this entire
Subscription Booklet to:
Professional Veterinary Products, Ltd.
10100 J Street
Omaha, Nebraska 68127
Attn: Jill Meehan
If you have any questions concerning completion of the documentation, please
call Jill Meehan at (402) 331-4440.
A1-1
<PAGE>
EXHIBIT A2
PURCHASER QUESTIONNAIRE
1. The Name of the Practice is: ______________________________________________.
2. The Practice is a: ___ Sole Proprietorship; ___ Partnership; ___ Corporation
3. If the Practice is a Sole Proprietorship, the Doctor's name is: __________.
4. If the Practice is a Partnership, the partners names are: _________________
___________________________________________________________________________.
5. If the Practice is a Partnership, the managing partner with whom
Professional Veterinary Products, Ltd. is to communicate: ________________.
6. If the Practice if a Corporation, the President's name is: _______________.
7. The mailing address of the Practice for correspondence and product delivery
is:
Practice name: _______________________________________
Address: _____________________________________________
City, State Zip Code: ________________________________
Phone Number: ________________________________________
Fax Number: __________________________________________
Federal Employer I.D. Number: ________________________
or Social Security Number: _________________________
Please attach a copy of your Federal D.E.A.
Certificate.
Computer System: Hardware: _______________ Software: ______________
Names of persons placing orders with PVPL: ________________________
___________________________________________________________________
Names of veterinarians (other than partners listed above) in the
practice:
__________________________________________________________________.
8. Bank name and address: _____________________________________________________
Bank phone number: _________________________________________________________
Contact person at the Bank: ________________________________________________
9. Exact name of Individual, Partnership, or Corporation to whom stock
certificate is to be issued: __
___________________________________________________________________________.
A2-1
<PAGE>
EXHIBIT A3
SUBSCRIPTION AGREEMENT
PROFESSIONAL VETERINARY PRODUCTS, LTD.
Professional Veterinary Products, Ltd.
10100 J Street
Omaha, Nebraska 68127
Ladies and Gentlemen:
1. SUBSCRIPTION. Subject to acceptance by the Company, the undersigned
hereby subscribes to purchase one share of Common Stock (the "Stock"), par value
$1.00, indicated below in accordance with the terms of this Agreement, and the
Prospectus of the Company dated ____________, 1999, relating to the Stock.
THIS SUBSCRIPTION MAY BE REJECTED BY THE COMPANY IN ITS SOLE DISCRETION.
2. REPRESENTATIONS AND WARRANTIES. The undersigned represents and warrants
to the Company as follows:
(a) The undersigned has received the Prospectus, and has carefully
reviewed this Agreement, the Prospectus, and has relied on the information
contained therein, including the information set forth under the caption
"Risk Factors" in the Prospectus.
(b) The undersigned is: ____________ an individual licensed
veterinarian; or ____________ any lawful form of business entity established
to deliver veterinary services and/or products in which all medical
decisions are made by licensed veterinarians. (Please check appropriate
status).
3. MISCELLANEOUS.
(a) The undersigned agrees not to transfer or assign this Agreement, or
any of the undersigned's interest herein, and further agrees that the
transfer or assignment of the Stock acquired pursuant hereto shall be made
only in accordance with the Articles of Incorporation and Bylaws of the
Company and all applicable laws.
(b) Notwithstanding any of the representations, warranties,
acknowledgments, or agreements made herein by the undersigned, the
undersigned does not thereby or in any other manner waive any rights granted
to the undersigned under federal or state securities laws.
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof and may be amended only by
a writing executed by all parties.
(d) This Agreement shall be enforced, governed, and construed in all
respects in accordance with the laws of the State of Nebraska without regard
to its conflicts of laws provisions.
(e) Upon request from the Company, the undersigned agrees to provide
such information and to execute and deliver such documents as reasonably may
be necessary to comply with any and all laws and ordinances to which the
Company is subject.
4. SUBSCRIPTION AND METHOD OF PAYMENT. There are three payment plans from
which to choose, please check the appropriate plan. The undersigned hereby
subscribes for the Stock as follows:
Plan 1: ____________ One payment for the full $3,000 cost of the share.
Plan 2: ____________ Three installments of $1,000 each, with the second and
third installments due thirty and sixty days after the first installment is
paid.
A3-1
<PAGE>
Plan 3: ____________ An initial payment of $500 with the $2,500 balance paid
on a 12 month installment payment schedule with 8% interest. Each month the
Company will send an invoice reflecting the principal and interest of $217.43
due. Payment is due 10 days following the date of such invoice and the Company's
stated finance charge will be assessed for any payments received thereafter.
There is no prepayment penalty.
ALL SUBSCRIPTIONS ARE SUBJECT TO ACCEPTANCE BY THE COMPANY AND MAY BE
REJECTED BY THE COMPANY IN ITS SOLE DISCRETION.
A3-2
<PAGE>
TYPE OF OWNERSHIP
(Check One)
<TABLE>
<S> <C>
Individual (One signature required)
- ------------
Limited Liability Company
- ------------
Corporation
- ------------
Partnership
- ------------
Other--please designate below.
- ------------
------------------------------------------------------------
Please print here the exact name (registration)
investor desires for Stock.
</TABLE>
A3-3
<PAGE>
SIGNATURE PAGE
FOR INDIVIDUAL INVESTORS
-------------------------------------------------------------------------------
Signature
-------------------------------------------------------------------------------
Social Security Number
-------------------------------------------------------------------------------
Print or Type Name
Residence Address:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Executed at:
-------------------------------------------------------------------------------
City
-------------------------------------------------------------------------------
State
this
---------- day of
---------------------------,
-----------.
Mailing Address:
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
SUBSCRIPTION ACCEPTED:
PROFESSIONAL VETERINARY PRODUCTS, LTD.
By:
-----------------------------------------------
Dr. Lionel L. Reilly, President
Date:
---------------------------------------------
A3-4
<PAGE>
SIGNATURE PAGE
FOR PARTNERSHIP, CORPORATE OR OTHER BUSINESS ENTITY INVESTORS
Name of partnership, corporation or other business entity (please print
or type)
By: ______________________________________________________________
(Signature of authorized agent)
Title: ___________________________________________________________
Taxpayer Identification No.: _____________________________________
Address of Principal Partnership,
Corporate or Business Office:
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Mailing Address, if different:
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Attention:
------------------------------------------------------------------
Executed at ______________ effective this ____ day of
______________, ____.
SUBSCRIPTION ACCEPTED:
PROFESSIONAL VETERINARY PRODUCTS, LTD.
By:
- ----------------------------------------
Dr. Lionel L. Reilly, President
Date:
- --------------------------------------
A3-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission registration
fee............................................. $ 417.00
Legal fees and expenses........................... $50,000.00
Blue Sky filing fees.............................. $17,000.00
Printing expenses................................. $ ***
Miscellaneous expenses............................ $ 1,000.00
----------
Total......................................... $ ***
----------
----------
</TABLE>
All of the above items except the registration fee are estimated.
- ------------------------
(***) Printing and Total Expenses to be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Directors, officers, employees and agents of Professional Veterinary
Products, Ltd. (the "Company") may be entitled to benefit from the
indemnification provisions contained in the Company's Articles of Incorporation
and the Nebraska Business Corporation Act. The general effect of these
provisions is summarized below:
The Articles of Incorporation provide that to the extent permitted by law,
the Company shall indemnify any director, officer, employee or agent who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, including any action or suit by or in the right of the Company
to procure a judgment in its favor, by reason of the fact that such person is or
was a director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture or other enterprise or as a
trustee, officer, employee or agent of an employee benefit plan. Such
indemnification shall be against expenses, including attorney fees, and except
for actions by or in the right of the Company, judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Generally under Nebraska law, any individual who is made a party to a
proceeding because the individual is or was a director may be indemnified if the
individual acted in good faith and had reasonable basis to believe that (1) in
the case of conduct in the individual's official capacity with the Company, that
the individual's conduct was in the Company's best interests; (2) in all other
cases, that the individual's conduct was at least not opposed to the Company's
best interest; and (3) regarding any criminal proceedings, the individual had no
reasonable cause to believe the individual's conduct was unlawful. Nebraska law
also extends such indemnification to officers of the Company and provides that
the Company may advance expenses to a director or officer of the Company.
Further, Nebraska law provides that neither a director or officer is liable for
any action taken as a director or officer, or any failure to take any action, as
long as the individual discharged his or her duties (1) in good faith, (2) with
the care of an ordinarily prudent person in a like position would exercise under
similar circumstances, and (3) in a manner the individual reasonably believes to
be in the best interests of the Company.
The Articles of Incorporation also provide that to the extent permitted by
law, the Company has the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the Company
against any liability asserted against such person while acting in such capacity
or arising out of his or her status as such, whether or not the Company would
have the power to
II-1
<PAGE>
indemnify him or her against such liability. Nebraska law provides that the
Company may purchase and maintain insurance on behalf of an individual who is or
was a director or officer of the Company, or who, while a director or officer of
the Company, serves at the Company's request as a director, officer, member of a
limited liability company, partner, trustee, employee, or agent of another
domestic or foreign corporation, limited liability company, partnership, joint
venture, trust, employee benefit plan, or other entity, against liability
asserted against or incurred by that individual in that capacity or arising from
the individual's status as a director or officer, whether or not the Company
would have the power to indemnify or advance expenses under Nebraska law.
The Articles of Incorporation provide that the indemnity provided for in the
Articles of Incorporation shall not be deemed to be exclusive of any other
rights to which those indemnified may be otherwise entitled, nor shall the
provisions of the Articles of Incorporation be deemed to prohibit the Company
from extending its indemnification to cover other persons or activities to the
extent permitted by law or pursuant to any provisions in the Articles of
Incorporation. Under the Nebraska Business Corporation Act, the Company may
provide indemnification or advance expenses to a director or officer only as
permitted under Nebraska law; however, the Company may, by a provision in its
articles of incorporation or bylaws, or in a resolution adopted or a contract
approved by its board of directors or shareholders, obligate itself in advance
of the act or omission giving rise to a proceeding to provide indemnification or
advance funds under Nebraska law.
There is no pending litigation or proceeding involving a director, officer,
employee or agent of the Company as to which indemnification is being sought.
The Company is not aware of any other threatened litigation that may result in
claims for indemnification by any director, officer, employee or agent.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In 1996, the Company sought and received from the Securities and Exchange
Commission a no-action letter, a copy of which is attached hereto as Exhibit
99.1. As reflected in the no-action letter, the SEC agreed to take a no-action
position, that Company shares at that time did not have the characteristics of a
security which needed to be registered. Among the factors leading to that
conclusion were the fact that the Company has operated exclusively as a
cooperative for its shareholder members. A shareholder has historically joined
the Company so it could purchase goods at lower prices. With minor limitations,
all sales of products were made to the shareholders. Therefore, there has been
no economic benefit other than is received by the shareholders through purchase
of lower priced products.
Since 1996, the Company has been provided opportunities to sell products to
persons or entities other than shareholders, but has been unable to do so
because of the structure described above and the representations made to the
Securities and Exchange Commission. It is now the Company's desire to sell such
products to persons or entities other than shareholders and, as a result, has
decided to register its shares. The following sales of Company common stock made
by the Company within the past three years have been made in reliance upon, and
in compliance with, the Company's SEC No-Action Letter.
II-2
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTS OR
TITLE(1) AMT DATE PRICE COMMISSIONS
- -------------------------------------------------------------------- ----- --------- --------- ---------------------
<S> <C> <C> <C> <C>
Sutton Vet Clinic, Sutton, NE....................................... 1 May-96 $ 3000 $ 0
Cntry Rd Vet Serv Bloomingdale, OH.................................. 1 May-96 $ 3000 $ 0
Todd Cty Vet Clinic Clarissa, MN.................................... 1 May-96 $ 3000 $ 0
Rugby Vet Serv, Rugby, ND........................................... 1 May-96 $ 3000 $ 0
Duluth Vet Hosp, Duluth, MN......................................... 1 May-96 $ 3000 $ 0
Ashley Vet Clinic, Ashley, ND....................................... 1 May-96 $ 3000 $ 0
Animal Med Ctr, Omaha, NE........................................... 1 May-96 $ 3000 $ 0
Bruns Animal Clinic, Versailles, OH................................. 1 May-96 $ 3000 $ 0
Town & Cntry An Hosp, Russell, KS................................... 1 May-96 $ 3000 $ 0
Liles Animal Clinic, Searcy, AR..................................... 1 May-96 $ 3000 $ 0
Scotland Vet Supply, Scotland, SD................................... 1 May-96 $ 3000 $ 0
Osage Vet Clinic, Bentonville, AR................................... 1 May-96 $ 3000 $ 0
Minster Vet Serv, Minster, OH....................................... 1 May-96 $ 3000 $ 0
Miami Vet Clinic, Paola, KS......................................... 1 May-96 $ 3000 $ 0
Fairview Vet Clinic, Lexington, NE.................................. 1 May-96 $ 3000 $ 0
Howdershell A/C, Florissant, MO..................................... 1 May-96 $ 3000 $ 0
Northwest Vet Assoc. St Albans, VT.................................. 1 May-96 $ 3000 $ 0
Heartland Equine, Dunbar, NE........................................ 1 May-96 $ 3000 $ 0
Companion A/Vet, Norfolk, NE........................................ 1 May-96 $ 3000 $ 0
Cow Country AC, Thedford, NE........................................ 1 May-96 $ 3000 $ 0
Best Friends AH, St Roberts, MO..................................... 1 May-96 $ 3000 $ 0
Cresco VC, Cresco, IA............................................... 1 May-96 $ 3000 $ 0
Wester Vet Clinic, Thomson, GA...................................... 1 May-96 $ 3000 $ 0
Hurst Animal Hosp, Springfield, IL.................................. 1 May-96 $ 3000 $ 0
Hays Vet Hosp, Hays, KS............................................. 1 May-96 $ 3000 $ 0
Fairfield Equine Assoc, Monroe, CT.................................. 1 May-96 $ 3000 $ 0
Creston Vet Clinic, Creston, IA..................................... 1 May-96 $ 3000 $ 0
Winchester Place Pet, Olathe, KS.................................... 1 May-96 $ 3000 $ 0
Frank Walker/DBA Flickertail, ND.................................... 1 Oct-96 $ 3000 $ 0
Animal Rescue, Maryld Line, MD...................................... 1 Oct-96 $ 3000 $ 0
Randall Alger/DBA Alger Vet, OH..................................... 1 Oct-96 $ 3000 $ 0
ABC Squared Seville, OH............................................. 1 Oct-96 $ 3000 $ 0
Albia Animal Clinic Albia, IA....................................... 1 Oct-96 $ 3000 $ 0
Novak Vet Clinic Ottawa, IL......................................... 1 Oct-96 $ 3000 $ 0
Virgil Brown DBA Moulton Vet, OH.................................... 1 Oct-96 $ 3000 $ 0
LaPorte City Vet, LaPorte City, IA.................................. 1 Oct-96 $ 3000 $ 0
J Fallert DBA Ste Genevieve, MO..................................... 1 Oct-96 $ 3000 $ 0
Janssen Vet Clinic Sheridan, IN..................................... 1 Oct-96 $ 3000 $ 0
Bellevue Vet Clinic Bellevue, IA.................................... 1 Oct-96 $ 3000 $ 0
James Pennington DBA, Starke, FL.................................... 1 Oct-96 $ 3000 $ 0
Center Hill Vet Clinic Darlington, WI............................... 1 Oct-96 $ 3000 $ 0
Mountain Empire Johnson City, TN.................................... 1 Oct-96 $ 3000 $ 0
Charles Guthrie DBA Animal, KY...................................... 1 Oct-96 $ 3000 $ 0
Todd Price DBA NCent Vet, OH........................................ 1 Oct-96 $ 3000 $ 0
Sophie O'Neill, Sioux Falls, SD..................................... 1 Oct-96 $ 3000 $ 0
Dr. Slaymaker, Chester Springs, PA.................................. 1 Oct-96 $ 3000 $ 0
Hartselle Animal, Hartselle, AL..................................... 1 Oct-96 $ 3000 $ 0
Jernigan Vet, Council Grove, KS..................................... 1 Oct-96 $ 3000 $ 0
Anderson Vet Serv, Platteville, WI.................................. 1 Oct-96 $ 3000 $ 0
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTS OR
TITLE(1) AMT DATE PRICE COMMISSIONS
- -------------------------------------------------------------------- ----- --------- --------- ---------------------
<S> <C> <C> <C> <C>
Breda Lakeview, Breda, IA........................................... 1 Oct-96 $ 3000 $ 0
Animal Care Clinic, Greensboro, NC.................................. 1 Oct-96 $ 3000 $ 0
Cordova Animal, Pensacola, FL....................................... 1 Oct-96 $ 3000 $ 0
Crawfordsville Vet, Crawfordsville, IA.............................. 1 Oct-96 $ 3000 $ 0
Eastern Shore, Laurel, DE........................................... 1 Oct-96 $ 3000 $ 0
Fowlerville Vet, Fowlerville, MI.................................... 1 Oct-96 $ 3000 $ 0
Freeport Vet Services, Freeport, MN................................. 1 Oct-96 $ 3000 $ 0
Norway Vet Clinic, Norway, IA....................................... 1 Oct-96 $ 3000 $ 0
Nelson Animal, Baldwyn, MS.......................................... 1 Oct-96 $ 3000 $ 0
Niceville Animal, Niceville, FL..................................... 1 Oct-96 $ 3000 $ 0
Ulysses Vet Hosp, Ulysses, KS....................................... 1 Oct-96 $ 3000 $ 0
Union Hill Animal, Canton, GA....................................... 1 Oct-96 $ 3000 $ 0
Woodford Animal, Versailles, KY..................................... 1 Oct-96 $ 3000 $ 0
Southkent Vet, Caledonia, MI........................................ 1 Oct-96 $ 3000 $ 0
Perry Creek Animal, Sioux City, IA.................................. 1 Oct-96 $ 3000 $ 0
Parkwood Animal, Durham, NC......................................... 1 Oct-96 $ 3000 $ 0
Etowah Vet, Marietta, GA............................................ 1 Oct-96 $ 3000 $ 0
Dr. James Raatz, Arlington, NE...................................... 1 Nov-96 $ 3000 $ 0
Seneca Vet, Seneca, KS.............................................. 1 Nov-96 $ 3000 $ 0
Kuhns Animal Clinic, Geneseo, IL.................................... 1 Nov-96 $ 3000 $ 0
Countryside Vet Clinic, Oberlin, KS................................. 1 Nov-96 $ 3000 $ 0
Dr. Mary Mountain, Kansas City, MO.................................. 1 Nov-96 $ 3000 $ 0
Dr. Gentry, DBA Beloit, Beloit, KS.................................. 1 Nov-96 $ 3000 $ 0
MidRiver Vet, Chamberlain, SD....................................... 1 Nov-96 $ 3000 $ 0
Dr. Craig Ott, Stroudsburg, PA...................................... 1 Nov-96 $ 3000 $ 0
Dr John Durling, Fort Scott, KS..................................... 1 Dec-96 $ 3000 $ 0
Garrison VS, Garrison, ND........................................... 1 Dec-96 $ 3000 $ 0
Gentle Care AH, Nixa, MO............................................ 1 Dec-96 $ 3000 $ 0
Mid Dakota VS, Harvey, ND........................................... 1 Dec-96 $ 3000 $ 0
Tates Creek AH, Lexington, KY....................................... 1 Dec-96 $ 3000 $ 0
Crestwood VC, Crestwood, KY......................................... 1 Dec-96 $ 3000 $ 0
Manakin-Sabot VC, Manakin-S, VA..................................... 1 Dec-96 $ 3000 $ 0
Jasper Swine, Rensselaer, IN........................................ 1 Dec-96 $ 3000 $ 0
Lost Mountain AH, Marietta, GA...................................... 1 Dec-96 $ 3000 $ 0
Walker VC, Concordia, KS............................................ 1 Dec-96 $ 3000 $ 0
Western Plains, Lakin, KS........................................... 1 Dec-96 $ 3000 $ 0
Lancaster VC, Lancaster, WI......................................... 1 Dec-96 $ 3000 $ 0
Lake Huron VC, Port Huron, MI....................................... 1 Dec-96 $ 3000 $ 0
Palmer VC, Palmer, NE............................................... 1 Dec-96 $ 3000 $ 0
Linda Barton, Blakeslee, PA......................................... 1 Dec-96 $ 3000 $ 0
Animal Care Ctr, Fort Scott, KS..................................... 1 Jan-97 $ 3000 $ 0
Boscobel VC, Boscobel, WI........................................... 1 Jan-97 $ 3000 $ 0
Dr Manchester-Hayes B-Raleigh, NC................................... 1 Jan-97 $ 3000 $ 0
Ryan Animal-Cayuga-Auburn, NY....................................... 1 Jan-97 $ 3000 $ 0
Winters Ctryside, Fairbury, NE...................................... 1 Jan-97 $ 3000 $ 0
Dr Gillen-Lincoln AH, Lincoln, IL................................... 1 Jan-97 $ 3000 $ 0
Dr Cunningham-Walnut Grove, MO...................................... 1 Jan-97 $ 3000 $ 0
Gammon Pet Clinic, Madison, WI...................................... 1 Jan-97 $ 3000 $ 0
Dr Stewart Beckett, Glastonbury, CT................................. 1 Feb-97 $ 3000 $ 0
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTS OR
TITLE(1) AMT DATE PRICE COMMISSIONS
- -------------------------------------------------------------------- ----- --------- --------- ---------------------
<S> <C> <C> <C> <C>
Dr Steve Wright, Millard Vet, Omaha, NE............................. 1 Mar-97 $ 3000 $ 0
Dr Tummons, Uniontown, PA........................................... 1 Mar-97 $ 3000 $ 0
Fairview Hospital, Decatur, IL...................................... 1 Mar-97 $ 3000 $ 0
Independence AH, Independence, KS................................... 1 Mar-97 $ 3000 $ 0
County Animal, Coldwater, OH........................................ 1 Mar-97 $ 3000 $ 0
Dr. P Cuddihee, Ashland, MO......................................... 1 Mar-97 $ 3000 $ 0
Swine Vet Serv., Zeeland, MI........................................ 1 Mar-97 $ 3000 $ 0
Dr James Smart, Abilene, KS......................................... 1 Mar-97 $ 3000 $ 0
Hillside VC, Hays, KS............................................... 1 Mar-97 $ 3000 $ 0
Cape Ann Vet, Gloucester, MA........................................ 1 Apr-97 $ 3000 $ 0
Danvers Animal, Danvers, MA......................................... 1 Apr-97 $ 3000 $ 0
Jefferson Cty AH, Waurika, OK....................................... 1 Apr-97 $ 3000 $ 0
Puget Island, Cathlamet, WA......................................... 1 Apr-97 $ 3000 $ 0
VMC, Worthington, MN................................................ 1 Apr-97 $ 3000 $ 0
Oldham Cty Vet, Buckner, KY......................................... 1 May-97 $ 3000 $ 0
Clearview AH, Bloomfield, IA........................................ 1 May-97 $ 3000 $ 0
Major AH, Watonga, OK............................................... 1 May-97 $ 3000 $ 0
An ER Clinic, Springfield, IL....................................... 1 May-97 $ 3000 $ 0
O'Neill VC, O'Neill, NE............................................. 1 May-97 $ 3000 $ 0
Westside AC, Spring Hill, FL........................................ 1 May-97 $ 3000 $ 0
Schmitts AH, Grand Rapids, MI....................................... 1 May-97 $ 3000 $ 0
Dr Mary Uhl, Killbuck, OH........................................... 1 May-97 $ 3000 $ 0
Dr Patricia Rouff, Grover, MO....................................... 1 May-97 $ 3000 $ 0
James Holt Assoc. Coatesville, PA................................... 1 May-97 $ 3000 $ 0
Brownstown AH, Brownstown, PA....................................... 1 Jun-97 $ 3000 $ 0
Donald Fickey, Mayfield, KY......................................... 1 Jun-97 $ 3000 $ 0
Leigh Vet Clinic, Leigh, NE......................................... 1 Jun-97 $ 3000 $ 0
Midwest Vet Services, Oakland, NE................................... 1 Jun-97 $ 3000 $ 0
Dr David Gourley, Mt Grove, MO...................................... 1 Jul-97 $ 3000 $ 0
Golden Valley AC, Clinton, MO....................................... 1 Jul-97 $ 3000 $ 0
Hilltop AC, Holton, KS.............................................. 1 Jul-97 $ 3000 $ 0
Evergreen AH, Reading, PA........................................... 1 Jul-97 $ 3000 $ 0
Maplehurst Genetics, Keota, IA...................................... 1 Jul-97 $ 3000 $ 0
Tri County Vet, Russiaville, IN..................................... 1 Jul-97 $ 3000 $ 0
Tri County Vet, Graham, NC.......................................... 1 Jul-97 $ 3000 $ 0
Tri County Animal, W. Salem, OH..................................... 1 Jul-97 $ 3000 $ 0
Macon Vet Clinic, Macon, MO......................................... 1 Aug-97 $ 3000 $ 0
Eastview An Hosp, Ottumwa, IA....................................... 1 Aug-97 $ 3000 $ 0
East Central, Mora, MN.............................................. 1 Aug-97 $ 3000 $ 0
Johnson Cty An Warrensburg, MO...................................... 1 Aug-97 $ 3000 $ 0
Richman Animal, Richmond Hts, OH.................................... 1 Aug-97 $ 3000 $ 0
Silver Maple, Kutztown, PA.......................................... 1 Aug-97 $ 3000 $ 0
Apley Vet Clinic, Larned, KS........................................ 1 Aug-97 $ 3000 $ 0
Animal Med Ctr, Hartley, IA......................................... 1 Sep-97 $ 3000 $ 0
Starks Vet, Cherokee, OK............................................ 1 Sep-97 $ 3000 $ 0
Dr Brian Schantz, Laurel, NE........................................ 1 Sep-97 $ 3000 $ 0
Odell Vet Clinic, Marshall, MO...................................... 1 Oct-97 $ 3000 $ 0
Vet Spec of Omaha, Omaha, NE........................................ 1 Oct-97 $ 3000 $ 0
Pinkerton AH, Minot, ND............................................. 1 Oct-97 $ 3000 $ 0
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTS OR
TITLE(1) AMT DATE PRICE COMMISSIONS
- -------------------------------------------------------------------- ----- --------- --------- ---------------------
<S> <C> <C> <C> <C>
Sassafras Equine, Rogersville, MO................................... 1 Oct-97 $ 3000 $ 0
Dr W.R. Sumrall, Henderson, TN...................................... 1 Nov-97 $ 3000 $ 0
Belton Animal Clinic, Belton, MO.................................... 1 Nov-97 $ 3000 $ 0
Dr Jack Gochenour, Mo Valley, IA.................................... 1 Nov-97 $ 3000 $ 0
Stockmans Vet Hosp, Elk City, OK.................................... 1 Nov-97 $ 3000 $ 0
Town & Country VC, Marietta, GA..................................... 1 Nov-97 $ 3000 $ 0
Douglas County AH, Douglasville, GA................................. 1 Nov-97 $ 3000 $ 0
Ani Amour Vet Med, Lovejoy, GA...................................... 1 Nov-97 $ 3000 $ 0
Loving Hands Ani Cl, Roswell, GA.................................... 1 Nov-97 $ 3000 $ 0
Dr. Val Frazier, Roswell, GA........................................ 1 Nov-97 $ 3000 $ 0
Coweta Vet Assoc., Newnan, GA....................................... 1 Nov-97 $ 3000 $ 0
North Cobb Ani Cl, Kennesaw, GA..................................... 1 Nov-97 $ 3000 $ 0
Lake Harbin AH, Morrow, GA.......................................... 1 Nov-97 $ 3000 $ 0
Sprayberry AH, Marietta, GA......................................... 1 Nov-97 $ 3000 $ 0
Dr Rod Hardee, Alpharetta, GA....................................... 1 Nov-97 $ 3000 $ 0
Arcadia AH, Arcadia, FL............................................. 1 Nov-97 $ 3000 $ 0
Jana Vet Corp, Lilburn, GA.......................................... 1 Nov-97 $ 3000 $ 0
T Heirigs Twin Lakes, Madison, SD................................... 1 Dec-97 $ 3000 $ 0
Prof Vet Services, Scott City, KS................................... 1 Dec-97 $ 3000 $ 0
Belle Isle Ani Cl, Atlanta, GA...................................... 1 Dec-97 $ 3000 $ 0
C Dean Bertholf, Anthony, KS........................................ 1 Dec-97 $ 3000 $ 0
Paul Tharp, Lee's Summit, MO........................................ 1 Dec-97 $ 3000 $ 0
Wade Bullock, Williston, FL......................................... 1 Dec-97 $ 3000 $ 0
Marceline VC, Marceline, MO......................................... 1 Dec-97 $ 3000 $ 0
TJ Vogelweid, Moberly, MO........................................... 1 Dec-97 $ 3000 $ 0
Max/Frances Mann, Quinter, KS....................................... 1 Dec-97 $ 3000 $ 0
A-4 Animal Hospital, Lincoln, NE.................................... 1 Dec-97 $ 3000 $ 0
Gentle Doctor AH, Brookings, SD..................................... 1 Dec-97 $ 3000 $ 0
Berryville VC, Berryville, AR....................................... 1 Jan-98 $ 3000 $ 0
A Evans/Boone County, Harrison, AR.................................. 1 Jan-98 $ 3000 $ 0
Butler Vet Assoc, Butler, PA........................................ 1 Jan-98 $ 3000 $ 0
J Bonham/Clinton AH, Clinton, OK.................................... 1 Jan-98 $ 3000 $ 0
J Droese/Conneaut AH, Conneaut, OH.................................. 1 Jan-98 $ 3000 $ 0
D Carder/Hoyt Ani, Hoyt, KS......................................... 1 Jan-98 $ 3000 $ 0
Stoney Creek, Farmland, IN.......................................... 1 Jan-98 $ 3000 $ 0
Volga VC, Volga, SD................................................. 1 Feb-98 $ 3000 $ 0
Baldwin Hilltop AHC, Baldwin C, KS.................................. 1 Feb-98 $ 3000 $ 0
Byergo/Countryside AH, Nevada, MO................................... 1 Feb-98 $ 3000 $ 0
Big Valley AH, Reedsville, PA....................................... 1 Feb-98 $ 3000 $ 0
Karrenbrock VC, Okarche, OK......................................... 1 Mar-98 $ 3000 $ 0
Ani Emergency Clinic, Cary, NC...................................... 1 Mar-98 $ 3000 $ 0
Hyannis VS, Hyannis, NE............................................. 1 Mar-98 $ 3000 $ 0
Dr Woodward, Richmond, IN........................................... 1 Mar-98 $ 3000 $ 0
Companion AH, Fort Calhoun, NE...................................... 1 Mar-98 $ 3000 $ 0
Dr Wakefield, Lewisburg, TN......................................... 1 Mar-98 $ 3000 $ 0
Postville VC, Postville, IA......................................... 1 Mar-98 $ 3000 $ 0
Animal Med Care, Brookings, SD...................................... 1 Apr-98 $ 3000 $ 0
Frog Creek VC, Waverly, KS.......................................... 1 Apr-98 $ 3000 $ 0
Greentown AH, Greentown, IN......................................... 1 Apr-98 $ 3000 $ 0
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTS OR
TITLE(1) AMT DATE PRICE COMMISSIONS
- -------------------------------------------------------------------- ----- --------- --------- ---------------------
<S> <C> <C> <C> <C>
Guthrie County VS, Guthrie C, IA.................................... 1 Apr-98 $ 3000 $ 0
Reston-Great Flls VC, Vienna, VA.................................... 1 Apr-98 $ 3000 $ 0
No Platte VC, No Platte, NE......................................... 1 Apr-98 $ 3000 $ 0
Pallone VH, Rose Bud, AR............................................ 1 Apr-98 $ 3000 $ 0
Quail Valley VC, Jefferson City, MO................................. 1 Apr-98 $ 3000 $ 0
Rushville VC, Rushville, NE......................................... 1 Apr-98 $ 3000 $ 0
Tri-County VS, Tompkinsville, KY.................................... 1 Apr-98 $ 3000 $ 0
Vilonia AC, Vilonia, AR............................................. 1 Apr-98 $ 3000 $ 0
Oakwood VS, Colona, IL.............................................. 1 Apr-98 $ 3000 $ 0
AgriMed VC, Palmyra, MO............................................. 1 May-98 $ 3000 $ 0
Schweikhardt/Buck Crk, Knightstwn, IN............................... 1 May-98 $ 3000 $ 0
Greenwood VH, Durham, NC............................................ 1 May-98 $ 3000 $ 0
Hebron VC, Hebron, ND............................................... 1 May-98 $ 3000 $ 0
Honey Creek VH, Trenton, MO......................................... 1 May-98 $ 3000 $ 0
Meriden AH, Meriden, KS............................................. 1 May-98 $ 3000 $ 0
Brent Hall/RaphineAC, Raphine, VA................................... 1 May-98 $ 3000 $ 0
Steve Rumsey/So71VC, Willmar, MN.................................... 1 May-98 $ 3000 $ 0
Twin Rivers VC, Columbus, NE........................................ 1 May-98 $ 3000 $ 0
JH DBA Hackett AC, Manchester, TN................................... 1 Jun-98 $ 3000 $ 0
Tri-County VS, Bland, MO............................................ 1 Jun-98 $ 3000 $ 0
JB DBA Soda Springs AC, Soda Springs, ID............................ 1 Jun-98 $ 3000 $ 0
JM DBA Pickrell VC, Pickrell, NE.................................... 1 Jun-98 $ 3000 $ 0
TS DBA Strathman VS, Rockford, IL................................... 1 Jun-98 $ 3000 $ 0
Cannon Valley VC, Northfield, MN.................................... 1 Jun-98 $ 3000 $ 0
WF DBA Ferrell VC Hennessey, OK..................................... 1 Jun-98 $ 3000 $ 0
Sylvania VH, Sylvania, OH........................................... 1 Jun-98 $ 3000 $ 0
CM DBA AFB VS, Richmond, UT......................................... 1 Jun-98 $ 3000 $ 0
Wyoming VS, Wyoming, IA............................................. 1 Jun-98 $ 3000 $ 0
JH DBA B B VH, Warrensburg, MO...................................... 1 Jun-98 $ 3000 $ 0
Roger Swenson, Blair, NE............................................ 1 Jul-98 $ 3000 $ 0
Mitchell Vet Service, Massey, MD.................................... 1 Jul-98 $ 3000 $ 0
K Heath DBA Vet Health, Norfolk, NE................................. 1 Jul-98 $ 3000 $ 0
Gill DBA, Gill VC, West Salem, IL................................... 1 Jul-98 $ 3000 $ 0
Bear Creek VS, Torrington, WY....................................... 1 Jul-98 $ 3000 $ 0
Stout DBA Farm VS, Coshocton, OH.................................... 1 Jul-98 $ 3000 $ 0
Dr Corsiglia Plantation, Waco, TX................................... 1 Jul-98 $ 3000 $ 0
Dyersville VC, Dyersville, IA....................................... 1 Aug-98 $ 3000 $ 0
Ani Med Clinic of Quincy, Quincy, IL................................ 1 Aug-98 $ 3000 $ 0
Van Roekel & Ass, Alva, FL.......................................... 1 Aug-98 $ 3000 $ 0
Faulkner Cty VC, Greenbrier, AR..................................... 1 Aug-98 $ 3000 $ 0
Dr Lou Scott Jetmore VS, Jetmore, KS................................ 1 Aug-98 $ 3000 $ 0
Dr Terry Coonradt Northview AH, Canton, IL.......................... 1 Aug-98 $ 3000 $ 0
Country Road VS, Apple Creek, OH.................................... 1 Aug-98 $ 3000 $ 0
Dr K Lacy DBA Starr VS, Miltonvale, KS.............................. 1 Sep-98 $ 3000 $ 0
Coldwater Animal Clinic, Coldwater, OH.............................. 1 Sep-98 $ 3000 $ 0
All Creatures AH, Wauchula, FL...................................... 1 Sep-98 $ 3000 $ 0
Dr W Lovett Jr DBA Hardee AC, Wauchula, FL.......................... 1 Sep-98 $ 3000 $ 0
Risinger VS, Terrell, TX............................................ 1 Sep-98 $ 3000 $ 0
Dr BC Taylor DBA Taylor VC, Houston, MO............................. 1 Sep-98 $ 3000 $ 0
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTS OR
TITLE(1) AMT DATE PRICE COMMISSIONS
- -------------------------------------------------------------------- ----- --------- --------- ---------------------
<S> <C> <C> <C> <C>
Dr Karen Sherman DBA Oak View AC, Pea Ridge, AR..................... 1 Sep-98 $ 3000 $ 0
Dr Alice Groner DBA Woodland AH, Jefferson City, MO................. 1 Sep-98 $ 3000 $ 0
Dairy Pharm, Chandler, AZ........................................... 1 Sep-98 $ 3000 $ 0
Vet Specialities Inc DBA Outback AH, Polk City, FL.................. 1 Sep-98 $ 3000 $ 0
Dr Ben Mays, Clinton, AR............................................ 1 Oct-98 $ 3000 $ 0
Dr Joe E Dawson, Quitman, TX........................................ 1 Oct-98 $ 3000 $ 0
Wasbasha V/S, Wabasha, MN........................................... 1 Oct-98 $ 3000 $ 0
Dr Mark Roozen, Roozen VH, Millersburg, KY.......................... 1 Oct-98 $ 3000 $ 0
Dr Gary T Old DBA Boulevard SA Clinic, Texarkana, AR................ 1 Oct-98 $ 3000 $ 0
Stockmans VC, North Platte, NE...................................... 1 Nov-98 $ 3000 $ 0
Town & Country VH, Winona, MN....................................... 1 Nov-98 $ 3000 $ 0
The Animal Hospital, Plainville, KS................................. 1 Nov-98 $ 3000 $ 0
Morningside Veterinary Hospital, Sioux City, IA..................... 1 Dec-98 $ 3000 $ 0
Kyle Animal Clinic PC, Carthage, TX................................. 1 Dec-98 $ 3000 $ 0
Dr Warner, Meredith Warner AC, Lewisburg, TN........................ 1 Dec-98 $ 3000 $ 0
Dr Mandel, Mandel VH, Wickliffe, OH................................. 1 Dec-98 $ 3000 $ 0
Dr George Copeland, Clinton, SC..................................... 1 Dec-98 $ 3000 $ 0
Gateway Equine Veterinary Clinic, Wentzville, MO.................... 1 Dec-98 $ 3000 $ 0
Dr Richter, Cayuga Bovine Service, Auburn, NY....................... 1 Dec-98 $ 3000 $ 0
Suburban AH, Fort Myers, FL......................................... 1 Dec-98 $ 3000 $ 0
Dr Chalfant, Great Plains VS, Hinton, OK............................ 1 Dec-98 $ 3000 $ 0
Portland VC, Portland, IN........................................... 1 Dec-98 $ 3000 $ 0
Swine Service Unlimited Inc, Morris, MN............................. 1 Dec-98 $ 3000 $ 0
Dr Lenington, Bluestem VC, Cedar Vale, KS........................... 1 Dec-98 $ 3000 $ 0
The Barkemeyer Co PC, Helena, MT.................................... 1 Dec-98 $ 3000 $ 0
Verona Pet Hospital, Verona, PA..................................... 1 Jan-99 $ 3000 $ 0
Lyne Enterprises Inc, Chester, VA................................... 1 Jan-99 $ 3000 $ 0
L-W Veterinary Asc, Washington, IA.................................. 1 Jan-99 $ 3000 $ 0
K Wade DVM DBA Appalachian AH, Piney Flats, TN...................... 1 Jan-99 $ 3000 $ 0
K Gochenor DVM DBA Ani House Mobl VC, Logan, IA..................... 1 Jan-99 $ 3000 $ 0
K Kackley DVM DBA Mt Sterling VC, Mt Sterling, IL................... 1 Jan-99 $ 3000 $ 0
J McMahon Woodward DBA Kings Park VH, Springfield, VA............... 1 Jan-99 $ 3000 $ 0
Riverdale VC, Muscoda, WI........................................... 1 Jan-99 $ 3000 $ 0
W Armon DBA High Ridge Animal Hospital, High Ridge, MO.............. 1 Feb-99 $ 3000 $ 0
Wiggins Animal Hospital, Springdale, AR............................. 1 Feb-99 $ 3000 $ 0
Stevens Point Animal Hospital, Stevens Point, WI.................... 1 Feb-99 $ 3000 $ 0
Argyle Veterinary Service, Argyle, WI............................... 1 Feb-99 $ 3000 $ 0
All Creatures Veterinary Clinic, Omaha, NE.......................... 1 Mar-99 $ 3000 $ 0
Nolan Rubin DVM dba Montrose Ani Health, Fairfax, VA................ 1 Mar-99 $ 3000 $ 0
Janet Hill DVM dba West Lake AH, Springfield, IL.................... 1 Mar-99 $ 3000 $ 0
John Niebruegge DVM dba Kirksville SA Hosp, Kirksville, MO.......... 1 Mar-99 $ 3000 $ 0
Valley Veterinary Clinic, Rock Valley, IA........................... 1 Mar-99 $ 3000 $ 0
5th Ave AH, Lebanon, PA............................................. 1 Mar-99 $ 3000 $ 0
John Weiner DVM dba Dairy Performance, Elkland, PA.................. 1 Mar-99 $ 3000 $ 0
Falls Church Animal Hospital, Falls Church, VA...................... 1 Mar-99 $ 3000 $ 0
Kentwood Veterinary Clinic, Kentwood, LA............................ 1 Mar-99 $ 3000 $ 0
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
DISCOUNTS OR
TITLE(1) AMT DATE PRICE COMMISSIONS
- -------------------------------------------------------------------- ----- --------- --------- ---------------------
<S> <C> <C> <C> <C>
DG Jennings DVM dba Lawrenceburg AH, Lawrenceburg, TN............... 1 Mar-99 $ 3000 $ 0
Renee Nodine VMD, Jonestown, PA..................................... 1 Mar-99 $ 3000 $ 0
Carolyn Woodruff DVM dba Knife River VC, Beulah, ND................. 1 Mar-99 $ 3000 $ 0
Matthew Stolzenburg DVM dba Cloud County VC, Concordia, KS.......... 1 Mar-99 $ 3000 $ 0
All Creatures VS, Big Timber, MT.................................... 1 Apr-99 $ 3000 $ 0
Dr Lias Interstate VC, Brandon, SD.................................. 1 Apr-99 $ 3000 $ 0
Blaine County VS, Chinook, MT....................................... 1 Apr-99 $ 3000 $ 0
Odon VC, Odon, IN................................................... 1 Apr-99 $ 3000 $ 0
Ellis VC, Ellis, KS................................................. 1 Apr-99 $ 3000 $ 0
Panhandle VC, Chadron, NE........................................... 1 Apr-99 $ 3000 $ 0
Dr Causey Citrus AC, Lake Placid, FL................................ 1 Apr-99 $ 3000 $ 0
North Main AH, O'Fallon, MO......................................... 1 Apr-99 $ 3000 $ 0
Dr Stephanie Benner, Sellersville, PA............................... 1 Apr-99 $ 3000 $ 0
Livestock Veterinary Services, Kinston, NC.......................... 1 May-99 $ 3000 $ 0
Dr RL Kutter, Wichita, KS........................................... 1 May-99 $ 3000 $ 0
Dr Dixson DBA Tri-State Vet Serv & Supply, Atwood, KS............... 1 May-99 $ 3000 $ 0
Sugarcreek VC, Sugarcreek, OH....................................... 1 May-99 $ 3000 $ 0
Rockwall Equine Center, Terrell, TX................................. 1 May-99 $ 3000 $ 0
Burr Oak VS, Fremont, WI............................................ 1 May-99 $ 3000 $ 0
Hermann, Ott VC, Lakeville, MN...................................... 1 May-99 $ 3000 $ 0
Caring Hands Animal Hospital, Centrevile, VA........................ 1 May-99 $ 3000 $ 0
Harlowton VC, Harlowton, MT......................................... 1 May-99 $ 3000 $ 0
Dr Cotterill DBA Cherryvale VC, Cherryvale, KS...................... 1 May-99 $ 3000 $ 0
Dr Callaway DBA The Pet Clinic, Athens, TN.......................... 1 May-99 $ 3000 $ 0
Dr Garrity DBA Bluff City VS, Natchez, MS........................... 1 May-99 $ 3000 $ 0
Dr King DBA Red Barn VC, Columbia, KY............................... 1 May-99 $ 3000 $ 0
Amite AC, Amite, LA................................................. 1 June-99 $ 3000 $ 0
Dr Salava DBA Salava VC, Clay Center, KS............................ 1 June-99 $ 3000 $ 0
Jacksonville Vet Hospital, Phoenix, MD.............................. 1 June-99 $ 3000 $ 0
Hansford County VH, Spearman, TX.................................... 1 June-99 $ 3000 $ 0
William Crank, Henderson, WV........................................ 1 June-99 $ 3000 $ 0
Dr Cain DBA Central Nebraska VS, Broken B........................... 1 June-99 $ 3000 $ 0
Dr. Woolsey DBA Greene County Veterinary M.......................... 1 June-99 $ 3000 $ 0
Animal House VC, Clarksville, TN.................................... 1 June-99 $ 3000 $ 0
Dr Randall Baker, Lewisburg, TN..................................... 1 June-99 $ 3000 $ 0
Wittenberg VC, Wittenberg, WI....................................... 1 June-99 $ 3000 $ 0
Dr Taylor-Keilholz DBA Osage Reginal VC, Li......................... 1 June-99 $ 3000 $ 0
Large Animal Services, Greeneville, TN.............................. 1 June-99 $ 3000 $ 0
Heartland VC, Harrisonburg, VA...................................... 1 June-99 $ 3000 $ 0
Laketown Animal Hospital, Springfield, IL........................... 1 June-99 $ 3000 $ 0
Stow Kent Animal Hospital, Kent, OH................................. 1 June-99 $ 3000 $ 0
Rolling Hills Veterinary Services, Cascade, IA...................... 1 June-99 $ 3000 $ 0
Dr Westbrook DBA Westbrook AC, Little Rock.......................... 1 June-99 $ 3000 $ 0
</TABLE>
- ------------------------
(1) All sales were exempt from registration pursuant to a No-Action Letter
issued by the Securities and Exchange Commission on July 12, 1996 (enclosed
as Exhibit 99.1 to this Registration Statement).
II-9
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation of Professional Veterinary Products, Ltd.(1)
3.2 Bylaws of Professional Veterinary Products, Ltd.(1)
4.1 Certificate of Professional Veterinary Products, Ltd.(1)
4.2 Article V of the Articles of Incorporation of Professional Veterinary Products, Ltd., which defines
the rights of holders of the securities being registered (included in Exhibit 3.1 above)
4.3 Article II of the Bylaws of Professional Veterinary Products, Ltd., which defines the rights of
holders of the securities being registered (included in Exhibit 3.2 above)
5.1 Form of Opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim(2)
10.1 Warranty Deed for real estate at 10100 J Street, Omaha, Nebraska from Professional Veterinary
Products, Ltd. to Duane E. and Barbara G. Miller(1)
10.2 Warranty Deed for real estate at 10077 South 134(th) Street, Omaha, Nebraska from Hilltop Industrial
Park to Professional Veterinary Products, Ltd.(1)
10.3 Lease of building located at 10100 J Street, Omaha, Nebraska between Professional Veterinary
Products, Ltd. and Duane E. and Barbara G. Miller(1)
10.4 Construction Agreement for building at 10077 South 134(th) Street, Omaha, Nebraska between
Professional Veterinary Products, Ltd. and Mudra Construction, Ltd.(1)
10.5 Sales Agency Agreement between Professional Veterinary Products, Ltd. and Bayer Corporation(1)*
10.6 Sales Agency Agreement between Professional Veterinary Products, Ltd. and Merial LLC(1)*
10.7 Select Distributors Marketing Agreement between Professional Veterinary Products, Ltd. and the Animal
Health Group of Pfizer, Inc.(1)*
10.8 Supply and Distribution Agreement between Professional Veterinary Products, Ltd. and Schering-Plough
Animal Health Corporation(1)*
10.9 Distributor Agreement between Professional Veterinary Products, Ltd. and The Upjohn Company(1)*
10.10 Distribution Agreement between Professional Veterinary Products, Ltd. and Fort Dodge Animal Health(1)
11.1 Statement re Computation of Per Share Earnings(1)
12.1 Statement re Computation of Ratios(1)
15.1 Letter re Unaudited Interim Financial Information(1)
23.1 Consent of Marvin E. Jewell & Co., P.C.(1)
23.2 Form of consent of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim (included in Exhibit 5.1
above)(2)
24.1 Power of Attorney executed by Michael Whitehair(1)
24.2 Power of Attorney executed by Russ Weston(1)
24.3 Power of Attorney executed by Timothy Trayer(1)
24.4 Power of Attorney executed by Kenneth Liska(1)
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
24.5 Power of Attorney executed by Wayne Rychnovsky(1)
24.6 Power of Attorney executed by Raymond Ebert II(1)
24.7 Power of Attorney executed by Mark Basinger(1)
24.8 Power of Attorney executed by Fred Garrison(1)
27.1 Financial Data Schedule (1)
99.1 No Action letter issued by Securities and Exchange Commission on July 12, 1996(1)
</TABLE>
- ------------------------
(1) Filed herewith.
(2) To be filed by amendment.
(*) Portions of this exhibit have been redacted pursuant to a request for
confidential treatment which is currently being reviewed by the Securities
and Exchange Commission.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
II-11
<PAGE>
furnished to the Commission by the registrant pursuant to section 13 or
section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Omaha, State of Nebraska
on this 20th day of August, 1999.
<TABLE>
<S> <C> <C>
PROFESSIONAL VETERINARY PRODUCTS, LTD.
By: /s/ LIONEL L. REILLY
-----------------------------------------
Lionel L. Reilly
PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities of Professional Veterinary Products, Ltd. on the 20th day of August,
1999.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
/s/ LIONEL L. REILLY
- ------------------------------ President
Lionel L. Reilly
/s/ NEAL B. SODERQUIST
- ------------------------------ Chief Financial Officer
Neal B. Soderquist
/s/ MARK A. BASINGER
- ------------------------------ Director
Mark A. Basinger
/s/ RAYMOND C. EBERT II
- ------------------------------ Director
Raymond C. Ebert II
/s/ FRED G. GARRISON
- ------------------------------ Director
Fred G. Garrison
/s/ KENNETH R. LISKA
- ------------------------------ Director
Kenneth R. Liska
</TABLE>
II-13
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------ --------------------------
<C> <S>
/s/ WAYNE E. RYCHNOVSKY
- ------------------------------ Director
Wayne E. Rychnovsky
/s/ TIMOTHY P. TRAYER
- ------------------------------ Director
Timothy P. Trayer
/s/ RUSS R. WESTON
- ------------------------------ Director
Russ R. Weston
/s/ MICHAEL L. WHITEHAIR
- ------------------------------ Director
Michael L. Whitehair
</TABLE>
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ---------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
3.1 Articles of Incorporation of Professional Veterinary Products, Ltd.(1)........................
3.2 Bylaws of Professional Veterinary Products, Ltd.(1)...........................................
4.1 Certificate of Professional Veterinary Products, Ltd.(1)......................................
4.2 Article V of the Articles of Incorporation of Professional Veterinary Products, Ltd., which
defines the rights of holders of the securities being registered (included in Exhibit 3.1
above)........................................................................................
4.3 Article II of the Bylaws of Professional Veterinary Products, Ltd., which defines the rights
of holders of the securities being registered (included in Exhibit 3.2 above).................
5.1 Form of Opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim(2).....................
10.1 Warranty Deed for real estate at 10100 J Street, Omaha, Nebraska from Professional Veterinary
Products, Ltd. to Duane E. and Barbara G. Miller(1)...........................................
10.2 Warranty Deed for real estate at 10077 South 134th Street, Omaha, Nebraska from Hilltop
Industrial Park to Professional Veterinary Products, Ltd.(1)..................................
10.3 Lease of building located at 10100 J Street, Omaha, Nebraska between Professional Veterinary
Products, Ltd. and Duane E. and Barbara G. Miller(1)..........................................
10.4 Construction Agreement for building at 10077 South 134th Street, Omaha, Nebraska between
Professional Veterinary Products, Ltd. and Mudra Construction, Ltd.(1)........................
10.5 Sales Agency Agreement between Professional Veterinary Products, Ltd. and Bayer
Corporation(1).*..............................................................................
10.6 Sales Agency Agreement between Professional Veterinary Products, Ltd. and Merial LLC(1).*.....
10.7 Select Distributors Marketing Agreement between Professional Veterinary Products, Ltd. and the
Animal Health Group of Pfizer, Inc.(1).*......................................................
10.8 Supply and Distribution Agreement between Professional Veterinary Products, Ltd. and
Schering-Plough Animal Health Corporation(1).*................................................
10.9 Distributor Agreement between Professional Veterinary Products, Ltd. and The Upjohn
Company(1).*..................................................................................
10.10 Distribution Agreement between Professional Veterinary Products, Ltd. and Fort Dodge Animal
Health(1).....................................................................................
11.1 Statement re Computation of Per Share Earnings(1).............................................
12.1 Statement re Computation of Ratios(1).........................................................
15.1 Letter re Unaudited Interim Financial Information(1)..........................................
23.1 Consent of Marvin E. Jewell & Co., P.C.(1)....................................................
23.2 Form of consent of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim (included in Exhibit
5.1 above)(2).................................................................................
24.1 Power of Attorney executed by Michael Whitehair(1)............................................
24.2 Power of Attorney executed by Russ Weston(1)..................................................
24.3 Power of Attorney executed by Timothy Trayer(1)...............................................
24.4 Power of Attorney executed by Kenneth Liska(1)................................................
24.5 Power of Attorney executed by Wayne Rychnovsky(1).............................................
24.6 Power of Attorney executed by Raymond Ebert II(1).............................................
24.7 Power of Attorney executed by Mark Basinger(1)................................................
24.8 Power of Attorney executed by Fred Garrison(1)................................................
27.1 Financial Data Schedule(1)....................................................................
99.1 No Action letter issued by Securities and Exchange Commission on July 12, 1996(1).............
</TABLE>
- ------------------------
(1) Filed herewith.
(2) To be filed by amendment.
(*) Portions of this exhibit have been redacted pursuant to a request for
confidential treatment which is currently being reviewed by the Securities
and Exchange Commission.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
PROFESSIONAL VETERINARY PRODUCTS, LTD.
ARTICLE I
NAME
The name of this Corporation is: Professional Veterinary Products, Ltd.
ARTICLE II
PURPOSE
The purposes for which this Corporation is organized are to do and transact
any and all lawful business for which corporations may be organized under the
Nebraska Business Corporation Act, including but not limited to acting as a
wholesaler for the items and services described below in order that they
might be sold at a reduced cost to the shareholders. The primary focus is for
the purpose of buying, selling, trading, warehousing, transporting and
otherwise dealing in pharmaceuticals, biologicals, insecticides, instruments,
equipment and other items and services related to the practice of veterinary
medicine.
ARTICLE III
AUTHORIZED SHARES
The total authorized capital stock of the Corporation shall be thirty thousand
(30,000) shares of common stock, and the common stock shall have par value of
one dollar ($1.00) per share.
ARTICLE IV
PREEMPTIVE RIGHTS
The shareholders of the Corporation shall not have preemptive rights.
ARTICLE V
RESTRICTIONS ON STOCK OWNERSHIP
A. Unless otherwise approved by the Board of Directors, the Corporation shall
sell shares of stock only to 1) individual licensed veterinarians; or 2) any
lawful form of business entity established to deliver veterinary services
and/or products in which all medical decisions are made by licensed
veterinarians. The Corporation may sell shares to such veterinary practices
which are locally operated but owned by a non-local entity.
<PAGE>
No solo practitioner or veterinary practice composed of multiple
veterinarians may own more than one (1) share of the Corporation's stock.
Veterinarians who have an interest in a veterinary practice with multiple
veterinarians may not own stock if the practice already owns one (1) share of
stock or if any of that veterinarian's fellow practitioners own one (1) share
of stock.
B. If a shareholder owes money to the Corporation and fails to make payments
by the due date, the Board of Directors shall have the option to repurchase
the stock owned by the shareholder at the price the shareholder paid for the
stock. This option shall extend for a period of six months after due date of
the debt. In the event a shareholder is no longer qualified to be a
shareholder under Article V(A) above, then the Corporation shall repurchase
the stock owned by such shareholder, and such shareholder shall sell such
stock to the Corporation, at the price the shareholder paid for such stock.
C. The Corporation shall sell a share of stock only to a qualified
veterinarian or practice after the approval of the Board of Directors of the
Corporation, at a price of $3,000 per share, or such lesser amount as
determined by the Board of Directors in its discretion. No shareholder of the
Corporation may sell, assign, or otherwise transfer (including through any
pledge or hypothecation) any stock of the Corporation held by such
shareholder except in compliance with this Article V and the Bylaws.
ARTICLE VI
RESTRICTIONS ON PRICE OF SALES
Unless otherwise approved by the Board of Directors, and unless otherwise
restricted by contract, sales of products to shareholders shall be no more
than 5% over the cost to the Corporation as determined by the Corporation's
Certified Public Accountant.
ARTICLE VII
DIRECTORS
The Board of Directors shall be composed of eight (8) shareholders who are
elected on staggered terms from eight geographic districts. The Board of
Directors of the Corporation shall be divided into three classes of
directors, Class I, Class II, and Class III. Class I shall consist of two
directors, one from District 3 and one from District 7. Class II shall
consist of three directors, one from each of the following Districts: 1, 2
and 6. Class III shall consist of three directors, one from each of the
following Districts: 4, 5 and 8. The geographic boundaries of the Districts
shall be provided for in the Bylaws of the Corporation and may be revised by
the Board of Directors from time to time. In addition to the eight voting
members, the Chairman Emeritus and the President shall be non-voting members
of the Board of Directors.
Duly elected and qualified Class I directors shall serve until the 2000
annual meeting of shareholders, and thereafter, the terms of the Class I
directors shall extend until the
2
<PAGE>
third succeeding annual meeting after each election of such directors. Duly
elected and qualified Class II directors shall serve until the 2001 annual
meeting of shareholders and, thereafter, the terms of Class II directors
shall extend until the third succeeding annual meeting after each election of
such directors. Duly elected and qualified Class III directors shall serve
until the 2002 annual meeting of shareholders and thereafter, the terms of
Class III directors shall extend until the third succeeding annual meeting
after each election of such directors.
ARTICLE VIII
DISSOLUTION
Upon the liquidation or dissolution of the Corporation, in the event the
Corporation has excess funds or assets after payment of all debts,
liabilities and obligations legally owed by the Corporation, such funds or
assets shall be distributed to the shareholders on an equal, per-share basis.
ARTICLE IX
AMENDMENTS
These Articles may be amended by the affirmative vote of more than 60% of the
members of the Board of Directors unless either one of the following is
applicable: 1) if 1/2 or more of the seats of the Board of Directors are
vacant, then 75% or more affirmative vote of the remaining sitting members
shall be required; or 2) the Nebraska Business Corporation Act requires
otherwise.
ARTICLE X
LIABILITY
A Director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for any action taken, or
for any failure to take action as a Director except for liability (i) for the
amount of a financial benefit received by a Director to which he or she is
not entitled; (ii) for intentional infliction of harm on the Corporation or
its shareholders; (iii) for a violation of Neb. Rev. Stat. ss. 21-2096; and
(iv) for an intentional violation of criminal law.
No amendment to or repeal of this Article shall apply to or have any
effect on the liability or alleged liability of any Director of the
Corporation for or with respect to any acts or omissions of such Director
occurring prior to such amendment or repeal. If the Nebraska Business
Corporation Act is hereafter amended to authorize the further elimination or
limitation of liability of Directors, then the liability of Directors shall
be eliminated or limited to the full extent authorized by the Nebraska
Business Corporation Act as so amended.
3
<PAGE>
ARTICLE XI
INDEMNIFICATION
To the extent permitted by law, the Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit, or proceeding, whether civil,
criminal, administrative or investigative, including any action or suit by or
in the right of the Corporation to procure a judgment in its favor, by reason
of the fact that such person is or was a Director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as
a director, officer, employee or agent of another Corporation, partnership,
joint venture or other enterprise or as a trustee, officer, employee or agent
of an employee benefit plan. Such indemnification shall be against expenses,
including attorney fees, and except for actions by or in the right of the
Corporation, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
To the extent permitted by law, the Corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee or agent of the Corporation against any liability
asserted against such person while acting in such capacity or arising out of
his or her status as such, whether or not the Corporation would have the
power to indemnify him or her against such liability.
The indemnity provided for by this Article shall not be deemed to be
exclusive of any other rights to which those indemnified may be otherwise
entitled, nor shall the provisions of this Article be deemed to prohibit the
Corporation from extending its indemnification to cover other persons or
activities to the extent permitted by law or pursuant to any provisions in
the Bylaws.
ARTICLE XII
REGISTERED OFFICE AND REGISTERED AGENT
The street address of the registered office of the Corporation is: 10100 J
Street, Omaha, Nebraska 68127 and the name of its registered agent at such
address is: Dr. Lionel L. Reilly.
ARTICLE XIII
NAME AND ADDRESS OF INCORPORATOR
The name and address of the Incorporator is: Richard E. Putnam, Baird, Holm,
McEachen, Pedersen, Hamann & Strasheim, 1500 Woodmen Tower, Omaha, Nebraska
68102.
4
<PAGE>
I, the undersigned, being the Incorporator hereinbefore named, for the
purpose of forming a Corporation under the Nebraska Business Corporation Act
adopt, sign and acknowledge these Articles of Incorporation this 20th day of
August 1999.
/s/ Richard E. Putnam
----------------------------
Richard E. Putnam
5
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
PROFESSIONAL VETERINARY PRODUCTS, LTD.
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Nebraska
shall be located in the City of Omaha, County of Douglas. The Corporation may
have such other offices, either within or without the State of Nebraska, as
the Board of Directors may designate or as the business of the Corporation
may require from time to time. The registered office of the Corporation
required by the Nebraska Business Corporation Act to be maintained in the
State of Nebraska may be, but need not be, identical with the principal
office in the State of Nebraska, and the address of the registered office may
be changed from time to time by the Board of Directors.
ARTICLE II
STOCK
Section 1. CERTIFICATE OF STOCK. A Certificate of stock, numbered
and signed by the President and the Secretary of the Corporation, shall be
issued to each shareholder.
Section 2. VOTING RIGHTS. Each shareholder shall be entitled to one
vote, in person, or by proxy, for each share of stock.
Section 3. LOST CERTIFICATES. A new certificate of stock may be
issued in the place of any certificate theretofore issued by the Corporation
which may have been lost or destroyed, upon presentation to the Corporation
of an affidavit describing the circumstances of the lost or destroyed
certificate.
Section 4. TRANSFER OF SHARES. Except as provided in the Articles of
Incorporation and Section 5 herein, no shareholder of the Corporation may
sell, assign, or otherwise transfer (including through any pledge or
hypothecation) any stock of the Corporation held by such shareholder.
Section 5. SHARE REDEMPTION. In the event a shareholder desires to
relinquish such shareholder's share of stock the Corporation shall repurchase
such share of stock from the shareholder within ninety (90) days of receiving
written notice of such shareholder's desire to sell the share at a price of
<PAGE>
$3,000.00. In the event of the death of a shareholder, the Corporation shall
repurchase such share of stock from the legal representative of the estate of
the deceased shareholder, at the price the deceased shareholder paid for such
share of stock.
Section 6. DIVIDENDS. The Board of Directors may determine in its
own discretion from time to time to pay dividends upon the shares of the
Corporation's capital stock. Any payment to shareholders from the Corporation
upon liquidation or dissolution of the Corporation shall be in accordance
with the Corporation's Articles of Incorporation.
Section 7. CLOSING OF TRANSFER BOOKS. The Board of Directors shall
have power to close the stock transfer books of the Corporation for a period
not exceeding sixty (60) days preceding the date of any meeting of
shareholders or the date for the allotment of rights or the date when any
change or conversion or exchange of capital stock shall go into effect,
provided, however, that in lieu of closing the stock transfer books as
aforesaid, the Board of Directors may fix in advance a date, not exceeding
sixty (60) days preceding the date of any meeting of shareholders or the date
for the allotment of rights, or the date when any change or conversion of or
exchange of capital stock shall go into effect, as a record date for the
determination of the shareholders entitled to receive any such allotment of
rights, or to exercise the rights in respect of any such change, conversion,
or exchange of capital stock, and in such cases only such shareholders of
record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on the
books of the Corporation after any such record date fixed as described above.
ARTICLE III
SHAREHOLDERS
Section 1. ANNUAL MEETING. The annual meeting of the shareholders
shall be held on the 2nd Saturday in the month of November in each year or at
such other time or place as the Board of Directors shall determine. If the
election of Directors shall not be held on the day designated herein for any
annual meeting of the shareholders, or at any adjournment thereof, the Board
of Directors shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as reasonably possible.
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the President or by the Board of Directors and shall be called by
the President at the request of the holders of not less than one-tenth of all
the outstanding shares of the Corporation entitled to vote at the meeting.
Section 3. PLACE OF MEETING. The Board of Directors may designate
any place, either within or without the State of Nebraska, as the place of
meeting for any annual meeting or any special meeting called by the Board of
Directors. If no designation is
2
<PAGE>
made or if a special meeting is otherwise called, the place of meeting shall
be the registered office of the Corporation in the State of Nebraska.
Section 4. NOTICE OF MEETING. Written or printed notice stating the
place, day, and hour of meeting and, in the case of special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) nor more than sixty (60) calendar days before the date of
the meeting, either personally or by mail, by or at the direction of the
President or the Secretary, to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, addressed to the shareholder at his
address as it appears on the stock transfer book of the Corporation, with
postage thereon prepaid.
Section 5. QUORUM. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 6. PROXIES. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. A proxy which does not specify who will hold the vote
of the share the proxy represents, shall be deemed to have named the member
of the Board of Directors from the District in which the shareholder resides
to vote on such shareholder's behalf.
ARTICLE IV
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by its Board of Directors.
Section 2. NUMBER. The Board of Directors shall be composed of eight
(8) persons who are elected on staggered terms from eight geographic
districts. The Board of Directors of the Corporation shall be divided into
three classes of directors, Class I, Class II, and Class III. Class I shall
consist of two directors, one from District 3 and one from District 7. Class
II shall consist of three directors, one from each of the following
Districts: 1, 2 and 6. Class III shall consist of three directors, one from
each of the following Districts: 4, 5 and 8. In addition to the eight voting
members, the Chairman Emeritus and the President shall be non-voting members
of the Board.
3
<PAGE>
Section 3. ELECTION AND TERM OF OFFICE. The appropriate class of
Directors shall be elected at each annual meeting of the shareholders and
shall hold office until removed or until their successors are respectively
elected and qualified. The term of the members of the Board of Directors is
staggered with a maximum term of three years. No member of the Board of
Directors is permitted to repeat a second term until that person has not been
a member of the Board of Directors for at least one year.
The Board, at its discretion, and no more frequently than annually,
may alter the boundaries of each geographic district to more accurately
represent an equitable number of shareholders. Such action and decision would
be prior to and announced at the annual shareholder meeting.
Duly elected and qualified Class I directors shall serve until the
2000 annual meeting of shareholders, and thereafter, the terms of the Class I
directors shall extend until the third succeeding annual meeting after each
election of such directors. Duly elected and qualified Class II directors
shall serve until the 2001 annual meeting of shareholders and, thereafter,
the terms of Class II directors shall extend until the third succeeding
annual meeting after each election of such directors. Duly elected and
qualified Class III directors shall serve until the 2002 annual meeting of
shareholders and thereafter, the terms of Class III directors shall extend
until the third succeeding annual meeting after each election of such
directors.
Section 4. QUALIFICATIONS. Directors must be shareholders. Each
Director's professional practice must be located in the District in which he
or she is elected from at the time of the election. The Districts for the
Board of Directors shall be as follows:
District 1: Nebraska, North Dakota, South Dakota, Wyoming, Montana,
Idaho, Washington, Alaska, and all Canadian provinces west of Omaha, Nebraska.
District 2: Iowa and Minnesota.
District 3: Illinois and Wisconsin.
District 4: Missouri, Arkansas, Louisiana, Mississippi, and Alabama.
District 5: Kansas Colorado, Oklahoma, Texas, New Mexico, Arizona,
Utah, Nevada, California, and Hawaii.
District 6: Michigan, Indiana, Ohio, Kentucky, Tennessee, and all
Canadian provinces east of Omaha.
District 7: West Virginia, Maryland, Delaware, New Jersey,
Pennsylvania, New York, Connecticut, Rhode Island, Massachusetts, Vermont,
New Hampshire, and Maine.
4
<PAGE>
District 8: Virginia, North Carolina, South Carolina, Georgia,
Florida, the Caribbean Islands, Mexico, Central America and South America.
Section 5. REGULAR MEETING. A regular meeting of the Board of
Directors shall be held, without other notice than this Bylaw, immediately
after, and at the same place as, the annual meeting of shareholders for the
purpose of the election of officers and the conducting of business which
otherwise comes before the Board. The Board of Directors may provide, by
resolution, the time and place, either within or without the State of
Nebraska, for the holding of additional regular meetings without other notice
than such resolution. Such additional regular meetings may be held
telephonically upon approval by the Board of Directors.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the President or any two
Directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Nebraska, as the place for holding any special meeting of the Board of
Directors called by them.
Section 7. NOTICE. Notice of any special meeting shall be given
seven (7) calendar days prior thereto by written notice delivered personally
or mailed to each Director at his business address or by such other means as
the Board shall approve from time to time. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. Any Director may waive notice of any meeting.
The attendance of a Director at a meeting shall constitute a waiver of notice
of such meeting, except where a Director attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting.
Section 8. QUORUM. Sixty percent (60%) or more of the members of the
Board of Directors fixed by Section 2 of this Article IV shall constitute a
quorum for the transaction of business at any meeting of the Board of
Directors, but if less than such majority is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice.
Section 9. MANNER OF ACTING. Any action by the Board of Directors
shall require affirmative votes by more than 60% of the members of the Board
of Directors unless 1/2 or more of the seats of the Board of Directors are
vacant, then a 75% or more affirmative vote of the remaining sitting members
shall be required.
Section 10. VACANCIES. Any vacancies occurring in the Board of
Directors may be filled by the affirmative vote of a majority of the
remaining Directors though less than
5
<PAGE>
a quorum of the Board of Directors. A Director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office.
Section 11. COMPENSATION. By resolution of the Board of Directors,
the Directors may be paid their expenses, if any, for attendance at the
annual and mid-year meeting of the Board of Directors and at each special
meeting at which their attendance is required, and shall be paid a fixed sum
for attendance at each meeting of the Board of Directors, including
telephonic conferences.
Section 12. PRESIDING OFFICERS. The Board of Directors annually
shall elect a Chairman, Vice-Chairman and Secretary. The Chairman shall
preside at all of the Board meetings. At the request of the Chairman, or in
the event of his or her absence or disability, the Vice-Chairman shall
perform all of the duties of the Chairman. It shall be the duty of the
Secretary to keep an accurate record of proceedings at all Directors and
shareholders meetings, give all notices required by law, the Articles of
Incorporation, the Bylaws or at the direction of the Board, and issue all
stock certificates. The Chairman, Vice-Chairman and Secretary shall exercise
such other powers as may be assigned to him or her by the Bylaws or the Board.
Section 13. DISPENSING WITH MEETING. Whenever the vote of the Board
of Directors at a meeting thereof is required to be taken in connection with
any corporate action, the meeting of Directors may be dispensed with and the
corporate action may be carried forward if each Director consents in writing
to a written vote on the action without a meeting of Directors, if prior to
such action a written consent thereto is signed by all members of the Board
and such written consent is filed in the corporate minute book.
ARTICLE V
CORPORATE OFFICERS
Section 1. NUMBER. The Board of Directors shall elect a President
and such other officers and assistant officers as the Board of Directors
deems necessary.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation to be elected by the Board of Directors shall be elected annually
by the Board of Directors at the Annual Meeting. Each officer shall hold
office until his successor shall have been duly elected and shall have
qualified, until his death, until he shall resign, or shall have been removed
in the manner hereinafter provided.
Section 3. REMOVAL; RESIGNATION. The Board of Directors may remove
any officer when in its judgment the best interest of the Corporation will be
served thereby.
Section 4. VACANCIES. Any vacancies occurring in the office of
President or any other officers approved by the Board by death, resignation,
removal, or otherwise, may be filled for the unexpired portion of the term by
the Board of Directors at a special meeting called for such purpose, but such
vacancies need not be filled until the first
6
<PAGE>
annual meeting of the Board of Directors subsequent to the vacation of the
office if the Board of Directors does not deem it advisable to fill the
vacancy prior to that meeting.
Section 5. PRESIDENT. The President shall be the chief executive
officer of the Corporation and, subject to the direction and under the
supervision of the Board of Directors, shall have general charge of the
business affairs and property of the Corporation and control of its several
officers. The President shall have such other duties and responsibilities and
may exercise such other powers as are usually incident to the office or as
from time to time may be assigned to him by these Bylaws or the Board of
Directors.
ARTICLE VI
AMENDMENT OF BYLAWS
These Bylaws may be amended, altered, supplemented or repealed by
the Board of Directors at any regular or special meeting.
7
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF PROFESSIONAL VETERINARY PRODUCTS, LTD.
The front of the certificate has a green boarder and a drawing of an
eagle located at the top center.
TEXT ON FRONT OF CERTIFICATE:
Certificate No. _____ Shares 1
Incorporated under the laws of the State of Missouri
PROFESSIONAL VETERINARY PRODUCTS, LTD.
Authorized Capital Stock 30,000 Common Stock $1.00 Par Value
This certifies that _______________________ is the owner of one
fully paid and non-assessable share of the capital stock of Professional
Veterinary Products, Ltd., transferable on the books of the Corporation in
person or by duly authorized Attorney upon surrender of this Certificate
properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate
to be signed by its duly authorized officers and sealed with the Seal of the
Corporation this ____ day of _____, A.D. , 19___.
- ----------------------------- ----------------------------
Dr. Timothy Trayer, Secretary Dr. Lionel Reilly, President
<PAGE>
TEXT ON BACK OF CERTIFICATE:
- ----------------------------
Certificate No.____ for 1 share.
This stock is not registered with the
Securities Exchange Commission.
Dated _______________, 19___.
Issued to _________________________________
_________________________________
_________________________________
_________________________________
Received this Certificate _____________, 19___
_________________________________
Surrendered this Certificate___________, 19___
_________________________________
If not an original issue show details of transfer below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TRANSFERRED FROM ORIGINAL CERTIFICATE NO. OF ORIG'L SHARES NO. OF SH'RS TRANSF'D
- -------------------------------------------------------------------------------------
NO. DATE
-------------------
</TABLE>
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
If this certificate is surrendered for transfer show details.
NEW CERTIFICATE ISSUED TO NO. OF NEW CERTIFICATE NO. OF SHARES TRANSFERRED
- ------------------------------------------------------------------------------
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
EXHIBIT 4.2
See Exhibit 3.1 Articles of Incorporation, Article V the for
restrictions on the ownership of the securities being registered.
<PAGE>
EXHIBIT 4.3
See Exhibit 3.2 Bylaws, Article II for the rights of holders of the
securities being registered.
<PAGE>
EXHIBIT 10.1
CORPORATE SURVIVORSHIP WARRANTY DEED
KNOW ALL MEN BY THESE PRESENTS That Professional Veterinary Products, LTD., a
Missouri corporation in consideration of One Dollar and other valuable
consideration received from grantee, does grant, bargain, sell, convey and
confirm unto Duane E. Miller and Barbara G. Miller, Husband and Wife as joint
tenants with right of survivorship, and not as tenants in common, the following
described real property in Douglas County, Nebraska:
Part of the Northeast Quarter of Section 4, Township 14 North, Range 12
East of the 6th P.M., in Douglas County, Nebraska, more particularly
described as follows:
Commencing at a Point of Intersection of the North right of way line of
"J" Street and the East right of way line of 102nd Street; thence North
89(degree)59'31" East, (Assumed Bearing) along the North right of way
line of said "L" Street, a distance of 231.00 feet to the point of
beginning; thence continuing North 89(degree)59'31" East, along said
North right of way line, a distance of 419.09 feet; thence North
00(degree)37'06" West, a distance of 322.41 feet to a point on the
South line of Union Pacific Railroad Company right of way; thence North
90(degree)00'00" West along said right of way line, a distance of
415.61 feet; thence South 00(degree)00'00" West, a distance of 322.45
feet to the point of beginning.
To have and to hold the above described premises together with all
tenements, hereditaments and appurtenances thereto belonging unto the grantees
and to their assigns, or to the heirs and assigns of the survivor of them
forever.
And the grantor does hereby covenant with the grantees and with their
assigns and with their heirs and assigns of the survivor of them that grantor is
lawfully seized of said premises; that they are free from encumbrance except
covenants, easements and restrictions of record; all regular taxes and special
assessments; except those levied or assessed subsequent to date hereof; that
grantor has good right and lawful authority to convey the same; and that grantor
warrants and will defend the title to said premises against the lawful claims of
all persons whomsoever.
It is the intention of all parties hereto that in the event of the
death of either of the grantees, the entire fee simple to the real estate shall
vest in the surviving grantee.
In witness whereof, grantor has hereunto caused its corporate seal to
be affixed and these presents signed by its President.
<PAGE>
Dated: April 29, 1999
Professional Veterinary Products, LTD
A Missouri Corporation
by: /s/ Lionel L. Reilly
---------------------------
Lionel L. Reilly, President
STATE OF NEBRASKA
COUNTY OF DOUGLAS
The foregoing instrument was acknowledged before me this 29 day of April, 1999
by [Lionel L. Reilly, President] Professional Veterinary Products, LTD., a
Missouri Corporation, on behalf of the corporation.
/s/ Steven G. Reeder
- ---------------------
Notary Public
Commission Expires: June 29, 2000
<PAGE>
EXHIBIT 10.2
WARRANTY DEED
KNOW ALL MEN BY THESE PRESENTS THAT I or WE, Hilltop Industrial Park, L.L.C.,
a Nebraska Limited Liability Company, herein called the grantor whether one
or more, in consideration of One Dollar and other valuable consideration
received from grantee, do hereby grant, bargain, sell, convey and confirm
unto Professional Veterinary Products Ltd., a Missouri Corporation, herein
called the grantee whether one or more, the following described real property
in Sarpy County, Nebraska:
Lot 3, Hilltop Industrial Park Replat 1, a Subdivision as surveyed,
platted and recorded in Sarpy County, Nebraska.
To have and to hold the above described premises together with all
tenements, hereditaments and appurtenances thereto belonging unto the grantee
and to grantee's heirs and assigns forever.
And the grantor does hereby covenant with the grantee and with
grantee's heirs and assigns that grantor is lawfully of said premises; that
they are free from encumbrance except covenants, easements and restrictions
of record; all regular taxes and special assessments, except those levied or
assessed subsequent to date hereof; that grantor has good right and lawful
authority to convey the same; and that grantor warrants and will defend the
title to said premises against the lawful claims of all persons whomsoever.
Dated: September 23, 1998
Hilltop Industrial Park, L.L.C.
by: /s/ Rudolph R. Mudra
------------------------------
Rudolph R. Mudra, President
STATE OF NEBRASKA
COUNTY OF DOUGLAS
The foregoing instrument was acknowledged before me this 23 day of September,
1998 by Rudolph R. Mudra, President of Hilltop Industrial Park, L.L.C., a
Nebraska Limited Liability Company, on behalf of the corporation.
/s/ Jennifer M. Deseck
- ----------------------
Notary Public
Commission Expires: June 29, 1999
<PAGE>
EXHIBIT 10.3
LEASE
THIS LEASE, made and entered into as of the 30th day of April 1999, by
and between Duane and Barbara Miller as lessor ("Lessor") and Professional
Veterinary Products, Ltd., a Missouri Corporation as lessee (Lessee"),
relating to certain real estate located at 10100 "J" Street, Omaha, Nebraska
(the "Premises"). The parties agree as follows:
(1) DEMISE. Lessor hereby leases unto Lessee, and Lessee leases from
Lessor, the Premises.
(2) TERM. The initial term of this Lease shall be for a period of
three (3) months commencing on May 1, 1999 and terminating on August 1, 1999.
Lessee shall have the right to extend this Lease until October 1, 1999 on a
month-to-month basis at the same monthly rental as the initial term. If
anything beyond the control of Seller prevents it from occupying its new
premises by October 1, 1999, the Seller may continue to lease the property on
a month-to-month basis at a rate of Eighteen Thousand and no/100 Dollars
($18,000.00) per month until December 31, 1999.
(3) RENTAL. Lessee shall pay, as monthly rent for the use and
occupancy of the Premises, the amount of Fifteen Thousand and no/100 Dollars
($15,000.00). All rent shall be due and payable on the first day of each
month during the term hereof.
(4) USE OF THE PREMISES. Lessee may use the Premises for uses which
are permitted or allowed under (or not prohibited by) the local zoning
ordinance. Lessee shall comply with all laws, statutes, ordinances, rules and
the like governing Lessee's particular use and occupancy of the Premises.
(5) INSURANCE. Lessee shall maintain, at its own expense, the
following types and amounts insurance (which may be included under a blanket
insurance policy if all the terms hereof are satisfied) designated below:
(a) Lessee shall obtain, maintain and pay for insurance
from a responsible insurance company or companies authorized to do
business in the State of Nebraska insuring against loss, damage or
destruction by all risks of loss including but not limited to, fire
and other casualty, including theft, vandalism and malicious
mischief, flood, machinery or equipment (Boiler and Machinery),
earthquake, sprinkler damage, glass, loss of rental income, all
matters covered under special form and extended coverage
endorsements, insuring the premises and all improvements and
betterments thereon for not less than the 100% of their full
insurable replacement cost. All insurance policies shall designate
Lessor and Lessors mortgagee as additional insureds as their
interests may appear. Lessee represents that it will be responsible
for insuring or self-insuring its personal
<PAGE>
property, contents, inventory, etc.
(b) Lessee shall obtain, maintain and pay for Comprehensive
General Liability Insurance from an insurance company or companies
authorized to do business in the State of Nebraska, with limits not
less than $1,000,000 in the primary policy and $5,000,000 in the
excess/umbrella for bodily injury, death, property damage or
personal injury from any one accident, for any claims, demands or
causes of action of any person or persons arising out of the Lessee
use thereof. Such insurance policy or policies shall contain a
"severability of interests" clause or endorsement which precludes
the insurer or insurers from denying the claim of either Lessee or
Lessor because of the negligence or other acts of the other. All
insurance policies shall designate lessor and Lessor's mortgagee as
"additional insured's on a primary basis."
(c) Lessee shall obtain, maintain and pay for Workers'
Compensation, employers' liability and such other insurance as may
be necessary to comply with applicable laws.
All insurance policies shall:
(a) Provide a waiver of subrogation by the insurer as to
claims against the lessor, its officers, partners, members, employees
and agents.
(b) Provide that the policies of Insurance shall not be
terminated, cancelled, non-renewed or substantially modified without
thirty (30) days prior written notice to the Lessor or to any lender
covered by the standard mortgagee clause/endorsement.
(c) Be issued by an insurance company with less than an "A"
rating by Best's Insurance Guide.
Lessee shall provide, upon execution of this lease, certificates of
insurance to the Lessor and its designated lender evidencing the insurance
satisfying the requirements of this lease is in effect at all times.
(6) REAL ESTATE TAXES. Lessee shall pay all real estate taxes which
become delinquent in 1999 allocable to the period of Lessee's occupancy
during the term of this Lease.
(7) UTILITIES. Lessee agrees to pay when due all charges and costs for
utilities or services, if any, consumed in the Premises by Lessee during the
term of this Lease.
(8) MAINTENANCE. Lessee covenants and agrees to maintain the Premises
in reasonable condition, at Lessee's costs, and shall deliver them to Lessor
at the end of the Lease term in the same condition as they are in on the date
hereof except reasonable wear and tear, structural and major repairs and
replacements, and damage
2
<PAGE>
by insured casualty.
(9) ALTERATIONS AND IMPROVEMENTS. Lessee may make alterations or
additions to the Premises, and construct and place any improvements on the
Premises, during the term of this Lease, provided Lessee first obtains
Lessors consent as to any material alterations. Lessee shall not allow any
construction liens to be filed against the Premises and shall immediately
accomplish the removal of any liens that may be filed in violation of this
provision. Lessee may erect and maintain signs on the Premises relating to
its operations on the Premises.
(10) CASUALTY. If, during the term of this Lease, the Premises are or
any material part thereof shall be destroyed or materially damaged by fire or
other casualty or any part of the Premises is so destroyed, which will result
in a substantial interference with Lessee's operations on the Premises, then
Lessee or Lessor may, within thirty (30) days thereafter, terminate this
Lease, and this Lease shall be of no further force and effect as of the date
of such casualty. In the event Lessee or Lessor does not so terminate this
Lease, this Lease will remain in full force and effect, and rent shall abate
in proportion to the area or value of the Premises of which Lessee is
deprived. Any insurance proceeds for the Premises shall be the property of
Lessor, and any such proceeds that relate to any of the Lessee's personal
property shall be the property of Lessee.
(11) ASSIGNMENT, SUBLETTING, TRANSFER. Lessee may not sublease nor
assign any of its interest in this Lease or the Premises.
(12) DEFAULT REMEDIES.
(a) DEFAULT BY LESSEE. If default be made in the payment of
rent due from Lessee hereunder and such default continues for a period
of ten (10) days after written notice thereof shall have been given to
lessee, or if default be made in the performance or observance by
Lessee of any other covenants or conditions herein contained, and such
payment or performance default shall continue for twenty (20) days
after written notice shall have been given to Lessee (except if such
default be of a nature that cannot be cured within twenty (20) days,
Lessee shall have such period of additional time to cure same as may
be reasonably required, provided that Lessee promptly commences to
cure the default and diligently pursues such cure), then Lessor may
elect to terminate this Lease and declare the term ended (or, without
terminating this Lease, terminate Lessee's right of possession), to
re-enter the Premises or any part thereof, to expel and remove Lessee
or any person or persons occupying the same in accordance with law and
again to repossess and enjoy the premises, and to collect all rents
and other charges due hereunder and reasonable costs of reletting,
removal and re-entering including but not limited to reasonable
attorney's fees; it being understood, however, that nothing herein
shall relieve Lessor of its duty to take reasonable steps to mitigate
damages. All damages incurred by Lessor and amount expended by Lessor
in curing Lessee's defaults
3
<PAGE>
shall be paid by Lessee upon demand by Lessor.
(b) DEFAULT BY LESSOR. If default be made in the performance
or observance by Lessor of any covenants or conditions herein
contained, and such default shall continue for twenty (20) days after
written notice thereof shall have been given to Lessor (except if such
default be of a nature that cannot be cured within twenty (20) days,
Lessor shall have such period of additional time to cure same as may
be reasonably required provided that Lessor promptly commences to cure
the default and diligently pursues such cure); then Lessee may elect
to terminate this Lease and declare the term ended or may cure any
default by Lessor and deduct the reasonable costs and expenses
incurred by Lessee in curing such default, including but not limited
to reasonable attorneys' fees, from the rental and any other amounts
thereafter accruing to Lessor. All damages incurred by Lessee and
amounts expended by Lessee in curing Lessors defaults shall be paid by
Lessor upon demand by Lessee.
(c) REMEDIES NOT EXCLUSIVE. Any right or remedy conferred on
Lessor or Lessee under this Lease shall not be deemed to be exclusive
of any other right or remedy which might otherwise be available
hereunder or at law or in equity. The rights and remedies hereunder
shall be cumulative and may be exercised and enforced concurrently and
whenever and as often as occasion therefore arises.
(13) QUIET ENJOYMENT. Lessor covenants and agrees that Lessee shall
peaceably and quietly have, hold and enjoy the Premises without any hindrance
or molestation from Lessor or any other party.
(14) MISCELLANEOUS.
(a) NOTICES. Whenever in this Lease it shall be required or
permitted that notice be given by any party hereto to the other, such
notice shall be given or certified or registered mail, and any notice
so sent shall be deemed to have been given on the date that the same
is received by the party to whom it is sent (or the date that delivery
of such notice is rejected by such party, as the case may be). Notices
shall be addressed to Lessor at: P.0. Box 24922, Omaha, Nebraska
68124; and to Lessee at: 10100 "J" Street, Omaha, Nebraska 68127, or
at such other address as either party may, from time to time, specify
in writing in lieu thereof.
(b) SURRENDER OF PREMISES. Lessee upon termination of this
Lease, by lapse time or otherwise, agrees peaceably to surrender the
Premises to Lessor.
(c) HOLDING OVER. If Lessee, with the prior consent of
Lessor, remains in possession of the Premises after the termination of
this Lease, and without the execution of a new lease, lessee shall be
deemed to be occupying the Premises as a tenant from month-to-month,
subject to all the applicable terms, conditions
4
<PAGE>
and covenants of this Lease.
(d) BENEFIT. This Lease and all covenants and conditions
herein contained shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(e) PROVISIONS SEVERABLE. If any provision of this Lease
shall be held or declared to be invalid, illegal or unenforceable
under any law applicable thereto, such provision shall be deemed
deleted from this Lease without impairing or prejudicing the validity,
legality and enforceability of the remaining provisions hereof.
(f) APPLICABLE LAW. This Lease shall be governed by and
construed under the laws of the State of Nebraska.
(g) NO WAIVER OF RIGHTS. The failure of Lessor or Lessee to
insist upon strict performance of any of the terms, covenants and
conditions herein contained shall not be deemed a waiver of any of
their rights or remedies by reason thereof, and shall not be deemed a
waiver of any subsequent breach or default in any of said terms,
covenants and conditions. No covenant or condition of this Lease can
be waived except by the written consent of the party against who such
waiver is claimed. Until complete performance of any covenant or
condition by Lessor of Lessee, as the case may be, each party shall be
entitled to invoke any remedy available to such party under this Lease
or by law or in equity despite any forbearance or indulgence.
IN WITNESS HEREOF, Lessor and Lessee have executed this instrument
under seal as of the day and year first above written.
LESSEE: Professional Veterinary Products,
Ltd. a Missouri corporation
By: /s/ DR. LIONEL L. REILLY
-------------------------------
LESSOR: Duane and Barbara Miller
By: /s/ DUANE E. MILLER
-------------------------------
Duane E. Miller
By: /s/ BARBARA G. MILLER
-------------------------------
Barbara G. Miller
5
<PAGE>
/s/ Dorothy J. Dorr May 27, 1999
-------------------
Notary Public
Commission Expires:December 9, 2001
6
<PAGE>
EXHIBIT 10.4
CONSTRUCTION MANAGEMENT/CONTRACTOR AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of
September, 1998, by and between MUDRA CONSTRUCTION, LTD., a Nebraska
corporation, with its principal place of business at 2425 North 84th Street,
Omaha, Nebraska, 68134 ("Mudra") and PROFESSIONAL VETERINARY PRODUCTS, LTD., a
Missouri corporation, with its principal place of business at 10100 J Street,
Omaha, Nebraska, 68127 ("PVP").
1. SCOPE OF WORK
(a) Subject to and in accordance with the terms and conditions of this
Agreement, Mudra agrees to furnish all design and engineering services, and all
construction services, including all general construction, mechanical, and
electrical and all other construction services, equipment and tools necessary to
perform the work as necessary and required for the construction of an
approximately 110,000 square foot office and warehouse building as set forth in
plans and specifications being furnished by Mudra upon the tract of land legally
described as Lot 3, Replat 1, Hilltop Industrial Park, Sarpy County, Nebraska.
(b) Mudra will contract with such qualified and licensed architects and
engineers as are necessary for the proper design of the Project. The cost of the
architect and engineering services shall be paid by Mudra and shall not be
included in the cost of the work. All architects and engineers utilized by Mudra
will be subject to the prior approval of PVP. The architect and engineers will
prepare plans and specifications in accordance with the PVP's requirement and
budget. PVP must approve all plans and specifications before bids for any work
are solicited. In the event PVP requests any changes in the plans and
specifications after such approval, PVP shall be responsible for such changes,
unless the changes are necessitated due to the fault of Mudra or any
subcontractor of Mudra.
(c) All documents, including the plans and specifications for the
Project, shall be deemed owned by PVP, who may utilize such documents in the
future for any renovation, remodeling, modification or expansion of the Project
without any future compensation to Mudra or to any architect or engineer
utilized by Mudra for preparation thereof. Mudra shall make appropriate
arrangements with any architect and engineer used by Mudra to assure PVP's
rights to such documents.
(d) Mudra shall furnish to PVP reproducible record drawings of the
Project, which shall be delivered to PVP within 120 days after final completion.
<PAGE>
2. CONSTRUCTION MANAGEMENT DUTIES AND RESPONSIBILITIES OF MUDRA
Mudra's construction management duties shall include, but not be
limited to, the following:
(a) Mudra shall utilize only qualified subcontractors and suppliers of
labor and materials to construct the building. For each subcontract to be
awarded, Mudra shall obtain two or more suitable bids based upon the plans and
specifications approved by PVP. PVP will approve in advance all such
subcontracts to be awarded by Mudra and shall reserve the right to reject any
subcontractor. PVP shall have the right to require that bids be obtained from
subcontractors that PVP designates; provided, however, that all such
subcontractors must be reasonably acceptable to Mudra. All subcontractors will
enter into written contracts with Mudra for the performance of such work, and
Mudra shall be responsible to PVP to manage the subcontractors' work and to
assure that all such work is performed by the subcontractors in accordance with
the requirements of this contract and in compliance with the plans and
specifications approved by PVP. All such subcontracts shall incorporate by
reference the terms and conditions of this Agreement and shall provide that upon
termination of this Agreement due to the default of Mudra, such subcontractors
shall, at the election of PVP, continue to perform their subcontracts as direct
contractors of PVP, without any increase in their respective subcontracted
awards. Mudra will obtain from the plumbing, mechanical, electrical and
sprinkler subcontractors payment and performance bonds in the amount of their
respective contracts.
(b) After receipt of bids for all of the work to be performed for such
Project, Mudra will furnish to PVP a guaranteed maximum price ("GMP") for the
Project, which GMP shall include a contingency acceptable to PVP for costs that
are reimbursable but are not the proper subject of a change order. Such GMP
shall be based upon the approved plans and specifications upon which the bids
were based. The GMP shall include the cost of all labor, materials, taxes,
permit fees, and all other costs of any nature, and shall include Mudra's fee
set forth in Paragraph 6 below. At the time the GMP is established, this
Agreement shall be amended to include the GMP as a part of this Agreement. Such
amendment shall also identify the plans and specifications upon which such GMP
is based and shall set forth any allowances, unit prices and unit price
quantities included therein. Any changes in the plans and specifications may
cause a change in the GMP as provided in Paragraph 10 below.
(c) Mudra shall be responsible for the construction of the Project and
as such, shall perform or cause to be performed, all construction work required
by the plans and specifications, Mudra shall further be responsible for the acts
and omissions of all subcontractors and for person and entities employed or
contracted by them. Mudra shall oversee and supervise the Project, inspect the
work of subcontractors for adherence to the plans and specifications, coordinate
the activities of the subcontractors and assure completion by the subcontractors
of all subcontracted work. All work shall be done in a good and worker like
manner, and in compliance with all
<PAGE>
applicable governmental laws, ordinances, regulations and codes. PVP shall
not interfere in any manner with the performance of the work by Mudra or any
subcontractor, so long as such work is being performed in a good and worker
like manner, in accordance with all applicable governmental laws, ordinances,
regulations and codes and is being performed in compliance with the Agreement
and with the approved plans and specifications
(d) Mudra shall, at the expense of PVP, obtain all required permits,
licenses and certificates of inspection and shall see to it that all
construction work and materials, and all activities of Mudra and the
subcontractors and others on the Project site are in compliance with all laws,
ordinances, and regulations of all governmental agencies having jurisdiction.
Mudra shall obtain all inspection services required by law. Any deviations from
the plans and specifications must be approved in advance by PVP.
(e) Mudra shall be responsible and shall take all necessary precautions
for the safety of all persons working at the Project and shall comply with all
applicable federal, state and local laws, ordinances and regulations applicable
thereto. Mudra shall take all necessary precautions to protect the safety and
protection of the workers on the Project, the public and for any improvements on
the Project site.
(f) Mudra shall pay all royalties and license fees which may be due for
the inclusion of any potential or copyrighted materials, methods or options
selected by Mudra, the architect, any engineer or subcontractor, and
incorporated in the Project, and shall indemnify PVP and hold PVP harmless from
any liability with respect thereto.
(g) Mudra shall meet and shall be responsible for requiring that each
subcontractor meet the insurance requirements stated below. Mudra and each
subcontractor shall purchase from and maintain in a company or companies
lawfully authorized to do business in the jurisdiction in which the work is
performed, and reasonably acceptable to PVP, insurance for claims under workers'
compensation; employers' liability; business automobile liability; and
commercial general liability (including product/completed operations coverage to
be maintained for at least 2 years after substantial completion) which may arise
out of or result from the obligations under this Agreement. The Insurance shall
include contractual liability insurance applicable to any indemnity obligation
of Mudra, and shall name PVP as an additional insured on such policies. Mudra
and each subcontractor shall furnish a certificate evidencing the insurance
required by this paragraph and evidencing the obligation of its insurer not to
cancel or materially amend such policy without thirty (30) days prior written
notice to PVP and evidencing PVP's status as an additional insured. The
certificates shall be filed with PVP prior to the commencement of the work. The
insurance required by this paragraph shall have minimum limits as follows:
<TABLE>
<S> <C>
Workers Compensation Statutory Limits
Employers' Liability $ 500,000
Automobile Liability $ 500,000
Commercial General Liability $1,000,000
</TABLE>
<PAGE>
(h) To the fullest extent permitted by law, Mudra shall defend,
indemnify and hold PVP harmless from all claims for bodily injury and property
damage including resulting loss of use that may arise from the performance of
the Work, to the extent of the acts or omissions of Mudra, any of the
subcontractors or anyone employed directly or indirectly by any of them or by
anyone for whose acts any of them may be liable.
3. WARRANTIES
Mudra warrants that all materials and equipment furnished under this
Agreement will be new unless otherwise specified, of good quality, in
conformance with the plans and specifications approved by PVP, and free from
defective workmanship and materials. Warranties shall commence on the date of
substantial completion of the entire Project. Mudra agrees to correct all
construction performed under this Agreement which proves to be defective in
workmanship and materials within a period of one year from the date of
substantial completion or for such longer periods of time as may be set forth
with respect to specific warranties required by the plans and specifications.
Mudra shall secure required certificates of inspection, testing or approval and
deliver them to PVP. Mudra shall collect all written warranties and equipment
manuals and deliver them to PVP. With the assistance of the PVP's maintenance
personnel, Mudra shall direct the checkout of utilities and operations of
systems and equipment for readiness, and assist in their initial start-up and
testing.
4. LABOR COSTS TO BE REIMBURSED TO MUDRA
If Mudra wishes to provide any labor personnel who are employees of
Mudra to work on the construction Project, Mudra shall first obtain the approval
of PVP and shall provide to PVP a written proposal for the cost of such work.
Subject to the limitation of the GMP, PVP shall reimburse Mudra at a rate of
$30.00 per hour for unskilled labor and $40.00 per hour for skilled labor. It is
expressly understood that supervisory services are to be paid only under
paragraph 6, Fee for Services. The hourly rate for any type of labor shall be
the total amount charged PVP for such work, and includes all payroll taxes,
workers' compensation insurance, unemployment insurance, employee benefits and
any other amounts which Mudra, as an employer, is obligated to pay on behalf of
its employees. Mudra shall indemnify and hold PVP harmless for any liability
arising out of Mudra's failure to provide or pay for the obligations stated in
this paragraph, including reasonable attorneys' fees to enforce this indemnity.
Mudra will be reimbursed monthly for labor incurred at the above rates upon
submission of invoices supported by time cards for each of the employees
involved, subject to the 10% retention referred to in Paragraph 7 hereof. It is
expressly agreed that Mudra is an independent contractor, all of the persons
described in this paragraph as employees are employees of Mudra and are not
employees, agents or representatives of PVP.
5. COMPLETION
The work to construct the Project shall commence upon receipt by
Contractor of
<PAGE>
a notice to proceed from PVP, and shall be Substantially Completed, subject
to delays approved by PVP, on the date set forth on the Addendum to this
Agreement which establishes the GMP. The Project will be considered
"Substantially Complete" when (1) the Project has been constructed in
conformance with the plans and specifications, (2) all required inspections
by the appropriate city and state (if any) departments have been completed,
(3) an Occupancy Permit has been issued ("Completion"), and (4) the Project
is capable of being used by PVP for its intended purpose. The Project will be
considered "Finally Completed" when substantial completion has been achieved,
and when Mudra has performed all work and other obligations to be performed
under this Agreement. It is necessary for PVP, or any other contractor of
PVP, to access the Project for purposes of installing, or preparing for the
installation of, any equipment, such access will be coordinated with Mudra
and shall be accomplished in a manner that does not unreasonably interfere
with Mudra's performance of the work hereunder.
6. FEE FOR SERVICES
In addition to reimbursement for labor costs, as provided in paragraph
4, Mudra shall receive a fee for the services outlined in this Agreement. Such
fee shall be $250,000.00, payable $50,000.00 upon completion of plans and the
issuing of an initial permit; $100,000.00 upon the building being erected,
enclosed and locked; and $100,000.00 upon final completion of the building
pursuant to paragraph 5. The cost of all architect and engineering fees for the
Project for preparation of plans and specifications upon which bids are
obtained, and for any ordinary and usual architectural services during
construction, such as approval of shop drawings, are included in said fee and
shall be paid by Mudra. Mudra's fee shall also include all services to be
performed by Mudra hereunder, except for labor costs for construction personnel
actually performing construction at the Project as set forth in paragraph 4
above. Prior to the commencement of construction of the Project, Mudra shall
furnish to PVP a letter of credit, issued by an FDIC insured bank, reasonably
acceptable to PVP, in the amount of $250,000, with PVP as the sole beneficiary
therein. Such letter of credit shall not expire until 6 months after the
scheduled date for final completion of the work. The purpose of the letter of
credit is to insure Mudra's performance under the terms of this Agreement and
payment for all labor and materials used therein. Such letter of credit shall
provide that PVP can draw on the letter of credit, one or more times and up to
the full amount thereof, for PVP's actual costs (excluding any insurance
reimbursement) resulting from Mudra's default under the terms of this Agreement.
Such draw by PVP shall occur only upon presentation to the bank of a draft by
PVP accompanied by the written certification of PVP that Mudra has defaulted
under this Agreement and that Mudra has taken no action to cure the default
after ten (10) days written notice thereof to Mudra.
7. PAYMENT
PVP will pay Mudra for the work performed on the Project, in addition
to the amounts referred to in paragraph 6 above, based upon the invoices
submitted by Mudra and by subcontractors for the work performed by such
subcontractors. Mudra shall be
<PAGE>
responsible for all payments to subcontractors. Such invoices shall include
only the work actually performed on the Project and for any materials
delivered to the Project site and suitably stored and insured. Mudra shall
also submit with each such pay request such other documents as PVP or PVP's
lender may reasonably request. The amounts paid to Mudra for subcontractor's
work will be subject to a retainage by PVP of 10% of amount of each
subcontractor invoice. Such retainage shall be held as to each such
subcontractor until such time as such subcontractor has completed all work to
be performed by such subcontractor for the Project. In no event shall the
total amount paid to any subcontractor exceed the amount of such
subcontractors' contracted amount for such work unless PVP has approved an
increase in such contracted amount. Any discount for prompt payment by Mudra
or any subcontractor shall inure to the benefit of PVP. All refunds,
discounts, and credits for any returned materials shall be credited to PVP.
In no event shall the cost of the work including the contractor's fee and all
amounts paid for contractor's labor costs, referred to in paragraph 4 above,
exceed the GMP except for any changes in the work by PVP as provided in
Paragraph 10 hereof. Any savings resulting from the cost of the work being
less than the GMP shall belong to PVP. Any costs in excess of the GMP shall
be the responsibility of, and shall be paid by Mudra. PVP shall not be
required to pay Mudra for: (a) the wages of any Mudra personnel other than
those referred to in Paragraph 4 above; (b) any home office expenses; (c) any
costs incurred due to the negligent act or omission of Mudra, or any of
Mudra's subcontractors or persons or entities for whose acts they are
responsible; or (d) correction of any defective work or any work damaged by
anyone other than PVP.
8. WAIVERS OF CONSTRUCTION LIENS
Mudra will obtain waivers of construction liens from all subcontractors
and material suppliers with each progress payment and prior to final payment to
Mudra. Mudra shall promptly procure the discharge of record of any construction
lien filed against the Project for any labor and/or materials furnished for the
Project by any person or entity. Mudra shall indemnify PVP and hold it harmless
for any loss or damage caused by the filing of any such liens.
9. PVP PROJECT ENGINEER
Tom Fiscus is designated the Project Representative for PVP, and
Mudra's services will be coordinated with the Project Representative. PVP will
also use the services of the Delta Group as a representative of PVP in
connection with the Project, which services shall be coordinated through Tom
Fiscus.
10. CHANGE ORDERS
(a) The GMP shall not be increased except by written change order
signed by PVP. In the event PVP proposes any changes in the work which results
in a material change in the work as described in the plans and specifications
upon which the GMP was determined, Mudra shall, within ten (10) days thereafter,
advise PVP of the proposed cost thereof. If PVP elects to proceed with the
change, and the amount
<PAGE>
thereof, does not exceed the amount of the contingency then remaining that is
part of the GMP, the GMP shall not be increased. In the event that the amount
for such changes does exceed the contingency account, then the GMP shall be
increased by the amount of the excess. Any deductive change order amounts
shall be credited to the contingency fund. There shall be no increase in the
GMP for any delays in the Project from whatever cause, unless such delay is
caused by the active interference by PVP.
(b) For any claim for an increase in the GMP, and/or an extension in
the date of Substantial Completion Mudra shall give PVP written notice of the
claim within twenty-one (21) days after the occurrence giving rise to the claim
or within twenty-one (21) days after Mudra first recognizes the condition giving
rise to the claim, whichever is later. Except in an emergency, notice shall be
given before proceeding with the Work. Any change in the GMP, and or date of
Substantial Completion resulting from such claim shall be authorized by Change
Order.
11. PROPERTY INSURANCE
(a) PVP shall obtain and maintain property insurance upon the entire
Project for the full cost of replacement at the time of any loss. This insurance
shall insure against loss from the perils of fire and extended coverage, and
shall include "all risk" insurance for physical loss or damage including without
duplication of coverage at least; theft, vandalism, malicious mischief, transit,
collapse, falsework, temporary buildings, debris removal, flood, earthquake,
testing, and, if available without additional premium cost, damage resulting
from defective design, workmanship or material. Any loss covered by such
insurance will be adjusted by PVP, and the proceeds thereof paid to PVP. In the
event of a casualty loss to the Project, if PVP elects to repair the damage, the
GMP will be increased to reflect the increased cost of the Project due to such
casualty loss.
12. WAIVER OF SUBROGATION
To the extent permitted by applicable insurance policies, PVP and Mudra
waive all rights against each other, and any of their respective employees,
agents, consultants, subcontractors and subsubcontractors for damages caused by
risks covered by casualty insurance maintained by either of them, to the extent
they are covered by that insurance and to the extent that insurance proceeds are
collectible under such policies due to such loss. Mudra shall require similar
waivers from all Subcontractors, and shall require each of them to include
similar waivers in their subsubcontracts and consulting agreements.
13. NO OTHER COMPENSATION
Mudra agrees that its only compensation for services rendered shall be
as specified in this Agreement, and that Mudra shall not accept any other fees
or compensation, such as overrides, commissions, refunds, or rebates from
contractors, suppliers, or any other person, either in money or in kind.
<PAGE>
14. TERMINATION
In the event either party fails to comply with any provision of this
Agreement, the other party may terminate the Agreement upon 10 days written
notice to the non-complying party and such defaulting party not correcting such
default in said 10 day period.
15. WAIVER/SEVERABILITY
No failure or delay by either party in exercising any right, remedy,
power of privilege hereunder will operate as a waiver thereof. If any of the
terms of this Agreement are found to be illegal or unenforceable by a court of
competent jurisdiction, the remaining terms and conditions of this Agreement
shall remain in full force and effect.
16. NO ASSIGNMENT
Mudra shall not assign this Agreement or any portion thereof, or any
right to payment hereunder without the prior written consent of PVP.
17. COMPLETE AGREEMENT AND BINDING EFFECT
The above accurately and completely represents the understanding and
intent of the parties hereto. This Agreement shall be binding on the successors
and permitted assigns of the parties hereto.
PROFESSIONAL VETERINARY PRODUCTS, LTD.
By: /s/ Dr. Lionel Reilly
-----------------------------
Title: President
MUDRA CONSTRUCTION, LTD.
By: /s/ Rudolph Mudra
-----------------------------
Title: President
<PAGE>
STATE OF NEBRASKA )
) SS.
COUNTY OF DOUGLAS )
Subscribed and sworn to before me this 20th day of July 1999, by Lionel
Reilly, President of Professional Veterinary Products, Ltd.
/s/ Hayley G. Tilley
-----------------------------
Notary Public
Commission Expires: March 3, 2002
STATE OF NEBRASKA )
) SS.
COUNTY OF DOUGLAS )
Subscribed and sworn to before me this 20th day of July 1999, by
Rudolph Mudra, President of Mudra Construction, Ltd.
/s/ Hayley G. Tilley
-----------------------------
Notary Public
Commission Expires: March 3, 2002
<PAGE>
ADDENDUM TO CONSTRUCTION MAMAGEMENT/CONTRACTOR AGREEMENT
THIS ADDENDUM ("Addendum") is made and entered into as of this 17th day
of May, 1999, by and between MUDRA CONSTRUCTION, LTD., a Nebraska Corporation
("Mudra") and PROFESSIONAL VETERINARY PRODUCTS, LTD., a Missouri Corporation
("PVP").
WITNESSETH:
WHEREAS, Mudra and PVP have entered into a Construction
Management/Contractor Agreement dated as of September 1, 1998, (the "Agreement")
for the construction of an office and warehouse building for PVP, and
WHEREAS, Mudra has now completed the plans and specifications for the
Project and has established a Guaranteed Maximum Price ("GMP") and a Substantial
Completion date for the Project, and
WHEREAS, the parties wish to amend the Agreement to add thereto the GMP
and the Substantial Completion date.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. The GMP for the Project (including Contractor's fee) is
$4,426,383.00.
2. The allowances that are included in the GMP are as follows:
See Purchase Order No. 30 attached. Total allowances are
$381,700.00.
3. Unit prices are as follows:
None
4. The date for Substantial Completion of the Project is October 31,
1999. Final Completion of the Project shall be achieved within sixty (60) days
after Substantial Completion.
5. The Purchase Orders and amounts used in determining the GMP for the
Project are listed on the attached Exhibits "A" and "B." The plans included are
as follows:
(a) Novotny Engineering, dated March 25, 1999
(b) Robert Engel Architect, dated April 15, 1999
(c) Schaefer Engineering, Inc., dated April 15, 1999
<PAGE>
6. All capitalized terms used herein shall have the same meaning as set
forth in the Agreement unless specifically defined otherwise herein. This
Addendum shall be binding on the successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have signed this Addendum as of the
date first above written.
MUDRA CONSTRUCTION, LTD.
By: /s/ Rudolph Mudra
-----------------------------
Its: President
PROFESSIONAL VETERINARY
PRODUCTS, LTD.
By: /s/ Lionel Reilly
-----------------------------
Its: President
<PAGE>
Redacted portions have been marked with asterisks (***). Confidential
treatment has been requested for the redacted portions. The confidential
redacted portions have been filed separately with the Securities and Exchange
Commission.
EXHIBIT 10.5
SALES AGENCY AGREEMENT
DATED January 11, 1999
BETWEEN
"AGENT" "BAYER"
PVP Bayer Corporation
10100 "J" Street P.O. Box 390
Omaha, NE 68127 Shawnee Mission, KS 66201-0390
1. Appointment of Agent
BAYER hereby appoints AGENT as its non-exclusive agent for the sale of
the BAYER products identified in Exhibit B (hereafter "PRODUCTS")
subject to the terms and conditions of this Agreement. AGENT hereby
accepts such appointment and agrees, at all times, to use its best
efforts to promote the PRODUCTS and secure orders for the sale of
PRODUCTS to CUSTOMERS, as hereinafter defined, in the TERRITORY, as
hereinafter defined. BAYER reserves the right to amend the TERRITORY at
any time upon thirty (30) days advance written notice to AGENT. Nothing
in this Agreement shall mean that AGENT has the exclusive right to
secure orders for the sale of PRODUCTS in the TERRITORY.
2. Term
The initial term of this Agreement shall commence on the date
hereinabove written and shall continue through December 31, 1999.
The Agreement may be renewed for successive periods, upon mutual
agreement, unless earlier terminated.
3. Supply of Products
(a) BAYER shall supply PRODUCTS to AGENT in accordance with the
BAYER ANIMAL HEALTH PRICES, POLICES AND TERMS FOR PRODUCTS
(hereafter the "PRICES, POLICIES AND TERMS") attached hereto
as Exhibit E, as such PRICES, POLICIES AND TERMS may be
amended from time to time by BAYER in its sole discretion.
(b) BAYER reserves the right at any time to allocate its supply
of any PRODUCTS among CUSTOMERS whenever any PRODUCT is
back ordered or otherwise not available for sale in
sufficient quantity to meet all orders then on hand.
Whenever BAYER is requested to make delivery in
<PAGE>
full by a date certain, BAYER's exercise of its
rights under this Paragraph shall excuse its failure to
make full delivery by such date. In addition, BAYER
reserves the right at any time to relocate its PRODUCTS
held in Agent's custody, at BAYER's expense, to one or more
of another Agent's custody to meet CUSTOMER's orders.
(c) BAYER reserves the right to limit orders of PRODUCT to
commercially reasonable quantities.
4. Delivery
(a). BAYER shall pay freight and insurance on all shipments of
PRODUCTS to BAYER-approved AGENT's Delivery/Distribution/
Sales Locations set forth in Exhibit A, which approval
BAYER may revoke or modify at any time. BAYER shall
determine the carrier, method of transportation and routing
of all such shipments of PRODUCTS. If AGENT erquests routes
or methods other than those chosen by BAYER, BAYER will try
to comply with AGENT's instructions and will bill AGENT for
the additional cost, if any, of shipping via the route or
method requested by AGENT. Other than as provided for herein,
AGENT shall bear the entire costs of shipping PRODUCTS from
AGENT's warehouse(s) to CUSTOMERS.
(b) BAYER shall not be obligated to fill any order submitted by
AGENT on behalf of CUSTOMERS calling for delivery sooner than
BAYER's then-current delivery schedule, nor shall BAYER be
obligated to fill any order for CUSTOMER if payment for any
PRODUCTS previously ordered by that CUSTOMER through AGENT is
past due.
(c) Bayer shall not be liable to AGENT for damages or losses of
whatsoever nature if delivery of PRODUCTS, in whole or in
part, is delayed.
5. Title and Risk of Loss
(a) BAYER shall retain title to PRODUCTS held in AGENT's
custody until such PRODUCTS are actually sold to CUSTOMERS.
Title to PRODUCTS shall pass from BAYER to CUSTOMERS upon
the consummation of such sale. AGENT shall take whatever
action is requested by BAYER to perfect or maintain title
in BAYER to PRODUCTS in the custody of AGENT. AGENT shall
at no time be deemed a purchaser of PRODUCTS nor shall
AGENT be deemed to have any interest, legal or equitable,
in PRODUCTS.
(b) BAYER shall bear the risk of loss to PRODUCTS until their
delivery to CUSTOMERS at the destination specified in the
bill of lading.
2
<PAGE>
6. Sales and Billing to Customers
(a) AGENT will be authorized to operate within any of the
BAYER-authorized approvals and limits in extending to
CUSTOMERS the credit limit in effect at the time of sale
without any further approval from BAYER, provided credit
approval is immediately rescinded by AGENT for any CUSTOMER
who is known to be delinquent sixty (60) days or more in
payment on a BAYER-approved credit account, or who AGENT
knows or has reason to know is insolvent, has filed for
bankruptcy or has had a petition in bankruptcy filed
against it. BAYER reserves the right in its sole discretion
to decline any order received through AGENT and to change
or rescind any credit approval limit at any time. Credit
terms shall be as set forth in Exhibit E, Section IV and
Exhibit F, Section 2.
(b) AGENT is authorized to make cash sales of PRODUCTS to any
CUSTOMER not appearing on the Do Not Ship list on behalf of
BAYER and collect payment thereof without obtaining specific
approval from BAYER. All reporting conditions still apply.
(c) All sales of the PRODUCTS are to be made only to approved
licensed, practicing veterinarians and/or livestock producers
(CUSTOMERS) with a prescription or Veterinary Drug Purchase
Order (VDPO), and AGENT shall invoice only CUSTOMERS for the
sale of such PRODUCTS.
(d) Sale of PRODUCTS to CUSTOMERS shall not be made on order or
prescription issued by any person in the employ of or under
contract with AGENT, or by any person not meeting the
required conditions for a valid Veterinarian Client Patient
Relationship (VCPR), as defined by FDA/CVM within AMDUCA
regulations.
(e) All sales of PRODUCTS must be secured by AGENT on BAYER's
behalf through BAYER-approved Delivery/Distribution/Sales
locations (Exhibit A) and by persons employed by AGENT who
are responsible for and assigned to the approved delivery /
distribution / sales locations.
(f) The solicitation, acceptance or confirmation of orders for
PRODUCTS by AGENT shall not commence until September 28,
1998. Any orders obtained by BAYER prior to this date for
PRODUCTS to be shipped through AGENT to CUSTOMERS will be
transmitted to AGENT on or immediately after that date.
(g) AGENT must issue a separate invoice for the sale of the
PRODUCTS for each order. All such invoices for the PRODUCTS
shall contain the following statement printed, stamped, or
typed on the invoice:
3
<PAGE>
"All Baytril 100 listed on this invoice belongs to
the supplier thereof and is being handled by us on
a consignment basis. The purchase prices of these
products are the supplier's Prices and are to be
paid to us as the supplier's agent."
(h) On all invoices for PRODUCTS, AGENT shall indicate the
PRODUCT is a prescription veterinary drug by using the "Rx"
symbol, or the following statement "Baytril 100 is a
Veterinary Prescription Drug."
(i) AGENT shall collect payments for all PRODUCTS ordered
through AGENT on behalf of BAYER. AGENT shall not be
responsible to BAYER for the ultimate payment for any
PRODUCTS sold hereunder within the limit of BAYER's credit
approval, but if a CUSTOMER defaults in any payment, AGENT
shall use its best efforts, within reason, to assist in the
collection of such payment. If BAYER has not approved
credit to a CUSTOMER, or if credit is negligently extended
to a CUSTOMER by AGENT beyond the limits of approved
credit, AGENT shall be responsible for the non-payment of
such amount beyond the limit of approved credit. In
addition, AGENT shall be responsible for any non-payment of
an account over 90 days past due that has not been properly
reported to BAYER.
(j) AGENT shall comply with all federal, state or local laws or
regulations reasonably related to its performance of this
Agreement.
(k) AGENT shall monitor, supervise and control its employees
acting on BAYER's behalf in performance of this Agreement,
and shall indemnify and defend BAYER against any claims
arising from the negligence of such employees.
(l) AGENT will be responsible for proof of delivery in the event
of disputed delivery of PRODUCT. If AGENT is unable to
document delivery, AGENT will be liable.
7. Commission and Terms of Remittance
(a) At the conclusion of each BUSINESS DAY, as hereafter
defined, AGENT shall electronically transmit to BAYER
through the AHI EDI Special Project invoicing detail on all
sales of PRODUCTS secured through AGENT (including product
returns), including but not limited to CUSTOMER HIN number
and zip code or full name, bill and ship-to address;
veterinarian's valid license number; date of sale; invoice
number; lot number; unit quantity and sales price per
PRODUCT and per order. For the purposes of this paragraph
7(a), "sales" shall mean information associated with
4
<PAGE>
PRODUCTS that have been shipped and/or invoiced by AGENT to
CUSTOMERS on BAYER'S behalf Sales of PRODUCTS secured
through AGENT on Saturdays, Sundays, or Holidays recognized
by BAYER, should be reported at the conclusion of the next
BUSINESS DAY.
(b) BAYER shall compensate AGENT for all services provided or
expenses incurred by AGENT the commissions listed in
Exhibit D on the net sales of each separate order for
PRODUCTS into the TERRITORY that result directly from the
efforts of AGENT and which BAYER authorized for shipment or
delivery into the TERRITORY. "Net Sales" means the invoice
price of PRODUCTS sold less all discounts, allowances,
purchase, sales or other similar taxes, freight, insurance
and duties, and net of returns. BAYER shall not compensate
AGENT with respect to PRODUCTS sold by or as a result of
the efforts of other AGENTS of BAYER, for shipment to
authorized CUSTOMERS out of the TERRITORY, or for orders
not pre-approved by BAYER for which payment remains
uncollected.
(c) BAYER will mail AGENT a statement monthly within five (5)
business days after month end. Month-end statements will show
summary of sales/returns by day and appropriate AGENT
commission for the month. Remittance, for all PRODUCT sold by
AGENT, to BAYER must be received no later than twenty (20)
calendar days following month end. AGENT failure to make
remittance or transmit complete and accurate information via
EDI to BAYER within the specified time periods shall result in
the reduction of the AGENT's commission for the month in which
the failure occurred by 2% of net sales.
(d) AGENT will take a physical inventory of PRODUCTS at the end
of each week and will transmit to BAYER their ending
inventory through the AHI EDI Special Project. Quantities
of PRODUCT that are unreconciled must be supported by
explanation and/or documentation satisfactory to BAYER.
AGENT shall be responsible for the List Price of any
PRODUCTS damaged, destroyed, lost or otherwise deemed
unsaleable through negligence or misconduct of AGENT or its
employees.
(e) All of the information required to be submitted by AGENT to
BAYER under Paragraph 7(a) shall be broken down according to
each of AGENT's individual, approved branch locations.
(f) BAYER shall have the right to change the rate, terms, and
conditions of AGENT's commission at any time upon thirty (30)
days advance written notice to AGENT.
(g) BAYER reserves the right to reject any order for PRODUCTS
received through AGENT, to discontinue the sale of any PRODUCT
or to allocate
5
<PAGE>
the supply of any PRODUCT as described in Paragraph 3(b)
without incurring liability to AGENT for the payment of
commissions hereunder.
(h) If a CUSTOMER does not pay any amounts due, for PRODUCTS
that have been shipped to such CUSTOMER, within sixty (60)
days after such payment is due, and AGENT had not acted
outside the scope of its authority in extending credit to
such CUSTOMER as set forth herein, AGENT shall notify BAYER
no more than 90 days after payment is due. BAYER shall
credit AGENT in the amount of the unpaid balance of account
less the AGENT commissions received on the unpaid balance.
BAYER will then assume full responsibility for collecting
such outstanding payment.
8. Prices and Terms
(a) AGENT shall secure orders for PRODUCTS on behalf of BAYER at
the LIST PRICES set forth in the PRICES, POLICES AND TERMS.
AGENT expressly agrees, for the purposes of insuring
compliance with the Robinson-Patman Act and other applicable
laws, that AGENT shall not rebate any part of its commission
either directly or indirectly, to CUSTOMERS.
(b) AGENT's securing of an order for PRODUCTS at a price other
than the LIST PRICE, or offering terms different than
specified by BAYER, or AGENT's direct or indirect rebate,
distribution, allocation or sharing of commissions or profits
generated from the sales of the PRODUCTS to CUSTOMERS shall
constitute a breach of this Agreement by AGENT.
(c) AGENT shall secure orders for PRODUCTS from CUSTOMERS on
behalf of BAYER on the terms and conditions set out in
Exhibits E and F. These terms and conditions may be
modified from time to time by BAYER without prior notice.
The LIST PRICES and terms and conditions in effect at the
time an order for PRODUCTS is taken by AGENT from a
CUSTOMER shall govern.
9. Records, Audits and Reports
(a) AGENT shall keep proper books of account and records
containing complete information relating to PRODUCTS
received, stored and sold through AGENT, including the
names of CUSTOMERS, HIN numbers, the quantities purchased,
lot numbers, prices, and veterinary license numbers, and
shall transmit this information to BAYER on a daily basis
through the AHI EDI Special Project. AGENT shall also
maintain a file containing copies of prescriptions or
VDPO's for PRODUCT sold to livestock producers.
6
<PAGE>
(b) BAYER shall have the right to audit, with 24 hours advance
notice, the records and inventory of AGENT relating to this
Agreement at any time upon request during normal business
hours. If an audit reveals that any monies are due BAYER,
BAYER will bill AGENT for the difference. AGENT shall pay
such amount to BAYER with AGENT's next succeeding payment
due under Paragraph 7(c), and documented accordingly. BAYER
shall further have the right to offset any payments due to
AGENT under this Agreement by such amount. If an audit
reveals that any monies are due AGENT, such amount may be
withheld by AGENT from its next succeeding payment due
under Paragraph 7(b), and documented accordingly.
(c) During the term of this Agreement, AGENT shall conduct an
internal audit at the end of its fiscal year, of inventory
of PRODUCT and sales records relating to this Agreement and
provide to BAYER certified documentation of such audit. If
any monies are due to BAYER, BAYER will invoice AGENT for
such amounts and AGENT shall make any such payment within
ten (10) days of the date of such invoice.
(d) When requested by BAYER, the AGENT will provide BAYER with a
non-binding forecast of expected PRODUCT sales for each year
that this agreement is in effect, for BAYER's production
planning purposes.
10. Taxes
(a) Property Tax
BAYER shall pay all personal and property taxes assessed on
all unsold PRODUCTS held by AGENT in inventory. AGENT shall
immediately send to BAYER any and all notices received by
AGENT, with respect to the property of BAYER held by AGENT in
its inventory, regarding audits, reviews or other activities
by any tax authorities. BAYER, and not AGENT, will deal with
all local tax authorities with respect to BAYER's property
held by AGENT in its inventory.
(b) Sales/Use Tax
AGENT shall be fully responsible for the assessment,
collection and remittance, to state taxing authorities of all
sales and/or use taxes applicable to sales of PRODUCTS to
CUSTOMERS. AGENT shall maintain on file a copy of a valid Tax
Exemption Certificate or resale certificate for CUSTOMERS to
whom PRODUCT has been sold under an allowed exemption.
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AGENT will allow BAYER, upon prior written notification, to
conduct an audit of applicable tax assessment and
collection activity, and will make available to BAYER a
copy of pertinent Tax Exemption or resale certificates in
the event of an audit of BAYER by taxing authorities.
11. AGENT'S Promotional Efforts
AGENT shares in the commitment of BAYER to promote PRODUCTS in order
to maintain PRODUCTS' high reputation and to maximize appropriate
sales of PRODUCTS. AGENT agrees to use its best efforts to promote
and increase sales of PRODUCTS in the TERRITORY. As part of its
efforts, AGENT shall include PRODUCTS in its regular sales promotion
and shall submit to BAYER copies of its internal bulletins,
instructions and announcements to demonstrate that this promotional
activity has been accomplished. AGENT shall not create or use any
materials, written or otherwise, to promote and/or advertise the
sale of PRODUCTS until AGENT has obtained BAYER's prior written
approval for such creation and use from BAYER. In connection with
promoting PRODUCTS, AGENT shall make no representations or claims
relating to PRODUCTS that are inconsistent with the labeling for
PRODUCTS or any BAYER-approved materials. AGENT agrees to exercise
its best efforts to help ensure that PRODUCTS are used in accordance
with their labeling and applicable federal and state laws and
regulations.
AGENT shall have adequate sales capability and shall organize and
conduct at least one meeting each year, for the purpose of
transferring product or associated technical information between
BAYER and the AGENT's sales personnel. AGENT shall maintain suitable
warehousing and delivery facilities for PRODUCTS. BAYER shall have
the right to inspect such facilities during AGENT's regular business
hours and upon providing AGENT reasonable notice. AGENT shall also
seek new creditworthy CUSTOMERS for PRODUCTS in the TERRITORY.
AGENT shall stay informed concerning the condition of the market in
the TERRITORY and make available to BAYER any non-confidential
information essential to the marketing of PRODUCTS, in particular,
sales possibilities, pricing, trade statistics and competitive
measures.
If AGENT operates a catalog business, AGENT shall not sell PRODUCT
through the catalog without prior written approval of BAYER.
12. Product Returns
(a) PRODUCTS shall at all times be subject to the direction and
control of BAYER, and AGENT shall promptly return to BAYER
any unsold PRODUCTS upon demand by BAYER. Returns of
defective or damaged
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PRODUCTS shall be governed by the PRICES, POLICIES AND
TERMS. (Refer to Exhibit E, Section 11-B, for Returned
Goods Policies).
(b) AGENT shall inspect PRODUCTS at the time of delivery and
shall immediately notify BAYER and the carrier of any
obvious damage, shortages, defects or failure of PRODUCTS
to conform to the order. If AGENT so notifies BAYER, upon
BAYER's request, AGENT shall return to BAYER, at BAYER's
expense, all PRODUCTS that AGENT believes are damaged,
defective or do not otherwise conform to the order. AGENT
shall not sell any PRODUCTS found or claimed to be damaged
or defective. AGENT shall send BAYER an itemized list of
PRODUCTS returned, dated as of the date of delivery by
AGENT to carrier, for reshipment to BAYER. BAYER shall
promptly replace at its own expense all PRODUCTS returned
hereunder which have been determined to be damaged,
defective or otherwise non-conforming by BAYER. (Refer to
Exhibit E, Section 11-B, for Returned Goods Policies).
13. Storage of Products
AGENT at its own expense shall maintain adequate and separate
storage space for PRODUCTS (such that PRODUCTS shall be segregated
from any other products stored by AGENT and shall be clearly marked
as being owned by BAYER). AGENT shall store PRODUCTS in accordance
with BAYER's instructions therefore as set out on PRODUCT label
instructions, and under conditions that will ensure PRODUCT retains
potency, purity, quality, and identity. For the purposes of
inspection, BAYER shall have access to AGENT's premises where
PRODUCTS are stored during AGENT's regular business hours and upon
providing AGENT reasonable notice.
BAYER shall be responsible for insuring all PRODUCTS stored by AGENT
against casualty loss or the like as a result of fire, flood or
other damage or destruction that is not the fault of AGENT or its
employees. Any losses of or damages to PRODUCTS in AGENT's custody
or control shall be reported to BAYER in writing with documentation
satisfactory to BAYER explaining such loss or damage. BAYER shall be
responsible for any PRODUCT losses or damages that are not the
result of the negligence or fault of AGENT or its employees. BAYER
requires that AGENT provide evidence of warehouse insurance coverage
for BAYER property in the possession of AGENT, in the event of
AGENT'S negligence in the loss of BAYER product. The limits of such
insurance coverage should be adequate to reimburse BAYER for the
loss of the sales value of BAYER PRODUCTS stored on the AGENT'S
premises.
14. Product Complaints and Indemnities
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(a) Upon the receipt of a PRODUCT complaint from a CUSTOMER,
AGENT shall report, within one business day, to BAYER's
Veterinary Technical Services Department receipt of such
complaint. AGENT shall cooperate in the investigation of
any complaint at the direction of BAYER. In the event of a
third party claim, suit or demand against either party
involving PRODUCTS supplied or purchased hereunder, the
parties agree to fully cooperate in the defense of such
claim, suit or demand.
(b) Unless AGENT acts outside the scope of its authority under
this Agreement, BAYER shall be liable for and indemnify,
defend and hold AGENT harmless from and against all claims,
suits, demands, losses or damages arising out of this
Agreement, except that AGENT shall be liable for and
indemnify, defend and hold BAYER and its AFFILIATES
harmless from and against all claims, suits, demands,
losses or damages resulting from the negligence or fault of
AGENT or its employees in the handling, storage,
transportation or promotion of PRODUCTS supplied under this
Agreement, whether used singly or in combination with other
products or materials, or resulting from any unauthorized
act by AGENT or its employees in carrying out the
activities under this Agreement.
15. Warranty
BAYER warrants that PRODUCTS shall conform with the description
contained in the labeling therefor. EXCEPT AS SET FORTH ABOVE, BAYER
MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO
PRODUCTS, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
16. Claims and Remedies
(a) No claim of any kind by AGENT against BAYER arising out of
this Agreement shall be for more than the commission earned
by AGENT on the sale of PRODUCTS. BAYER shall not be liable
to AGENT for any special, incidental or consequential
damages, whether arising in contract or tort.
(b) The remedies set forth in this Agreement and the PRICES,
POLICIES AND TERMS shall be AGENT's sole and exclusive
remedies with respect to:
(i) defects in PRODUCTS found or claimed on AGENT's
inspection; and,
(ii) failure of the PRODUCTS to conform to AGENT's
order.
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17. Trademarks and Copyright
(a) All trademarks used or designated by BAYER shall be
displayed by AGENT, without alteration, on all PRODUCTS
bearing any such trademark supplied by BAYER to AGENT
hereunder, and all use of such trademarks shall inure to
BAYER's benefit or that of its AFFILIATES. AGENT shall not
use any trademark, brand or trade dress which is the same
as, or which is likely to cause confusion or mistake with
any trademark, brand or trade dress of BAYER or its
AFFILIATES, except that the trademarks, brands and trade
dress used or designated by BAYER may be used in connection
with the promotion, sale, display, or advertising of
PRODUCTS bearing the same, provided an approved attribution
of BAYER ownership is contained therein.
(b) Any copyright of BAYER or its AFFILIATES that may be
created in any article, package design, label, or the like,
whether or not bearing any trademark of BAYER or its
AFFILIATES, shall be the property of BAYER or its
AFFILIATES, as the case may be.
(c) BAYER warrants and represents that, to the best of its
present knowledge and belief, the use of the trademarks
designated by BAYER for use on the PRODUCTS and any
promotional materials that have been approved for AGENT's
use by BAYER, in the Territory, will not infringe a
trademark of a third party. BAYER agrees to indemnify and
hold AGENT harmless from and against any loss, liability or
expense (including reasonable attorney's fees and cost of
litigation) resulting from the breach of the above
warranty. AGENT shall promptly notify BAYER of any claim of
trademark infringement by a third party resulting from the
use of a trademark designated by BAYER, of which AGENT
becomes aware. AGENT agrees immediately to discontinue use
of any BAYER trademark upon notice by BAYER, and all
liability arising out of AGENT's use of such trademark
after such notice by BAYER shall be borne by AGENT.
18. Confidential Information
BAYER may give AGENT technical or non-technical information
("Confidential Information") not generally known to the trade or
public, including without limitation information relating to
CUSTOMERS, PRODUCTS or other animal health products, techniques,
technological methods, prospective new animal health products,
research programs or areas, processes, services and other valuable
business information (including the terms of this agreement) of
BAYER. During the term of this Agreement and thereafter for a period
of ten years, AGENT shall not (except as authorized in writing in
advance by BAYER):
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(a) disclose to any third person in any manner whatsoever any
Confidential Information so long as such information is not
generally known to the trade or public; or
(b) use such Confidential Information except for the express
purpose of performing its activities under this Agreement.
19. Security Agreement
AGENT hereby grants to BAYER a security interest on all PRODUCTS in
AGENT'S custody and control under this Agreement, and agrees to allow
BAYER to execute a standard form financing statement with a copy of
this Agreement to be filed with appropriate state and local government
offices, and further agrees that no PRODUCTS will become subject to
liens or other security interests or encumbrances as a result of this
Agreement or otherwise. If AGENT fails to keep PRODUCTS free and clear
of all liens, encumbrances and security interests, AGENT shall pay all
costs associated with securing the release of any such liens,
encumbrances and security interests.
20. Definitions
(a) Status of AGENT: This Agreement describes a sales agency
arrangement between AGENT and BAYER, but does not make
AGENT a distributor, franchisee, partner or employee of
BAYER, nor does it authorize AGENT to act as AGENT for
BAYER for any purpose other than what is expressly provided
for herein. Nothing in this Agreement or otherwise shall be
construed as authorizing AGENT to create or assume any
obligation or liability in the name of, or on behalf of,
BAYER or to subject BAYER to any obligation or liability to
any third person or entity other than as expressly provided
for herein. After termination of this Agreement, AGENT
shall not use, either directly or indirectly, any name,
title or expression that could be construed to mean, or
lead any CUSTOMER or other third party to believe, that
AGENT is still acting as an agent of BAYER.
(b) "CUSTOMER" is any of the following individuals:
(I) A BAYER-authorized licensed and practicing
veterinarian
(ii) A BAYER-authorized livestock producer with a
prescription or Veterinary Drug Purchase Order
(VDPO).
CUSTOMER shall not mean any other agent having a contract
with BAYER similar to this Agreement, or any wholesaler or
distributor. BAYER shall have the right to reject any
orders for PRODUCTS obtained from persons other than those
deemed to be CUSTOMERS hereunder. AGENT
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shall not transfer any PRODUCTS to any of its other
locations (if any), or to any other agent having a contract
with BAYER similar to this Agreement, or to any wholesaler
or distributor, without BAYER's prior written approval.
(c) "LIST PRICE" means the price for PRODUCTS, as set forth in
PRICES, POLICIES AND TERMS.
(d) "PRODUCTS" mean the BAYER animal health products listed in
Exhibit B, as such Exhibit may be amended from time to time
by BAYER in its sole discretion.
(e) "TERRITORY" means the geographic area defined by the state
areas set forth in Exhibit C.
(f) "BUSINESS DAY" means Monday, Tuesday, Wednesday, Thursday,
Friday, excluding days recognized by BAYER as Holidays.
21. Termination
(a) This Agreement may be terminated with or without cause by
either party at any time upon thirty (30) days prior
written notice to the other party. In addition, BAYER shall
have the right to immediately terminate this Agreement,
without incurring any liability to AGENT, at any time upon
written notice to AGENT (such termination to be effective
as of the date of such notice), in the event of a material
breach by the AGENT. Such material breach on the part of
the AGENT shall include but not be limited to:
(i) AGENT's breach of any provision of this Agreement,
which goes uncured for thirty (30) days following
receipt of written notice thereof;
(ii) AGENT's insolvency; dissolution or termination of
existence,
(iii) an assignment for the benefit of creditors by AGENT;
(iv) the appointment of a trustee or receiver for any
part of AGENT's property;
(v) The filing by or against AGENT of any petition in
bankruptcy or under any of the provisions of the
Bankruptcy Act;
(vi) The entry of any judgment against AGENT which
remains undischarged or unbonded of record for
thirty (30) days;
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(vii) The attachment of or levy against any of AGENT's
property by any judicial officer which is not
discharged within thirty (30) days thereafter;
(viii) A change, to any extent or however occurring, in the
ownership of AGENT's business or in the direct or
indirect control or management of AGENT;
(ix) Altering the labeling of the PRODUCTS; or
(x) Failing to obey any Federal, State or local laws or
regulations reasonably related to performance of
this Agreement.
(b) Termination of this Agreement shall not discharge the
rights and obligations of the parties that have accrued
prior to the effective date of such termination.
Termination for any reason shall be without prejudice to
BAYER's rights to any amounts then owing by AGENT under
this Agreement, and BAYER shall pay AGENT its commission
but only for orders accepted in accordance with this
Agreement prior to the effective date of such termination.
Within fifteen (15) days after termination of this
Agreement, AGENT shall return to BAYER:
(i) All unsold PRODUCTS in the custody of AGENT,
properly packed and delivered and, except for
transportation (including insurance) charges,
without expense to BAYER; and
(ii) All advertising, promotional and sales materials for
PRODUCTS supplied by BAYER to AGENT under this
Agreement, and any and all copies of written
Confidential Information supplied by BAYER to AGENT
under this Agreement, and AGENT shall retain no
copies thereof.
(c) Paragraphs 14, 15, 16, 18, 19, and 26 shall survive
termination or expiration of this Agreement.
22. Force majeure
Neither party shall be liable to the other by reason of any failure
or delay in performance of any provision of this Agreement, nor
shall such failure or delay give the other party any right to
terminate this Agreement (except for changes in ownership or control
of AGENT) if such failure or delay is due to any event (other than
financial) beyond the reasonable power of the party failing or
delaying to perform. Without limiting the generality of the
foregoing, governmental action,
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<PAGE>
inability to obtain supplies, material, labor or transportation, and
strikes, boycotts, lockouts and labor disputes shall all be
conclusively deemed beyond the reasonable power of the party failing
or delayed thereby, even though that party might be able to obviate
such failure or delay by agreeing to terms proposed by government,
suppliers, carriers, employees or their bargaining representatives,
labor disputants, or other third parties.
23. Assignment
(a) This Agreement is personal to AGENT and except as otherwise
provided herein, neither this Agreement nor any rights
hereunder are assignable, delegable or transferable
(including without limitation the right to sub-contract) by
AGENT without the prior written consent of BAYER.
(b) BAYER shall have the right to assign or transfer this
Agreement at any time without the consent of AGENT.
24. Notices
Any notice required or permitted by the terms of this Agreement
shall be given by telegram or by registered mail, prepaid and
properly addressed, or delivered by hand to BAYER or AGENT at its
address set forth in this Agreement or at such other address as
either party hereto may designate by notice given as provided
herein. If mailed, any such notice shall be deemed to have been
given when mailed, and if delivered by hand, when received written.
25. Captions
The captions of the paragraphs herein are for convenience of reference
only and shall not be deemed parts of this Agreement, nor shall they
have any effect on the meaning or interpretation of any of the
provisions of this Agreement.
26. Governing Law
This Agreement shall be governed by and interpreted in accordance with
the law of the State of Kansas applicable to contracts made and
performed entirely within that State, regardless of its or any other
jurisdiction's choice of law principles
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27. Entire Agreement
This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, and supersedes all prior
writings and discussions relating to such subject matter. Any
amendments or modifications to this Agreement shall not be valid
unless in writing and signed by duly authorized representatives of
both parties.
In witness whereof, the parties have executed this agreement as of the date
first above written.
PVP BAYER CORPORATION
Professional Veterinary Products, Ltd. Agriculture Division
10100 J Street Animal Health
Omaha, NE 68127 Livestock Business Unit
By /s/ Dr. Lionel L. Reilly By /s/ Dan Birch
------------------------ --------------------
Dr. Lionel L. Reilly Dan Birch
President National Sales Manager
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EXHIBIT A
APPROVED AGENT DELIVERY/DISTRIBUTION/SALES LOCATIONS
BAYER will ship PRODUCTS to the following approved delivery/distribution/sales
locations* which are owned or leased by PROFESSIONAL VETERINARY PRODUCTS, LTD.,
10100 "J" STREET, OMAHA, NE 68127:
*Additional locations may be added subject to the prior written approval of
BAYER.
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EXHIBIT B
PRODUCTS
PRODUCT CODE NO. UNIT SIZE CASE QUANTITY PALLET QUANTITY
- ------- -------- --------- ------------- ---------------
Baytril 100 023699 100 ml 24 576
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EXHIBIT C
"TERRITORY"
AGENT shall be entitled to obtain orders for the sale of PRODUCTS to approved
CUSTOMERS only in the TERRITORY, designated by the following map of the
TERRITORY:
Under no circumstances shall AGENT obtain orders for the sale of PRODUCTS or
transfer any PRODUCTS outside of the TERRITORY without obtaining the prior
written approval of BAYER.
TERRITORY:
THE ENTIRE U.S.
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EXHIBIT D
AGENT COMMISSION RATES
BAYER will pay AGENT, by approved delivery/distribution/sales locations, for
provision of commissioned field sales, telemarketing or inside sales,
distribution, and administration services at the following rates:
Order/Entry, Warehouse and Shipping Services 3% of Net Sales
Commissioned Field Sales Services 3% of Net Sales*
Telemarketing (outbound phone sales) Services
and/or Retail Sales Location and Service 1% of Net Sales
Administration/Records/Collection Services 1% of Net Sales
*1% of Net Sales is to be paid by AGENT to its Field Sales Personnel
BONUS COMMISSION FOR GOAL ACHIEVEMENT
An additional Bonus Commission of 2% is available for goal achievement. The
AGENT sales goal is listed on Exhibit G. Bonus Commissions are paid at
year-end, and are paid on total net sales for the year, less unpaid balances
BAYER has credited AGENT.
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EXHIBIT E
BAYER ANIMAL HEALTH
PRICES, POLICIES AND TERMS FOR PRODUCTS
I. List Prices
See the attached BAYER Animal Health Price List for PRODUCTS
(hereafter "Price List"). All prices listed in the Price List are
subject to change by BAYER without notice.
II. Policies for Inventory
A. Minimum Annual Sales Volumes (gross sales minus returns) for
each approved Delivery/Distribution/Sales location shall be
$25,000. AGENT agrees to invoice within a 12 month period of
the effective date of this Agreement PRODUCTS having an
aggregate gross sales value of no less than $25,000 per
approved Delivery/Distribution/Sales location. Such amount
shall be cumulative for each of AGENT's approved
Delivery/Distribution/Sales locations. The sales volume
requirement will be pro-rated on a month basis if the AGENT
enters into this Agency Agreement at any time other than
January.
BAYER reserves the right at all times to set maximum
inventory levels of PRODUCTS that are in AGENT's custody.
B. Returned Goods
1. CUSTOMER Returns to AGENT
BAYER shall allow AGENT to arrange for the return
of PRODUCTS from CUSTOMERS. AGENT shall not pick
up or place PRODUCT returned for any reason back
into saleable inventory. All PRODUCTS returned to
AGENT by CUSTOMER are deemed to be non-saleable,
and must be returned to BAYER. AGENT will issue
credit to CUSTOMER as required based on original
invoice price. Lot number tracking is required.
2. AGENT Returns to BAYER
Upon receipt of non-saleable PRODUCTS returned from
AGENT, BAYER will ship to AGENT an equivalent amount
of PRODUCTS for replacement of inventory.
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When AGENT is returning product to BAYER, CUSTOMER
returns must be kept separate from AGENT returns.
To arrange for a return of PRODUCT, AGENT shall
contact the Baytril Inventory Control Specialist
at 800-255-6517, who will make any appropriate
adjustments to inventory and arrange for pick-up.
In most cases a Return Authorization (RA) will be
issued by BAYER for the return of PRODUCT. The
cost of return freight will be borne by BAYER.
III. Delinquent Remittance Terms
Should any remittance due from AGENT be delinquent, BAYER shall be
entitled to (1) freeze and/or retrieve inventory in AGENT's
possession, and/or (2) terminate this Agency Agreement on thirty
(30) days prior written notice to AGENT. The remedies provided for
herein are not exhaustive and BAYER shall have the right to pursue
other legal remedies against AGENT for AGENT's delay or failure to
remit payments for PRODUCTS.
IV. Credit
A. Approval
1. AGENT shall have the authority to open accounts
with an initial credit limit which will be
predetermined by BAYER. Such amount may be amended
as needed by BAYER on not less than five (5) days
written notice to the AGENT. AGENT will extend or
deny credit within such limit based upon AGENT'S
professional judgement, which shall encompass the
following:
a. Evaluation of the CUSTOMER'S credit
worthiness, if such information appears in
the AGENT'S database, and if permitted by
law. The AGENT will review such credit
worthiness for all CUSTOMERS and restrict
credit accordingly.
b. BAYER Credit will notify AGENT of any
CUSTOMER that does not qualify for
shipments, based on inadequate credit
worthiness or for marketing reasons (DNS).
c. Any CUSTOMER past due more than 60 days
with no payment activity, or which the
AGENT knows to be insolvent, which has
filed for bankruptcy or has had a
petition in Bankruptcy filed against it,
will be placed on DO NOT SHIP status.
BAYER should be notified immediately of
such a situation.
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2. Any credit line above the then applicable credit
limit set forth in Paragraph A.1 above, shall
require the prior written approval of the BAYER
Credit Department.
B. At month-end, AGENT will provide the BAYER Credit Department
with an Aging Schedule of all outstanding receivables over 60
days.
1. Any credit line above the then applicable credit
limit set forth in Paragraph A.1 above, shall
require the prior written approval of the AGENT
must notify the BAYER Credit Department of any
account over 60 days past due with no payment
activity, and place the CUSTOMER on DO NOT SHIP
status.
2. If AGENT elects to turn an account over to BAYER
after 90 days past due, AGENT must provide BAYER
with copies of outstanding invoices and proofs of
delivery (POD).
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EXHIBIT F
BAYER ANIMAL HEALTH PRODUCTS
SALES TERMS AND CONDITIONS
1. All product orders are subject to acceptance by BAYER.
2. See the attached BAYER Animal Health Price List for PRODUCTS
(hereafter "Price List"). All prices listed in the Price List are
subject to change by BAYER without prior notice. Payment terms are
net thirty (30) days.
3. All returns of PRODUCTS to BAYER are to be arranged by AGENT and
accomplished following prior authorization by the Baytril 100
Inventory Control Specialist. Return freight from AGENT to BAYER
will be paid by BAYER.
4. To obtain assistance concerning your Baytril inventory or consignment
orders contact the Baytril Inventory Control Specialist at
800-255-6517. For customer or technical service call 800-633-3796, or
notify your local BAYER sales representative.
5. BAYER reserves the right at any time to allocate its supply of any
product among CUSTOMERS in proportion to their orders, or otherwise
partially fill their orders, whenever any product is back ordered or
otherwise not available for sale in sufficient quantity to meet all
orders then on hand. BAYER reserves the right to limit orders to
commercially reasonable quantities. Whenever BAYER is requested to
make delivery in full by a certain date, BAYER'S exercise of its
rights under this Paragraph shall excuse its failure to make full
delivery by such date.
6. BAYER shall not be obligated to fill any order requesting delivery
sooner than BAYER'S then current delivery schedule, nor shall BAYER be
obligated to fill any order for a customer if payment for any products
previously sold to such customer is past due
7. BAYER shall retain title to and bear the risk of loss for products
until their delivery to customer at the destination specified in the
bill of lading.
8. BAYER warrants that products shall conform with the description
contained in the labeling thereof EXCEPT AS SET FORTH ABOVE, BAYER
MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO
PRODUCTS, INCLUDTNG ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
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9. No claim of any kind by CUSTOMER against BAYER arising out of the
sale of the PRODUCTS shall be for more than the value of that
portion of the PRODUCTS for which any claim is made. BAYER shall not
be liable for any special, incidental or consequential damages,
whether arising in contract or tort.
The remedies set forth herein shall be CUSTOMER's sole and exclusive
remedies with respect to any defective or damaged PRODUCTS.
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EXHIBIT G
BAYTRIL 100 AGENT SALES GOAL
BONUS COMMISSION
Agent will be eligible for a 2% bonus commission on all sales of Baytril 100
after achieving the sales goal identified below. This bonus commission will
be paid on an annual basis on all sales of Baytril 100 which have been made
in the effective time period.
Effective Dates: January 1, 1999 through December 31, 1999
Agent: PVP
Sales Goal: $*******
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
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PRODUCTS PRICE LIST
Effective date: January 1, 1999
PRODUCT CODE SIZE QUANTITY UNIT PRICE
- ------- ---- ---- -------- ----------
Baytril 100 023699 100 mi 1-23 Units $**** ea
Baytril 100 023699 100 mi 24 + Units $**** ea
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
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<PAGE>
Terms and Conditions of Sale
All prices based on $***** minimum purchase. No orders for less than
case quantity will be accepted.
Terms of Sale
The terms and conditions of sale established by Bayer conform to
current commercial and legal requirements. Accordingly, acceptance of
Distributor's orders are expressly made conditional on Distributor's assent
to these terms and conditions. No modification or addition hereto shall be
affected by acknowledgement or acceptance of purchase orders containing
additional or differing terms. Any changes or additions must specifically
refer to this Agreement and be signed by Bayer.
Transportation F. O. B.
Origin of Bayer's choice with freight allowed to a single common
carrier destination in Distributor's area of responsibility, provided each
order must be at least $***** per shipping location. If the order is for less
than the specified minimum, freight shall be charged to the distributor and
included on the invoice. Bayer shall select transportation mode and carrier
routing. If Distributor requires a transportation mode and/or carrier routing
other than that selected by Bayer, and is satisfactory to Bayer, Distributor
shall pay additional costs.
Title and Risk of Loss
Title and risk of loss in all goods sold hereunder shall pass to
Distributor at shipping point. In the event of loss or damage, Distributor
should mark receiving documents appropriately and initiate a claim with
carrier. Damage claims or carrier's freight bill and an inspection report
should support shortages. Bayer will provide reasonable assistance to
Distributor in claim filing, if notified within 3 business days.
Delivery
Bayer reserves the right to make shipments in installments.
Distributor's orders will be supplied subject to availability of product and,
in the event of product shortage for any reason, Bayer reserves the right to
restrict or allocate its supply of products.
Contingencies
In the event of war, flood, strike, labor trouble, riot, acts of
governmental authority, natural disasters, or other contingencies beyond the
reasonable control of the parties, interfering with the production, supply,
or transportation to Distributor of goods covered herein, or with the supply
of any raw materials used in connection therewith,
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
28
<PAGE>
quantities so affected shall be eliminated from the order without liability,
but the order shall otherwise remain unaffected.
Warranty and Damages
Bayer warrants that products shall conform with the description
contained on the labeling thereof. EXCEPT AS SET FORTH ABOVE, BAYER MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH REGARD TO PRODUCTS. INCLUDING ANY
WARRANTY OF MERCHANTABILTY OR FITNESS FOR A PARTICULAR PURPOSE. Distributor's
exclusive remedy for breach of the foregoing warranty by Bayer and Bayer's
sole liability shall be replacement or refund of the purchase price for the
goods involved. In no event shall Bayer be liable for consequential or
incidental damages.
Patents and Trademarks
Bayer has been advised that the sale of its products outside the
United States and its possessions may or may not infringe the patent and
trademark rights of others.
Price, Taxes and Payment Terms
Price shall be as specified in the Bayer Price List in effect at the
time of Distributor's order, provided Distributor places no restrictions
against immediate shipment. Prices are subject to change without notice. Any
list or resale prices referred to Distributor are suggested only. Goods are
invoiced without sales or use tax, provided Distributor maintains properly
executed resale certificate on file at Bayer.
Normal terms of sale are Net 30 days.
Controlling Law
Differences and disputes arising out of the sale of Bayer products
shall be resolved in accordance with the laws of the State of Kansas.
Return Goods Policy
1. Outdated merchandise cannot be returned without prior authorization
from a Bayer Sales Representative.
2. Credit for or exchange of merchandise will be issued only to the
original purchaser.
3. A Returned Merchandise Authorization Form approved by a Bayer Sales
Representative must accompany outdated returns.
29
<PAGE>
4. Outdated merchandise in unopened containers may be returned if within
120 days of expiration. Product received more than 120 days beyond
expiration date is not eligible for credit.
5. Outdated returns will receive:
Biologicals
-----------
Biologicals approved for return can, at distributor's discretion, be
replaced with IDENTICAL products (same product codes), or credit can
be issued for 80% of current published price.
If replacement is selected, Bayer will issue a credit memo and
subsequent invoice at the same price for tracking purposes.
All Other Bayer Products
------------------------
All other Bayer products approved for return for credit will be issued
at 100% of price paid.
6. Merchandise labeled and/or sold as nonrefundable cannot be returned
for credit.
7. In-date merchandise cannot be returned without prior approval by the
Bayer Sales Management.
8. Returns should be prepaid with shipping labels affixed to the outside
of all shipping containers, and shipped freight prepaid to:
Bayer Corporation
Agriculture Division
Animal Health
5101 Speaker Road
Kansas City, KS 66106
30
<PAGE>
Sales Agreement
This document will identify the conditions and terms of the Sales
Agreement between Professional Veterinary Products, Ltd. and Bayer
Corporation, Agriculture Division, Animal Health.
1. The term of the Agreement shall be January 1, 1999 through
December 31, 1999.
2. Bayer understands that Professional Veterinary Products
Ltd. is in a class of trade called a Veterinary Buying
Group. This will entitle P.V.P. to sell the Bayer product
ADVANTAGE. P.V.P. will transmit ADVANTAGE orders to be
processed by Bayer via E.D.I. The ADVANTAGE orders will
then be shipped and billed by Bayer.
3. Bayer will provide P.V.P., whenever possible, advance
notice of all ADVANTAGE promotional programs to allow
incorporation into P.V.P. programs, if appropriate.
4. The ANNUAL purchase goal and total for the period of this
Agreement is:
Annual Total $*******
--------
5. Bayer will pay P.V.P. a rebate based on sales of ADVANTAGE.
This rebate will be paid monthly at the rate of 5 % of
P.V.P. ADVANTAGE sales to its members.
6. The Bayer Regional Manager will have the primary
responsibility for P.V.P., and will coordinate and direct
the frequent support of the local Bayer sales
representative.
7. P.V.P. will comply with, and is entitled to respectively,
the terms and conditions of sale and return goods policy to
veterinarians as set forth in the 1999 ADVANTAGE conditions
of sale.
8. P.V.P. represents that it sells Advantage only to licensed,
practicing veterinarians whose activities are engaged
substantially, if not predominantly, in the private
practice of veterinary medicine.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
31
<PAGE>
9. This Agreement can be terminated by either party within 10
days by providing written notice of their intent to the
other party.
Signature of this document by both parties signify agreement on the
above conditions.
BAYER CORPORATION PROFESSIONAL VETERINARY
PRODUCTS, LTD.
/s/ Glenn Watson /s/ Dr. Lionel L. Reilly
----------------- ------------------------
Director of Sales President
March 1, 1999 February 23, 1999
32
<PAGE>
Redacted portions have been marked with asterisks (***). Confidential
treatment has been requested for the redacted portions. The confidential
redacted portions have been filed separately with the Securities and Exchange
Commission.
EXHIBIT 10.6
Sales Agent Agreement between
Professional Veterinary Products Limited and Merial
This Agreement, dated August 1, 1997, defines the business relationship
between Merial Limited, a company limited by shares registered in England and
Wales (registered number 3332751) with a registered office at 27
Knightsbridge, London SW1, England, and domesticated in Delaware, USA as
Merial LLC ("Merial") and Professional Veterinary Products, 10100 "J" Street,
Omaha, NE, 68127 and its Affiliates ("Professional Veterinary Products").
This Agreement is intended to establish a mutually profitable relationship in
which Merial provides sales opportunities to Professional Veterinary Products
for market-leading animal health products, and Professional Veterinary
Products actively promotes Merial Products on a preferred or exclusive basis
within those products' respective therapeutic classes. This Agreement
represents a commitment on the part of Merial and Professional Veterinary
Products to work together to develop markets and to expand the use of Merial
Products for the benefit of animals, their owners, veterinarians,
Professional Veterinary Products, and Merial.
1. The Territory will initially be Professional Veterinary Products'
Primary Territory as shown in Professional Veterinary Products' 1997
Merck AgVet Sales Agent Agreement and will remain unchanged through
December 31, 1997. Effective January 1, 1998, the Territory will be:
Shareholders in AR, FL GA, IA, IL IN, KS, KY, MD, Ml, MN, MO, NC, ND,
NE, NY, OH, PA, SD, TN, VA, WI, OK
"Products" will initially mean those products shown in Professional
Veterinary Products' 1997 Merck AgVet Sales Agent Agreement. Additional
products will be added upon notice in writing by Merial to Professional
Veterinary Products between the date of this Agreement and January 1,
1998, at which time Products will be as listed in Schedule A.
Professional Veterinary Products is authorized to obtain orders for the
Merial Products from Authorized Merial Accounts (AMAs) in the Territory.
Merial will pay commissions on those orders according to Schedule A.
Commissions on sales, if any, made by Professional Veterinary Products
to Special Services Organizations (SSOs) will be paid to Professional
Veterinary Products as show, in Schedule B.
Additionally, Professional Veterinary Products is authorized to obtain
orders for the Merial Products from AMAs in states or territories not
included in the Territory. Commissions will not be earned for such
orders obtained outside the Territory.
All sales of Merial Small Animal Products will be made only to
veterinarians who will
<PAGE>
dispense the Products to clients with whom they have an established
veterinarian/ client/patient relationship.
Merial reserves the right to expand or reduce the Territory upon thirty
(30) days written notice to Professional Veterinary Products and to
authorize other Sales Agents to sell Merial Products, with or without
commission, in the Territory.
2. Merial agrees to:
a. Integrate all Merial Products approved in the U.S. into the Merial
Sales Agency system by January 1, 1998, providing Professional
Veterinary Products the opportunity to take orders from AMAs for
Products that are listed in Professional Veterinary Products' 1997
Merck AgVet Sales Agent Agreement and are listed in the attached
Schedule A (Merial Products).
b. Promptly fill accepted orders that are submitted by Professional
Veterinary Products.
c. Be responsible for all collection actions and expenses.
Professional Veterinary Products will assist in obtaining payment
from AMAs with overdue invoices when requested to do so by Merial.
d. Pay Professional Veterinary Products, as full compensation for all
services rendered under this Agreement, certain commissions.
Effective January 1, 1998, commissions will be paid as shown in the
attached Schedule A. On all sales of Merial Products invoiced after
the date of this Agreement but before January 1, 1998 (the "Interim
Period'), commissions for Merial Products included in the 1997
Merck AgVet Sales Agent Agreement will continue to be paid at the
rates reflected in that agreement. Commissions earned in the
Interim Period on sales of Merial Products added to the Merial
Sales Agency system after August 1, 1997, will be at the rate for
85%-100% of goal shown in the attached Schedule A. At all times,
commissions will be calculated on net invoiced sales. A monthly
report of sales and commissions earned will be provided to
Professional Veterinary Products.
e. Make available for the purposes of securing sales from AMAs all
national deals and sales promotion programs designed for AMAs and
applicable to Merial Products.
f. Work with Professional Veterinary Products to conduct in-depth
Business Planning to increase sales opportunities and results and
to maximize the use of available resources for Merial Products.
g. Support Professional Veterinary Products by increasing awareness
and usage of Merial Products in Professional Veterinary Products'
Territory in accordance with the Sales Agent's demonstrated
commitment to marketing Merial Products and by means that Merial
determines to be reasonable, which may include:
2
<PAGE>
i. Conducting national and regional consumer marketing and
promotional campaigns.
ii. Conducting sales promotions, disease and product awareness
campaigns, and client education programs for AMAs.
iii. Providing marketing assistance programs to develop
professional promotional and educational programs, workshops,
and seminars as mutually agreed between Merial and
Professional Veterinary Products.
iv. Providing product and skills training for Professional
Veterinary Products which may include the following:
- sales training for Professional Veterinary Products field
and telemarketing sales organizations
- sales Management training for Professional Veterinary
Products' managers
- technical training in the Merial Products and the
diseases which are controlled or prevented by them
- conducting meetings to inform Professional Veterinary
Products' sales force about sales promotions and the use
of campaign detail materials, sales tools, and
point-of-purchase merchandising aids
- participating in account presentations to AMAs
- handling customer complaints and inquiries and providing
consultations to promote and maintain customer
satisfaction
- maintaining communication between Merial and Professional
Veterinary Products to effectuate this Agreement.
h. Indemnify and hold Professional Veterinary Products harmless from
and against any and all claims, damages, losses, and liabilities
directly associated with the use of Merial Products, except to the
extent that said claim arises out of any statement, act, or
omission by Professional Veterinary Products.
3. Professional Veterinary Products agrees to:
a. Establish Merial Products shown on Schedule A as "Preferred
Products" within the formulary offered by Professional Veterinary
Products, by January 1, 1998. Professional Veterinary Products will
distinguish the "Preferred Products" from other products by:
- achieving sales goals agreed to by Professional Veterinary
Products and Merial management
3
<PAGE>
- conveying to Professional Veterinary Products' sales and
marketing organizations the strategic importance of Merial and
its Products
- offering sales representatives financial incentives to sell
Merial Products that are comparable or greater than the
incentives offered by Professional Veterinary Products to sell
any other supplier's products
- featuring Merial Products in daily detailing and sales
campaigns and mailings
- recommending Merial Preferred Products as the preferred
products offered within the respective product category
- permitting no negative selling against any Merial Products
- making no affirmative efforts to shift sales of Merial
Products to competing products
- recommending Merial Preferred Products as the preferred
products offered to veterinarians within the respective
product category
- utilizing Merial sales and technical support to increase and
maintain sales support
- providing Merial quarterly access to Professional Veterinary
Products sales force for product and sales training
- providing premium space allocation in publications for Merial
product advertisements
- providing to Merial preferred participation in regional and
national sales meetings.
For the term of this Agreement, Professional Veterinary Products
will not, on a preferred basis, sell, market or promote any
product(s) that compete directly with the Merial Products or any
combinations thereof.
b. That as of August 1,1997, the only products containing the
ivermectin molecule that Professional Veterinary Products will
represent, sell or distribute are those supplied, manufactured or
distributed by Merial.
In the event that Professional Veterinary Products elects to
represent, sell, or distribute ivermectin products not supplied or
manufactured by Merial, Merial reserves the right, to be exercised
within thirty (30) days of its discovery of such violation by
giving written notice to Professional Veterinary Products, to
terminate
4
<PAGE>
this Agreement or to modify its terms including, but not limited
to, the commissions paid for Merial Products.
c. Provide adequate sales representation to contact and service the
AMAs in the Territory according to the goals stated in the
Professional Veterinary Products business plan.
d. Use best efforts to solicit orders for the Merial Products from the
AMAs in the Territory, and submit the orders within two hours of
receipt from the AMA through a communications method (i.e.,
Electronic Data Interchange) designated and scheduled by Merial.
e. Ensure compliance with the Robinson-Patman Act and other applicable
laws. Professional Veterinary Products will not rebate any part of
the commission payment, either directly or indirectly, to any AMA.
Professional Veterinary Products agrees that Merial has the right
to apply commissions earned by Professional Veterinary Products
against any past due balance under any invoice(s) issued by Merial
to Professional Veterinary Products.
f. Meet with Merial management to develop an annual Business Plan
which describes Professional Veterinary Products' actions to
achieve marketing objectives and reasonable sales performance goals
that are developed on an annual basis by Merial and Professional
Veterinary Products management. The Business Plan will be developed
by March 1 of each year.
g. Generate sales for Merial Products equal to or greater than the
goals agreed to in the Business Plan. If Professional Veterinary
Products fails to meet 90% of the sales performance goals for two
(2) years in succession, or fails to reach 80% of the sales goal in
any year, Merial will have the right, upon thirty (30) days written
notice, to terminate this Agreement or to alter the Territory. If
Professional Veterinary Products' failure to meet these sales
performance goals is due to competitive market forces alone, and is
not due to any failure on the part of Professional Veterinary
Products to actively promote and expand sales of the Merial
Products in the Territory, Merial may waive its right to terminate
this Agreement with respect to that specific instance. Such waiver
will not affect Merial's rights to terminate this Agreement or
modify Professional Veterinary Products' Territory in the case of
other performance failures.
h. Arrange for Merial representatives to meet and make sales calls
with Professional Veterinary Products' representatives as specified
in the Business Plan or when needed to support Merial marketing and
sales promotions.
i. Provide training for Professional Veterinary Products' key
personnel, including inside and outside sales people, in the proper
procedure for placing AMA orders with Merial and administering the
Merial Returned Goods Policy.
j. Make no representations or warranties with respect to Merial
Products, other than such representations issued or approved in
writing by Merial.
5
<PAGE>
k. Assist Merial in providing AMAs in Professional Veterinary
Products' Territory full access to all Merial promotional
allowances, marketing programs, point-of-purchase materials, and
Product information literature.
l. Immediately notify Merial upon being made aware of any adverse
reaction, injury, damage, claim or lawsuit involving a Merial
Product, whether or not directly attributable to the Product.
m. Strictly comply with all applicable governmental requirements
relating to animal drugs, biologicals, and pesticides. Professional
Veterinary Products' failure to strictly comply with such
governmental requirements will result in the automatic termination
of this Agreement without the need for any prior notice by Merial.
n. Indemnify and hold Merial harmless from and against all claims,
damages, losses and liabilities arising out of any act or omission
by Professional Veterinary Products, except to the extent that said
claim arises out of any act or omission of Merial.
o. Provide Merial with timely, complete and accurate data on market
conditions in Professional Veterinary Products' Territory.
p. Utilize EDI as the primary means for transmitting AMA orders to
Merial and adhere to the provisions outlined in the attached EDI
Trading Partner Policy (Attachment 1) for all orders placed via EDI.
4. General
a. All orders will be obtained at prices and upon terms established by
Merial and will be submitted to Merial for acceptance. If Merial
accepts an order obtained by Professional Veterinary Products, it
will ship the Merial product(s) directly to the AMA.
b. Neither Professional Veterinary Products nor Merial will be liable
for failure to perform any part of this Agreement on account of any
cause beyond its reasonable control, including but not limited to
any act of God, fire, labor trouble, the government or any agency
thereof, inevitable accident, war or insurrection.
c. All information and materials relating to AMA customer databases,
AMA sales volume and Product formulation usage information and
general AMA account information is the sole property of Merial and
confidential and may not be disclosed by Professional Veterinary
Products to any third party without the prior written consent of
Merial.
d. Failure by Merial or Professional Veterinary Products at any time
to enforce any of the terms or conditions of this Agreement shall
not affect or impair such terms or conditions in any way, or the
right of Merial or Professional Veterinary
6
<PAGE>
Products at any time to avail itself of such remedies as it may
have for any breach of such terms or conditions under this
Agreement.
e. Professional Veterinary Products will not in any way jeopardize the
good will and reputation of Merial or Merial Products, and will
have no authority to bind Merial to any act or representation
unless specifically so authorized in writing. Professional
Veterinary Products will indemnify and hold Merial harmless from
and against all claims arising out of any breach of this subsection.
f. This Agreement describes a sales agency arrangement between Merial
and Professional Veterinary Products. This Agreement does not
constitute Professional Veterinary Products as a distributor or
franchisee or authorize Professional Veterinary Products to act as
an agent for Merial for any purposes other than those that are
expressly provided for herein.
g. (i) This Agreement will not be assignable or transferable by
either party without the written consent of the other, except
that Merial may assign it to an Affiliate. (For purposes of
this Agreement, an "Affiliate" is any corporation,
partnership, trust or other entity directly or indirectly
controlling or controlled by or under direct or indirect
common control with a party, control for the purpose of this
definition being taken to mean direct or indirect ownership of
at least 50% of the voting rights of the "controlled" entity.)
This Agreement cannot be modified or changed in any way except
in writing signed by both parties. Merial will have the right
to terminate this Agreement immediately or at any time
thereafter in the event that a majority of the stock, assets
or control of Professional Veterinary Products is acquired by
any other party(s) or the Professional Veterinary Products
becomes insolvent. This Agreement will become effective when
signed by both parties and shall continue in effect until
January 31, 2000 unless terminated sooner. This Agreement will
be renewable, by mutual consent expressed in writing, for
additional periods as determined by Merial.
(ii) Except as otherwise provided in this Agreement, either party
may terminate this Agreement upon thirty (30) days written
notice in the event of a breach of a material term of the
Agreement by the other party which is not cured by such other
party within the thirty (30) day period.
(iii) Termination will not extinguish obligations and liabilities
accrued prior to termination. However in the event of
termination neither party shall be liable for any claims of
lost future sales, profits, or commissions, or consequential
damages of any type.
h. All notices hereunder required to be in writing will be sufficient
if sent by certified mail, return receipt requested, postage
prepared, addressed as follows:
If to Merial: Merial Limited
2100 Ronson Road
Iselin, NJ 08830-3077
7
<PAGE>
Attention: Sales Operations
If to Professional Veterinary Products: Professional Veterinary
Products, Ltd.
10100 "J" Street
Omaha, Nebraska 68127
i. This Agreement supersedes any previous agreements between Merck
AgVet and Professional Veterinary Products except as specifically
stated herein.
j. Except for matters where injunctive relief may be available, any
controversy or claim arising out of or relating to this Agreement,
or the breach or validity thereof, whether at common law or under
statute, including without limitation claims asserting violation of
the antitrust laws, will be settled by final and binding
arbitration in accordance with the rules for commercial arbitration
of the American Arbitration Association in effect at the time of
the execution of this Agreement. This Agreement will be construed
and the respective rights of the parties hereto determined
according to the laws of the State of New Jersey notwithstanding
any conflict of law principles to the contrary. In the event of any
dispute arising from this Agreement or any acts or any party, the
prevailing party in such dispute shall be entitled to recover
reasonable costs and attorneys' fees.
k. If any provision of this agreement contravenes any law applicable
to this Agreement, then to the extent that such law is applicable,
such provision will be deemed to be severable from the balance of
this Agreement and will not affect any other provision thereof.
Merial Limited
BY:
/s/ Dennis F. Steadman
-----------------------
Dennis F. Steadman
Vice President
ACCEPTED BY: (Please Print)
Name: Dr. Lionel L. Reilly
Title: President
Date: September 12, 1997
Signature: /s/ Dr. Lionel L. Reilly
---------------------------
8
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS
Small Animal Products
Schedule A
(Effective January 1, 1998)
COMMISSION % FOR:
<TABLE>
<CAPTION>
HEARTGARD(R) Plus FRONTLINE(R) Spray
HEARTGARD(R) for Cats FRONTLINE(R) TOP SPOT(TM)
TRESADERM(R) Solution ENACARD(R) Tablets
Vaccines IMMITICIDE(R)
<S> <C> <C> <C> <C>
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Sales v. Goal for all Merial Products *%-**% >**%-***% >***%-***% >***%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Total Commissions **% **% ***% ***%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
MSA Commission on Sales in Range **% **% **% **%
Bonus Commission on Sales in Range **% **% **% **%
Sales Agent Representative Commission **% **% **% **%
Promotional Allowance* **% **% **% **%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
</TABLE>
* *% Promotional Allowance will be paid only for sales of HEARTGARD(R) Plus,
HEARTGARD(R) for Cats, FRONTLINE(R) Spray, and FRONTLINE(R) TOP SPOT(TM).
COMMISSION % FOR:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
HEARTGARD(R) Tablets HEARTGARD(R) Chewables
CAPARSOLATE(R) PENTOTHAL(R)
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Sales v. Goal for all Merial Products *%-**% >**%-***% >***%-***% >***%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Total Commissions **% **% **% **%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
MSA Commission **% **% **% **%
Bonus Commission on Sales in Range **% **% **% **%
Sales Agent Representative Commission **% **% **% **%
Promotional Allowance** **% **% **% **%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
</TABLE>
** *% Promotional Allowance will be paid only for sales of HEARTGARD(R)
Tablets and HEARTGARD(R) Chewables.
Professional Veterinary Products earns commissions for the sales of Merial
Products to AMAs when the order is placed with Merial by Professional
Veterinary Products. Orders received directly from the AMA, orders for
products not listed on schedule A, and orders taken from AMAs outside of the
Territory will not earn commissions. Commissions will be paid to Professional
Veterinary Products within 30 days of the last business day of the month in
which Merial receives the qualifying order.
Sales Agent Representative is an individual who, working as an agent or
employee of Professional Veterinary Products, solicited and placed the
qualifying order. Professional Veterinary Products will provide Merial a list
of Sales Agent Representatives with address, telephone number, and SAR code
(number). Sales Agent Representatives commissions will be paid to
Professional Veterinary Products at the rate shown in Schedule A within 30
days of the last business day of the month in which Merial receives the
qualifying order. Professional Veterinary Products must not make any
deductions from amounts due Sales Agent Representatives.
Promotional Allowance is an allowance for any Merial approved localized
marketing programs meeting the Merial "Animal Health Products Promotional
Allowance" guidelines. A Promotional Allowance proposal form must be
submitted to, reviewed by, and approved by Merial sales and marketing
representatives prior to program development and implementation. Promotional
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
Allowance will be paid within 30 days of the last business day of the month
during which documented expenses for approved programs are received by Merial.
2
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS
Small Animal Products
Schedule B
Commissions for Sales Made to Special Services Organizations (SSOs)
(Effective January 1, 1998)
COMMISSION % FOR:
<TABLE>
<CAPTION>
HEARTGARD(R) Plus FRONTLINE(R) Spray
HEARTGARD(R) for Cats FRONTLINE(R) TOP SPOT(TM)
TRESADERM(R) Solution ENACARD(R) Tablets
Vaccines IMMITICIDE(R)
<S> <C> <C> <C> <C>
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Sales v. Goal for all Merial Products *%-**% >**%-***% >***%-***% >***%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Total Commissions **% **% **% **%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
MSA Commission on Sales in Range **% **% **% **%
Bonus Commission on Sales in Range **% **% **% **%
Sales Agent Representative Commission **% **% **% **%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
</TABLE>
COMMISSION % FOR:
<TABLE>
<CAPTION>
HEARTGARD(R) Tablets HEARTGARD(R) Chewables
CAPARSOLATE(R) PENTOTHAL(R)
<S> <C> <C> <C> <C>
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Sales v. Goal for all Merial Products *%-**% >**%-***% >***%-***% >***%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
Total Commissions **% **% **% **%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
MSA Commission on Sales in Range **% **% **% **%
Bonus Commission on Sales in Range **% **% **% **%
Sales Agent Representative Commission **% **% **% **%
- ------------------------------------------------- ---------------- ---------------- ----------------- ----------------
</TABLE>
Professional Veterinary Products earns commissions for the sales of Merial
Products to AMAs when the order is placed with Merial by Professional
Veterinary Products. Orders received directly from the AMA, orders for
products not listed on schedule A, and orders taken from AMAs outside of the
Territory will not earn commissions. Commissions will be paid to Professional
Veterinary Products within 30 days of the last business day of the month in
which Merial receives the qualifying order.
Sales Agent Representative is an individual who, working as an agent or
employee of Professional Veterinary Products, solicited and placed the
qualifying order. Professional Veterinary Products will provide Merial a list
of Sales Agent Representatives with address, telephone number, and SAR code
(number). Sales Agent Representatives commissions will be paid to
Professional Veterinary Products at the rate shown in Schedule A within 30
days of the last business day of the month in which Merial receives the
qualifying order. Professional Veterinary Products must not make any
deductions from amounts due Sales Agent Representatives.
Promotional Allowance is an allowance for any Merial approved localized
marketing programs meeting the Merial "Animal Health Products Promotional
Allowance" guidelines. A Promotional Allowance proposal form must be
submitted to, reviewed by, and approved by Merial sales and marketing
representatives prior to program development and implementation. Promotional
Allowance will be paid within 30 days of the last business day of the month
during which documented expenses for approved programs are received by Merial.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
EDI POLICY FOR PROFESSIONAL VETERINARY PRODUCTS
Attachment 1
August 1,1997
1. This letter will serve to confirm that the terms of the Sales Agency
Agreement entered by Professional Veterinary Products and Merial dated
August 1, 1997 govern all purchase orders issued by Professional
Veterinary Products to Merial by telephone, purchase order forms or
electronically. Professional Veterinary Products agrees to use the
Electronic Data Interchange System (EDI) as the primary method of
transmitting purchase orders under the Merial Sales Agency Agreement to
Merial. The EDI format system to be utilized for transmitting purchase
orders from Professional Veterinary Products to Merial shall be ANSIX12
EDI format as defined by Merial. Merial reserves the right to modify
this format as it solely deems necessary upon thirty (30) days prior
notification to Professional Veterinary Products.
2. Professional Veterinary Products agrees to transmit purchase orders
through the EDI format system within two (2) hours of placement of any
such orders with Professional Veterinary Products by an Authorized
Merial Account (AMA). Merial hereby agrees to retrieve EDI purchase
orders hourly from 7:00 a.m. to 6:00 p.m. central time on every business
day that this letter agreement is in effect. Professional Veterinary
Products hereby agrees to utilize its best efforts in transmitting EDI
purchase orders to insure that purchase orders are available to be
collected by Merial from the EDI format system at the above-stated
retrieval times.
3. Professional Veterinary Products agrees to maintain the necessary
equipment and personnel to process the ANSIX12 997 Functional
Acknowledgment defined by Merial. Professional Veterinary Products
further agrees that it will notify the Merial EDI contact by telephone
if Professional Veterinary Products does not receive a 997 FA within
twenty-four (24) hours of placement of EDI purchase order by
Professional Veterinary Products with Merial to insure proper receipt by
Merial of the transmission purchase order.
4. Merial hereby agrees to utilize a Value Added Network (i.e., Sterling,
Advantis, etc.) to provide Value Added Network Services and the costs of
this system shall be shared equally by Professional Veterinary Products
and Merial.
5. Professional Veterinary Products hereby agrees to re-transmit within
four (4) hours, at Merial's request, any EDI purchase order placed
within the previous six (6) business days. Professional Veterinary
Products agrees to maintain adequate system support and personnel for
data back-up and retransmission capabilities. In case of a service
interruption where Professional Veterinary Products cannot transmit or
Merial cannot retrieve EDI purchase order
<PAGE>
transmittals, Professional Veterinary Products agrees to place purchase
orders by telephone or facsimile transmission to Merial within four (4)
hours of EDI service interruption.
6. Professional Veterinary Products agrees to receive and process the 855
Purchase Order Acknowledgment from Merial in the ANSIX12 format as
defined by Merial.
Professional Veterinary Products agrees to use the information provided
in this EDI document to convey backorder information to the Authorized
Merial Account (AMA) within one (1) business day of transmission of this
EDI data from Merial. Further, Professional Veterinary Products agrees
to act as a single point of contact for the AMA for backorder inquiries
and contact Merial for any issues relative to any such backorders.
Professional Veterinary Products agrees to maintain backordered product
information (product code and release date) within its system.
Professional Veterinary Products further agrees to advise AMAs of such
items and dates at the time of order, beginning no later than two (2)
hours after receipt of the first 855 P0 Acknowledgment. Professional
Veterinary Products will also update its internal system if a new
release date is transmitted by Merial.
Professional Veterinary Products agrees to transmit a 997 FA to Merial
as defined by Merial within twenty-four (24) hours of receipt of the 855
P0 Acknowledgment.
<PAGE>
REVISED COMMUNICATION
PLEASE DISCARD LETTER DATED JANUARY 28, 1999.
February 5, 1999
Dave Stuhr
Professional Veterinary Products Ltd.
10100 "J" Street
Omaha, NE 68128
Dear Dave:
This letter will serve to confirm our telephone conversation and mutual
agreement to amend our Agreement by modifying the Sales Agent Commission
Schedule A with the attached revised Sales Agent Commission Schedule A and B.
Schedule B is for sales made to Merial Special Services Organizations (SSOs).
All other terms of the Agreement shall remain in force.
Please indicate your acceptance by signing both copies of this letter
and returning a signed original to: Jeanne K. Petersen, Merial Limited, 2100
Ronson Road --ISF 205, Iselin, New Jersey, 08830. Thank you.
Very truly yours,
/s/ Dan Kearney
- ---------------
Dan Kearney
Executive Director,
Large Animal Sales & Marketing
Agreed to and Accepted by:
Dr. Lionel L. Reilly
- --------------------
Name (please print)
President
Title
/s/ Dr. Lionel L. Reilly
- ------------------------
Signature
June 17, 1999
Date
cc: Jeanne K. Petersen
Jay Lewandowski
Bob Covington
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS
Small Animal Products
Schedule A
(Effective February 1, 1999)
COMMISSION % FOR:
<TABLE>
<CAPTION>
HEARTGARD(R) Plus 12-Pack FRONTLINE(R) TOP SPOT(TM)
Vaccines
<S> <C> <C>
--------------------------------- ----------------------------------
Commissions for Sales to **% Commissions for all Sales if
Merial Goal Sales v. Merial Goal are >**%
- ------------------------------------------------- --------------------------------- ----------------------------------
Total Commissions ***% ***%
- ------------------------------------------------- --------------------------------- ----------------------------------
PVPL Commission ***% ***%
Sales Agent Representative Commission **% **%
Promotional Allowance* **% **%
- ------------------------------------------------- --------------------------------- ----------------------------------
</TABLE>
* **% Promotional Allowance will be paid only for sales of HEARTGARD(R) Plus,
Vaccines, ENACARD, FRONTLINE(R) Spray, and FRONTLINE(R) TOP SPOT(TM).
COMMISSION % FOR:
<TABLE>
<CAPTION>
HEARTGARD(R) Plus FRONTLINE(R) Spray
ENACARD(R)
<S> <C> <C>
--------------------------------- ----------------------------------
Commissions for Sales to **% Commissions for all Sales if
Merial Goal Sales v. Merial Goal are >**%
- ------------------------------------------------- --------------------------------- ----------------------------------
Total Commissions ***% ***%
- ------------------------------------------------- --------------------------------- ----------------------------------
PVPL Commission ***% ***%
Sales Agent Representative Commission **% **%
Promotional Allowance* **% **%
- ------------------------------------------------- --------------------------------- ----------------------------------
</TABLE>
<TABLE>
<CAPTION>
COMMISSION % FOR:
HEARTGARD(R) Chewables TRESADERM(R) Solution
HEARTGARD(R) Tablets PENTOTHAL(R)
HEARTGARD(R) For Cats IMMITICIDE(R)
<S> <C> <C>
--------------------------------- ----------------------------------
Commissions for Sales to **% Commissions for all Sales if
Merial Goal Sales v. Merial Goal are >**%
- ------------------------------------------------- --------------------------------- ----------------------------------
Total Commissions **% **%
- ------------------------------------------------- --------------------------------- ----------------------------------
PVPL Commission **% **%
Sales Agent Representative Commission **% **%
- ------------------------------------------------- --------------------------------- ----------------------------------
</TABLE>
Sales Agent earns commissions for the sales of Merial Products to Merial
Veterinary Customers (MVC) when the order is placed with Merial by Sales
Agent. Orders received directly from MVCs, orders for products not listed on
Schedule A, and orders taken from MVCs outside of the Territory will not earn
commissions. Commissions will be paid to Sales Agent within 30 days of the
last business day of the month in which Merial receives the qualifying order.
Sales Agent Representative is an individual who, working as an agent or
employee of Sales Agent, solicited and placed the qualifying order. The Sales
Agent will provide Merial a list of Sales Agent Representatives with address,
telephone number, and SAR code (number). Sales Agent Representative
commissions will be paid to Sales Agent at the rate shown in Schedule A
within 30 days of the last business day of the month in which Merial receives
the qualifying order. Sales Agent must not make any deductions from amounts
due Sales Agent Representatives.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
PROFESSIONAL VETERINARY PRODUCTS
Small Animal Products
Schedule B
Commissions for Sales Made to Special Services Organizations (SSOs)
(Effective February 1, 1999)
COMMISSION % FOR:
<TABLE>
<CAPTION>
HEARTGARD(R) Plus 12-Pack FRONTLINE(R) TOP SPOT(TM)
Vaccines
<S> <C> <C>
--------------------------------- ----------------------------------
Commissions for Sales to **% Commissions for all Sales if
Merial Goal Sales v. Merial Goal are >**%
- ------------------------------------------------- --------------------------------- ----------------------------------
Total Commissions **% ***%
- ------------------------------------------------- --------------------------------- ----------------------------------
PVPL Commission **% ***%
Performance Rebate* *% *%
Sales Agent Representative Commission **% **%
- ------------------------------------------------- --------------------------------- ----------------------------------
</TABLE>
* Performance Rebate paid only upon the achievement of goals as described in the
Business Plan.
COMMISSION % FOR:
<TABLE>
<CAPTION>
HEARTGARD(R) Plus FRONTLINE(R) Spray
HEARTGARD(R) For Cats IMMITICIDE(R)
HEARTGARD(R) Chewables TRESADERM(R) Solution
HEARTGARD(R) Tablets PENTOTHAL(R)
ENACARD(R)
<S> <C> <C>
--------------------------------- ----------------------------------
Commissions for Sales to **% Commissions for all Sales if
Merial Goal Sales v. Merial Goal are >**%
- ------------------------------------------------- --------------------------------- ----------------------------------
Total Commissions **% **%
- ------------------------------------------------- --------------------------------- ----------------------------------
PVPL Commission **% **%
Sales Agent Representative Commission **% **%
- ------------------------------------------------- --------------------------------- ----------------------------------
</TABLE>
Sales Agent earns commissions for the sales of Merial Products to Merial
Veterinary Customers (MVC) when the order is placed with Merial by Sales
Agent. Orders received directly from the MVC, orders for products not listed
on Schedule A, and orders taken from MVCs outside of the Territory will not
earn commissions. Commissions will be paid to Sales Agent within 30 days of
the last business day of the month in which Merial receives the qualifying
order.
Sales Agent Representative is an individual who, working as an agent or
employee of Sales Agent, solicited and placed the qualifying order. The Sales
Agent will provide Merial a list of Sales Agent Representatives with address,
telephone number, and SAR code (number). Sales Agent Representative
commissions will be paid to Sales Agent at the rate shown in Schedule A
within 30 days of the last business day of the month in which Merial receives
the qualifying order. Sales Agent must not make any deductions from amounts
due Sales Agent Representatives.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
March 26, 1999
Dave Stuhr
Professional Veterinary Products Limited
10100 "J" Street
Omaha, NE 68128
Re: Sales Agent Agreement dated August 1, 1997, between Merial
Limited ("Merial") and Professional Veterinary Products
Limited, as amended
Dear Mr. Stuhr:
This letter will confirm that the parties to the above referenced Agreement
hereby consent and modify their agreement, by amending Schedule A of the
Agreement, the Large Animal Product List, by the addition of the following:
Sales Agent is authorized to obtain orders for the equine product
GastroGard(TM) in the Territory provided however Sales Agent is only
authorized to obtain such orders from veterinarians as GastroGard(TM) is
a federal legend product. Merial will pay commissions on all of the
above described orders according to Schedule A, as amended. The 1%
performance commission will be paid for sales results achieved in the
execution of targeted sales programs developed jointly by Merial and
Sales Agent.
<TABLE>
<CAPTION>
Sales Agent Sales Agent Rep Performance
PRODUCT COMMISSION COMMISSION COMMISSION
<S> <C> <C> <C>
GASTROGARD *% *% *%
</TABLE>
An amended Schedule A is attached. This amendment shall be effective
immediately; all other provisions of the agreement, as amended, shall remain
in full force and effect.
On behalf of Merial, and as one of its duly-authorized representatives, I
request that you please indicate your approval by countersigning this letter,
in duplicate, and returning one executed original to my attention. Thank you.
Very truly yours,
/s/ Dan Kearney
- ---------------
Dan Kearney
Executive Director,
Sales & Marketing Large Animals
AGREED AND ACCEPTED:
On behalf of [Name]
/s/ Dr. Lionel L. Reilly
------------------------
[Name]
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
Merial Sales Agent
Large Animal Products
Schedule A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------- -------------- ----------------- --------------
Sales Agent
Sales Agent Representative Performance
Product Commission Commission Commission
- ---------------------------------------------------------------------- -------------- ----------------- --------------
PARASITICIDES *
- -------------
IVOMEC(R) Pour-On for Cattle *% * *
IVOMEC(R) EPRINEX(R) Pour-On for Cattle *% * *
IVOMEC Plus(R) Injection for Cattle (50, 200 & 500 ml) *% * *
IVOMEC Plus(R) Injection for Cattle (1000 ml) *% * *
IVOMEC(R) SR Bolus for Cattle *% * *
IVOMEC(R) 1% Injection for Cattle and Swine (50, 200 & 500 ml) *% * *
IVOMEC(R) 1% Injection for Cattle and Swine (1000 ml) *% * *
IVOMEC(R) 1% Injection for Swine (50, 200 & 500 ml) *% * *
IVOMEC(R) 0.27% Inj for Grower and Feeder Pigs (200 ml) *% * *
IVOMEC(R) 0.08% Drench Solution for Sheep *% * *
EQVALAN(R) Paste and Liquid for Horses *% *% *
ANTI-ULCER MEDICATIONS
GastroGard(TM) (omeprazole) Oral Paste for Equine Ulcers *% *% *%
BOVINE BIOLOGICALS
J-VAC(R) *% * *
IBR Plus(R) *% * *
JOURNEY(TM) *% * *
FUSION(R) *% * *
EQUINE BIOLOGICALS
RM Equine Potomavac(R) *% *% *
RM Equine Potomavac(R)+ Imrab *% *% *
RM(R) Equine EWTF *% *% *
Tetanus Antitoxin *% *% *
IMRAB Bovine Plus *% * *
FLUKICIDES
CURATREM(R) 8.5% Drench for Cattle *% * *
COCCIDIOSTATS
CORID(R) (1.25% Crumbles, 9.6% Sol., 20% Soluble Powder) *% * *
REPRODUCTIVES
CYSTORELIN(R) *% * *
SYNCRO-MATE-B(R) *% * *
APPLICATOR SYSTEMS
IVOMEC(R) Pour-On Applicator Gun *% * *
IVOMEC EPRINEX(R) Pour-On Applicator Gun *% * *
Bolus applicator for IVOMEC(R) SR Bolus for Cattle *% * *
SYNCRO-MATE-B(R) Implant Gun *% * *
Extra Needles for SYNCRO-MATE-B(R) Implant Gun *% * *
Accessory Kit for SYNCRO-MATE-B(R) Implant Gun *% * *
- ----- ---------------------------------------------------------------- -------------- ----------------- --------------
</TABLE>
Merial Sales Agent earns commissions for the sales of Merial Products to
MVC's when the order is placed with Merial by the Merial Sales Agent. Orders
received directly from the MVC, orders for products not listed on Schedule A
and orders taken from MVC's outside of the Territory will not earn
commissions. Commissions will be paid to Merial Sales Agent within thirty
(30) days of the last business day of the month in which Merial receives the
qualifying order.
Sales Agent Representative is an individual who, working as an agent or
employee of Merial Sales Agent, solicited and placed the qualifying order.
Merial Sales Agent will provide Merial a list of Sales Agent Representatives
with address, telephone number, and SAR code (number). Sales Agent
Representative commissions will be paid to Merial Sales Agent at the rate
shown in Schedule A within 30 days of the last business day of the month in
which Merial receives the qualifying order. Merial Sales Agent must not make
any deductions from amounts due Sales Agent Representatives.
Merial reserves the right to pay Sales Agent at Merial's sole discretion
during specified and announced time periods an supplemental commission of *%
for qualified sales of GastroGard only.
* Pay its sales representatives at least ****** (**%) percent of the total
commission paid by Merial on MVC orders or rate specified in table above.
(R) Registered trademarks of Merial. (C)1999 Merial Limited, Iselin, NJ 08830
All rights reserved.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
June 23,1999
Mr. Dave Stuhr
Professional Veterinary Products Ltd.
10110 "J" Street
Omaha, NE 68128
Dear Mr. Stuhr:
The enclosed Large Animal Products Schedule A dated June, 1999 has been
revised to reflect the inclusion of additional vaccine products for which a
*% rate of commission applies.
Please keep this current Schedule A with your signed Sales Agent agreement.
Very truly yours,
/s/ Jeanne K. Petersen
- ---------------------
Jeanne K. Petersen
Analyst
cc: Derka
Hickman
Lewandowski
Smith, C.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
Merial Sales Agent
Large Animal Products
Schedule A
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ---------------------------------------------------------------------- -------------- ----------------- --------------
Sales Agent
Sales Agent Representative Performance
Product Commission Commission Commission
- ---------------------------------------------------------------------- -------------- ----------------- --------------
PARASITICIDES
IVOMEC(R) Pour-On for Cattle *% * *
IVOMEC(R) EPRINEX(R) Pour-On for Cattle *% * *
IVOMEC Plus(R) Injection for Cattle (50, 200 & 500 ml) *% * *
IVOMEC Plus(R) Injection for Cattle (1000 ml) *% * *
IVOMEC(R) SR Bolus for Cattle *% * *
IVOMEC(R) 1% Injection for Cattle and Swine (50, 200 & 500 ml) *% * *
IVOMEC(R) 1% Injection for Cattle and Swine (1000 ml) *% * *
IVOMEC(R) 1% Injection for Swine (50, 200 & 500 ml) *% * *
IVOMEC(R) 0.27% Inj for Grower and Feeder Pigs (200 ml) *% * *
IVOMEC(R) 0.08% Drench Solution for Sheep *% * *
EQVALAN(R) Paste and Liquid for Horses *% *% *
ANTI-ULCER MEDICATIONS
GastroGard(TM) (omeprazole) Oral Paste for Equine Ulcers *% *% *%
BOVINE BIOLOGICALS
J-VAC(R) *% * *
IBR Plus(R) *% * *
JOURNEY(TM) *% * *
FUSION(R) *% * *
RELIANT(TM) *% * *
REPISHIELD(TM) *% * *
EQUINE BIOLOGICALS
RM Equine Potomavac(R) *% *% *
RM Equine Potomavac + Imrab(R) *% *% *
RM(R) Equine EWTF *% *% *
Tetanus Antitoxin *% *% *
IMRAB Bovine Plus *% * *
FLUKICIDES
CURATREM(R) 8.5% Drench for Cattle *% * *
COCCIDIOSTATS
CORID(R) (1.25% Crumbles, 9.6% Sol., 20% Soluble Powder) *% * *
REPRODUCTIVES
CYSTORELIN(R) *% * *
SYNCRO-MATE-B(R) *% * *
APPLICATOR SYSTEMS
IVOMEC(R) Pour-On Applicator Gun *% * *
IVOMEC EPRINEX(R) Pour-On Applicator Gun *% * *
Bolus applicator for IVOMEC(R) SR bolus for Cattle *% * *
SYNCRO-MATE-B(R) Implant Gun *% * *
Extra Needles for SYNCRO-MATE-B(R) Implant Gun *% * *
Accessory Kit for SYNCRO-MATE-B(R) Implant Gun *% * *
- ----- ---------------------------------------------------------------- -------------- ----------------- --------------
</TABLE>
Merial Sales Agent earns commissions for the sales of Merial Products to
MVC's when the order is placed with Merial by the Merial Sales Agent. Orders
received directly from the MVC, orders for products not listed on Schedule A
and orders taken from MVC's outside of the Territory will not earn
commissions. Commissions will be paid to Merial Sales Agent within thirty
(30) days of the last business day of the month in which Merial receives the
qualifying order.
Sales Agent Representative is an individual who, working as an agent or
employee of Merial Sales Agent, solicited and placed the qualifying order.
Merial Sales Agent will provide Merial a list of Sales Agent Representatives
with address, telephone number, and SAR code (number). Sales Agent
Representative commissions will be paid to Merial Sales Agent at the rate
shown in Schedule A within 30 days of the last business day of the month in
which Merial receives the qualifying order. Merial Sales Agent must not make
any deductions from amounts due Sales Agent Representatives.
Merial reserves the right to pay Sales Agent at Merial's sole discretion
during specified and announced time periods an supplemental commission of **%
for qualified sales of GastroGard only.
* Pay its sales representatives at least ******* (**%) percent of the total
commission paid by Merial on MVC orders or rate specified in table above.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
Redacted portions have been marked with asterisks (***). Confidential
treatment has been requested for the redacted portions. The confidential
redacted portions have been filed separately with the Securities and Exchange
Commission.
EXHIBIT 10.7
SELECT DISTRIBUTORS
MARKETING AGREEMENT
This Agreement is between the Animal Health Group of PFIZER INC., a Delaware
corporation having a place of business at 235 East 42nd Street, New York, New
York 10017 (hereinafter, "PFIZER") and Professional Veterinary Products, Ltd.,
having a place of business at 10100 "J" Street, Omaha, NE 68127 (hereinafter,
"PVPL")
1. PFIZER hereby appoints PVPL, and PVPL hereby accepts appointment,
as a contract distributor for PFIZER Animal Health Products set forth on Exhibit
A (hereinafter, the "Products"), to purchase from Pfizer and to resell for
PVPL's own account as a distributor subject to the following terms and
conditions.
2. PVPL recognizes and agrees to the following:
(a) PFIZER has elected to identify and work with a select
group of contract distributors that are and will be committed to maximizing the
sale and distribution of the Products and to working closely with PFIZER to
identify market opportunities for both companies;
(b) the intent of this Agreement is to attain the goals set
forth above. PFIZER is relying on PVPL to fulfill that intent and to cooperate
in promotions and programs, and meet PVPL's other commitments herein;
(c) PFIZER selected PVPL in part in reliance on PVPL's
representations concerning its willingness and ability to conduct promotional
campaigns effectively, to otherwise carry out its obligations hereunder,
particularly those obligations set forth in Exhibit B to this Agreement, and to
act generally so as to preserve and enhance the image and goodwill of PFIZER;
(d) PFIZER intends to utilize this group of distributors to
sell the Products to customers below them in the distribution chain and that
PFIZER has, and may in the future, run promotions and other activities that
would be seriously prejudiced if PVPL resells the Products to other Pfizer
contract distributors, non-employee agents or through brokers.
<PAGE>
3. Accordingly, PVPL shall:
(a) use its reasonable best efforts to purchase at least the
quantity of the Products set forth on Exhibit C, in the calendar year commencing
with the effective date of this Agreement (and, if this Agreement is extended,
the revised quantity for the year commencing with the effective date of any
extension hereof);
(b) use its reasonable best efforts to focus its primary
effort at reselling Products to veterinarians that support sales to livestock
producers;
(c) store and handle its inventory of Products under
conditions (including refrigeration where appropriate) that will ensure that
such Products retain their potency, purity, quality, and identity;
(d) maintain a full-time outside and inside sales force that
will personally and actively solicit sales of the Products and to compensate
such sales representatives in a way which doesn't disfavor their selling efforts
for products;
(e) use its reasonable best efforts and full management and
sales support to sell the Products [subject to the terms of paragraph 3(b)]
directly to veterinarians that support sales to livestock producers, and other
customers below it in the distribution chain;
(f) provide inventory data and sales information (units,
average selling price, zip code) with respect to the Products to PFIZER on a
monthly basis, in such amounts and format as PFIZER may require, by means of EDI
as set forth in paragraph 9(a);
(g) not sell the Products to other PFIZER contract
distributors, nor shall PVPL sell the Products through brokers or non-employee
agents. However, with respect to Products with less than sixty (60) days left
before expiration date, or in other exceptional circumstances, PVPL may request
PFIZER's consent to sell such Products to other contract distributors or through
brokers, and such consent will not be unreasonably withheld;
(h) set its resale prices for the Products independently
and at its sole discretion;
(i) provide regularly scheduled delivery service to its
customers, use its best efforts to anticipate its customers' requirements for
the Products, and maintain adequate stocks of the Products to meet its
customers' demands;
(j) cooperate fully with PFIZER by actively participating in
such
<PAGE>
strategy sessions as Pfizer reasonably may require, for the purpose of
developing programs to increase use of the Products; and to cooperate fully with
Pfizer in implementing all promotions and sales campaigns for the Products,
including, but not limited to, supporting key Products through customer meetings
as needed;
(k) permit a PFIZER representative to enter its premises at
least once each month to confirm physical inventory of the Products and to check
their condition and salability, and upon request, permit PFIZER to have access
to records of sales, sales meetings, and promotional activities with respect to
the Products;
(l) allow PFIZER's representatives to attend and actively
participate in meetings of PVPL's sales representatives at lease twice during
each six-month period;
(m) permit the listing or other use of its name as a PFIZER
distributor, free of charge, in such national, regional and local advertising
and other materials promoting the sale or use of the Products as PFIZER may
determine;
(n) distribute the Products only under the labeling provided
by PFIZER; prescribe, recommend, suggest, and advertise each Product for use
only under the conditions stated in the labeling provided by PFIZER; and observe
all federal, state, and local laws governing the distribution of animal drugs;
(o) in the case of Products bearing the legend, "CAUTION:
FEDERAL LAW RESTRICTS THIS DRUG TO USE BY OR ON THE ORDER OF A LICENSED
VETERINARIAN," or any similar legend, sell such Products only to or on the order
of a licensed veterinarian for use in the course of his or her professional
practice or to another person or entity regularly and lawfully engaged in the
use, distribution or dispensing of such legend drugs;
(p) submit to PFIZER's Divisional Credit Manager PVPL's most
recent financial statements, or such other information or documentation as said
Credit Manager may elect to accept, at the time this Agreement is signed, and on
an annual basis thereafter (if this Agreement is extended) within a reasonable
time after the close of PVPL's fiscal year. Financial statements and other
documentation should be mailed to PFIZER INC. Animal Health Group, North America
Region, Divisional Credit Manager, 812 Springdale Drive, Exton, PA 19341. PVPL
agrees that credit limits established by PFIZER shall be subject to change by
PFIZER in its sole discretion and that no shipments will be made to PVPL in
excess of the established credit limits;
(q) take no action, whether or not identified above, that
would harm the goodwill or name of PFIZER, or damage the interests of PFIZER or
the Products;
<PAGE>
(r) PVPL shall immediately notify PFIZER in the event PVPL
obtains information indicating that any of the Products may have to be recalled
either by virtue of applicable law or regulation or good business judgment.
PFIZER shall control all efforts necessary to conduct any such recall. PVPL
shall cooperate with PFIZER and PVPL agrees to maintain adequate records to
conduct such recall, including the name, address and Product purchases of all
purchasers of PFIZER Products.
4. PFIZER shall:
(a) sell to PVPL those Products listed on Exhibit A at the
prices in effect in the then current published Pfizer Animal Health Products
Distributor Price List (hereinafter, "Price List"). PFIZER also shall permit
PVPL to participate in any distributor incentive program offered by PFIZER, in
accordance with the terms of such program. A copy of the program proposed by
PFIZER to be effective during the term of this Agreement is attached hereto as
Exhibit C. Products introduced by PFIZER during the term of this Agreement may
be included hereunder at PFIZER's sole discretion. PFIZER shall have the
unrestricted right to revise the prices, terms and conditions of the Price List,
and to add or delete Products or package sizes, without advance notice to PVPL,
and the revisions shall be effective on all orders submitted after the effective
date of the price revisions. In all cases of orders received for other than
immediate shipment, the price for the Products shall be that in effect at the
time of shipment;
(b) provided that PVPL performs all of its obligations under
this Agreement including, but not limited to meeting the annual purchase targets
contained in Exhibit C hereto, pay to PVPL the bonuses provided for in Exhibit C
hereto, provided, however, that such bonus shall not include payment for sales
transacted as a Swine Service Agent for Pfizer Inc.;
(c) supply PVPL with such promotional literature for the
Products as PFIZER may determine, including, but not limited to, bulletins,
brochures and advertising reprints for use by PVPL in selling Products covered
under this Agreement. PFIZER reserves the right to limit quantities of such
items supplied to PVPL;
(d) allow PVPL credit on prepaid returns in accordance with
PFIZER's Outdated Products Policy which is in effect at the time.
5. Nothing in this Agreement shall be deemed to limit PFIZER's ability
to sell Products to any other party.
<PAGE>
6. All purchases by PVPL pursuant to this Agreement shall be in
accordance with the terms of PFIZER's Pricing and Shipping Policies, as may be
amended by PFIZER from time to time. Unless the parties agree otherwise,
shipments shall be made to either PVPL's central warehouse point or to branch
offices at PVPL'S direction.
7. PVPL shall pay for each shipment delivered under this Agreement in
accordance with the terms set forth in the invoice
8. If for any reason, PFIZER's stock of the Products covered hereunder
becomes depleted so that PFIZER is unable to fill all orders that it has
received from its customers, including PVPL, PFIZER shall have the right to
apportion its supply of the Products among its customers, including PVPL, in
whatever manner PFIZER reasonably shall deem to be equitable, the terms and
conditions of this Agreement notwithstanding.
9. The following standard conditions shall apply to all sales under
this Agreement:
(a) PVPL shall cooperate fully with PFIZER toward
implementing the Animal Health Institute Electronic Data Interchange Special
Project for the reporting of sales, inventory data and control totals on a
daily basis. The data to be reported shall be as described in the AHI EDI
Transaction sets.
Until the AHI EDI Special Project is implemented, and for a
reasonable, mutually agreed testing period thereafter, PVPL will continue to
submit its PFIZER product sales data to Sterling Commerce on a monthly basis by
the tenth business day after the close of the month. The data shall contain the
month; year; warehouse identifier (branch); PVPL product number, description,
and unit of measure; PFIZER product number; PVPL sales person ID; ship to zip
code; quantity sold and value of the sales. It is understood that PVPL is
currently submitting the above described data via Sterling Commerce in a
satisfactory format.
Until the AHI EDI Special Project is implemented, and for a
reasonable, mutually agreed testing period thereafter, PVPL will continue to
submit its inventory data to PFIZER via hardcopy (fax) as it has for the past
year. Inventory data will include the currently agreed warehouses, if any, and
any other stocking locations which PFIZER may later designate;
<PAGE>
(b) all orders are subject to acceptance by PFIZER's Home
Office. Title to the goods shall pass to PVPL upon delivery to the carrier.
Products requiring temperature control will be shipped F.O.B. destination;
(c) any tax or other charge upon the sale and/or shipment of
the goods now or hereafter imposed by federal, state or municipal authorities
shall be paid by PVPL. In the event that the price of any article includes
transportation charges, any increase or decrease in transportation charges shall
be for PVPL's account;
(d) for the purposes of Section 303(c) of the Federal Food,
Drug, and Cosmetic Act, as amended, PFIZER warrants and guarantees that no
article when shipped is adulterated or misbranded within the meaning of said
Act, or is an article that may not, under the provision of Section 404, 505, or
512 of said Act, be introduced into interstate commerce. PFIZER certifies that
the Products sold hereunder were produced in compliance with the Fair Labor
Standards Act of 1938, as amended;
(e) EXCEPT AS SET FORTH IN THIS AGREEMENT, OR IN THE LABELING
OF THE PRODUCTS SOLD HEREUNDER, PFIZER MAKES NO EXPRESS OR IMPLIED WARRANTIES
WITH RESPECT TO THE PRODUCTS;
(f) PFIZER shall defend and indemnify PVPL from all claims
resulting from any breach by PFIZER of the warranties set forth in this
paragraph 9, and specifically any claim that the Products, as sold by PFIZER,
were defective. In the event PFIZER is found by any court of competent
jurisdiction to be liable for any claim based in products liability, then PFIZER
shall reimburse PVPL's reasonable legal fees incurred in the course of
cooperating with PFIZER's defense. To be covered by this defense and indemnity,
PVPL must: promptly notify PFIZER of any such claim; allow PFIZER to fully
control the defense and/or resolution of the claim; and cooperate fully with
PFIZER in the matter. This defense, indemnity and payment for legal fees shall
not apply to claims alleging: PVPL alteration, negligent handling or improper
storage of the Products; sale of outdated Products; sale or recommendation of
the Products for uses or in a manner not set forth in the labeling supplied by
PFIZER; or sale of the Products after receipt of notice from PFIZER that such
sales should be halted;
(g) in no event shall PFIZER be liable to PVPL for special,
collateral, incidental, or consequential damages in connection with or arising
out of the purchase, resale, or use of the Products. Except as provided under
subparagraph 9(f), above, total damages recoverable against PFIZER by PVPL shall
be exclusively limited to the purchase price of the Products with respect to
which damages are claimed;
<PAGE>
(h) failure of PFIZER to make or of PVPL to take, when due,
any delivery (or portion thereof) pursuant to an order hereunder, if occasioned
by any circumstance or condition beyond the control of the party so failing,
shall not subject the failing party to any liability to the other and, at the
option of either party, that order or portion thereof not delivered may be
canceled;
(i) acceptance of PVPL's order by PFIZER is expressly made
conditional upon the PVPL's acceptance of the conditions of sale as set forth
herein, and the prices, terms and conditions of the Price List then in effect,
notwithstanding acknowledgment or receipt of PVPL's purchase order containing
additional or different provisions, or conflicting oral representations by any
agent of PFIZER.
10. PVPL shall not delegate its duty of performance or assign its
obligations under this Agreement without the prior written consent of PFIZER.
11. This Agreement shall not be binding upon PFIZER until it is
approved by PFIZER at its Exton, Pennsylvania headquarters.
12. This Agreement shall be effective as of January 1, 1999, and shall
expire on December 31, 1999. Either party may terminate this agreement prior to
the expiration date:
(a) with or without cause, upon thirty (30) days written
notice to the other party, or
(b) immediately upon written notice, in the event of a
material breach by the other party. Such material breach on the part of PVPL
shall include, but not be limited to: failure to pay for Products as set
forth herein; making sales of the Products through brokers or to other
contract distributors, except with PFIZER's prior consent; engaging in
practices inconsistent with the spirit of this Agreement; altering the
labeling of the Products supplied by PFIZER; or failing to obey any federal,
state or local law governing the distribution of such Products.
13. PVPL and PFIZER acknowledge that in the performance of their
duties hereunder PVPL and PFIZER may obtain access to "Confidential Information"
(as defined below) of each other. PVPL and PFIZER agree that during the term of
this Agreement and for a period of five (5) years after the termination of this
Agreement,
<PAGE>
unless specifically permitted in writing by the other party, to (a)
retain in confidence and not disclose to any third party and (b) use only for
the purpose of carrying out their duties hereunder, any such Confidential
Information. As used herein the term "Confidential Information" means any
information, or data, whether of a business or scientific nature and whether in
written, oral or tangible form, relating to PFIZER's and PVPL's business or
potential business or its research and development activities, not generally
available to or known to the public, and not otherwise known to the receiving
party, that is disclosed to or learned by the other party pursuant hereto. Upon
completion of the work provided for hereunder or other termination of this
Agreement each party will return to the other party any documents, or copies
thereof, or any product samples, containing or constituting Confidential
Information disclosed to or generated by either party in connection with this
Agreement. Neither PVPL nor PFIZER shall disclose the existence of this
Agreement without the consent of the other party hereto.
14. This Agreement shall be governed by the laws of the State of New
York applicable to contracts to be fully performed therein.
15. This Agreement and documents referred to herein embody the entire
understanding between the parties hereto, will supersede prior agreements
relating to the Products, and may be modified only in writing and signed by the
parties to be bound. No activities conducted pursuant to this Agreement or
related thereto, including but not limited to the future planning activities of
the parties, shall be deemed to give rise to any obligations on the part of
either party other than as expressly provided for herein.
PROFESSIONAL VETERINARY PFIZER ANIMAL HEALTH,
PRODUCTS, LTD. NORTH AMERICA REGION
By: /s/ Dr. Lionel L. Reilly By: /s/ Peter Lydon
------------------------ ---------------------
Peter Lydon, President
North America Region
Date: June 22, 1999 Date: June 30, 1999
<PAGE>
Exhibit A
Contract Product Group at SKU Level
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Contract Product Group Product Product Line Name SKU ID SKU Name
Line ID
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Dectomax Injectable 64220 Dectomax Injectable 7513 Dectomax Inj. Bonus Pack
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7897 Dectomax Inj. 1% 100ml
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7898 Dectomax Inj. 1% 250ml
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7899 Dectomax Inj. 1% 500ml
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Dectomax Pour On 64225 Dectomax Pour On 7892 Dectomax PourOn 250ml
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7893 Dectomax PourOn 1L
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7894 Dect Pour On 2.5 L
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7895 Dectomax Pour On 5 LT
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Key Bios 74107 APP Products 4186 Pneumosius III 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4597 PleuroGuard 4 35ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
71101 Prv 4008 PR Vac Plus 25ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4009 PR Vac Plus 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4033 PR-Vac Plus 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4601 PR-Vac 5ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4604 PR-Vac 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4617 PR-Vac (killed) 25ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
52131 TSV 2 4904 TSV-2 1ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4909 TSV-2 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4912 TSV-2 25ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
57106 Ultrabac 4371 Ultrabac-CD 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4379 Ultrabac-7 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4380 Ultrabac-7 200ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4381 Ultrabac-7 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4382 Ultra-7/Somubac 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4383 Ultra-7/Somubac 200ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4384 Ultra-7/Somubac 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4385 Ultrabac-8 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4386 Ultrabac-8 200ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4387 Ultrabac-8 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4388 Ultrabac-CD 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
55111 Vibrios 4143 CattleMst.4+VL5* 5ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4144 CattleMst.4+VL5* 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4145 CattleMst.4+VL5*25ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4658 PregGuard 9 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4659 PregGuard 9 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4890 StayBred VL5 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4892 StayBred VL5 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4917 Vibrio/L-5 2ml 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4918 Vibrio/L-5 2ml 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4935 Vibrin 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Contract Product Group Product Product Line Name SKU ID SKU Name
Line ID
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4937 Vibrin 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
LA-200 66245 LA-200 7959 Liq LA-200 100ml-4690
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7960 Liq LA-200 250ml-4696
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7961 Liq LA-200 500ml-4697
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Other-Volume 66205 Albon Bolus 8448 Albon Bolus 5gm 50
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
8449 Ablon Bolus 15gm 12
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8450 Albon Bolus 15gm 50
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
66215 Albon Cattle 8445 Albon DWS 12.5% Gl
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8446 Albon Sol.Powd. 107gm
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
66210 Albon Inject 8451 Albon Inj. 40% 250ml
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
66200 Albon SR Bolus 8447 Albon SR 12.5gm 50
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
66230 Calf Boluses 7948 TM Scr Tab 24 (6912)
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7949 TM Scr Tab 100 (8876)
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
65200 Durasect 7030 Durasect Gl
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
58221 Entrolyte 8150 Entrolyte Twin 200gm
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8152 Entrolyte H.E.
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
74101 Erysipelas 4224 EVA 10ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4228 EVA 50ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4233 ER-Bac/Lepto-5 50ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4242 ER-Bac 50ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
5040 ER BAC Plus 50ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
5041 ER BAC Plus 250ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
66220 Inject Antibiotics 8024 Amoxi-Inject 25gm
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
55101 Leptos 4475 Leptoferm-5 2ml 10ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4477 Leptoferm-5 2ml 50ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
66225 Mastitis 8128 Amoxi-Mast 10ml
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8130 Dariclox 10ml
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8134 Orbenin-DC 10ml
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
58222 Resorb 8112 Re-Sorb Packettes Box
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
8142 Resorb `72' Bucket
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
52142 Somubac Combo 4254 Somubac 50ds
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4255 Somubac 10ds
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4295 Resvac 3/Somubac 50ds
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4307 Resvac 4/Somubac 50ds
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4308 Resvac 4/Somubac 10ds
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4313 Resvac BRSV/Somu. 50ds
------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4314 Resvac BRSV/Somu. 10ds
------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Strategic Bios 74105 Atrobac 4000 Atrobac-3 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
52101 Bovishield 4095 Bovi-K 4 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4097 Bovi-K 4 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4124 Bovi-Shield IBR-BVD
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Contract Product Group Product Product Line Name SKU ID SKU Name
Line ID
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4127 Bovi-Shield IBR-BVD50
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4129 B-S IBR-BVD-BRSV-LP10
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4146 B-S IBR-BVD-BRSV-LP50
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4148 Bovi-Shield 3 10 ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4153 Bovi-Shield 3 50 ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4156 Bovi-Shield 4 5ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4162 Bovi-Shield 4 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4167 Bovi-Shield 4 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4168 Bovi-Shield 4+L5 5ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4175 Bovi-Shield 4 +L5 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4177 Bovi-Shield 4+L5 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4179 NEW 50DS BOVI-SHD IBR
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4184 50DS BOVI-SHLD I-R-LP
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4243 50DS BOVI-SHLD I-P-R
- -------------------------
------------- ----------------------------- ----------- ------------------------------------
52111 Cattlemaster 4135 CattleMaster 4* 5ds
- ------------------------- ----------- ------------------------------------
4136 CattleMaster 4* 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4137 CattleMaster 4* 25ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4139 CattleMstr 4+L5* 5ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4140 CattleMstr 4+L5* 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4141 CattleMstr 4+L5* 25ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4147 CattleMstr BVD* 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
------------- ----------------------------- ----------- ------------------------------------
4149 CattleMstr BVD* 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
57107 Fortress 4412 Fortress CD 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4413 Fortress CD 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4417 Fortress 7 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4418 Fortress 7 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4419 Fortress 7 200ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4423 Fortress 8 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4424 Fortress 8 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4425 Fortress 8 200ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
76111 Litterguard 4402 LitterGuard 2ml 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4408 L/Grd LT-C 10ds (4409)
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4410 LtrGd LT-C 50ds (4411)
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4426 LitterGuard LT 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4428 LtrGrd LT 50ds (4431)
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
70101 Parvo 4560 FarrowSure B 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4561 FarrowSure B 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4562 FarrowSure B-PRV 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4568 FarrowSure 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4569 FarrowSure 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4571 FarrowSure PRV 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Contract Product Group Product Product Line Name SKU ID SKU Name
Line ID
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4583 ParvoVac/
Lepto-5 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
52151 Pasteurella 4988 OneShot 5ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4991 OneShot 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4993 OneShot 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
74111 Respisure 4606 RespiSure 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4618 Respisure 250ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
56101 Scourguards 4002 CalfGuard 25's 1ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4854 ScourGuard 3(K) 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4856 ScourGuard 3(K) 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4858 ScourGuard 3K/C 10ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
4859 ScourGuard 3K/C 50ds
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
TM-343 92210 Terramycin SP Swine 7875 TM-343 4.5 LB Pail
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7915 TM-343 Pkts (5623)
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7916 TM-343 9.56oz (5633)
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
7917 TMSP 6.4oz62Pail-4163
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
Valbazen 64201 Valbazen-Cattle 8783 Valbazen Susp. 500ml
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8784 Valbazen Susp. Liter
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8785 Valbazen Susp. 5 Ltr
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
8786 Valbazen Paste 205gm
- ------------------------- ------------- ----------------------------- ----------- ------------------------------------
</TABLE>
<PAGE>
Exhibit B
Specific Undertakings of PVPL.
PVPL agrees to participate in and undertake the following activities with, and
on behalf of, PFIZER:
Planning
1) PFIZER and PVPL shall conduct at least two full joint planning
meetings per year. These sessions will include representatives from sales,
marketing, technical services and management from both PFIZER and PVPL
(hereafter referred to as the PVPL/PFIZER Account Team).
2) PVPL and PFIZER shall prepare jointly, a written detailed sales
plan which addresses key Products, programs and customers to be focused on
during the coming year. Plans shall include the identification of specific
support materials and training requirements, detailed communication plans
including specific PVPL sales representatives and managers and the customers to
be contacted and the sequence, timing and communication vehicle to be used.
Annual sales plans will be divided into quarterly segments. Upon completion on a
quarterly program, the account Team will conduct a review outlining the
strengths and weaknesses of the program. Annual plans shall be completed in
September/October for the following calendar year.
3) PVPL will provide PFIZER with an annual sales forecast as well as
PVPL's interpretation and insight of the basis and meaning of such forecasts.
The forecast shall include all PFIZER sku's which PVPL sells. Both parties agree
that forecasts are not to be considered binding orders for delivery.
4) During the term of this Agreement PVPL shall participate with
PFIZER outside of the annual plans necessary for performance under this
Agreement. Active cooperation and participation by key managers of PVPL in
PFIZER's strategic planning for the future is highly desirable to PFIZER.
Information Support
1) PVPL will provide PFIZER with sales out data on each PFIZER sku
PVPL sells. Sales out data shall include the following:
a) PFIZER's Product number
<PAGE>
b) Units sold
c) Selling price
d) Ship to zip code
Sales out data shall be provided monthly to PFIZER within ten (10)
working days following the month end close. PVPL will use its best efforts to
insure sales out data integrity and timeliness.
2) Annual sales forecasts shall be updated on a quarterly basis. The
PVPL/PFIZER account team will review each quarterly forecast update and
determine relative actions required if any.
3) PVPL will provide PFIZER each month, unit inventories on each
PFIZER sku PVPL sells.
Product Support
1) PVPL will staff all appropriate sales meetings as planned in
advance with PFIZER. Such sales meetings shall be at no charge to PFIZER and
include but not be limited to the following:
a) All appropriate sales representatives, and managers
as determined by PVPL
b) Key management participation and support
c) PVPL preparation on the material to be covered
d) Meeting summary and feedback mechanism
2) PVPL will participate in and assist in conducting product, program,
production practices, sales training and customer knowledge training sessions.
3) PVPL will guarantee to PFIZER that PFIZER Products will be
presented to customers on each and every appropriate sales call.
4) PVPL will monitor customer meetings and industry groups and
provide feedback to PFIZER.
5) While there is no requirement that PVPL pay SPIF's or commission
to its sales force, to the extent PVPL does make such payments, then PVPL
will provide SPIF's and percentage sales commissions to its sales force
employees equal (or greater) than competitive products. PVPL agrees that the
commission percentage paid to its sales force employees shall be calculated
based on the total amount of money received by PVPL for the sale of Products
including any rebates from PFIZER, less the purchase price of the Products,
and that PFIZER's program terms for commissions and
<PAGE>
special performance incentive payments to sales force employees will be
complied with. PFIZER shall have the right to direct special performance
incentive payments directly to PVPL sales force employees following notice to
and approval by PVPL of PFIZER's intent to do so. No notice will be given to
PVPL's sales force of such programs prior to approval.
6) PVPL will provide PFIZER Territory Manager access to account's
management and representatives.
OTHER TERMS
a) Rebates will only be paid on product shipped. All orders
for immediate shipment must be received by the close of business, December 2,
1999 to ensure full participation in the program, and orders should be shipped
by December 28, 1999 to qualify under the program.
Orders placed between January 1, 1999 and December 2, 1999, but
shipped after December 28, 1999 will not count toward the 1999 incentive program
goal.
b) Marketing Agreement holders with more than one location
must combine purchases of all locations to determine attainment level for
incentives. In the event that one Agreement holder acquires or combines with
another Agreement holder, the purchase objectives, will be adjusted accordingly
for the purpose of determining incentives earned.
c) Direct purchase from PFIZER will be used to determine the
level of purchases achieved. Any discrepancies documented by the Marketing
Agreement holder using copies PFIZER invoices.
Professional /s/ W. Thomas Boarders /s/ Dr. Lionel L. Reilly
----------------------- ------------------------
Veterinary Products, Ltd. Pfizer Signature Account Signature
Account Name (Sales Management) (President, Owner)
______________________ July 6, 1999 June 22, 1999
Date Date Date
<PAGE>
Exhibit A
PRODUCT GROUPINGS and REBATE PERCENTAGES
<TABLE>
<CAPTION>
---------------- ------------------- -------------------------------- ---------------------------------------------------------
PRODUCT GROUP STRATEGIC BIOS DECTOMAX VOLUME
---------------- ------------------- -------------------------------- ---------------------------------------------------------
<S> <C> <C> <C> <C>
PRODUCT LINES
BOVISHIELD INJECTABLE LA-200 OTHER VOLUME:
CATTLEMASTER SOMUBAC COMBO
PASTEURELLA POUR ON KEY BIOS: LEPTOS
SCOURGAURDS TSV 2 ENTROLYTE
FORTRESS VIBRIOS RESORB
PARVO ULTRABAC DURASECT
ATROBAC PRV ALBON SR BOLUS
RESPISURE APP ALBON BOLUS
LITTERGAURD ALBON INJECT
TM-343 ALBON CATTLE
INJECT ANTIBIOTICS
VALBAZEN MASTITIS
CALF BOLUSES
ERYSIPELAS
-------------------------------------------------------------------------------------------------------------------------------
PRODUCT GROUP REBATE *% *% *%
PRODUCT GROUP REBATE IS PAID ON INDIVIDUAL PRODUCT GROUP PURCHASES FOR ATTAINMENT OF THAT GROUP'S 1998 GOAL
-------------------------------------------------------------------------------------------------------------------------------
OVERALL REBATE *% *% *%
OVERALL REBATE IS PAID ON ALL PURCHASES FOR ATTAINMENT OF THE TOTAL 1998 GOAL
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Example:
($000's)
1998 Rebate % Paid
---------------------------------------
Product Group Goal Year End Purchases Over/ (Under) Goal Product Group Overall Rebate $
<S> <C> <C> <C> <C> <C> <C>
Strategic Bios **** **** *** *% *% ***
Dectomax Injectable **** **** *** *% *% ***
Dectomax Pour-on *** *** (**) *% **
Total Volume **** **** (***) NA *% **
--------------------------------------- -------------------- -------------------------- -----------
GRAND TOTAL $**** $**** $*** NA *% $***
</TABLE>
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
Exhibit C
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
1999 PFIZER MARKETING AGREEMENT DISTRIBUTION PROGRAM
PVPL
$000'S
- ------------------- ---------------- ---------------- ---------------- --------------------------- -----------------------
1997 1998 1999 REBATE @ GOAL
Product Group Full Yr Full Yr Full Yr Product Group Overall -------------
Goal % Gwth Goal % Gwth Goal % Gwth Rebate % * Rebate % ** Product Overall Total
- ------------------- ---------------- ---------------- ---------------- --------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Strategic Bios **** -**% **** ***% **** ***% *% *% *** *** ***
Dectomax Injectable *** ***% **** ***% **** **% *% *% ** ** **
Dectomax Pour-On *** **** **** ***% *% *% ** ** **
Volume:
LA-200 *** *** **% **** ***% *% ** **
Key Bios *** **% **** ***% **** ***% *% ** **
TM-343 ** ****% ** **% ** ***% *% * *
Valbazen *** -*% *** ***% *** ***% *% * *
Other - Volume **** -**% **** **% **** **% *% ** **
-------------- ---- ---- ---- -- ---- ----
Total Volume **** *% **** **% **** ***% *** ***
Grand Total **** *% ***** ***% ***** ***% *** *** ***
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Product Group Rebate is paid on Individual Product Group Purchases for
attainment of that Group's 1999 goal
** Overall Rebate % is paid on All Purchases upon attainment of the TOTAL 99
Goal less sales transacted as a Swine Service Agent
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
Redacted portions have been marked with asterisks (***). Confidential
treatment has been requested for the redacted portions. The confidential
redacted portions have been filed separately with the Securities and Exchange
Commission.
EXHIBIT 10.8
SUPPLY AND DISTRIBUTION AGREEMENT
---------------------------------
THIS AGREEMENT ("Agreement"), made as of this 1st day of
January, 1998, by and between SCHERING-PLOUGH ANIMAL HEALTH CORPORATION, a
Delaware corporation, having its principal office located at 1095 Morris
Avenue, Union, New Jersey 07083 (hereinafter, referred to as "Schering"), and
PROFESSIONAL VETERINARY PRODUCTS LIMITED, a Missouri corporation, having its
principal office located at 10100 J Street, Omaha, Nebraska 68127
(hereinafter, referred to as "Distributor").
RECITALS
--------
WHEREAS, Schering is engaged in the business of developing,
manufacturing, marketing, and selling certain Products (as hereinafter
defined);
WHEREAS, Schering owns and/or utilizes the rights to the Trademarks
(as hereinafter defined);
WHEREAS, Distributor desires the non-exclusive right to sell
the Products under the Trademarks within the Territory (as hereinafter
defined); and
WHEREAS, Distributor has the authority and requisite
experience and resources to distribute the Products within the Territory.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements and covenants set forth in this Agreement, Schering and
Distributor hereby agree as follows:
ARTICLE I. DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
1.01 "Adverse Drug Event" shall mean:
(a) any expected or unexpected experience which is adverse,
including what are commonly described as adverse or undesirable experiences,
adverse events, adverse reactions, side effects, or death due to any cause
associated
<PAGE>
with, or observed in conjunction with, the use of any Products, whether or
not (i) considered related to the use of any Products, (ii) occurring in the
course of the use of any Products, or (iii) associated with, or observed in
conjunction with, an accidental or intentional overdose from any Products,
abuse of any Products, or dependency on or withdrawal from any Products; or
(b) any failure of expected pharmacological action of any Products,
including, without limitation, deterioration or contamination of any Products
or any mistake in the labeling of any Products.
1.02 "Affiliate" shall mean any entity, directly or
indirectly, controlling, controlled by, or under common control with a Party.
For purposes of this definition, "control" shall mean: (a) ownership of more
than fifty percent (50%) of the equity capital or other ownership interest in
or of such Affiliate; (b) the power to control or otherwise direct the
affairs of such Affiliate; or (c) in the case of non-stock organization, the
power to control the distribution of profits.
1.03 "Confidential Information" shall mean any technical,
financial and business information relating to a Party's research,
development, inventions, products, production, manufacturing, finances,
marketing, customers, or business plans, including, without limitation, trade
secrets, know-how, data, formulae, processes, other intellectual property, or
confidential communications, that (i) is or has been disclosed to or
otherwise received or obtained by a Receiving Party, whether or not in
connection with or pursuant to this Agreement and (ii) has been marked by the
Disclosing Party as Confidential Information or, if disclosed orally, has
been confirmed in writing by the Disclosing Party as Confidential Information
within thirty (30) days of such disclosure.
1.04 "Disclosing Party" shall mean the Party (a) who
discloses, and owns or otherwise possesses the rights or interests to or in,
Confidential Information or (b) whose Confidential Information is the subject
of any process, subpoena, or demand.
1.05 "Good Manufacturing Practices" shall mean the laws,
regulations, and orders of any governmental authority, including, without
limitation, the United States Food and Drug Administration, the United States
Department of Agriculture, and the United States Environmental Protection
Agency, that may be applicable to the Products at any time during the term of
this Agreement.
1.06 "Parties" shall mean Schering and Distributor, and
"Party" shall mean Schering or Distributor.
1.07 "Price List" shall mean the various prices set forth on
Exhibit A, which is attached hereto and made a part hereof.
2
<PAGE>
1.08 "Products" shall mean the finished, packaged products set
forth on Exhibit A hereto and any amendment thereof or supplement thereto,
which are manufactured by Schering, any Affiliate of Schering, or any
designee of Schering or such Affiliate in accordance with the standards,
specifications, and formulae established by Schering or such Affiliate.
Schering shall have the right, in its sole discretion and from time to time
by written notice, delete or otherwise exclude any of the Products from this
Agreement.
1.09 "Professional Service Representative" shall mean any
sales representatives, administrative personnel, and agents of Distributor
used or otherwise retained by Distributor for the marketing, distribution,
promotion, or sale of the Products.
1.10 "Receiving Party" shall mean the Party who (a) receives
or otherwise obtains Confidential Information of the Disclosing Party or (b)
is served with any process, subpoena, or demand.
1.11 "Territory" shall mean the fifty states of the United
States but shall not include any of the territories or possessions of the
United States.
1.12 Trademarks shall mean the trademarks and trade names of
Schering or any Affiliate of Schering as set forth on Exhibit A hereto.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
------------------------------
Distributor hereby represents and warrants to Schering that,
as of the date of this Agreement, the following statements are and shall be
true and correct in all material respects:
(a) ORGANIZATION AND GOOD STANDING. Distributor: (i) is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of _________; and (ii) has the corporate power and
authority to conduct the business in which it presently is engaged, to enter
into this Agreement, and to perform its obligations hereunder.
(b) AUTHORIZATION AND BINDING EFFECT. All corporate action on the
part of Distributor and its officers and directors necessary for the
authorization, execution, and delivery of this Agreement and for the
performance of all of Distributor's obligations hereunder has been taken, and
that Agreement, when executed and delivered, shall constitute a valid and
legally binding obligation of Distributor enforceable against Distributor in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, and other laws affecting creditors' rights generally
or by general equitable principles.
3
<PAGE>
(c) EXECUTION, DELIVERY AND PERFORMANCE. The execution, delivery,
and performance by Distributor of this Agreement do not: (i) violate or
breach the certificate of incorporation or bylaws of Distributor; (ii)
violate or conflict with any applicable laws; (iii) violate, breach, cause a
default under, or otherwise give rise to a right of termination, cancellation
or acceleration with respect to (presently, with the giving of notice or the
passage of time), any agreement, contract or instrument to which Distributor
is a party or by which any of its assets are bound; or (iv) result in
creation or imposition of any lien, pledge, mortgage, claim, charge, or
encumbrance upon any assets of Distributor.
(d) GOVERNMENTAL AND OTHER CONSENTS. No consent, authorization,
license, permit, registration or approval of, or exemption or other action
by, any governmental authority or any other person is required in connection
with Distributor's execution and delivery of this Agreement or with the
performance by Distributor of its obligations hereunder.
ARTICLE III. SCOPE OF AGREEMENT
------------------
3.01 APPOINTMENT. Schering hereby appoints Distributor, and
Distributor hereby accepts the appointment, as a distributor of the Products
in the Territory only under the Trademarks, with the non-exclusive right to
distribute the Products in the Territory.
3.02 NO DELEGATION. Distributor shall not, without the prior
written approval of Schering, appoint any other distributor, representative,
dealer, or agent to sell the Products in the Territory.
3.03 ADDITIONAL DISTRIBUTORS. Notwithstanding anything in this
Agreement to the contrary, Schering shall have the right to (a) distribute
the Products itself in the Territory and (b) appoint, from time to time, such
other distributors as it, in its sole discretion, deems appropriate.
ARTICLE IV. SALE OF PRODUCTS TO DISTRIBUTOR
-------------------------------
4.01 PRICING AND PRICING REVISIONS. Schering shall sell (or
cause to be sold) the Products to Distributor at the prices specified on the
Price List. Schering shall have the right to revise the Price List or any
portion thereof at any time, which revision shall be effective upon written
notice to Distributor. Any revision to the Price List shall apply to all
Products shipped after the date of such notice. Payment by Distributor for
the Products shall be made within thirty (30) days from the date of
Schering's invoice. Due and punctual payment by Distributor of any and all
indebtedness incurred by Distributor hereunder constitutes an essential
condition of this Agreement.
4
<PAGE>
4.02 DELIVERY. Delivery shall be F.O.B. Omaha, Nebraska,
freight and insurance prepaid. Title to and risk of loss of the Products
shall pass to Distributor at the time of the delivery to Distributor at the
shipping point of Schering or its designee.
4.03 DELAY IN SHIPMENT. Except for delays resulting from force
majeure as provided in Section 12.02 hereof and subject to Section 4.09
hereof, Schering shall ensure prompt delivery to Distributor of all Products
ordered by Distributor under this Agreement.
4.04 PURCHASE REQUIREMENTS. Distributor shall purchase the
Products exclusively from Schering or its designee. Each purchase order of
Distributor shall be for an amount of Products not less than One Thousand
Dollars ($1,000) or such other amount that Schering may, at its sole
discretion, reasonably establish from time to time.
4.05 FORECASTS. Within fifteen (15) days of (a) the effective
date of this Agreement and (b) the commencement of each calendar quarter
thereafter, Distributor shall furnish to Schering a good-faith forecast of
its requirements for all Products in each of the succeeding twelve (12)
calendar months after the date of such forecast.
4.06 PURCHASE ORDERS. Distributor shall to the extent
practicable deliver to Schering or its designee a purchase order of Product
not less than ten (10) days prior to the last day of each calendar month, and
Schering shall have the right to reject, and shall have no liability for such
rejection of, any purchase order of Distributor. Subject to Section 4.03
hereof, Schering shall diligently complete and ship (or cause to be completed
and shipped) all purchase orders to the extent such purchase orders are in
accordance with this Section 4.06. The only function of Distributor's
purchase order shall be to set forth the quantities of the Products ordered
and the date by which such Products are to be delivered, and no term or
condition of Distributor's purchase order shall have, or be deemed to have,
any force or effect. In the event production requirements are inadequate at
any time to satisfy (a) all purchase orders received by Schering from
Distributor and any other persons and (b) other purchase requirements,
Schering shall allocate the available production of Products on an equitable
basis. Schering may supply any of Distributor's purchase orders from whatever
source Schering chooses.
4.07 PRODUCT SPECIFICATION CHANGES. Nothing in this Agreement
shall impose, or be deemed to impose, on Schering the obligation to
manufacture or sell any of the Products or prevent Schering from making such
changes in any of the Products as Schering, in its sole discretion, may deem
appropriate.
5
<PAGE>
4.08 DIRECT SALES. Schering reserves the right to sell the
Products directly to present and future customers of Schering within the
Territory. Any such direct sale shall not entitle Distributor to any
compensation, indemnification, damages, or other payment of any kind.
4.09 NO LIABILITY FOR FAILURE TO SUPPLY. Distributor expressly
releases Schering from liabilities for any loss or damage, including, without
limitation, incidental or consequential damages or lost profits, arising from
the failure of Schering or its designee to fill any order by Distributor.
ARTICLE V. OBLIGATIONS OF SCHERING
-----------------------
5.01 ADEQUATE SUPPLY. Subject to Section 4.06 hereof, all
applicable import, export, currency and other applicable laws and
regulations, and the terms of this Agreement, Schering shall make available
to Distributor for purchase the Products in quantities adequate, in the
opinion of Schering, to meet the needs of Distributor's market throughout the
Territory.
5.02 DISTRIBUTOR ASSISTANCE. Schering shall render to
Distributor such assistance as Schering, in its sole discretion, believes is
reasonably necessary to enable Distributor, if so requested by Schering, to
(a) register the Products and (b) prepare and implement plans to disseminate
information regarding the Products to the trade or the public, as the case
may be.
5.03 PRODUCT WARRANTIES. The Products delivered hereunder
shall be manufactured in accordance with (a) Good Manufacturing Practices,
(b) applicable industry requirements regarding purity, shape, appearance,
potency, and shelf life, and (c) Schering's quality control standards and
applicable specifications for the Products. SCHERING MAKES NO WARRANTY THAT
THE PRODUCTS SHALL BE FIT FOR ANY PARTICULAR PURPOSE, EXCEPT AS EXPRESSLY
STATED ON THE PRODUCT LABEL, NOR IS THERE ANY OTHER WARRANTY, EXPRESS OR
IMPLIED, EXCEPT AS STATED IN THIS AGREEMENT.
ARTICLE VI. OBLIGATIONS OF DISTRIBUTOR
--------------------------
6.01 EXTRA-TERRITORIAL ORDERS. Distributor shall distribute
the Products only in the Territory and only under the Trademarks in
accordance with this Agreement. Distributor shall: (a) not solicit or accept
orders for the Products from customers located outside the Territory through
any means, including, without limitation, advertising; (b) not establish a
sales office, warehouse, or distribution center outside the Territory for the
Products; and (c) notify Schering of all inquiries or orders for the Products
(i) from
6
<PAGE>
present or potential customers located outside the Territory or (ii) intended
to be sold outside the Territory.
6.02 DILIGENT EFFORTS. Distributor shall exercise diligent
efforts to promote, advertise, and increase the sales of the Products in the
Territory to customers in both the private and institutional sectors.
Distributor shall not implement or otherwise release any advertising or
promotional program and/or material prepared by or for Distributor without
Schering's prior written approval. Distributor shall: (a) adhere to
Schering's promotional and marketing programs; (b) implement such programs in
accordance with the time frames specified by Schering; and (c) inform each of
its customers in a timely manner of such programs. Schering shall have the
right to reasonably establish and amend from time to time, and Distributor
shall comply with, the quarterly and annual purchase goals set forth on
Exhibit B, which is attached hereto and made a part hereof.
6.03 DISTRIBUTOR'S FACILITIES. Distributor shall provide, at a
minimum, the following facilities:
(a) office space, desks, telephone service, and adequate
secretarial and clerical assistance for (i) all those engaged in the
promotion and sale of the Products, including, without limitation,
Professional Service Representatives, and (ii) any other person who may visit
the Territory in connection with the promotion or sale of the Products;
(b) a room or area adequate for the conduct of sales and marketing
meetings;
(c) warehouse space adequate for the storage and refrigeration of
the Products; and
(d) a room or area adequate for the storage of samples of the
Products and promotional literature pertaining to the Products.
6.04 MARKETING AND SALES REPORTING. Distributor shall, within
thirty (30) days from the date of receipt of a request by Schering and at
such frequency as Schering shall reasonably require, furnish to Animal Health
Institute EDI Project, c/o Animal Health Institute, 501 Wythe Street,
Alexandria, Virginia 22314, Distributor's sales data with respect to each of
the Products. Distributor shall not, without Schering's prior written
consent, supply sales data in any other manner. In addition, Schering shall
have the right to require, as it deems necessary in its sole discretion, any
or all of the following from Distributor:
(a) monthly reports on the inventory and sales of Products by units
and sales values;
7
<PAGE>
(b) quarterly reports on all customer complaints regarding the
Products in accordance with the procedures as Schering may, from time to
time, establish; and
(c) such other reports relating to the Products as Schering may
reasonably require.
6.05 FACILITY INSPECTION AND AUDIT. Distributor shall, upon
reasonable notice by Schering, grant Schering or its designee access to
Distributor's facility to (a) inspect such facility, (b) conduct a physical
inventory of Distributor's stock of the Products, and (c) audit Distributor's
books to ascertain compliance with the terms and conditions of this Agreement.
6.06 LEGEND DRUGS. Distributor shall, with respect to any
Products bearing the legend "CAUTION: FEDERAL LAW RESTRICTS THIS DRUG TO USE
BY OR ON THE ORDER OF A LICENSED VETERINARIAN," sell, or caused to be sold,
such Products only to, or on the order of, a duly licensed veterinarian for
use in the course of the professional practice of such veterinarian or to any
other person who is regularly and lawfully engaged in the distribution or
dispensing of the Products bearing such legend.
6.07 DUTIES AND OBLIGATIONS AFTER EXPIRATION. Distributor's
duties and obligations under this Agreement, including, without limitation,
Distributor's duties and obligations under Articles VI, VII, VIII, IX, and XI
hereof, shall survive the expiration or termination of this Agreement.
6.08 INSURANCE. During the term of this Agreement, Distributor
shall, at its cost and expense: (a) maintain, and shall cause any of its
Affiliates to maintain, general liability insurance, including coverage for
product liability and contractual liability, in an amount not less than
*********** Dollars (U.S. $******), with an umbrella coverage of not less
than ********** Dollars (U.S. $******); and (b) furnish to Schering written
notice of any change in or cancellation of any such insurance not less than
thirty (30) days prior to the date of such change or cancellation.
Distributor shall, within thirty (30) days from the date of this Agreement,
furnish to Schering a certificate of insurance evidencing compliance with the
requirements of this Section 6.08. Distributor's obligation to Schering shall
not be limited to the amount of such insurance or the amount of insurance
actually carried by Distributor.
6.09 CREDIT WORTHINESS. Distributor shall, within ten (10)
days from the date of receipt of a request by Schering, submit to Schering or
its designated credit representative Distributor's most recent financial
statements or such other information and documentation as Schering or such
representative may reasonably request to verify Distributor's financial
status, and Distributor agrees that such financial statements and other
information and documentation shall be complete, true and correct in all
respects.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
8
<PAGE>
Schering shall have the right to establish and amend, from time to time in
its sole discretion, credit limits applicable to the Distributor, and the
Parties agree that no shipment of Products shall be made in excess of such
credit limits.
6.10 ADVERSE DRUG EVENT REPORTING.
(a) Distributor shall, within twenty-four (24) hours of
becoming aware of, or receiving notice of or information concerning and in
accordance with applicable requirements of any governmental authority, notify
Schering of any Adverse Drug Event. Such notice shall include, but not be
limited to, the name, address, and telephone number of the person making the
complaint or report of an Adverse Drug Event, the Products involved, and the
nature of the Adverse Drug Event. Schering shall investigate any complaint or
report of an Adverse Drug Event, and Distributor shall provide all reasonable
and necessary information and assistance to Schering in connection with such
investigation, including, without limitation, completion of Schering's form
entitled "Product Experience Form" and collection of samples of the Products.
Schering shall notify Distributor of the results of, and any action taken
with respect to, Schering's investigation.
(b) Distributor shall, within thirty (30) days from the
date of receipt of a request by Schering, provide to Schering a print-out or
computer disk of each Adverse Drug Event reported to or known by Distributor
for the twelve- (12-)month period prior to the date of such request.
(c) Distributor shall, within ten (10) days from the date
of receipt of a request by Schering, make available to Schering or its
designee, for inspection and copying by Schering or such designee, records
(including computer disks) of Distributor relating to each Adverse Drug Event.
(d) Disclosure by Distributor of records and information
concerning any Adverse Drug Event to Schering shall continue as long as
Distributor continues to clinically test or market the Products.
(e) Schering and Distributor shall meet, in a timely
fashion and from time to time as may be reasonably required, to implement the
Adverse Drug Event reporting and consultation procedures prescribed in this
Article VI.
(f) Except as expressly provided in this Section 6.11 or
as expressly required by any governmental authority, Distributor shall not
make or file any report, or otherwise make any disclosure, with respect to
any Adverse Drug Event.
ARTICLE VII. TRADEMARKS
----------
7.01 PROTECTION. Distributor shall: (a) display the Trademarks
solely in connection with the marketing, advertising, and promotion of the
Products; (b) at all
9
<PAGE>
times recognize the validity and ownership of the Trademarks, whether owned
by Schering or any Affiliate or licensor of Schering, and Schering's sole
right to use and license such Trademarks in the Territory, along with any and
all patents and patent applications of Schering or any Affiliate of Schering
or its licensor covering the Products; and (c) at no time do, nor allow to be
done by its employees, agents or representatives or any person on behalf of
Distributor or its employees, agents or representatives, whether by act,
omission or commission, anything that would (i) put in issue or otherwise
adversely affect such validity or ownership or (ii) damage or prejudice the
reputation or goodwill of Schering or any Affiliate or licensor of Schering.
The Parties hereby agree and intend that any and all use of the Trademarks
shall at all times inure to the benefit of Schering or any Affiliate or
licensor of Schering, as the case may be, as the owners of the Trademarks.
Distributor shall at no time use the name SCHERING CORPORATION or
SCHERING-PLOUGH ANIMAL HEALTH CORPORATION or any trademarks, logos or designs
owned by Schering or any Affiliate or licensor of Schering in or as a
trademark or trade name, without the prior written consent of Schering or
such Affiliate or licensor, as the case may be.
7.02 REGISTRATION. Distributor shall not, except with the
prior written consent of Schering or any Affiliate or licensor of Schering,
as the case may be, take any action in respect of the registration, renewal,
or infringement of the Trademarks. In the event that any such registration or
renewal is secured by Distributor, then Schering or such Affiliate or
licensor, as the case may be, shall be the beneficial owner of such
Trademarks, and Distributor shall, upon the request of Schering or its
Affiliate or licensor, in accordance with applicable law, make assignment
thereof or surrender the Trademarks for cancellation. Distributor shall
immediately notify Schering of any potential infringement of the Trademarks
or claims that any of the Trademarks infringe the rights of any person.
Schering may, in its sole discretion, determine if litigation to protect the
Trademarks is warranted, and Distributor shall, at its cost and expense,
cooperate with Schering in the prosecution and defense of the Trademarks.
Distributor shall not adopt, register, or use any trademarks or trade names
which are confusingly similar to any of the Trademarks or trade names covered
by this Agreement.
ARTICLE VIII. CONFIDENTIAL INFORMATION
------------------------
8.01 CONFIDENTIALITY. During the term of this Agreement and
for a period of ten (10) years after the expiration of this Agreement, a
Receiving Party shall, and shall use diligent efforts to ensure that each of
its officers, directors, employees and agents shall, (a) protect and hold in
confidence all Confidential Information of the Disclosing Party and (b) not
disclose, or cause to be disclosed; such information to any person, except as
expressly provided to the contrary in this Agreement. Nothing obtained by a
Receiving Party shall be deemed Confidential Information of the Disclosing
Party, if such information:
10
<PAGE>
(a) is or becomes a matter of public knowledge through no act or
omission of the Receiving Party; PROVIDED, HOWEVER, that information shall
not be deemed a matter of public knowledge merely because it (i) is embraced
by more general information in the prior possession of a Party or any other
person or (ii) is expressed in public literature in general terms not
specifically in accordance with Confidential Information;
(b) is rightfully received by, or otherwise made available to, the
Receiving Party from an independent person without a duty of confidentiality;
or
(c) is already in the possession of the Receiving Party at the time
of receipt from the Disclosing Party, as documented by pre-existing records
of the Receiving Party.
8.02 DISCLOSURE.
(a) A Receiving Party shall immediately notify a Disclosing Party
of receipt of any process, subpoena or demand by any governmental authority
or any other person, requiring production of Confidential Information of the
Disclosing Party, and shall, within one (1) day from the date of such
receipt, furnish to the Disclosing Party a copy of such process, subpoena or
demand and of all materials and acts relating thereto. The Disclosing Party
shall have the right to take any legal action to prevent disclosure of its
Confidential Information, including, without limitation, the right to appear
on behalf of the Receiving Party, to represent the Receiving Party, and to
employ counsel of its choice for these purposes, all at its cost and expense.
(b) The Disclosing Party shall have the right to make any legal
arguments and to take any legal action, including, without limitation, trials
and appeals on behalf of itself and the Receiving Party, to prevent
disclosure of its Confidential Information. If a Disclosing Party elects to
exercise its rights under this Section 8.02, it shall do so at its cost and
expense and shall protect, hold harmless, defend, and indemnify the Receiving
Party from and against any and all legal responsibility or liability from the
exercise of these rights. If a Disclosing Party elects not to exercise any
such rights or if, in the absence of a protective order or other remedy or
the receipt of a waiver by the Disclosing Party, the Receiving Party is
nonetheless legally compelled to disclose Confidential Information of the
Disclosing Party, then the Receiving Party may, without liability hereunder,
disclose only that portion of such Confidential Information that it is
legally compelled to disclose.
8.03 CONFIDENTIALITY OF AGREEMENT. The provisions of this
Article 8 also shall apply to the contents of this Agreement; PROVIDED,
HOWEVER, that the contents hereof may be disclosed only (a) as required by
applicable law or (b) in connection with the enforcement of this Agreement.
8.04 NOTIFICATION OF BREACH. Each Party shall notify the other
Party in the event of any breach of this Article 8, including, without
limitation, conditions or
11
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circumstances that indicate Confidential Information has been or may have
been prejudiced or otherwise exposed to loss or unauthorized disclosure or
use. A Receiving Party shall, upon request of the Disclosing Party, take all
steps reasonable necessary to recover any and all Confidential Information
that has been or may have been compromised, prejudiced, improperly disclosed
or otherwise exposed to loss or unauthorized use. The expense of taking such
steps shall be borne solely by the Receiving Party.
8.05 RETURN OF CONFIDENTIAL INFORMATION. All Confidential
Information shall be and remain the sole property of the Disclosing Party,
and the Receiving Party shall have no rights or interests (except as
hereinafter provided) to or in such information. Immediately upon termination
of this Agreement, each Party shall discontinue the use of Confidential
Information of the other Party; and the Receiving Party shall, upon the
written request of the Disclosing Party, return to such Party, within thirty
(30) days from the date of receipt of such request, all items of Confidential
Information of such Party, including, without limitation, all copies and
originals of such items of Confidential Information.
ARTICLE IX. PRODUCT RECALL
--------------
9.01 NOTIFICATION. In the event any governmental authority
issues a recall, or takes similar action, in connection with any Products
sold or distributed by Distributor in the Territory, Distributor shall,
within twenty-four (24) hours from the time of receipt or knowledge of such
recall or similar action, notify Schering, and Schering and Distributor shall
agree on an appropriate course of action; provided, however, that if Schering
and Distributor cannot agree on a course of action, then Distributor shall
implement the course of action as designated by Schering. In the event
Schering requests that Distributor recall one or more of the Products,
Distributor shall immediately cease all sales of such Products and take all
appropriate actions to recall such Products. Schering shall bear the cost and
expense of any recall requested by Schering or resulting from negligent
manufacturing, packaging, or shipment by Schering. Distributor shall bear the
cost and expense of any other recall. For the purposes of this Agreement, the
cost and expense of recall shall include, without limitation, the expenses of
notification and destruction or return of the recalled Products, but shall
not include the expense or service fees associated with the time of the
Professional Service Representatives, which time shall be borne solely by
Distributor. In the event a recall is requested by Schering, Distributor
shall be reimbursed by Schering in an amount equal to the sum paid by
Distributor to Schering for the Products recalled.
9.02 CUSTOMER RECORDS. In the event of a recall or similar
action regarding any Products, Distributor shall maintain, and make available
to Schering for inspection upon request, all information reasonably requested
by Schering, including, without limitation, a current written record of names
and addresses of its customers and lot numbers (to the extent possible) and
volume of the Products purchased.
12
<PAGE>
ARTICLE X. TERM AND TERMINATION
--------------------
10.01 TERM. This Agreement shall become effective as of the date
first above written and, except as provided in this Article X, shall continue
in effect for an initial period of one (1) year, to be automatically renewed
for one (1)-year periods, subject to the right of either Party to terminate
this Agreement, with or without cause, at any time, upon not less than thirty
(30) days prior written notice to the other Party.
10.02 TERMINATION FOR BREACH. Either Party may, at its option,
terminate this Agreement in the event the other Party breaches any material
obligation under this Agreement, including, without limitation, achievement
of any of the purchase or sales-out goals or requirements, and fails to
remedy or otherwise cure such breach within thirty (30) days from the date of
receipt of notice of such breach given by the non-breaching Party; PROVIDED,
HOWEVER, that if (a) such breach was outside the control of the other Party
or (b) the other Party cures such breach within such thirty (30)-day period,
then there shall be no termination of this Agreement.
10.03 INSOLVENCY. This Agreement shall terminate immediately,
without further notice or action by Schering, in the event: (a) Distributor
shall become insolvent, or shall make or seek to make an arrangement with, or
an assignment for the benefit of, creditors; (b) proceedings in voluntary or
involuntary bankruptcy shall be instituted by, on behalf of, or against
Distributor; or (c) a receiver or trustee of Distributor's property shall be
appointed.
10.04 GOVERNMENTAL INTERVENTION AND CHANGE OF CONTROL. This
Agreement shall be terminable at any time by Schering, upon written notice to
Distributor, in the event Distributor and/or any of its activities are
partially or completely nationalized, expropriated, taken over, or otherwise
intervened in by any governmental authority. In the event there is a change,
directly or indirectly, in the control in or over Distributor, this Agreement
shall terminate, without further notice or action by Schering, effective as
of the moment of the occurrence of such change.
10.05 EFFECT OF TERMINATION. Upon the effective date of expiration
or termination of this Agreement:
(a) Schering or its designee shall have the right (but not
the obligation) to purchase from Distributor, and Distributor shall sell to
Schering or such designee upon request, all or any portion of the inventory
of Products, including samples, held by or for Distributor. Schering or its
designee shall pay for such Products in the currency in which they were
purchased by Distributor at Distributor's landed cost (excluding storage
costs);
(b) To the extent that Schering or its designee may have
supplied to Distributor any of the Products or promotional literature for or
samples of such Products, either (i) on consignment or without charge or (ii)
without having duly
13
<PAGE>
received full invoiced value thereof, Schering or its designee shall have the
right, paramount to all other persons as permitted by law, to repossess or
possess, as absolute owner, all or any portion of such Products, at the
warehouse of Distributor or any other person, without any charge to Schering
or its designee. To determine whether full payment has been made for any
Products hereunder, each shipment of Products shall be deemed a separate
obligation, and Schering shall apply all payments by Distributor in the
chronological order in which such shipments were made, notwithstanding any
different method of application either Party may have used prior to
expiration or termination of this Agreement;
(c) Notwithstanding any contrary payment terms established
from time to time under, this Agreement, invoices for any and all Products
that shall have been shipped to Distributor prior to termination or
expiration of this Agreement shall become immediately due and payable;
(d) Distributor shall: (i) cease any and all display of
the Trademarks; (ii) not register or use any trademark or trade name
confusingly similar to the Trademarks; or (iii) not use or register any
package designs, advertising copy, or other indicia of origin associated with
Trademarks If Distributor has been recorded as a registered user of the
Trademarks, then Distributor shall execute any documents reasonably requested
by Schering to cancel such record; and
(e) Distributor shall return to Schering all originals and
copies of all Confidential Information, and Distributor and its officers,
directors, employees, agents, and Affiliates shall not, directly or
indirectly, make, retain or use such Confidential Information, in whole or in
part.
10.06 NO LIABILITY FOR TERMINATION. Neither the expiration nor
termination of this Agreement, in accordance with any provision of this
Agreement or otherwise, shall subject either Party to any liability or
obligation to the other Party or to any other person, either by operation of
law or on any other basis, except as specifically set forth in this Agreement.
10.07 ADDITION OF PRODUCTS. Schering shall have the right, at
any time and from time to time, to add or delete Products to or from Exhibit
A hereto, and such addition or deletion of Products shall not result in the
termination of this Agreement, a claim of breach of contract, or any other
liability on the part of Schering.
ARTICLE XI. INDEMNIFICATION
---------------
11.01 INDEMNIFICATION.
(a) SCHERING INDEMNIFICATION. Schering shall, at its cost
and expense, indemnify, defend, and forever hold harmless Distributor and its
Affiliates from and against all claims, suits, actions, proceedings, damages,
losses, liability, costs, and
14
<PAGE>
expenses (including reasonable attorneys' fees) arising out of or resulting
from (i) Schering's performance or breach of its obligations under this
Agreement or (ii) subject to Section 11.02 hereof, any defective Products, to
the extent that such claims, suits, actions, proceedings, damages, losses,
liability, costs, or expenses stem from Schering's negligence. Distributor
shall immediately notify Schering of receipt of notice of any claim, suit,
action, proceeding, damage, loss, liability, cost, or expense, and shall,
within one (1) day from the date of such receipt, furnish to Schering a copy
of such notice and all materials and facts relating thereto. Schering shall
have the right, at its cost and expense, to defend, handle and control such
claim, suit, action, proceeding, damage, loss, liability, cost, or expense.
Distributor shall have the right, at its cost and expense, to participate.
(b) DISTRIBUTOR INDEMNIFICATION. Distributor shall, at its
cost and expense, indemnify, defend, and forever hold harmless Schering and
its Affiliates from and against all claims, suits, actions, proceedings,
damages, losses, liability, costs, and expenses (including reasonable
attorneys' fees) arising out of or resulting from (i) Distributor's
performance or breach of its obligations under this Agreement, (ii) the
storage, handling, promotion, marketing, sale, or distribution of the
Products in the Territory, or (iii) Distributor's negligence, errors, or
omissions. Schering shall immediately notify Distributor of receipt of notice
of any claim, suit, action, proceeding, damage, loss, liability, cost, or
expense, and shall, within one (1) day from the date of such receipt, furnish
to Distributor a copy of such notice and all materials and facts relating
thereto. Distributor shall have the right, at its cost and expense, to
defend, handle and control such claim, suit, action, proceeding, damage,
loss, liability, cost, or expense. Schering shall have the right, at its cost
and expense, to participate.
(c) NO CONSEQUENTIAL DAMAGES. Schering shall not be liable
to Distributor for any special or consequential damages, whether based upon
lost goodwill, lost resale profits, work stoppage, or impairment of other
goods or arising out of breach of warranty, breach of contract, strict
liability or negligence.
(d) ASSISTANCE. Each Party shall provide all information in
its possession and reasonable assistance to the other Party as necessary to
enable the other Party to defend any such suit, claim, or demand.
11.02 REMEDY FOR DEFECTIVE PRODUCTS. Schering shall, as soon as
practicable after receipt of notice by Distributor, replace or rectify any
Products which are defective or fail to meet Schering's specifications.
Schering's sole obligation and Distributor's sole remedy under this Article
XI shall be, at Schering's option, (a) the refund by Schering to Distributor
of any amount paid to Schering by Distributor for any such Products, (b) the
re-working of any such Products so that they meet the specifications, or (c)
the replacement by Schering of any such Products. Schering shall have no duty
to indemnify or reimburse Distributor for any other cost, expense, claim, or
damage which may result from any such Products, including, without
limitation, any consequential or contingent damages or lost profits.
15
<PAGE>
ARTICLE XlI. GENERAL PROVISIONS
------------------
12.01 COMPLIANCE WITH LOCAL LAWS.
(a) LOCAL LAWS AND REGULATIONS. At all times during the
term of this Agreement, Distributor shall comply with all laws, regulations
and policies which are in effect in the Territory and apply to the storage,
handling, distribution, sale, or promotion of the Products and conduct of
business under this Agreement.
(b) PAYMENTS TO OTHER PERSONS. No payments or benefits, if
any, received by Distributor from Schering pursuant to this Agreement, or
otherwise under arrangements hereafter agreed to, shall be paid to any other
person, except for reasonable and necessary business expenses not violative
of applicable laws or regulations.
(c) GOVERNMENTAL OFFICIALS. Distributor shall not hire or
retain any governmental employees or officials to assist Distributor in the
performance of its obligations under this Agreement, and Distributor shall
not perform any services on behalf of any undisclosed persons with respect to
matters covered by this Agreement. Distributor shall not pay, authorize,
offer, or promise anything of value, directly or indirectly, to any
governmental employee or official, political party, or candidate for
political office in connection with Distributor's activities under this
Agreement.
12.02 FORCE MAJEURE. Neither Party shall be liable for any delay or
failure of performance of any obligation hereunder by reason of any act or
circumstance beyond the control of such Party, including, without limitation,
an act of God, fire, flood, war, public disaster, strike or labor dispute, or
governmental enactment, rule or regulation; PROVIDED, HOWEVER, that such
Party shall: (a) be excused from such performance only to the extent of such
delay; (b) take good-faith efforts that are commercially reasonable to resume
performance hereunder; and (c) continue performance hereunder with the utmost
dispatch as soon as the cause for such delay is removed. In the event of any
delay attributable to any act or circumstance beyond the control of a Party,
the time for performance affected by such act or circumstance shall be
extended for a period equal to the time lost by reason of such delay. A Party
asserting any excuse for delay or failure of performance of any obligation
under this Section 12.02 shall immediately notify the other Party.
12.03 NON-WAIVER. Schering's failure to exercise or enforce any
right conferred upon it hereunder shall not be deemed to be a waiver of any
such right or any other right or operate to bar the exercise of performance
thereof at any time or times thereafter; nor shall Schering's waiver of any
right hereunder at any time, including right to any payment, be deemed a
waiver thereof for any other time.
12.04 GOVERNING LAW. This Agreement and all issues arising under or
relating to this Agreement, including, without limitation, its construction,
interpretation,
16
<PAGE>
breach, and damages for breach, shall be governed by and construed in
accordance with the laws of the State of New Jersey (without regard to its
conflict of laws principles). Any action, cause of action or dispute arising
under or relating to this Agreement shall be brought only in the courts of
the State of New Jersey or the federal court of the United States, located in
Newark, New Jersey, and each of the Parties expressly consents to personal
jurisdiction in the State of New Jersey, with respect to such action, cause
of action, or dispute.
12.05 ASSIGNMENT AND AMENDMENT. This Agreement, any portion hereof,
or any obligation hereunder shall not be assigned by Distributor except with
the prior written consent of Schering. Neither this Agreement nor any of the
terms hereof may amended, supplemented, waived, or modified except in a
specific writing signed by the Parties; PROVIDED, HOWEVER, that any change in
Distributor's purchase order shall not constitute, or be deemed to
constitute, an amendment, supplement, waiver, or modification of this
Agreement.
12.06 SEVERABILITY. Any provision of this Agreement that may be
finally determined by a court of competent jurisdiction to be invalid or
unenforceable in any jurisdiction in the Territory for any reason shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability, without invalidating or rendering unenforceable any other
provision of this Agreement, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. The Parties shall negotiate in good faith to
replace such provision with an appropriate, legal provision and, to the
extent permitted by law, hereby waive any provision of law that renders any
provision of this Agreement invalid or unenforceable in any respect.
12.07 HEADINGS AND COUNTERPARTS. The division of this Agreement
into sections, the provision of a table of contents, and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original but all of which taken together shall constitute one and the same
instrument.
12.08 NOTICES. All notices required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent
by means of telex, facsimile or other wire transmission (with provision for
assurance of receipt in a manner typical with respect to communications of
that type), or (c) mailed by registered or certified first class mail, return
receipt requested, at the address or facsimile (fax) number set forth below
(or to such other person, address, or facsimile (fax) number as a Party may,
from time to time, designate by written notice):
17
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(i) If to Schering:
Schering-Plough Animal Health Corporation
1095 Morris Avenue
Union, New Jersey 07083
Attention: President
Fax: (908) 629-3103;
(ii) If to Distributor:
-------------------------------------------
-------------------------------------------
-------------------------------------------
Attention:_________________________________
Fax:_______________________________________
12.09 FURTHER ASSURANCES. Each of the Parties shall perform such
acts, execute and deliver such instruments and documents, and do all such
other things as may be reasonably necessary to accomplish the transactions
contemplated under this Agreement.
12.10 INDEPENDENT CONTRACTOR. Nothing contained in this Agreement
shall be construed to constitute either Party as a partner or agent of the
other Party or to create any other form of legal association that would
impose liability upon a Party for any act or omission of the other Party or
provide a Party with the right, power, or authority to create or impose any
duty or obligation on the other Party, it being intended that each Party
shall remain an independent contractor acting in its own name and for its own
account.
12.11 ENTIRE AGREEMENT. This Agreement, together with all Exhibits
hereto, represents and contains the full and complete understanding and
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
statements, clauses, and conditions with respect to the transactions
contemplated by this Agreement or which may be contained in any other form or
document, including, without limitation, Distributors purchase order form.
18
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
duly executed as of the date first above written.
PROFESSIONAL VETERINARY PRODUCTS LIMITED
By: /s/ Dr. Lionel L. Reilly
------------------------
Name: Dr. Lionel L. Reilly
Title: President
SCHERING-PLOUGH ANIMAL HEALTH CORPORATION
By: /s/ Thomas F. Battaglini
------------------------
Name: Thomas F. Battaglini
Title: Vice President, Companion Animal Business Unit
19
<PAGE>
EXHIBIT A
---------
PRICE LIST AND TRADEMARKS
20
<PAGE>
EXHIBIT B
---------
QUARTERLY AND ANNUAL PURCHASE GOALS
21
<PAGE>
EXHIBIT 10.9
DISTRIBUTOR AGREEMENT
between
THE UPJOHN COMPANY
and
---------------------
<PAGE>
Redacted portions have been marked with asterisks (***). Confidential
treatment has been requested for the redacted portions. The confidential
redacted portions have been filed separately with the Securities and Exchange
Commission.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made and entered into the ____ day
of _____________, 19 ___ by and between THE UPJOHN COMPANY, a Delaware
corporation ("Upjohn"), with offices at 7000 Portage Road, Kalamazoo, MI
49001 and ______________ ("Distributor"), a _____________ corporation with
offices at ________________________
WHEREAS, Upjohn is engaged in the business of manufacturing the
products described in Exhibit A attached hereto;
WHEREAS, the Distributor would like to act as Upjohn's distributor
of such products on a nonexclusive basis within the area hereinafter
described;
Now, therefore, in consideration of the promises and agreements
herein set forth, it is agreed as follows:
I. DESIGNATION AS DISTRIBUTOR
1.1 Upon and subject to the terms and conditions contained in this
Agreement, Upjohn hereby designates the Distributor as an authorized
distributor of the products listed and described in Exhibit A attached hereto
and made a part hereof (hereinafter referred to as the "Products"),
throughout the area hereinafter described.
1.2 Distributor hereby agrees that it will distribute and otherwise
undertake to market the Products only within the territory described in Exhibit
B attached hereto and
<PAGE>
made a part hereof (hereinafter referred to as the "Territory") and that it
will make deliveries of the Products only within the Territory and only to
persons located within the Territory whom the Distributor has no reason to
believe may take the Products outside the Territory.
1.3 Distributor shall have no right to distribute the Products to
any person or entity that may further distribute the Products without the
written approval of Upjohn.
II. PURCHASE AND RESALE OF PRODUCTS
2.1 Upjohn hereby grants to the Distributor the right, subject to
the terms and conditions of the Agreement, to purchase the Products from
Upjohn for resale only.
2.2 Upjohn agrees to sell and deliver to the Distributor such
Products as the Distributor may order for purchase, to the extent that Upjohn
has such Products available for sale and accepts such orders. No order
submitted to Upjohn by the Distributor shall become effective unless and
until it is formally accepted by Upjohn.
2.3 Upjohn reserves the right to accept or reject any orders
received by it from the Distributor. All orders and deliveries are subject to
the condition that the Distributor's credit standing is, in the sole judgment
of Upjohn's credit department, acceptable.
III. PRICES AND PAYMENT TERMS
3.1 The prices to be paid by the Distributor for the Products,
purchased for resale, in the absence of a specific arrangement in writing to
the contrary, shall be Upjohn's list prices in effect at the time of
shipment. Prices are subject to change by Upjohn at any time upon written
notice to the Distributor. No change in price shall,
<PAGE>
however, be effective with respect to any orders received from the
Distributor which have been previously accepted by Upjohn.
3.2 Unless otherwise specifically agreed in writing, payment for any
Products purchased by the Distributor shall be made within the time when such
payment is due under Upjohn's standard terms and conditions for sale as in
effect from time to time. In case of any failure by the Distributor in making
payment for the Products shipped hereunder, Upjohn may, at its option, defer
further deliveries until the overdue payments shall have been made and Upjohn
shall be satisfied that payment will be made for further deliveries.
IV. DELIVERY; RISK OF LOSS
4.1 Upjohn shall ship all Products ordered by the Distributor
hereunder in the manner and under the terms specified in Exhibit C attached
hereto and made a part hereof.
4.2 Upjohn will not be responsible for any delays or damages in
shipment occurring after delivery of Products and transfer of title thereto
to Distributor as aforesaid. Distributor will handle the Products strictly in
accordance with Upjohn's shipment instructions.
V. WARRANTIES AND REPRESENTATIONS
5.1 a) Upjohn shall use due care in the manufacture of the Products
sold hereunder in accordance with the provisions of the Federal Food, Drug
and Cosmetic Act (the "Act") and the FDA's Current Good Manufacturing
Practices and other regulations promulgated thereunder relating to the
manufacture of pharmaceutical
<PAGE>
products.
(b) Upjohn hereby acknowledges that no Product constituting or
being a part of any shipment made by Upjohn pursuant hereto shall at the time
of any such shipment be adulterated or misbranded within the meaning of the
Act, or regulations promulgated thereunder, as such law or regulation is
constituted and in effect at the time of any such shipment.
5.2 The foregoing warranty is in lieu of any other warranties,
express or implied, including but not limited to any implied warranties of
merchantability or fitness for a particular purpose. Distributor shall not
bind or purport to bind Upjohn to any affirmation, representation or warranty
with respect to the Products to any third party.
5.3 Upjohn and Distributor will cooperate to handle any complaints
of Distributor's customers in an efficient and cost-effective manner,
PROVIDED that Distributor shall not return any Product to Upjohn without
Upjohn's prior written consent in each instance.
VI. OBLIGATIONS OF DISTRIBUTOR
6.1 Distributor shall maintain a stock of all Products and be able
to deliver 100% of orders within two working days.
6.2 Distributor shall use its best efforts to promote and sell the
Products in the Territory. All advertising, sales promotion and selling costs
shall be the responsibility of Distributor. Further, Distributor agrees to
initiate an incentive program with Distributor's sales and marketing
personnel to encourage promotion of Upjohn's Products. Distributor shall
submit to Upjohn reports of its incentive program on a quarterly basis.
<PAGE>
6.3 Distributor shall be responsible for the shipping and billing on
all orders that are $300 or less. On orders greater than $300, Upjohn shall
be responsible for the shipping and billing to the customer.
6.4 Distributor shall provide Upjohn with sales reports in a form
designated by Upjohn, on a monthly basis, which reports shall include,
without limitation, customer names and addresses, customer contacts, customer
purchases and pricing.
VII. UPJOHN'S ASSISTANCE
7.1 Upjohn will supply to Distributor sales and promotional
materials to assist Distributor in selling or distributing the Products in a
proper manner. Upjohn shall not be responsible for or incur any liability in
connection with any sales or promotional materials not provided by it.
7.2 Upjohn shall provide to Distributor, in its sole discretion,
additional assistance, including qualified personnel to train and monitor
Distributor's sales force in product knowledge, selling skills and Upjohn's
marketing programs.
7.3 Upjohn shall replace all out-dated Products at 80% of Upjohn's
best catalog price at the time of the Products' return.
7.4 UPJOHN'S INCENTIVE PROGRAM
(a) By the last day of each calendar quarter, Upjohn shall pay
Distributor an "incentive payment" for each Product shipped by Distributor
and payment for which was received in full by the Distributor during the
immediately preceding calendar quarter.
<PAGE>
(b) The incentive payment shall be calculated as follows:
1. GROUP IV PRODUCTS
a. Upjohn will pay distributor *% of the sales price for
stocking, shipping and collecting payment for the
Product, plus
b. Upjohn will pay Distributor up to a maximum of *% of
the sales price based on the Distributor's
participation, as determined by Upjohn, in the
activities as described in Exhibit D attached hereto
and made a part hereof.
2. All Other Products
a. Upjohn will pay distributor *% of the sales price
for stocking, shipping and collecting payment for
the Product, plus
b. Upjohn will pay Distributor up to a maximum of *% of
the sales price based on the Distributor's
participation, as determined by Upjohn, in the
activities as described in Exhibit D attached hereto
and made a part hereof.
***Confidential material omitted pursuant to a request for confidential
treatment and filed separately with the Securities and Exchange Commission.
<PAGE>
VIII. TERM AND TERMINATION
8.1 This Agreement shall become effective upon its execution by
both parties hereto by their authorized representatives. Upon execution, this
Agreement shall remain in effect until terminated under the provisions
hereinafter set forth.
8.2 This Agreement may be terminated at any time by mutual consent
of the parties in writing, effective as provided therein, or may be
terminated without cause by either party be giving the other party thirty
(30) days notice, in writing, by registered or certified mail, of such
termination.
IX. REGULATORY MATTERS
9.1 Distributor shall promptly notify Upjohn of, and shall provide
Upjohn with, copies of any correspondence or other documentation received by
or prepared by Distributor in connection with any of the following events:
(a) receipt of a Warning Letter or other regulatory correspondence from the
FDA or any other regulatory authority in connection with the distribution
and/or storage of the Products; (b) any seizure or other regulatory or
enforcement action by the Food and Drug Administration or other regulatory
authority against the Products; or (c) any recall, market withdrawal or field
correction of the Products.
9.2 Distributor shall maintain copies of all complaints received by
it concerning Upjohn's Products and shall promptly provide to Upjohn copies
of all such complaints. Upjohn shall have the sole responsibility for
reporting to the FDA and/or any other regulatory authority all relevant
complaints relating to the Products, including, but not limited to,
complaints relating to adverse drug experience reports.
<PAGE>
9.3 In the event that Distributor's facilities and/or records are
inspected by representatives of any federal, state or local regulatory agency
in connection with Upjohn's Products, Distributor shall notify Upjohn
immediately (by telephone and, if possible, in writing) upon learning of such
inspection, and shall supply Upjohn with copies of any correspondence or
portions of correspondence which relate to such inspection. Upjohn shall have
the right to review and comment on any response, or partial response prior to
submission of the response. After the filing of the response with the
appropriate regulatory authority, Distributor will notify Upjohn of any
further developments relating to the Products, and Distributor shall provide
copies of any documents obtained or received by Distributor from such
regulatory authority which relate to such further developments.
X. PRODUCT RECALLS
10.1 The parties agree that if either party shall discover or become
aware of any fact, condition, circumstance or event (whether actual or
potential) concerning or related to any Products which may reasonably require
recall, market withdrawal, or field correction of the Products, such party
shall promptly communicate such fact, condition, circumstance or event to the
other party within twenty-four (24) hours. In the event that: (a) any
governmental entity or regulatory body requests that any Products be
recalled, (b) a court of competent jurisdiction orders such a recall, or (c)
the parties agree, after consultation with each other, that any of the
Products should be recalled, withdrawn from the market or corrected in the
field, the parties shall take all appropriate remedial actions with respect
to such recall, withdrawal, or field correction of the Products. In the
extent that it is necessary to communicate with any party, including but not
limited to any governmental entity or regulatory body, the media or any
customer of Upjohn, concerning any such fact, condition, circumstance or
event, an Upjohn official shall be
<PAGE>
the primary contact person concerning the remedial action. The party that is
responsible, as determined by an independent testing laboratory or mutually
acceptable FDA consultant, for the fact, consideration, circumstance or event
resulting in the recall, market withdrawal or field correction of the
Products shall bear all expense of notification, including but not limited
to, preparing customer lists and letters, mailing expenses, media notices or
other public announcements and any other necessary notices, and distribution
or return of the recalled, withdrawn, or corrected Product. Distributor shall
maintain, for a period of three years after the termination or expiration of
this Agreement, sufficient records of all sales and distributions of Products
(including but not limited to the names of customers purchasing such product
or the person receiving such distribution of Products) in order to adequately
administer a product recall, market withdrawal, or field correction.
XI. LEGAL COMPLIANCE
11.1 Each-party shall comply with all federal and state laws,
regulations and mandatory guidelines applicable to the content of its
business pursuant to this Agreement, including, but not limited to the
Federal Food, Drug & Cosmetic Act, and the Viruses, Serums, and Toxins Act.
XII. TRADEMARKS AND PROPRIETARY INFORMATION
12.1 Distributor may use Upjohn's trademarks as listed in Exhibit E
attached hereto and made a part hereof (hereinafter referred to as
"Trademarks") on a non-exclusive basis during the term of this Agreement in
the Territory solely for display, promotional and advertising purposes in
connection with the sale and distribution of the Products as permitted
hereunder. No other use of the Trademarks is permitted without Upjohn's prior
written permission.
<PAGE>
12.2 Distributor shall identify prominently each Product by the
Trademark or Trademarks specified by Upjohn for such Product.
12.3 Distributor shall use the Trademarks so as to assure their
continued validity and enforceability. Distributor shall use the Trademarks
in strict compliance with the provisions of all applicable laws and
regulations.
12.4 No trademarks or trade names other than the Trademarks shall be
affixed to any Product.
12.5 Each party hereto understands that in connection with its
performance under this Agreement, it may receive from the other party certain
of the other party's confidential and proprietary technical or commercial
information and trade secrets, including information concerning the Products
and other products, the other party's sales, promotional and pricing
policies, plans for product development or marketing, sources of supply,
manufacturing processes and techniques, formula and raw materials. Each party
will treat as confidential and proprietary any information not protected by
patent or copyrights, and will not disclose such information to any third
party without the other party's prior written consent. Furthermore, the
receiving party will take all steps necessary to ensure that all persons to
whom such information is disclosed in the course of its performance of this
Agreement will treat such information as confidential and proprietary and
will not disclose such information to third parties.
12.6 No rights or licenses with respect to patents, Proprietary
Information, trademarks or trade names are granted or deemed granted
hereunder or in connection herewith, other than those rights expressly
granted in this Agreement.
<PAGE>
XIII. GENERAL PROVISIONS
13.1 The Distributor is not an agent of Upjohn, and nothing herein
or performed hereunder shall be represented or construed as constituting the
Distributor an agent of Upjohn. The Distributor shall have no authority to
make any representation, guarantee or warranty (except such as are set forth
in any printed warranties furnished with the Products or otherwise authorized
by Upjohn), commitment or agreement on behalf of Upjohn or to assume or incur
any liability or indebtedness on Upjohn's behalf, or to bind Upjohn under any
obligation whatever. Upjohn shall not be liable for any act or failure to act
by the Distributor, its agents, salesmen, assistants or other employees. The
Distributor agrees to indemnify Upjohn and hold it harmless from any and all
claims resulting from violation of this paragraph or resulting from any
activity of the Distributor, its agents, salesmen, assistants or other
employees.
13.2 Neither this Agreement nor any rights hereunder shall be
assigned or transferred by the Distributor without the written consent of
Upjohn.
13.3 Upjohn shall in no event be liable for indirect, special or
consequential damages or for lost profits on any claim of any kind resulting
from any order hereunder, or from any performance or breach of this Agreement.
13.4 None of the conditions or provisions of this Agreement shall be
held to have been waived by any act or knowledge on the part of either party,
except by an instrument in writing signed by a duly authorized officer or
representative of such party. Further, the waiver by either party of any
right hereunder or the failure to enforce at any time any of the provisions
of this Agreement, or any rights with respect thereto, shall not be deemed to
be a waiver of any other rights hereunder or any breach or failure of
performance of the other party.
<PAGE>
13.5 Any notice required or contemplated by this Agreement shall be
in writing, delivered by registered or certified mail, addressed to the
parties at their addresses hereinabove set forth, or at such other addresses
as may from time to time be substituted thereof or by notice in writing sent
by the party changing its address.
13.6 This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Michigan, United States of America.
13.7 If any provision of this Agreement shall in any way become
violative or prohibited by or under the valid applicable laws, judgments,
decrees or public policy of any state or jurisdiction, said provision or part
thereof shall be, as to said jurisdiction, ineffective and void to the extent
of such violation or prohibition without invalidating any of the remaining
provisions of this Agreement.
13.8 Distributor represents and warrants to Upjohn that this
Agreement constitutes the legal, valid and binding obligation of Distributor,
enforceable against Distributor in accordance with its terms. Upjohn
represents and warrants to Distributor that this Agreement constitutes the
legal, valid and binding obligation of Upjohn, enforceable against Upjohn in
accordance with its terms.
13.9 This Agreement and all exhibits attached hereto set forth the
entire understanding between the parties as to the subject matter hereof and
incorporates herein and supersedes all prior and collateral representations
and agreements by or between the parties. Any and all prior franchise,
dealership, distributorship or representation agreements, commitments or
understandings which may have been entered into by the parties are hereby
terminated and superseded hereby and any and all claims for violations or
breach thereunder are hereby disavowed and released.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized agents to sign this Agreement as of the first date written above.
THE UPJOHN COMPANY
-----------------------------
By: By:
------------------------- -------------------------
Name: Name:
----------------------- -----------------------
Title: Title:
---------------------- ----------------------
<PAGE>
EXHIBIT A
THE UPJOHN COMPANY
PRODUCTS
GROUP IV PRODUCTS
ALL OTHER PRODUCTS
<PAGE>
EXHIBIT B
THE UPJOHN COMPANY
TERRITORY
Fifty (50) United States and the District of Columbia
<PAGE>
EXHIBIT C
THE UPJOHN COMPANY
TERMS OF DELIVERY
<PAGE>
EXHIBIT D
THE UPJOHN COMPANY
ACTIVITY-BASED INCENTIVE PROGRAM
1. Conduct telemarketing programs identified and described by Upjohn;
2. Provide Upjohn with market and brand support;
3. Initiate and complete promotional mailings;
4. Conduct in-store advertising and marketing programs;
5. Conduct merchandising programs;
6. Provide incentives to Distributor's sales personnel to promote sales of
Upjohn Products; and
7. Assign an employee dedicated to handling Upjohn's business, including,
but not limited to, promotions, reporting, goal setting, problem solving
and communications with Upjohn and customers.
<PAGE>
EXHIBIT E
THE UPJOHN COMPANY
TRADEMARKS
<PAGE>
THE UPJOHN COMPANY
PRICING POLICY
The Upjohn Company ("Upjohn") believes that excessive discounting of its
products jeopardizes brand integrity and defeats advertising and marketing
goals. Accordingly, under Upjohn's Pricing Policy, Upjohn will terminate its
business relationship with any Distributor who advertises or sells any Upjohn
product at a price below the suggested retail price for the products on
Upjohn's most current price list. In addition, Upjohn will terminate its
business relationship with any Distributor who provides rebates or other
forms of price reductions on Upjohn products such that the price is below the
suggested retail price on Upjohn's most current price list.
The Pricing Policy reflects the unilateral action of Upjohn and is subject to
modification within Upjohn's sole discretion. Upjohn does not seek, nor will
it accept, a Distributor's agreement to the Pricing Policy. Each Distributor
must make its own independent decision as to how to advertise and to sell
Upjohn products, including deciding at what price to sell Upjohn products.
Issued: September, 1995
<PAGE>
EXHIBIT 10.10
DISTRIBUTION AGREEMENT
DATED April 1,1996
BETWEEN
"DISTRIBUTOR" "FORT DODGE"
PROFESSIONAL VET PRODUCTS FORT DODGE ANIMAL HEALTH
10100 J Street AND Division of American Home
Omaha, Nebraska 68127 Products Corporation
9401 Indian Creek Parkway,
Suite 1500
Overland Park, Kansas 66225
FORT DODGE and DISTRIBUTOR hereby agree as follows:
PART I. THE DISTRIBUTORSHIP: PRODUCTS, TERRITORY, DURATION
1. APPOINTMENT OF DISTRIBUTOR. FORT DODGE hereby appoints
DISTRIBUTOR as a distributor of the PRODUCTS subject to the terms and
conditions of this Agreement. DISTRIBUTOR hereby accepts that appointment and
agrees to use its best efforts to promote and sell the PRODUCTS. Nothing in
this Agreement shall mean that DISTRIBUTOR has an exclusive right to sell
PRODUCTS.
2. TERM. This Agreement shall expire December 31, 1996. At the sole
option of FORT DODGE, it may be renewed for subsequent terms of one (1) year
each commencing January 1 and expiring the following December 31, by a
written renewal executed by both parties.
PART II. SUPPLY OF PRODUCTS
3. PURCHASE AND SALE. FORT DODGE agrees to sell, and the DISTRIBUTOR
agrees to purchase the PRODUCTS which the DISTRIBUTOR may reasonably request
by written order. At the option of FORT DODGE, DISTRIBUTOR agrees to pay for
all PRODUCTS ordered by DISTRIBUTOR's subsidiaries, branches, and/or
divisions from FORT DODGE during the term hereof in accordance with the
payment terms referred to in PARAGRAPH 7. FORT DODGE's Prices, Policies and
Terms in effect at the time of receipt by FORT DODGE of DISTRIBUTOR's order
shall govern such order. Such Prices, Policies and Terms may be changed by
FORT DODGE from time to time. The current prices for the PRODUCTS are set
forth in FORT DODGE's current Prices, Policies and Terms, attached hereto as
Exhibit A.
<PAGE>
4. MINIMUM PURCHASE AND ORDER REQUIREMENTS. (a) DISTRIBUTOR agrees
to meet the minimum purchase and order requirements set forth in FORT DODGE's
Prices, Policies and Terms, as issued by FORT DODGE from time to time.
(b) FORT DODGE shall not be required to fill any order from the
DISTRIBUTOR which calls for delivery sooner than FORT DODGE's then current
delivery schedule, nor shall FORT DODGE be obligated to fill any order from
the DISTRIBUTOR or its subsidiaries, divisions, or branches if payment for
any PRODUCTS previously ordered by DISTRIBUTOR is then past due. All orders
by DISTRIBUTOR calling for delivery sooner than FORT DODGE's then current
delivery schedule shall be subject to acceptance in writing by FORT DODGE.
5. INVENTORY. If applicable, DISTRIBUTOR agrees to maintain at all
times an inventory of each PRODUCT sufficient to satisfy the reasonably
anticipated needs of its customers. DISTRIBUTOR shall not transfer or transship
any PRODUCTS to or among its subsidiaries, division(s), or branches without the
prior written consent of FORT DODGE.
6. DELIVERY. (a) If applicable, FORT DODGE shall pay freight and
insurance on shipments of PRODUCTS, to the extent provided in the FORT DODGE's
Prices, Policies and Terms, as issued by FORT DODGE from time to time. Title to
and risk of loss on the PRODUCTS shall pass to the DISTRIBUTOR upon delivery of
the PRODUCTS to the destination specified in the bill of lading. FORT DODGE
shall determine the carrier, method of transportation and routing of all
shipments. If the DISTRIBUTOR requests routes or methods other than those chosen
by FORT DODGE, FORT DODGE will try to comply with the DISTRIBUTOR's instructions
and may add to the invoice the additional cost of shipping via the route or
method requested by the DISTRIBUTOR.
(b) DISTRIBUTOR's locations approved for shipment by FORT DODGE
are listed on Exhibit B. Additional locations may be added, subject to FORT
DODGE's prior approval.
(c) At the request of FORT DODGE, DISTRIBUTOR shall provide
written notice with additional updates as necessary to FORT DODGE of the area
of its sales coverage and markets served.
7. PAYMENT TERMS. Payment for orders of PRODUCTS shall be made in
accordance with FORT DODGE's then current Prices, Policies and Terms.
8. ALLOCATION OF PRODUCTS IN SHORT SUPPLY. Notwithstanding any other
provisions of this Agreement, FORT DODGE reserves the right at any time to
allocate its supplies of any particular PRODUCT(S) among its customers in
proportion to their orders, or otherwise partially fill their orders,
whenever such PRODUCT(S) are back ordered or otherwise not available for sale
in sufficient quantity to meet all orders then
<PAGE>
on hand. Whenever FORT DODGE is required to make delivery in full by a date
certain, FORT DODGE's exercise of its rights under this paragraph shall
excuse its failure to make full delivery by such date.
PART III. PROMOTION AND MARKETING; SERVICE AND TRAINING
9. COOPERATIVE PROMOTIONAL AND MARKETING EFFORTS. A key feature of
this AGREEMENT is the shared commitment of FORT DODGE and the DISTRIBUTOR to
promote and market the PRODUCTS in order to maintain the PRODUCTS' high
reputation, utilize all appropriate avenues for distribution, and maximize
sales. DISTRIBUTOR agrees to use its best efforts to promote and increase
sales and market share of the PRODUCTS. As part of its efforts, DISTRIBUTOR
shall include the PRODUCTS in its regular sales promotion and shall submit to
FORT DODGE copies of its internal bulletins, instructions and announcements
to demonstrate that this promotional activity has been accomplished.
DISTRIBUTOR agrees to abide by all applicable governmental regulations
relating to the advertising and promotion of the Products. DISTRIBUTOR shall
establish adequate sales, warehousing and delivery facilities for the
PRODUCTS. DISTRIBUTOR agrees to employ a sufficient number of trained sales
representatives to solicit at regular intervals as volume warrants, by its
customary methods of phone and/or personal solicitation, sell and provide
good service to DISTRIBUTOR's customers. DISTRIBUTOR shall also seek new
customers for the PRODUCTS.
10. COMMISSIONS PAID. The DISTRIBUTOR agrees to provide each of
their sales representatives with a listing of all monies and rebates
specified for commissions and Market Development Funds provided by FORT
DODGE. In addition, DISTRIBUTOR agrees to provide their inside and outside
sales representatives a summary of commissions paid on the sale of FORT DODGE
PRODUCTS. This shall include both commission monies specified by FORT DODGE
as well as commissions, contest and bonus monies paid to the sales
representative based on the DISTRIBUTOR's compensation program. The summary
shall be supplied to each individual sales representative in writing a
minimum of each quarter.
11. SALES BY DISTRIBUTOR TERRITORY. The DISTRIBUTOR agrees to supply
in writing on a quarterly basis actual sales of FORT DODGE PRODUCTS for each
DISTRIBUTOR sales territory.
12. SALES REPORTING. The DISTRIBUTOR agrees to report to FORT DODGE
sales of FORT DODGE PRODUCTS by DISTRIBUTOR on a monthly basis in the format
attached hereto as Exhibit C or such similar format as may be requested by
FORT DODGE from time to time. This information will not be disclosed to any
other distributor by FORT DODGE. This information will enable FORT DODGE to
administer sales promotions and programs for customers buying FORT DODGE
PRODUCTS.
<PAGE>
13. SALES MEETING. DISTRIBUTOR shall notify FORT DODGE at least
thirty (30) days prior to DISTRIBUTOR's regularly held sales meetings and
shall afford FORT DODGE the opportunity to reasonably participate in such
meetings.
14. INVENTORY AUDIT. Upon reasonable notice and during regular
business hours, FORT DODGE shall have the right to take an actual inventory
of FORT DODGE PRODUCTS at DISTRIBUTOR's locations twice per year.
PART IV. PRODUCT RETURNS AND CLAIMS
15. RETURNS TO DISTRIBUTOR. The DISTRIBUTOR may accept returns of
any PRODUCT from its customers for resale by DISTRIBUTOR provided that: (i)
such goods are returned in new and resalable condition to the DISTRIBUTOR in
the original unopened packages; and (ii) such packages are clean, properly
labeled, and unmarked, and, generally, are in "new", immediately salable
condition, and not out-dated. (The term "original unopened package" means the
unopened container in which FORT DODGE has placed both the package insert, if
any, and the bottle, vial, box or other receptacle itself containing the
medication).
16. DISTRIBUTOR CANNOT AUTHORIZE RETURNS. The DISTRIBUTOR agrees
that it is not empowered to and shall not authorize its customers to return
PRODUCTS to FORT DODGE for credit or charge.
17. RETURNS TO FORT DODGE. The DISTRIBUTOR shall inspect the
PRODUCTS within three (3) working days after delivery to the destination
specified in the bill of lading and shall immediately notify FORT DODGE and
the carrier of any shortages, defects or failure of the PRODUCTS to conform
to the order. Failure of DISTRIBUTOR to inspect and notify FORT DODGE within
three (3) working days shall constitute an irrevocable acceptance of the
goods. If the DISTRIBUTOR so notifies FORT DODGE within three (3) working
days, the DISTRIBUTOR may, and shall upon FORT DODGE's request, return to
FORT DODGE at the latter's expense all PRODUCTS which are defective or do not
conform to the order. The DISTRIBUTOR shall not resell any PRODUCTS it finds
or claims to be defective. DISTRIBUTOR shall send FORT DODGE an itemized list
of the PRODUCTS returned, dated as of the date of delivery by DISTRIBUTOR to
carrier for reshipment to FORT DODGE. Returns of outdated PRODUCTS to FORT
DODGE shall be subject to the terms of FORT DODGE's Prices, Policies and
Terms in effect on the date of return.
The remedies set forth in this paragraph 17 shall be the only
remedies of DISTRIBUTOR with respect to (i) defects in any of the PRODUCTS
found or claimed on DISTRIBUTOR's inspection, (ii) failure of any of the
PRODUCTS to conform to DISTRIBUTOR's order, and (iii) outdated PRODUCTS.
18. WARRANTY. FORT DODGE WARRANTS THAT THE PRODUCTS SOLD TO
DISTRIBUTOR UNDER THIS AGREEMENT SHALL CONFORM WITH THE DESCRIPTION CONTAINED
IN THE LABELING THEREFOR. FORT DODGE MAKES
<PAGE>
NO WARRANTY AS TO MERCHANTABILITY OR THE FITNESS OF THE PRODUCTS FOR A
PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED, WHICH EXTENDS
BEYOND THE DESCRIPTION CONTAINED IN THE LABELING OF THE PRODUCTS. DISTRIBUTOR
ASSUMES ALL RISK AND LIABILITY FOR LOSS OR DAMAGE RESULTING FROM
DISTRIBUTOR's IMPROPER HANDLING, STORAGE OR USE OF THE PRODUCTS PURCHASED
UNDER THIS AGREEMENT, WHETHER USED SINGLY OR IN COMBINATION WITH OTHER
MATERIAL.
19. CLAIMS. No claim of any kind by DISTRIBUTOR, whether as to the
PRODUCTS delivered or delays or non-delivery of PRODUCTS or otherwise, shall
be for more than the purchase price of that portion of the PRODUCTS for which
such claim is made. Notwithstanding anything in this Agreement to the
contrary, FORT DODGE shall not be liable to DISTRIBUTOR for loss of profit or
use, or incidental or consequential damages, whether such liability is based
or claimed to be based upon contract, tort, or any other cause whatsoever.
PART V. DISTRIBUTOR STATUS AND RIGHTS
20. DISTRIBUTOR STATUS. DISTRIBUTOR is, and at all times shall be,
an independent contractor. Nothing contained in this Agreement or otherwise
shall be construed as constituting the DISTRIBUTOR as the partner, agent or
employee of FORT DODGE or as authorizing the DISTRIBUTOR to create or assume
any obligation or liability in the name of, or on behalf of, FORT DODGE or to
subject FORT DODGE to any obligation or liability to any third person or
entity.
21. TRADE SECRETS. FORT DODGE may, but need not, from time to time,
give DISTRIBUTOR technical or non-technical information ("Confidential
Information") not generally known to the trade or public, including without
limitation information relating in any way to customers, PRODUCTS,
techniques, technological methods, prospective new PRODUCTS, research
programs or areas, and processes and services of FORT DODGE. DISTRIBUTOR
agrees that, during the term of this Agreement and thereafter, it will not
disclose to any third person in any manner whatsoever (except as authorized
in writing in advance by FORT DODGE) any Confidential Information so long as
such information is not generally known to the trade or public.
22. AUTHORIZED DISTRIBUTOR. (a) DISTRIBUTOR may indicate in its
advertising that it is an authorized FORT DODGE distributor of PRODUCTS, but
the DISTRIBUTOR shall not use as or in its name or assumed name FORT DODGE,
or any name which is the same as, or which is likely to cause confusion or
mistake with, any corporate or assumed name of FORT DODGE or of any of FORT
DODGE subsidiaries affiliates.
(b) All trademarks used or designated by FORT DODGE shall be
displayed by the DISTRIBUTOR, without alteration on all PRODUCTS bearing any
such
<PAGE>
trademark sold by FORT DODGE for resale by the DISTRIBUTOR, and all use of
such trademarks shall inure to FORT DODGE's benefit or that of AHP.
(c) Any copyright of FORT DODGE or AHP which may be created in
any article, package design, label, or the like, whether or not bearing any
trademark of FORT DODGE or of AHP shall be the property of FORT DODGE or AHP
as the case may be. The DISTRIBUTOR shall not use any trademark, brand or
trade dress which is the same as, or which is likely to cause confusion or
mistake with any trademark, brand or trade dress of FORT DODGE or of AHP,
except that the trademarks, brands and trade dress, or any of the foregoing,
used or designated by FORT DODGE, may be used in connection with the
promotion, sale, display or advertising of PRODUCTS bearing the same.
23. SECURITY AGREEMENT. DISTRIBUTOR hereby grants to FORT DODGE a
security interest on all PRODUCTS in DISTRIBUTOR's custody and control under
this Agreement and agrees to allow FORT DODGE to execute a standard form
financing statement with a copy of this Agreement to be filed with
appropriate state and local government offices, and further agrees that no
PRODUCTS will become subject to liens or other security interests or
encumbrances as a result of this Agreement or otherwise.
PART VI. TECHNICAL PROVISIONS
24. DEFINITIONS. (a) "AFFILIATE" means any corporation or other
business entity controlling, controlled by, or under common control with
AMERICAN HOME PRODUCTS CORPORATION, and control means the direct or indirect
beneficial ownership of fifty percent or more of the voting interest in, or a
fifty percent or greater interest in the income of AMERICAN HOME PRODUCTS
CORPORATION, such corporation or other business entity, or such other
relationship as constitutes actual control.
(b) "PRODUCTS" mean the FORT DODGE ANIMAL HEALTH animal health
products listed on Exhibit D, as said Exhibit may be amended from time to
time by FORT DODGE.
(c) "AHP" means, collectively, American Home Products
Corporation and its AFFILIATES.
25. TERMINATION. This Agreement may be terminated by either party
with or without cause at any time upon thirty (30) days' prior written notice
to the other party. In addition to its other rights, FORT DODGE shall have
the right, exercisable at any time by written notice to the DISTRIBUTOR and
without incurring any liability to the DISTRIBUTOR, to terminate this
Agreement as of the date of such notice upon the breach of this Agreement by
DISTRIBUTOR or the happening of any of the following events:
<PAGE>
(a) the failure of the DISTRIBUTOR to meet the minimum purchase
or order requirements set forth in FORT DODGE's Prices,
Policies and Terms, as issued by FORT DODGE from time to
time;
(b) default by the DISTRIBUTOR in complying with the provisions
requiring "best efforts" set forth in paragraphs 1 and 9,
provisions relating to prompt payment and creditworthiness
set forth in paragraphs 3 and 7, or any other provision of
this Agreement;
(c) the failure of DISTRIBUTOR to service the majority of its
customers PRODUCTS for a period of more than four (4) weeks
for any reason;
(d) death, dissolution, or termination of existence of the
DISTRIBUTOR;
(e) insolvency of the DISTRIBUTOR;
(f) an assignment for the benefit of creditors by the
DISTRIBUTOR;
(g) appointment of a trustee or receiver for any part of the
DISTRIBUTOR's property;
(h) filing by or against the DISTRIBUTOR of any petition in
bankruptcy or under any of the provisions of the Bankruptcy
Act;
(i) entry of any judgment against the DISTRIBUTOR which remains
undischarged or unbonded of record for thirty (30) days; or
(j) attachment of or levy against any of the DISTRIBUTOR's
property by any judicial officer which is not discharged
within thirty (30) days thereafter.
Termination of this Agreement for any reason or termination of any
DISTRIBUTION Agreement that FORT DODGE may have with a subsidiary, division,
or branch of DISTRIBUTOR, shall be without prejudice to FORT DODGE's rights
to any amounts then owing by the DISTRIBUTOR under this Agreement.
26. FORCE MAJEURE. Neither party shall be liable to the other by
reason of any failure or delay in performance of any provision of this
Agreement, nor shall such failure or delay give the other party any right to
terminate this Agreement (except for changes in control of DISTRIBUTOR) if
such failure or delay is due to any event (other than financial) beyond the
reasonable power of the party failing or delaying to perform. Without
limiting the generality of the foregoing sentence, governmental action,
inability to obtain supplies, material, labor or transportation, and strikes,
boycotts, lockouts and labor disputes shall all be conclusively deemed beyond
the reasonable power of the party failing or delayed a thereby, even though
that party might be able to obviate such failure or delay by agreeing to
terms proposed by government, suppliers, carriers, employees or their
bargaining representatives, labor disputants, or other third parties.
<PAGE>
27. ASSIGNMENT AND CHANGE OF CONTROL OF DISTRIBUTOR. Neither this
Agreement nor any rights hereunder are assignable, transferable, or delegable
by the DISTRIBUTOR without the prior written consent of FORT DODGE.
Furthermore, upon thirty (30) days' written notice to the DISTRIBUTOR, FORT
DODGE shall have the right to terminate this Agreement if there is a change,
to any extent or however occurring, in the ownership of DISTRIBUTOR's
business or in the direct or indirect control or management of DISTRIBUTOR.
28. GOVERNING LAW. The validity and interpretation of this Agreement
shall be governed by the laws of the State of New Jersey, exclusive of choice
of law rules.
29. NOTICES. Any notice required or permitted by the terms of this
Agreement shall be given by telegram or by registered mail, prepaid and
properly addressed, or delivered by hand to FORT DODGE or DISTRIBUTOR at its
address set forth in this Agreement or at such other address as either party
hereto may designate by notice given as provided herein. If mailed, any such
notice shall be deemed to have been given when mailed, and if delivered by
hand, when received.
30. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof, and
supersedes all prior writings and discussions relating to such subject matter.
31. MODIFICATION; WAIVER. This Agreement may be modified, amended,
or waived only by a written instrument signed by both parties or, in the case
of a waiver, by the party waiving compliance. The failure of either party to
insist upon or enforce strict performance by the other party of any
provisions of this Agreement or to exercise any right under this Agreement
shall not be construed as a waiver or relinquishment of its right to assert
or rely upon such provision or right in that or any other instance.
32. CAPTIONS. The captions of the paragraphs herein and the pages of
this booklet (other than the pages on which this Agreement appears) are for
convenience of reference only and shall not be deemed parts of this
Agreement, nor shall they have any effect on the meaning or interpretation of
any of the provisions of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PROFESSIONAL VET PRODUCTS FORT DODGE ANIMAL HEALTH
10100 J Street A Division of American Home
Omaha, Nebraska 68127 Products Corporation
By: /s/ Dr. Lionel L. Reilly By: /s/ David Sandvig
------------------------ --------------------------------
President Sr. Vice President, Marketing &
Sales
- -------------------------
* All terms in SOLID CAPITAL LETTERS are defined in Paragraph 24+.
+ All Paragraph references are references to Paragraphs of this Agreement.
<PAGE>
Exhibit A
FORT DODGE ANIMAL HEALTH
Prices, Policies and Terms
January 1, 1996
QUANTITIES
All items will be shipped in case lots only. All products, except mastitis
products, may be assorted for quantity discounts in unbroken cases only.
TERMS
Payment due within 10 days of the month following date of invoice. No
shipments will be made to accounts with past due balances of 60 days or more.
TRANSPORTATION
Orders totaling $500.00 or more will be shipped prepaid via the carrier of
our selection (excluding accessorial delivery and detention charges). The
title of all goods sold shall pass to the purchaser upon delivery of the
goods to the carrier.
DAMAGE IN TRANSIT
In the event of loss or damage, the distributor should mark the receiving
documents appropriately and initiate a claim and Fort Dodge Animal Health
will assist in claim filing.
RETURN OF MERCHANDISE
1. Credit or exchange of returned merchandise will be issued only to the
original purchaser.
2. Outdated merchandise in unmarked and unopened containers may be
returned if within 120 days of expiration. Merchandise outdated more
than 120 days will not qualify for exchange or credit.
3 All returns must be authorized in writing. Complete a "Merchandise
Return Request" form and forward to Fort Dodge Animal Health for
authorization.
4. Returns will be accepted only if shipped prepaid and a "returned
goods" label is used. The return goods label will be supplied with
the approved merchandise return request. Do not return merchandise
prior to receiving proper authorization.
<PAGE>
5. Merchandise approved for return will be replaced with like
product(s) or product(s) of equal value. If the distributor prefers,
a credit memo will be issued at 50% of the current lowest listed
price.
6. Defective merchandise or shipments made in error may be returned for
full invoice price provided that Fort Dodge Animal Health is notified
within two weeks of date of shipment.
7. All merchandise returned becomes the property of Fort Dodge Animal
Health.
8. Merchandise NOT acceptable for exchange or credit
a) Unauthorized returns e) Discontinued items
b) Opened containers f) Products designated with a star(*)
c) Containers marked or g) Instruments and supplies
disfigured in any way h) Sleepaway
d) Special sale items
9. Products returned to distributor due to mis-shipments, will not be
accepted for replacement by Fort Dodge Animal Health.
PRESCRIPTION PRODUCTS
Rx identifies prescription products bearing the legend "Restricted to use by
or under the direction of a licensed veterinarian."
DEA SCHEDULE II PRODUCTS
ORDERING OF SLEEPAWAY
1. Fort Dodge Animal Health must have a copy of the distributor's
current Federal DEA Registration Certificate.
2. Fort Dodge Animal Health must have received a properly completed DEA
Order Form 222.
3. Sleepaway must be shipped to address on order form 222 (which must
correspond exactly to current Federal DEA Registration).
4. Sleepaway orders will be handled a separate orders.
5. Sleepaway is non-returnable.
DEA SCHEDULE III PRODUCTS
ORDERING OF TELAZOL
<PAGE>
1. Before an order for Telazol can be shipped, Fort Dodge Animal Health
must have a copy of your current DEA Registration Certification on
file. Telephone confirmation is not acceptable.
2. Telazol will only be shipped to the address shown on the
certificate.
3. Telazol orders will be handled as separate orders.
RETURNING OF TELAZOL
I. Telazol may be returned in accordance with the terms stated in the
most current Fort Dodge Distributor price list.
2. You are to inform Fort Dodge that you wish to return Telazol by
submitting a completed Fort Dodge Merchandise Return Request Form.
Please use a separate form for Telazol.
3. Upon receipt and verification, the approved form along with a return
label addressed to Fort Dodge Animal Health, DEA Return, 800 5th St.
NW, Fort Dodge, IA 50501 will be sent to you.
4. Please do not include other products with the returned Telazol. The
return label MUST be used.
5. The Fort Dodge DEA registration number will be stated on the
Merchandise Return Form so you will be able to transfer the product
from your inventory to Fort Dodge.
6. If you receive product that is broken in shipment, the broken
container and its label are to be returned to Fort Dodge following
the instructions as described.
<PAGE>
Exhibit B
Distribution Locations
Professional Vet Products -- Omaha, NE
<PAGE>
Exhibit C
ACCOUNT INFO
(Sorted in Zip Order)
<TABLE>
<CAPTION>
Current Month YTD
Doses Sold Doses Free Dollars Doses Sold Doses Free Dollars
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
SMALL ANIMAL BIOS
Product Name xxx xxx.xx xxx xxx.xx
Product Name xx Xx xxx.xx xxx xx xxx.xx
Product Name xxx xxx.xx xxx xxx.xx
---- ---- ------ ---- --- ----
TOTAL xxx Xx x,xxx.xx xxx xx x,xxx.xx
EQUINE BIOS
Product Name xxx xxx.xx xxx xxx.xx
Product Name xx Xx xxx.xx xxx xx xxx.xx
Product Name xxx xxx.xx xxx xxx.xx
---- ---- ----- ---- --- ----
TOTAL xxx Xx x,xxx.xx xxx xx x,xxx.xx
LIVESTOCK BIOS
Product Name xxx xxx.xx xxx xxx.xx
Product Name xx Xx xxx.xx xxx xx xxx.xx
Product Name xxx xxx.xx xxx xxx.xx
---- ---- ----- ---- --- ----
TOTAL xxx Xx x.xxx.xx xxx xx x.xxx.xx
COMPANION ANIMAL PHARMACEUTICALS (Units)
Product Name xxx xxx.xx xxx xxx.xx
Product Name xx Xx xxx.xx xxx xx xxx.xx
Product Name xxx xxx.xx xxx xxx.xx
---- ---- ---- ---- --- ----
TOTAL xxx Xx x,xxx.xx xxx xx x,xxx.xx
LIVESTOCK PHARMACEUTICALS (Units)
Product Name xxx xxx.xx xxx xxx.xx
Product Name xx Xx xxx.xx xxx xx xxx.xx
Product Name xxx xxx.xx xxx xxx.xx
---- ---- ---- ---- ---- ----
TOTAL xxx Xx x,xxx.xx xxx xx x,xxx.xx
</TABLE>
<PAGE>
DISTRIBUTOR SUMMARY
(Movement and Free Goods)
<TABLE>
<CAPTION>
Current Month YTD
Doses Sold Doses Free Dollars Doses Sold Doses Free Dollars
---------- ---------- ------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
SMALL ANIMAL BIOS
Product Name xx,xxx xxx x,xxx.xx xx,xxx. xxx xx,xxx.xx
Product Name xx,xxx xxx x,xxx.xx x,xxx xx xx,xxx.xx
Product Name x,xxx x,xxx.xx x,xxx xxx x,xxx.xx
----- ---- ------ ----- ---- ------
TOTAL xxx,xxx x,xxx xxx,xxx.xx xx,xxx xxxx xxx,xxx.xx
EQUINE BIOS
Product Name xx,xxx xxx x,xxx.xx xx,xxx xxx xx,xxx.xx
Product Name xx,xxx xxx x,xxx.xx x,xxx xx xx,xxx.xx
Product Name x,xxx x,xxx.xx x,xxx xxx x,xxx.xx
----- ---- ----- ---- --- -----
TOTAL xxx,xxx x,xxx xxx,xxx.xx xx,xxx xxxx xxx,xxx.xx
LIVESTOCK BIOS
Product Name xx,xxx xxx x,xxx.xx xx,xxx xxx xx,xxx.xx
Product Name xx,xxx xxx x,xxx.xx x,xxx xx xx,xxx.xx
Product Name x,xxx x,xxx.xx x,xxx xxx x,xxx.xx
----- ---- ----- ---- --- -----
TOTAL xxx,xxx x,xxx xxx,xxx.xx xx,xxx xxxx xxx,xxx.xx
COMPANION ANIMAL PHARMACEUTICALS (Units)
Product Name xx,xxx xxx x,xxx.xx xx,xxx xxx xx,xxx.xx
Product Name xx,xxx xxx x,xxx.xx x,xxx xx xx,xxx.xx
Product Name x,xxx x,xxx.xx x,xxx xxx x,xxx.xx
----- ---- ----- ---- --- -----
TOTAL xxx,xxx x,xxx xxx,xxx.xx xx,xxx xxxx xxx,xxx.xx
LIVESTOCK PHARMACEUTICALS (Units)
Product Name xx,xxx xxx x,xxx.xx xx,xxx xxx xx,xxx.xx
Product Name xx,xxx xxx x,xxx.xx x,xxx xx xx,xxx.xx
Product Name x,xxx x,xxx.xx x,xxx xxx x,xxx.xx
---- ---- ----- ---- --- -----
TOTAL xxx,xxx x,xxx xxx,xxx.xx xx,xxx xxxx xxx,xxx.xx
</TABLE>
<PAGE>
Exhibit D
Products
Fort Dodge Animal Health (complete line)
- Fort Dodge line including Synovex, Synanthic Agency
<PAGE>
EXHIBIT 11.1
PROFESSIONAL VETERINARY PRODUCTS, LTD.
Statement re Computation of Per Share Earnings
The following table sets forth the computation of basic earnings per
share:
<TABLE>
<CAPTION>
- --------------------------------------- -------------------- -------------------- --------------------- --------------------
July 31, 1998 July 31, 1997 April 30, 1999 April 30, 1998
- --------------------------------------- -------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
Numerator:
Net income 101,543 46,030 591,282 919,225
- --------------------------------------- -------------------- -------------------- --------------------- --------------------
Denominator:
Basic common shares
outstanding 1,048 966 1,118 1,020
- --------------------------------------- -------------------- -------------------- --------------------- --------------------
Basic earnings per share 96.89 47.65 528.87 901.20
- --------------------------------------- -------------------- -------------------- --------------------- --------------------
</TABLE>
<PAGE>
EXHIBIT 12.1
PROFESSIONAL VETERINARY PRODUCTS, LTD.
Computation of Ratio of Earnings to Fixed Charges
For the Nine Months Ended April 30, 1999 and April 30, 1998
and For the Five Years Ended July 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------- --------------------------- ------------ ----------------------------
Fiscal Years Ended Third Quarter
Ended
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
July 31 July 31 July 31 July 31 July 31 April 30 April 30
1994 1995 1996 1997 1998 1999 1998
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
1) Income before $145,840 101,786 74,006 76,766 174,983 986,514 1,518,771
income taxes
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
2) Plus interest 47,286 105,631 148,291 208,407 244,111 223,178 204,085
expense
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
3) Earnings available 193,126 207,417 222,297 285,173 419,094 1,209,692 1,722,856
for fixed charges
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
Fixed charges:
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
4) Interest expense 47,286 105,631 148,291 208,407 244,111 223,178 204,085
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
Ratio of earnings to fixed 4.08x 1.96x 1.50x 1.37x 1.72x 5.42x 8.44x
charges
- ------------------------------ ------------ ----------- ------------- ------------- ------------ ------------- --------------
</TABLE>
<PAGE>
EXHIBIT 15.1
[MARVIN E. JEWELL & CO. LETTERHEAD]
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Professional Veterinary Products, Ltd.
Registration Statement on Form S-1
Commissioners:
We are aware that our report dated June 4, 1999 on our compiled financial
statements of Professional Veterinary Products, Ltd. as of April 30, 1999 and
for the nine months ended April 30, 1999 and April 30, 1998 is included in
Professional Veterinary Products, Ltd. Prospectus as part of the Registration
Statement on Form S-1. Pursuant to Rule 436(c) under the Securities Act of 1933,
that report should not be considered a part of the Registration Statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
Very truly yours,
MARVIN E. JEWELL & CO., P.C.
/s/ Dennis Kubicek, VP
------------------------------
Dennis Kubicek, Vice President
<PAGE>
EXHIBIT 23.1
Consent of Independent Certified Public Accountants
As independent certified public accountants, we hereby consent to the use in
the Prospectus constituting part of this Registration Statement on form S-1
of our report dated September 24, 1998, relating to the financial statements
of Professional Veterinary Products, Ltd. which appears in such Prospectus.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
Marvin E. Jewell & Co., P.C.
<PAGE>
EXHIBIT 23.2
See Exhibit 5.1 Form of Opinion of Baird, Holm, McEachen, Pedersen,
Hamann & Strasheim.
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of
August, 1999.
/s/ Michael Whitehair
----------------------
STATE OF NEBRASKA )
) ss.
COUNTY OF DOUGLAS )
On this 20th day of August, 1999, before me, a Notary Public
qualified for said County, personally came Michael Whitehair, known to me to
be the identical person who signed the foregoing instrument and acknowledged
the execution thereof to be his voluntary act and deed.
/s/ Kim A. Soash
----------------------------------
Notary Public
My commission expires: 4/13/01
<PAGE>
EXHIBIT 24.2
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of July,
1999.
/s/ Russ Weston
---------------
STATE OF ILLINOIS )
) ss.
COUNTY OF STEPHENSON )
On this 9th day of July, 1999, before me, a Notary Public qualified for
said County, personally came Russ Weston, known to me to be the identical person
who signed the foregoing instrument and acknowledged the execution thereof to be
his voluntary act and deed.
/s/ Sherry L. Brinker
---------------------
Notary Public
My commission expires: 5/14/01
<PAGE>
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 26th day of July,
1999.
/s/ Timothy Trayer
------------------
STATE OF PENNSYLVANIA )
) ss.
COUNTY OF LANCASTER )
On this 26th day of July, 1999, before me, a Notary Public qualified
for said County, personally came Timothy Trayer, known to me to be the identical
person who signed the foregoing instrument and acknowledged the execution
thereof to be his voluntary act and deed.
/s/ Erin L. Shelly
------------------
Notary Public
My commission expires:12/23/02
<PAGE>
EXHIBIT 24.4
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of July,
1999.
/s/ Kenneth Liska
-----------------
STATE OF NEBRASKA )
) ss.
COUNTY OF WAYNE )
On this 9th day of July, 1999, before me, a Notary Public qualified for
said County, personally came Kenneth Liska, known to me to be the identical
person who signed the foregoing instrument and acknowledged the execution
thereof to be his voluntary act and deed.
/s/ Tim Keller
--------------
Notary Public
My commission expires: 7/31/99
<PAGE>
EXHIBIT 24.5
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of July,
1999.
/s/ Wayne Rychnovsky
--------------------
STATE OF IOWA )
) ss.
COUNTY OF ADAMS )
On this 12th day of July, 1999, before me, a Notary Public qualified
for said County, personally came Wayne Rychnovsky, known to me to be the
identical person who signed the foregoing instrument and acknowledged the
execution thereof to be his voluntary act and deed.
/s/ Judy K. Antisdel
--------------------
Notary Public
My commission expires: 4/13/01
<PAGE>
EXHIBIT 24.6
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 20th day of
August, 1999.
/s/ Raymond Ebert II
--------------------
STATE OF NEBRASKA )
) ss.
COUNTY OF DOUGLAS )
On this 20th day of August, 1999, before me, a Notary Public
qualified for said County, personally came Raymond Ebert II, known to me to
be the identical person who signed the foregoing instrument and acknowledged
the execution thereof to be his voluntary act and deed.
/s/ Kim A. Soash
--------------------
Notary Public
My commission expires: 4/13/01
<PAGE>
EXHIBIT 24.7
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 9th day of July,
1999.
/s/ Mark Basinger
-----------------
STATE OF OHIO )
) ss.
COUNTY OF PUTNAM )
On this 9th day of July, 1999, before me, a Notary Public qualified for
said County, personally came Mark Basinger, known to me to be the identical
person who signed the foregoing instrument and acknowledged the execution
thereof to be his voluntary act and deed.
/s/ Mary E. Kiene
-----------------
Notary Public
My commission expires: 7/28/02
<PAGE>
EXHIBIT 24.8
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, the undersigned, do hereby appoint
Lionel Reilly, or Neal Soderquist, or either of them, attorney for me and in my
name and on my behalf to sign the Registration Statement on Form S-1 of
PROFESSIONAL VETERINARY PRODUCTS, LTD., and any amendment or supplement thereto,
to be filed with the Securities and Exchange Commission under the Securities Act
of 1933 with respect to the registration of the common stock of Professional
Veterinary Products, Ltd., and generally to do and perform all things necessary
to be done in the premises as fully and effectually in all respects as I could
do if personally present.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of July,
1999.
/s/ Fred Garrison
-----------------
STATE OF VIRGINIA )
) ss.
COUNTY OF FAIRFAX )
On this 11th day of July, 1999, before me, a Notary Public qualified
for said County, personally came Fred Garrison, known to me to be the identical
person who signed the foregoing instrument and acknowledged the execution
thereof to be his voluntary act and deed.
/s/ Kenneth L. Walls
--------------------
Notary Public
My commission expires: 6/30/02
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> JUL-31-1998 APR-30-1999
<PERIOD-START> AUG-01-1997 AUG-01-1998
<PERIOD-END> JUL-31-1998 APR-30-1999
<CASH> 0 1,232,487
<SECURITIES> 0 0
<RECEIVABLES> 4,584,767 9,579,171
<ALLOWANCES> (0) (0)
<INVENTORY> 13,005,313 14,528,763
<CURRENT-ASSETS> 17,590,080 25,340,421
<PP&E> 3,934,491 3,289,491
<DEPRECIATION> (1,730,215) (1,586,252)
<TOTAL-ASSETS> 20,007,753 27,412,209
<CURRENT-LIABILITIES> 14,891,174 22,718,437
<BONDS> 0 0
0 0
0 0
<COMMON> 3,072,000 3,283,000
<OTHER-SE> 819,490 1,410,772
<TOTAL-LIABILITY-AND-EQUITY> 20,007,753 27,412,209
<SALES> 90,641,232 88,011,648
<TOTAL-REVENUES> 94,406,580 88,389,307
<CGS> 85,261,574 80,404,318
<TOTAL-COSTS> 85,261,574 80,404,318
<OTHER-EXPENSES> 8,725,912 6,775,297
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 244,111 223,178
<INCOME-PRETAX> 174,983 986,514
<INCOME-TAX> 73,440 395,232
<INCOME-CONTINUING> 101,543 591,282
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 101,543 591,282
<EPS-BASIC> 96.89 528.87
<EPS-DILUTED> 96.89 528.87
</TABLE>
<PAGE>
EXHIBIT 99.1
[letterhead of United States
Securities and Exchange Commission
Washington, D.C. 20549]
July 12, 1996
Dennis J. Fogland, Esq.
Baird, Holm, McEachen, Pedersen
Hamann & Strasheim
1500 Woodmen Tower
Omaha, Nebraska 68102-2068
RE: PROFESSIONAL VETERINARY PRODUCTS, LTD.
Dear Mr. Fogland:
In regard to your letter of June 27, 1996 our response thereto is
attached to the enclosed photocopy of your correspondence. By doing this, we
avoid having to recite or summarize the facts set forth in your letter.
Sincerely,
/s/ Martin P. Dunn
-----------------------------
Martin P. Dunn
Chief Counsel
<PAGE>
[letterhead of Baird, Holm, McEachen,
Pedersen, Hamann & Strasheim]
June 27, 1996
VIA FEDERAL EXPRESS
Office of the Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
450 Fifth Street, N. W.
Washington, D. C. 20549
Attention: Anita Klein, Esq.
Re: PROFESSIONAL VETERINARY PRODUCTS, LTD.
Dear Ms. Klein:
The purpose of this letter is to request on behalf of Professional
Veterinary Products, Ltd. ("Company") that the staff of the Division of
Corporation Finance and the Division of Market Regulation (the "Staff") of the
Securities and Exchange Commission (the "Commission") not recommend any action
to the Commission with respect to: (1) the issuance of "stock" by the Company
without registration under Section 5 of the Securities Act of 1933 (the
"Securities Act"); and (2) the deregistration by the Company of its "stock"
under Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act").
It is our opinion that the "stock" of the Company, in the context and under the
facts and circumstances as set forth herein, including the proposed amendments
to the Articles of Incorporation of the Company described herein, will not
constitute a "security" within the meaning of that term as defined in Section
2(1) of the Securities Act and Section 3(a)(10) of the Exchange Act. Therefore,
registration is not required of the Company's stock under Section 5 of the
Securities Act and Section 12(g) of the Exchange Act (the Securities Act and
Exchange Act are collectively referred to herein as the "Acts").
I. BACKGROUND AND FACTS.
Professional Veterinary Products, Ltd. ("Company") was organized as a
Missouri corporation on August 2, 1982 with the express purpose of acting as a
wholesale buyer of pharmaceuticals, vaccines, supplies, equipment and other
items related to the practice of veterinary medicine so that the Company might
sell such items at a reduced cost to its members (Article VIII, Company's
Articles of Incorporation). (A copy of the Company's
2
<PAGE>
current Articles of Incorporation is enclosed as Attachment I; a copy of
proposed amendments to the Articles of Incorporation as discussed below is
enclosed as Attachment II.) According to Article III of the Company's
Articles of Incorporation: "No one may own stock in the Corporation other
than a licensed, practicing veterinarian (or business entity comprised of
veterinarians such as a partnership or a corporation)," and each such
stockholder may own only one share of stock.
Under Article VIII of the Company's Articles of Incorporation, sales to
shareholder-members can be at no more than 5% over the Company's cost as
determined by the Company's certified public accountant. In furtherance of its
cooperative purpose, the Company annually issues rebates to its members, which
are strictly based on a percentage of purchases made by the respective member.
No dividends have ever been paid on the stock of the Company, and none are
anticipated. In addition, the Company's Board of Directors has approved a
proposed amendment to the Article of Incorporation (Amendment to Article III, as
shown on Attachment II), which prohibits the Company from paying any dividends
on its stock.
Under its Articles of Incorporation (Article VIII), the Company sells
items only to its shareholder-members, except with the explicit approval of the
Board of Directors. As of the fiscal year ended July 31, 1995, 96.7% of the
Company's sales of product were made to members. Sales made to other
distributors, such as the Company, accounted for 2.8% of the Company's sales,
while sales to non-members were 0.5% of total sales. Sales by the Company to
other distributors generally are made to reduce inventory of seasonal items,
while sales to non-members include sales to prospective veterinarian
shareholder-members who chose not to become a member. These percentages for
fiscal year 1995 are consistent with the Company's experiences in prior fiscal
years, and its expectations for the future. The Company does not solicit sales
of its products to parties other than its own members (or prospective members)
and does not market its products to anyone other than this same group.
The Company may issue a share of stock only to a qualified veterinarian
or practice after the approval of the Board of Directors (Article III).
Initially, shares were issued for $2,000 per share; since 1982 shares have been
issued for $3,000 per share, which is essentially an "initiation fee" for the
member to have access to purchase products from the Company. A single share of
stock is sold to a veterinarian when that veterinarian requests to become a
member of the cooperative. (Potential members are generally given the
opportunity to buy products on a "trial basis" for a short period prior to
becoming a member-shareholder.) Proceeds from the sale of shares are used in the
administration of the Company and to help fund the activities of the Company in
purchasing veterinary products needed to supply its membership.
New shareholder members are obtained primarily through referrals from
existing veterinarian shareholders. Prospective members expressing an interest
in the Company may be contacted by a field service representative of the Company
to answer questions concerning the Company and its program. A prospective member
is not induced to
3
<PAGE>
purchase his or her membership share through any representation or promise of
an expectation of profit or gain that might be realized by such member from
the monetary or resale value of such share of stock. There are no commissions
or discounts or other forms of remuneration paid to such representatives, or
any other party, in connection with the sale of the membership shares. There
is no general public advertising or marketing of the Company's membership
shares. The Company does not advertise in any trade magazine or professional
journals, or in any media which is generally disseminated to the public. As
part of this request, the Company is proposing to amend its Articles of
Incorporation to require that the price of a share of stock to be issued to
future members may not exceed $3,000 per share, or such lesser amount as
determined by the Board of Directors in its discretion. (Amendment to Article
III, Articles of Incorporation).
There is no trading market for the Company's shares. Under current
Article III of the Articles, the Company has a first right of refusal to
purchase any proposed transfer of Company stock at the price paid for the stock.
Historically, such transfers have been rare, primarily where a veterinary
practice was sold, or upon death. Under the proposed Amendment to Article III,
all transfers of Company stock to third parties will be prohibited (including
any pledge or hypothecation of such stock), and any sale of a share must be sold
back to the Company at the original price paid for the stock.
There are currently eight directors, each of whom is a veterinarian
shareholder-member, representing eight geographic districts where
shareholder-members are located (Article VI of the Articles of Incorporation).
Directors are elected for 4-year terms by the shareholder-members. Each
veterinarian shareholder-member has one vote (as the holder of one share) on
matters to be voted on by the shareholder-members. No shareholder-member (and
therefore no director) receives any salary or other type of remuneration from
the Company, other than meeting fees paid to directors. Members of the Board of
Directors receive rebates on purchases from the Company on the same basis as all
other shareholder-members (i.e., based on the volume of purchases, not on share
ownership).
There are currently approximately 80 employees of the Company, none of
whom are shareholder-members of the Company. The President and Chief Executive
Officer of the Company is Dr. Lionel L. Reilly, who is a salaried employee, and
is not a shareholder-member. There are currently 871 shares of the Company
outstanding, held by 871 veterinarian shareholders. The Company's facilities are
located at 10100 J Street, Omaha, Nebraska 68127. The Company business consists
of purchasing veterinary pharmaceutical and related veterinary products and
equipment from manufacturers at volume prices, which savings (due to volume
purchase discounts) are then passed on to members. These products are stored in
the Company's warehouse facility and sold and shipped to veterinarian
shareholder-members in response to telephonic orders to the Company's
telemarketing staff. The Company keeps records of all purchases made by each
member-shareholder, and at the end of the fiscal year issues a credit voucher to
each member based on that member's purchases during the preceding year. This
credit voucher is then used by the member towards future purchases from the
Company. The
4
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amount of the credit voucher is in direct proportion to the dollar volume of
eligible purchases made by the member-shareholder.
None of the directors, officers or employees of the Company directly or
indirectly (through businesses they own) provide goods or services to the
Company (except in their status as directors, officers and employees). To the
best of the knowledge of the Company, none of the shareholder-members of the
Company directly or indirectly (through businesses they own) provide goods or
services to the Company, except for one shareholder-member who sells
approximately $7,000 of product to the Company annually (compared to the
Company's net sales in excess of $62 million for fiscal year ended July 31,
1995).
The Company filed a Form 10 with the Commission in August 1995,
registering the Company's stock under Section 12(g). Since such time the Company
has filed its Form 10-K Annual Report and Form 10-Q Quarterly Reports in
accordance with the Exchange Act requirements. After further review this year,
the Company Board of Directors has approved the following Amendments to the
Articles of Incorporation of the Company:
(1) An amendment to Article III expressly prohibiting the payment of
any dividends on any shares of stock of the Company. As noted above, the Company
has never paid any dividends on its stock, and has no intentions to do so.
(2) An amendment to Article III expressly setting the price of one
share at $3,000, OR SUCH LESSER AMOUNT as determined by the Board of Directors
in its discretion.
(3) An amendment to Article III expressly prohibiting the sale or
transfer (including by pledge or hypothecation) to any third party of any share
of stock of the Company by the shareholder-member. Under the Article III
amendment, the shareholder-member may sell the share of stock only back to the
Company at the same price as the original sale price. The Company also has the
right to repurchase the share of stock at the original sale price in the event
the holder no longer qualifies under the Company's Articles of Incorporation as
an eligible licensed veterinarian, or upon the death of a shareholder-member.
(4) An amendment to the Articles of Incorporation adding new Article X
which provides that upon liquidation or dissolution of the Company the proceeds,
if any, in excess of the return of the original purchase price of the
shareholder's stock, shall be distributed as follows. Each shareholder would be
entitled to designate to the Corporation that any excess funds, determined on a
pro rata per shareholder basis, would be distributed by the Corporation to
either (i) the American Veterinary Medical Association, (ii) the state
Veterinary Medical Association selected by the shareholder, or (iii) the College
of Veterinary Medicine selected by the shareholder.
Under the Company's Articles of Incorporation (Article IX) such
amendment will require a 2/3 vote of the shares of the Company at a meeting in
which a majority of the shares are represented. The Company intends to call a
special shareholder-members'
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meeting for the sole purpose of voting on such amendments as soon as
practicable. The Board of Directors of the Company approved the proposed
amendments to the Articles of Incorporation on May 16, 1996, and voted to
recommend such amendments to the shareholder-members for approval at a
special meeting to be held in accordance with the Company's Articles and
Bylaws. Similar conforming amendments to the Company Bylaws will be made as
are proposed above for the Articles of Incorporation. Amendment to the Bylaws
requires a majority vote of the shareholders-members at a meeting at which a
quorum is present.
While the Company believes that its stock as currently issued, and
under current Company policies and practices, is not a "security" for purposes
of the Acts, the following analysis and legal opinion is based on the Company's
completion of the proposed amendments to the Company's Articles of Incorporation
(which requires the requisite vote of shareholder-members and filing of the
Articles of Amendment with the Missouri Secretary of State).
II. STATEMENT OF ISSUE.
Whether the "stock" of the Company constitutes a "security" within the
scope of the definition of that term in Section 2(1) of the Securities Act and
Section 3(a)(10) of the Exchange Act in the context where: (1) the "stock" can
only be issued to licensed veterinarians, who purchase it for the purpose of
gaining membership in a veterinary buying cooperative organization; (2) the
issuance and repurchase price of such "stock" is set at the same fixed price, so
that the shareholder-member may never receive more for such "stock" than the
initial price paid for it; (3) no dividends are ever paid on the "stock" and are
in fact prohibited to be paid under the Company's Articles of Incorporation; (4)
the Articles of Incorporation prohibit the sale or transfer (including pledge or
hypothecation) of the "stock," except back to the Company at the initial
purchase price; (5) there is no trading market in the "stock" of the Company and
never has been any market; (6) any rebates received by shareholder-members from
the Company are based solely on the volume of purchases by the member from the
Company, and not on the share of "stock" held by the member; (7) upon
liquidation or dissolution of the Company the shareholder member is entitled to
receive back only the initial purchase price; and (8) the Company has the right
to repurchase the "stock" (at the initial sale price) if the holder should no
longer be a licensed veterinarian.
III. LEGAL OPINION.
It is our opinion that the "stock" of the Company, in the context and
under the facts and circumstances set forth under Sections I and II above, does
not constitute a "security" within the meaning of that term as defined in
Section 2(1) of the Securities Act and Section 3(a)(10) of the Exchange Act.
Accordingly, in our opinion, registration of the Company's
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<PAGE>
"stock" is not required under Section 5 of the Securities Act and Section
12(g) of the Exchange Act.
IV. LEGAL DISCUSSION AND BASES FOR OPINION.
A. THE MERE DESIGNATION OF THE MEMBERSHIP INTERESTS AS "STOCK" IS NOT
SUFFICIENT TO CREATE A "SECURITY" WITHIN THE COVERAGE OF THE FEDERAL SECURITIES
LAWS.
While the definition of the term "security" under the Securities Act
and the Exchange Act does include the words "any . . . stock," the Supreme Court
in UNITED HOUSING FOUNDATION, INC. V. FORMAN, 421 U. S. 837, 848 (1975),
rejected the contention that the purchase of an apartment in a housing project
evidenced by the sale of stock must be considered a securities transaction
simply because of the statutory definition. In reversing a prior decision by the
Second Circuit Court of Appeals, which held that because the instruments were
labeled "stock," the Securities Act applied, the Supreme Court said:
"We reject at the outset any suggestion that the present transaction
evidenced by the sale of shares called "stock," must be considered a security
transaction simply because the statutory definition of a security includes the
words `any ...stock'. Common sense suggests that people who intend to acquire
only a residential apartment in a state-subsidized cooperative, for their
personal use, are not likely to believe that in reality they are purchasing
investment securities simply because the transaction is evidenced by something
called a share of stock." 421 U.S. at 848.
Similarly, in the current circumstances the Company believes that a
shareholder-member of the Company views the mandatory purchase of a "share of
stock" as necessary incident to doing business with the cooperative and not as
the purchase of an investment security. Rather, members expect a return from
their own efforts, i.e., their purchases of merchandise from the Company, not
from their investment of capital.
Further, in REVES V. ERNST & YOUNG, 494 U.S. 56 (1990), the Supreme
Court emphasized: (i) that the purpose of the Acts is to regulate investments;
(ii) legal formalisms are not binding, but the court should consider the
economics of the transaction; (iii) form should be disregarded for substance;
and (iv) the proper focus is on economic reality. Accordingly, "the task has
fallen to the Securities and Exchange Commission, the body charged with
administering the Securities Acts, and ultimately to the federal courts to
decide which of the myriad financial transactions in our society come within the
coverage of these statutes." FORMAN, supra, at 848. In interpreting the term
"security," form should be disregarded for substance and the emphasis should be
on economic reality." TCHEREPNIN V. KNIGHT, 389 U.S. 332, 336 (1967).
B. THE COMPANY'S "STOCK" DOES NOT HAVE THE SIGNIFICANT CHARACTERISTICS
GENERALLY ASSOCIATED WITH SECURITIES COVERED BY THE ACTS.
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<PAGE>
In determining whether a particular instrument is a "security," as the
Supreme Court noted in LANDRETH TIMBER CO. V. LANDRETH, 471 U.S. 681 (1985), "we
must ... determine whether these instruments possess `some of the significant
characteristics typically associated with' stock." 471 U.S. at 486 (quoting
FORMAN, 421 U.S. at 851). In FORMAN, the Court identified these characteristics
as: (1) the right to receive dividends contingent upon an apportionment of
profits; (2) negotiability; (3) the ability to be pledged or hypothecated; (4)
the conferring of voting rights in proportion to the number of shares owned; and
(5) the capacity to appreciate in value.
Applying these characteristics to the Company's "stock" leads to the
conclusion that the Company's stock does not have the significant
characteristics of a security as defined in the Acts. As noted under Section I
above, the Company's stock: (1) has never paid dividends and cannot pay
dividends under its Articles of Incorporation, as amended; (2) is not negotiable
or transferable (except back to the Company at the original purchase price); (3)
cannot be pledged or hypothecated (under amended Article III to the Articles of
Incorporation); and (4) cannot appreciate in value (either through resale or
transfer, or through liquidation or dissolution of the Company). While the
Company's stock does give each holder one vote on Company matters, there is no
correlation between the number of votes a member has (always one vote) and the
true measure of economic benefit to the member, which is the amount of rebate to
which the member is entitled (which is based solely on the volume of business
done with the Company, not share ownership).
The relationship between the Company and its shareholder-members is in
a number of respects similar to the relationship in FORMAN between the housing
cooperative and its shareholder-tenants. First, in FORMAN, the tenants could not
transfer, assign or pledge their common stock, which is also true for the
Company's shares. Second, in Forman, the tenants who desired to sell their
shares were required to offer the stock back to the housing cooperative at its
initial price. Under amended Article III, each member-shareholder will be able
to sell such share only back to the Company at the same price such member paid
for it. There is no opportunity for the shareholder-member to realize any gain
from the sale of the share due to appreciation in value.
Third, in FORMAN, the tenant members purchased stock for the economic
benefit of subsidized low-cost housing and not with the expectation of making a
profit on the stock. Similarly, professional veterinarians seek membership in
the Company in order to realize reduced merchandise costs by purchasing
inventory collectively in large volume as the economic benefit, not appreciation
in their "investment" in the stock. This is a critical difference between the
Company and ordinary business corporations: the economic benefits which accrue
to the Company member-shareholder are directly related to their patronage
activity (i.e., the amount of their purchases from the Company), while the
economic benefits in a regular business corporation are returned to the
shareholders in direct proportion to their investment in the corporation (i.e.,
the number of shares held). The veterinarian's decision to associate with the
Company is not predicated on the opportunity to realize investment profits, but
rather the evaluation of the economic benefits of lower cost for merchandise
through large volume buying power.
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The existence of a small percentage of revenue from non-member business
does not change the conclusion that the Company's stock is not a security. In
the FORMAN decision, the Supreme Court held that the stock of the residential
housing cooperative did not involve the kind of profits which would transform
such stock into a security even though the members of the cooperative benefited
from non-cooperative income derived from leasing professional offices and
parking spaces and from operating community washing machines. The Court relied
on the economic reality that the members purchased the cooperative's stock in
order to procure housing at a beneficial price, and not because they expected to
realize a profit from such incidental activities. The Court concluded that the
focus of the arrangement was on obtaining cooperative housing; the existence of
incidental profit did not constitute an "expectation of profit" for purposes of
determining a "security."
As indicated above, in its most recent fiscal year, 96.7% of the
Company's sales of product were to member-shareholders. Sales to other
distributors constituted 2.8% and were generally made to reduce inventory of
seasonal items. Sales to non-members, which included sales made to prospective
members who decided not to become a member, constituted only 0.5% of the
Company's total sales. These non-member sales revenues, when evaluated in the
context of their significance to total business operations, are not significant
and are merely incidental to the Company's cooperative activities.
Significantly, the Company does not solicit sales of its products to parties
other than its own members (or prospective members) and does not market to
anyone other than this same group. Further, the Company does not in any manner
sell its membership shares on the basis of the economic gain to be derived from
such non-member business.
This position is consistent with a number of prior SEC Staff No-Action
Letters, including Affiliated of Florida, Inc., September 25, 1987, available in
LEXIS 1987 SEC No-Act. LEXIS 2464 (non-member sales constituted approximately
12.3% of company's total sales); Associated Grocers of New England, Inc.,
October 5, 1989, available in LEXIS 1989 SEC No-Act. LEXIS 993 (non-member sales
constituted approximately 5.6% of total sales); and Associated Grocers,
Incorporated, February 12, 1988, available in LEXIS 1988 SEC No-Act. LEXIS 174
(grocer members required to purchase at least $10,000 of stock and sales to
non-members constituted approximately 1% of overall sales).
C. THE COMPANY'S "STOCK" DOES NOT CONSTITUTE AN INVESTMENT CONTRACT.
In addition to the analysis described above under the FORMAN decision,
in determining whether or not a "security" exists courts have analyzed whether
or not the instrument constitutes an "investment contract." In REVES V. ERNST &
YOUNG, 494 U.S. 56 (1990), the Supreme Court held that the following factors
should be examined in determining whether a transaction involves an "investment
contract" and thus constitutes a "security": (1) the motivations that would
prompt a reasonable seller and buyer to enter into the transaction; (2) the
"plan of distribution"; (3) the reasonable expectations of the
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investors; and (4) additional factors, such as the existence of another
regulatory scheme which would reduce the risk of the investment.
In the present case, as noted above, the purchaser of the share of
stock is motivated by the desire to be able to purchase veterinary supplies and
equipment at a lower price through the Company's large volume cooperative buying
power. The member does not purchase the share of stock to realize any profit or
gain on the share of stock, and indeed the Company's Articles do not permit the
realization of any such gain. There is no inducement made to the prospective
member to become a shareholder based on the potential gain or "profit" from the
value of the one share of stock purchased. Indeed, the Company's Articles of
Incorporation prohibit any such gain or profit from the sale or other transfer
of the share of stock.
There is no "plan of distribution" for the Company's stock. As
previously noted, initial purchase of the stock is limited to qualified
veterinarians. In addition, the stock is not transferable, and can be sold only
to the Company at the initial purchase price. There is no trading market for the
stock, and it cannot be pledged by the holder. Therefore, there is no "trading
for speculation or investment" in the Company's stock.
The Supreme Court in REVES noted that certain instruments can be
"securities" on the basis of public expectation, even where an economic analysis
might suggest the instruments are not securities. In the present case, there
does not appear to be any public expectation with respect to the Company's
stock. First, membership in the Company (and thus the purchase of a share of
stock) is limited only to veterinarians. Second, as has been noted above, such
persons or entities themselves purchase for the benefit of the cooperative
buying power, not the expectation of profit from the purchase of their one share
of stock, which cannot appreciate in value, and has no negotiability, except
back to the Company.
D. PREVIOUS STAFF NO-ACTION LETTERS SUPPORTING THE COMPANY'S POSITION
THAT ITS "STOCK" IS NOT A SECURITY.
Numerous previous SEC Staff No-Action Letters support the opinion that
the Company stock is not a "security" within the meaning of the definitional
sections of the Act. See Cap Rock Telephone Company, Inc., November 4, 1994,
available in LEXIS 1994 SEC No-Act. LEXIS 763; Service Centers Corporation, May
21, 1993, available in LEXIS, 1993 SEC No-Act. LEXIS 721; Peer Marketing
Associates, Inc., Feb. 3, 1993, available in LEXIS, 1993 SEC No-Act. LEXIS 146;
Marine Preservation Association, Sept. 16, 1991, available in LEXIS, 1991 SEC
No-Act. LEXIS 1085; Producers Feed Company, July 30, 1990, available in LEXIS,
1990 SEC No-Act. Lexis 999; Certified Physicians of Indiana, P.C., June 4, 1990,
available in LEXIS, 1990 SEC No-Act. LEXIS 856; Associated Grocers of New
England, Inc., SEC No-Action Letter [1990 Transfer Binder] Fed. Sec. L. Rep.
(CCH) P79, 415 at 77,171 (Oct. 5, 1989); Hardware Wholesalers, Inc., Nov. 4,
1985, available in LEXIS, 1985 SEC No-Act, LEXIS 2660; End-Users, Inc., Nov. 12,
1984,
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available in LEXIS, 1984 SEC No-Act, LEXIS 2714; American Hardware Supply
Co., Jan. 9, 1984, available in LEXIS, 1984 SEC No-Act. LEXIS 1521.
In addition, in other similar recent No-Action letters, the Staff has
specifically noted whether the "stock" in question possessed most of the
characteristics of a security, looking at factors such as:
(1) Whether there is restricted or unrestricted transferability;
(2) Whether the stock merely evidences membership in a corporation
operating on a cooperative basis;
(3) Whether there is potential for appreciation in value for the
common stock; and
(4) Whether there is any payment of dividends on the stock.
See Independent Stationers, Inc., April 15, 1994, available in LEXIS, 1994 SEC
No-Act. LEXIS 444; American Truckload Cooperative, Inc., July 1, 1993, available
in LEXIS, 1993 SEC No-Act. LEXIS 850; Kentucky Pharmacy Services Corporation,
June 6, 1991, available in LEXIS, 1991 SEC No-Act. LEXIS 768; and Sports
Specialists, Ltd., September 30, 1991, available in LEXIS, 1991, SEC No-Act.
LEXIS 119.
As is discussed above, with respect to each of these factors the
Company's "stock" does not have the characteristics of a security.
With respect to deregistration of the stock of a company which has
already registered its stock under the Securities Exchange Act of 1934, see
Affiliated of Florida, Inc., September 25, 1987, available in LEXIS, 1987 SEC
No-Act. LEXIS 2464, and Associated Grocers, Incorporated, February 12, 1988,
available in LEXIS, 1988 SEC No-Act. LEXIS 174, in which the Staff granted
no-action positions to Exchange Act registered companies.
V. CONCLUSION.
In view of the foregoing, it is our opinion that the "stock" of the
Company is not a "security" within the meaning of that term as defined in
Section 2(1) of the Securities Act and Section 3(a)(10) of the Exchange Act.
Accordingly, we respectfully request the Staff not to recommend any enforcement
action to the Commission with respect to: (1) the issuance by the Company of its
stock without registration under Section 5 of the Securities Act; and (2) the
deregistration by the Company of its stock under Section 12(g) of the Exchange
Act.
Pursuant to the procedures set forth in Securities Act Release Nos.
33-6269 (December 5, 1980) and 33-5127 (January 25, 1971), we enclose seven
copies of this
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letter. Should the Staff not be inclined to act favorably on our request, we
respectfully request a conference with the Staff before the issuance of any
adverse written response. In the event you have any questions or need
additional information, please contact me (402-344-0500) or my partner,
Richard E. Putnam. Thank you in advance for your attention to this matter.
Yours very truly,
/s/ Dennis J. Fogland
--------------------------
Dennis J. Fogland
FOR THE FIRM
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ATTACHMENT I
ARTICLES OF INCORPORATION
OF
PROFESSIONAL VETERINARY PRODUCTS, LTD.
(As Amended)
The undersigned natural persons of the age of eighteen years or more
for the purpose of forming a corporation under The General and Business
Corporation Law of Missouri adopt the following Articles of Incorporation:
ARTICLE I
The name of the corporation is: Professional Veterinary Products, Ltd.
ARTICLE II
The address, including street and number, if any, of the
corporation's initial registered office in this state is: Route #3, Box 109,
Fayette, Missouri, 65248, and the name of its initial agent at such address
is: Richard F. Taylor.
ARTICLE III
The aggregate number, class and par value, if any, of shares which
the Corporation shall have authority to issue shall be: The total authorized
capital stock of the Corporation shall be 30,000, and the capital stock shall
have no par value.
No one may own stock in the Corporation other than a licensed,
practicing veterinarian (or business entity comprised of veterinarians such
as a partnership or a corporation) the majority of whose practice is within a
50-mile practice area. Stock shall not be issued to a veterinarian who does
not have a reputation of a high standard for morals, ethics, and excellence
in his practice. Further, no solo practitioner nor practice with multiple
veterinarians may own more than one (1) share of the Corporation's stock.
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<PAGE>
Veterinarians involved in a multiple veterinary practice may not own stock if
the practice itself already owns one (1) share of stock or if any of that
veterinarian's fellow practitioners own a share of stock.
If a shareholder owes money to the Corporation and fails to make
payments by the due date, the Board of Directors shall have the option to
repurchase the stock owned by the shareholder at the price the shareholder
paid for the stock. This option shall extend for a period of six months after
the due date of the debt.
The Corporation shall sell a share of stock only to a qualified
veterinarian or practice after the approval of the Board of Directors of
Corporation. Any shareholder desiring to sell stock must notify the Board of
Directors of Corporation of the intended transferee. The Board will then have
an option for 60 days to repurchase the shareholder's stock at the price the
shareholder paid for the stock.
ARTICLE IV
No shareholder shall have any preemptive rights.
ARTICLE V
The name and place of residence of each incorporator is as follows:
<TABLE>
<CAPTION>
NAME STREET CITY
<S> <C> <C>
1. Vincil M. Wilt Route #1 Paris, MO 65275
2. Don Hudson 933 Emmons Street Mexico, MO 65265
3. Mexico Animal Hospital, Inc. 1001 W. Monroe Mexico, MO 65265
By: Frank F. Sutton
4. Brookfield Vet. Clinic P.O. Box 348 Brookfield, MO 64628
By: John Perry
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
5. Howard Co. Vet. Service RFD 3 Fayette, MO 65248
By: K.M. Vroman
6. Booneslick Animal Hospital Hwy. 87 East Booneville, MO 65233
By: William Hope
7. Hermann Vet. Clinic, Inc. Rt. #1 Box 55 Herman, MO 65041
By: Leo E. Rohlfing
8. Kent Vet. Clinic 2 Northwest Street Green City, MO 63545
By: Kyle C. Kent
9. Chillicothe Animal Hosp. 1011 S. Washington Street Chillicothe, MO
By: Clark A. Gwin
10. Tri-County Vet Hosp. 61 South Bowling Green, MO
By: H. E. Wheatley
11. Sam Jameson, Inc. Box 36 Albany, MO 64402
By: Sam Jameson
12. Town & Country Vet. Hosp. 1220 North Green Street Kirksville, MO
By: D.H. Moore & J.S. Niebruegge
13. Hillside Vet. Clinic Rt. #3 Maryville, MO 64468
By: Danny Burns
14. Dr. Steve A. Nickell 119 S. Park Street Stanbuery, MO
15. King City Vet. Service King City, MO
By: J.A. Breckenridge
16. Parkview Animal Hospital 1203 N. Baltimore Kirksville, MO
By: K.R. Conklin
17. Lee's Summit Animal Clinic 411 South Market Lee's Summit, MO
By: Robert E. Hertzog
18. Vaughn Vet. Clinic, Inc. Box 292 Canton, MO 63435
By: Michael B. Vaughn
19. Carlson & McDonald Princeton, MO By: Rodney McDonald
20. Cameron Vet. Clinic 720 Orange Cameron, MO 64429
By: Jerry Rainey
21. General Vet. Clinic Box 217 Monreo City, MO
By: Jack Coleman
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C>
22. Warrensburg Box 82 Warrensburg, MO 64093
Animal Hospital, P.C.
By: John W. Hunt
</TABLE>
ARTICLE VI
Presently there are 8 directors. A director must be a shareholder or
an equity owner of a shareholder. The 8 directors shall be elected from 8
districts, and each director shall serve for a 4-year term. A director may
not be re-elected to the Board of Directors unless that director has been off
of the Board of Directors for at least a year. The Districts for the Board of
Directors shall be as follows:
DISTRICT 1. Nebraska, North and South Dakota, Wyoming, Montana, Idaho,
Washington, Alaska, and all Canadian provinces west of Omaha, Nebraska.
DISTRICT 2. Iowa and Minnesota.
DISTRICT 3. Illinois and Wisconsin.
DISTRICT 4. Missouri, Arkansas, Louisiana, Mississippi, and Alabama.
DISTRICT 5. Kansas, Colorado, Oklahoma, Texas, New Mexico, Arizona, Utah,
Nevada, California, and Hawaii.
DISTRICT 6. Michigan, Indiana, Ohio, Kentucky, and Tennessee and all
Canadian provinces east of Omaha.
DISTRICT 7. West Virginia, Maryland, Delaware, New Jersey, Pennsylvania, New
York, Connecticut, Rhode Island, Massachusetts, Vermont, New Hampshire, and
Maine.
DISTRICT 8. Virginia, North and South Carolina, Georgia, Florida, the
Caribbean Islands, Mexico, and Central and South America. This is a new
district whose nominee to the Board is James S. Reid, D.V.M.
If any Director should fail to serve an entire term, the Board of
Directors may name an individual to serve on the Board until the next
election of Directors when an individual shall be elected to complete the
term of the Director who failed to complete his elected term. The number and
manner of serving on the Board of Directors may only be changed
16
<PAGE>
by a vote of the Shareholders. Any action by the Board of Directors shall
require affirmative votes by 60% of the members of the Board of Directors
unless 1/2 or more of the seats of the Board of Directors are vacant, then a
75% affirmative vote of the remaining sitting members shall be required. A
Director may vote in person or by proxy whether that proxy provides for a
specific vote on a specific issue or is a general proxy vesting the power to
vote in a fellow director.
ARTICLE VII
The duration of the corporation is perpetual.
ARTICLE VIII
The corporation is formed for the purpose of buying, selling, trading,
storing, warehousing, transporting, and otherwise dealing in pharmaceuticals,
supplies, biologicals, chemicals, equipment, and all other items related to
the practice of veterinary medicine. The purpose of this corporation is to
act as a wholesaler for these items in order that the corporation might sell
these items at a reduced cost to the shareholders. The corporation shall sell
items only to the shareholders, except with the explicit approval of the
Board of Directors. All sales to shareholders shall be at no more than 5%
over the cost of Corporation as determined by the Corporation's Certified
Public Accountant.
Further, Corporation is formed for the purpose of acquiring property
both real and personal to further the primary purpose of the Corporation in
acting as a wholesaler of veterinary related items and all other legal acts
permitted general and business corporations.
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ARTICLE IX
These Articles may only be amended by a two-thirds vote of the
shares of the corporation at a meeting in which a majority of the shares are
represented. The annual meeting of the shareholders shall occur on the second
Saturday in August of each year; however, the Board of Directors shall have
the power to vary this date by thirty days either way. In addition to the
annual meeting, a meeting may be called by the President of the corporation,
the Board of Directors, or a majority of the stockholders. Written notice,
unless waived in writing, shall be sent to all shareholders no less than
twenty days nor more than ninety days before the day of the meeting
specifying the date, time, place of meeting, and purpose for the meeting. Any
action by the shareholders shall require a simply majority vote represented
at a shareholders meeting at which at least a majority of the total shares
issued are represented in person or by proxy. A shareholder may vote in
person or by proxy whether that proxy provides for a specific vote on a
specific issue or is a general proxy vesting the power to vote in a fellow
shareholder.
Any proxy, which does not specify who will hold the vote of the
share the proxy represents, shall be deemed to have named the Director from
the District in which the shareholder resides.
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ATTACHMENT II
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
PROFESSIONAL VETERINARY PRODUCTS, LTD.
Pursuant to the provisions of the corporation laws of the State of
Missouri, Section 351.085, the undersigned Corporation does hereby make the
following Certificate of Amendment by the hands of its duly authorized
officers:
FIRST: The name of the Corporation is Professional Veterinary Products, Ltd.
SECOND: The shareholders of the Corporation duly adopted the following
resolutions by at least a 2/3 vote at a properly held and constituted
shareholder's meeting at which a quorum of the shares were present on the
17th day of August, 1996, in Kansas City, Missouri.
RESOLVED, that Article III of the Articles of Incorporation be amended to
read in its entirety as follows: [UNDERLINED TEXT IS NEW LANGUAGE.]
(A) The aggregate number, class and par value, if any, of shares
which the Corporation shall have authority to issue shall be: The total
authorized capital stock of the Corporation shall be 30,000, and the capital
stock shall have no par value. THE CORPORATION SHALL NOT PAY ANY DIVIDENDS ON
ITS CAPITAL STOCK.
(B) No one may own stock in the Corporation other than a licensed,
practicing veterinarian (or business entity comprised of veterinarians such
as a partnership or a corporation) the majority of whose practice is within a
50-mile practice area. Stock shall not be issued to a veterinarian who does
not have a reputation of a high standard for morals, ethics, and excellence
in his practice. Further, no solo practitioner nor practice with multiple
veterinarians may own more than one (1) share of the Corporation's stock.
Veterinarians involved in a multiple veterinary practice may not own stock if
the practice itself already owns one (1) share of stock or if any of that
veterinarian's fellow practitioners own a share of stock.
(C) If a shareholder owes money to the Corporation and fails to make
payments by the due date, the Board of Directors shall have the option to
repurchase the stock owned by the shareholder at the price the shareholder
paid for the stock. This option shall extend for a period of six months after
due date of the debt. IN THE EVENT A SHAREHOLDER IS NO LONGER QUALIFIED TO BE
A SHAREHOLDER UNDER ARTICLE III(B) ABOVE, THEN THE CORPORATION SHALL
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REPURCHASE THE STOCK OWNED BY SUCH SHAREHOLDER, AND SUCH SHAREHOLDER SHALL
SELL SUCH STOCK TO THE CORPORATION, AT THE PRICE THE SHAREHOLDER PAID FOR
SUCH STOCK.
(D) The Corporation shall sell a share of stock only to a qualified
veterinarian or practice after the approval of the Board of Directors of the
Corporation, AT A PRICE OF $3,000 PER SHARE, OR SUCH LESSER AMOUNT AS
DETERMINED BY THE BOARD OF DIRECTORS IN ITS DISCRETION. NO SHAREHOLDER OF
THE CORPORATION MAY SELL, ASSIGN, OR OTHERWISE TRANSFER (INCLUDING THROUGH
ANY PLEDGE OR HYPOTHECATION) ANY STOCK OF THE CORPORATION HELD BY SUCH
SHAREHOLDER EXCEPT IN COMPLIANCE WITH THIS ARTICLE III. IN THE EVENT A
SHAREHOLDER DESIRES TO SELL SUCH SHAREHOLDER'S SHARE OF STOCK, SUCH
SHAREHOLDER SHALL GIVE WRITTEN NOTICE OF PROPOSED SALE TO THE CORPORATION,
AND THE CORPORATION SHALL, SUBJECT TO ANY LEGAL RESTRICTIONS ON SUCH
PURCHASE, REPURCHASE SUCH SHARE OF STOCK FROM THE SELLING SHAREHOLDER WITHIN
NINETY DAYS OF RECEIPT OF SUCH WRITTEN NOTICE OF SALE AT THE PRICE THE
SELLING SHAREHOLDER PAID FOR SUCH SHARE OF STOCK. IN THE EVENT OF THE DEATH
OF A SHAREHOLDER, THE CORPORATION SHALL REPURCHASE SUCH SHARE OF STOCK FROM
THE LEGAL REPRESENTATIVE OF THE ESTATE OF THE DECEASED SHAREHOLDER, AND SUCH
LEGAL REPRESENTATIVE SHALL SELL SUCH SHARE OF STOCK TO THE CORPORATION AT THE
PRICE THE DECEASED SHAREHOLDER PAID FOR SUCH SHARE OF STOCK.
RESOLVED, that a new Article X be added to the Articles of
Incorporation of the Corporation as follows:
UPON THE LIQUIDATION OR DISSOLUTION OF THE CORPORATION, IN THE EVENT
THE CORPORATION HAS EXCESS FUNDS OR ASSETS AFTER PAYMENT OF ALL DEBTS,
LIABILITIES AND OBLIGATIONS LEGALLY OWED BY THE CORPORATION, SUCH FUNDS OR
ASSETS SHALL BE DISTRIBUTED FIRST TO THE SHAREHOLDERS OF THE CORPORATION
PROVIDED THAT EACH SHAREHOLDER SHALL BE PAID NO MORE THAN THE AMOUNT SUCH
SHAREHOLDER PAID FOR THE SHARE OF STOCK HELD BY SUCH SHAREHOLDER. ANY FUNDS
OR ASSETS REMAINING AFTER THE DISTRIBUTION TO SHAREHOLDERS SHALL BE
DISTRIBUTED AS FOLLOWS: EACH SHAREHOLDER SHALL BE ENTITLED TO DESIGNATE TO
THE CORPORATION THAT ANY EXCESS FUNDS, DETERMINED ON A PRO RATA PER
SHAREHOLDER BASIS, SHALL BE DISTRIBUTED BY THE CORPORATION TO EITHER (I) THE
AMERICAN VETERINARY MEDICAL ASSOCIATION, (II) THE STATE VETERINARY MEDICAL
ASSOCIATION SELECTED BY THE SHAREHOLDER, OR (III) THE COLLEGE OF VETERINARY
MEDICINE SELECTED BY THE SHAREHOLDER.
FURTHER RESOLVED, that since the Board of Directors and Shareholders
of the Corporation have adopted the aforesaid Amendments, the Corporation is
hereby authorized to make by the hands of its President and Secretary a
Certificate setting forth the Amendments and cause the same to be filed
pursuant to the corporate laws of the State of Missouri.
THIRD: The total number of outstanding shares having voting power of
the Corporation is 870 and the total number of votes entitled to be cast by
the holders of all of
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the outstanding shares is 870. Of the 870 shares entitled to vote, ____,
representing over 2/3 of those voting, voted for these Amendments, and ___
voted against these Amendments.
Dated this ___ day of _____, 1996.
PROFESSIONAL VETERINARY PRODUCTS, LTD.
By:
-----------------------------------
Dr. Lionel Reilly, President
ATTEST:
Dr. Tony Forshey, Secretary
[Affix Seal]
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July 12, 1996
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Professional Veterinary Products, Ltd. (the "Company")
Incoming letter dated June 27, 1996
Based on the facts presented, the Division will not recommend
enforcement action to the Commission if the Company, in reliance on your
opinion that registration under the Securities Act of 1933 and the Securities
Exchange Act of 1934 (the "Exchange Act") is not required, offers and sells
shares of its stock without compliance with such registration requirements
and discontinues filing periodic and other reports under the Exchange Act.
This position is conditioned on the prior adoption of the amendments to the
Company's articles of incorporation described in your letter.
In reaching this position, we note in particular that, following the
adoption of the described amendments to the Company's articles of
incorporation: (1) the stock will not possess most characteristics of a
security, such as ordinary dividend rights and unrestricted transferability;
(2) there will be no potential for appreciation in the stock's value; and (3)
the stock will represent only membership interests in a corporation operated
on a cooperative basis.
The Division of Market Regulation has asked us to inform you that it
concurs in this position.
Because this position is based on the representations made in your
letter, it should be noted that different facts or conditions might require a
different conclusion. Further, this response expresses the Division's
position only on enforcement action and does not purport to express any legal
conclusions on the questions presented.
Sincerely,
/s/ Anita Klein
------------------------------
Anita Klein
Special Counsel
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