Exhibit 10.1


 


LIVESTOCK
PRODUCTS AGREEMENT


 


This Agreement effective as
of January 1, 2006 is made by and between Pfizer Inc.,
812 Springdale Drive, Exton, PA 19341 (“Pfizer”) and MWI
Veterinary Supply Co., 2201 North 20th Street, Nampa, ID
83687 (“MWI”).


 


WHEREAS, MWI is in the business of buying and selling
animal health products and servicing customers for those products, and


 


WHEREAS MWI and Pfizer wish to set forth the terms of
their relationship related to the purchase and supply of such products,


 


NOW, THEREFORE, in consideration of the promises and
covenants contained herein, the parties hereby agree as follows:


 


1.            (a)
Pfizer will continue to promote its products to certain select customers in the
livestock field.  The parties agree that
each time a customer from the list of customers approved by Pfizer enters into
an annual volume agreement with Pfizer (such customers referred to as “PARTICIPATING
CUSTOMERS”) and selects MWI as their supplier and to service that customers
account, Pfizer shall send to MWI Pfizer Suggested Price List which shall
specify the Pfizer cattle, dairy and multi-species products (listed on Schedule
A hereto) and suggested resale prices which are the subject of an agreement
between Pfizer and such PARTICIPATING CUSTOMERS (hereafter a “SUGGESTED PRICE
LIST”).  Each such SUGGESTED PRICE LIST
shall be incorporated into and become part of this Agreement.


 


(b) Certain SELECT SWINE
PRODUCERS (as listed on Schedule B), who are not PARTICIPATING CUSTOMERS may
purchase any of the Pfizer SWINE PRODUCTS (as listed on Schedule C hereto) from
MWI.  MWI will not be eligible for
payment of the RSA under paragraph 5 (a) hereof for such sales.  Pfizer will pay MWI, on a monthly basis, five
percent (5%) of MWI’s sales out of SWINE PRODUCTS to SELECT SWINE PRODUCERS as
a logistics fee. Final pricing to such SELECT SWINE PRODUCERS of SWINE PRODUCTS
and any other fees, charges, rebates or credits between MWI and a SELECT SWINE
PRODUCER shall be agreed between MWI and the producer.  In the event MWI’s negotiated price to the
SELECT SWINE PRODUCER is less than MWI’s cost from Pfizer for the SWINE
PRODUCTS involved, Pfizer will reimburse MWI for the difference in price up to
a maximum amount equal to the difference between MWI’s cost from Pfizer for
such products and the Pfizer Suggested Resale Price for such products for the
specific account.  No sales by MWI to
SELECT SWINE PRODUCERS of SWINE PRODUCTS shall count towards MWI’s achievement
of any quarterly or year end rebates or incentives provided for in Schedule D
hereto.  Pfizer shall not be obligated to
pay MWI either an RSA payment or the 5% logistics fee provided for in this
paragraph for sales of any Pfizer product, including SWINE PRODUCTS made
directly by Pfizer to SELECT SWINE PRODUCERS and such sales shall not count
towards MWI’s achievement of any quarterly or year end rebates or incentives
provided for in Schedule D hereto.


 


(c) Certain SELECT SWINE
VETERINARIANS (as listed on Schedule E), who are not PARTICIPATING CUSTOMERS
may purchase any of the Pfizer SWINE PRODUCTS (as listed on Schedule C hereto)
from MWI.  MWI will not be eligible for
payment of the RSA under paragraph 5 (a) hereof for such sales.  Pfizer will pay MWI, on a monthly basis, (i)
five percent (5%) of MWI’s sales out of all SWINE PRODUCTS which are listed on
Schedule C that are swine only products and, (ii) nine percent (9%) of MWI’s
sales out of ExcedeTM and those SWINE PRODUCTS listed on Schedule C that are
multi-species products to SELECT SWINE VETERINARIANS as a logistics fee.  Final pricing to such SELECT SWINE
VETERINARIANS of SWINE PRODUCTS and any other fees, charges, rebates or credits
between MWI and a SELECT SWINE VETERINARIAN shall be agreed between MWI and the
producer.  In the event MWI’s negotiated
price to the SELECT SWINE VETERINARIAN is less than MWI’s cost from Pfizer for
the SWINE PRODUCTS involved, Pfizer will reimburse MWI for the difference in
price up to a maximum amount equal to the difference between MWI’s cost from
Pfizer for such products and the Pfizer Suggested Resale Price for such
products for the specific account.  No
sales by MWI to SELECT SWINE VETERINARIANS of SWINE PRODUCTS shall count
towards MWI’s achievement of any quarterly or year end rebates or incentives
provided for in Schedule D hereto.  Pfizer
shall not be obligated


 

















 


to pay MWI either an RSA payment or the 5% logistics
fee provided for in this paragraph for sales of any Pfizer product, including
SWINE PRODUCTS made directly by Pfizer to SELECT SWINE VETERINARIANS and such
sales shall not count towards MWI’s achievement of any quarterly or year end
rebates or incentives provided for in Schedule D hereto.


 


(d)  MWI shall not be entitled to receive the 5% logistics fee
payment provided for in paragraphs 1 (b) and (c) above for sales of any Pfizer
product to PARTICIPATING CUSTOMERS.


 


(e)  Other than as provided for specifically in paragraphs 1
(b) and (c), sales by MWI of any SWINE BIOLOGICAL PRODUCTS to any customer or
PARTICIPATING CUSTOMER are not eligible for any payment from Pfizer to MWI
under any circumstances.  All sales by
MWI of SWINE BIOLOGICAL PRODUCTS shall be on a buy/sell basis and all terms and
conditions are to be negotiated between MWI and its customers.  MWI shall not be entitled to payment of any
RSA payments under paragraph 5 (a) for any sales of SWINE BIOLOGICAL PRODUCTS.


 


(f)  Pfizer
reserves the right to add or delete producers and/or veterinarians from Schedules
B and E at any time in Pfizer’s sole discretion.  Pfizer will provide notice to MWI of any changes.


 


2.             (a)
MWI agrees to purchase from Pfizer, at credit terms agreed to between the
parties and as may be further set forth on Pfizer’s invoices, products
sufficient to fulfill demand from all customers to whom MWI will sell products
in the quantities desired by the customers.  MWI agrees to make purchases from Pfizer in
accordance with the timing set forth in Appendix I hereto.


 


(b)  MWI agrees to maintain inventory equal to thirty (30)
days Demand. For purposes of this Agreement “Demand” shall mean 12 running
months of sales out by MWI divided by 365 times 30.


 


(c)  MWI agrees that all sales of Pfizer cattle, dairy and
multi-species products from MWI to a PARTICIPATING CUSTOMER shall reflect the
specific prices for each product provided for in that PARTICIPATING CUSTOMERS
most recent SUGGESTED PRICE LIST. In the event that the price listed on a
PARTICIPATING CUSTOMERS most recent SUGGESTED PRICE LIST for any particular
product is lower (at the time of consummation of a sale of such particular
products between MWI and that PARTICIPATING CUSTOMER) than the price paid by
MWI to Pfizer for such product, Pfizer agrees to credit MWI’s account for the
amount of such difference. MWI agrees to pay Pfizer for its products on a
timely basis.


 


3.             Nothing herein contained shall
create or be deemed to create any relationship between the parties other than
as specifically provided for herein. No employment, partnership, specific or
general agency relationship shall exist unless specifically provided for in
writing between the parties. MWI shall not represent, directly or indirectly,
expressly or by implication, that any such relationships exist and/or that MWI
has any authority except as set forth in this Agreement.


 


4.             MWI shall use its best efforts to
provide appropriate service to the customers to whom MWI will sell hereunder.
MWI shall:


 


(a)  Store its inventory of Pfizer products under conditions
(including refrigeration where appropriate) that will ensure that such products
retain their potency, purity, quality, and identity;


 


(b)  Provide to Pfizer your Health Industry Number, Customer
Health Industry Number, Pfizer product number, transaction date, number of
units and price with respect to each sale of product on a monthly basis, in
such amounts and format as Pfizer may require, by means of EDI. This
information should be sent to Pfizer at 812 Springdale Drive, Exton, PA 19341,
Attn. Sales Support Department. At year end all available data should be
reported to Covansys by December 22, 2006;


 


(c)  Establish any service fee or other charge or discount to
any customer including PARTICIPATING CUSTOMERS for Pfizer products
independently and at its sole discretion;


 


(d)  Provide regularly scheduled delivery service to its
customers, use its best efforts to anticipate its customers’ requirements for
Pfizer products, and maintain adequate stocks of Pfizer products to meet its
customers’ demands. In the event Pfizer delivers any product order to a


 


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PARTICIPATING CUSTOMERS (drop ships) no consideration
shall be payable to MWI for that order under paragraph 5 below;


 


(e)  MWI 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 MWI in excess of the established credit limits;


 


(f)  Invoice
customers in an accurate and timely manner;


 


(g)  Refer to that PARTICIPATING CUSTOMERS SUGGESTED PRICE
LIST on each invoice for Pfizer cattle, dairy and multi-species products;


 


(h)  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 Pfizer products.


 


(I)  Make payment to Pfizer for all
products purchased from Pfizer net 60 days.


 


(j)  Provide to
Pfizer by the close of business on the last business day of each Pfizer
Accounting Period (as set forth in Schedule F hereto) an inventory report
covering all inventory purchased from Pfizer and setting forth in dollars at
MWI’s acquisition cost from Pfizer the amount of inventory by species. MWI
agrees that Pfizer shall have the right to audit inventory in the possession of
MWI to confirm compliance with this paragraph 4 (j) and to confirm the accuracy
of the data contained in the report;


 


(k)  MWI and PFIZER
agree that MWI shall not be entitled to any payment or rebates under Schedule D
for sales to customers at the close of any fiscal or calendar quarter or at the
end of any fiscal or calendar year that do not comply with Pfizer’s Revenue
Recognition Guidelines for reporting of sales and income in appropriate fiscal
periods. All determinations of the appropriateness of sales by MWI shall be in
Pfizer’s discretion.


 


In
addition to the obligations set forth above related to PARTICIPATING CUSTOMERS,
MWI agrees as to all customers to undertake with Pfizer those efforts set forth
in Appendix II hereto.


 


5.             In consideration of MWI undertaking the
obligations set forth herein related to PARTICIPATING CUSTOMERS, Pfizer agrees
to pay to MWI the following service fees on sales to PARTICIPATING CUSTOMERS;


 


(a)  a Revenue Sharing Allowance (RSA) paid at a rate of (i)
9% on sales out for cattle, dairy and multi-species products to identified
PARTICIPATING CUSTOMERS who are producers, (ii) a Revenue Sharing Allowance
(RSA) paid at a rate of 9% on sales out for cattle, dairy and multi-species
products to identified PARTICIPATING CUSTOMERS who are veterinarians or dealers
and who take possession of the Products which are the subject of the sale for
which the RSA is to be paid, (iii) a Revenue Sharing Allowance (RSA) paid at a
rate of 5% on sales out for cattle, dairy and multi-species products to
identified PARTICIPATING CUSTOMERS who are veterinarians or dealers and who DO
NOT take possession of the Products which are the subject of the sale for which
the RSA is to be paid. The RSA is calculated on a product by product basis and
based on the product price contained in the SUGGESTED PRICE LIST. The RSA is contingent
on MWI fulfilling all conditions outlined in paragraph 4 of this Agreement.  The payments made pursuant to this paragraph 5
(a) are not payable for sales to anyone other than PARTICIPATING CUSTOMERS. The
RSA is net of any difference between MWI’s purchase price and the SUGGESTED
PRICE LIST price. Pfizer shall pay MWI a 4% RSA on MWI’s sales out to 2nd
tier distributors (which are listed on Schedule G) of (i) cattle, dairy and
multi-species products (which are listed on Schedule A) and (ii) the
non-biological products listed on Schedule C. MWI shall not receive any payment
RSA payment on sales of biological products listed on Schedule C. MWI shall not
be entitled to any payment of any RSA under this paragraph 5 for sales of SWINE
PRODUCTS to any SELECT SWINE PRODUCER or SELECT SWINE VETERINARIAN.


 


(b)  the rebates provided for on Schedule D, provided,
however, that sales to other distributors do not count towards the calculation
of sales to determine appropriate rebate level. 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. Any sales out by MWI during calendar year 2006 reported
after that will count towards 2007 incentives, in addition, MWI can earn the
CMP provided for in Schedule H.


 


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(c)  Pfizer shall have the right to audit shipping records of
MWI to confirm delivery to products to veterinarians, dealers or producers in
order to assure proper logistics fee payments under paragraph 1 and proper RSA
payments under paragraph 5 (a) above. Any material misrepresentations by MWI
related to paragraphs 1, 5 (a) (ii) or (iii) above and the party actually taking
possession of the products shall void any payments due under paragraphs 1 and 5
(b) above. In addition, MWI recognizes that the AVA program is designed as an
effective go to market approach to selling for the benefit of veterinarians who
add value in the transaction and for producers. Blatant abuse of the intended
structure of AVA (including, but not limited to, falsification of EDI data or
establishing false business entities or inserting other business entities that
add no commercial value to end users purely to obtain additional RSA payments)
will subject MWI to potential forfeiture of all or a portion of the year end
rebate provided for in Schedule D at the sole discretion of PFIZER.


 


(d)  The parties agree that MWI will provide to Pfizer on
request and within 48 hours proof of delivery on any suspicious (as determined
by Pfizer) EDI transaction. MWI agrees that Pfizer shall be entitled to audit,
either directly or through external auditors hired by Pfizer and upon reasonable
notice by Pfizer, MWI’s books and records for the purpose of determining the
accuracy of EDI data for Pfizer Product sales only communicated to Pfizer
through Covansys.


 


(e)  The parties agree that Pfizer will no longer
automatically credit MWI for returns of Products not sold in the calendar year
in which they are returned. Prior to issuing any appropriate credit Pfizer
shall be entitled to conduct a detailed manual review of sales data.


 


(f)  The parties
agree that Pfizer shall not be obligated to issue credits for any returns that exceed
the current average of select distributors as calculated by Pfizer unless such
returns are the subject of a recall or made at the request of Pfizer.


 


6.             Sales of Pfizer products to any
party other than a SELECT SWINE PRODUCER, SELECT SWINE VETERINARIAN or a
PARTICIPATING CUSTOMER for whom a SUGGESTED PRICE LIST has been incorporated
into this Agreement are not covered by this Agreement. Any transaction
involving cattle, dairy or multi-species products with any customer including a
PARTICIPATING CUSTOMER for which MWI has not been selected by that
PARTICIPATING CUSTOMER as the distributor are not covered by this Agreement


 


7.             MWI shall not be provided with any
rebate, discount or other compensation for products handled under this Agreement,
including any rebate, discount or compensation which would otherwise be due
under Pfizer’s spring, fall or other similar program. All sales by Pfizer to
MWI shall be at the then current Pfizer list price but subject to appropriate
credits in accordance with paragraph 2 (c). Pfizer shall have the right to
raise or change the price of any or all Products to MWI on 15 days notice.
Pfizer shall be free to limit sales of any or all Products to MWI in advance of
any price increase.


 


8.             The RSA payable hereunder on sales
from the SUGGESTED PRICE LIST, to PARTICIPATING CUSTOMERS and the logistics fee
shall be net of returns and constitute full and complete compensation for MWI
providing the EDI data and upholding the reputation of Pfizer in carrying out
the service of PARTICIPATING CUSTOMERS.


 


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9.             Pfizer may terminate this Agreement
at any time on fifteen (15) days notice in the event MWI takes any action that
harms the good will of Pfizer. All returns shall be approved by Pfizer and
subject to Pfizer’s Returned Goods Policy. MWI may not offset payment to Pfizer
of invoice amounts as credit for the fee payable hereunder. Pfizer shall make
monthly payment of appropriate fees to MWI.


 


10.           MWI and Pfizer agree that, under the
specific circumstances delineated herein, Pfizer, at Pfizer’s sole discretion,
may recoup the sums outstanding to it from MWI against those sums which may become
due from Pfizer to MWI, in that the obligations arise from mutual transactions.


 


A.           The
specific circumstances which will enable Pfizer to initiate recoupment are:


 


i.             MWI
becomes insolvent which shall be defined as:


 


(a)         the sum of MWI’s debts is greater than all of
MWI’s property (“Balance Sheet Test”); or


 


(b)        MWI is generally not paying its debts as they
come due; or


 


(c)         MWI has failed to act in good faith for a
period in excess of six months to resolve any outstanding invoice or purchase
order issues or reconciliations.


 


ii.            MWI
commences a liquidation of its operations by means of a sale of its assets in
their entirety or piecemeal.


 


iii.           MWI
ceases its business operations whether or not such cessation is voluntary or
involuntary.


 


iv.           MWI
files a proceeding pursuant to the U.S. Bankruptcy Code or any state court
proceeding, including an Assignment for the Benefit of Creditors.


 


11.           Nothing in this Agreement shall be
deemed to preclude MWI from negotiating a service fee or any other
consideration from any customer including PARTICIPATING CUSTOMERS for the
services (including those services specified hereunder or any other services
provided by MWI to any customer) provided by MWI.


 


12.           MWI shall distribute Pfizer 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.


 


13.           Nothing in this Agreement shall be
deemed to limit Pfizer’s ability to sell any product at any time to any
customer including PARTICIPATING CUSTOMERS or any other party. Transactions consummated
directly between Pfizer and any such customer or other party shall not qualify
for the fee payable under paragraph 5 above.


 


14.           MWI and Pfizer acknowledge that in
the performance of their duties hereunder each may obtain access to “Confidential
Information” (as defined below) of the other. MWI and Pfizer agree that during
the term of this Agreement and for a period of three (3) years after the
termination of this Agreement, 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 MWI’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.


 


15.           This Agreement shall be effective as
of the date first written above and shall continue in force until December 31,
2006. This Agreement may be terminated by either party upon thirty (30) days prior
written notice. Such termination may be without cause. This Agreement may be
terminated immediately by either party upon written notice in the event of a
material breach by the other.


 


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16.           This Agreement shall governed by the
laws of the State of New York applicable to contracts made and performed
therein. This Agreement is not assignable without the express written consent
of Pfizer, and may be modified or amended only in writing signed by the party
to be bound.


 


17.           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.


 


IN WITNESS WHEREOF, intending
to be legally bound, the parties have executed this Agreement.


 


 


	
  MWI
  Veterinary Supply Co.

  	
  Pfizer
  Inc.

  
	
   

  	
   

  
	
  By

  	
     /s/ Mary Pat Thompson

  	
   

  	
  By

  	
     /s/ Robert DiMarzo

  	
   

  
	
   

  	
  Mary Pat Thompson

  	
   

  	
   

  	
  Robert DiMarzo

  
	
   

  	
   

  	
   

  	
   

  	
  President,
  U.S. Operations

  
	
  Title

  	
    VP and CFO

  	
   

  	
   

  	
  Pfizer
  Animal Health

  
	
   

  	
   

  	
   

  	
   

  
	
  Date

  	
    3-23-2006

  	
   

  	
  Date

  	
    3-30-2006

  	
   

  
								



 


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