Sales Agency Agreement

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


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.


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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:


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"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


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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


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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.


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(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 app ...