Document:

exv10w4

 

EXHIBIT 10.4

CONFIDENTIAL MATERIALS OMITTED — ASTERISKS (*) DENOTE OMISSIONS

2007 Global Performance Bonus Plan

			
	I.	 	Introduction

          This 2007 Global Performance Bonus Plan (the “Plan”) contains highly confidential
information about the revenue and operations of Sapient Corporation and its consolidated
subsidiaries (individually or collectively, the “Company” or “Sapient”). This Plan may not be
shared with anyone outside of Sapient, and each person is required to keep this Plan and its
contents confidential at all times. Except as otherwise permitted by law, disclosure of this Plan
to anyone not an employee of Sapient is a violation of whichever of the following agreements has
been signed by the Participant: Sapient Nondisclosure, Nonsolicitation and Noncompete Agreement;
Agreement Re: Nondisclosure, Nonsolicitation and Noncompetition; Employment Agreement;
Confidentiality Agreement and/or any agreement between the Participant and Sapient pertaining to
nondisclosure of confidential information (collectively, “Employee NDA”).

			
	II.	 	Philosophy & Purpose

          The purpose of this Plan is to reward qualified, eligible Participants who achieve
certain Company, group and individual goals during a period when the Company and/or its Business
Units (“BUs”) have also achieved certain financial performance goals. This Plan is designed to:

	 	 ̈	 	Drive Winning Performance across the Company
	 
	 	 ̈	 	Promote a mindset of company success as well as BU/GSS team success
	 
	 	 ̈	 	Provide a clear connection between people’s everyday actions and company success
	 
	 	 ̈	 	Promote alignment with the Company’s Strategic Context
	 
	 	 ̈	 	Differentiate payout based on individual performance
	 
	 	 ̈	 	Provide for holistic assessment, taking into account various performance aspects,
including client satisfaction, revenue, client margin, recurring revenue, fostering
Strategic Context connection, morale, turnover, leadership, utilization, compliance
with the Company’s policies and procedures, etc.

          Receipt of a bonus under this Plan is not guaranteed, but rather depends on Company, group and
individual performance. During periods when the Company and BUs achieve their financial
performance goals, Participants will have the opportunity to earn a bonus. However, if achievement
of individual, group or Company performance falls short of expectations, Participants may qualify
for a limited bonus, or possibly no bonus, as determined by the Company in its sole discretion. For
the avoidance of doubt, nothing in this Plan entitles any Participant to a contractual right to any
bonus.

			
	III.	 	Effective Date

          This Plan is effective January 1, 2007, and covers the period from January 1, 2007
through December 31, 2007 (the “Plan Period”), and for the purpose of determining eligibility only
(as setout in Sections IV and IX below) through the day payouts are made under this Plan, in each
case, inclusive, unless modified or terminated earlier as provided for in this Plan. All prior
bonus plans have expired of their own terms or have been revoked and withdrawn. This Plan
supersedes all prior written or oral bonus plans, promises, agreements, practices, understandings,
negotiations and/or incentive arrangements.

 

 

			
	IV.	 	Eligibility

          A person who is eligible to participate in this Plan (a “Participant”) must meet the
following criteria during the Plan Period and from the end of the Plan Period through the date
payouts are made:

A. He or she must be assigned one of the following titles by Sapient: Associate, Senior
Associate, Specialist, Senior Specialist, Manager, Senior Manager, Director, Vice President,
Senior Vice President, Executive Vice President, and Executive Officer. In addition, people
participating in any other bonus plan are not eligible to participate in this Plan, except
as it applies to people participating in the 2007 Government Services Bonus Plan.

B. He or she must be employed in a position that is determined by Sapient to be
non-overtime-eligible (e.g. an exempt role)

C. He or she must be actively employed by Sapient in an eligible title during the entire
Plan Period and from the end of the Plan Period through the date any payout is made under
this Plan, except for people who are hired and commence employment with Sapient in 2007 (as
discussed below) and in certain other circumstances where a pro rata bonus may be paid (as
discussed below). A person who is hired and commences employment with Sapient during 2007
is eligible as a Plan Participant for a pro rata portion of any bonus or incentive deemed
earned and payable under this Plan by the Company, if he or she is hired and actively
working at Sapient on or before December 15, 2007 and he or she otherwise remains actively
employed by the Company through the date any payout is made under this Plan.
Notwithstanding anything to the contrary, in the event a person who is otherwise eligible
under this Plan is on an expatriate assignment or an assignment outside his or her home
office country, the Company may vary or change the terms of this Plan in its sole discretion
for that individual as it believes circumstances warrant, or the Company may in its sole
discretion assign the person to another plan. No contractors are eligible to participate in
this Plan, whether or not they have signed contracts with the Company, and regardless of
whether any court or administrative governmental body makes any kind of determination as to
their status as other than contractor;

D. He or she has complied and is complying with all of his or her obligations under his or
her Employee NDA or Employment Agreement, as the case may be;

E. He or she (i) has not received any loan or advance from Sapient, (ii) has not been paid
an excess draw from any prior bonus or incentive plans which remains unpaid as of the day
payouts are made under this Plan or (iii) does not have any outstanding repayment
obligations with respect to an expatriate assignment or tax equalization as of the day
payouts are made under this Plan, UNLESS he or she (a) has agreed in writing to regular
payroll deductions for repayment of the loan, advance or excess draw, and (b) prior to the
payout of any bonus or incentive under this Plan repays Sapient the full amount of the loan,
advance or excess draw, or in Sapient’s sole discretion agrees in writing to apply the
amount of any then-current bonus or incentive payout toward repayment of such loan, advance
or excess draw;

F. He or she is not an employee entitled to the protections of the (Indian) Payment of Bonus
Act, 1965 (as the same may be amended).

			
	V.	 	Plan Components

          The components of this Plan include: (A) funding of a pool available for bonuses based
on Company performance, and (B) distribution to individuals of any bonus pool made available to BUs
or GSS Teams based on team and personal performance against criteria determined by the Company,
BUs, and/or GSS Teams.

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 2

 

 

			
	A.	 	Funding and Allocation of Bonus Pool

1. Funding and Allocation Mechanisms. Funding and allocation of a bonus pool to BUs,
and GSS Teams and receipt of bonuses under this Plan are all contingent on the Company’s achieving
a satisfactory level of financial performance in the Plan Period. If the Company determines that
it can fund and allocate a pool for bonuses under this Plan, the Company determines in its sole
discretion the size of the pool. Any level of full or partial bonus pool funding will be
determined by the Company in its sole discretion. If the Company exceeds its annual operating
margin target, then the Company will determine in its sole discretion whether or not it will
increase bonus pool funding. In any event, *% of pre-bonus operating margin is the maximum amount
available for a bonus pool under this Plan.

a. Allocation to BU and GSS Teams. Whether or not the Business Units or GSS Teams
receive funding and allocation of a bonus pool under this Plan, if any, is contingent on the
Company’s 2007 achievement of operating margin, measured in dollars, against its 2007
operating margin target (the “Company Margin Component”). Once funded, the bonus pool will
be allocated to a BU in accordance with that respective BU’s performance against its 2007
profit targets. Allocation to the GSS teams will generally be in accordance with the
Company’s profit performance. Note that if total allocations and payouts would take Sapient
into a loss position or to a level of profitability determined unacceptable by the Company
in its sole discretion, then the Company will reduce funding and allocation and prorate such
reduction across the BUs accordingly. Also, BUs may not pay bonuses under this Plan in
excess of their funding and allocations.

b. Additional Funding and Allocation Information. The determinations of Company
operating margin profitability or loss (if any) shall be made by the Company in its sole
discretion. The Company, acting in its sole discretion, will set Company operating margin
dollar targets and contribution margin percent targets for the Plan Period.

     The CEO and CFO have the discretion to approve different revenue growth goals, a
different operating margin target for the Company and different contribution margin percent.
In such event, the applicable formulas in this Plan will be revised and this Plan amended
accordingly.

     After allocations, if any, have been made to BUs and GSS Teams, the amount of any
allocation remaining, if any, after calculation of individual distributions will then be
returned to the Company and may be used for discretionary bonuses to individuals in the
Company (any one or more BUs, or on any one or more GSS Teams, as determined by the Company
in its sole discretion); provided that such individual discretionary bonus payouts are
approved by the Compensation Committee of the Board of Directors.

2. Interim Payout. In the event that the Company makes an interim payout as determined at
the Company’s discretion, the funding and allocation to BU and GSS Teams and payouts to
Participants will be based on the Company’s progress toward 2007 financial goals and be made
generally in accordance with the terms of this Plan, except that Plan terms and conditions will
relate to the time period through the payout period’s effective date and provisions relating to
eligibility and employment termination will apply with respect to the date any payout is made,
rather than the date of payout for the Plan Period. Also, to be eligible for an interim payout, a
Participant must have started employment with the Company prior to January 1, 2007. In the event
that the Company does an interim payout, any amount paid to any Participant in connection with an
interim payout will be deducted from any bonus payout made under this Plan after the close of the
Plan Period.

3. Potential Scenario of No Funding or Allocation. Although the Company is optimistic that
it will operate profitably in 2007, the Company will not fund or allocate any bonus pool or pay any
bonuses under this Plan if the Company has an annual loss for 2007 (after accounting for bonuses
and including 2007 restructuring costs, if any), notwithstanding anything to the contrary and
regardless of the performance of any person, team, BU or GSS Team. The Company will consider
whether its financial performance justifies the funding of a pool available for payment of any
bonuses under this Plan. The determination of Company profitability or loss (if any) shall be made
by the Company in its sole discretion.

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 3

 

 

			
	B.	 	Distribution to Individuals

1. Target Bonus Opportunity Tracks. This Plan features three “tracks” at the level of
individual distributions based on Plan metrics. Participants in this Plan who are not Directors,
VPs or higher may be on Track A or Track B. Participants in this Plan who are Directors, VPs and
higher are on the Director/VP Track. Subject to funding and allocation to the applicable BU or GSS
Team, the range of individual bonus payouts is based on Track assignment and dependent on each
individual’s “Individual Payout Percentage” (as that term is defined below). Subject to funding
and allocation, target bonus opportunities for each of the tracks are as follows:

	 	•	 	Track A Participants have a target bonus opportunity of *% of base salary
	 
	 	•	 	Track B Participants have a target bonus opportunity of *% of base salary
	 
	 	•	 	Director/VP Track Participants have individual set amounts for their target
bonus opportunity (expressed in their local currency) and sometimes referred to in
this Plan as “Performance Incentive”.

When a Participant’s entry into this Plan becomes effective, he or she will be informed of his or
her applicable track, or for Directors and VPs, his or her Performance Incentive. When the base
salary used in the calculation of bonus payout, it is a Participant’s base salary in his or her
home office country, unless the applicable BU Lead or GSS Lead determines otherwise. Changes
between tracks are not generally permitted during the Plan Period except in the event of a
promotion or title change, in which event the Participant’s BU Lead or GSS Team Lead will determine
which track is appropriate for the Participant.

2. Assessment and Determination of Individual Performance Percentage Achieved. Subject to
funding and allocation to BUs and GSS Teams, distributions to Participants within those groups that
receive funding and allocation will be made based on a Participant’s Track assignment and his or
her respective BU Lead or GSS Team Lead’s assessment of the Participant’s performance in certain
categories, which may vary by title, and in some cases by individual. This assessment will be
reflected in his or her “Individual Performance Percentage” which, as detailed below, will become
part of the final bonus payout calculation.

a. Non-Business Lead Participants. For Participants on the Director/ VP track, it
is anticipated that BU Leads and GSS Team Leads will establish performance criteria and/or
goals for each such Participant who is not a Business Lead (“Non-BL Participant”) in their
respective groups. Specific metric targets are not required, and the criteria and/or goals
may be set by title groups or at the individual level. The performance criteria and/or
goals for these Participants may include the following:

	 	 ̈	 	Client Satisfaction
	 
	 	 ̈	 	Client and/or Engagement Recognized Revenue
	 
	 	 ̈	 	Client Contribution Margin and/or Engagement Margin
	 
	 	 ̈	 	Utilization
	 
	 	 ̈	 	People Satisfaction and Turnover
	 
	 	 ̈	 	Fostering Strategic Context connection
	 
	 	 ̈	 	Leadership
	 
	 	 ̈	 	Winning Performance Score
	 
	 	 ̈	 	Compliance with the Company’s policies and procedures
	 
	 	 ̈	 	Team’s performance to budget

     BU Leads and GSS Team Leads may also establish other performance criteria and/or goals
for Non-BL Participants on the Director/ VP track in their BUs or on their teams,
respectively. In general, the Winning Performance Scores of Participants on Track A and B
will play a significant part in the assessment and determination of such the Individual
Performance Percentage. This, as well as other performance criteria such as utilization and
compliance with company policies and procedures, will ensure that individual assessment is
holistic (e.g., includes metrics as well as team building, leadership, fostering our
Strategic Context, building a great business, etc.) and discretionary, not formulaic
or based solely on targets or metrics.

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 4

 

 

     Individual performance criteria and/or goals for Non-BL Participants are subject to
change in the BU Lead’s or GSS Team Lead’s sole discretion. Subject to the terms and
conditions of this Plan, a BU Lead, or GSS Team Lead may assign various levels of priority
to the performance criteria and/or goals in the list above (and other criteria and/or goals
as determined by the BU Lead or GSS Team Lead).

     After the close of the Plan Period, BU Leads and GSS Team Leads will assess each
person’s performance against the criteria and/or goals set by the BU Lead or GSS Team Lead
and assign that Participant a percentage representing his or her level of achievement (the
“Individual Performance Percentage”).

     The average bonus payout, if any, for more senior people (managers and above) will in
general closely correlate to the overall performance of that BU or GSS team. Further,
average bonus payouts at junior career stages across the company will be in line with the
company average.

b. Business Lead Participants. A Business Lead (BL) is a Company employee who leads
one of the Company’s business teams, denoted internally as an animal or color team. Each BL
will be given a individual profit target which his or her respective business team is
expected to generate during 2007. A BL Participant’s bonus will largely be determined by
the actual profit amount of his/ her business team relative to the target profit amount. At
the end of the Plan Period, the respective BU Lead will determine a VFactor score for each
BL (from *% to *%) in his discretion based on one or more of the following factors:

	 	•	 	EM revenue in the BL’s team
	 
	 	•	 	SAP revenue in the BL’s team
	 
	 	•	 	Quarter to Quarter average sequential growth rate targets (starting Q4 2006)
	 
	 	•	 	BU turnover
	 
	 	•	 	BU Client Satisfaction
	 
	 	•	 	BU DSO
	 
	 	•	 	Winning Performance Score

The VFactor will then be included in the bonus calculation as set forth in the payout
formula provided in Section V.B.4.b. below.

3. Further Information on Performance Criteria. All Participants will be evaluated on
their Winning Performance Score (WPS) during the Plan Period. In addition to the WPS, BU Leads and
GSS Team Leads may set other performance criteria and/or goals for one or more Participants, as the
BU Leads and GSS Team Leads determine is appropriate for their units, the business of the Company
and the applicable Participants. For example, GSS Team members may be evaluated on their team’s
performance to budget. Executive leadership may also set performance targets and/or goals for
Executive VPs and Sr. VPs that include the criteria listed in this section as well as other
performance targets and/or goals.

4. Individual Distributions.

a. Non-BL Participants. Provided that a BU or GSS Team receives bonus
funding and an allocation, and subject to pool and allocation size, a Non-BL Participant’s bonus will be calculated based
on his or Individual Payout Percentage (determined by the applicable BU or GSS Lead in
accordance with the performance criteria set forth above), the applicable % of Company or BU
Funding, and the Target Bonus Amount (e.g. for a person on Track A, the “Target Bonus
Amount” would be *% of his/her base salary) as follows:

Bonus Payout = (Target Bonus Amount) x (Company or BU Funding Percentage) x
(Individual Performance Percentage)

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 5

 

 

If the bonus pool is not fully funded, or if a Participant’s BU or GSS Team
receives less than full allocation, then payouts will be proportionately lower, even if
individual performance is at or above *%.

b. BL Participants. Provided that a BU or GSS Team receives bonus funding
and an allocation, and subject to pool and allocation size, a BL Participant’s bonus will be calculated based on
the following formula:

Bonus Payout = (Target Bonus Amount) x (BU Funding Percentage) x (Percentage
Achievement of Profit Target) x (*% + VFactor)

If a BL Participant’s BU receives less than full allocation, then payouts will be
proportionately lower, even if a BL Participant’s achievement of his or her profit
target is at or above *%.

			
	VI.	 	Timing of Payouts; Prorations; Currency

			
	A.	 	Timing

          Following the closing of the Plan Period, a number of calculations need to be made by the
Company to determine individuals’ bonus or incentive results. Accordingly, any annual payouts will
be made in the Sapient pay period following completion of the calculations.

			
	B.	 	Prorations

          If a prorated bonus or incentive is payable, the following rule applies: Proration will
be calculated on the basis of 0.083 for each full calendar month of eligibility, as outlined in the
following table:

	 	 	 	 	 
	# of Months	 	Proration
	1
	 	 	0.083	 
	2
	 	 	0.167	 
	3
	 	 	0.250	 
	4
	 	 	0.333	 
	5
	 	 	0.417	 
	6
	 	 	0.500	 
	7
	 	 	0.583	 
	8
	 	 	0.667	 
	9
	 	 	0.750	 
	10
	 	 	0.833	 
	11
	 	 	0.917	 
	12
	 	 	1.000	 

          To the extent any bonuses or incentives are paid under this Plan, if a date is not otherwise
specified in this Plan for a proration, then for a month to be included in a proration calculation,
the event giving rise to the proration must occur on or before the 15th of a month. If
such event occurs after the 15th of a month, the next calendar month will be considered
the first month of the occurrence for purposes of proration. In the event of any proration of
year-to-date amounts, any previous payouts will be deducted.

          The circumstances that may warrant pro rata payment include but are not limited to:

	 	•	 	Base compensation changes;
	 
	 	•	 	Target bonus opportunity changes;

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 6

 

 

	 	•	 	Bonus Track changes;
	 
	 	•	 	Commencement of employment and new entrance into this Plan;
	 
	 	•	 	Certain title changes (as described below);
	 
	 	•	 	Certain re-assignment among BUs (as described below); and
	 
	 	•	 	Qualified leave of absence, disability or death of Participant (as discussed below).

			
	C.	 	Currency

          All currency figures in this Plan are expressed in U.S. dollars, unless stated otherwise
in this Plan, but payout calculations and payments are done in local currency. In performing
currency conversions, if any, Sapient will apply commercial exchange rates determined by Sapient in
its sole discretion.

			
	VII.	 	Title Changes

          A person ceases to participate in this Plan if he or she changes to a Sapient title or
job that is not eligible under this Plan. If a person remains employed by the Company but moves to
a title or job that is not eligible under this Plan, then the time the person is considered
eligible under this Plan will be pro-rated subject to the proration rules of this Plan. If a
Participant remains on this Plan for the entire Plan Period but during that time switches to a
different title also covered by this Plan, then the time spent in each title will be prorated, as
applicable, subject to the proration rules of this Plan.

          If a Participant’s regular BU assignment changes within the Plan Period (as approved by
appropriate BU management and recorded in the Company’s HRMS system), at the end of the Plan
Period, then the time spent in each BU will be prorated subject to the proration rules of this
Plan.

			
	VIII.	 	Termination of Employment

			
	A.	 	Effect of Termination

          Participants must be employed by the Company in an eligible title through the entire
Plan Period and through the day payouts are made for the Plan Period to receive a payout under this
Plan, subject to applicable local law. Therefore, employees whose employment terminates for any
reason, whether voluntarily or involuntarily, before the end of the Plan Period or the day payouts
are made for the Plan Period are not eligible for any payout under this Plan, subject to applicable
local law.

			
	B.	 	No Extension

          A Participant’s right to receive payment or participate in this Plan shall not be extended
beyond his or her last day of active employment because he or she receives pay in lieu of notice in
accordance with his or her Employment Agreement.

			
	IX.	 	Leaves of Absence and Short Term Disability

          If a Participant takes an approved leave of absence (including a medical leave under the
Company’s Short-Term Disability Program) during the Plan Period for fewer than 30 days, no
adjustment will be made in the payout calculation or in the Participant’s metrics.

          If such leave of absence extends for more than 30 days during the Plan Period, the Participant
may be eligible for a pro rated payout calculated in accordance with the above table and the other
terms of this Plan as permitted by local law. All payments (if any) will be paid on the same date
that active Participants receive payment.

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 7

 

 

          For purposes of determining whether the payment may be pro rated, a leave of absence begins on
the date that the leave of absence begins as noted in the Company’s records (or in the case of
short term disability, on the same date that short term disability benefits begin).

			
	X.	 	Death and Long Term Disability

          In the event of long-term disability or death, a pro rated payment based on the length of
service during the Plan Period will be paid in accordance with the above table and other terms of
this Plan. All such payments (if any) will be paid on the same date that active Participants
receive payment or, at the Company’s discretion, at an earlier date. “Long-term disability” is
defined as eligibility to receive long-term disability benefits under the Company’s LTD Policy.
For proration purposes, active service ends when the employee is no longer paid regular wages
through payroll for work performed.

			
	XI.	 	Loans, Advances or Draws

          Loans or advances against potential payments will not be made under this Plan. If a
Participant has an outstanding advance or loan from the Company or has an outstanding obligation to
repay to the Company money related to an expatriate assignment or tax equalization, all or a
portion of any bonus or incentive payout under this Plan may be first applied to the outstanding
balance of such advance, loan or obligation related to an expatriate assignment or tax
equalization, as permitted by law. Upon request by the Company, any Participant with such an
outstanding loan, advance or other obligation will sign and deliver a written instrument
authorizing such application of any payout.

			
	XII.	 	Forms of Payment

          As permitted by law, Sapient may, with the agreement of a Participant, pay a bonus or
incentive in whole or in part, in cash, stock options, stock, warrants or other equity instruments
(or any combination thereof), in such amounts and under such terms and conditions to which Sapient
and a Participant may agree.

			
	XIII.	 	Plan Administration and Management

          A Plan Committee will administer this Plan. The Plan Committee will be composed of the
CEO, CFO, General Counsel and People Success lead. The Plan Committee will have full and absolute
discretion with respect to administration of all aspects of this Plan, including, without
limitation, determining Plan payouts, interpreting this Plan and ruling on special situations.
Further, the Plan Committee, in its sole discretion and with or without notice or cause, may, to
the extent authorized by the Compensation Committee of the Board of Directors of the Company (the
“Compensation Committee”), modify, amend or terminate this Plan or take other actions affecting
Plan Participants without advance notice to Participants of such actions. While this Plan will be
administered in accordance with applicable law, nothing in this Plan is a guarantee of current or
future compensation or income.

          The Company’s books and records are the exclusive source of data for administration of this
Plan. The Plan Committee’s interpretation of the books and records is final.

          If a Participant wants to dispute a bonus or incentive payout or calculation decision
affecting the Participant or any other decision affecting the Participant, that Participant must
request reconsideration in writing. The request must be given to the People Success Lead within 60
days after the date of the disputed decision.

          By participating in this Plan, each Participant agrees that a failure to properly request
reconsideration of any payout or calculation decision or other decision within this 60-day period
constitutes agreement with such decision made by the Company. If the reconsideration request is
properly submitted, the People Success Lead will resolve the disputed decision upon review of the
circumstances and of the available documentation and submit his

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 8

 

 

or her initial determination to the Plan Committee for review. The decision of the People
Success Lead as to such dispute will be final.

			
	XIV.	 	Miscellaneous

          Unless required by law or court order, a Participant may not assign this Plan or any
bonus or incentive payment or right to payment.

          If a provision of this Plan is found invalid, illegal or unenforceable, the other provisions
of this Plan shall remain in full force and effect, and such invalid, illegal or unenforceable
provision shall be reformed as necessary to make it valid, legal and enforceable to the maximum
extent possible under law (or, if such reformation is impossible, such provision shall be severed
from this Plan).

          All payouts under this Plan are anticipated to be made within the first quarter of the year
following the

          expiration of the Plan Period (but in any event within the calendar year following the expiration
of the Plan Period) and are subject to applicable withholdings and deductions as required by law.

          If employed by Sapient Corporation, Sapient Government Services, Inc., or Sapient Private
Limited, the

          Participant continues to be an “at will” employee, and Sapient has the right to terminate a
Participant’s employment and/or participation in the Plan at any time, with or without cause or
prior notice.

          If employed by Sapient Canada Inc., Sapient GmbH, Sapient Limited or Sapient Netherlands B.V.,
the Participant continues to be employed in accordance with the terms of his/her employment
agreement (the “Employment Agreement”). Sapient has the right to terminate a Participant’s
employment and/or participation in this Plan at any time, with or without cause or prior notice,
subject to the terms of the Participant’s Employment Agreement and as permitted by local applicable
law.

          This Plan supersedes all prior understandings, negotiations and agreements, whether written or
oral, between each individual Participant and the Company as to the subject matter covered by this
Plan. In the event of any conflict between this Plan and any presentations, documents, statements
or other communications concerning the subject matter of this Plan, this Plan shall control. This
Plan describes the sole and exclusive bonuses or incentives the Company is offering to Participants
during the Plan Period; provided, however, that nothing in this Plan will prevent the Company from
paying any individual a discretionary bonus or incentive payment at any time or from time to time
if authorized in advance by the Compensation Committee. The Company has no obligation to pay
anyone a discretionary bonus or incentive at any time.

          No person who is not a Participant in this Plan shall have any right under the Contracts
(Rights of Third Parties) Act 1999 to enforce any term or provision of this Plan.

			
	 	 	 
	SAPIENT CONFIDENTIAL
	 	Page 9exv10w12

 

EXHIBIT 10.12

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH THE SYMBOL
“[***]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECRETARY OF THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING CONFIDENTIAL TREATMENT
UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934.

SHAREHOLDER AGREEMENT

dated as of May 17, 2007

among

INVERNESS MEDICAL SWITZERLAND GMBH,

PROCTER & GAMBLE INTERNATIONAL OPERATIONS, SA

and

SPD SWISS PRECISION DIAGNOSTICS GMBH

 

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page	 
	Article 1 General Provisions
	 	 	2	 
	 
	 	 	 	 
	Section 1.1 Term
	 	 	2	 
	 
	 	 	 	 
	Article 2 Shareholders
	 	 	2	 
	 
	 	 	 	 
	Section 2.1 Shareholders
	 	 	3	 
	Section 2.2 Rights and Powers of Shareholders; No Management
	 	 	3	 
	Section 2.3 Transactions with Affiliates
	 	 	3	 
	Section 2.4 Shareholder Voting Rights
	 	 	3	 
	Section 2.5 Shareholders’ Meetings
	 	 	3	 
	Section 2.6 Telephonic Meetings
	 	 	3	 
	Section 2.7 Notice of Meetings
	 	 	4	 
	Section 2.8 Unanimous Shareholder Consent
	 	 	4	 
	Section 2.9 Written Consent
	 	 	5	 
	Section 2.10 General Voting Obligation
	 	 	5	 
	 
	 	 	 	 
	Article 3 Board of Managers
	 	 	5	 
	 
	 	 	 	 
	Section 3.1 Board of Managers
	 	 	5	 
	Section 3.2 Managers
	 	 	6	 
	Section 3.3 Chairperson
	 	 	6	 
	Section 3.4 Meetings of Board
	 	 	6	 
	Section 3.5 Notice of Meetings
	 	 	6	 
	Section 3.6 Quorum
	 	 	7	 
	Section 3.7 Agendas; Vote Required at Meetings
	 	 	7	 
	Section 3.8 Special Meetings
	 	 	9	 
	Section 3.9 Action Without a Meeting
	 	 	9	 
	Section 3.10 Compensation
	 	 	9	 
	Section 3.11 Observation Rights
	 	 	9	 
	 
	 	 	 	 
	Article 4 Officers
	 	 	9	 
	 
	 	 	 	 
	Section 4.1 Officers
	 	 	9	 
	Section 4.2 Management in Accordance with Budget
	 	 	10	 
	Section 4.3 Management Team
	 	 	10	 
	Section 4.4 Duties and Authority of Officers
	 	 	10	 
	Section 4.5 Initial Chief Executive Officer and Chief Financial Officer
	 	 	11	 
	 
	Article 5 Capital Contributions
	 	 	11	 
	 
	Section 5.1 Capital Contributions
	 	 	11	 
	Section 5.2 Additional Capital Contributions
	 	 	11	 
	Section 5.3 No Interest on Capital
	 	 	12	 
	Section 5.4 Return of Capital
	 	 	12	 
	Section 5.5 No Liability of Shareholders
	 	 	12	 

 

 

	 	 	 	 	 
	 	 	Page	 
	Section 5.6 Shareholders’ Capital Accounts
	 	 	12	 
	Section 5.7 Allocation of Profit or Loss
	 	 	13	 
	Section 5.8 Banking; Investments
	 	 	16	 
	Section 5.9 Distributions
	 	 	16	 
	Section 5.10 Advance in Excess of Capital Contribution
	 	 	16	 
	 
	 	 	 	 
	Article 6 Accounting, Tax and Reporting Matters
	 	 	16	 
	 
	 	 	 	 
	Section 6.1 Books; Fiscal Year
	 	 	16	 
	Section 6.2 Reports
	 	 	16	 
	Section 6.3 Company Information
	 	 	17	 
	Section 6.4 Records; Internal Controls
	 	 	17	 
	Section 6.5 Consents of Independent Auditors
	 	 	18	 
	Section 6.6 Tax Returns
	 	 	18	 
	Section 6.7 Tax Characterization
	 	 	18	 
	Section 6.8 Tax Matters Partner
	 	 	19	 
	Section 6.9 Tax Elections
	 	 	19	 
	Section 6.10 Withholding
	 	 	19	 
	 
	 	 	 	 
	Article 7 Transfers; Admission; Liquidation
	 	 	20	 
	 
	 	 	 	 
	Section 7.1 Transfers
	 	 	20	 
	Section 7.2 Effect of Transfers
	 	 	23	 
	Section 7.4 PGIO’s Option
	 	 	23	 
	 
	 	 	 	 
	Article 8 Indemnification
	 	 	23	 
	 
	 	 	 	 
	Section 8.1 [Reserved]
	 	 	23	 
	Section 8.2 Indemnification
	 	 	23	 
	 
	 	 	 	 
	Article 9 Dissolution; Liquidation
	 	 	25	 
	 
	 	 	 	 
	Section 9.1 Dissolution
	 	 	25	 
	Section 9.2 Distribution Upon Dissolution
	 	 	25	 
	Section 9.3 Time For Liquidation
	 	 	26	 
	Section 9.4 Liquidation And Deletion of Entry in Commercial Register
	 	 	26	 
	 
	 	 	 	 
	Article 10 [Reserved]
	 	 	26	 
	 
	 	 	 	 
	Article 11 Finances
	 	 	26	 
	 
	 	 	 	 
	Section 11.1 Business Plan and Budget
	 	 	26	 
	Section 11.2 Reserves
	 	 	27	 
	Section 11.3 Additional Capital
	 	 	27	 
	 
	 	 	 	 
	Article 12 New Business
	 	 	28	 
	 
	 	 	 	 
	Section 12.1 Potential Expansion of Field
	 	 	28	 
	Section 12.2 New Business
	 	 	28	 
	Section 12.3 Purchase; Development by Shareholder
	 	 	30	 
	Section 12.5 Intellectual Property License Back
	 	 	32	 
	 
	 	 	 	 
	Article 13 Non-Compete; Confidentiality
	 	 	33	 
	 
	 	 	 	 
	Section 13.1 Non-Compete
	 	 	33	 

iii

 

	 	 	 	 	 
	 	 	Page	 
	Section 13.2 Confidentiality
	 	 	34	 
	Section 13.3 Non-Solicitation
	 	 	35	 
	 
	 	 	 	 
	Article 14 Material Breach; Bankruptcy; Withdrawal
	 	 	35	 
	 
	 	 	 	 
	Section 14.1 Material Breach
	 	 	35	 
	Section 14.2 Bankruptcy
	 	 	36	 
	Section 14.3 Effect of Material Breach or Bankruptcy
	 	 	36	 
	 
	 	 	 	 
	Article 15 Disputes Among Shareholders
	 	 	37	 
	 
	 	 	 	 
	Section 15.1 Management Mediation
	 	 	37	 
	Section 15.2 Arbitration
	 	 	38	 
	Section 15.3 Costs
	 	 	38	 
	 
	 	 	 	 
	Article 16 Miscellaneous
	 	 	39	 
	 
	 	 	 	 
	Section 16.1 Notices
	 	 	39	 
	Section 16.2 Definitions
	 	 	40	 
	Section 16.3 Descriptive Headings; Certain Interpretations
	 	 	49	 
	Section 16.4 Assignment
	 	 	50	 
	Section 16.5 Entire Agreement
	 	 	50	 
	Section 16.6 No Third-Party Beneficiaries
	 	 	50	 
	Section 16.7 Counterparts
	 	 	50	 
	Section 16.8 Governing Law
	 	 	50	 
	Section 16.9 Severability
	 	 	51	 
	Section 16.10 Amendments; Waiver
	 	 	51	 
	Section 16.11 Further Assurances
	 	 	51	 
	Section 16.12 Amendment to CO
	 	 	51	 
	Section 16.13 Relationship
	 	 	51	 
	Section 16.14 Equitable Remedies
	 	 	52	 
	Section 16.15 Fees and Expenses
	 	 	52	 
	Section 16.16 Ancillary Restraints
	 	 	52	 
	 
	 	 	 	 
	Schedules:
	 	 	 	 
	 
	 	 	 	 
	Schedule I: Shareholders; Shares; Capital Contributions
	 	 	 	 
	Schedule II: Initial Business Plan
	 	 	 	 
	Schedule III: Restricted Third Parties
	 	 	 	 
	Schedule 12.2(a): Timing of Presentation and Implementation Parameters
	 	 	 	 
	Schedule 13.1(a)(2): Non-Compete Exception — P&G existing business
	 	 	 	 
	Schedule 13.1(a)(3): Non-Compete Exception — IMS Existing Business
	 	 	 	 
	Schedule 16.16
***
	 	 	 	 

 

			
	***	 	Represents text omitted pursuant to a request
for confidential treatment. The omitted material has been filed
separately with the Securities and Exchange Commission.

iv

 

Index

	 	 	 	 	 
	Accounting Period
	 	 	38	 
	Acquiring Shareholder
	 	 	29	 
	Adjusted Capital Account Deficit
	 	 	39	 
	Affiliate
	 	 	39	 
	Agreement
	 	 	1	 
	Allocated Value
	 	 	21	 
	Arbitration Request
	 	 	36	 
	Articles of Incorporation
	 	 	39	 
	Bankrupt Shareholder
	 	 	34	 
	Beneficial Owner
	 	 	39	 
	Board of Managers
	 	 	5	 
	Breaching Shareholder
	 	 	34	 
	Business Day
	 	 	39	 
	Business Plan and Budget
	 	 	7	 
	Capital Account
	 	 	11	 
	Capital Contribution
	 	 	39	 
	Cardiology Field
	 	 	40	 
	Carve Out Business
	 	 	32	 
	Chairperson
	 	 	5	 
	Change of Control
	 	 	40	 
	CO
	 	 	41	 
	Code
	 	 	41	 
	Company
	 	 	1	 
	Company Minimum Gain
	 	 	41	 
	Company to IMA License Agreement
	 	 	41	 
	Company to P&G License Agreement
	 	 	41	 
	Consumer Channel
	 	 	41	 
	Consumer Diagnostics Business
	 	 	1	 
	Contracting Party
	 	 	3	 
	Debt
	 	 	41	 
	Depreciation
	 	 	41	 
	Determination Date
	 	 	21	 
	Developing Shareholder
	 	 	29	 
	Diabetes Field
	 	 	41	 
	Distributable Cash
	 	 	41	 
	Excluded Fields
	 	 	42	 
	Fair Market Value
	 	 	42	 
	Field
	 	 	42	 
	Financial Investor
	 	 	42	 
	Fiscal Year
	 	 	42	 
	GAAP
	 	 	42	 
	Governmental Entity
	 	 	42	 
	Gross Asset Value
	 	 	42	 
	IMA
	 	 	1	 
	IMA License Agreement
	 	 	5	 
	IMS
	 	 	1	 
	IMS Contribution Agreement
	 	 	1	 
	IMS’s Valuation
	 	 	29	 
	Indemnified Party
	 	 	22	 
	Initial Business Plan and Budget
	 	 	25	 
	Initial Period
	 	 	43	 
	Initial Term
	 	 	2	 
	Intellectual Property
	 	 	43	 
	Intellectual Property Rights
	 	 	44	 
	Interim Third Party Business
	 	 	27	 
	Kunz
	 	 	1	 
	Lanter
	 	 	1	 
	Law
	 	 	44	 
	Legal Proceeding
	 	 	44	 
	Lien
	 	 	44	 
	Liquidation Agent
	 	 	24	 
	Majority of Managers
	 	 	6	 
	Manager
	 	 	5	 
	Material Adverse Effect
	 	 	44	 
	Material Breach
	 	 	44	 
	Net Losses
	 	 	44	 
	Net Profits
	 	 	44	 
	New Business
	 	 	26	 
	Non-Breaching Indemnitee
	 	 	34	 
	Non-Breaching Shareholder
	 	 	35	 
	Nonrecourse Deductions
	 	 	45	 
	Nonrecourse Liability
	 	 	45	 
	Non-Selling Shareholder
	 	 	21	 
	Non-Transferring Shareholder
	 	 	19	 
	Option Agreement
	 	 	45	 
	Ordinary Course Capex Reserve
	 	 	25	 
	P&G License Agreement
	 	 	5	 
	Participation Notice
	 	 	19	 
	Percentage Interest
	 	 	45	 
	Person
	 	 	45	 
	PGIO
	 	 	1	 
	PGIO Contribution Agreement
	 	 	1	 
	PGIO’s Valuation
	 	 	29	 
	Purchase Agreement
	 	 	1	 
	Purchased CD Business
	 	 	1	 
	Regulatory Allocations
	 	 	14	 
	Renewal Term
	 	 	2	 
	Representative
	 	 	45	 
	Required Working Capital Balance
	 	 	25	 
	Restricted Third Party
	 	 	19	 

v

 

	 	 	 	 	 
	Sale Event
	 	 	45	 
	Sale Notice
	 	 	21	 
	Schedule
	 	 	45	 
	Securities Act
	 	 	17	 
	Securities Filings
	 	 	15	 
	Selling Shareholder
	 	 	20	 
	Share
	 	 	46	 
	Share Capital
	 	 	46	 
	Share Capital Percentage
	 	 	46	 
	Share Transfer Agreement
	 	 	1	 
	Shareholder In-License Agreement
	 	 	20	 
	Shareholder In-License Agreements
	 	 	46	 
	Shareholder New Business
	 	 	26	 
	Shareholder New Business Proposal
	 	 	27	 
	Shareholder Nonrecourse Debt
	 	 	46	 
	Shareholder Nonrecourse Debt Minimum Gain
	 	 	46	 
	Shareholder Nonrecourse Deductions
	 	 	46	 
	Shareholders
	 	 	1	 
	Strategic Investor
	 	 	46	 
	Subsidiary
	 	 	46	 
	Tag-Along Election
	 	 	20	 
	Tax Matters Partner
	 	 	17	 
	Tax Year
	 	 	46	 
	Term
	 	 	2	 
	Third Party
	 	 	46	 
	Third Party New Business
	 	 	26	 
	Transaction Agreements
	 	 	46	 
	Transfer
	 	 	47	 
	Transferring Shareholder
	 	 	19	 
	Treasury Regulations
	 	 	47	 
	US JV
	 	 	47	 
	US JV LLC Agreement
	 	 	47	 
	Waiver
	 	 	48	 

vi

 

SHAREHOLDER AGREEMENT, dated as of May 17, 2007 (this “Agreement”),
among Inverness Medical Switzerland GmbH, a Swiss company (“IMS”),
Procter & Gamble International Operations, SA, a Swiss corporation
(“PGIO” and together with IMS, the “Shareholders”) and SPD Swiss
Precision Diagnostics GmbH, a Swiss company (the “Company”).

Introduction

     The Company was formed on December 19, 2006, by Dominique Kunz (“Kunz”) and Marco Lanter
(“Lanter”), each a resident of Switzerland, on behalf of IMS. In connection with the formation of
the Company, each of Kunz and Lanter, on behalf of IMS, contributed CHF 10,000 to the Company and
as consideration for such contribution received one quota (one Share of the Company, representing,
immediately following such contribution, 50% of the outstanding Shares of the Company).

     Effective December 21, 2006, Kunz and IMS entered into a share transfer agreement, pursuant to
which Kunz sold to IMS and IMS purchased from Kunz, one Share of the Company for a purchase price
of CHF 10,000. Following the consummation of such sale and purchase, each of Lanter, on behalf of
IMS, and IMS owned one quota (one Share of the Company, representing 50% of the outstanding Shares
of the Company).

     On or prior to the date hereof, Lanter, on behalf of IMS, and PGIO entered into a Share
Transfer Agreement (the “Share Transfer Agreement”), pursuant to which Lanter sold and PGIO
purchased the Share of the Company owned by Lanter, on behalf of IMS, for a purchase price of CHF
10,000. Immediately following such sale and purchase, each of IMS and PGIO owned 50% of the
Company’s outstanding Shares.

     Inverness Medical Innovations, Inc, a Delaware corporation (“IMA”), and certain of its
Subsidiaries (including IMS) are in the business of human diagnostics and/or monitoring including
developing, manufacturing, marketing, selling and distributing human diagnostics and monitoring
products for sale and distribution through over-the-counter channels, including retail outlets and
emerging channels located in such retail outlets (the “Consumer Diagnostics Business”).

     On or prior to the date hereof, PGIO and IMS entered into an Amended and Restated Asset
Purchase Agreement (the “Purchase Agreement”) pursuant to which PGIO has agreed to purchase for
cash consideration from IMS and certain of its Affiliates certain assets of the Consumer
Diagnostics Business (the “Purchased CD Business”) on terms and conditions set forth therein. On
or prior to the date hereof, PGIO, IMS and the Company entered into a PGIO Contribution Agreement
(the “PGIO Contribution Agreement”) pursuant to which PGIO has agreed to contribute to the Company
the Purchased CD Business and cash in the amounts of CHF 990,000 and $11,269,050. In consideration
for PGIO’s contribution of CHF 990,000, PGIO’s share capital in the Company will be increased to
CHF 1,000,000.

     On or prior to the date hereof, IMS, PGIO and the Company entered into an Amended and Restated
Contribution Agreement (the “IMS Contribution Agreement”), pursuant

 

 

to which IMS has agreed (a)
subject to the exceptions set forth in the IMS Contribution Agreement, to contribute to the Company
certain assets of the Consumer Diagnostics Business described in the IMS Contribution Agreement,
and the Company will assume certain liabilities of the Consumer Diagnostics Business, as set forth
in the IMS Contribution Agreement; (b) to contribute to the Company cash in the amounts of CHF
990,000 and $11,269,050; and (c) to contribute a promissory note in favor of the Company in an
original principal amount of $22,326,000. In consideration for IMS’s contribution of CHF 990,000,
IMS’s share capital in the Company will be increased to CHF 1,000,000. Immediately after the
Closing (as defined in the IMS Contribution Agreement), IMS and PGIO shall each own 50% interest in
the Company.

     The Shareholders desire to enter into this Agreement for the purpose of regulating certain
aspects of the Shareholders’ relationships with regard to the Company and each other.

     Certain capitalized terms have the meanings assigned to them in Section 16.2 or as otherwise
provided in this Agreement.

     For good and valuable consideration, the parties, intending legally to be bound, hereby agree
as follows:

ARTICLE 1

General Provisions

     Section 1.1 Term. This Agreement shall enter into effect as of the date hereof, and
continue for an initial period of 25 years (the “Initial Term”), or until the earlier dissolution
of the Company as provided by its Articles of Incorporation and by Law. The Initial Term shall
automatically be renewed for successive terms of 10 years (each such term being a “Renewal Term”)
unless either Shareholder gives written notice not to renew the Initial Term or any Renewal Term
three years prior to the expiration of the Initial Term or any Renewal Term. The Initial Term and
any Renewal Term shall be referred to herein as a “Term.”

ARTICLE 2

Shareholders

     Section 2.1 Shareholders. Each of the Persons listed on Schedule I hereof is
a Shareholder of the Company. The rights and liabilities of the Shareholders shall be as provided
in the CO, except as is otherwise expressly provided herein. Whenever the Shares and Capital
Contributions of Shareholders are changed in accordance with this Agreement, Schedule I
shall be amended to record any such changes. However, the failure to amend Schedule I
shall not impair the effectiveness of any change in Shares effected in accordance with this
Agreement.

     Section 2.2 Rights and Powers of Shareholders; No Management. The Shareholders shall
not have any right or power to act for or bind the Company in any way, except for the rights and
powers of the Shareholders specifically set forth in this Agreement, the inalienable rights and
powers of Shareholders set forth in Article 810 of the CO and, to the extent not inconsistent with
this Agreement, any other rights and powers provided to the Shareholders in the CO.

2

 

     Section 2.3 Transactions with Affiliates. Each Shareholder acknowledges and agrees
that the conduct of the Company’s business may involve business dealings and undertakings with
Shareholders and their respective Affiliates. With respect to any transaction between the Company
on the one hand and a Shareholder or its Affiliate (a “Contracting Party”) on the other hand, all
negotiations on behalf of the Company with respect to such transactions will be conducted by a
Manager representing a Shareholder who is not a Contracting Party (or by an officer of the Company
approved by such Shareholder to conduct such negotiations or take such actions).

     Section 2.4 Shareholder Voting Rights. No Shareholder has any voting or consenting
right except with respect to those matters specifically reserved for a Shareholder vote or consent
which are set forth in this Agreement or as required by the CO. Whenever the vote or consent of
Shareholders is permitted or required under this Agreement, such vote or consent may be given in
person at a meeting, by a duly authorized representative, in writing, by facsimile or by comparable
electronic transmission (to be followed by original signatures, if necessary or desired). Unless
otherwise expressly provided in this Agreement or by the CO, Shareholders who have an interest
(economic or otherwise) in the outcome of any particular matter upon which the Shareholders vote or
consent, may vote or consent upon any such matter and their vote or consent, as the case may be,
shall be counted in the determination of whether the particular matter is approved by the
Shareholders. The Shareholders shall be entitled to vote or consent in a manner consistent with
their own interests when such interests are not, or may not be, consistent with the interests of
the Company or the Shareholders as a whole.

     Section 2.5 Shareholders’ Meetings. A Shareholders’ meeting may be called by the
Board of Managers or any Shareholder for any matter that is appropriate for consideration at such
meeting. Each meeting of Shareholders shall be conducted by such Persons as the Shareholders may
designate.

     Section 2.6 Telephonic Meetings. Shareholders’ meetings may be held through the use
of conference telephone or similar communications equipment so long as all Persons participating in
such Shareholders’ meetings can hear one another at the time of such Shareholders’ meeting.
Participation in a Shareholders’ meeting via conference telephone or similar communications
equipment in accordance with the preceding sentence constitutes presence in person at the
Shareholders’ meeting. Following such telephonic or similar meeting, the Shareholders will confirm
the resolutions in writing in a circular resolution.

     Section 2.7 Notice of Meetings. Written notice of each Shareholders’ meeting shall
state the place, date and time of such Shareholders’ meeting, and the agenda of the business to be
transacted. Notice shall be given in the manner prescribed in Section 16.1 not fewer than 10 days
nor more than 20 days before the date thereof.

     Section 2.8 Unanimous Shareholder Consent. No action may be taken by the Company
(whether by the Board of Managers, or otherwise) in connection with any of the following matters
without the unanimous consent of the Shareholders:

     (a) acts in contravention of this Agreement;

3

 

     (b) any transaction that would result in a Sale Event, subject to the Option Agreement;

     (c) the issuance or sale of any additional Shares, including any options, warrants or other
rights to purchase Shares or any other securities convertible into Shares;

     (d) the issuance or incurrence of Debt by the Company in excess of $* * * or the
equivalent amount in Euros;

     (e) the making of any election under the Code or the Treasury Regulations and Internal Revenue
Service guidance issued thereunder;

     (f) the admission of any additional Shareholders to the Company (other than in connection with
Transfers of Shares in accordance with Section 7.1);

     (g) the reorganization of the Company, including conversion of the Company into another form
of entity;

     (h) voluntary bankruptcy of the Company;

     (i) any transaction to liquidate or dissolve the Company; provided, however, that the
Shareholders agree to adopt a resolution or take such other actions as may be necessary for the
dissolution of the Company prior to the expiration of the Term such that the Company will be
dissolved upon expiration of the Term;

     (j) any transaction between the Company and any Shareholder or Affiliate of any Shareholder
(other than transactions pursuant to the terms and conditions of any Transaction Agreement or any
agreement between the Company and a Shareholder or an Affiliate of a Shareholder that has been
approved in accordance with this Section 2.8, excluding (for the
avoidance of doubt) any amendment, modification, consent, waiver or acquiescence with respect
to such agreement);

     (k) the entry by the Company or any Subsidiary of the Company into a new line of business or a
New Business in accordance with Article 12;

     (l) the appointment or dismissal of the Chief Executive Officer and the Chief Financial
Officer and any other senior officers required to be appointed by the Shareholders pursuant to
Article 810 para. 2 CO, but subject to Section 4.1;

     (m) any contribution of property to the Company by a Shareholder to the extent that such
contribution will increase such Shareholder’s Share ownership;

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

4

 

     (n) any sublicensing by the Company of Intellectual Property Rights licensed or sublicensed to
the Company pursuant to (i) the License Agreement by and among IMA, IMS and the Company, dated as
of the date hereof (the “IMA License Agreement”), (ii) the License Agreement by and between The
Procter & Gamble Company and the Company, dated as of the date hereof (the “P&G License Agreement”)
and (iii) the Sublicense Agreement by and between US JV and the Company, dated as of the date
hereof;

     (o) any increase of the quota (share) capital; or

     (p) the entering into any commitment to do any of the things set forth in (a) — (o) above in
this Section 2.8 unless expressly conditioned upon the approval required under this Section 2.8.

     Section 2.9 Written Consent. Any action required or permitted to be taken at any
Shareholders’ meeting may be taken without a meeting if all Shareholders consent thereto in
writing. Any such written consents shall be filed with the minutes of the proceedings.

     Section 2.10 General Voting Obligation. Each Shareholder agrees to take all actions
legally required pursuant to the CO, including voting its Shares and, if necessary, convening,
attending and voting at a Shareholders’ meeting, in order to fulfill the obligations, and to permit
each Shareholder to exercise its rights, under this Agreement.

ARTICLE 3

Board of Managers

     Section 3.1 Board of Managers. Except as otherwise provided in this Agreement, the
day to day business and affairs of the Company shall be managed under the direction of a Board of
Managers (the “Board of Managers” and each member thereof, a “Manager”) appointed by the
Shareholders as provided in Section 3.2 below. Except where the Shareholders’ approval is
expressly required by this Agreement or the CO, the Board of
Managers shall have authority, power and discretion to make decisions with respect to the
Company’s business.

     Section 3.2 Managers. The Board of Managers of the Company shall consist of six
Managers, of which three Managers shall be designated by IMS and three Managers shall be designated
by PGIO. The Shareholders shall take all action, including the voting of their Shares, (a) to
elect the Managers designated by IMS and PGIO respectively in accordance with the foregoing, (b) to
remove, with or without cause, a Manager at the request of the Shareholder that designated such
Manager and (c) to fill the resulting vacancy in accordance with the following sentence. Upon the
death, incapacity, resignation or removal of a Manager or other vacancy on the Board of Managers,
the Shareholder that designated the Manager the departure of which created such vacancy, shall have
the right to nominate for election a replacement Manager, and the Shareholders shall so elect such
replacement Manager. Each Manager shall have one vote on all matters to be decided by the Board of
Managers.

     Section 3.3 Chairperson. One Manager shall be appointed to act as chairperson (the
“Chairperson”) of the Board of Managers. Appointment of the Chairperson shall be made by the
Managers appointed by one Shareholder the first year of the term and by the

5

 

Managers appointed by
the other Shareholder the following year of the term, such Chairperson appointment to alternate
from year to year thereafter from the Managers appointed by each Shareholder, respectively. In the
absence or unavailability of the Chairperson, any two Managers may take the actions designated
herein to be taken by the Chairperson; provided that the two Managers are not appointed by the same
Shareholder.

     Section 3.4 Meetings of Board. The Board of Managers shall hold regular meetings no
less frequently than once every fiscal quarter and the Chairperson shall establish meeting times,
dates and places and adopt rules or procedures consistent with the terms of this Agreement. Unless
otherwise approved by the Chairperson, each meeting of the Board of Managers will be held at the
Company’s principal place of business; provided that provision shall be made for telephone
participation in each meeting, and participation in a meeting of the Board of Managers via
conference telephone or similar communications equipment constitutes presence in person at such
meeting so long as all Persons participating in such meeting can hear one another at the time of
such meeting. The Board of Managers shall cause written minutes of all actions taken by it to be
signed by the Chairman and the Secretary and to be distributed to all Managers promptly after the
related meeting.

     Section 3.5 Notice of Meetings. Written notice of each meeting of the Board of
Managers shall state the place, date and time of such meeting, and the general nature of the
business to be transacted (if not otherwise set forth in the agenda delivered pursuant to Section
3.7). Notice shall be given in the manner prescribed in Section 16.1 not fewer than two days
before the date thereof. Receipt of notice of a particular meeting may be waived, in writing, by
any Manager either before or at such meeting, and shall be deemed to have been waived by any
Manager who participates in such meeting, without protesting prior to the conclusion of such
meeting the lack of notice of such meeting;
provided that such Manager has been given an adequate opportunity at the meeting to protest
such lack of notice (except where a Manager participates in the meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business on the ground that the
meeting has not been convened properly under this Agreement).

     Section 3.6 Quorum. At all meetings of the Board of Managers, the presence of a
majority of the Managers of the Board of Managers shall be necessary to constitute a quorum for the
transaction of business. If a quorum shall not be present at any meeting of the Board of Managers,
the Managers present thereat may, in accordance with Section 3.5, adjourn and reschedule the
meeting to a date no earlier than five days thereafter.

     Section 3.7 Agendas; Vote Required at Meetings. (a) The Chairperson shall prepare or
direct the preparation of the agenda for, and preside over, meetings of the Board of Managers. The
Chairperson shall deliver such agenda to each Manager at least two Business Days prior to the
giving of notice of a regular or special meeting of the Board of Managers, and each Manager may add
items to such agenda. The Board of Managers shall act by affirmative vote of a majority of the
Managers, which majority shall include at least one Manager appointed by PGIO and one Manager
appointed by IMS (such majority, a “Majority of Managers”). The authorization of any contract or
transaction between the Company and one or more of the Managers, or between the Company and any
other Person in which one or more of the Managers, are directors or officers, or have a financial
interests, shall require the affirmative votes of a

6

 

majority of the disinterested Managers. In the
event of a vacancy on the Board of Managers for any reason, unless otherwise approved by the
Shareholders, no action shall be taken by the Board of Managers until the vacancy is filled by the
applicable Shareholder as long as filled within 30 days of notice given to a Shareholder by the
other Shareholder.

          (b) Without limiting the generality of Section 3.1, the Company may not (without an
affirmative vote of a Majority of Managers):

     (i) adopt or approve a business plan and budget for the Company (the “Business Plan and
Budget”) or any material modifications thereof;

     (ii) launch any new product other than the products that are the Base Products under
the Finished Product Purchase Agreement, dated as of the date hereof, between the Company,
IMS and certain of its Subsidiaries;

     (iii) issue or incur Debt up to the amount subject to Shareholders’ approval in
accordance with Section 2.8(d);

     (iv) enter into any agreement or incur any expenditure not provided for in the Business
Plan and Budget involving amounts in excess of $* * *, or the equivalent amount
in Euros, individually, or more than $* * *, or the equivalent amount in Euros, in the
aggregate during any Fiscal Year;

     (v) file any material income or similar tax returns and reports;

     (vi) sublicense or license any of the Company’s Intellectual Property Rights, subject
to the Shareholder approval requirement set forth in Section 2.8(n);

     (vii) enter into any material agreement of the Company (including any material
amendment or modification thereof);

     (viii) take any enforcement or waiver actions regarding any material agreement between
the Company and a Shareholder or an Affiliate of a Shareholder (including (x) any
determination of a breach or potential breach thereunder, or (y) any determination relating
to a waiver or acquiescence with respect to such agreement);

     (ix) appoint or dismiss (or alter the compensation of) any senior officers of the
Company, other than appointment or dismissal (or alteration of the compensation) of the
Chief Executive Officer, the Chief Financial Officer, and any other senior officers
required, pursuant to art. 810 para. 2, to be appointed or dismissed by the Shareholders
(who shall be appointed or dismissed pursuant to Section 2.8(l));

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

7

 

     (x) retain or otherwise appoint, or dismiss, the Company’s accountant and any primary
legal advisor or financial advisor to the Company;

     (xi) commence or settle any litigation or arbitration to which the Company is, or is to
be, a party involving amounts in question in excess of $* * * or the equivalent
amount in Euros or enter into any agreement or court filing that * * *;

     (xii) market, or permit any distributor, commissionaire or sales agent to market, the
Company’s products under a third party’s label brand except for private label brands in the
ordinary course of business; or

     (xiii) commit to do any of the things set forth in (i)-(xii) above in this Section
3.7(b) unless expressly conditioned upon the approval required under this Section 3.7(b).

          Section 3.8 Special Meetings. Special meetings of the Board of Managers may be called
(a) by the Chairperson or (b) by any two other Managers at any time and from time to time. Notice
of each special meeting shall be given to each Manager on the Board of Managers by telephone,
telecopy or similar method (in each case, notice shall be given at least 48 hours before the time
of the meeting) or sent by first-class mail (in which case notice shall be given at least five days
before the meeting), unless a longer notice period is established by the Board of Managers. Each
such notice shall state (x) the time, date, place (which shall be at the principal office of the
Company unless otherwise agreed to by all Managers) or other means of conducting such meeting and
(y) the purpose of the meeting to be so held.

     Section 3.9 Action Without a Meeting. Any action required or permitted to be taken at
any meeting of the Board of Managers may be taken without a meeting if all Managers consent thereto
in writing. Any such written consents shall be filed with the minutes of the proceedings.

     Section 3.10 Compensation. The Managers shall not be entitled to compensation for
services rendered to the Company in their capacity as Managers.

     Section 3.11 Observation Rights. Each Shareholder for so long as it shall be a
Shareholder may from time to time designate no more than three (3) persons (or such greater number
as the Board of Managers may determine) to attend all meetings of the Board of Managers in a
nonvoting observer capacity; provided, however, that such observer agrees in writing to hold in
confidence and trust all confidential and proprietary information provided or discussed at any such
meeting so attended; and provided, further, that the Company reserves the right to withhold any
information and to exclude such observer from any meeting or portion thereof if access to such
information or attendance at such meeting could adversely affect the attorney-client privilege
between the Company and its counsel.

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

8

 

ARTICLE 4

Officers

     Section 4.1 Officers. The Shareholders hereby create the offices of a Chief Executive
Officer, a Chief Financial Officer and a secretary. The Shareholders shall have the power to
create the offices of such other senior officers as are required by art. 810 para. 2 CO to be
appointed or dismissed by the Shareholders, with such powers as the Shareholders deem appropriate
as shall be determined by the Shareholders consistent with the terms of this Agreement. Subject to
art. 810 para. 2 CO, the Board of Managers shall have the power to create such other officer
positions with such powers as it deems appropriate as shall be determined by the Board of Managers
consistent with the terms of this Agreement, including one or more Vice Presidents and one or more
Assistant Secretaries. The officers of the Company shall have the power and authority to conduct
the day-to-day operations of the Company in accordance with this Agreement. The Shareholders shall
determine the signing authority of such officers.

     Section 4.2 Management in Accordance with Budget. The officers of the Company shall
conduct the business and operations of the Company in accordance with, and subject to the
limitations set forth in, any Business Plan and Budget in force from time to time.

     Section 4.3 Management Team. It is the intent of the Shareholders that each
Shareholder’s contributions to the Company’s management team will reflect the core capabilities of
such Shareholder, and that the Company’s management team will have balanced representation of each
Shareholder. Accordingly, it is the Shareholders’ expectation that, unless the Shareholders agree
otherwise, (a) individuals to serve as leaders of core efforts on marketing, sales, logistics,
finance and supply chain management of the Company will be drawn principally from PGIO; provided,
that any employee decisions made by PGIO with respect to the leaders of the core efforts in sales
and marketing will not derogate or otherwise impair the Company’s access to the institutional
knowledge of the CD Business (as defined in the IMS Contribution Agreement) provided by IMS and its
personnel, including any employee transferred to, or providing services for, the Company, and (b)
individuals to serve as leader of core efforts on research and development, human resources, new
business development and legal will be drawn principally from IMS.

     Section 4.4 Duties and Authority of Officers.

     (a) Chief Executive Officer. The Chief Executive Officer shall supervise the daily
operations of the business of the Company, and shall report to the Board of Managers. Subject to
the provisions of this Agreement and to the direction of the Board of Managers, he or she shall
perform all duties which are commonly incident to the office of chief executive officer of a
corporation organized under Swiss Law or which are delegated to him or her by the Board of
Managers. To the fullest extent permitted by Law, he or she shall have power to sign all contracts
and other instruments of the Company which are authorized, to take actions and incur expenditures
provided for in the Business Plan and Budget and shall have general supervision and direction of
all of the other officers, employees and agents of the Company.

     (b) Vice President. Each Vice President shall have such powers and duties as may be
delegated to him or her by the Board of Managers.

9

 

     (c) Chief Financial Officer. The Chief Financial Officer shall have responsibility
for establishing in accordance with the Business Plan and Budget the Required Working Capital
Balance and the Ordinary Course Capex Reserve, subject to the supervision of the Board of Managers,
and maintaining the financial records and accounting controls of the Company. He or she shall
render from time to time an account of all such transactions and of the financial condition of the
Company to the Board of Managers. The Chief Financial Officer shall also perform such other duties
as set forth in this Agreement and as the Board of Managers or the Chief Executive Officer may from
time to time prescribe.

     (d) Secretary. The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the Shareholders and the Board of Managers. He or she shall
have charge of the corporate books and shall perform such other duties as the Board of
Managers or the Chief Executive Officer may from time to time prescribe.

     (e) Delegation of Authority. Subject to any limitations set forth in this Agreement
or the CO, the Chief Executive Officer may from time to time delegate his or her powers and duties
to the other officers of the Company.

     Section 4.5 Initial Chief Executive Officer and Chief Financial Officer.

     (a) Hilde Eylenbosch will be Chief Executive Officer of the Company for the Initial Period;
provided that IMS shall have the right to remove Hilde Eylenbosch and nominate a successor (who
shall be a qualified individual) as Chief Executive Officer of the Company any time during the
Initial Period, subject to the approval of the Shareholders in accordance with Section 2.8 of this
Agreement.

     (b) Riccardo Guitart will be Chief Financial Officer of the Company for the Initial Period;
provided that PGIO shall have the right to remove Riccardo Guitart and nominate a successor (who
shall be a qualified individual) as Chief Financial Officer of the Company any time during the
Initial Period, subject to the approval of the Shareholders in accordance with Section 2.8 of this
Agreement.

     (c) After the Initial Period, the Chief Executive Officer and the Chief Financial Officer of
the Company shall be appointed by the Shareholders and in accordance with Section 2.8(l) of this
Agreement.

ARTICLE 5

Capital Contributions

     Section 5.1 Capital Contributions. On or prior to the date hereof, each of IMS and
PGIO shall have made capital contributions to the Company of CHF 1,000,000 in cash, and shall have
made, or caused certain of their respective Affiliates to have made, such other contributions to
the Company as are described in the IMS Contribution Agreement and the PGIO Contribution Agreement,
respectively. IMS and PGIO each have acquired one Share with the par value and representing the
amount of capital contributions specified opposite their respective names on Schedule I.

10

 

          Section 5.2 Additional Capital Contributions. Except as expressly provided in this
Agreement or as required under any applicable Law, no Shareholder shall be required or permitted to
make additional capital contributions or lend any funds to, or expend any funds on behalf of, the
Company without the written consent of all of the Shareholders; provided that each Shareholder
shall be required to make such additional capital contributions pursuant to Section 11.3. An
additional capital contribution required under this Agreement by either Shareholder may be made in
the form of a loan to the Company on terms agreed upon by the Shareholders. Except with the
unanimous approval of the Shareholders, no Shareholder shall be entitled to make any additional
capital contribution in property other than cash. In no event may any such property be
encumbered with any Liens, unless the Shareholders have otherwise unanimously approved.

          Section 5.3 No Interest on Capital. No interest shall accrue or be paid on
Shareholders’ Shares (Stammeinlage) or Capital Contributions (Leistung auf Stammeinlage).

          Section 5.4 Return of Capital. Except as expressly provided in this Agreement, (x) no
Shareholder shall be entitled to withdraw all or any part of such Shareholder’s Capital
Contribution from the Company prior to the Company’s dissolution and liquidation, (y) when such
withdrawal is permitted, no Shareholder will be entitled to demand a distribution of property other
than cash, and (z) no Shareholder shall have priority over any other Shareholder as to the return
of capital contributions or as to profits, losses or other items of income, gain or deduction.
This Section 5.4 shall not apply to the repayment of loans (as distinguished from capital
contributions) which a Shareholder has made to the Company.

          Section 5.5 No Liability of Shareholders. All capital, whenever contributed, shall be
subject in all respects to the risks of the business and subordinate in right of payment to the
claims of present or future creditors of the Company and of any successor firm in accordance with
this Agreement. However, no Shareholder shall have any personal liability for any obligations of
the Company or of any other Shareholder, except as required by applicable Law.

          Section 5.6 Shareholders’ Capital Accounts. A separate capital account (a “Capital
Account”) shall be established and maintained for each Shareholder in accordance with Treasury
Regulations Section 1.704-1(b), as of any particular date. Each Shareholder’s initial Capital
Account (as determined immediately after giving effect to the contributions described in Section
5.1 hereof) is set forth on Schedule I, which initial Capital Accounts apply the principles
of Treasury Regulation Section 1.704-1(b)(2)(iv)(d) and thereafter such Capital Account shall be
adjusted as follows:

          (a) The Capital Account of each Shareholder shall be increased by:

     (i) the amount of any Net Profits (and any items of income or gain), allocated on or
after the date hereof to such Shareholder;

     (ii) the amount, if any, of any Company liabilities assumed by such Shareholder or
taken subject to or in connection with the distribution of property to such Shareholder by
the Company on or after the date hereof;

11

 

     (iii) the amount of any cash contributed by the Shareholder to the Company on or after
the date hereof (other than contributions required pursuant to the IMS Contribution
Agreement or the PGIO Contribution Agreement);

     (iv) the Gross Asset Value of property contributed to the Company by such Shareholder
on or after the date hereof (other than contributions required pursuant to the IMS
Contribution Agreement or the PGIO Contribution Agreement); and

     (v) any other item required by Treasury Regulation Section 1.704-1(b)(2)(iv) to be
credited for proper maintenance of capital accounts.

          (b) The Capital Account of each Shareholder shall be decreased by:

     (i) the amount of cash distributed to such Shareholder by the Company on or after the
date hereof;

     (ii) the amount of any Net Losses (and any items of deduction or loss) allocated to
such Shareholder on or after the date hereof;

     (iii) the Gross Asset Value of any property distributed to such Shareholder by the
Company on or after the date hereof;

     (iv) the amount of any liabilities of such Shareholder assumed by the Company or taken
subject to or in connection with the contribution of property by such Shareholder to the
Company on or after the date hereof (other than liabilities assumed or taken subject to or
in connection with as described in the IMS Contribution Agreement or the PGIO Contribution
Agreement); and

     (v) any other item required by Treasury Regulation Section 1.704-1(b)(2)(iv) to be
debited for proper maintenance of capital accounts.

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Treasury Regulations under Section 704(b) of the Code
and, to the extent not inconsistent with the provisions of this Agreement, shall be interpreted and
applied in a manner consistent with such Treasury Regulations. The Board of Managers may make such
modifications to the manner in which the Capital Accounts, or any debits or credits thereto, are
computed in order to comply with Treasury Regulation Section 1.704(b)(2)(iv), or otherwise for
purposes of determining the appropriate allocations of Company items for tax purposes.

          Section 5.7 Allocation of Profit or Loss. (a) Except as otherwise provided in this
Agreement, the Net Profits and Net Losses of the Company (and items thereof) for each Accounting
Period shall be allocated in accordance with the Shareholders’ respective Percentage Interests.

          (b) If a Shareholder Transfers all or any portion of its Share during any Fiscal Year, Net
Profits and Net Losses attributable to such transferred Share for such Fiscal Year shall be
apportioned between the transferor and the transferee or computed as to such Shareholders on

12

 

the
basis of an interim closing of the books and records of the Company; provided in all events that
any apportionment described above shall be permissible under the Code and applicable regulations
thereunder.

          (c) Tax credits, if any, shall be allocated among the Shareholders in proportion to their
Percentage Interests.

          (d) When the Gross Asset Value of a Company asset differs from its basis for federal or other
income tax purposes, solely for purposes of the relevant tax and not for purposes of computing
Capital Account balances, income, gain, loss, deduction and credit with respect to such asset shall
be allocated among the Shareholders under the traditional method described in Treasury Regulation
Section 1.704-3(b).

          (e) All matters concerning the allocation of Net Profits and Net Losses (and items of income,
gain, loss and deduction) among the Shareholders, tax elections (except as may otherwise be
required by the income tax laws) and accounting procedures not expressly and specifically provided
by the terms of this Agreement, shall be determined by the Board of Managers, and on a basis that
is in conformity with the requirements imposed under Code Section 704 and the Treasury Regulations
thereunder as equitably applied among the Shareholders.

          (f) Except for interest payable pursuant to Shareholder loans permitted to be made hereunder,
no interest shall be paid by the Company on capital contributions, balances in Shareholder’s
Capital Accounts or any other funds contributed to the Company or distributed or distributable by
the Company under this Agreement.

          (g) (i) Except as otherwise provided in Section 1.704-2(f) of the Treasury Regulations,
notwithstanding any other provision of this Section 5.7, if there is a net decrease in Company
Minimum Gain during any taxable period, each Shareholder shall be specially allocated, before any
allocations of Net Profits or Net Losses for such period, items of Company income and gain for such
period (and, if necessary, subsequent periods) in an amount equal to such Shareholder’s share of
the net decrease in Company Minimum Gain, determined in accordance with Section 1.704-2(g) of the
Treasury Regulations. Allocations pursuant to the preceding sentence shall be made in proportion
to the respective amounts required to be allocated to each Shareholder pursuant thereto. The items
to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2)
of the Treasury Regulations. This Section 5.7(g)(i) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.

     (ii) Except as otherwise provided in Section 1.704-2(f) of the Treasury Regulations,
notwithstanding any other provision of this Section 5.7, if there is a net decrease in
Shareholder Nonrecourse Debt Minimum Gain attributable to a Shareholder Nonrecourse Debt
during any taxable period, each Shareholder who has a share of the Shareholder Nonrecourse
Debt Minimum Gain attributable to such Shareholder Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall be specially
allocated items of Company income and gain for such period (and, if necessary, subsequent
periods) in an amount equal to such Shareholder’s

13

 

share of the net decrease in Shareholder
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(4) of the Treasury
Regulations. Allocations pursuant to the preceding sentence shall be made in proportion to
the respective amounts required to be allocated to each Shareholder pursuant thereto. The
items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury
Regulations. This Section 5.7(g)(ii) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted
consistently therewith.

          (h) Notwithstanding the allocations provided for in Section 5.7(a), (b), (c), (d) or (e), no
allocation of an item of loss or deduction shall be made to a Shareholder to the extent such
allocation would cause or increase an Adjusted Capital Account Deficit for such Shareholder as of
the end of the taxable period to which such allocation relates and such losses or deductions shall
be allocated to other Shareholders in accordance with the positive balances in such Shareholders’
capital accounts so as to allocate the maximum permissible losses or deductions to each Shareholder
under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations. In the event any Shareholder
unexpectedly receives any adjustments, allocations or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Treasury Regulations, items of Company income and gain
shall be specially allocated to such Shareholder in an amount and manner sufficient to eliminate,
to the extent required by Treasury Regulations, the Adjusted Capital Account Deficit of the
Shareholder as quickly as possible; provided that an allocation under this sentence shall be made
only if and to the extent that the Shareholder would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Section 5.7 have been tentatively made as if this
sentence were in this Agreement.

          (i) (i) Nonrecourse Deductions for any taxable period shall be specially allocated to the
Shareholders in proportion to their respective Percentage Interests.

     (ii) Any Shareholder Nonrecourse Deductions for any taxable period shall be specially
allocated to the Shareholder who bears the economic risk of loss with respect to the
Shareholder Nonrecourse Debt to which such Shareholder Nonrecourse Deductions are
attributable in accordance with Section 1.704-2(i)(1) of the Treasury Regulations.

          (j) The allocations set forth in Sections 5.7(g), (h), (i) and (k) (the “Regulatory
Allocations”) are intended to comply with certain requirements of Section 1.704-1(b) of the
Treasury Regulations. The Regulatory Allocations shall be taken into account in allocating other
Net Profits and Net Losses and items of income, gain, loss and deduction so that, to the extent
possible, the net amount of such other allocations and the Regulatory Allocations to each
Shareholder shall be equal to the net amount that would have been allocated to such Shareholder if
the Regulatory Allocations had not been made.

          (k) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to
Code Section 734(b) or Code Section 743(b) is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining capital accounts, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis) and such gain or

14

 

loss shall be allocated to the
Shareholders in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(m).

          Section 5.8 Banking; Investments. All funds of the Company shall be deposited in such
bank account or accounts, or invested, and withdrawals from any such bank account shall be made
upon such signature or signatures, as shall be established and designated by the Chief Financial
Officer with the approval of the Board of Managers.

          Section 5.9 Distributions.

          (a) Except as otherwise required by Law or as provided in this Agreement, no Shareholder shall
have any right to withdraw any portion of its Capital Contribution without the consent of all the
other Shareholders, and subject to applicable Law.

          (b) Unless otherwise agreed by the Shareholders, and subject to applicable Law, promptly after
the statement contemplated by Section 6.2 has been prepared after the end of each Fiscal Year, the
Company shall distribute all Distributable Cash, if any, to the Shareholders in proportion to their
respective Shares. Distributions upon the dissolution of the Company shall be made in accordance
with Section 9.2 hereof.

          Section 5.10 Advance in Excess of Capital Contribution. Except as expressly provided
in this Agreement or with unanimous approval of the Shareholders, if any Shareholder advances any
funds to the Company in excess of the amount of any capital contributions such Shareholder is
required to make, the excess amount of such advance shall neither increase such Shareholder’s
Capital Contribution nor entitle it to any increase in its share of the distributions of the
Company. Instead, such amount shall be a Shareholder loan, repayable by the Company. Any such
amount shall be payable and collectible only out of the Company’s assets.

ARTICLE 6

Accounting, Tax and Reporting Matters

          Section 6.1 Books; Fiscal Year. The Company shall maintain complete and accurate
books of account of the Company’s affairs at the Company’s principal place of business. Such books
shall be kept in accordance with GAAP. The Company’s accounting period for tax purposes shall be
the Tax Year. The Company’s accounting year for all other purposes shall be the Fiscal Year.

          Section 6.2 Reports. (a) The Company shall deliver for each fiscal month unaudited
financial statements for the Company which shall have been prepared in accordance with GAAP,
subject to the absence of footnotes. Such monthly reports shall be delivered by the Company within
seven Business Days after the conclusion of each fiscal month.

          (b) The Company shall prepare and distribute to each Shareholder quarterly unaudited financial
statements, which shall be prepared in accordance with GAAP and shall be in sufficient detail to
permit each of PGIO and IMS to prepare and timely file its respective financial statements and
quarterly filings under applicable federal, state, local and foreign securities Laws (“Securities
Filings”), including its Quarterly Report
on Form 10-Q, and shall include or be accompanied by such other financial information as each
of PGIO and IMS may

15

 

reasonably request. Such quarterly statements shall be made available to each
Shareholder no later than 30 days after the end of each quarter.

          (c) Within 45 days of the end of each Fiscal Year (or such earlier date as necessary to permit
each of PGIO and IMS to make its Securities Filings, including its Annual Report on Form 10-K), the
Company shall deliver audited financial statements prepared in accordance with GAAP together with
the notes thereto and the report thereon of the Company’s independent auditors, which auditors
shall be registered with the Public Company Accounting Oversight Board. Such audited financial
statements shall be prepared in a manner (including containing the requisite information and detail
therein) that permits filing of such financial statements under, and in compliance with, Rule 3-09
of Regulation S-X.

          (d) To the extent reasonably requested by either Shareholder, the Company shall prepare and
deliver to each Shareholder, within a reasonable time period, those financial statements required
by Sections 6.2(b) and 6.2(c) on a combined consolidated basis with the financial statements of the
US JV which combined consolidated financial statements shall be prepared in accordance with GAAP.

          Section 6.3 Company Information. Upon reasonable request, the Company shall supply to
any Shareholder information regarding the Company, its sales, receipts, payments, all accounting
information and records as well as all activities of the Company. In the event the Company
provides reports or similar information regarding the Company, including its business operations,
strategies, plans, assets, activities or prospects, to one Shareholder, its Affiliates or its
Representatives (other than reports and other deliverables contemplated under any operating or
services agreements, such as transition services, long-term services, product, distribution and
commissionaire agreements, entered into on the date hereof or following the date hereof in
compliance with Section 2.8(j) hereof by the Company and/or any Subsidiary of the Company and a
Shareholder and/or any Affiliates of such Shareholder), the Company shall provide, or cause to be
provided, such information to all other Shareholders. Except to the extent prohibited by, and
subject to compliance with, applicable Swiss Law, each Shareholder and its Representatives shall
have reasonable access during normal business hours to discuss the operations and business of the
Company with employees or agents of the Company, and to inspect, audit or make copies of all books,
records and other information relative to the operations and business of the Company at their own
expense; provided, however, that each Shareholder shall, and shall cause its Affiliates and
Representatives to, preserve the confidentiality of such information in accordance with Section
13.2 hereof.

          Section 6.4 Records; Internal Controls. (a) The Company shall keep or cause to be
kept appropriate books and records in accordance with the CO with respect to the Company’s
business, which books and records shall at all times be kept at the principal office of the
Company. Without limiting the foregoing, the Company shall keep at its principal office the
following:

     (i) a current list of the full name and the last known street address of each
Shareholder;

16

 

     (ii) a copy of the deed of incorporation and a copy of the current Articles of
Incorporation and this Agreement and all amendments thereto;

     (iii) copies of the Company’s federal, state and local income tax returns and reports,
if any, for the three most recent Tax Years or such longer period as reasonably requested by
a Shareholder;

     (iv) copies of the Company’s financial statements, for the ten most recent Fiscal
Years; and

     (v) such other documents with respect to the Company’s business as may reasonably be
required from time to time by the Board of Managers.

          (b) The Company shall engage an experienced third party to establish and maintain a system of
internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are
executed in accordance with management’s general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in accordance with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in accordance with
management’s general or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate actions are taken with
respect to any differences.

          (c) The Company shall take such actions, and shall use its reasonable best efforts to cause
its independent auditors to take such actions, as may be reasonably requested by a Shareholder or
such Shareholder’s independent auditors in connection with fulfilling such Shareholder’s
responsibilities and obligations under Section 404 of the Sarbanes-Oxley Act of 2002, as amended,
and the regulations promulgated thereunder.

          Section 6.5 Consents of Independent Auditors. The Company shall use its reasonable
best efforts to cause its independent auditors to prepare consents and such other documents as may
be necessary for each Shareholder to fulfill any requirements to include or incorporate by
reference the Company’s financial statements, and the report of the Company’s independent auditors
thereon, in any filing made under the Securities Act of 1933, as amended (the “Securities Act”),
the Securities Exchange Act of 1934, as amended, and any other federal, state, local and foreign
securities Laws.

          Section 6.6 Tax Returns. Except to the extent prohibited by, and subject to
compliance with, applicable Swiss Law, the Shareholders shall provide each other with copies of all
correspondence or summaries or other communication with any taxing authority regarding any aspect
of items of Company income, gain, loss or deduction and no Shareholder shall enter into settlement
negotiations with respect to the tax treatment of any Company item of income, gain, loss or
deduction without first giving reasonable advance notice of such intended action to the other
Shareholders.

          Section 6.7 Tax Characterization. The Shareholders agree to take all actions required
for the Company to elect to be
treated as a partnership for United States federal income tax purposes and for purposes of
applicable state and local tax law.

17

 

          Section 6.8 Tax Matters Partner. Pursuant to Section 6231(a)(7)(A) of the Code, PGIO
shall be the “Tax Matters Partner” of the Company for all purposes of the Code and any
corresponding state or local statute. Each Shareholder consents to such designation and agrees to
take such further action as may be required, by regulation or otherwise, or as may be requested by
any Shareholder, to effectuate such designation. Except to the extent prohibited by, and subject to
compliance with, applicable Swiss Law, the Tax Matters Partner shall cooperate with the other
Shareholders and shall promptly provide the other Shareholders with copies of notices or other
materials from, and inform the other Shareholders of discussions engaged in with, any taxing
authority and shall provide the other Shareholders with notice of all scheduled administrative
proceedings, including meetings with agents, technical advice conferences and appellate hearings,
as soon as possible after receiving notice of the scheduling of such proceedings. The Tax Matters
Partner will schedule such proceedings only after consulting the other Shareholders with a view to
accommodating the reasonable convenience of both the Tax Matters Partner and the other
Shareholders. The Tax Matters Partner shall be responsible for preparing all tax returns of the
Company; provided that prior to filing any material income or similar tax return or report (x) a
draft of such return or report shall be provided to each Shareholder a reasonable period of time
prior to the due date therefor, and (y) the Board of Managers shall approve the filing thereof;
provided further, that the Tax Matters Partner shall be permitted to file any such tax return that
has been submitted to the Board of Managers for approval a reasonable period of time prior to the
due date therefor, but that on the due date therefor, has not then been approved by the Board of
Managers. The Tax Matters Partner shall not agree to (i) extend the period of limitations for
assessments; (ii) file a petition or complaint in any court; (iii) file a request for an
administrative adjustment of partnership items after any return has been filed or (iv) enter into
any settlement agreement with respect to Company items of income, gain, loss or deduction except at
the direction of the Board of Managers. The Tax Matters Partner may request extensions to file any
tax return or statement without the written consent of, but shall so inform, the other
Shareholders. The provisions of this Agreement regarding the Company’s tax returns shall survive
the termination of the Company and the transfer of any Shareholder’s interest in the Company and
shall remain in effect for the period of time necessary to resolve any and all matters regarding
the taxation of the Company and items of Company income, gain, loss and deduction, notwithstanding
the expiration of all applicable statutes of limitations (including extensions thereof).

          Section 6.9 Tax Elections. The Shareholders shall determine whether to make any
available tax election.

          Section 6.10 Withholding. Each Shareholder hereby authorizes the Company to withhold
from or pay on behalf of or with respect to such Shareholder any amount of federal, state, local or
foreign taxes that the Board of Managers determines that the Company is required to withhold or pay
with respect to any amount distributable or allocable to such Shareholder pursuant to this
Agreement, including any taxes required to be withheld by the Company pursuant to applicable tax
Laws. Any amount paid on behalf of or with respect to a Shareholder shall be treated as having
been distributed to
such Shareholder with subsequent distributions under this Agreement to take into account such
deemed distribution treatment.

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ARTICLE 7

Transfers; Admission; Liquidation

          Section 7.1 Transfers. 

          (a) No Shareholder may Transfer all or any portion of its Share other than (i) pursuant to the
terms of Sections 7.1(b), (c), or (d) hereof, or (ii) upon the unanimous written consent of the
Shareholders. Any attempted Transfer of Shares, other than in accordance with this Article 7,
shall be null and void and the purported transferee shall have no rights as a Shareholder or
assignee hereunder. In the event a Shareholder desires to Transfer its Share in accordance with
the first sentence of this Section 7.1(a), the other Shareholder agrees to take all actions legally
required pursuant to the CO to effect such Transfer, including to approve at a Shareholders’
meeting (i) the Transfer of the Share and (ii) the pertinent amendment of the Articles of
Incorporation. 

          (b) A Shareholder may Transfer all or part of its Share to a wholly-owned, direct or indirect,
Subsidiary of such Shareholder; provided, however, that in no event shall such Transfer relieve any
Shareholder of its obligations under this Agreement. It shall be a condition to such Transfer that
the transferee shall have assumed by written agreement all of the obligations of such Shareholder
under this Agreement. In the event a Shareholder desires to Transfer its Share in accordance with
the foregoing, the other Shareholder agrees to take all actions legally required pursuant to the CO
to effect such Transfer, including to approve at a Shareholders’ meeting (i) the Transfer of the
Share and (ii) the pertinent amendment of the Articles of Incorporation.

          (c) A Shareholder (the “Transferring Shareholder”) may Transfer all (but not part) of its
Share to any third party, other than a Person set forth on Schedule III hereto (each, a
“Restricted Third Party”); provided that (i) all (but not part) of the interest in the US JV owned
by such Transferring Shareholder (if any) and such Transferring Shareholder’s Affiliates are
simultaneously transferred to the same third party transferee or such transferee’s Affiliates, (ii)
such third party agrees in writing to assume all liabilities and obligations of the Transferring
Shareholder provided under this Agreement and other Transaction Agreements to which the
Transferring Shareholder (or any of its Affiliates) is a party, and (iii) the Company’s rights and
interests under the IMA License Agreement and the P&G License Agreement, and the Intellectual
Property underlying the Consumer Diagnostics Business, are not impaired or prejudiced in any
material respect. In the event a Shareholder desires to Transfer its Share in accordance with the
foregoing, the other Shareholder agrees to take all actions legally required pursuant to the CO to
effect such Transfer, including to approve at a Shareholders’ meeting (i) the Transfer of the Share
and (ii) the pertinent amendment of the Articles of Incorporation.

          (d) A Transferring Shareholder may Transfer all (but not part) of its Share; provided that (i)
all (but not part) of the interest in the US JV owned by such Transferring
Shareholder (if any) and such Transferring Shareholder’s Affiliates are simultaneously
transferred to the same third party transferee or such transferee’s Affiliates, (ii) such
Restricted Third Party agrees in writing to assume all liabilities and obligations of the
Transferring Shareholder provided under this Agreement and other Transaction Agreements to which
the Transferring Shareholder (or any of its Affiliates) is a party, and (iii) the Company’s rights
and

19

 

interests under the IMA License Agreement and the P&G License Agreement, and the Intellectual
Property underlying the Consumer Diagnostics Business, are not impaired or prejudiced in any
material respect; provided, further, that (x) the Transferring Shareholder shall give notice of
such intended Transfer to the other Shareholder (the “Non-Transferring Shareholder”) and the
Company; (y) such notice (the “Participation Notice”) shall set forth terms and conditions of such
proposed Transfer, including the name of the prospective transferee, the purchase price proposed to
be paid for the Share and the payment terms and type of Transfer to be effectuated; and (z) within
30 days following the delivery of the Participation Notice by the Transferring Shareholder, the
Non-Transferring Shareholder may, by notice to the Transferring Shareholder and to the Company,
elect to sell all (but not part) of its Share (simultaneous with an election by its Affiliates to
Transfer all (but not part) of such Affiliates’ interest in the US JV), to the Restricted Third
Party buyer, on the same terms and conditions as applicable to the Transferring Shareholder (the
“Tag-Along Election”). Each Shareholder agrees to take all actions legally required pursuant to
the CO to effect the Transfers of Shares contemplated in and to be effected in accordance with the
foregoing, including to approve at a Shareholders’ meeting (i) the Transfers of the Share and (ii)
the pertinent amendment of the Articles of Incorporation.

          (e) In the event that the Transferring Shareholder Transfers all or a portion of its Share and
a Non-Transferring Shareholder does not consummate a Tag-Along Election, then:

     (i) notwithstanding the provisions of Section 2 of the Shareholder In-License
Agreements, neither the Non-Transferring Shareholder nor the Transferring Shareholder shall
have an obligation to provide license grants to the Company with respect to Intellectual
Property acquired or developed after the date of the Participation Notice; provided,
however, that the licenses granted to the Company under such Section 2 with respect to
Intellectual Property existing prior to such date shall survive until the termination of the
applicable Shareholder In-License Agreement;

     (ii) neither the Transferring Shareholder nor the Non-Transferring Shareholder
thereafter shall have any obligations under Article 12;

     (iii) neither the Transferring Shareholder nor the Non-Transferring Shareholder shall
be bound by the restrictions set forth in Section 13.1 so long as such Shareholder does not
infringe the Business Intellectual Property (as defined in the IMS Contribution Agreement)
of the Company; and

     (iv) the Non-Transferring Shareholder agrees to take all actions legally required
pursuant to the CO to effect such Transfer, including to approve at a Shareholders’ meeting
(i) the Transfer of the Share and (ii) the pertinent amendment of the Articles of
Incorporation.

For purposes of this Agreement, “Shareholder In-License Agreement” means, in the case of PGIO, the
P&G License Agreement, and in the case of IMS, the IMA License Agreement.

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          (f) (i) In the event of a Change of Control of a Shareholder (the “Selling Shareholder”) as
the result of which the Selling Shareholder will become a Restricted Party or an Affiliate of a
Restricted Third Party, such Selling Shareholder shall:

     (1) within 30 days following the earlier of the public announcement or the
closing of the Change of Control, engage an internationally recognized investment
banking firm to determine the combined value of the Selling Shareholder’s Share in
the Company and its (or its Affiliates’) interest in the US JV as such value is
reflected in the total value of the consideration for such Change of Control (such
value, the “Allocated Value”); and

     (2) within five Business Days following the determination of the Allocated
Value in accordance with Section 7.1(e)(1), give notice of such proposed Change of
Control to the other Shareholder (the “Non-Selling Shareholder”) and to the Company.
Such notice (the “Sale Notice”) shall set forth terms and conditions of such
proposed Change of Control, including (A) the identity of the prospective
acquirer(s), (B) the Allocated Value determined by the investment banking firm, (C)
the proposed form and method of payment of the consideration for the Change of
Control, and (D) in reasonable detail, the proposed terms and conditions of the
Change of Control, including the identity of the investment banking firm, its
determination of the Allocated Value and the methodology therefor;

     (ii) The Non-Selling Shareholder shall have the right for a period of 30 days after the
receipt of the Sale Notice to review the determination of the Allocated Value and the
methodology therefor, and to present, by notice to the Selling Shareholder and the Company,
any objections in reasonable detail. The Shareholders shall attempt in good faith to
resolve any dispute concerning the determination of the Allocated Value. If the
Shareholders are unable to resolve any such dispute within 30 days of the non-selling
Shareholder’s objection, then the Allocated Value shall be determined in accordance with the
arbitration procedures set forth in the Option Agreement; provided that the investment
banking firm who will make such determination is instructed to consider the value of the
consideration for the related Change of Control. The “Determination Date” of the Allocated
Value shall be (x) the 31st day after the delivery of the Sale Notice, if the Non-Selling
Shareholder does not make a written objection within the 30 days period after the receipt of
the Sale Notice, or (y) the date on which the Allocated Value is determined in accordance
with the Option Agreement pursuant to the preceding sentence.

     (iii) Within 30 days following the Determination Date, the Non-Selling Shareholder may,
by notice to the Selling Shareholder and to the Company, elect to sell all (but not part) of
its Share and its interest in the US JV at the price per Share and the price per unit of the
US JV, respectively, that represent the proportional share of the value of the Company and
the US JV that is reflected in the Allocated Value as determined above.

     (iv) If the Non-Selling Shareholder does not make the election pursuant to Section
7.1(e)(iii) or if such election is not consummated, then:

21

 

     (1) notwithstanding the provisions of Section 2 of the Shareholder In-License
Agreements, neither Shareholder shall have an obligation to provide license grants
to the Company with respect to Intellectual Property acquired or developed after the
date of the Change of Control; provided, however, that the licenses granted to the
Company under such Section 2 with respect to Intellectual Property existing prior to
such date shall survive until the termination of the applicable Shareholder
In-License Agreement;

     (2) neither Shareholder thereafter shall have any obligations under Article 12;
and

     (3) neither Shareholder shall be bound by the restrictions set forth in Section
13.1 so long as such Shareholder does not infringe the Business Intellectual
Property of the Company.

          Section 7.2 Effect of Transfers.   Upon any permitted Transfer, the
assignee shall be entitled to receive any distributions and the allocations of income, gain, loss,
deduction, credit or similar items to which the transferring Shareholder was entitled with respect
to the Share so transferred and shall be admitted as a Shareholder pursuant to the terms of this
Agreement. Upon admission of a Shareholder, or upon any Shareholder ceasing to be a Shareholder,
the books and records of the Company and Schedule I shall be revised accordingly.

          Section 7.3 PGIO’s Option. Notwithstanding anything to the contrary in this
Agreement, the Shareholders shall have their respective rights and obligations set forth in the
Option Agreement (including exercise of the rights set forth therein, and compliance with the
obligations thereunder, without complying with the provisions of this Article 7), subject to the
terms and conditions thereof.

ARTICLE 8

Indemnification.

          Section 8.1 [Reserved].

          Section 8.2 Indemnification. (a) The Company shall indemnify, defend and hold
harmless, except for willful misconduct and gross negligence, any Manager, officer, director,
employee, and agent of the Company, 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 (other than an
action by or in the right of the Company) by reason of the fact that he, she or it is or was a
Manager, or an officer, director, manager, employee, agent or affiliate of the Company, or is or
was serving at the request of the Company as a director, officer, manager, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise (an “Indemnified
Party”), from and against expenses (including attorneys’ fees and expenses), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such Person in connection with such
claim, action, suit or proceeding if such Person acted in good faith and in a manner such Person
reasonably believed to be in, or not opposed to, the best interests of the Company, and, with
respect to any criminal sanction or proceeding, had no reasonable cause to believe that his, her or
its conduct was unlawful. The

22

 

termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the Person did not act in good faith and in a manner that he, she or it
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 reasonable cause to believe that his, her or its
conduct was unlawful.

          (b) To the extent permitted by applicable Law, expenses incurred in defending a civil,
criminal, administrative or investigative action, suit or proceeding shall be paid by the Company
in advance of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of any Indemnified Party to repay such amount if it shall be ultimately
determined by a court of competent jurisdiction from which no further appeal may be taken or the
time for appeal has lapsed that such Person is not entitled to be indemnified by the Company
pursuant to the terms and conditions of this Section 8.2; provided, however, that the Company shall
not be required to pay such expenses with respect to any action, suit or proceeding initiated
against the Company by any Indemnified Party.

          (c) The indemnification and advancement of expenses provided by, or granted pursuant to, this
Section 8.2 shall continue as to a Person who has ceased to be a Manager, or any officer, director,
manager, employee or agent of the Company or any Shareholder, and shall inure to the benefit of the
heirs, executors, administrators and other legal successors of such Person.

          (d) The indemnification provided by this Section 8.2 shall not be deemed exclusive of any
other rights to indemnification to which those seeking indemnification may be entitled under any
agreement, determination of Shareholders or otherwise.

          (e) Any indemnification hereunder shall be satisfied only out of the assets of the Company
(including insurance and any agreements pursuant to which the Company and indemnified Persons are
entitled to indemnification), and neither the Shareholders nor any Manager shall be, in such
capacity, subject to personal liability by reason of these indemnification provisions.

          (f) No Person shall be denied indemnification in whole or in part under this Section 8.2
because such Person had an interest in the transaction with respect to which the
indemnification applies if the transaction was otherwise permitted by the terms of this
Agreement.

          (g) The Company shall purchase and maintain insurance, at its expense, to protect itself and,
to the extent legally permitted, any Manager, officer or agent of the Company who is or was serving
at the request of the Company or any Shareholder as a manager, representative, director, officer,
partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise against any expense, liability or
loss, whether or not the Company or such Shareholder would have the power to indemnify such Person
against such expense, liability or loss under this Article 8 or any Shareholder’s organizational
documents, as applicable.

23

 

ARTICLE 9

Dissolution; Liquidation

          Section 9.1 Dissolution. The Company shall be dissolved and its affairs wound up,
upon the first to occur of any of the following events:

          (a) the written resolution of all Shareholders in the form of a public deed, which resolution
the Shareholders agree to adopt, and to take such other actions as may be necessary, prior to the
expiration of the Term such that the Company is dissolved upon the expiration of the Term;

          (b) declaration of bankruptcy (Konkurseröffnung) in accordance with Article 820 para. 3 CO;

          (c) the entry of a decree of judicial dissolution with respect to the Company pursuant to
Article 820 para. 4 CO; or

          (d) the other dissolution events provided for by applicable Law.

          Section 9.2 Distribution Upon Dissolution. Upon dissolution, the Company shall not be
terminated and shall continue until the liquidation of the Company is completed, and the Company
has been deleted from the commercial register, in accordance with Article 823 CO. Subject to
Article 823 CO, upon dissolution of the Company, the Board of Managers, or any other Person
designated by the Board of Managers with an affirmative vote of a Majority of Managers (the
“Liquidation Agent”), shall take full account of the assets and liabilities of the Company and
shall, unless the Shareholders agree otherwise, liquidate the assets of the Company. Subject to
applicable Law, the proceeds of any liquidation shall be applied and distributed in the following
order:

          (a) first, to the payment of debts and liabilities of the Company (including payment of all
indebtedness to Shareholders and their respective Affiliates) and the expenses of liquidation;

          (b) second, any balance to the Shareholders, in accordance with their Shares.

          Section 9.3 Time For Liquidation. A reasonable amount of time shall be allowed for the
orderly liquidation of the assets of the Company and the discharge of liabilities to creditors so
as to enable the Liquidation Agent to minimize the losses attendant upon such liquidation.

          Section 9.4 Liquidation And Deletion of Entry in Commercial Register. Upon the
dissolution of the Company other than in the event of a bankruptcy of the Company, the dissolution
of the Company shall be filed and registered with the commercial register at the Company’s
registered seat in accordance with Article 821 CO. The liquidation of the Company shall be
completed when the Company has been deleted from the commercial register in accordance with Article
823 CO.

24

 

ARTICLE 10

[Reserved]

ARTICLE 11

Finances.

          Section 11.1 Business Plan and Budget. (a) The initial Business Plan and Budget for
the Company consists of the Business Principles and the three-year budget governing the Company,
and is attached hereto as Schedule II (the “Initial Business Plan and Budget”), and shall
be considered to be adopted and approved by the Shareholders as the Business Plan and Budget of the
Company as of the date hereof. Within 90 days of the date hereof, the Company’s management team
shall develop and present to the Board of Managers for approval and adoption a revised Initial
Business Plan consisting of the items set forth in Section 11.1(b).

          (b) No later than 180 days prior to the beginning of each subsequent Fiscal Year, the Board of
Managers shall cause to be prepared a Business Plan and Budget, in compliance with the principles
set forth in this Agreement. Each Business Plan and Budget shall include detailed line items and
projections for the coming two Fiscal Years, and at least summary line items and projections for
the subsequent three Fiscal Years.

          (c) Each such Business Plan and Budget shall be subject to the approval of Board of Managers.
In the event that the Board of Managers does not approve a Business Plan and Budget for a Fiscal
Year prior to the beginning of such Fiscal Year, the Business Plan and Budget for the then current
year shall remain in effect until modified by the Board of Managers, except for any non-recurring
or extraordinary items set forth in such current year’s Business Plan and Budget.

          (d) The Board of Managers shall meet with the Chief Executive Officer and the Chief Financial
Officer and other appropriate officers of the Company at least once every fiscal quarter to discuss
the Company’s actual financial performance compared to the Business Plan and Budget, and whether
any adjustment should be made to the Business Plan and Budget including any adjustment to reflect
the performance of any other entities engaged in like business of the Company.

          Section 11.2 Reserves. Not less frequently than quarterly, the Chief Financial Officer
shall, subject to approval by the Board of Managers, determine the amount of and establish (a) a
cash reserve (the “Required Working Capital Balance”) sufficient for the Company to pay its current
liabilities when due and to meet its other working capital requirements and (b) a capital
expenditure reserve (the “Ordinary Course Capex Reserve”) to meet its ordinary course capital
expenditure requirements, in each case with respect to the next succeeding fiscal quarter and to
the extent such requirement can not be met out of projected cash flow. The Required Working
Capital Balance and the Ordinary Course Capex Reserve shall be consistent with the Business Plan
and Budget.

25

 

          Section 11.3 Additional Capital. (a) The Shareholders severally agree to make
additional capital contributions to the Company, pro rata in accordance with their respective
Shares, in amounts sufficient

     (i) to meet the funding requirements of the Company pursuant to the Business Plan and
Budget and fund such other working capital requirements, capital expenditures or other
capital needs as may from time to time be determined by action of the Shareholders,
including the capital expenditures required in connection with the acquisition of any New
Business; and

     (ii) to fund any deficiency in the Required Working Capital Balance or the Ordinary
Course Capex Reserve, in each case as established by the Company’s Chief Financial Officer,
subject to the approval of the Board of Managers.

          (b) Each Shareholder shall contribute the aforesaid amounts to the Company within ten Business
Days for capital contributions of up to $* * * or the equivalent amount in Euros and
within 30 Business Days for capital contributions in excess of $* * * or the equivalent amount in
Euros, in each case after receipt of a demand therefor. Except where this Agreement expressly
provides otherwise, no capital contribution may be made by any Shareholder unless each other
Shareholder is entitled to make a simultaneous capital contribution.

          (c) If any Shareholder provides debt financing to the Company, which financing must by
approved by the Shareholders in accordance with Section 2.8, such financing shall be on competitive
market terms.

ARTICLE 12

New Business

          Section 12.1 Potential Expansion of Field. During the term of this Agreement, IMS and
PGIO will consult with each other in good faith not less frequently than twice a year to explore
whether any new business opportunity exists for the Company in areas (excluding the Excluded
Fields) outside the Field but within the Consumer Channel. If IMS and PGIO agree that such new
business opportunity in any such area for the Company exists, the definition of “Field” shall be
extended to cover new applications in respect of such new business opportunity in such area,
subject to the existing conditions of the new business opportunity.

          Section 12.2 New Business. (a) (i) During the term of this Agreement, (x) if any
third party offers to IMS or PGIO or any of their respective Affiliates any new business, product
or technology whose application falls within the Field and the Consumer Channel (each, a “Third
Party New Business”), or (y) if either Shareholder or any of its Affiliates shall develop

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

26

 

any new
business, product or technology, or potential new business, product or technology of such
Shareholder or its Affiliates whose application falls within the Field and the Consumer Channel
(each, a “Shareholder New Business,” and any Shareholder New Business or Third Party New Business,
a “New Business”), then, in each case, IMS and PGIO shall promptly offer such New Business to the
Company for its consideration of whether to acquire all or any portion of, assume the development
of all or any portion of, or license all or any portion of, such New Business. Notwithstanding the
foregoing, Swiss JV-Inverness Collaboration IP (as defined in the IMA License Agreement) and Swiss
JV-P&G Collaboration IP (as defined in the P&G License Agreement) shall not (A) constitute New
Business or (B) be subject to the rights and obligations set forth in this Article 12. Within 60
days from the date of this Agreement, the Shareholders shall discuss and mutually agree to a
schedule that shall describe the timing of presentation and implementation of a Shareholder New
Business proposal (each, a “Shareholder New Business Proposal”) which parameters shall thereafter
be attached and set forth on Schedule 12.2(a) to this Agreement. Notwithstanding the
foregoing, if, prior to the Shareholders’ agreement on such Schedule 12.2(a), a Third Party
New Business is offered by a Shareholder, or any of its Affiliates, to the Company (such offer to
be made within 30 days following receipt by IMS or PGIO or any of their respective Affiliates of
the offer to acquire such Third Party New Business), the Company shall decide whether or not to
acquire, assume the development of, or license such Third Party New Business within 90 days
following the offer, or such other period as may be set forth on the agreed upon Schedule
12.2(a). Promptly after the receipt by the Board of Managers of any Shareholder New Business
Proposal pursuant to the foregoing, the Board of Managers shall assess such New Business in the
context of periodic upstream technology reviews to determine whether to recommend to the
Shareholders that the Company should acquire, assume the development of, or license such New
Business. If, during such 90-day period (or such other period as may be set forth on the agreed
upon Schedule 12.2(a)), the Company reasonably requests additional information from the
offering Shareholder regarding
such offered New Business, such period shall be tolled until the offering Shareholder
reasonably responds to such request and provides such additional information, to the extent such
information is available to it or is otherwise in such Shareholder’s possession or control
following reasonable efforts by such Shareholder to obtain the same; provided, that, prior to the
Shareholders’ agreement on Schedule 12.2(a), the Company and the Shareholders shall make
their final decision as to whether the Company should acquire, assume the development of, or
license such New Business within 120 days following receipt of the offer.

     (ii) From December 23, 2006 to the date of this Agreement, if a Third Party New Business
(the “Interim Third Party New Business”) has been offered to, or acquired by, either
Shareholder, such Shareholder agrees to present (or to cause an Affiliate to present) such
Interim Third Party New Business to the other Shareholder. Then such other Shareholder
shall have a reasonable period of time, but in no event more than ninety (90) days following
the date of this Agreement, to consider whether the Company shall acquire or license such
Interim Third Party New Business. If such other Shareholder determines that the Interim
Third Party New Business shall be acquired or licensed by the Company, then (x) it shall pay
to the presenting Shareholder 50% of the acquisition price attributable to the Interim Third
Party New Business and (y) the entire Interim Third Party New Business shall be acquired by,
contributed to, or licensed to, the Company within thirty (30) days of notice that the
Shareholder desires that the Company acquire or license such Interim Third Party New
Business (or such longer period of time

27

 

as may be agreed to by the Shareholders or as
required by applicable Law). If the other Shareholder determines that such Interim Third
Party New Business shall not be acquired or licensed by the Company, then the assets
(including intellectual property) and liabilities of such Interim Third Party New Business
shall not then be acquired or assumed by, or licensed to, the Company, and the presenting
Shareholder shall have the rights and obligations provided in Section 12.3 related to Third
Party New Business. For the purpose of this Article 12, the Interim Third Party New
Business shall be deemed to be a Third Party New Business. The presenting Shareholder also
agrees to provide all information related to the Interim Third Party New Business (including
a summary of the business and the acquisition terms and price) as reasonably requested by
the other Shareholder. In no event shall the Company acquire any rights in any of the
Interim Third Party New Business’ assets, properties, products or rights, including
Intellectual Property Rights, unless and until such time as such business is acquired by or
contributed or licensed to, the Company as contemplated by this Article 12.

          (b) In the event that any Shareholder offers a New Business to the Company, and the
Shareholders approve the acquisition or licensing of such Third Party New Business or assumption of
the development of such Shareholder New Business in accordance with Section 12.2(a) and Section 2.8
of this Agreement, the Shareholders agree to use commercially reasonable efforts to structure an
acceptable financing structure in order for the Company to acquire or assume the development of
such New Business. In the event that either Shareholder proposes any New Business and the other
Shareholder is not then able, as determined in its reasonable sole discretion, to provide its
capital contribution required for the Company to fund the acquisition, assumption of the
development or licensing of such New Business, the proposing Shareholder agrees to in good faith
assist the other Shareholder in financing such capital
contribution on then-market terms without altering the Shareholders’ respective Shares in the
Company.

          (c) In the event that a Shareholder or any of its Affiliates considers acquiring a business,
product or technology in areas other than the Field and the Consumer Channel, such Shareholder
agrees (and agrees to cause its Affiliates) to use commercially reasonable efforts to acquire or
provide the Company the right to acquire such business, product, or technology in the Field or in
the Consumer Channel.

          (d) In no event shall any meetings held between the Shareholders pursuant to Section 3 of the
IMA License Agreement and Section 3 of the P&G License Agreement, alone, constitute an offer or
proposal relating to any New Business under this Section 12.2.

          Section 12.3 Purchase; Development by Shareholder.

          (a) Purchase; Development by Shareholder.

     (i) If a New Business is offered or proposed by a Shareholder pursuant to Section 12.2,
but the Shareholders in good faith fail to approve such acquisition, assumption or license
arrangement (including, in each case, the financing plan for such acquisition, assumption or
license arrangement) and the disagreement with respect thereto (if one exists) is not
resolved by the management mediation procedure set

28

 

forth in Section 15.1 (without regard to
the last two sentences thereof), then notwithstanding Section 13.1, such proposing
Shareholder may, at its option, (x) acquire or cause any of its Affiliates to acquire such
New Business, if it is a Third Party New Business or (y) assume the development or cause any
of its Affiliates to assume the development of such New Business, if it is a Shareholder New
Business; in each case, consistent with the Shareholder New Business Proposal and subject to
Section 12.3(b).

     (ii) If the Shareholders have approved the Company’s acquisition, assumption or
licensing of a New Business (including the financing plan therefor) but a Shareholder shall
have failed to advance to the Company its additional capital contribution required for such
acquisition, assumption or license arrangement in full within 60 days after the Shareholders
voted in favor of the acquisition, assumption or license arrangement, the other Shareholder
shall have the right to (x) acquire or cause any of its Affiliates to acquire such New
Business, if it is a Third Party New Business or (y) assume the development or cause any of
its Affiliates to assume the development of such New Business, if it is a Shareholder New
Business; in each case, subject to Section 12.3(b). The Shareholder who has failed to
advance to the Company the additional capital contribution required for the Company’s
acquisition as described in the preceding sentence shall not be or become a Breaching
Shareholder solely because of such failure on its part if such Shareholder is not otherwise
in Material Breach.

          (b) Company’s Option. By notice given not earlier than 90 days prior to, and not
later than 90 days after, the third anniversary date of (i) the completion of an acquisition of a
Third Party New Business by a Shareholder (the “Acquiring Shareholder”) or any of its Affiliates or
(ii) the date on which reasonable evidence exists as to technical viability of a product developed
or to be developed by the Shareholder New Business of a Shareholder (the “Developing Shareholder”)
or any of its Affiliates and there is a documented plan for research and development execution with
respect to such product, in accordance with Section 12.3(a), the Company may elect to purchase such
New Business, together with any product, business or technology developed by the Acquiring
Shareholder or the Developing Shareholder or any of its Affiliates out of such New Business. The
purchase price of such New Business shall be an amount mutually agreed on by the Shareholders or,
if the Shareholders cannot agree on the purchase price within 30 days after the notice by the
Company, the purchase price shall be determined pursuant to Section 12.3(c). In the event that the
Company elects not to purchase a New Business in accordance with this Section 12.3(b), the
Developing Shareholder or the Acquiring Shareholder, as applicable, or any of such party’s
Affiliates shall continue to have the right, in accordance with this Section 12.3, to continue to
develop and or operate such New Business notwithstanding anything to the contrary in Section 13.1.

          (c) Appraisal. (i) If, pursuant to Section 12.3(b), there is required to be a
determination of the purchase price for the New Business, PGIO and IMS shall designate a mutually
agreed upon internationally recognized investment banking firm to serve as the appraiser. If they
cannot agree, within five Business Days after they failed to agree on the purchase price of the New
Business, on an investment banking firm to serve as the appraiser, PGIO and IMS shall each appoint
an internationally recognized investment banking firm, which two firms shall pick a third
internationally recognized investment banking firm to serve as the appraiser.

29

 

     (ii) Within 30 days of the appointment of the appraiser in accordance with Section
12.3(c)(i), PGIO shall submit to the appraiser a statement setting forth PGIO’s proposal for
a valuation of the New Business (“PGIO’s Valuation”), and IMS shall submit to the appraiser
a statement setting forth IMS’s proposal for a valuation of the New Business (“IMS’s
Valuation”).

     (1) The appraiser will be instructed to select between the two valuations the
valuation that most accurately reflects the New Business’ fair value based on the
valuation determined by the appraiser.

     (2) The appraiser shall be permitted to select only one of either PGIO’s
Valuation or IMS’s Valuation. Neither PGIO nor IMS shall be permitted to submit,
nor shall the appraiser be permitted to consider nor shall it consider, any
proposals in addition to the initial proposal or any modifications thereto;
provided, however, that the appraiser shall be permitted to seek reasonable
clarification of either initial proposal. The appraiser shall deliver its report of
the selection of the valuation of the New Business to each of PGIO and IMS. The
purchase price to be paid for the New Business shall be the value selected by the
appraiser.

     (3) In order to enable the appraiser to render its decision and to select
between the two proposals, the Acquiring Shareholder or the Developing Shareholder
shall provide the appraiser and the other Shareholder with full access (x) to all
material information concerning the business, operations and assets of the New
Business and (y) to the key employees of the New Business. The other Shareholder
shall be subject to Section 13.2 with respect to the information disclosed to it
pursuant to the foregoing and the appraiser shall keep confidential all information
disclosed to it in the course of conducting its valuation, and, to that end, will
execute such customary documentation as the Acquiring Shareholder or the Developing
Shareholder may reasonably request with respect to such confidentiality obligation.
The Acquiring Shareholder or the Developing Shareholder will provide the appraiser
and the other Shareholder with such information relating to the New Business within
its possession that may be reasonably requested in writing by the appraiser or such
other Shareholder for purposes of its evaluation hereunder. Each of PGIO and IMS
shall have full access to the appraiser’s work papers and shall be entitled to make
presentations to the appraiser in connection therewith. The appraiser will be
directed to comply with the provisions of this Section 12.3(c).

     (4) To the fullest extent permitted by Law, the decision made by the appraiser
in accordance with this Section 12.3(c) shall be final and binding on the parties
hereto, and such decision shall not be appealable to or reviewable by any court or
arbitrator.

30

 

          Section 12.4 * * *.

          Section 12.5 Intellectual Property License Back.

          (a) In the event that (x) the Shareholders fail under this Article 12 to approve the
acquisition or assumption of development of any New Business proposed by IMS or (y) IMS and its
Affiliates are granted rights under Section 13.1(b) to pursue a Carve Out Business, and (z) in
IMS’s sole discretion, IMS requires rights under any Inverness Licensed IP (as defined in the IMA
License Agreement) with respect to the current and/or future operation of any such New Business or
Carve Out Business, the Company and IMS shall negotiate in good faith a reasonable royalty for the
non-exclusive license-back granted pursuant to Section 2.5 of the Company to IMA License Agreement,
to IMA and its Affiliates under the Inverness Licensed IP solely to the extent reasonably necessary
for the exploitation of such New Business or Carve Out Business. Any such royalty shall be based
on the Fair Market Value of such Inverness Licensed IP.

          (b) In the event that (x) the Shareholders fail under this Article 12 to approve the
acquisition or assumption of development of any New Business proposed by PGIO or (y) PGIO and its
Affiliates are granted rights under Section 13.1(b) to pursue a Carve Out Business, and (z) in
PGIO’s sole discretion, PGIO requires rights under any P&G Licensed IP (as defined in the P&G
License Agreement) with respect to the current and/or future operation of any such New Business or
Carve Out Business, the Company and PGIO shall negotiate in good faith a reasonable royalty for the
non-exclusive license-back granted pursuant to Section 2.5 of the Company to P&G License Agreement,
to P&G and its Affiliates under the P&G Licensed IP solely to the extent reasonably necessary for
the exploitation of such New Business or Carve Out Business. Any such royalty shall be based on
the Fair Market Value of such P&G Licensed IP.

ARTICLE 13

Non-Compete; Confidentiality

          Section 13.1 Non-Compete. (a) Except as otherwise permitted in Sections 7.1(e)(iii),
7.1(f)(iv)(3), 12.3 and 13.1(b) of this Agreement, neither IMS nor PGIO nor any of their respective
Affiliates (including, in the case of PGIO, The Procter & Gamble Company, in the case of IMS,
Inverness Medical Innovations, Inc.) shall, during the term of this Agreement, directly or
indirectly, own, manage, operate, control, or use or permit its name to be used in connection with
any business or enterprise that competes anywhere in the world with the Company within the Field
and the Consumer Channel; provided that the foregoing restriction shall not be construed to
prohibit the ownership (1) by either Shareholder together with its Affiliates and associates, as
the case may be, of not more than * * * of any class of securities of any corporation which has a
class of securities publicly owned and regularly traded on any securities exchange or over the
counter market, (2) subject to the rights and obligations under the P&G License Agreement, by PGIO
or any of its Affiliates of those businesses, products, and

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

31

 

          potential products as and to the extent
set forth on Schedule 13.1(a)(2) hereto that are currently conducted by PGIO or any of its
Affiliates or (3) subject to Section 12.2(a)(ii), by IMS or any of its Affiliates of those
businesses, products, and potential products as and to the extent set forth on Schedule
13.1(a)(3) hereto that are currently conducted by IMS or any of its Affiliates.

          (b) Notwithstanding Section 13.1(a), (x) IMS, PGIO and any of their respective Affiliates may
invest in, license to or otherwise acquire an interest in any business directly competing or
attempting to directly compete with the Company within the Field and the Consumer Channel if such
business’ revenues in the preceding calendar year did not exceed
* * * of the Company’s revenues (or, in the event that the Company was not in
existence and revenue-producing during such period, * * * of the revenues of the Consumer
Diagnostics Business) in the corresponding period, and (y) IMS, PGIO and any of their respective
Affiliates may acquire any business directly competing or attempting to directly compete with the
Company within the Field and the Consumer Channel that is part of a larger business of which
the competitive business is not the most significant part (the competitive business described in
clause (x) or (y) of this sentence is referred to as a “Carve Out Business”); provided, that prior
to, or promptly after, IMS’s, PGIO’s or any of their respective Affiliates’ acquisition of the
Carve Out Business, the Company shall have been offered a reasonable opportunity to acquire the
Carve Out Business along with reasonably adequate time (but not longer than 60 days) to finance
such acquisition if it determines to acquire the Carve Out Business. If IMS, PGIO or any of their
respective Affiliates acquires any Carve Out Business, such Carve Out Business shall be subject to
the Company’s option to purchase upon the third anniversary of the acquisition by IMS, PGIO or any
of their respective Affiliates as provided in Section 12.3(b).

          (c) Nothing in this Agreement shall be deemed to restrict in any way the right of IMS, PGIO or
any of their respective Affiliates to conduct any other business or activity, and none of them
shall be accountable to the Company or any other party under this Agreement with respect to such
other business or activity, so long as such other business or activity does not directly compete
with the Company with respect to the Field.

          Section 13.2 Confidentiality. Each party hereto will hold, and will cause its
Affiliates, Representatives and employees to hold, in strict confidence from any Person (other than
any such Affiliate, Representative or employee with a need to know), the terms of this Agreement
and all documents and information concerning the other party or any of its Affiliates furnished to
it by the other party or such other party’s Affiliates, Representatives and employees in connection
with this Agreement and the transactions contemplated hereby, including documents and information
disclosed prior to the date hereof (collectively, “Confidential Information”); provided, that a
party hereto may disclose, or cause its Affiliates, Representatives and employees to disclose,
Confidential Information if and to the extent

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

32

 

          (a) compelled to disclose by judicial or administrative process or by other requirements of
Law or, if advised by legal counsel that disclosure is required, as requested by a Governmental
Entity having jurisdiction over such party;

          (b) disclosed in a Legal Proceeding brought by a party hereto in pursuit of its rights or in
the exercise of its remedies hereunder; or

          (c) disclosed to (i) the managing underwriter or placement agent for any sale of the
securities of the receiving party, and such managing underwriter’s or placement agent’s
Representatives, (ii) the lead lender, arranger, representative or agent for any other financing
transaction of the receiving party, and such lender’s, arranger’s, representative’s or agent’s
Representatives, (iii) any Person whose voting securities are acquired in a single transaction by
the receiving party in such an amount so as to grant Control over such Person to the receiving
party and such Person’s Representatives, (iv) any Financial Investor in the receiving party, and
such Financial Investor’s Representatives, (v) any Strategic Investor, and such Strategic
Investor’s Representatives, or (vi) any potential acquiror of the receiving party, and such
Person’s Representatives;

provided, that in the case of any disclosure permitted under clause (c) above, such disclosure
shall consist solely of the terms of this Agreement (and not any other Confidential Information)
and shall in no event include any schedules (including the Disclosure Schedule) or exhibits to this
Agreement; and provided further, that any Person receiving any disclosure pursuant to this Section
13.2 from a party hereto, or any of such party’s Affiliates, Representatives or employees, must be
bound by an established legal privilege, or agree in writing, to hold in strict confidence from any
other Person (including with respect to disclosure permitted under clause (c), any member of an
underwriting or lending syndicate, or any Person to whom a portion of such financing is
participated or otherwise transferred in connection with such sale or financing, or any Affiliate,
shareholder or member of or any investor in such Person) the Confidential Information so disclosed.
Notwithstanding anything in this Section 13.2 to the contrary, Confidential Information shall not
include any such documents or information that the receiving party can demonstrate were (A)
previously known by the party receiving such documents or information, (B) in the public domain
(either prior to or after the furnishing of such documents or information hereunder) through no
fault of such receiving party, (C) later acquired by the receiving party from another source if the
receiving party is not aware that such source is under an obligation to another party hereto to
keep such documents and information confidential or (D) developed by employees of the receiving
party without knowledge of the documents and information of the other party or any of its
Affiliates. The receiving party agrees that it will not, and it will cause each of its Affiliates,
Representatives and employees not to, use Confidential Information in any way, for its own account
or the account of any third Person, except for the exercise of its rights and performance of its
obligations under this Agreement and the other Transaction Agreements. The receiving party shall
be jointly and severally liable for any breach by its Affiliates, Representatives and employees of
the restrictions set forth in this Agreement.

          Section 13.3 Non-Solicitation. Without the prior written consent of the other
Shareholder, IMS, on the one hand, and PGIO, on the other hand, agree that, during the Term,
neither of them nor any of their respective Affiliates shall, directly or indirectly, (i) employ,
hire or engage, or cause to employ, hire or engage, any Person who is or was an employee (including

33

 

any Transferred Employee (as defined in the Purchase Agreement)) of the other party or any of its
Affiliates, or (ii) solicit, recruit or induce, or attempt to solicit, recruit or induce, any
Person who is or was an employee (including any Transferred Employee (as defined in the Purchase
Agreement)) of the other party or any of its Affiliates to leave his or her employment with the
other party or any of its Affiliates.

ARTICLE 14

Material Breach; Bankruptcy; Withdrawal

          Section 14.1 Material Breach. If (i) any Shareholder is in Material Breach and (ii)
within 30 days’ after written notice to such Shareholder from another Shareholder, such notice
specifying with particularity the condition, act, omission or course of conduct asserted to
constitute such Material Breach, such Shareholder has not cured, corrected or eliminated such
Material Breach or, if such Material Breach by its nature cannot be cured within 30 days, such
Shareholder has not taken steps which, if diligently prosecuted to conclusion, are reasonably
designed to expeditiously cure, correct or eliminate such Material Breach, then such Shareholder
will be a “Breaching Shareholder.” Until the Board of Managers determines otherwise, a Breaching
Shareholder shall, and hereby agrees to, vote its Share, and cause its appointed Managers to vote,
pursuant to the instructions of the Shareholder who is not a Breaching Shareholder, which
instructions shall be consistent with the terms and conditions of this Agreement.

          Section 14.2 Bankruptcy. If (a) any Shareholder or any parent entity (including any
general partner of a Shareholder that is a partnership or parent entity of such general partner) of
any Shareholder commences a voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar Law or any other case or proceeding to be
adjudicated a bankrupt or insolvent, or consents to the entry of a decree or order for relief in
respect of either of them in an involuntary case or proceeding under any applicable Federal or
state bankruptcy, insolvency, reorganization or other similar Law or to the commencement of any
bankruptcy or insolvency or insolvency case or proceeding against either of them, or files a
petition or answer or consent seeking reorganization or relief under any applicable federal or
state Law, or consents to the filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of either
of them, or (b) an involuntary case or other proceeding shall be commenced against any Shareholder
or any parent entity (including any general partner of a Shareholder that is a partnership or
parent entity of such general partner) of such Shareholder seeking liquidation, reorganization or
other relief with respect to it or its debts under any applicable Federal or state bankruptcy,
insolvency, reorganization or similar Law now or hereafter in effect or seeking the appointment of
a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of it, and
such involuntary case or other proceeding shall remain undismissed and unstayed, or an order or
decree approving or ordering any of the foregoing shall be entered and continued unstayed and in
effect, in any such event, for a period of 90 days, then such Shareholder will be a “Bankrupt
Shareholder.” Until the Board of Managers determines otherwise, a Bankrupt Shareholder shall, and
hereby agrees to, vote its Share, and cause its appointed Managers to vote, pursuant to the
instructions of the Shareholder who is not a Bankrupt Shareholder, which instructions shall be
consistent with the terms and conditions of this Agreement.

34

 

          Section 14.3 Effect of Material Breach or Bankruptcy.

          (a) Indemnification. Any Breaching Shareholder shall indemnify, defend and hold
harmless the Company any other Shareholder who is not a Breaching Shareholder or a Bankrupt
Shareholder (a “Non-Breaching Indemnitee”) from and against any and all Liabilities paid or
incurred by such Non-Breaching Indemnitee as a result of the Breaching Shareholder’s Material
Breach. All rights of an Indemnitee under this Section 14.3 shall survive the dissolution of the
Company and the withdrawal of the Non-Breaching Indemnitee from the Company.

          (b) Forced Sale or Forced Withdrawal. Any Bankrupt Shareholder may be forced to sell
its Share in the Company, or, at the discretion of the Shareholder who is not a Bankrupt
Shareholder, to withdraw from the Company, in accordance with Article 794 CO. In the event a
Shareholder is forced to sell its Share or to withdraw from the Company in accordance with the
foregoing, such Shareholder agrees to take all actions legally required,
including voting its Share and otherwise approve the withdrawal or sale, to effect such
withdrawal or sale, as the case may be.

          (c) Payments Upon Withdrawal or Forced Sale.

     (i) In the event a Bankrupt Shareholder is forced to sell its Share in the Company,
pursuant to Section 14.3(b), the Bankrupt Shareholder shall sell its Share to the other
Shareholder that is not a Bankrupt Shareholder for an amount equal to 100% of the Fair
Market Value of such Share. If the Shareholders cannot agree on the Fair Market Value of
the Share of the Bankrupt Shareholder, the Fair Market Value of the Share of the Bankrupt
Shareholder shall be determined pursuant to the appraisal set forth in Section 3 of the
Option Agreement. The cost of any such appraisal shall be paid or borne by such Bankrupt
Shareholder.

     (ii) In the event of a withdrawal of a Bankrupt Shareholder pursuant to Section
14.3(b), the Bankrupt Shareholder shall sell its Share to the Company for an amount equal to
100% of the Fair Market Value of such Share. If the Shareholders cannot agree on the Fair
Market Value of the Share of the Bankrupt Shareholder, the Fair Market Value of the Share of
the Bankrupt Shareholder shall be determined pursuant to the appraisal set forth in the
Option Agreement. The cost of any such appraisal shall be paid or borne by such Bankrupt
Shareholder.

          (d) [Reserved].

          (e) Material Breach. (i) In the event of a Material Breach, the Breaching
Shareholder shall have the right to cure such Material Breach in a reasonable period of time (in no
event to exceed 90 days). 

     (ii) The Breaching Shareholder may submit to arbitration the determination of the
existence of a Material Breach and the damages resulting from such a breach, and either the
Breaching Shareholder or the other Shareholder (the “Non-Breaching Shareholder”) may submit
to arbitration the determination of damages, which will be arbitrated under the baseball
arbitration method provided in the Option Agreement.

35

 

     (iii) If the damages for the Material Breach have not been paid in full six months after
determination, the Non-Breaching Shareholder shall have the right to purchase from the
Breaching Shareholder all of such Breaching Shareholder’s Share in accordance with Section
1(b) of the Option Agreement. The remedy provided in this Section 14.3(e) shall be in
addition to other remedies available under this Agreement.

ARTICLE 15

Disputes Among Shareholders

          Section 15.1 Management Mediation. In the event that a dispute relating to this
Agreement arises between the Shareholders, good faith discussions and negotiations shall be
conducted by a designated
management representative of each Shareholder to resolve such dispute. If such
representatives are unable to resolve the dispute within 10 Business Days after the initial request
for negotiations at this level, then the matter shall be referred to the most senior executive
officer of each Shareholder, who shall attempt, through good faith negotiations and discussions, to
resolve the dispute within five Business Days immediately following such initial 10 Business Day
period. If the dispute is not resolved within the aforementioned five Business Day period, then
the matter may be submitted for binding arbitration as provided in Section 15.2. This Section 15.1
shall not apply to or limit the right of a Shareholder to seek a temporary restraining order or
other provisional or permanent remedy to preserve the status quo or to prevent irreparable harm.

          Section 15.2 Arbitration. Except as otherwise provided in this Agreement, any
controversy or claim arising out of or relating to this Agreement, or the breach hereof, that has
not been resolved after compliance with Section 15.1 shall be settled by binding arbitration in the
following manner:

          (a) If a Shareholder intends to commence arbitration to resolve a dispute arising under this
Agreement, such Shareholder shall provide written notice (the “Arbitration Request”) to the other
Shareholder of such intention and the issues for resolution. Within five Business Days after the
receipt of the Arbitration Request, the other Shareholder may, by written notice, add additional
issues for resolution; provided that such issues are eligible for arbitration under this Section
15.2.

          (b) Arbitration shall be held in New York City, New York under the CPR Rules for
Non-Administered Arbitration. The arbitration shall be conducted by three arbitrators who are
knowledgeable in the subject matter at issue in the dispute. One arbitrator will be selected by
each Shareholder, and the third arbitrator will be selected by mutual agreement of the two
arbitrators selected by the Shareholders. Each party shall submit to such arbitrators its proposed
ruling and remedy for each issue that is the subject of arbitration. The arbitrators shall, within
15 days after the conclusion of the arbitration hearing, issue a written award and statement of
decision describing the essential findings and conclusions on which the award is based, including
the calculation of any damages awarded. Any such award and decision shall reflect the proposed
ruling and remedy of one of the Shareholders as to each disputed issue. The arbitrators shall be
authorized to award compensatory damages, but shall not be authorized to award non-economic damages
or punitive damages, or to reform, modify or materially change this Agreement or any other
agreements contemplated hereunder. The arbitrators shall also be

36

 

authorized to grant any
temporary, preliminary or permanent equitable remedy or relief the arbitrators deem just and
equitable and within the scope of this Agreement, including an injunction or order for specific
performance. The award of the arbitrators shall be the sole and exclusive remedy of the
Shareholders (except for any other remedies set forth in this Agreement). The arbitrators may
proceed to an award, notwithstanding the failure of either Shareholder to participate in the
proceedings. Judgment on the award rendered by the arbitrators may be enforced in any court having
competent jurisdiction thereof, subject only to revocation on grounds of fraud or clear bias on the
part of the arbitrators.

          Section 15.3 Costs. Unless and until otherwise agreed or determined in the course of
any mediation or arbitration proceeding pursuant
to Section 15.1 or 15.2, each Shareholder shall bear its own costs of the mediation and
arbitration.

ARTICLE 16

Miscellaneous

          Section 16.1 Notices. All notices, requests, claims, demands, waivers and other
communications under this Agreement shall be in writing and shall be by facsimile, courier services
or personal delivery to the following addresses, or to such other addresses as shall be designated
from time to time by a Shareholder in accordance with this Section 16.1:

if to PGIO:

Procter & Gamble International Operations, SA

c/o The Procter & Gamble Company

One Procter & Gamble Plaza

Cincinnati, Ohio 45202

Attention: Corporate Secretary

Facsimile: 513-983-2611

with a copy (which shall not constitute notice) to:

Covington & Burling LLP

1330 Avenue of the Americas

New York, New York 10019

Attention: Scott F. Smith

Facsimile: 646-441-9056

if to IMS:

Inverness Medical Switzerland GmbH

c/o Inverness Medical Innovations Inc.

51 Sawyer Road

Suite 200

Waltham, MA 02453

Attention: General Counsel

Facsimile Number: 781-647-3939

37

 

with a copy (which shall not constitute notice) to:

Goodwin Procter LLP

Exchange Place

Boston, MA 02109

Attention: Scott F. Duggan

Facsimile: 617-523-1231

if to the Company:

SPD Swiss Precision Diagnostics GmbH

c/o Procter & Gamble International Operations, SA

SBC Saconnex Business Centre

207 route de Ferney

CH-1218 Grand-Saconnex

Geneva, Switzerland

Attention: General Counsel

Facsimile: +41-22-709-8658

with a copy (which shall not constitute notice) to:

Inverness Medical Switzerland GmbH

c/o Inverness Medical Innovations Inc.

51 Sawyer Road

Suite 200

Waltham, MA 02453

Attention: General Counsel

Facsimile Number: 781-647-3939

with a copy (which shall not constitute notice) to:

Procter & Gamble International Operations, SA

c/o The Procter & Gamble Company

One Procter & Gamble Plaza

Cincinnati, Ohio 45202

Attention: Corporate Secretary

Facsimile: 513-983-2611

All notices and communications under this Agreement shall be deemed to have been duly given (x)
when delivered by hand, if personally delivered, (y) one Business Day after when delivered to a
courier, if delivered by commercial one-day overnight courier service or (z) when sent, if sent by
facsimile, with an acknowledgment of sending being produced by the sending facsimile machine.

          Section 16.2 Definitions

38

 

          The following terms shall, for the purposes of this Agreement and the Schedules and Exhibits
hereto, have the following meanings (terms defined in the singular or the plural include the plural
or the singular, as the case may be):

          “Accounting Period” means the Fiscal Year, or any period of shorter duration commencing upon
the Closing Date or the day following the last day of the preceding Accounting Period and
terminating upon the earlier of (a) the last day of the Fiscal Year or (b) the day preceding the
effective date of (i) the admission of any new
Shareholder, (ii) any other change in the relative interests of the Shareholders (including
PGUS’s exercise of any Option under the Option Agreement), (iii) a Transfer by any Shareholder,
(iv) a sale of substantially all the assets of the Company, (v) the termination of the Company for
federal income tax purposes, (vi) the dissolution of the Company and (vii) any other similar
transaction or event, as determined by the Board of Managers.

          “Adjusted Capital Account Deficit” means, with respect to any Shareholder, the deficit
balance, if any, in such Shareholder’s Capital Account as of the end of the relevant taxable
period, after giving effect to the following adjustments:

          (i) credit to such Capital Account any amounts that the Shareholder is deemed to be obligated
to restore pursuant to the penultimate sentences in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Treasury Regulations, and

          (ii) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4),
(5) and (6) of the Treasury Regulations.

          The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted
consistently therewith.

          “Affiliate” means, with respect to any Person, a Person who is an “affiliate” of such first
Person within the meaning of Rule 405 under the Securities Act. For purposes of this definition, a
Person shall be deemed to control another Person if it owns or controls 50% or more of the voting
equity of the other Person (or other comparable ownership if the Person is not a corporation);
provided, however, that solely for purposes of this Agreement, the Company shall not be deemed to
be an “Affiliate” of any party hereto (or such parties’ other Affiliates).

          “Articles of Incorporation” shall refer to the Articles of Incorporation of the Company as
filed and registered from time to time with the commercial register at the registered seat of the
Company.

          “Bankrupt Shareholder” has the meaning set forth in Section 14.2.

          “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the United States
Securities Exchange Act of 1934, as amended.

          “Breaching Shareholder” has the meaning set forth in Section 14.1.

39

 

          “Business Day” means any day other than a Saturday or Sunday or a day on which banking
institutions located in New York City or Geneva, Switzerland are permitted or required by Law,
executive order or decree of a Governmental Entity to remain closed.

          “Capital Contribution” means, with respect to each Shareholder, such Shareholder’s
contribution to the Company with respect to its Share (Leistung auf die Stammeinlage) as defined in
the CO.

          “Cardiology Field” has the meaning set forth in the IMA License Agreement.

          “Carve Out Business” has the meaning set forth in Section 13.1(b).

          “Change of Control” shall be deemed to have occurred, with respect to a Shareholder, if the
event set forth in any one of the following paragraphs shall have occurred:

          (a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
such Shareholder (not including in the securities beneficially owned by such Person any securities
acquired directly from such Shareholder other than securities acquired by virtue of the exercise of
a conversion or similar privilege or right unless the security being so converted or pursuant to
which such right was exercised was itself acquired directly from such Shareholder) representing 50%
or more of (i) the then outstanding shares of common stock of such Shareholder or (ii) the combined
voting power of such Shareholder’s then outstanding voting securities entitled to vote generally in
the election of directors; or

          (b) there is consummated a merger or consolidation of such Shareholder or any direct or
indirect Subsidiary of such Shareholder with any other corporation, other than a merger or
consolidation pursuant to which (i) the voting securities of such Shareholder outstanding
immediately prior to such merger or consolidation will continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity or any parent
thereof) more than 50% of the outstanding shares of common stock, and the combined voting power of
the then outstanding voting securities entitled to vote generally in the election of directors, as
the case may be, of such Shareholder or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation and (ii) no Person will become the Beneficial Owner,
directly or indirectly, of securities of such Shareholder or such surviving entity or any parent
thereof representing 50% or more of the outstanding shares of common stock or the combined voting
power of the outstanding voting securities entitled to vote generally in the election of directors
(except to the extent that such ownership existed prior to such merger or consolidation); or

          (c) the stockholders of such Shareholder approve a plan of complete liquidation or dissolution
of such Shareholder or there is consummated an agreement for the sale or disposition by such
Shareholder of all or substantially all of such Shareholder’s assets, other than a sale or
disposition by such Shareholder of all or substantially all of such Shareholder’s assets to an
entity, (i) more than 50% of the outstanding shares of common stock, and the combined voting power
of the then outstanding voting securities entitled to vote generally in the election of directors,
as the case may be, of which (or of any parent of such entity) is owned by stockholders of such
Shareholder in substantially the same proportions as their ownership of

40

 

such Shareholder
immediately prior to such sale and (ii) in which (or in any parent of such entity) no Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of such
Shareholder representing 50% or more of the outstanding shares of common stock resulting from
such sale or disposition or the combined voting power of the outstanding voting securities entitled
to vote generally in the election of directors (except to the extent that such ownership existed
prior to such sale or disposition).

          “CO” means the Swiss Federal Code of Obligations, as amended from time to time.

          “Code” means the U.S. Internal Revenue Code of 1986, as amended, or any corresponding
provisions of succeeding law.

          “Company Minimum Gain” has the same meaning as the term “partnership minimum gain” in Sections
1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.

          “Company to IMA License Agreement” means the License Agreement by and between the Company and
IMA, dated as of the date hereof.

          “Company to P&G License Agreement” means the License Agreement by and between the Company and
P&G, dated as of the date hereof.

          “Consumer Channel” has the meaning set forth in the IMA License Agreement.

          “Contracting Party” has the meaning set forth in Section 2.3.

          “Debt” means, as to any Person, as of any date of determination, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or services, (b) all
amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under
letters of credit, surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person, (c) all indebtedness for borrowed money or for the
deferred purchase price of property or services secured by any lien on any property owned by such
Person, to the extent attributable to such Person’s interest in such property, even though such
Person has not assumed or become liable for the payment thereof, and (d) obligations of such Person
incurred in connection with entering into a lease which, in accordance with generally accepted
accounting principles, should be capitalized.

          “Depreciation” shall mean for any taxable period or portion thereof, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with respect to an asset for
such period for federal income tax purposes, except that with respect to any asset whose Gross
Asset Value differs from its adjusted basis for federal income tax purposes at the beginning of
such period, Depreciation shall be an amount that bears the same relationship to such beginning
Gross Asset Value as the depreciation, amortization or cost recovery deduction in such period for
federal income tax purposes bears to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at the beginning of such period is
zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method selected by the
Board of Managers.

41

 

          “Diabetes Field” has the meaning set forth in the IMA License Agreement.

          “Distributable Cash” means the excess of the Company’s positive cash flow on a consolidated
basis over the Company’s consolidated working capital needs. The Company’s positive cash flow on a
consolidated basis shall mean the excess of consolidated cash receipts (excluding the proceeds of
any borrowing by the Company or any Subsidiary thereof) over consolidated cash disbursements for
any given period. The Company’s working capital needs shall be determined by the Board of Managers
in accordance with the Business Plan and Budget and shall include reasonable reserves (including
the reserves established by the Chief Financial Officer pursuant to Section 11.2 of this Agreement)
for current and future operating expenses, debt service, business expansion and acquisitions,
contingencies and emergencies.

          “Excluded Fields” means the Diabetes Field, the Cardiology Field and the Oral Care Field, as
such terms are defined in the IMA License Agreement.

          “Fair Market Value” means, on any date with respect to any asset owned by any Person, the cash
amount that a willing seller not compelled to sell would reasonably expect to receive for such
asset in a current sale to a willing buyer not compelled to buy.

          “Field” has the meaning set forth in the IMA License Agreement.

          “Financial Investor” means an investor, other than an operating company or a Subsidiary,
division, unit or business segment of an operating company engaged primarily in investing
activities, that purchases the equity securities of another Person, whether or not such purchases
or equity securities are registered under the Securities Act, based on the prospect of financial
gain.

          “Fiscal Year” of the Company means 12-month period ending on June 30.

          “GAAP” shall mean United States generally accepted accounting principles as in effect from
time to time and applied on a consistent basis.

          “Governmental Entity” means any nation, state, province, county, city or political subdivision
and any official, agency, arbitrator, authority, court, department, commission, board, bureau,
instrumentality or other governmental entity of any thereof, whether domestic or foreign.

          “Gross Asset Value” shall mean, with respect to any Company asset, such asset’s adjusted basis
for federal income tax purposes, except as follows:

     (i) The initial Gross Asset Value of any asset contributed by a Shareholder to the
Company shall be the gross Fair Market Value of such asset, as agreed between the Company
and the contributing Shareholder in connection with the contribution or, in the absence of
such an agreement, as determined by the Board of Managers;

     (ii) The Gross Asset Value of the Company assets shall be adjusted to equal their
respective gross Fair Market Values (taking Code Section 7701(g) into account), as
determined by the Board of Managers, as of the following times: (w) the

42

 

acquisition of an
additional interest in the Company by any new or existing Shareholder in exchange for more
than a de minimis Capital Contribution; (x) the distribution by the Company to a Shareholder
of more than a de minimis amount of Company property as consideration for an interest in the
Company; (y) the issuance of Shares as consideration for the provision of services to or for
the benefits of the Company; and (z) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to
clauses (x) and (y) above shall be made only if the Board of Managers reasonably determine
that such adjustments are necessary or appropriate to reflect the relative economic
interests of the Shareholders in the Company;

     (iii) The Gross Asset Value of any Company asset distributed to any Shareholder shall
be adjusted to equal the gross Fair Market Value (taking Code Section 7701(g) into account)
of such asset on the date of distribution as determined by the Board of Managers; and

     (iv) The Gross Asset Values of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such adjustments are taken into account
in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m);
provided, however, that Gross Asset Values shall not be adjusted pursuant to this paragraph
(iv) to the extent the Board of Managers determine that an adjustment pursuant to paragraph
(ii) above is necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (iv).

          If the Gross Asset Value of an asset has been determined or adjusted pursuant to paragraphs
(i), (ii) or (iv) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation
taken into account with respect to such asset for purposes of computing Net Profits and Net Losses.

          “IMA License Agreement” has the meaning set forth in Section 2.8(n).

          “Initial Period” means the two-year period from the date of this Agreement.

          “Initial Term” has the meaning set forth in Section 1.1.

          “Intellectual Property” means any or all of the following (in each case in any domestic or
foreign jurisdiction): (a) patents (including utility patents, petty patents, design patents and
certificates of invention) and applications therefor (including provisional, non-provisional,
converted provisional and continued prosecution applications) and all reissues, reexaminations,
revalidations, divisionals, renewals, extensions or restorations (including any supplementary
protection certificate and the like), provisionals, continuations and continuations-in-part
thereof; (b) inventions, discoveries and ideas (whether patentable or not), (c) trade secrets,
proprietary information, know how, confidential information, technology, technical data, and all
documentation relating to any of the foregoing and rights to limit the use of disclosure thereof by
any person; (d) copyrights, copyright registrations and applications therefor and all

43

 

other rights
corresponding thereto, and writings and other works that are the subject matter of such copyrights;
(e) trade names, trademarks, service marks, brand names, certification marks, trade dress and other
indications of origin, the goodwill associated with the foregoing, and the registrations and
applications for registration of any of the foregoing; (f) databases and data collections and all
rights therein; (g) computer software including all source code, object code, firmware, development
tools, files, records and data, and all media on which any of the foregoing is recorded; and (h)
Web addresses, sites and domain names.

          “Intellectual Property Rights” shall mean, collectively, any and all rights in, to and under
Intellectual Property, including patent rights, trade secret rights, copyrights, trademarks,
service marks, trade dress and similar rights of any type under the Laws of any Governmental
Entity, including all applications and registrations relating to the foregoing.

          “Law” means any constitution, act, statute, law (including common law), ordinance, treaty,
rule or regulation of any Governmental Entity.

          “Legal Proceeding” means any investigation, claim, action, suit, complaint, dispute, audit,
demand, litigation or judicial, administrative or arbitration proceeding.

          “Lien” any lien, pledge, claim, charge, mortgage, encumbrance or other security interest of
any kind, whether arising by any contract or by operation of law.

          “Material Adverse Effect” means any change, circumstance, development, state of facts, event
or effect that has had or would reasonably be expected to have a material adverse change or effect
(taken alone or in the aggregate with any other adverse change or effect) in or with respect to the
business, assets, condition (financial or otherwise), or results of operations of an entity.

          “Material Breach” means a breach of this Agreement or the US JV LLC Agreement that (a) would
reasonably be expected to have a Material Adverse Effect on the Company and the US JV on a combined
basis or (b) would materially impair the Company’s or the US JV’s ability to pursue its businesses.

          “Net Profits” and “Net Losses” means the net income or net loss of the Company (including
capital gains and losses) as determined in
accordance with the accounting methods followed by the Company for federal income tax purposes
including income exempt from tax and described in Code Section 705(a)(1)(B) and treating as
deductions items of expenditure described in, or under Treasury Regulations deemed described in,
Code Section 705(a)(2)(B). For purposes of computing Net Profits and Net Losses, gain or loss
resulting from the disposition of property, which gain or loss is recognized for federal income tax
purposes, shall be computed by reference to the Gross Asset Value of such property rather than its
adjusted tax basis. In lieu of the depreciation, amortization and other cost recovery deductions
taken into account in computing taxable income or loss for federal income tax purposes, there shall
be taken into account Depreciation. In addition: (i) in the event the Gross Asset Value of any
Company asset is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment
increases the Gross Asset

44

 

Value of the asset) or an item of loss (if the adjustment decreases the
Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account
for purposes of computing Net Profit or Net Losses; and (ii) notwithstanding any other provision of
this definition, any items which are specially allocated pursuant to sections 5.7(g), (h), (i), (j)
and (k) hereof shall not be taken into account for purposes of computing Net Profits or Net Losses.
The amounts of the items of Company income, gain, loss or deduction available to be specially
allocated pursuant to sections 5.7(g), (h), (i), (j) and (k) hereof shall be determined by applying
rules analogous to those set forth in this definition of “Net Profits” and “Net Losses.”

          “Nonrecourse Deductions” has the meaning set forth in Sections 1.704-2(b)(1) and 1.704-2(c) of
the Treasury Regulations.

          “Nonrecourse Liability” has the meaning set forth in Section 1.704-2(b)(3) of the Treasury
Regulations.

          “Non-Selling Shareholder” has the meaning set forth in Section 7.1(f)(i)(2).

          “Option Agreement” means the Option Agreement, dated the date hereof, among the Company, the
US JV, IMA, IMS, Procter & Gamble RHD, Inc., and PGIO.

          “P&G License Agreement” has the meaning set forth in Section 2.8(n).

          “Percentage Interest” means a Shareholder’s aggregate economic percentage interest in the
Company as determined by dividing the number of Shares owned by such Shareholder by the number of
Shares then owned by all Shareholders. The Percentage Interest of each of the Shareholders as of
the effective date of this Agreement is 50.000%.

          “Person” means an individual, corporation, limited liability company, limited liability
partnership, partnership, trust, or unincorporated association, or a government or any agency or
political subdivision thereof.

          “Renewal Term” has the meaning set forth in Section 1.1.

          “Representative” means, with respect to a Person, such Person’s legal and internal and
independent accounting advisors and representatives.

          “Required Working Capital Balance” has the meaning set forth in Section 11.2.

          “Restricted Third Party” has the meaning set forth in Section 7.1(c).

          “Sale Event” means (a) a merger or consolidation of the Company with or into another entity
(with respect to which less than a majority of the outstanding voting power of the surviving or
consolidated entity immediately following such event is held by persons or entities who were
Shareholders immediately prior to such event); (b) the sale, license or transfer of all or
substantially all of the properties and assets of the Company; (c) any acquisition by any Person
(or group of affiliated or associated Persons) of beneficial ownership of a majority of the Share
Capital in a single transaction or a series of related transaction or (d) any other change of
control of 50% or more of the outstanding voting power of the Company; in each case in a single
transaction or a series of related transactions.

45

 

          “Schedule I” shall refer to the Schedule of Shareholders to be maintained by the Company.

          “Selling Shareholder” has the meaning set forth in Section 7.1(f)(i).

          “Share” means, with respect to each Shareholder, such Shareholder’s entire interest
(Stammanteil) in the Company. Each Shareholder shall hold one Share only, but the par value of
each Share may vary.

          “Share Capital” means the Company’s registered capital (Stammkapital) as defined in the CO.

          “Share Capital Percentage” means the percentage of the Company’s Share Capital represented by
a Shareholder’s Share.

          “Shareholder In-License Agreements” have the meaning set forth in Section 7.1(e).

          “Shareholder Nonrecourse Debt” has the same meaning as the term “partner nonrecourse debt” in
Section 1.704-2(b)(4) of the Treasury Regulations.

          “Shareholder Nonrecourse Debt Minimum Gain” means an amount, with respect to each Shareholder
Nonrecourse Debt, equal to the Shareholder Minimum Gain that would result if such Shareholder
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section
1.704-2(i)(3) of the Treasury Regulations.

          “Shareholder Nonrecourse Deductions” has the same meaning as the term “partner nonrecourse
deductions” in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury Regulations.

          “Strategic Investor” means, with respect to any Person, an operating company or a Subsidiary
of an operating company that (whether directly or through one or more Subsidiaries) (a) conducts
business in the same industry as that in which such Person conducts business (or in an industry
functionally related to the industry in which such Person conducts business) that purchases the
equity securities of such Person in one or more strategic transactions, or (b) develops,
manufactures, licenses or sells products, services or technology that are of key importance to, or
are reasonably likely in the future to be of key importance with respect to, a strategic
transaction involving the purchase of equity securities of such Person, in each case whether or not
such purchases or equity securities are registered under the Securities Act.

          “Subsidiary” means, with respect to any Person, an Affiliate controlled by such Person
directly, or indirectly through one or more intermediaries.

          “Tax Year” means the 12-month period ending on June 30.

          “Term” has the meaning set forth in Section 1.1.

46

 

          “Third Party” means any Person other than the Company, the Shareholders and their Permitted
Transferees.

          “Transaction Agreements” has the meaning set forth in the IMS Contribution Agreement.

          “Transfer” means, whether directly or indirectly by merger, operation of law or otherwise
(including through a transaction involving the equity or other ownership interest of a Subsidiary),
any sale, assignment, conveyance, transfer, donation or any other means to dispose of, or pledge,
hypothecate or otherwise encumber in any manner whatsoever, or permit or suffer any Lien of any
interest in the Company (whether profits, management, Shares, Share Capital Percentage).

          “Transferring Shareholder” has the meaning set forth in Section 7.1(c).

          “Treasury Regulations” means the regulations promulgated by the U.S. Department of the
Treasury under the Code.

          “US JV” means US CD LLC, a Delaware limited liability company.

          “US JV LLC Agreement” means the Amended and Restated Limited Liability Company Agreement,
dated as of the date of this Agreement, by and between Inverness Medical Innovations, Inc., Procter
& Gamble RHD, Inc. and US JV.

          Section 16.3 Descriptive Headings; Certain Interpretations. The table of contents and
headings contained in this Agreement are for reference purposes only and shall not control or
affect the meaning or construction of this Agreement. Except where expressly stated otherwise in
this Agreement, the following rules of interpretation apply to this Agreement:
(a) “or” is not exclusive and “include,” “includes” and “including” are not limiting; (b)
“hereof,” “hereto,” “hereby,” “herein” and “hereunder” and words of similar import when used in
this Agreement refer to this Agreement as a whole and not to any particular provision of this
Agreement; (c) “date hereof” refers to the date of this Agreement; (d) “extent” in the phrase “to
the extent” means the degree to which a subject or other thing extends, and such phrase does not
mean simply “if”; (e) definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms; (f) references to an agreement or instrument mean such
agreement or instrument as from time to time amended, modified or supplemented, and all exhibits,
appendices, schedules or other attachments thereto; (g) references to a Person are also to its
permitted successors and assigns; (h) references to an “Article,” “Section,” “Clause,” “Exhibit” or
“Schedule” refer to an Article, Section or Clause of, or an Exhibit or Schedule to, this Agreement;
(i) words importing the masculine gender include the feminine or neuter and, in each case, vice
versa; (j) references to a Law include any amendment or modification to such Law and any rules or
regulations issued thereunder, whether such amendment or modification is made, or issuance of such
rules or regulations occurs, before or after the date of this Agreement; and (k) except with
respect to the Shareholders’ initial Capital Contributions, references to monetary amounts shall be
denominated in United States Dollars.

          Section 16.4 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned, in whole or in part, by operation of law or

47

 

otherwise by
any of the parties hereto without the prior written consent of the other parties hereto. Any
purported assignment without such consent shall be void. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of and be enforceable by, the parties hereto
and their respective successors and assigns.

          Section 16.5 Entire Agreement. This Agreement and the Schedules hereto contain the
entire agreement and understanding between the parties hereto with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both written and oral,
with respect to the transactions contemplated thereby.

          Section 16.6 No Third-Party Beneficiaries. This Agreement is for the sole benefit of
the parties hereto and their permitted successors and assigns and nothing herein express or implied
shall give or be construed to give to any Person, other than the parties hereto and such successors
and assigns, any legal or equitable rights or remedies.

          Section 16.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties hereto and
delivered to the other parties hereto. Delivery of an executed counterpart of this Agreement by
facsimile or other electronic transmission shall be as effective as delivery of a manually executed
counterpart of this Agreement.

          Section 16.8 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of
New York, USA, regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.

          Section 16.9 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any Shareholder. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the parties hereto as
closely as possible in an acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.

          Section 16.10 Amendments; Waiver. Amendments to this Agreement may be made from time
to time, provided, however, that no amendment, modification or waiver of this Agreement or any
provision hereof shall be valid or effective unless in writing and signed by each and every party
hereto. No consent to, or waiver, discharge or release (each, a “Waiver”) of, any provision of or
breach under this Agreement shall be valid or effective unless in writing and signed by the party
giving such Waiver, and no specific Waiver shall constitute a Waiver with respect to any other
provision or breach, whether or not of similar nature. Failure on the part of any party hereto to
insist in any instance upon strict, complete and timely performance by another party hereto of any
provision of or obligation under this Agreement shall not constitute a Waiver by such party of any
of its rights under this Agreement or otherwise.

48

 

          Section 16.11 Further Assurances. The Company and each Shareholder shall execute or
cause to be executed from time to time all other instruments, certificates, notices and documents
and shall do or cause to be done all such acts and things (including keeping books and records and
making publications or periodic filings) as may now or hereafter be necessary or appropriate with
respect to the formation, valid existence, and termination (when appropriate) of the Company and to
otherwise carry out the purposes and intent of this Agreement.

          Section 16.12 Amendment to CO. The Shareholders are aware that an amendment to the CO
in connection with limited liability companies (GmbH) is envisaged to enter into force in the
course of 2007. The Shareholders agree to negotiate in good faith any amendment to (a) the
Articles of Incorporation, (b) this Agreement and (c) any related document to the extent necessary
to reflect the Shareholders’ common economic understanding of the Agreement once the amendment of
the CO with respect to the limited liability companies (GmbH) has entered into force.

          Section 16.13 Relationship. This Agreement does not constitute any Shareholder,
Manager, or any employee or agent of the Company as the agent or legal manager of any Shareholder
for any purpose whatsoever and no Shareholder, Manager, or any employee or agent of the Company is
granted hereby any right or
authority to assume or to create any obligation or responsibility, express or implied, on
behalf of or in the name of any Shareholder or to bind any Shareholder in any manner or thing
whatsoever.

          Section 16.14 Equitable Remedies. Each party acknowledges that no adequate remedy of
Law would be available for a breach of this Agreement, and that a breach of any of such Sections or
Articles of this Agreement by one party would irreparably injure the other and accordingly agrees
that in the event of a breach of any of such Sections or Articles of this Agreement, the respective
rights and obligations of the parties hereunder shall be enforceable by specific performance,
injunction or other equitable remedy (without bond or security being required), and each party
waives the defense in any action and/or proceeding brought to enforce this Agreement that there
exists an adequate remedy or that the other party is not irreparably injured. Nothing in this
Section 16.14 is intended to exclude the possibility of equitable remedies with respect to breaches
of other Sections or Articles of this Agreement.

          Section 16.15 Fees and Expenses. Each party shall be responsible for any legal and
other fees and expenses incurred by such party in connection with the negotiation and preparation
of this Agreement and the transactions contemplated hereby.

          Section 16.16 * * *.

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

49

 

          Section 16.17 Ancillary Restraints. With respect to those clauses of Section 12.1,
Section 13.1 and Section 13.3 that constitute a restrictive practice as defined in the Israeli
Restrictive Trade Practices Law (1988), receipt by the Parties of an exemption with respect thereto
under applicable Israel law shall be a condition precedent to the effectiveness of such clauses in
Israel, provided that in the event such exemption is received, this sentence shall, to the extent
of such exemption, automatically be of no further force and effect.

[SIGNATURE PAGE FOLLOWS]

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the day and year first herein above written.

	 	 	 	 	 	 	 
	 	 	INVERNESS MEDICAL SWITZERLAND GmbH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ron Zwanziger
 

	 	 
	 	 	Name: Ron Zwanziger	 	 
	 	 	Title: Manager	 	 
	 
	 	 	 	 	 	 
	 	 	PROCTER & GAMBLE INTERNATIONAL OPERATIONS, SA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Andreas Demmer	 	 
	 

	 	 	 	 

Name: Andreas Demmer	 	 
	 

	 	 	 	Title: Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Claus Michael Lindner	 	 
	 

	 	 	 	 

Name: Claus Michael Lindner	 	 
	 

	 	 	 	Title: Director	 	 
	 
	 	 	 	 	 	 
	 	 	SPD SWISS PRECISION DIAGNOSTICS GmbH	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Geoffrey Jenkins	 	 
	 

	 	 	 	 

	 	 
	 	 	Name: Geoffrey Jenkins	 	 
	 	 	Title: Director	 	 

[Signature Page to Shareholder Agreement]

 

 

SCHEDULE I

Shareholders; Shares; Capital Contribution

	 	 	 	 	 
	 	 	Share	 	Capital Contribution
	Shareholder	 	(Stammeinlage)	 	(Leistung auf Stammeinlage)
	Procter & Gamble International
Operations, SA
	 	1	 	CHF 1,000,000
	 
	 	 	 	 
	Inverness Medical Switzerland
GmbH
	 	1	 	CHF 1,000,000
	 
	 	 	 	 
	Total
	 	2	 	CHF 2,000,000

 

 

SCHEDULE II

Initial Business Plan

* * *

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

SCHEDULE III

Restricted Third Parties

As used in the Agreement to which this Schedule III is attached, “Restricted Third Parties” means
each of the following Persons and their respective Affiliates:

     * * *

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

SCHEDULE 12.2(a)

Timing of Presentation and Implementation Parameters

[To be developed after the date of this Agreement in accordance with Section 12.2(a).]

 

 

SCHEDULE 13.1(a)(2)

Non-Compete Exception — P&G Existing Business

* * *

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

SCHEDULE 13.1(a)(3)

Non-Compete Exception — IMS Existing Business

The business of * * *.

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

SCHEDULE 16.16

* * *

 

			
	* * *	 	REPRESENTS TEXT OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

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