Document:

EXECUTION COPY

Exhibit 10.2

 

EXECUTION COPY

 

TAX ALLOCATION AGREEMENT dated as of

November 21, 2001 (this “Agreement”), among JOHNSON & JOHNSON, a

New Jersey corporation (“Parent”), INVERNESS MEDICAL TECHNOLOGY, INC., a

Delaware corporation (the “Company”), and INVERNESS MEDICAL INNOVATIONS, INC.,

a Delaware corporation and a direct majority owned subsidiary of the Company

(“Newco”).

 

WHEREAS

the Company is the common parent of the group of affiliated corporations (the

“Company Consolidated Group”), within the meaning of Section 1504(a) of

the Internal Revenue Code of 1986, as amended (the “Code”), with which the

Company filed a consolidated federal income Tax Return (as defined herein) at

any time prior to the Split-Off (as defined herein);

 

WHEREAS,

pursuant to the Agreement and Plan of Split-Off and Merger, dated as of

May 23, 2001 (the “Merger Agreement”), among Parent, Sunrise Acquisition

Corp. (“Sub”) and the Company, the Company will, on the Effective Date (as

defined herein) (i) effect the restructuring transactions (the

“Restructuring”) described in the Restructuring Agreement, dated as of

November 21, 2001, among the Company, Newco and certain subsidiaries of

the Company (the “Restructuring Agreement”) and (ii) distribute to the

holders of Company Common Stock all the outstanding shares of Newco Common

Stock in consideration of the redemption of a portion of their shares of

Company Common Stock (the “Split-Off”);

 

WHEREAS,

on the Effective Date, Sub will merge with and into the Company with the

Company surviving (the “Merger”) as contemplated by the Merger Agreement,

pursuant to which the holders of Company Common Stock will receive solely

common stock of Parent in exchange for their Company Common Stock not exchanged

in the Split-Off;

 

WHEREAS

Parent, the Company and Newco intend that, after the Split-Off, neither Newco

nor any of its Subsidiaries will be a member of the Company Consolidated Group

for federal income tax purposes;

 

WHEREAS,

for Federal income tax purposes, it is intended (a) by the Company that the distribution

of Newco Common Stock in connection with the transactions contemplated by the

Merger Agreement shall qualify, as to the stockholders of the Company, as a

transaction described in Section 355 of the Code (it being understood and

agreed that such qualification shall not be a condition to the

 

 

consummation

of the transactions contemplated by this Agreement or the other Transaction

Agreements and that Parent shall have no obligation to cause such distribution

to so qualify) and (b) by Parent, the Company and Newco that the Merger qualify

as a “reorganization” within the meaning of Section 368 (a) of the Code;

and

 

WHEREAS

Parent, the Company and Newco desire on behalf of themselves, their

Subsidiaries and their successors to set forth their rights and obligations

with respect to Taxes relating to taxable periods before and after the

Split-Off.

 

NOW, THEREFORE, the parties hereto agree as

follows:

 

ARTICLE

I

 

Definitions

 

SECTION 1.01.  Definitions.  For

purposes of this Agreement:

 

“Agreement” shall have the meaning

set forth in the Preamble.

 

“Code” shall have the meaning set

forth in the Recitals.

 

“Company” shall have the meaning set

forth in the Preamble.

 

“Company Consolidated Group” shall

have the meaning set forth in the Recitals.

 

“Company Group” shall mean the

Company and each of its direct and indirect Subsidiaries, other than members of

the Newco Group.

 

“Dispose” (and, with correlative

meaning, “Disposition”) shall mean pay, discharge, settle or otherwise dispose.

 

“Due Date” shall mean, with respect

to any Tax Return or payment, the date on which such Tax Return is due to be

filed with, or such payment is due to be made to, the appropriate Tax Authority

pursuant to applicable law, giving effect to any applicable extensions of the

time for such filing or payment.

 

 

2

 

“Effective

Date” shall mean the date on which the Effective Time occurs.

 

“Effective

Time” shall have the meaning set forth in the Merger Agreement.

 

“Final

Determination” shall mean (1) the entry of a decision of a court of

competent jurisdiction at such time as an appeal may no longer be taken from

such decision or (2) the execution of a closing agreement or its equivalent

between the particular taxpayer and the relevant Tax Authority.

 

“Merger”

shall have the meaning set forth in the Recitals.

 

“Merger

Agreement” shall have the meaning set forth in the Recitals.

 

“Newco”

shall have the meaning set forth in the Preamble.

 

“Newco

Business” shall have the meaning set forth in the Restructuring Agreement.

 

“Newco

Group” shall mean Newco and each corporation that is, immediately after the

Split-Off, a direct or indirect Subsidiary of Newco.

 

“Parent”

shall have the meaning set forth in the Preamble.

 

“Payee”

shall have the meaning set forth in Section 4.6 hereof.

 

“Payor”

shall have the meaning set forth in Section 4.6 hereof.

 

“Post-Distribution

Period” shall mean any taxable period beginning after the Effective Date

and, in the case of any Straddle Period, that portion of such Straddle Period

that begins on the day immediately following the Effective Date.

 

“Pre-Distribution

Period” shall mean any taxable period that ends on or prior to the

Effective Date and, in the case of any Straddle Period, that portion of such

Straddle Period ending on and including the Effective Date.

 

“Restructuring”

shall have the meaning set forth in the Recitals.

 

 

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“Split-Off”

shall have the meaning set forth in the Recitals.

 

“Sunrise

Business” shall have the meaning set forth in the Restructuring Agreement.

 

“Straddle

Period” shall mean any taxable period that begins before or on and ends

after the Effective Date.

 

“Subsidiary”

shall mean a subsidiary, as defined in the Merger Agreement, that is a corporation.

 

“Tax

Authority” shall mean the Internal Revenue Service and any other state,

local or foreign governmental authority responsible for the administration of

Taxes.

 

“Tax

Claim” shall mean a notice of deficiency, proposed adjustment, assessment,

audit, examination, suit, dispute or other claim with respect to Taxes or a Tax

Return.

 

“Taxes”,

as used in this Agreement, shall include (1) all forms of taxation,

whenever created or imposed, and whether domestic or foreign, and whether

imposed by a national, federal, state, provincial, local or other Governmental

Entity, including all interest, penalties and additions imposed with respect to

such amounts; (2) liability for the payment of any amounts of the type

described in clause (1) as a result of being a member of an affiliated,

consolidated, combined or unitary group; and (3) liability for the payment

of any amounts as a result of being party to any tax sharing agreement (other

than this Agreement) or as a result of any express or implied obligation to indemnify

any other person with respect to the payment of any amount described in

clause (1) or (2) (other than an obligation to indemnify under this

Agreement).

 

“Tax

Return” shall mean all domestic or foreign (whether national, federal,

state, provincial, local or otherwise) returns, declarations, statements,

reports, schedules, forms and information returns relating to Taxes and any

amended return relating to Taxes.

 

“Transaction

Taxes” shall have the meaning set forth in Section 3.03 (a) hereof.

 

“Underpayment

Rate” shall mean the interest rate specified under Section 6621 (a)

(2) of the Code.

 

 

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Any capitalized term not defined herein

shall have the meaning set forth in the Merger Agreement or the Restructuring

Agreement, as the case may be.

 

ARTICLE

II

 

Preparation

and Filing of Tax Returns

 

SECTION 2.01.      Preparation of Pre-Distribution Period Tax Returns and

Straddle Period Tax Returns. 

(a)  Parent or the Company shall, with the cooperation of

Newco and each member of the Newco Group (as provided for in Article VI

hereof), prepare (or cause to be prepared) and file (or cause to be filed) all

Tax Returns with respect to the Company Consolidated Group for any

Pre-Distribution Period or Straddle Period. 

Parent and the Company shall have sole discretion as to the positions

taken in any such Tax Returns except as otherwise provided in this

Agreement.  Similar provisions shall

apply with respect to any consolidated, combined, unitary, or aggregate state,

local, or foreign income Tax Return for any Pre-Distribution Period or Straddle

Period that includes any member of the Company Group.

 

(b)           Newco

shall, with respect to any Pre-Distribution Period or Straddle Period, prepare

(or cause to be prepared) and file (or cause to be filed) all separate state,

local or foreign Tax Returns of each member of the Newco Group and any

consolidated combined, unitary or aggregate state, local, or foreign Tax

Returns that do not include any member of the Company Group.

 

SECTION

2.02.      Preparation and Filing of

Post-Distribution Period Tax Returns. 

With respect to Post-Distribution Periods, Newco shall not have any

responsibility for preparing (or causing to be prepared) or filing (or causing

to be filed) any Tax Return with respect to any member of the Company Group,

and Parent and the Company shall not have any responsibility for preparing (or

causing to be prepared) or filing (or causing to be filed) any Tax Return with

respect to any member of the Newco Group.

 

SECTION 2.03.      Consistent Treatment. 

Each Tax Return described in this Article II (including Tax Returns

with respect to Post-Distribution Periods) shall be prepared (i) in a

manner consistent with the opinion of counsel obtained in connection with the

Merger pursuant to the provisions of the Merger Agreement, (ii) in a

manner consistent with the representations, warranties, statements

 

 

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and covenants set forth in the Transaction

Agreements and (iii) in a manner consistent with prior methods, practices

and procedures (except to the extent that departure from such methods,

practices and procedures would not materially adversely affect another party to

this Agreement).  Notwithstanding the

previous sentence, Tax Returns shall be prepared in the manner required by any

applicable Final Determination.

 

SECTION 2.04.      Amended Returns and Claims for Refund.  No member of the Newco Group (or any entity

that directly or indirectly controls Newco) shall amend a Tax Return or file a

claim for Tax refund with respect to any Pre-Distribution Period subject to a

Tax Return described in Section 2.01(a) hereof without the prior written

consent of Parent or the Company, which consent shall not be unreasonably

withheld or delayed.

 

ARTICLE

III

 

Payments

with Respect to Taxes

 

SECTION 3.01.      Payment of Taxes. 

(a)      For all Taxes with respect

to which Parent, the Company or any other member of the Company Group is

required to file a Tax Return pursuant to Section 2.01(a) hereof, Newco

shall pay the Company the amount of such Taxes attributable to the Newco

Business within 10 business days after receipt from Parent or the Company of a

copy of such Tax Return (or a copy of the decision or agreement with respect to

any Final Determination regarding the period to which such Tax Return relates),

together with a statement showing in reasonable detail the calculation of any

Taxes attributable to the Newco Business.

 

(b)           For all Taxes with respect to which

Newco or any other member of the Newco Group is required to file a Tax Return

pursuant to Section 2.01(b) hereof, the Company shall pay Newco the amount

of such Taxes attributable to the Sunrise Business within 10 days after receipt

from Newco of a copy of such Tax Return (or a copy of the decision or agreement

with respect to any Final Determination regarding the period to which such Tax

Return relates), together with a statement showing in reasonable detail the

calculation of any Taxes attributable to the Sunrise Business.

 

SECTION 3.02.      Remittance of Taxes to a Tax Authority.  The Company and Newco shall remit or cause

to be remitted in a timely manner to the appropriate Tax Authority all Taxes

due in respect of any Tax for which (i) in the

 

 

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case of

the Company, the Company or Parent is required to file a Tax Return pursuant to

Section 2.01(a) hereof, and (ii) in the case of Newco, Newco is

required to file a Tax Return pursuant to Section 2.01(b) hereof.

 

SECTION 3.03.      Calculation of Federal Income Taxes Attributable to the

Newco Business and the Sunrise Business. 

(a)    For purposes of this

Article III, the “Newco Business Tentative Tax” for any taxable period shall

equal the excess of (i) the actual liability for federal income Taxes of the

Company Consolidated Group for such period (the “Consolidated Group Tentative

Tax”), over (ii) the Consolidated Group Tentative Tax for such period assuming

that the Newco Business (and any assets used or held for use primarily in

connection therewith) had not been held, used or operated by the Company

Consolidated Group, provided, however, that the calculations

required by this Section 3.03 shall be made without regard to (x) any “net

operating loss carryovers” (as defined in Section 172 of the Code) of the

Company Consolidated Group (the “Consolidated Group NOL Carryovers”), and (y)

any liability for taxes directly or indirectly attributable to the

Restructuring, the Split-Off and all related transactions, including any taxes

imposed as a result of the application of Section 355(e) of the Code

(collectively the “Transaction Taxes”).

 

(b)           For purposes of this Article III, the

“Newco Business NOL Carryovers” for the relevant taxable period shall be the

Consolidated Group NOL Carryovers available for such period multiplied by a

fraction, the numerator of which is the Newco Business Tentative Tax for such

period and the denominator of which is the Consolidated Group Tentative Tax for

such period.

 

(c)           For purposes of this Agreement, the

amount of federal income Taxes attributable to the Newco Business for the

relevant taxable period shall equal the excess of (i) the actual liability for

federal income Taxes of the Company Consolidated Group for such period over

(ii) the actual liability for federal income Taxes of the Company Consolidated

Group for such period assuming for purposes of this clause (ii) that (x) the

Newco Business (and any assets used or held for use primarily in connection

therewith) had not been held, used or operated by the Company Consolidated

Group, and (y) the Consolidated Group NOL Carryovers for such period had been

reduced by an amount equal to the Newco Business NOL Carryovers for such

period, provided, however, that the calculations required by this

Section 3.03(c) shall be made without regard to the Transaction Taxes.

 

 

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(d)           For purposes of this Agreement, the

amount of federal income Taxes attributable to the Sunrise Business shall equal

the excess of (i) the actual liability for federal income Taxes of the Company

Consolidated Group for the such period over (ii) the amount of federal income

Taxes attributable to the Newco Business for such period.

 

SECTION 3.04.      Calculation of Taxes (Other Than

Federal Income Taxes Attributable to the Newco Business and the Sunrise

Business.  For purposes of this

Agreement, with respect to Taxes other than federal income Taxes, the amount of

such Taxes attributable to the Newco Business and the Sunrise Business shall be

determined in a manner similar to and consistent with the provisions of

Section 3.03 hereof.

 

SECTION 3.05.      Tax Refunds.  Newco shall be entitled to its pro rata

share of any refund of Tax subject to a Tax Return described in

Section 2.01 hereof to the extent of any amount paid by Newco under this

Agreement with respect to such Tax Return. 

Parent or the Company shall be entitled to any refund of Tax subject to

a Tax Return described in Section 2.01 in excess of the amount described

in the previous sentence.  Any refund of

Tax received by one party shall, no later than three business days after

receipt, be paid to the other party to the extent of the other party’s

entitlement thereto under this Section 3.05, together with a statement

showing in reasonable detail the calculation of such payment.

 

SECTION

3.06.      Calculation of Pro Rata

Share of Tax Refunds.  Newco’s pro

rata share of any Tax refund shall be equal to the excess, if any, of (i) the

amount of federal income Taxes attributable to the Newco Business as originally

calculated under this Agreement over (ii) the amount of federal income Taxes

attributable to the Newco Business as recalculated under this Agreement taking

into account the facts and circumstances giving rise to such refund.

 

SECTION 3.07.      Alternative Minimum Tax.  The purpose of this Article III is to

allocate tax liability in proportion to the respective tax liabilities

attributable to the Sunrise Business and the Newco Business, exclusive of “net

operating loss carryovers” (as defined in Section 172 of the Code) and

without regard to the Split-Off, the Restructuring and all related

transactions.  In the case of any

Company Consolidated Group alternative minimum tax under Section 55 of the

Code, the respective portions of such tax attributable to the Sunrise Business

and the Newco Business shall be determined in a manner similar to and

consistent with the provisions of Section 3.03 hereof.

 

 

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ARTICLE

IV

 

Indemnification

 

SECTION 4.01.      Obligations of the Company.  The Company and each other member of the Company Group shall

indemnify and hold Newco and each other member of the Newco Group harmless from

and against the following:

 

(a)           any liability for Taxes attributable

to the Sunrise Business as calculated pursuant to Article III hereof;

 

(b)            any liability for Transaction Taxes;

and

 

(c)           any liability for Taxes attributable

to the Company or any other member of the Company Group to the extent that

Newco has made a payment to the Company with respect thereto pursuant to

Section 3.01 hereof.

 

SECTION 4.02.      Obligations of Newco. 

Newco and each other member of the Newco Group shall indemnify and hold

Parent, the Company and each other member of the Company Group harmless from

and against the following:

 

(a)           any liability for Taxes attributable

to the Newco Business as calculated pursuant to Article III hereof; and

 

(b)           any liability for Taxes attributable

to Newco or any other member of the Newco Group or Transaction 

Taxes, to the extent that the Company has

made a payment to Newco with respect thereto pursuant to Section 3.01

hereof; and

 

SECTION 4.03.      Straddle Periods. 

(a)    To the extent permitted by

law or administrative practice, the taxable year of any member of the Company

Group which includes the Effective Date shall be treated as closing on (and

including) the Effective Date.

 

(b)           Where it is necessary pursuant to

this Agreement to apportion between Newco, on the one hand, and the Company, on

the other hand, the Tax liability of an entity for a Straddle Period which is

not treated under Section 4.03 (a) hereof as closing on the Effective

Date, such liability shall be apportioned between the Pre-Distribution

Period and the Post-Distribution Period on the basis of an interim closing of

the books, except that

 

 

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Taxes

(such as real property Taxes) imposed on a periodic basis shall be allocated on

a daily basis.

 

SECTION

4.04.      Tax Obligations Arising

Under a Pre-Distribution Period Tax Sharing Agreement.  Except as set forth in this Agreement, any

and all existing Tax sharing agreements and practices regarding Taxes and their

payment, allocation, or sharing between any member of the Company Group and any

member of the Newco Group shall be terminated as of the Effective Date and no

remaining liabilities thereunder shall exist thereafter.  This Section 4.04 does not address tax

sharing agreements (if any) solely among members of the Newco Group or solely

among members of the Company Group.

 

SECTION 4.05.      Indemnification Payments.  To the extent that a party (the “Payor”) is required to make an

indemnification payment to another party (the “Payee”) pursuant to

Section 4.01, 4.02 or 4.03 hereof, the Payor shall pay the Payee no later

than 10 business days prior to the Due Date of the relevant Tax Return or 10

business days after the Payor receives the Payee’s calculations of the Payor’s

indemnification obligation hereunder, whichever occurs last, the amount of such

indemnification obligation.

 

ARTICLE

V

 

Tax

Claims

 

SECTION 5.01.      General.  Newco,

on the one hand, shall have sole control over all Tax Claims with respect to

any Tax Return which Newco is responsible for preparing (or causing to be

prepared) pursuant to this Agreement, and Parent and the Company, on the other

hand, shall have sole control over all Tax Claims with respect to any Tax

Return which Parent or the Company is responsible for preparing (or causing to

be prepared) pursuant to this Agreement. 

The party controlling a Tax Claim pursuant to the preceding sentence

shall have the sole right to contest, litigate and Dispose of such Tax Claim

and to employ counsel of its choice at Newco’s sole expense in the case of a

Tax Claim controlled by Newco, and at the Company’s sole expense in the case of

a Tax Claim controlled by the Company or Parent; provided, however,

that the other party may, at its own expense, participate in (but not control)

the defense of any such Tax Claim, but only if such Tax Claim may result in a

payment by such other party pursuant to the terms of this Agreement.  If a Tax Claim may result in a payment by

such other party pursuant to the terms of this Agreement or presents an issue

that affects both the Newco Business and

 

 

10

 

the Sunrise Business, the party controlling

such Tax Claim shall not litigate or Dispose of such Tax Claim without the

prior written consent of such other party, which consent shall not be

unreasonably withheld or delayed.

 

SECTION 5.02.        Tax Claim Management. 

(a)       Parent or the Company, on

the one hand, and Newco, on the other hand, shall promptly notify the other

party in writing of any Tax Claim that may result in liability of the other

party to make a payment under this Agreement or that affects both the Newco

Business and the Sunrise Business.  With

respect to any such Tax Claim, the party controlling such Tax Claim shall

(i) not make any submission to any Tax Authority without offering the

other party the opportunity to review it, (ii) keep the other party

informed as to any information that it receives regarding the progress of such

Tax Claim, and (iii) provide the other party with any information that it

receives regarding the nature and amounts of any proposed Disposition of the

Tax Claim.

ARTICLE

VI

 

Cooperation

 

Parent and the Company, on the one hand,

and Newco, on the other hand, shall (and shall cause the members of the Company

Group and the Newco Group, respectively, to) cooperate with each other in the

preparation and filing of Tax Returns and the conduct of any audit or other

proceeding and each shall execute and deliver such powers of attorney and make

available such other documents as are necessary to carry out the intent of this

Agreement.  Such cooperation shall

include, without limitation, (a) making employees available on a mutually

convenient basis to provide such assistance as might reasonably be required and

(b) providing such information as might reasonably be required in connection

with any such Tax Return or proceeding, including, without limitation, records,

returns, schedules, documents, work papers or other relevant materials.

 

The

parties hereto shall use reasonable efforts to reduce any transfer, sales or

other similar Taxes that may be incurred with respect to the transactions

contemplated by the Transaction Agreements.

 

 

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ARTICLE

VII

 

Retention

of Records; Access

 

The Company Group and the Newco Group shall

(a) retain all records, documents, accounting data and other information

(including computer data) which may contain information or provide evidence

relevant to any taxable period that is the subject of a Tax Return for which a

member of the other group is responsible under this Agreement, until such time

as a Final Determination occurs with respect to such taxable period, provided,

however, that such records need not be retained longer than 15 years

after the end of the latest taxable period to which they relate and such

records do not relate to an ongoing contest; and (b) give to the other

group reasonable access to such records, documents, accounting data and other

information (including computer data) and to its personnel (ensuring their

cooperation) and premises, with reimbursement by the requesting group of

reasonable out-of-pocket costs incurred in connection therewith, to the extent

relevant to any obligation or liability of the requesting party under this

Agreement.

 

ARTICLE

VIII

 

Disputes

 

If the parties disagree as to the

calculation of any Tax or the amount of (but not liability for) any payment to

be made under this Agreement, the parties shall cooperate in good faith to

resolve any such dispute, and any agreed–upon amount shall be promptly

paid to the appropriate party.  If the

parties are unable to resolve such dispute within 10 business days

thereafter, such dispute shall be resolved by a law firm or accounting firm

acceptable to both Parent and the Company, on the one hand, and Newco, on the

other hand.  The decision of such firm

shall be final and binding.  The fees

and expenses incurred in connection with such decision shall be shared by the

Company and Newco in proportion to the final allocation of the Tax liability in

dispute.  Following the decision of such

firm, the parties shall each take (or cause to be taken) any action that is

necessary or appropriate to implement such decision, including, without

limitation, the filing of amended Tax Returns.

 

 

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ARTICLE

IX

 

Survival

 

Notwithstanding any provision in any other

Transaction Agreement to the contrary, all covenants, obligations and rights

under this Agreement shall survive indefinitely, except to the extent otherwise

provided herein.

 

 

ARTICLE

X

 

Miscellaneous

Provisions

 

SECTION 10.01.    Consistent Reporting. 

(a)           Parent,

the Company and Newco agree to report the transactions set forth in

Section 4.1 of the Restructuring Agreement, for federal income tax

purposes, as follows:

 

(i)            the

transaction described in Section 4.1(a) of the Restructuring Agreement is

a liquidation under Section 332 of the Code;

 

(ii)           the

transaction described in Section 4.1(b) of the Restructuring Agreement is a

liquidation under Section 332 of the Code;

 

(iii)          the

transactions described in Section 4.1(c) (i) and Section 4.1(c) (iii)

of the Restructuring Agreement are transfers between divisions of a single

corporation and the transaction described in Section 4.1(c) (ii) of the

Restructuring Agreement is a sale;

 

(iv)          the transaction described in

Section 4.1(d) of the Restructuring Agreement is a transfer in connection

with a reorganization under Section 368(a)(1)(D) of the Code;

 

(v)           the transaction described in Section

4.1(e) of the Restructuring Agreement is a distribution under Section 301 of

the Code;

 

(vi)          the transactions described in Section

4.1(f) of the Restructuring Agreement are, respectively (I) a contribution

under Section 351 of the Code, and (II) a distribution under Section 301 of the

Code;

 

(vii)         the transaction described in Section

4.1(g) of the Restructuring Agreement is a distribution under Section 301

of the Code;

 

 

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(viii)        the transaction described in

Section 4.1(h) of the Restructuring Agreement is a distribution under

Section 301 of the Code;

 

(ix)           the transaction described in

Section 4.1(i) of the Restructuring Agreement is a distribution under

Section 301 of the Code;

 

(x)            the transaction described in

Section 4.1(j) of the Restructuring Agreement is a distribution under

section 301 of the Code;

 

(xi)           the transaction described in

Section 4.1(k) of the Restructuring Agreement is a transfer in connection

with a reorganization under Section 368(a) (1) (D) of the Code;

 

(xii)          the transaction described in

Section 4.1(1) of the Restructuring Agreement is a transfer in connection

with a reorganization under Section 368(a) (1)(D) of the Code; and

 

(xiii)         the transaction described in

Section 4.1(m) of the Restructuring Agreement is a distribution under

Section 301 of the Code.  For

purposes of determining the federal income tax consequences of such transaction,

the fair market value of the assets transferred in such transaction shall be

computed in accordance with the formula set forth in Schedule 4.1(m) to the

Restructuring Agreement.

 

(b)           Parent, the Company and Newco agree

to report the Split-Off, for federal income tax purposes, as integrated with

the Merger and as a redemption of a number of shares of Company Common Stock

equal in value to the value of the Newco Common Stock distributed in the

Split-Off, with such redemption qualifying, as to the stockholders of the

Company, as a transaction described in Section 355 of the Code; provided

that Goodwin Procter LLP, counsel to the Company, shall have issued (i) an

opinion to the Company to the effect that, more likely than not, the Split-Off

qualifies, as to the stockholders of the Company, as a transaction described in

Section 355 of the Code (the “Split-Off Opinion”), and (ii) an

opinion to the officers of the Company and the officers of Parent

(collectively, the “Officers”) substantially to the effect that the Officers

will not incur any liability under the Code for Taxes (including fees and other

monetary and non-monetary penalties) solely as a result of causing Parent and

the Company to report the Split-Off as a transaction qualifying, as to the

stockholders of the Company, as a transaction described in Section 355 of

the Code (the “Officer’s Opinion”).  In

rendering the Split-Off Opinion and the Officer’s Opinion, such counsel shall

be entitled to rely

 

 

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upon representations

reasonably requested by such counsel, including but not limited to the

representations in the Parent Representation Letter.

 

SECTION

10.02.    Overpayments and Interest on

Late Payments.  Any payment required

by this Agreement which is not made on or before the date required to be made

hereunder shall bear interest after such date at the Underpayment Rate.  Any payment made under this Agreement the

amount of which is subsequently determined to be in excess of the amount due

under this Agreement shall be refunded to the payor within 10 business

days of such subsequent determination, together with interest at the

Underpayment Rate calculated from the date of original payment.

 

SECTION

10.03.    Determination and

Characterization of Payments. 

(a)  All indemnification payments

under this Agreement shall be determined on an after-Tax basis, i.e.,

taking into account the Tax consequences to the indemnified party (and each

other member of the indemnified party’s Group) of making a payment that is

indemnified by another party under this Agreement or of receiving a payment

under this Agreement as indemnification therefor, but only to the extent such

Tax consequences are not otherwise taken into account in determining the amount

of an indemnification payment hereunder.

 

(b)           The payments made pursuant to this

Agreement shall be treated as occurring immediately before the Split-Off, and

no member of the Newco Group or the Company Group shall take any position

inconsistent with such treatment before any Tax Authority, except to the extent

that a Final Determination requires otherwise.

 

SECTION

10.04.    Notices and Governing Law.  All notices required or permitted to be

given pursuant to this Agreement shall be given, and the applicable law

governing the interpretation of this Agreement shall be determined, in

accordance with the applicable provisions of the Merger Agreement.

 

SECTION

10.05.    Amendments.  This Agreement may not be amended except by

an agreement in writing, signed by the parties.

 

SECTION

10.06.    Binding Effect; No

Assignment; Third Party Beneficiaries. 

This Agreement shall be binding on, and shall inure to the benefit of,

the parties and their respective successors, assigns, and persons controlling

any of the corporations bound hereby. 

Parent and the Company, on the one hand, and Newco, on the other hand,

hereby

 

 

15

 

guarantee

the performance of all actions, agreements and obligations provided for under

this Agreement of the Company’s Subsidiaries and Newco’s Subsidiaries,

respectively.  The Company and Newco

shall, upon the written request of any other party, cause any of their

respective Subsidiaries to execute this Agreement.  No party to this Agreement shall assign any of its rights or

delegate any of its duties under this Agreement without the prior written

consent of Newco, in the case of Parent or the Company, or without the prior

written consent of Parent or the Company, in the case of Newco, except that the

Company may assign, in its sole discretion, any or all of its rights, interests

and obligations under this Agreement (other than tax payment obligations and

other payment obligations) to Parent or to any direct or indirect wholly owned

Subsidiary of Parent, but no such assignment shall relieve the Company of any

of its obligations hereunder.  Nothing

contained in this Agreement is intended to confer upon any person or entity

other than the parties hereto and their respective successors and permitted

assigns, any benefit, right or remedy under or by reason of this Agreement.

 

SECTION

10.07.    Entire Agreement.  This Agreement constitutes the entire

agreement of the parties concerning the subject matter hereof and supersedes

all prior agreements, whether or not written, concerning such subject matter.  To the extent that the provisions of this

Agreement are inconsistent with the provisions of any other Transaction

Agreement, the provisions of this Agreement shall prevail.

 

SECTION

10.08.    Counterparts.  This Agreement may be executed in one or

more counterparts, each of which shall be deemed an original and all of which

shall constitute together the same document.

 

16

 

IN

WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the

day and year first above written.

 

	

   

  	

  Johnson & Johnson,

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  

  	

    

  /s/  ERIC MILLEDGE 

  	

   

  
	

   

  	

   

  	

  Name:

  	

  Eric Milledge

  
	

   

  	

   

  	

  Title:

  	

  Company Group Chairman

  
	

   

  	

   

  
	

   

  	

  Inverness Medical Technology, Inc.,

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  

  	

    

  /s/  RON ZWANZIGER

  	

   

  
	

   

  	

   

  	

  Name:

  	

  Ron Zwanziger

  
	

   

  	

   

  	

  Title:

  	

  President and Chief

  
	

   

  	

   

  	

   

  	

  Executive Officer

  
	

   

  	

   

  
	

   

  	

  Inverness Medical Innovations, Inc.,

  
	

   

  	

   

  	

   

  
	

   

  	

  By:

  

  	

    

  /s/  RON ZWANZIGER

  	

   

  
	

   

  	

   

  	

  Name:

  	

  Ron Zwanziger

  
	

   

  	

   

  	

  Title:

  	

  President and Chief

  
	

   

  	

   

  	

   

  	

  Executive Officer

  
					

 

[Tax Allocation Agreement](1)

Exhibit

10.3

DATED                  28TH July 1998

(1)           SCHLEICHER

& SCHUELL GMBH

(2)           UNIPATH LIMITED

 

 

 

 

 

SUPPLY OF

GOODS AGREEMENT

 

 

 

 

 

 

 

 

UNILEVER UK LEGAL DEPARTMENT

Unilever House

Blackfriars

London EC4

Tel: +44 (0)171-822 5252

Fax: +44 (0)171-822 6536

(RH)

 

 

 

 

TABLE OF CONTENTS

 

 

1.             DEFINITIONS

AND INTERPRETATION

                1.1          Defined

Terms

                1.2          References

 

2.             SUPPLY

AND PURCHASE

                2.1          Agreement

to Supply

                2.2          Variation

 

3.             PRICING

                3.1          Supply

Prices

                3.2          Most

Favoured Customer Status

                3.3          Re-negotiation

of Supply Prices

                3.4          Taxes

and Duties

                3.5          Packaging

                3.6          Change

Control

 

4.             PAYMENTS

 

5.             FORECASTS

                5.1          Annual

Estimated Forecast

                5.2          Monthly

Estimated Indication

                5.3          Safety

Stock

 

6.             ORDERS

                6.1          Delivery

of Orders

                6.2          Supplier’s

Obligation to Meet Orders

                6.3          Shortfall

or Excess in Delivery

                6.4          Allocation

of Available Products

                6.5          Supplier

to Maintain Stocks of Raw Materials

 

7.             SAFEGUARDS

FOR SUPPLY

                7.1          Safety

Stock

                7.2          Supplier

to Invest

 

8.             QUALITY

 

9.             REJECTION

                9.1          Rejection

                9.2          Supplier’s

Cost

                9.3          Right

of Set-Off and Right to Replacement Product

 

10.          TERM

 

i

 

11.          FORCE

MAJEURE

                11.1        Effect

of Force Majeure on Agreement

                11.2        Right

to Terminate

 

12.          TERMINATION

                12.1        Reasons

for Termination by Either Party

                12.2        Supplier’s

Obligations on Termination

                12.3        Effect

of Termination

 

13.          INDEMNITY BY SUPPLIER

                13.1        Indemnity

                13.2        Mitigate

Loss

 

14.          CONFIDENTIALITY

                14.1        Obligations

to Keep Information Confidential

                14.2        Disclosure

to Employees

                14.3        Exceptions

                14.4        Tangible

Forms of Confidential Information

                14.5        Disclosure

to Unilever Group Companies

 

15.          NO

PARTNERSHIP ETC.

 

16.          FURTHER

ASSURANCE

 

17.          AMENDMENTS

AND WAIVERS

                17.1        Amendments

In Writing

                17.2        Delay

not to Operate as Waiver etc.

 

18.          ASSIGNMENT

                18.1        No

Assignment by the Supplier

                18.2        Assignment

by the Customer

                18.3        Treatment

of Permitted Assignees

                18.4        Disclosure

to Permitted Assignees

 

19.          ENTIRE

AGREEMENT

                19.1        Entire

Agreement

                19.2        No

Reliance etc.

 

20.          NOTICES

 

21.          SEVERABILITY

                21.1        Invalidity

of Part

                21.2        RTPA

 

22.          LAW AND

JURISDICTION

 

ii

 

23.          COUNTERPARTS

 

Schedule 1             PRODUCTS

Schedule 2             SUPPLY

PRICES

Appendix               SPECIFICATIONS

 

iii

 

SUPPLY OF GOODS AGREEMENT

DATE:                    28TH

July 1998

PARTIES:

(1)                                  SCHLEICHER & SCHUELL GmbH, a company

registered in Germany whose registered office is at Hahnestrasse 3, D-37586

Dassel (“Supplier”); and

 

(2)                                  UNIPATH LIMITED, a company registered in

England and Wales with [illegible] 842528, whose registered office is at Priory

Business Park, Bedford MK44 3UP (“Customer”).

 

BACKGROUND:

 

(A)                              The Supplier is skilled and experienced

in the manufacture of polyester backed nitrocellulose suitable for use in the

production of kits for the testing of certain analytes.

 

(B)                                The Customer is skilled and experienced

in the production of such kits.

 

(C)                                The Customer wishes to purchase a

specific quantity of polyester backed nitrocellulose from the Supplier and the

Supplier is wiling to sell the same to the Customer on the terms and conditions

set out below.

 

IT IS NOW AGREED THAT:

 

1.                                      DEFINITIONS AND INTERPRETATION

 

1.1          Defined

Terms

 

In this Agreement:

 

“batch” shall have the meaning described in

the Specifications;

 

“Business Day” means any day (other than a

Saturday or a Sunday) when clearing banks are open for business in the City of

London for the transaction of normal banking business;

 

“Commencement Date” shall be deemed to be 1

January 1998;

 

 

 

“Contract Year” means any period of 12

months commencing on the Commencement Date or an anniversary thereof;

 

“Force Majeure” means acts of God, war,

hostilities, riot, fire, explosion, accident, flood, sabotage, lack of adequate

fuel, power, raw materials, containers, transportation or labour, strike,

lock-out or injunction (provided that neither party shall be required to settle

a labour dispute against its own best judgement), compliance with governmental

laws, regulations or orders, breakage or failure of machinery or apparatus, or

any other cause whether or not of the class or kind enumerated which affects

performance of this Agreement arising from or attributable to acts, events,

omissions or accidents beyond the reasonable control of the party affected;

 

“Index” means the Lohnkosten je

Produkteinheit Index published by the Statistisches Bundesamt, Wiesbaden in

Germany;

 

“Intellectual Property Rights” means

patents, trade marks, design rights, copyright (including rights in computer

software and databases), know how and moral rights and other intellectual

property rights, in each case whether registered or unregistered and including

applications for, and the right to apply for, the foregoing and all rights or

forms of protection having equivalent or similar effect to any of the foregoing

which may subsist anywhere in the world;

 

“Losses” means costs and expenses reasonably

incurred and losses, liabilities and damages, in each case of any nature

whatsoever but excluding any consequential damages;

 

“Products” means the Products manufactured

by or on behalf of the Supplier as described in Schedule 1 (The Products);

 

2

 

“Quality Control Standards” means the

standards, tests and procedures used by the Customer and/or the Supplier, as

applicable, to ensure the quality of the Products and/or raw materials, as

applicable, as agreed between the Customer and the Supplier from time to time;

 

“Quarter Day” means each of the dates which

fall at the end of the first three months, six months and nine months of, and

the last day of, a Contract Year;

 

“Safety Stock” shall have the meaning given

to it in clause 7.1;

 

“Specifications” means the specifications

for the Products copies of which are attached hereto as the Appendix

(Specifications);

 

“Supply Prices” means the prices for the

Products as specified in Clause 3.1 (Supply Prices);

 

“Unilever Group” means Unilever PLC,

Unilever NV and any company in which either or both together directly or

indirectly owns or controls the voting rights attaching to not less than 50% of

the issued share capital, or controls directly or indirectly the appointment of

a majority of the board of management, and references to a member of the

Unilever Group or a Unilever Group Company will be construed accordingly.

 

1.2          References

 

In this Agreement, unless

the context requires otherwise, any reference to:a party or the parties is to a

party or the parties (as the case may be) to this Agreement;

 

(a)           a Clause or a Schedule is to a clause

of or a schedule to this Agreement (as the case may be) and references made in

the Schedules to Paragraphs are to paragraphs of that Schedule;

 

(b)           “this Agreement” includes the

Schedules and the Appendix, which form part of this Agreement for all purposes.

 

3

 

2.                                      SUPPLY AND PURCHASE

 

2.1          Agreement

to Supply

 

Subject to the terms of

this Agreement, the Supplier shall

 

                a)             supply

the Products in accordance with the Specifications and the Customer shall

purchase them; and

 

                b)            build

up and maintain the Safety Stock in accordance with Clause 7.1.

 

2.2          Variation

 

The Specifications shall

not be varied by the Supplier except by written agreement between the Supplier

and the Customer in accordance with Clause 3.6 (Change Control) and Clause 17.1

(Amendments in Writing).

 

3.                                      PRICING

 

3.1          Supply

Prices

 

The Supply Prices are set

out in Schedule 2 (Supply Prices) and shall apply for the duration of this

Agreement, subject to the provisions of Clause 3.2 and 3.3.

 

3.2          Most

Favoured Customer Status

 

The Supply Prices

including all discounts and volume rebates and all other terms and conditions

shall be no less favourable to the Customer than the terms offered from time to

time to any other customer of the Supplier for products of a materially similar

nature to the Products at a similar time.

 

3.3          Re-negotiation

of Supply Prices

 

The parties shall no

later than two months before the end of each Contract Year meet as necessary to

discuss and negotiate changes (if any) to the Supply Prices on the following

basis:

 

4

 

(a)           no increase in Supply Prices shall be

greater than a rise in accordance with the Index and may be less; and

 

(b)           the Supply Prices may decrease; and

 

(c)           for the avoidance of doubt no

increase in Supply Prices shall be effective before 1 January 1999 for any

reason.

 

3.4          Taxes

and Duties

 

The Supply Prices are

exclusive of value added tax (or any successor tax or equivalent local tax)

which will be added and shall be payable by the Customer in accordance with the

law applicable from time to time against receipt of an appropriate invoice.

 

3.5          Packaging

 

The Supply Prices are CIF

(as described in the Incoterms 1990 Edition) provided that:

 

(a)           delivery shall be procured by the

Supplier to the Customer’s factory premises in Bedford, and for the avoidance

of doubt, but without limitation, include the cost of packaging the Products in

accordance with the Appendix and cost of insurance and delivery of the Products

to the Customer’s factory premises in Bedford; and

 

(b)           risk in the Products shall transfer

from the Supplier to the Customer on delivery to the Customer’s factory

premises in Bedford.

 

The terms of this

Agreement shall prevail over the CIF terms in the event of any inconsistency.

 

3.6          Change

Control

 

The Customer may at any

time suggest changes to the Specification or the Quality Control

Standards.  Within a reasonable time

(not in any event to exceed one month) and prior to the implementation of any

change to the Specification or Quality Control Standards the Supplier 

 

5

 

shall provide the

Customer with a written appraisal fully setting out the proposed costing of and

any technical or other effect of the proposed changes.  Any increase or decrease in the Supply

Prices as a result of any changes shall be whatever is reasonable taking into

account all the circumstances. 

Following the written appraisal referred to above, the Supplier shall be

obligated to put into effect any changes reasonably requested by the Customer.

 

4.                                      PAYMENTS

 

(a)           The Customer shall pay to the

Supplier the Supply Prices for all Products delivered pursuant to this

Agreement by the end of the month following the month of delivery.  Payment shall be made in Deutschmarks or, if

applicable, Euros.

 

(b)           Safety stock shall be paid for in the

manner provided in clauses 7.1(e) and (f).

 

5.                                      FORECASTS

 

5.1          Annual

Estimated Forecast

 

On signing this Agreement

and subsequently within two months before every anniversary of the Commencement

Date the Customer shall deliver to the Supplier an estimated forecast of its

requirements of the Products for each of the next three Contract Years.  Such forecast may include details of a range

of purchase possibilities by the Customer, for example demand for Product which

is conditional on a launch by the Customer of its end product in a new

territory.

 

5.2          Monthly

Estimated Indication

 

In addition to the annual

estimated forecast given in accordance with Clause 5.1, on signing this

Agreement and on 1st of each month, the Customer will deliver to the

Supplier an estimated indication of its requirements of the Products for each

of the following six months.

 

 

6

 

5.3          Safety

Stock

 

For the avoidance of all

doubt Safety Stock shall be in addition to that set out in any forecast.

 

6.                                      ORDERS

 

6.1          Delivery

of Orders

 

Notwithstanding the

provisions of Clause 5 (Forecasts), the Customer shall place orders for its

actual requirements of the Products from time to time in accordance with its

usual procedure.

 

6.2          Supplier’s

Obligation to Meet Orders

 

(a)           The Supplier shall deliver Products

to the Customer’s factory premises in Bedford within 8 weeks of receipt of the

relevant order.

 

(b)           Shipments and orders should conform

to mutually agreed production lot quantity. 

It is understood by both parties that production lot quantities

(expressed as the number of sheets) should exceed the current lot size of

20,000 sheets and that each party will as a result of reduced QC work equally

benefit if larger batch sizes are validated. 

Trial and validation runs which are made on the Customer’s demand can

have a lot size of less than 20,000 sheets.

 

6.3          Shortfall or Excess in Delivery

 

(a)           If the quantity of Products delivered

is up to (and including) 15% greater or lower than that ordered, the Customer

shall pay the Supply Prices for the quantity actually delivered.

 

(b)           If the quantity of Products delivered

is lower than that ordered by in excess of 15%, the Supplier shall supply the

shortfall to the Customer within 15 Business Days of the short delivery.

 

7

 

(c)           If the quantity of Products delivered

is greater than that ordered by in excess of 15%, the Customer shall be

entitled, without prejudice to any other right or remedy under this Agreement,

to reject the excess in accordance with Clause 9 (Rejection) or to retain the

excess and pay the Supply Prices for the excess when payment for the next

delivery is made.

 

6.4          Allocation

of Available Products

 

Without prejudice to

Clause 6.2, in the event that the Supplier is unable to meet the Customer’s

orders for reasons of Force Majeure or for any other reason, the Supplier will

give the Customer priority over any other customers when allocating the available

Products.

 

6.5          Supplier

to Maintain Stocks of Raw Materials

 

The supplier shall hold a

stock of the raw materials which make up the Products sufficient to allow the

Supplier to continue to manufacture sufficient quantities of Products to enable

it to meet the monthly estimated indication provided by the Customer under

Clause 5.2 for the following three months. 

Such stock shall consist of raw materials which have satisfactorily met

the Quality Control Standards of the Supplier and which have been approved by

the Customer under Clause 8 (Quality).

 

7.                                      SAFEGUARDS FOR SUPPLY

 

7.1          Safety

Stock

 

The Supplier and the

Customer agree that a safety stock (the “Safety Stock”) should be established

which will provide security of continuation of supply of the Products, for

example in the event of an unprecedented demand for, or an interruption in the

manufacture of, the Products.  The

Safety Stock, which will be manufactured at the Supplier’s plant in Dassel and

stored at the Supplier’s site in a separate facility at Dassel or Einbeck shall

be operated in accordance with the following provisions:

 

8

 

(a)           The Supplier will start building the

Safety Stock on the Commencement Date and shall as soon as practically possible

(and in any event within three months of the Commencement Date) manufacture and

maintain three month’s Safety Stock equivalent to the customer’s estimated

indication of its requirements of the Products on a rolling basis for the

following three months in accordance with the first 3 months of each estimate

given under clause 5.2 (Monthly Estimated Indication);

 

(b)           All Safety Stock produced and

maintained shall be separate and in addition to any Products ordered for

delivery to the Customer;

 

(c)           the Safety Stock shall consist of

Products which meet the Specifications and which have satisfactorily met the

Quality Control Standards of both the Customer and the Supplier and shall

unless the parties otherwise agree comprise half of a batch the remainder of which

is supplied to the Customer for use by the Customer;

 

(d)           the Safety Stock shall be held at the

risk of the Supplier and the Supplier shall maintain insurance to cover the

full cost of replacement of all the Safety Stock held from time to time;

 

(e)           the Customer shall whilst the Safety

Stock is being built up pay the Supplier the Supply Prices for such Safety

Stock by the end of the month following the month in which the Safety Stock has

passed the Supplier’s and the Customers tests in respect of their respective

Quality Control Standards;

 

(f)            once the Safety Stock has reached

the required level specified in Clause 7.1(a), the Customer shall pay for any

additional Safety Stock required to match any overall increase in the

Customer’s estimated requirements for Products notified under sub-clause 5.2 or

to replenish any use of Safety Stock in the manner provided under Clause

7.1(i);

 

9

 

(g)           the Supplier shall pay for the cost

of storage of the Safety Stock;

 

(h)           the Supplier shall maintain the

storage of the Safety Stock in accordance with all applicable safety standards

and in a climate controlled room that conforms to the Supplier’s recommended

temperature and humidity conditions and shall notify the Customer immediately

of any matter or occurrence which affects the storage of the Safety Stock in

any way;

 

(i)            once the Safety Stock has reached

the required level specified in Clause 7.1(a), the Customer may request the

supply of Products from the Safety Stock. 

The Supplier shall comply with such requests and replenish the Safety

Stock as soon as reasonably practical thereafter.  No additional payment shall be made by the Customer for the

supply of Products from Safety Stock in addition to that specified in Clause

7.1(e) or (f);

 

(j)            the Supplier shall maintain a list

of all lots of Products produced including shelf life dating and any other

information that the Customer may reasonably request from time to time.  The Supplier shall give the Customer full

access at all times to such records and will notify the Customer of any lot

that has less than nine months shelf life. 

Subject to this it shall be the responsibility of the Customer to

request timely shipments of Products from the Safety Stock and any losses of Safety

Stock due to expired shelf life shall be the sole responsibility of the

Customer.

 

7.2          Supplier to Invest

 

The Supplier acknowledges

that the Customer’s requirements of the Products are likely to increase

substantially over the period of this Agreement and thereafter, and will invest

in good time in all manufacturing and other equipment necessary to enable it to

comply with the forecasts for Product given by the Customer.  In the event that the Supplier in its

reasonable 

 

10

 

opinion requires

to make an investment of two million Deutschmarks (or its equivalent in Euros)

or more than the Customer and the Supplier may agree an extension to the term

of this Agreement in advance of such investment being made (the length of such

extension being related to the investment to be made by the Supplier and the

perceived benefit at that time that such investment would have for the

Customer).

 

8.                                      QUALITY

 

The Supplier warrants and

represents to the Customer that:

 

(a)           it will manufacture the Products in

accordance with the manufacturing practices employed by it or by other members

of the Supplier’s group for Products equivalent or similar to the Products and

with all relevant legal requirements;

 

(b)           it will ensure that all raw materials

and other components used in the manufacture of the Products are of the

requisite standard to comply with the Specifications;

 

(c)           it will ensure that all Products are

manufactured in accordance with and fully comply with the Specifications and

satisfy all Quality Control Standards and quality assurance requirements

contained in the Specifications;

 

(d)           it will notify the Customer of

proposed batch changes in critical raw materials (i.e. nitro-cellulose wool) 6

(six) months in advance of the previous batch finishing going through the

Supplier’s production line and will at such time send samples of Products

manufactured using such materials to the Customer for evaluation.  The Customer shall evaluate and respond to

any proposed batch change within 15 (fifteen) days of receipt of Product

manufactured using such material and shall not reject any batch change without

good cause.

 

11

 

9.                                      REJECTION

 

9.1          Rejection

 

Without prejudice to its

rights under this Agreement, the Customer may, by notice to the Supplier within

15 Business Days of delivery of the relevant Products, reject a delivery of the

Products, or any part thereof, if:

 

(a)           they do not accord in all respects

with the Specifications or do not satisfactorily meet the Quality Control

Standards of the Customer; or

 

(b)           when incorporated by the Customer in

to further products the technical performance is not as would be reasonably

anticipated from the Quality Control results, such that the further products

cannot be sold.

 

Nothing in this Clause

9.1 shall limit or restrict the Customer’s ability to claim under this

Agreement in respect of any defect in the Products or non-fulfillment by the

Products of the Specification or the Quality Control Standards of the Customer

which could not reasonably have been expected to be discovered by an inspection

on delivery by the Customer of the Products.

 

9.2          Supplier’s Cost

 

The Supplier shall

collect from the Customer’s premises at the Supplier’s cost any Products which

are rejected under Clause 9.1 or (if so requested by the Customer) under Clause

6.3 (Shortfall or Excess in Delivery).

 

9.3          Right of Set-Off and Right to Replacement Product

 

The Customer shall be

entitled to set-off against the Supply Prices the full price of any Products

which are rejected under Clause 6.3 (Shortfall or Excess in Delivery).  The Customer shall be entitled to

replacement in full of all Products rejected under Clause 9.1(a) at the Supplier’s

cost (the Supplier in addition paying for all shipping and insurance costs for

such 

 

12

 

replacement

Products) provided that if any Products are rejected under Clause 9.1(b) the

Customer shall only be entitled to set-off 25 (twenty-five) per cent of the

Supply Prices of those Products against the Supply Prices.

 

10.                               TERM

 

This Agreement shall

(unless terminated at an earlier date pursuant to Clause 12 (Termination))

continue in force for an initial term (“Initial Term”) of 5 years from the Commencement

Date and shall continue in force after the Initial Term until terminated by

either party giving to the other party not less than 12 months’ notice in

writing of termination expiring at the end of the Initial Term or at any time

after the Initial Term.

 

11.                               FORCE MAJEURE

 

11.1        Effect of Force Majeure on Agreement

 

If either party is

prevented or delayed from or in performing any of its obligations under this

Agreement (other than an obligation to make payment) by Force Majeure, then:

 

(a)           that party’s obligations under this

Agreement shall be suspended for so long as the Force Majeure continues and to

the extent that that party is so prevented, hindered or delayed;

 

(b)           as soon as reasonably possible and in

any event within 5 Business Days after commencement of the Force Majeure, that

party shall notify the other party in writing of the occurrence of the Force

Majeure, the date of commencement of the Force Majeure and the effects of the

Force Majeure on its ability to perform its obligations under this Agreement;

 

(c)           that party shall use all reasonable

efforts to mitigate the effects of the Force Majeure upon the performance of

its obligations under this Agreement and in particular, if that party is the

Supplier, the provisions of Clause 12.2(a) shall apply;

 

13

 

(d)           as soon as reasonably possible and in

any event within 5 Business Days after the cessation of the Force Majeure, that

party shall notify the other party in writing of the cessation of the Force

Majeure and shall resume performance of its obligations under this Agreement.

 

11.2        Right to Terminate

 

If any Force Majeure

prevails for a continuous period in excess of three months, the party who is

not prevented or delayed from or in performing any of its obligations as

described in Clause 11.1 shall be entitled to terminate this Agreement by

giving not less than 10 Business Days notice in writing to the other party.

 

12.                               TERMINATION

 

12.1        Reasons for Termination by Either Party

 

Either party (the

“Terminating Party”) may terminate this Agreement with immediate effect by

notice to the other party (the “Defaulting Party”) on or at any time after the

occurrence of any of the events specified below in relation to the other party:

 

(a)           a breach by the Defaulting Party of

any of its obligations under this Agreement which (if the breach is capable of

remedy) the Defaulting Party has failed to remedy within 30 days after receipt

of notice in writing from the Terminating Party requiring the Defaulting Party

to do so (which notice, if the Customer is the Defaulting Party, shall also be

sent by registered post to, and received by, the Vice President Commercial at

Unipath Limited, Priory Business Park, Bedford, MK44 3UP);

 

(b)           the Defaulting Party goes into liquidation

either compulsorily or (except for the purpose of reconstruction of

amalgamation) voluntarily;

 

14

 

(c)           a receiver is appointed in respect of

the hole or any part of the assets of the Defaulting Party;

 

(d)           a provisional liquidator is appointed

to the Defaulting Party or the Defaulting Party enters into a voluntary

arrangement or any other composition or compromise with the majority by value

of its creditors;

 

(e)           the Defaulting Party threatens to do

any of these things or a judgment or administration order is made against the

Defaulting Party or any similar occurrence under the laws of any jurisdiction

affects the Defaulting Party; or

 

(f)            The other party is prevented or

delayed from or in performing any of its obligations for the period referred to

in Clause 11.2 (Right to Terminate).

 

12.1A     Reasons for Termination by the Customer

 

The Customer may

terminate this Agreement with immediate effect by notice to the Supplier if

four or more successive batches of Product have, when incorporated by the

Customer into further products given a technical performance that is not as

would be reasonably anticipated from the Quality Control results such that the

further products cannot be sold, provided that the Customer has given the

Supplier prompt notice of such failure to function and permitted the Supplier

to do all it can during such one month period to rectify such failure to

function by the supply of replacement Products.

 

12.2        Supplier’s

Obligations on Termination

 

Upon termination of this

Agreement where the Supplier is the Defaulting Party the Supplier shall:

 

(a)           Use its best endeavors to grant a

license to the Customer or to a new manufacturing source of all Intellectual

Property Rights used in the manufacture and supply of 

 

15

 

the Product pursuant to this Agreement and to effect

the transfer to a new manufacturing source by nominating a third party

acceptable to the Customer to manufacture and supply products meeting the

Specification and satisfying the Customer’s Quality Control Standards or by

accepting a nomination by the Customer of such a third party.  On approval of the third party by the

Customer, the Supplier shall disclose to the third party the know-how and other

information necessary to enable the third party to manufacture the Products and

make available key personnel as may be reasonably requested by the Customer;

and

 

(b)           Release and make available for

collection by or on behalf of the Customer all stock (including, without

limitation, all stocks of nitro-cellulose and all other raw materials) and

work-in-progress relating to this Agreement and all finished Products.  The price to be paid by the Customer for

such stock, work-in-progress and finished Products will, where such items are

in perfect condition, reflect the direct costs incurred by the Supplier in

their purchase and subsequent processing save that the relevant prices shall

not exceed in aggregate the Supply Prices. 

Where such items are not in perfect condition, the Customer shall pay to

the Supplier such an amount as, in the reasonable opinion of the Customer,

equates to their net realisable value.

 

12.3        Effect

of Termination

 

All rights and

obligations of the parties shall cease to have effect immediately upon

termination of this Agreement except that termination shall not affect:

 

(a)           Accrued rights and obligations of the

parties at the date of termination; and

 

16

 

(b)           The continued existence and validity

of the rights and obligations of the parties under those Clauses which are

expressed to survive termination and any provisions of this Agreement necessary

for the interpretation or enforcement of this Agreement.

 

13.                               INDEMNITY BY SUPPLIER

 

13.1        Indemnity

 

Subject to Clause 13.2

the Supplier shall indemnify and keep indemnified the Customer in respect of

all Losses suffered or incurred directly or indirectly as a result of,

(including (without limitation) any Losses suffered or incurred directly or

indirectly as a result of defending or settling any claim alleging any

liability as a result of):

 

(a)           The negligence of the Supplier, its

officers, employees or agents;

 

(b)           The Intellectual Property Rights of

any third party having rendered the use or sale of the Products by the Customer

unlawful; and

 

(c)           Any breach of or on behalf of the

Supplier of any of its obligations under this Agreement save to the extent such

breach arises as a result of the negligence of the Customer or breach by the

Customer of its obligations under this Agreement.

 

The above indemnify shall

be limited to the total payments made by the Customer to the Supplier in the

Contract Year immediately preceding such breach or, in the case of a breach

occurring in the first Contract Year, the total payments made by the Customer

to the Supplier up to the time that the breach occurs plus an amount for the

rest of the first Contract Year calculated pro rata on the same basis, provided

that this limit shall not to any breach giving rise to damages under clause

13.1(b) above or any breach of clause 14 (confidentiality) giving rise to

damages under 13.1(c) above.

 

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13.2        Mitigate

Loss

 

The Customer shall take

all reasonable steps to mitigate any Losses which might result in a claim for

indemnification being made under this Agreement.

 

14.                               CONFIDENTIALITY

 

14.1        Obligations

to Keep Information Confidential

 

Each party (the

“Receiving Party”) shall keep strictly private and confidential all information

and documentation disclosed by the other party before or after the date of this

Agreement (the “Disclosing Party”) to the Receiving Party (the “Confidential

Information”) and will not use any Confidential Information for any purpose other

than the performance of its obligations under this Agreement or copy or

disclose any Confidential Information to any third party whatsoever.  This Clause shall survive termination of

this Agreement for whatever cause.

 

14.2        Disclosure

to Employees

 

During the term of this

Agreement the Receiving Party may disclose the Confidential Information to its

employees (any such person being referred to in this Clause as the “Recipient”)

to the extent that it is reasonably necessary for the purposes of this Agreement.  The Receiving Party shall procure that each

Recipient is made aware of and complies with all the Receiving Party’s

obligations of confidentiality under this Agreement as if the Recipient was a

party to this Agreement.

 

14.3        Exceptions

 

The obligations contained

in Clauses 14.1 and 14.2 shall not apply to any confidential information which:

 

18

 

(a)           is as the date of this Agreement

already in, or at any time after the date of this Agreement comes into, the

public domain other than through breach of this Agreement by the Receiving

Party or any Recipient;

 

(b)           can be shown by the Receiving Party

to the reasonable satisfaction of the Disclosing Party to have been known by

the Receiving Party before disclosure by the Disclosing Party to the Receiving

Party;

 

(c)           subsequently comes lawfully into the

possession of the Receiving Party from a third party; or

 

(d)           can be shown by the Receiving party

to the reasonable satisfaction of the Disclosing Party to have been developed

by the Receiving Party wholly independently of the information received from

the Disclosing Party.

 

14.4        Tangible

Forms of Confidential Information

 

All tangible forms of

Confidential Information, including, without limitation, all summaries, copies,

excerpts of any Confidential Information whether prepared by the Disclosing

Party or not, shall be the sole property of the Disclosing Party, and shall be

immediately delivered by the Receiving Party to the Disclosing Party upon the

Disclosing Party’s request.  The

Receiving Party shall not copy, reproduce, publish or distribute in whole or in

part any Confidential Information without the prior written consent of the

Disclosing Party.

 

14.5        Disclosure

to Unilever Group Companies

 

Notwithstanding the obligations

contained in Clauses 14.1 and 14.2 the information received by the Customer may

be disclosed to other companies in the Unilever Group, other than any company

operating a similar business to that of the Supplier or to its consultants,

provided that such other companies or consultants accept the same obligations

of confidentiality.

 

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15.                               NO PARTNERSHIP ETC.

 

Nothing in this Agreement

or any document referred to in it or any arrangement contemplated by it shall

be construed as creating a partnership between the parties for any purpose

whatsoever and neither party shall have the power or authority to bind the

other party or impose any obligations on it to the benefit of any third party.

 

16.                               FURTHER ASSURANCE

 

Each party shall do and

execute or procure to be done and executed all necessary acts, deeds, documents

and things reasonably within its power to give effect to this Agreement.

 

17.                               AMENDMENTS AND WAIVERS

 

17.1        Amendments

In Writing

 

No amendment or variation

of the terms of this Agreement shall be effective unless it is made or

confirmed in a written document signed by both parties.

 

17.2        Delay

Not To Operate As Waiver etc.

 

No delay in exercising or

non-exercise by either party of any of its rights under or in connection with

this Agreement shall operate as a waiver or release of that right.  Rather, any such waiver or release must be

specifically granted in writing signed by the party granting it.

 

18.                               ASSIGNMENT

 

18.1        No

Assignment by the Supplier

 

The Supplier may not

assign, sub-contract, sub-license or otherwise dispose of any of its rights

under this Agreement without the prior written consent of the Customer, such

consent not to be unreasonably withheld or delayed.

 

 

20

 

18.2        Assignment

by the Customer

 

The Customer may assign,

sub-contract, sub-license or otherwise dispose of all or any of its rights and

transfer all or any of its obligations under this Agreement to:

 

(a)           any company limited by shares which

is a member of the Unilever Group; or

 

(b)           any person or company to whom the

whole or a substantial part of the business of the Customer is sold or

transferred.

 

Apart from that, the

Customer may not assign, sub-contract, sub-license or otherwise dispose of any

of its rights under this Agreement without the prior written consent of the

Supplier, such consent not to be unreasonably withheld or delayed.

 

18.3        Treatment

of Permitted Assignees

 

Following any permitted

assignment and/or transfer under Clause 18.2, any reference in this Agreement

to the Customer shall, where the context allows, include the assignee and/or

transferee.

 

18.4        Disclosure

to Permitted Assignee

 

Notwithstanding the

provisions of Clause 14 (Confidentiality) and any confidentiality obligation

imposed on the Customer by law, the Customer may disclose to any assignee or

proposed assignee such information about the Supplier, this Agreement and the

transactions referred to herein as the Customer thinks fit and the Supplier irrevocably

waives all rights of confidentiality in respect of such disclosure.

 

21

 

19.                               ENTIRE AGREEMENT

 

19.1        Entire

Agreement

 

This Agreement and the

Confidentiality Agreement dated 20 October 1992 as amended and restated on

28/7/98, made between the parties to this Agreement together represent the

entire agreement between the parties in relation to the subject matter of this

Agreement and supersede any previous agreement whether written or oral between

the parties in relation to that subject matter.  Accordingly, all other terms, conditions, representations,

warranties and other statements which would otherwise be implied (by law or

otherwise) shall not form part of this Agreement.

 

19.2        No

Reliance etc.

 

Each party acknowledges

that in entering into this Agreement it places no reliance on any

representation, warranty or other statement relating to the subject matter of

this Agreement, save for the representations and warranties set out in Clause 8

(Quality).

 

20.                               NOTICES

 

All communications

relating to this Agreement shall be in writing and delivered by hand or sent by

post or facsimile to the party concerned at the relevant address shown at the

start of this Agreement (or such other address as may be notified from time to

time in accordance with this Clause by the relevant party to the other

party).  Any such communication shall

take effect if delivered, upon delivery; if posted, upon delivery and if sent

by facsimile, when a complete and legible copy of the communication, whether

that sent by facsimile a hard copy sent by post or delivered by hand, has been

received at the appropriate address.

 

22

 

21.                               SEVERABILITY

 

21.1        Invalidity

of Part

 

If any part of any provision

of this Agreement shall be invalid or unenforeceable, than the remainder of

such provision and all other provisions of this Agreement shall remain valid

and enforceable.

 

21.2        RTPA

 

No provision of this

Agreement or of any agreement or arrangement of which this Agreement forms part

and which is subject to registration under the Restrictive Trade Practices Act

1976 shall take effect until the day after particulars of this Agreement or of

the agreement or arrangement of which it forms part (as the case may be) have

been furnished to the Director General of Fair Trading pursuant to the

provisions of Section 24 of that Act.

 

22.                               LAW AND JURISDICTION

 

This Agreement shall be

construed in accordance with English law and the parties irrevocably submit to

the non-exclusive jurisdiction of the English courts to settle any dispute

which may arise in connection with this Agreement (provided that, if the

parties so agree, any dispute may be referred for arbitration or mediation).

 

23.                               COUNTERPARTS

 

This Agreement may be

executed in any number of counterparts and by the parties to it on separate

counterparts, each of which when so executed and delivered shall be an

original, but all the counterparts shall together constitute one and the same

instrument.

 

EXECUTION:

 

The parties have shown

their acceptance of the terms of this Agreement by executing it at the end of

the Schedules.

 

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