Document:

EXHIBIT 10.2

 

CONFIDENTIAL
TREATMENT REQUESTED AS TO CERTAIN INFORMATION CONTAINED IN THIS EXHIBIT 10.2
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

 

RESEARCH AND DEVELOPMENT AGREEMENT

among

ITI SCOTLAND LIMITED

and

INVERNESS MEDICAL INNOVATIONS, INC.

and

STIRLING MEDICAL INNOVATIONS LIMITED

and

INVERNESS MEDICAL SWITZERLAND, GMBH

25 February 2005

 

 

 

CONTENTS

 

	
  Clause

  	
   

  
	
   

  	
   

  	
   

  
	
  1.

  	
  Definitions and
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Conditions Precedent

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  IMI’s
  and Stirling’s Obligations and SwissCo’s Consent

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  The Research
  and Development Project

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Stirling’s
  Knowledge Management, Access and Reporting Obligations

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Financial Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Royalty Adjustment

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Changes
  to the Research and Development Project

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Dispute Resolution

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  Warranties and
  Indemnities

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  Variation

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  Assignation and
  Sub-Contracting

  	
   

  
	
   

  	
   

  	
   

  
	
  16.

  	
  Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  Publicity

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  Remedies not Exclusive

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  Severance

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  Governing Law

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SCHEDULE

  	
   

  
	
   

  	
   

  
	
  Part 1 Milestones

  	
   

  
	
   

  	
   

  
	
  Part 2A
  IMI Financial Contribution

  	
   

  
	
   

  	
   

  
	
  Part
  2B Stirling Minimum Expenditure

  	
   

  
	
   

  	
   

  
	
  Part
  3 Development Fee

  	
   

  
	
   

  	
   

  
	
  Part
  4 Royalty Adjustment Formula

  	
   

  
	
   

  	
   

  
	
  Part
  5 Expertise Profile

  	
   

  

 

 

	
  Part
  6 Marketing Agreement Form

  	
   

  
	
   

  	
   

  
	
  Part
  7 Parent Company Guarantee

  	
   

  
	
   

  	
   

  
	
  SCHEDULE

  	
   

  
	
   

  	
   

  
	
  Notice

  	
   

  
	
   

  	
   

  
	
  Part
  8 Part 8A

  	
   

  
	
   

  	
   

  
	
  Legal Opinion regarding
  SwissCo

  	
   

  
	
   

  	
   

  
	
  Part 8 Part 8B

  	
   

  
	
   

  	
   

  
	
  Legal Opinion regarding IMI

  	
   

  

 

iii

 

RESEARCH AND
DEVELOPMENT AGREEMENT

 

among

 

ITI SCOTLAND
LIMITED, incorporated in Scotland under the Companies Acts with registered
number SC251900 and having its registered office at 180 St. Vincent Street,
Glasgow, G2 5SG (“ITI”); and

 

INVERNESS  MEDICAL INNOVATIONS, INC. incorporated in the
State of Delaware,  United States of
America and having its principal place of business at 51 Sawyer Road, Suite
200, Waltham, MA 02453-3448, United States of America (“IMI”); and

 

STIRLING
MEDICAL INNOVATIONS LIMITED, formerly called “Cardiosure Limited”, having
changed its name conform to Certificate of Incorporation on Change of Name
dated 25 February 2005) incorporated in Scotland under the Companies Acts
with registered number SC277069 and having its registered office at 249 West
George Street, Glasgow, G2 4RB (hereinafter referred to as “Stirling”) and

 

INVERNESS
MEDICAL SWITZERLAND, GmbH, incorporated in Switzerland (Company Number
CH-170.4.003.523-4)) and having its principal place of business at Bundesplatz
1, 6300 Zug (“SwissCo”)

 

WHEREAS:

 

A             IMI has significant experience and expertise in developing
diagnostic products;

 

B             ITI wishes to fund a research and development project in the field
of microfluidics and the identification and development of Biomarkers and IMI
and Stirling have agreed to undertake such research and development; and

 

C             ITI, IMI, Stirling and SwissCo wish to enter into this Agreement to
govern their relationship in this matter.

 

 

NOW THEREFORE
IT IS HEREBY AGREED as follows:-

 

 

1.             Definitions and Interpretation

 

1.1           In this Agreement, the
following words and expressions shall, unless the context otherwise requires,
bear the following meanings:

 

	
  “Agreement”

  	
   

  	
  means this agreement together with the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Authorised Development Fee Expenditure”

  	
   

  	
  means Eligible Expenditure excluding capital
  expenditure;

  
	
   

  	
   

  	
   

  
	
  “Background Intellectual Assets”

  	
   

  	
  means any and all patents, patent applications and
  patent rights (i) owned by any Group Company as at the Commencement Date or
  licensed to any Group Company as at the Commencement Date or (ii) filed by a
  Group Company within 30 days after the Commencement Date in respect of
  inventions reduced to practice prior to the Commencement Date; and in each
  case which that Group Company has the right to license to ITI as at the
  Commencement Date and which are necessary for (i) research and/or development
  for the purposes of Commercial Exploitation and/or (ii) for Commercial
  Exploitation by ITI and its Sub-Licensees;

  
	
   

  	
   

  	
   

  
	
  “Background Intellectual Assets Licence”

  	
   

  	
  means
  the background intellectual assets licence among ITI and SwissCo dated of
  even date herewith;

  
	
   

  	
   

  	
   

  
	
  “Biomarkers”

  	
   

  	
  means
  a bio-molecule, substance or measurable parameter, which can be used to
  diagnose, monitor or treat a health or disease condition;

  
	
   

  	
   

  	
   

  
	
  “Business Day”

  	
   

  	
  means
  a day (other than a Saturday or a Sunday) on which branches of the major
  Scottish clearing banks are open for business in Scotland;

  
	
   

  	
   

  	
   

  
	
  “Certified Statement”

  	
   

  	
  means
  a statement which has been independently

  

 

2

 

	
   

  	
   

  	
  verified
  by the firm of chartered accountants which are the relevant Party’s external
  auditors;

  
	
   

  	
   

  	
   

  
	
  “Change of Control”

  	
   

  	
  means
  the sale or other transfer of shares (or other voting stock) to a third party
  (not being a Group Company) directly or indirectly by operation of law or
  otherwise, which represent a majority of the voting power in a company;

  
	
   

  	
   

  	
   

  
	
  “Code”

  	
   

  	
  means
  the Scottish Ministers’ Code of Practice on the Discharge of Functions by
  Public Authorities under the Freedom of Information (Scotland) Act 2002 as
  the same may be amended, varied or replaced from time to time;

  
	
   

  	
   

  	
   

  
	
  “Commencement Date”

  	
   

  	
  means
  1 March 2005;

  
	
   

  	
   

  	
   

  
	
  “Commercial Exploitation”

  	
   

  	
  means
  the use, licensing and other exploitation of all or any of the Foreground
  Intellectual Assets for or in the design, manufacture, marketing, sale,
  supply, distribution or other exploitation of Products which are produced for
  commercial sale or supply;

  
	
   

  	
   

  	
   

  
	
  “Commercially Sensitive Information”

  	
   

  	
  (i)

  	
  all
  information comprised in the record of work to be maintained pursuant to
  Clause 4.4;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)

  	
  all
  information comprised in the reports on expenditure to be provided pursuant
  to Clause 5.2;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)

  	
  all
  information comprised in summaries of technical developments to be provided
  pursuant to Clause 5.1.2;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)

  	
  all
  information posted by a Group Company on the Project Extranet;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (v)

  	
  all
  information supplied by a Group Company which is comprised in the minutes of
  the

  

 

3

 

	
   

  	
   

  	
   

  	
  Quarterly
  meetings to be taken pursuant to Clause 5.11;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vi)

  	
  all
  information, correspondence, reports and other documentation relating to the
  creation or protection of Foreground Intellectual Assets (other than
  published patent applications) and the exploitation of the Foreground
  Intellectual Assets in the IMI Field;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vii)

  	
  the
  Know-How, the Manufacturing Know-How and the Market Information;

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (viii)

  	
  the
  statement of work set out in Part 1 of the Schedule; and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ix)

  	
  the
  financial terms of this Agreement, except for (a) those disclosed in any
  jointly agreed press release and (b) the Development Fee;

  
	
   

  	
   

  	
   

  	
   

  
	
  “Confidential Information”

  	
   

  	
  means
  any information which has been designated as confidential by any Party in
  writing or that ought to be considered as confidential (however it is
  conveyed or on whatever media it is stored) including information which
  relates to the business, affairs, property, assets, trading practices, goods,
  services, developments, trade secrets, intellectual property rights,
  know-how, personnel, customers and suppliers of a Party and, which shall, in
  respect of the obligations of confidentiality imposed on ITI, include the
  Commercially Sensitive Information;

  

 

4

 

	
  “Development Fee”

  	
   

  	
  means
  the total sum payable by ITI to IMI in consideration for carrying out the
  Research and Development Project, as set out in Part 3 of the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Division”

  	
   

  	
  means
  IMI’s cardiology division from time to time;

  
	
   

  	
   

  	
   

  
	
  “Eligible Expenditure”

  	
   

  	
  means all expenditure expended for the purpose of
  any part of the Research and Development Project, including research and
  development expenditure, all market research expenditure of any Group
  Company, all capital expenditure of any Group Company (including payments
  made to acquire Intellectual Property Rights) and all Stirling capital
  expenditure and operating costs, in each case as such expenditure relates to
  the Research and Development Project, but excluding any and all corporate
  management charges paid to any Group Company, any and all sales and marketing
  costs (other than market research expenditure relating to the Research and
  Development Project) and the costs of manufacturing Products for commercial
  sale;

  
	
   

  	
   

  	
   

  
	
  “Expertise Profile”

  	
   

  	
  means the expertise profile set out in Part 5 of the
  Schedule;

  
	
   

  	
   

  	
   

  
	
  “Exploitation Agreement”

  	
   

  	
  means the exploitation agreement among ITI, IMI,
  Stirling and SwissCo dated of even date herewith;

  
	
   

  	
   

  	
   

  
	
  “FOISA”

  	
   

  	
  means
  the Freedom of Information (Scotland) Act 2002 and any subordinate
  legislation made under this Act from time to time together with any guidance
  and/or codes of practice issued by the Scottish Information Commissioner in
  relation to such legislation;

  
	
   

  	
   

  	
   

  
	
  “Foreground Intellectual Assets”

  	
   

  	
  means any and all Intellectual Property and

  

 

5

 

	
   

  	
   

  	
  Intellectual Property Rights and/or Market
  Information (but excluding the Know-How and the Manufacturing Know-How)
  created, or developed during the Period in the course of the Research and
  Development Project or any part of it, excluding (for the avoidance of doubt)
  all Background Intellectual Assets and excluding Market Information in the
  IMI Field of Use;

  
	
   

  	
   

  	
   

  
	
  “GLP”

  	
   

  	
  means good laboratory practices as defined in the
  U.S Food and Drug Administration guidelines from time to time;

  
	
   

  	
   

  	
   

  
	
  “GMP”

  	
   

  	
  means good manufacturing practices as defined in
  the U.S. Food and Drug Administration guidelines from time to time;

  
	
   

  	
   

  	
   

  
	
  “Group Company”

  	
   

  	
  means IMI, any parent undertaking of IMI and any
  subsidiary undertaking of IMI or of such parent undertaking all as defined in
  section 258 of the Companies Act 1985 (as amended) and includes (for the
  avoidance of doubt) Stirling and SwissCo;

  
	
   

  	
   

  	
   

  
	
  “IMI Field of Use”

  	
   

  	
  means the field of human healthcare, and for the
  avoidance of doubt, includes tools that support throughput screening for drug
  discovery and/or development;

  
	
   

  	
   

  	
   

  
	
  “IMI Financial Contribution”

  	
   

  	
  means the total sum to be contributed by the Group
  Companies in each Year to the Research and Development Project Expenditure,
  which contribution is set out in Part 2A of the Schedule, and which sum
  excludes (for the avoidance of doubt) the Development Fee;

  
	
   

  	
   

  	
   

  
	
  “IMI Income”

  	
   

  	
  has the meaning set out in the Exploitation
  Agreement;

  
	
   

  	
   

  	
   

  
	
  “Information”

  	
   

  	
  has the meaning given under section 73 of
  FOISA;

  

 

6

 

	
  “Instalment”

  	
   

  	
  means the amount of the Development Fee set out in
  the third column of the table in Part 3 of the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Instalment Date”

  	
   

  	
  means
  any date identified as such in Part 3 of the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Intellectual Property”

  	
   

  	
  means
  all ideas, concepts, inventions, discoveries, experience, drawings,
  documents, designs, models, computer programs and codes, texts, records,
  operating and testing procedures, instruction manuals, software, bills of
  materials, tables of operating conditions, specifications, data, databases,
  formulae, processes and process techniques, diagrams, recipes, reports, prototypes,
  and other technical information and data of any kind in whatever media
  recorded;

  
	
   

  	
   

  	
   

  
	
  “Intellectual Property Rights”

  	
   

  	
  means any and all intellectual property or
  industrial rights of any description anywhere in the world including without
  limitation to the foregoing generality any patents, registered designs,
  copyright (including without limitation to the foregoing generality rights in
  computer software, object and source code), rights in the nature of
  copyright, database rights, semi-conductor topography rights, unregistered
  design rights, and any analogous or similar right in any jurisdiction
  (whether any such rights referred to in this definition are registered,
  unregistered, registerable or not and any applications or rights to apply for
  registration of any of them together with any registered rights resulting
  from any such applications or rights to apply for registration), but
  excluding rights in and to trade names, trade

  

 

7

 

	
   

  	
   

  	
  marks, business names, product names and logos;

  
	
   

  	
   

  	
   

  
	
  “ITI Field of Use”

  	
   

  	
  means
  any and all fields excluding the IMI Field of Use, and for the avoidance of
  doubt, the ITI Field of Use shall include: 

  (a) testing of the environment for human pathogens or allergens but not
  testing humans or samples from humans; and 

  (b) testing food and drink for human pathogens or allergens;

  
	
   

  	
   

  	
   

  
	
  “ITI Liaison Officer”

  	
   

  	
  means
  the person appointed by ITI pursuant to Clause 4.3;

  
	
   

  	
   

  	
   

  
	
  “ITI’s Absence”

  	
   

  	
  means
  the period from the date on which ITI terminates its involvement in the
  Research and Development Project pursuant to Clause 10.2.2 to the date on
  which ITI exercises its option under Clause 10.4, both dates inclusive;

  
	
   

  	
   

  	
   

  
	
  “Know How”

  	
   

  	
  means
  such knowledge and experience as is necessary for efficient and effective
  Commercial Exploitation and as is created or developed during the Period in
  the course of and relating to the Research and Development Project, but
  excluding Manufacturing Know-How;

  
	
   

  	
   

  	
   

  
	
  “Legal Opinions”

  	
   

  	
  means
  the opinion from IMI’s external US attorneys in the form set out in Part 8B
  of the Schedule and the opinion from SwissCo’s external Swiss attorneys
  in the form set out in Part 8A of the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Manufacturing Know-How”

  	
   

  	
  has
  the meaning set out in the Exploitation Agreement;

  
	
   

  	
   

  	
   

  
	
  “Marketing Agreement Form”

  	
   

  	
  means
  the form, separate from this Agreement, which authorises a Party to carry out
  certain

  

 

8

 

	
   

  	
   

  	
  marketing
  and public relations activities with particular reference to IMI and/or Stirling,
  an example of which is set out in Part 6 of the Schedule to this
  Agreement;

  
	
   

  	
   

  	
   

  
	
  “Market Information”

  	
   

  	
  means
  market surveys, sectoral and territorial Intellectual Property Rights
  analyses, competitor landscape, product and service trends, market demographics,
  market analyses, collaborators and collaborations, growth predictions and
  other market information and data of any kind in whatever media recorded;

  
	
   

  	
   

  	
   

  
	
  “Microfluidics Platform”

  	
   

  	
  means a system able to perform an assay on a sample
  volume of less than one millilitre;

  
	
   

  	
   

  	
   

  
	
  “Milestone”

  	
   

  	
  means a milestone identified as such in Part 1 of
  the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Milestone Date”

  	
   

  	
  means any date identified as such in Part 1 of the
  Schedule;

  
	
   

  	
   

  	
   

  
	
  “Nominated Representative”

  	
   

  	
  means
  a representative nominated by IMI, Stirling or ITI and intimated to the other
  Parties to resolve disputes that arise between Stirling and ITI or between
  IMI and ITI;

  
	
   

  	
   

  	
   

  
	
  “Parent Company Guarantee”

  	
   

  	
  means
  the guarantee in the form set out in Part 7 of the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Parties”

  	
   

  	
  means
  IMI, Stirling, SwissCo and ITI and “Party” shall be construed accordingly;

  
	
   

  	
   

  	
   

  
	
  “Payment Request”

  	
   

  	
  means
  a written request for the payment of an Instalment;

  
	
   

  	
   

  	
   

  
	
  “Period”

  	
   

  	
  means
  the period of 36 months from the Commencement Date or such other period arising
  pursuant to Clause 10.5 or by the written agreement of the Parties;

  
	
   

  	
   

  	
   

  
	
  “Products”

  	
   

  	
  has
  the meaning set out in the Exploitation

  

 

9

 

	
   

  	
   

  	
  Agreement;

  
	
   

  	
   

  	
   

  
	
  “Project Extranet”

  	
   

  	
  means
  an extranet site on which certain information relating to the Research and
  Development Project will be posted by the Parties during the Period;

  
	
   

  	
   

  	
   

  
	
  “Project Premises”

  	
   

  	
  means
  Stirling’s premises in Scotland at which Stirling’s activities in respect of
  the Research and Development Project shall be undertaken pursuant to Clause
  4;

  
	
   

  	
   

  	
   

  
	
  “Quarter”

  	
   

  	
  means
  a period of three months commencing on a Quarter Day, with the exception of
  (i) the first Quarter, which shall be the period commencing on the
  Commencement Date and ending on 30 June 2005, and (ii) the last Quarter,
  which shall be the period commencing on 1 January 2008 and ending on the
  day before the third anniversary of the Commencement Date;

  
	
   

  	
   

  	
   

  
	
  “Quarter Day”

  	
   

  	
  means
  each of 1 January, 1 April, 1 July and 1 October;

  
	
   

  	
   

  	
   

  
	
  “Requests for Information”

  	
   

  	
  shall
  have the meaning set out in FOISA or any apparent request for information
  under FOISA, the Environmental Information Regulations or the Code;

  
	
   

  	
   

  	
   

  
	
  “Research and Development Project”

  	
   

  	
  means
  the research and development work to be undertaken by or on behalf of Group
  Companies to:

   

  (i)
  identify and develop a Microfluidics Platform, and

   

  (ii)
  identify and develop novel Biomarkers or new applications of Biomarkers,
  which can be used in a Microfluidics Platform or any other platform;

  
	
   

  	
   

  	
   

  
	
  “Research and Development Project

  	
   

  	
  means
  the Development Fee and the IMI Financial

  

 

10

 

	
  Expenditure”

  	
   

  	
  Contribution
  for each Year together;

  
	
   

  	
   

  	
   

  
	
  “Schedule”

  	
   

  	
  means
  the schedule in 8 Parts annexed to and forming part of this Agreement;
  and

  
	
   

  	
   

  	
   

  
	
  “Stirling Minimum Expenditure”

  	
   

  	
  means the minimum amount which Stirling must expend
  on items of Eligible Expenditure in each Year, but expressly excluding
  amounts expended by Stirling on sub-contracting any part or parts of the
  Research and Development Project to any Group Company or any other party
  outside Scotland, which minimum amount is set out in Part 2B of the Schedule;

  
	
   

  	
   

  	
   

  
	
  “Stirling Project Manager”

  	
   

  	
  means an employee of Stirling appointed by Stirling
  as the project manager pursuant to Clause 4.2;

  
	
   

  	
   

  	
   

  
	
  “Year”

  	
   

  	
  means
  a period of four Quarters commencing on 1 January, with the exception of (i)
  the first year which shall be the period commencing on the Commencement Date
  and ending on 31 December 2005 and (ii) the last year which shall be the
  period commencing on 1 January 2008 and ending on the day before the
  third anniversary of the Commencement Date.

  
	
   

  	
   

  	
   

  

1.2           In this Agreement unless
the context otherwise requires:-

 

1.2.1              references to the
singular include the plural and vice versa;

 

1.2.2              reference to Clauses are
to clauses of this Agreement;

 

1.2.3              reference to any
statute, statutory instrument or regulation shall be construed as a reference
to that statute, statutory instrument or regulation as amended, replaced or
re-enacted after the date of this Agreement;

 

1.2.4              the headings to Clauses
are inserted for convenience only and shall not affect the construction or
interpretation of this Agreement; and

 

1.2.5              the words “include” or “including”
are to be construed as meaning without limitation.

 

11

 

2.             Conditions Precedent

 

2.1           No Party shall be bound by
any of its undertakings or obligations under this Agreement unless and until
both the Exploitation Agreement and the Background Intellectual Assets Licence
have been properly executed by all parties thereto.

 

2.2           No Party shall be bound by
any of its undertakings or obligations under this Agreement unless and until a
properly executed Parent Company Guarantee has been delivered by IMI to ITI.

 

2.3           No Party shall be bound by
any of its undertakings or obligations unless and until Legal Opinions duly
executed by the relevant attorneys have been delivered by IMI to ITI.

 

 

3.             IMI’s and Stirling’s
Obligations and SwissCo’s Consent

 

3.1           IMI shall spend, or procure that other Group Companies spend, the
IMI Financial Contribution on the Research and Development Project. Where Group
Companies together spend more than the IMI Financial Contribution on the
Research and Development Project in any Year the amount of the overspend shall
be credited against the IMI Financial Contribution for the following Year or
Years as reasonably directed by IMI within 3 months after the end of the Year
in which such overspend occurred.

 

3.2           Stirling shall spend, as
Eligible Expenditure, the Stirling Minimum Expenditure and such Stirling
Minimum Expenditure will be part of the Research and Development Project
Expenditure.  Where Stirling spends more
than the Stirling Minimum Expenditure on the Research and Development Project
in any Year the amount of the overspend shall be credited against the Stirling
Minimum Expenditure for the following Year or Years as reasonably directed by
Stirling within 3 months after the end of the Year in which such overspend occurred.

 

3.3           For the Period, Stirling
shall procure that Stirling’s sole business is the carrying on and management
of the Research and Development Project and Stirling shall not carry out any
other work or carry on any other business during the Period.

 

3.4           Stirling shall:

 

3.4.1              within 3 months after
the Commencement Date, acquire and locate itself in Project Premises; and

 

12

 

3.4.2              not, at any time within
5 years of the payment by ITI to IMI of the first Instalment of the Development
Fee, locate its principal research and development or manufacturing facility
outside of Scotland.

 

3.5           SwissCo hereby acknowledges
and consents to Stirling undertaking all of its obligations under Clause 8.

 

 

4.             The Research and Development
Project

 

4.1           Stirling shall itself or
through other Group Companies:

 

4.1.1              carry out and manage the
Research and Development Project in accordance with the terms of this
Agreement;

 

4.1.2              use reasonable
endeavours to achieve the Milestones by the Milestone Dates;

 

4.1.3              promptly notify ITI in
writing if any of the Milestones are, in its opinion, likely to be late or not
achieved or not achievable;

 

4.1.4              ensure that the Research
and Development Project shall be undertaken by appropriately skilled and
qualified employees or contractors and in accordance with GLP and GMP;

 

4.1.5              provide the facilities,
equipment, tools and materials which are necessary to carry out the Research
and Development Project;

 

4.1.6              provide such personnel
as may be necessary for the proper performance of the Research and Development
Project; and

 

4.1.7              comply with all relevant
statutes and regulatory requirements of any government or other competent
authority when carrying out the Research and Development Project.

 

4.2           Stirling will appoint a
Stirling Project Manager who shall co-ordinate Stirling’s contribution to the
Research and Development Project and who shall measure the progress of the
Milestones against the Milestone Dates. 
Stirling will ensure that a Research and Development Project manager is
appointed by IMI to oversee and manage the Research and Development Project.

 

4.3           ITI shall appoint an ITI
Liaison Officer in respect of the Research and Development Project.

 

4.4           Throughout the Research and
Development Project Stirling shall maintain a record of work carried out in
relation thereto and will manage, maintain and keep up to date all materials
and

 

13

 

media incorporating Foreground Intellectual
Assets and Know-How in its possession, in whatever form it currently exists,
all in accordance with GLP and GMP.

 

 

5.             Stirling’s Knowledge
Management, Access and Reporting Obligations

 

5.1           Within 12 Business Days of
the end of each Quarter, Stirling shall provide ITI with a report which will
contain the following:

 

5.1.1              reports on expenditure
in terms of Clauses 5.2;

 

5.1.2              a summary of technical
developments (if any) made and patents filed in respect of Foreground
Intellectual Assets and Know-How (if any) created during the relevant Quarter;
and

 

5.1.3              patents granted (if any)
on any Foreground Intellectual Assets.

 

5.2           Stirling shall provide ITI
with an expenditure report showing (a) all Eligible Expenditure of the Group
Companies (being the spend that counts towards the calculation of the IMI
Financial Contribution), (b) all Eligible Expenditure of Stirling, (being the
spend that, with the exception of amounts expended  by Stirling on sub-contracting any part or
parts of the Research and Development Project to any Group Company or any other
party outside Scotland, counts towards the calculation of the Stirling Minimum
Expenditure) and (c) the amount of the Development Fee spent on Authorised
Development Fee Expenditure, during the relevant Quarter.

 

5.3           Stirling shall, throughout
the Period and for 36 months thereafter, keep and maintain true and accurate
records of Stirling’s expenditure
in relation to the Research and Development Project in accordance with
generally accepted United Kingdom accounting practices.

 

5.4           Within 2 months after the
end of each Year, Stirling shall or shall procure that IMI shall provide ITI
with an expenditure report showing (a) the total Eligible Expenditure of the
Group Companies, (b) the total Eligible Expenditure of Stirling, and (c) the amount
of the Development Fee spent on Authorised Development Fee Expenditure in each
case during the relevant Year.  In
addition to providing the expenditure report, as part of an annual audit
process Stirling or IMI, as the case may be, will provide ITI with a Certified
Statement confirming that the expenditure shown on the expenditure report for
that Year has been properly accounted for and that expenditure made using the
Research and Development Project Expenditure constitutes Eligible Expenditure
(and in the case of the Development Fee, Authorised Development Fee
Expenditure) in terms of this Agreement.

 

14

 

5.5           Throughout the Period,
Stirling shall permit the ITI Liaison Officer, upon reasonable notice, reasonable
controlled access during normal office hours to the Project Premises and to all
other premises of Group Companies where the Research and Development Project is
being carried out, for the purpose of gaining sufficient technical knowledge
and insight to facilitate Commercial Exploitation within the ITI Field of Use,
provided that ITI agrees to be bound, and to procure that the ITI Liaison
Officer is bound, by all regulations or requirements, so far as made known to
them in writing by a Group Company, applicable to such premises.

 

5.6           Stirling shall give the ITI Liaison Officer
reasonable access, under supervision, to the records, materials and media
referred to in Clause 4.4, and make them available for inspection and review by
the ITI Liaison Officer (or their authorised representative) on reasonable
notice.  Stirling shall use reasonable
endeavours to ensure that electronic copies of all such records shall also be
lodged within the Project Extranet.

 

5.7           Without prejudice to Clauses 5.5, 5.6 and
5.10, throughout the Period, ITI shall be entitled to contact Stirling with
queries it has relating to the Research and Development Project and Stirling
shall ensure that Group Companies reply to such queries provided that (a) the
aggregate time spent by Stirling and the other Group Companies in responding to
such queries does not exceed 6 hours per month, and (b) all ITI queries are
directed to the Stirling Project Manager, who shall, at his reasonable
discretion, determine to whom within Stirling or any other Group Company ITI’s
query should be referred. The workings of the arrangements set out in this
Clause 5.7 shall be reviewed by the Parties in good faith at the Quarterly
meetings referred to in Clause 5.10 but neither ITI nor Stirling will be
obliged to agree any amendments or variations to such arrangements.

 

5.8           At all times during
the Period and for 5 years thereafter, Stirling will host the Project
Extranet for delivery of information concerning the Research and Development
Project.

 

5.9           Stirling shall give ITI access to the Project
Extranet and will ensure that ITI is able both to utilise and to contribute to
the Project Extranet at all times (subject to reasonable downtimes). For the
avoidance of doubt, it will be ITI’s responsibility to ensure that it has
appropriate communication and computer facilities necessary to access the
Project Extranet as advised in writing by Stirling.

 

5.10         The Stirling Project Manager
and the ITI Liaison Officer shall meet within 25 Business Days after the end of
each Quarter throughout the Period, unless otherwise agreed in writing by ITI,

 

15

 

and within 3 months after the end of the
Period to review progress on the Research and Development Project generally and
to discuss and review:-

 

5.10.1            financial information
relating to the Research and Development Project;

 

5.10.2            technical developments
made and Foreground Intellectual Assets created (if any) during the relevant
Quarter; and

 

5.10.3            draft patent applications
(if any) in respect of the Foreground Intellectual Assets and any amendments
requested to these by ITI.

 

5.11         At the Quarterly meetings
referred to in Clause 5.10 or as necessary if the filing of a patent
application (a) is or becomes urgent, or (b) occurs after the last Quarter, the
Stirling Project Manager shall consult with the ITI Liaison Officer in relation
to any proposed patent application in respect of the Foreground Intellectual
Assets, reasonably in advance of any Group Company filing such patent application
(or in such circumstances as (a) above, as soon as practicable in the
circumstances) so as to afford ITI an opportunity to consult with Stirling in
good faith on the preparation, drafting and application for, and geographical
scope of, such patent and the inclusion of any claims relevant to the ITI Field
of Use and Stirling shall give due consideration to any and all views of and
requests from ITI in connection with same. 
ITI shall respond promptly to any request for consultation and shall not
unreasonably delay the filing of any patent application.  In addition to discussions at the Quarterly
meetings referred to in Clause 5.10, in relation to any particular Foreground
Intellectual Asset IMI shall use reasonable endeavours to accommodate any
written request by ITI that IMI should seek patent protection of that
Foreground Intellectual Asset in the ITI Field of Use (or any part of it, as
identified in ITI’s written request).

 

5.12         Stirling
shall ensure that appropriate Stirling personnel shall attend the meetings
required under Clause 5.10 to enable Stirling to report to ITI and to provide
ITI with sufficient information as ITI may reasonably require.  ITI shall ensure that appropriate ITI
personnel attend such meetings.

 

5.13         Stirling
shall take minutes in respect of each meeting held pursuant to Clause 5.10 and
within 5 Business Days following the date of each meeting, Stirling shall
deliver the minutes of the relevant meeting electronically to the ITI Liaison
Officer.  The ITI Liaison Officer shall
either approve the minutes in writing or suggest reasonable amendments to the
minutes.  Where the ITI Liaison Officer
notifies Stirling of amendments, Stirling shall have a further 5 Business Days
from the date of receiving such notification in which to make appropriate
amendments

 

16

 

and re-deliver the minutes to the ITI
Liaison Officer for written approval.  If
the minutes have not been approved by the date of the next following meeting,
they shall be presented at that meeting for approval and if they are not
approved at that meeting the differences shall be noted.

 

5.14         Stirling will
ensure that each of the key scientist and project leaders employed or engaged
by Stirling to conduct the Research and Development Project completes an
Expertise Profile as soon as reasonably practicable following their employment
or engagement.

 

 

6.             Financial Provisions

 

6.1           In consideration for
Stirling carrying out and managing the Research and Development Project, ITI
shall pay to Stirling the Development Fee in twelve (12) Instalments, in
accordance with the provisions of this Clause 6.

 

6.2           Stirling shall submit a
Payment Request to ITI at least 15 days prior to each Instalment Date, with the
exception of the first Instalment Date where the Payment Request shall be
submitted by Stirling to ITI on the Commencement Date.

 

6.3           Following receipt of a
Payment Request pursuant to Clause 6.2, ITI shall then pay the relevant
Instalment to Stirling on the relevant Instalment Date or, where the relevant
Instalment Date is not a Business Day, on the next Business Day following that
Instalment Date.

 

6.4           In conjunction with the
Expenditure Report delivered under Clause 5.2, Stirling shall render a Value
Added Tax (“VAT”) invoice to ITI in respect of the amount of the previous
Instalment spent on Authorised Development Fee Expenditure as identified in the
Expenditure Report. Such VAT invoice shall be dated the last day of the
previous Quarter to which that previous Instalment relates and shall cover the
whole of the period of that Quarter, with the exception that in respect of the
last Instalment, Stirling shall render a VAT invoice to ITI which will cover
the whole of the period from 1 October 2007 to the date immediately before
the third anniversary of the Commencement Date and which shall be delivered to
ITI within 12 Business Days after the end of such period.

 

6.5           All payments due under this
Clause 6 shall be paid by ITI into a Stirling bank account notified in writing
to ITI.

 

6.6           The Development Fee shall
be exclusive of VAT which shall be payable in addition by ITI on receipt of the
appropriate VAT invoice in accordance with the provisions of Clause 6.4.  The

 

17

 

Development Fee shall be used only for
Authorised Development Fee Expenditure and for no other purpose whatsoever. The
Development Fee shall be earned to the extent of incurred Authorised
Development Fee Expenditure.  If (i) on
termination of this Agreement pursuant to Clause 9, or (ii) on termination of
ITI’s involvement in the Research and Development Project pursuant to Clause
10, or (iii) on a date which is three months after the end of the Period, any
part of the Development Fee which has been paid by ITI to Stirling prior to
that date has not been spent on Authorised Development Fee Expenditure (and
therefore remains unearned by Stirling at that date), Stirling will repay that
part of the Development Fee to ITI within 15 Business Days. Save as set out in
this Clause 6.6, no part of the Development Fee paid to Stirling will be
repayable. For the avoidance of doubt this Clause 6.6 shall not preclude ITI
from claiming damages from Stirling in respect of a breach of this Agreement by
Stirling.

 

6.7           If ITI fails to pay any of
the Development Fee for a period of more than 60 days following its due date,
Stirling may require payment of that instalment with interest thereon at the
rate of 3% above the base lending rate from time to time of the Bank of
Scotland from the due date for payment until the actual date of payment in
full, without prejudice to any other rights or remedies it may have and the
Parties agree that this constitutes a substantial remedy under the Late Payment
of Commercial Debts (Interest) Act 1998.

 

6.8           If Stirling fails to repay
any of the Development Fee for a period of more than 15 Business Days following
its due date for repayment pursuant to Clause 6.6, ITI may require payment of
that amount with interest thereon at the rate of 3% above the base lending rate
from time to time of the Bank of Scotland from the due date for payment until
the actual date of payment in full, without prejudice to any other rights or
remedies it may have and the Parties agree that this constitutes a substantial
remedy under the Late Payment of Commercial Debts (Interest) Act 1998.

 

 

7.             Royalty Adjustment

 

7.1           If in any Year during the
Period, Stirling is in breach of its obligation under Clause 3.2 or IMI is in
breach of its obligation under Clause 3.1 of this Agreement, ITI may at its
sole option elect to waive its rights in respect of any such breach (including
any right it may have to terminate under Clause 9) for such Year and instead
elect by notice in writing to increase the royalty rate payable to it in
respect of IMI Income under the Exploitation Agreement in accordance with Part
4 of the Schedule.

 

18

 

7.2           Stirling or IMI can remedy
a breach of its obligations under Clause 3.1 or 3.2 as the case may be by
expending the amount of any shortfall of the IMI Financial Contribution or the
Stirling Minimum Expenditure, as the case may be, in any relevant Year during
the Year immediately following the Year in which such shortfall occurred,
provided that the amount of IMI Financial Contribution or the Stirling Minimum
Expenditure, as the case may be, to be expended in the Year immediately
following the Year in which the shortfall occurred, is fully expended in
addition to the amount of the shortfall.

 

7.3           Where Stirling or IMI
remedies a breach of its obligations under Clause 3.1 or 3.2, as the case may
be, the royalty increase applied in respect of that particular breach shall be
removed with effect from the date on which such breach is remedied.

 

 

8.             Intellectual Property

 

8.1           The Parties agree that all
Background Intellectual Assets shall remain the property of the relevant Group
Company or the party who has granted a licence of such Background Intellectual
Assets to the relevant Group Company and, except as otherwise stated in this
Agreement, the Exploitation Agreement or the Background Intellectual Assets
Licence, ITI shall have no rights to such Background Intellectual Assets or any
other Intellectual Property Rights of any Group Company.

 

8.2           The Parties agree that all
Foreground Intellectual Assets developed, created or acquired by any Group
Company shall be the sole property of ITI and, subject to Clause 8.3, Stirling
hereby assigns to ITI on Stirling’s own behalf and as agent for all other Group
Companies involved in creating the Foreground Intellectual Assets, its and
their whole right, title and interest in the Foreground Intellectual Assets by
way of present assignation of future Intellectual Property Rights.  To the extent that Foreground Intellectual Assets
come into existence following the Commencement Date and are not capable of
being assigned to ITI by way of present assignation of future Intellectual
Property Rights, and subject to Clause 8.3, Stirling hereby assigns to ITI on
Stirling’s behalf and as agent for all other Group Companies involved in
creating the Foreground Intellectual Assets its and their whole right, title
and interest in and to the Foreground Intellectual Assets with effect from the
date of their creation. To the extent that Foreground Intellectual Assets come
into existence during ITI’s Absence, and subject to Clause 8.3, Stirling hereby
agrees to assign to ITI on Stirling’s behalf and as agent for all other Group
Companies involved in creating the Foreground Intellectual Assets

 

19

 

its and their whole right, title and
interest in and to the Foreground Intellectual Assets with effect from the date
on which ITI exercises its option under Clause 10.4.  Stirling undertakes to ITI on Stirling’s own
behalf and as agent for all other Group Companies involved in creating the
Foreground Intellectual Assets that no Group Company, nor any of their
employees shall have any Intellectual Property Rights in the Foreground
Intellectual Assets following the date of assignation, save as provided for in
Clauses 8.3 or 8.4 or under the Exploitation Agreement.

 

8.3           Where Stirling or any other
Group Company has instructed or used the services of any third party (not being
a Group Company) in carrying out the Research and Development Project, Stirling
shall use reasonable endeavours to ensure that all right, title and interest in
and to any Foreground Intellectual Assets created by such third party shall
vest in Stirling or such other Group Company to enable the assignation provided
for in Clause 8.2 to be effective in respect of all of the Foreground
Intellectual Assets.  To this end,
Stirling shall use reasonable endeavours to require any such third party to
sign an appropriately worded assignation in favour of Stirling or such other
Group Company.  ITI shall be entitled to
inspect any agreement reached by Stirling or any Group Company with third
parties pursuant to this Clause to the extent it relates to any Foreground
Intellectual Assets.

 

8.4           If the assignation referred
to in Clause 8.3 cannot be obtained by Stirling, Stirling will inform ITI of
this as soon as practicable, introduce ITI to such third party and use
reasonable endeavours to facilitate discussions between ITI and such third
party so as to enable ITI to obtain (at ITI’s own cost) such licence rights as
ITI may require.

 

 

9.             Termination

 

9.1           Subject to Clause 9.6, ITI
may terminate this Agreement with immediate effect by notice in writing in any
of the following events:-

 

9.1.1              if either IMI or
Stirling commits a material breach  of this
Agreement, which breach has not been cured within 21 days after written notice
is given to either IMI or Stirling , as the case may be, specifying the breach;
or

 

9.1.2              if IMI or Stirling
commits a material breach of this Agreement which breach is not capable of
being remedied; or

 

9.1.3              if IMI or Stirling
enters into a deed of arrangement or compounds with its creditors or if any
order is made or a resolution is passed for the winding-up of either IMI or

 

20

 

Stirling (other than a solvent amalgamation
or reconstruction) or an administrator is appointed to manage either IMI’s or
Stirling’s affairs, business and property or if a receiver is appointed over
any of IMI’s or Stirling’s assets or undertaking or if circumstances arise
which entitle the Court or a creditor to appoint a receiver or manager or which
entitle the Court to make a winding-up order or if either IMI or Stirling takes
or suffers any similar or analogous action in consequence of debt in or under
any jurisdiction to which it is subject.

 

9.2           Subject to Clause 9.6, IMI
or Stirling may terminate this Agreement with immediate effect by notice in
writing in any of the following events:-

 

9.2.1              if ITI commits a
material breach of this Agreement, which default has not been cured within 21
days after written notice is given to ITI specifying the breach; or

 

9.2.2              if ITI commits a
material breach of this Agreement which breach is not capable of being
remedied;

 

9.2.3              if ITI enters into a
deed of arrangement or compounds with its creditors or if any order is made or
a resolution is passed for the winding-up of ITI (other than a solvent
amalgamation or reconstruction) or an administrator is appointed to manage ITI’s
affairs, business and property or if a receiver is appointed over any of ITI’s
assets or undertaking or if circumstances arise which entitle the Court or a
creditor to appoint a receiver or manager or which entitle the Court to make a
winding-up order or if ITI takes or suffers any similar or analogous action in
consequence of debt.

 

9.3           This Agreement shall
terminate if the Exploitation Agreement is terminated for any reason.

 

9.4           Subject to Clause 9.6, ITI shall be entitled, at its sole discretion, to
terminate this Agreement forthwith, if at any time
within 5 years of the payment by ITI to IMI of the first instalment of the
Development Fee,
Stirling locates its principal research and development or manufacturing
facility outside of Scotland.

 

9.5           On termination of this
Agreement howsoever caused the Foreground Intellectual Assets shall comprise
only those Foreground Intellectual Assets in existence on the date of
termination.

 

9.6           If any dispute is referred
to the procedure set out in Clause 11, no Party may exercise its rights under
Clause 9 until the dispute resolution procedure is complete.

 

9.7           Termination of this
Agreement shall be without prejudice to any accrued rights or liabilities of
the Parties and to the continuation in force of all provisions which are
expressed to or by

 

21

 

implication remain in force following
termination or which would be intended by the Parties to continue beyond
termination including Clauses 1, 5.3, 5.4, 5.8, 5.9, 5.10, 5.11, 6.4, 6.6, 6.7,
6.8, 7, 8, 9, 10.4, 10.5 and 11 – 22 inclusive.

 

 

10.          Changes to the Research and
Development Project

 

10.1         IMI and Stirling shall
periodically, throughout the Period, review the progress of the Research and
Development Project.  If, as a result of
any such review, IMI and Stirling determine any of the following:

 

(i)             that no Group Company is
achieving technical results of sufficient quality in relation to the
development of the Microfluidics Platform as to warrant further research and
development work in respect of such Microfluidics Platform; or

 

(ii)            that market forces no
longer justify continued investment in research and development into a
Microfluidics Platform; or

 

(iii)           in the event that the scope
and/or focus of the Research and Development Project has already been changed
pursuant to Clause 10.1, that no Group Company is achieving technical results
of sufficient quality in relation to such altered Research and Development
Project as to warrant further research and development,

 

and, as a result of such determination, IMI
and Stirling decide that they wish to change the scope and/or focus of the
Research and Development Project, IMI or Stirling will promptly notify ITI of
this in writing, giving full details of the proposed change and the reasons for
it, together with details of any changes (if any) to the Research and
Development Project Expenditure and IMI Financial Contribution.

 

10.2         Within 60 days of receipt of
such written notice, ITI shall notify IMI or Stirling, as the case may be,
either:

 

10.2.1            that ITI wishes to continue
its involvement in the Research and Development Project, as amended in light of
the change of scope and focus notified to it under Clause 10.1, in which case
this Agreement shall continue unaffected (except insofar as the definition of
the Research and Development Project has to be amended) always provided that if
the IMI Financial Contribution towards the redefined Research and Development
Project has decreased, the Development Fee and the Stirling Minimum Expenditure
shall be reduced proportionally.  ITI
shall in no circumstances be obliged to increase the Development Fee in the

 

22

 

event that the scope and/or focus of the
Research and Development Project is changed; or

 

10.2.2            that ITI wishes to terminate
its involvement in the Research and Development Project, in which case ITI
shall be so entitled to terminate its involvement and the Parties shall have no
further rights or obligations under this Agreement, save for those set out in
Clauses 9.7, 10.4 and 10.5.

 

10.3         If ITI fails to notify IMI or
Stirling pursuant to Clause 10.2.1 or 10.2.2 within 60 days of receipt of the
written notice to be given pursuant to Clause 10.1, then, at the end of such 60
day period ITI shall be deemed to have terminated its involvement in the
Research and Development Project in terms of Clause 10.2.2.  Where ITI has terminated its involvement in
the Research and Development Project the Foreground Intellectual Assets shall
comprise only those Foreground Intellectual Assets in existence on the date of
termination.

 

10.4         If, at any time during the
period from the date on which ITI’s involvement in the Research and Development
Project is terminated pursuant to Clause 10.2.2 and 1 March 2009, Stirling
(whether itself or through any other Group Company), or any other Group Company
carries out, directly or indirectly, or commissions research into or
development of a Microfluidics Platform, Stirling shall offer ITI the option to
participate in the Research and Development Project, such option being open for
acceptance for a period of 60 days from ITI’s receipt of written notice to this
effect from Stirling.

 

10.5         If ITI exercises its option
under Clause 10.4 it shall be as though there had never been a break in ITI’s
involvement in the Research and Development Project and ITI will not require to
pay any more than that part of the Development Fee which had yet to be paid
prior to the termination of ITI’s involvement in the Research and Development
Project pursuant to Clause 10.2.2 together with any amount repaid under Clause
6.6, and the Period the Milestone Dates and Instalments Dates shall be adjusted
accordingly.

 

 

11.          Dispute Resolution

 

11.1         All disputes arising out of
or relating to this Agreement shall be referred, by any Party, to its and the
other Parties’ Nominated Representatives for resolution.

 

11.2         If the dispute cannot be
resolved by the Parties’ Nominated Representatives within a maximum of ten (10)
days after it has been referred under Clause 11.1 the dispute may be

 

23

 

referred by a Party to mediation in
accordance with the Centre for Effective Dispute Resolution (“CEDR”) Model
Mediation Procedure.

 

11.3         Work and activity to be
carried out, and in particular the carrying out of the Research and Development
Project and payment of the Development Fee under this Agreement shall not cease
or be delayed by any referral by a Party of a dispute to this dispute
resolution procedure.

 

11.4         The Parties acknowledge that
notwithstanding the provisions of this Clause 11, nothing in this Agreement
shall prevent a Party from bringing proceedings in any court of competent
jurisdiction for any interim or interlocutory relief or to protect the
Foreground Intellectual Assets or Confidential Information.

 

 

12.          Confidentiality

 

12.1         The Parties agree and
undertake that during the term of this Agreement and thereafter they will keep
confidential and will not use for their own purposes except for the performance
of this Agreement nor, without the prior written consent of the Party who
discloses the relevant Confidential Information, disclose to any third party
any Confidential Information provided to them, in the case of ITI, by Stirling,
IMI or SwissCo, or in the case of Stirling, IMI and/or SwissCo, by ITI, unless:

 

12.1.1            the receiving Party can
show such information is public knowledge or already known to the receiving
Party at the time of disclosure, or subsequently becomes public knowledge other
than by breach of this Agreement; or

 

12.1.2            the receiving Party can
show that such information subsequently comes lawfully into the possession of
the receiving Party from a third party without an obligation of
confidentiality; or

 

12.1.3            Clauses 12.7 to 12.10
apply to such information, to the extent only as permitted by these Clauses.

 

12.2         Any Confidential Information
disclosed by any Party to any other Party prior to the execution of this
Agreement and/or the Commencement Date shall be considered as having been
disclosed under this Agreement.

 

12.3         To the extent necessary to
implement the provisions of this Agreement or to progress Commercial
Exploitation in the IMI Field of Use, Stirling, IMI or SwissCo may disclose the Confidential
Information of ITI to any Group Company and such of
their employees, agents or

 

24

 

representatives as may be reasonably
necessary or desirable provided that before any such disclosure Stirling shall
and shall ensure that IMI or Swiss Co (as appropriate) shall make the Group Companies
and such of their employees, agents and representatives aware of that Party’s
obligations of confidentiality under this Agreement, and shall ensure that any
such Group Company or third party employee and their agent or representative
has agreed in writing, whether through a contract of employment or otherwise,
to obligations of confidentiality commensurate with the requirements of this
Agreement.

 

12.4         To the extent necessary to
implement the provisions of this Agreement (including where a Group Company
uses the services of a third party in carrying out the Research and Development
Project) or to progress Commercial Exploitation in the IMI Field of Use, a
Group Company may disclose
the Confidential Information of ITI to a third party,
provided that Stirling shall and shall procure that any other relevant Group
Company shall ensure that such third party firstly agrees in writing to
obligations of confidentiality no less onerous than those set out in this
Clause 12.

 

12.5         ITI may disclose Confidential
Information of IMI or Stirling to third parties to the extent necessary to
progress Commercial Exploitation in the ITI Field of Use and to Scottish
Enterprise and Highlands and Islands Enterprise, provided that prior to any
such disclosure ITI shall ensure that the party to whom disclosure is made
firstly agrees in writing to obligations of confidentiality no less onerous
than those set out in this Clause 12 and, in particular, that that party to
whom disclosure is made shall not be entitled to disclose such Confidential
Information to any other third party without placing on such other third party
obligations of confidentiality no less onerous than those set out in this
Clause 12.

 

12.6         Notwithstanding any other
provision of this Clause 12, ITI hereby reserves the right, at its sole
discretion, to disclose to any third party through any medium at any time, full
details of the Development Fee and the timings of payment of the Development
Fee under this Agreement and each of IMI, Stirling and SwissCo hereby irrevocably
consents to such disclosure and waives any rights it may have to prevent or
restrict disclosure on grounds of commercial confidentiality or otherwise.

 

12.7         Any Party may disclose
Confidential Information to the extent it is required to do so by a statutory,
legal, regulatory or parliamentary obligation placed upon the Party making the
disclosure (including, in the case of ITI, its obligations to Audit Scotland
and any successor body to Audit Scotland), provided, to the extent practicable,
that the Party obliged to make the

 

25

 

disclosure will provide the Party to whom
the Confidential Information belongs with a reasonable opportunity to make
representations to the body compelling such disclosure as to the nature and
extent of the disclosure required and the procedures for maintaining
confidentiality of the Confidential Information to be disclosed. This Clause
12.7 shall not apply to the requirements for disclosure under FOISA, the Code,
or the Environmental Information Regulations, the procedure for which is set
out in Clauses 12.8 to 12.10.

 

12.8         In the event that ITI
receives a Request for Information that would involve a disclosure of any
Commercially Sensitive Information:

 

12.8.1            ITI will as soon as
reasonably practicable notify IMI of the Request for Information and shall
afford IMI the opportunity to make representations about any such disclosure to
ITI within 5 Business Days of receiving such notification and before making any
disclosure;

 

12.8.2            Unless otherwise agreed in
writing by IMI, such consent not to be unreasonably withheld or delayed, ITI
will refuse to disclose such Commercially Sensitive Information to the third
party who has made the Request for Information;;

 

12.8.3            Where that decision is
referred to the Scottish Information Commissioner by the third party making the Request for Information, ITI
will not disclose the Commercially Sensitive Information unless and to the
extent it is compelled to do so by the Scottish Information Commissioner; and

 

12.8.4            to the extent practicable,
ITI will provide IMI’s
representations to the Scottish Information Commissioner as to the
confidentiality of the Commercially Sensitive Information and the likelihood of
the commercial interests of the Group Companies being substantially prejudiced
by the disclosure of the Commercially Sensitive Information.

 

12.9         In the event that any Request
for Information is received by Stirling, Stirling shall transfer the Request
for Information to ITI as soon as practicable after receipt and in any event
within five Business Days of receiving a Request for Information, whereupon
Clause 12.8 shall apply.

 

12.10       In the
event that, pursuant to a request which ITI has received under FOISA, it is
required to disclose any Confidential Information of a Group Company falling
outside the definition of “Commercially Sensitive Information”, it will notify
IMI promptly and consult with IMI prior to disclosing such Confidential
Information.

 

26

 

13.          Warranties and Indemnities

 

13.1         In supplying information to
each other, the Parties undertake to use reasonable endeavours to ensure the
accuracy thereof.  In the event of any
error in such information being notified by a Party, that Party shall promptly
use all reasonable endeavours to remedy such error.

 

13.2         IMI and Stirling (i) jointly
and severally warrant to ITI on the Commencement Date, and (ii) undertake to
ensure on the dates on which any assignation of Foreground Intellectual Assets
to ITI becomes effective under Clause 8.2, that:

 

13.2.1            there are and will be no
liens, charges, encumbrances or restrictions anywhere in the world which affect
or will affect Stirling’s ability to grant the assignations contained herein or
its ability to provide that the Foreground Intellectual Assets shall vest in
ITI in accordance with this Agreement; and

 

13.2.2            no Group Company will
knowingly  infringe or violate any
Intellectual Property Rights of any third party in performing its obligations
pursuant to this Agreement; and

 

13.2.3            the Foreground
Intellectual Assets assigned to ITI will (i) be the original works of a Group
Company or other entity instructed by any of them, having been created by
employees of a Group Company in the course of their employment, or by an entity
instructed by  a Group Company, (ii) not
have been created jointly with any third party other than one with whom a Group
Company has a contractual arrangement governing the ownership or licensing of
the resultant Intellectual Property Rights, and (iii) have not been copied
knowingly from, or knowingly based on, the works of any third party.

 

13.3         IMI and Stirling jointly and
severally warrant to ITI on the Commencement Date that:

 

13.3.1            all consents and
authorisations necessary to allow IMI and Stirling to enter into and perform
this Agreement and necessary for the validity and enforceability of this
Agreement have been obtained by IMI and Stirling and are in full force and
effect; and

 

13.3.2            no Group Company has
achieved any of Milestones 3 to 11 with respect to a home cardiology product
prior to the Commencement Date.

 

13.4         IMI and Stirling jointly and
severally warrant that, as at the Commencement Date, so far as they are aware,
no third party has infringed or threatened to infringe or is infringing or
threatening to infringe the Foreground Intellectual Assets and neither IMI nor
Stirling has any

 

27

 

information or knowledge of any nature,
without having made any specific enquiries, that a third party will infringe or
attempt to infringe the Foreground Intellectual Assets or to indicate any risk
of such infringement.

 

13.5         Stirling undertakes to notify
ITI immediately should it become aware of any infringement, attempted
infringement, threatened infringement or other violation of the Foreground
Intellectual Assets in the ITI Field of Use.

 

13.6         ITI warrants to IMI and
Stirling on the Commencement Date that all consents and authorisations
necessary to allow ITI to enter into and perform this Agreement and necessary
for the validity and enforceability of this Agreement have been obtained by ITI
and are in full force and effect.

 

13.7         ITI shall indemnify and hold
harmless Stirling and IMI and IMI and Stirling shall indemnify and hold harmless
ITI and each of their respective officers, directors, employees, agents,
representatives and assignees from and against any and all legal liability
(including expenses) arising out of claims or suits brought against the
indemnified Party as a direct result of the injury to or death of any employee,
agent or representative of that Party while engaged in connection with the
Research and Development Project or otherwise under this Agreement, where such
injury or death is due to the negligent act or omission of the indemnifying
Party, its employees, agents or representatives.

 

13.8         ITI shall indemnify and hold
harmless Stirling and IMI and Stirling and IMI shall indemnify and hold
harmless ITI from and against damage to or loss of the property of the indemnified
Party to the extent that such damage is caused by the negligent act or omission
of the indemnifying Party, its employees, agents or representatives.

 

13.9         The indemnities granted under
this Clause 13 shall not apply unless the Party seeking an indemnity notifies
the indemnifying Party as soon as is reasonably practicable of any matters in
respect of which the indemnity may apply and gives the indemnifying Party full
opportunity to control the response to and the defence of such claim including,
without limitation, the right to accept or reject settlement offers and to
participate in any litigation provided that in no event shall the
non-indemnifying Party be liable for any settlement or compromise made without
its consent, such consent not to be unreasonably withheld or delayed.

 

13.10       Each Party shall maintain in
force during the continuance of this Agreement such insurance with a reputable
insurer as is required by law. If requested by another Party, that Party shall

 

28

 

provide written evidence of the maintenance
of such insurance and the payment of relevant premiums.

 

13.11       Subject to Clauses 13.11 and
13.12, and other than in respect of death and personal injury caused by a Party’s
negligence, or in relation to any liability which by law may not be limited or
excluded:

 

13.11.1          the cumulative liability of IMI, Stirling and SwissCo taken
together, and the cumulative liability of ITI, with regard to any matter,
aspect, fact or thing arising from or relating to this Agreement shall in no
event exceed 125% of the amount of the Development Fee actually paid by ITI to
Stirling; and

 

13.11.2          no Party shall be liable for any indirect or consequential loss
including loss of profit, business, data, revenue, goodwill or anticipated
savings insofar as each of these is an indirect or consequential loss, which
arises out of or in connection with this Agreement.

 

13.12       Clause 13.10 will not limit or
exclude ITI’s obligation to pay the Development Fee or (where applicable)
Stirling’s obligation to repay any part of the Development Fee pursuant to
Clause 6.6 (and, where applicable, any interest thereon) in accordance with
this Agreement.

 

13.13       Clause 13.10 will not limit or
exclude either (i) IMI’s obligation under Clause 3.1, or (ii) Stirling’s
obligation under Clause 3.2.

 

 

14.          Variation

 

This Agreement shall not be amended and no variation to its terms shall
be effective unless such amendment or variation is in writing and is signed by
an authorised signatory on behalf of each of the Parties.

 

 

15.          Assignation and
Sub-Contracting

 

15.1         IMI and Stirling may assign
or transfer this Agreement or its rights and obligations under this Agreement
(in whole but not in part) without the consent of ITI, where such assignation
or transfer (a) is to a Group Company, or (b) as part of the sale to a third
party of all or substantially all of the Division, or (c) in accordance with
Clause 15.2 but shall not otherwise assign or transfer its rights or
obligations under this Agreement without the prior written consent of ITI.

 

29

 

 

15.2         Without prejudice to Clauses
8.3 and 8.4, IMI, Stirling and the other Group Companies, as the case may be,
may sub-contract parts of the Research and Development Project, provided always
that IMI or Stirling, as the case may be, remains responsible for all acts or
omissions of its sub-contractors.

 

15.3         ITI may assign or transfer
this Agreement or its rights and obligations under this Agreement (in whole but
not in part) to any public sector body without the consent of IMI, SwissCo or
Stirling but ITI shall not assign or transfer its rights or obligations under
this Agreement to any party which is or which is part of a group which has an
entity or operations which are competitive with any Group Company in the IMI
Field of Use without the prior written consent of SwissCo, Stirling and IMI.

 

15.4         Following a Change of Control
of Stirling, Stirling shall ensure that the Eligible Expenditure occurring
after the date of the Change of Control shall be reasonably expended in the
circumstances.

 

 

16.          Waiver

 

The failure of a Party to exercise or enforce any right conferred upon
it by this Agreement shall not be deemed to be a waiver of any such right or
operate so as to bar the exercise or enforcement of such right at any time or
times thereafter.  No waiver or discharge
shall be valid unless in writing and signed by the relevant Party against whom
such waiver or discharge is sought to be enforced or unless given by ITI
pursuant to Clause 7.1.

 

 

17.          Publicity

 

17.1         Stirling and IMI shall be
entitled to publish marketing materials or otherwise engage in marketing or
public relations activities regarding IMI’s and/or Stirling’s involvement with
ITI, subject to obtaining ITI’s consent through the execution of a Marketing
Agreement Form or in such other manner as the parties agree.  For the avoidance of doubt, if there is any
conflict between the terms of the Marketing Agreement Form and this Agreement
the terms of the Marketing Agreement Form shall prevail.

 

17.2         ITI shall be entitled to
publish marketing materials or otherwise engage in marketing or public
relations activities regarding ITI’s involvement with IMI or Stirling, subject
to obtaining IMI’s or Stirling’s consent, as the case may be, through the
execution of a Marketing Agreement Form or in such other manner as the parties
agree. For the avoidance of doubt, if there is any

 

30

 

conflict between the terms of the Marketing
Agreement Form and this Agreement the terms of the Marketing Agreement Form
shall prevail.

 

 

18.          Notices

 

18.1         Notices under this Agreement
shall be given by courier or by recorded delivery mail, posted prepaid and
addressed to the addresses of the respective post holders as follows:.

 

ITI:

 

Director of Intellectual Asset Management

 

ITI Life Sciences

 

Innovation House

 

17 Luna Place

 

Dundee Technology Park

 

Dundee DD2 1TP

 

United Kingdom

 

Stirling:

 

Company Secretary

 

249 West George Street

 

Glasgow G2 4RB

 

United Kingdom

 

IMI:

 

General Counsel

 

Inverness Medical Innovations, Inc

 

51 Sawyer Road

 

Suite 200

 

Waltham

 

MA 02453-3448

 

United States of America

 

SwissCo:

 

General Counsel

 

Inverness Medical Switzerland, GmbH

 

Bundesplatz 1

 

6300 Zug

 

31

 

Switzerland

 

18.2         Where ITI gives a notice to
Stirling, ITI shall copy that notice to IMI and where ITI gives a notice to
IMI, ITI shall copy that notice to Stirling.

 

18.3         If a Party or a post holder
changes its address for notification purposes, then it shall give the other
Parties prior written notice of the new address and the date on which it shall
become effective.

 

18.4         Notices served by courier or
mail shall be deemed to be delivered 72 hours after the time of delivery into
the hands of a courier or of posting.

 

18.5         For the avoidance of doubt, service
of any process or any writ or document in relation to any court proceedings
which may be taken hereunder in relation to IMI may be served at care of DLA
Piper Rudnick Gray Cary Scotland LLP, Rutland Square, Edinburgh EH1 2AA, United
Kingdom (or such other address in Scotland as notified to ITI by IMI from time
to time). For the avoidance of doubt, such service shall be in addition to, and
not in substitution for, service on IMI at its own address for service.

 

 

19.          Remedies not Exclusive

 

No remedy conferred by any of the provisions of this Agreement is
intended to be exclusive of any other remedy, except as expressly provided in
this Agreement and each and every remedy shall be cumulative and shall be in
addition to every other remedy given under this Agreement now or hereafter
existing in law.

 

 

20.          Severance

 

If any provision of this Agreement is or becomes illegal, invalid or
unenforceable in any jurisdiction, that shall not affect:-

 

(a)           the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or

 

(b)           the legality, validity or enforceability in any other jurisdiction
of that or any other provision of this Agreement.

 

 

21.          Entire Agreement

 

This Agreement, together with the Exploitation Agreement and the
Background Intellectual Assets Licence, constitutes the entire agreement and
understanding among the Parties in

 

32

 

relation to its subject matter and supersedes all previous agreement
and arrangements among the Parties in relation to its subject matter.  No Party shall be entitled to rely on any
oral or written representations, understandings or agreements among the Parties
which are not fully expressed in this Agreement, the Exploitation Agreement and
the Background Intellectual Assets Licence, and each Party expressly excludes
any liability therefor, except for any such misrepresentations which are made
fraudulently.

 

 

22.          Governing Law

 

This Agreement shall be governed by and interpreted in accordance with
the laws of Scotland, and subject to Clause 11 the parties hereby submit to the
exclusive jurisdiction of the Scottish Courts in respect of any dispute arising
hereunder.

 

IN WITNESS WHEREOF these
presents consisting of this and the preceding 32 pages together with the Schedule in 8 Parts annexed
hereto are executed in four originals as follows:-

 

 

	
  They
  are subscribed for and on behalf of ITI

  	
   

  
	
  Scotland
  Limited by John Chiplin,

  	
   

  
	
  an
  authorised signatory,

  	
   

  
	
  at
  Edinburgh

  	
   

  
	
  on 25
  February 2005

  	
   

  
	
  Before
  this witness:

  	
  Signatory:

  	
  /s/
  John Chiplin

  
	
  /s/
  Joanna Susan Boag-Thomson

  	
   

  	
  Witness

  	
  Full
  Name: John Chiplin

  	
   

  
	
  Joanna
  Susan Boag-Thomson

  	
  Full
  Name

  	
   

  
	
  241
  Nithsdale Road

  	
  Address

  	
   

  
	
  Glasgow

  	
   

  
						

 

33

 

	
  They
  are subscribed for and on behalf of Inverness

  	
   

  
	
  Medical
  Innovations, Inc. by    David Scott.,

  	
   

  
	
  an
  authorised signatory, at        Edinburgh

  	
   

  
	
  on 25
  February 2005. before this witness:

  	
   

  
	
   

  	
  Signatory:

  	
  /s/
  David Scott

  
	
   

  	
  Full
  Name: David Scott

  	
   

  
	
   

  	
   

  
	
  /s/
  Ian Bryson McCarlie

  	
   

  	
  Witness

  	
   

  	
   

  
	
  Ian
  Bryson McCarlie

  	
  Full Name

  	
   

  	
   

  
	
  Rutland
  Square Edinburgh

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  
	
  They
  are subscribed for and on behalf of Stirling

  	
   

  
	
  Medical
  Innovations, Inc. by   David Scott.,

  	
   

  
	
  an
  authorised signatory, at      Edinburgh

  	
   

  
	
  on 25
  February 2005. before this witness:

  	
  Signatory:

  	
  /s/
  David Scott

  
	
   

  	
  Full
  Name: David Scott

  	
   

  
	
   

  	
   

  
	
  /s/
  Ian Bryson McCarlie

  	
   

  	
  Witness

  	
   

  	
   

  
	
  Ian
  Bryson McCarlie

  	
  Full Name

  	
   

  	
   

  
	
  Rutland
  Square Edinburgh

  	
  Address

  	
   

  	
   

  
	
   

  	
   

  
	
  They
  are subscribed for and on behalf of Inverness

  	
   

  
	
  Medical
  Switzerland GmbH by

  	
   

  
	
  Steve
  Howell                      ,
  as attorney for Inverness

  	
   

  
	
  Medical
  Switzerland GmbH, at Edinburgh                on

  	
   

  
	
      25
  February 2005.

  	
  Signatory:

  	
  /s/
  Steve Howell

  
	
  before
  this witness:

  	
  Full
  Name: Steve Howell

  	
   

  
	
  /s/
  John Christopher McKinley

  	
   

  	
  Witness

  	
   

  	
   

  
	
  John
  Christopher McKinley

  	
  Full Name

  	
   

  	
   

  
	
  7
  Queens Avenue

  	
  Address

  	
   

  	
   

  
	
  Edinburgh

  	
   

  
											

 

34

 

This is the Schedule referred to in the foregoing
Research and Development Agreement among ITI SCOTLAND LIMITED,  INVERNESS MEDICAL INNOVATIONS, INC., STIRLING
MEDICAL INNOVATIONS LIMITED and INVERNESS MEDICAL SWITZERLAND GmbH

 

SCHEDULE

 

Part 1

Milestones

 

 

	
  Milestones

  	
   

  	
  Milestone Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  

 

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

 

35

 

	
  Milestones

  	
   

  	
  Milestone Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  
	
   

  	
   

  	
   

  
	
  ****

  	
   

  	
  ****
  months from Commencement Date

  

 

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

 

36

 

Part 2A

 

IMI Financial Contribution

 

Part 2A

 

IMI Financial Contribution

 

	
  Year

  	
   

  	
  IMI Financial
  Contribution

  
	
  1

  	
   

  	
  £7,500,000
  (of which £3,000,000 is the Stirling Minimum Expenditure)

  
	
  2

  	
   

  	
  £11,500,000
  (of which £7,000,000 is the Stirling Minimum Expenditure)

  
	
  3

  	
   

  	
  £14,000,000
  (of which £11,000,000 is the Stirling Minimum Expenditure)

  
	
  4

  	
   

  	
  £4,500,000
  (of which £3,000,000 is the Stirling Minimum Expenditure)

  

 

37

 

Part 2B

Stirling Minimum Expenditure

 

	
  Year

  	
   

  	
  Stirling Minimum
  Expenditure

  	
   

  
	
  1

  	
   

  	
  £

  	
  3,000,000

  	
   

  
	
  2

  	
   

  	
  £

  	
  7,000.000

  	
   

  
	
  3

  	
   

  	
  £

  	
  11,000,000

  	
   

  
	
  4

  	
   

  	
  £

  	
  3,000,000

  	
   

  

 

38

 

Part
3

 

Development Fee

 

	
  Instalment

  	
   

  	
  Instalment Date

  	
   

  	
  Development Fee

  	
   

  
	
  1.

  	
   

  	
  5
  Business Days after the Commencement Date

  	
   

  	
  £

  	
  5,000,000

  	
   

  
	
  2.

  	
   

  	
  1 July 2005

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  3.

  	
   

  	
  1 October 2005

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  4.

  	
   

  	
  1 January 2006

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  5.

  	
   

  	
  1 April 2006

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  6.

  	
   

  	
  1 July 2006

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  7.

  	
   

  	
  1 October 2006

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  8.

  	
   

  	
  1 January 2007

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  9.

  	
   

  	
  1 April 2007

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  10.

  	
   

  	
  1 July 2007

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
  11.

  	
   

  	
  1 October 2007

  	
   

  	
  £

  	
  2,500,000

  	
   

  
	
   

  	
   

  	
  Total

  	
   

  	
  £

  	
  30,000,000

  	
   

  

 

39

 

Part 4

 

Royalty Adjustment Formula

 

	
  IMI Financial

  Contribution

  	
   

  	
  0 -10%

  Shortfall

  	
   

  	
  10 - 20%

  Shortfall

  	
   

  
	
  Year 1 -
  £7,500,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Year 2 -
  £11,500,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Year 3 -
  £14,000,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Year 4 –
  £4,500,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  

 

	
  Stirling Minimum

  Expenditure

  	
   

  	
  0 - 10%

  Shortfall

  	
   

  	
  10 - 20%

  Shortfall

  	
   

  
	
  Year 1 -
  £3,000,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Year 2 -
  £7,000,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Year 3 -
  £11,000,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  
	
  Year 4 -
  £3,000,000

  	
   

  	
  ****

  	
   

  	
  ****

  	
   

  

 

NB - Royalty increases are either 0–10% shortfall or 10-20%
shortfall not both.  If both IMI and
Stirling are in material breach in any Year ITI may apply the relevant increase
in respect of each such breach.  By way
of example only, if IMI has had a 10% shortfall and Stirling has a 21%
shortfall in Year 2, the total amount of the increase would be ****%.

 

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

 

40

 

Part 5

 

Expertise Profile

 

To meet ITI
Scotland’s objective of creating ‘communities of expertise’, there is a need to
proactively seek out individuals or become aware of individuals who may be willing
to contribute their ‘expertise-in-context’ to assist the ITIs and to
participate in future Programmes and Projects.

 

The aim of
completing an expertise profile is to capture knowledge about individuals, with
this knowledge being placed in context within an area of the ITI’s business, to
create networks of expert individuals and communities of practice and expertise
across Scotland.

 

 

	
  Field Name

  	
   

  	
  Comments

  
	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  First Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Last Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Work Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Town/County

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Country

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Postal/Zip Code

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Work Telephone (Daytime)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Work Email

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Job Title/Position

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ITI Context

  	
   

  	
  Description of any experience obtained by individual
  working on other ITI projects.

  

 

41

 

	
  Education

  	
   

  	
  Description of Education and qualifications.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Professional

  Memberships/Associations

  	
   

  	
  Details of any Professional Memberships or Associations.

  
	
   

  	
   

  	
   

  
	
  Academic Positions

  	
   

  	
  Description of any academic positions held by individual.

  
	
   

  	
   

  	
   

  
	
  Current Research Areas of Interest

  	
   

  	
  Description of current research areas of interest.

  
	
   

  	
   

  	
   

  
	
  Commercial Experience

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Commercial Positions Held

  	
   

  	
  Description of any commercial positions held.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Any other relevant information

  	
   

  	
   

  

 

42

 

Part 6

 

Marketing Agreement Form

 

Marketing Agreement Form

 

Please
complete this form to record ITI Life Sciences’/Inverness Medical Innovations,
Inc’s/Stirling Medical Innovations Limited’s
[Delete as appropriate] approval to take part in mutually beneficial
marketing and PR opportunities.

 

Each individual opportunity/article will be passed to ITI Life
Sciences/Inverness Medical Innovations, Inc./Stirling
Medical Innovations Limited’s [Delete as appropriate]for
review or approval prior to publication and will be drafted in line with the
terms and conditions already in place between us.

 

	
  Company
  Name:

  	
   

  	
   

  	
   

  	
  Name
  & Job Title:

  	
   

  	
   

  
	
  email
  Address:

  	
   

  	
   

  	
   

  	
  Tel
  No:

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I
  confirm that the following information can be used by ITI Life
  Sciences/Inverness Medical Innovations, Inc./Stirling Medical Innovations
  Limited’s [Delete as appropriate]
  for the following marketing purposes: [Insert
  details of information]

  

 

 

	
  o

  	
  PRESS RELEASE

  	
  o

  	
  TESTIMONIAL

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Quote/comment
  about ITI

  Life Sciences/Inverness Medical

  Innovations, Inc./Stirling Medical

  Innovations Limited [Delete as

  appropriate

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  Newsletter

  	
  o

  	
  Case Study

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Article feature
  in

  internal publications

  or other appropriate

  media

  	
   

  	
  Description
  of Programme

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  Website

  	
  o

  	
  Use of Name

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  News
  feature or Press Release on

  website

  	
   

  	
  e.g.
  published client list

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  Logo

  	
  o

  	
  Images

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Use
  of ITI Life Sciences’/Inverness Medical

  Innovations, Inc.’s/[Stirling Medical
  Innovations

  Limited’s ] [Delete as

  appropriate] logo in marketing material

  	
   

  	
  Use
  of images in marketing

  

 

43

 

Further
comments (please state here any exceptions or restrictions)

 

 

Please return
form to:

 

1)             Lynn Murphy, Marketing
& Communications Director:

email:   lynn.murphy@itilifesciences.com

Tel:      +44 (0)1382 568 067; or

 

2)             [Insert details of IMI marketing contact]; or

 

3)             [Insert details of Stirling Medical Innovations Limited’s marketing
contact required].

 

[Delete as appropriate]

 

44

 

Part
7

 

Parent Company Guarantee

 

 

PARENT COMPANY GUARANTEE

 

INVERNESS MEDICAL INNOVATIONS INC.

as Guarantor

 

ITI SCOTLAND LIMITED

as Company

 

25 February 2005

 

45

 

AGREEMENT

 

between

 

(1)           INVERNESS MEDICAL INNOVATIONS INC., a
company incorporated in the State of Delaware and having its principal place of
business at 51 Sawyer Road, Suite 200, Waltham, MA 02453 — 3448, USA (“Guarantor”)

 

(2)           ITI SCOTLAND LIMITED, a company
incorporated in Scotland under the Companies Acts (Company Number SC251900) and
having its registered office at 180 St Vincent Street, Glasgow G2 5SG and its permitted assignees and permitted
transferees from time to time (“Company”)

together the “parties”

 

BACKGROUND

 

(A)          The Guarantor is the ultimate parent company of (i) Inverness
Medical Switzerland GmbH, incorporated in Switzerland (company number
CH-170.4.003.523-4) and having its principal place of business at Bundesplatz
1, 6300 Zug (“Swissco”) and (ii)
Stirling Medical Innovations Limited (formerly called “Cardiosure Limited”
having changed its name conformed to a Certificate of Incorporation on Change
of Name dated 25 February 2005), a company incorporated under the
Companies Acts (Company Number SC277069) and having its registered office at
249 West George Street, Glasgow, G2 4RB (“Stirling”).

 

(B)           This Guarantee is ancillary to (i) a research and development
agreement between inter alia the
Guarantor, Stirling and the Company dated on or around the date hereof (“R&D Agreement”) under the terms of
which Stirling has incurred certain payment obligations  to the Company (ii) an exploitation agreement
between and amongst the Guarantor, Stirling, the Company and Swissco (“Exploitation Agreement”) under the terms
of which Stirling and Swissco have incurred certain payment obligations to the
Company and (iii) a background intellectual assets licence between the Company
and Swissco (“BIA Licence”) under
the terms of which Swissco has incurred certain payment obligations to the
Company

 

(C)           The Guarantor has agreed with the Company, subject to the terms of
this Guarantee, to guarantee:

 

(i)                   the said payment
obligations under the R&D Agreement of (1) Stirling and (2) any party to whom Stirling’s
obligations under the R&D Agreement are transferred (whether by
assignation, novation or otherwise) (the “R&D
Principal”); and

 

46

 

(ii)                  the said payment
obligations under the Exploitation Agreement of (1) Stirling and/or Swissco as
the case may be and/or (2) any
party to whom Stirling’s or Swissco’s obligations under the Exploitation
Agreement have been transferred (whether by assignation, novation or otherwise)
(the “Exploitation Principals”);
and

 

(iii)                 the said payment
obligations under the BIA Licence of (1) Swissco and (2) any party to whom Swissco’s obligations under the BIA Licence
are transferred (whether by assignation, novation or otherwise) (the “BIA Licence Principal”).

 

IT IS HEREBY AGREED:

 

 

1.             Guarantor Obligations

 

1.1           The Guarantor guarantees
irrevocably and unconditionally, to the Company:

 

1.1.1              the observance by the
R&D Principal of its Payment Obligations to the Company under the terms of
the R&D Agreement (“R&D Payment
Obligations”); and

 

1.1.2              the observance by the
Exploitation Principals of their Payment Obligations to the Company under the
terms of the Exploitation Agreement (“Additional
Payment Obligations”).

 

1.1.3              the observance by the
BIA Licence Principal of its Payment Obligations to the Company under the terms
of the BIA Licence (“BIA Licence Payment
Obligations”);

 

1.2           The parties agree that each
of :

 

1.2.1              an order made by a court
to pay damages; and

 

1.2.2              a settlement agreed by
the R&D Principal pursuant to which the R&D Principal agrees to pay a
sum of money to the Company in respect of a dispute under the R&D
Agreement; and

 

1.2.3              a settlement agreed by
the Exploitation Principals pursuant to which the Exploitation Principals agree
to pay a sum of money to the Company in respect of a dispute under the
Exploitation Agreement; and

 

1.2.4              a settlement agreed by
the BIA Licence Principal pursuant to which the BIA Licence Principal agrees to
pay a sum of money to the Company in respect of a dispute under the BIA
Licence;

 

47

 

shall constitute “Payment Obligations”
of the R&D Principal under the R&D Agreement and/or the Exploitation
Principals under the Exploitation Agreement and/or  the BIA Licence Principal under the BIA
Licence.

 

1.3           For the purpose of Clause
1.2.1 above, “an  order made by a court” shall mean an order
by a court having competent jurisdiction over the Guarantor which has not been
appealed and the time for appeal has expired or from which no appeal can be
taken.

 

 

2.             Discharge of Payment Obligations

 

On the occurrence of the non-performance by

 

(a)           the
R&D Principal of the R&D Payment Obligations,

 

(b)           the
Exploitation Principals of the Additional Payment Obligations, or

 

(c)           the
BIA Licence Principal of the BIA Licence Payment Obligations

 

the Guarantor as primary obligant irrevocably and unconditionally
undertakes to meet in full the R&D Payment Obligations due by the R&D
Principal to the Company under the terms of the R&D Agreement, and/or the
Additional Payment Obligations due by the Exploitation Principals to the
Company under the terms of the Exploitation Agreement, and/or the BIA Licence
Payment Obligations due  by the BIA
Licence Principal to the Company under the terms of the BIA Licence, such
payments to be made by the Guarantor on demand, subject to the terms of this
Guarantee, by the Company.

 

 

3.             Notice of Default

 

The Guarantor shall not be liable under this Guarantee if, having been
called upon to do so by the Company by a notice in writing (in a form substantially
in the terms of the notice referred to in the Schedule hereto) (“Notice”), the R&D Principal or where
applicable the Exploitation Principals, or where applicable the BIA Licence
Principal have within twenty one days of the date of receipt of such Notice,
rectified the breach or failure in respect of any R&D Payment Obligations
and/or Additional Payment Obligations and/or BIA Licence Payment Obligations
specified in the Notice (as appropriate). 
A copy of the Notice to the R&D Principal or (where applicable) the
Exploitation Principals or (where applicable) the BIA Licence Principal shall
be sent to the Guarantor at the same time as it is sent to the R&D
Principal or (where applicable) the Exploitation Principals or (where
applicable) the BIA Licence Principal. 
If the R&D Principal or (where applicable) the Exploitation
Principals or (where applicable) the BIA

 

48

 

Licence Principal fail to rectify the breach or failure within twenty
one days of the date of receipt of the Notice, the Company will so inform the
Guarantor by notice in writing and the Guarantor will, to the extent that
appropriate action has not already been taken by the R&D Principal, or
(where applicable) the Exploitation Principals or (where applicable) the BIA
Licence Principal  take appropriate
action hereunder to forthwith rectify the relevant breach or failure.

 

 

4.             Continuing Security

 

This Guarantee shall be a continuing security and accordingly it shall:

 

4.1           not be discharged by any
partial satisfaction (except to the extent of such partial satisfaction) by the
R&D Principal of its R&D Payment Obligations and/or the Exploitation
Principals of their Additional Payment Obligations and/or the or the BIA
Licence Principal of its BIA Licence Payment Obligations ;

 

4.2           not be discharged or
impaired by any time or indulgence (subject to a maximum period of 25 Business
Days) granted by the Company to the R&D Principal in respect of the R&D
Payment Obligations and/or the Exploitation Principals in respect of their
Additional Payment Obligations and/or the BIA Licence Principal in respect of
their BIA Licence Payment Obligations;

 

4.3           not be discharged or
impaired by any amendment to the terms of the R&D Agreement and/or the
Exploitation Agreement and/or the BIA Licence (save for any amendment which
removes the requirement to provide a guarantee on the terms hereunder); and

 

4.4           extend to cover the
unperformed part of the R&D Payment Obligations of the R&D Principal
and/or Additional Payment Obligations of the Exploitation Principals and/ or
BIA Licence Payment Obligations of the BIA Licence Principal from time to time.

 

 

5.             Warranties

 

The Guarantor warrants that:

 

5.1           it is duly incorporated and
validly existing under the laws of its country of incorporation;

 

5.2           it has full and
unrestricted power and authority to enter into this Guarantee and that all
corporate or other action required to authorise the entering into of this
Guarantee, or any matter ancillary thereto, has been taken;

 

5.3           the execution, delivery and
performance by the Guarantor of this Guarantee does not:

 

49

 

5.3.1              require any consent or
approval of any shareholder of the Guarantor, or any other person, which it has
not duly obtained;

 

5.3.2              violate any provision of
any laws in any jurisdiction applicable to the Guarantor;

 

5.3.3              result in a breach of,
or constitute a default under, any security, agreement, or other document or
instrument, or any other obligation or undertaking, to which the Guarantor is a
party or by which it or any material part of its property or assets may be
bound or affected, including without limitation any loan covenant;

 

5.3.4              result in, or require
the creation or imposition of any lien (or similar security or obligation) upon
any material part of the property or assets owned or controlled by the
Guarantor;

 

5.4           it is not in default under
or in breach of any law or security, agreement, or other document or instrument
which default or breach could have a materially adverse effect on its ability
to perform its obligations under this Guarantee.

 

 

6.             Limitation of Liability

 

The Guarantor’s liability under this Guarantee shall not exceed (a)
that of the R&D Principal under the R&D Agreement or of the Exploitation
Principals under the Exploitation Agreement or the BIA Licence Principal under
the BIA Licence, determined on the basis that the R&D Agreement, the
Exploitation Agreement and BIA Licence are valid, enforceable and have full
force and effect., together with (b) any interest payable by the Guarantor
pursuant to Clause 8.1 and (c) any costs, charges and expenses payable by the
Guarantor pursuant to Clause 8.2.

 

 

7.             Winding Up

 

None of the liabilities or obligations of the Guarantor shall be
released or discharged by the winding up, amalgamation, reconstruction or
reorganisation of the R&D Principal or the Exploitation Principals or the
BIA Licence Principal (or the commencement of any of the foregoing or of any
proceedings therefor).

 

 

8.             Interest & Expenses

 

8.1           To the extent that the
Guarantor’s obligations of payment hereunder (if any) are not paid when due
following demand hereunder, interest at a rate of 3% per annum above the base

 

50

 

lending rate of The Governor and Company of
the Bank of Scotland shall accrue on a daily basis (in substitution for any
rate then applying to the R&D Payment Obligations and/or the Additional
Payment Obligations and/or the BIA Licence Payment Obligations so that, for the
avoidance of doubt, there shall be no double counting of interest) until
payment of such sums is made in full.

 

8.2           The Guarantor shall pay all costs, charges and
expenses reasonably and properly incurred by the Company in the enforcement,
preservation of rights under, exercise of rights under or decision as to
whether to exercise its rights under, assignation, release or discharge of this
Guarantee which costs, charges and expenses shall be payable within 10 Business
Days of written demand by the Guarantor.

 

 

9.             Assignation

 

9.1           The Guarantor shall not,
without the prior written consent of the Company (such consent not to be
unreasonably withheld or delayed), assign or transfer to any entity its rights
or obligations under this Guarantee.

 

9.2           The Company may at any time
without the consent of the Guarantor assign or transfer any part of its rights
under this Guarantee to any party to whom the Company has assigned its rights
under the R&D Agreement and/or the Exploitation Agreement and/ or the BIA
Licence.

 

 

10.          Notices

 

10.1         Any notice required to be
given or served under or pursuant to this Guarantee shall be sufficiently given
or served if delivered by hand or sent by pre-paid recorded delivery letter to
the address of the relevant party stated below or to such other address as the
relevant party may most recently have directed by written notice to the other
parties and, if delivered by hand, shall be deemed to have been received on the
date of delivery or, if sent by post, shall be deemed to have been received on
the third business day following the posting thereof (and proof that an
envelope containing the same was properly addressed, pre-paid and posted as
aforesaid shall be conclusive evidence that the notice was given).

 

51

 

	
  10.2

  	
   

  	
  The address of the Company is:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
  Innovation
  House

  
	
   

  	
   

  	
   

  	
   

  	
  17
  Luna Place

  
	
   

  	
   

  	
   

  	
   

  	
  Dundee
  Technology Park

  
	
   

  	
   

  	
   

  	
   

  	
  Dundee
  DD2 1TP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For
  the attention of:

  	
   

  	
  Director
  of Intellectual Asset Management

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.3

  	
   

  	
  The address of the Guarantor is:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
  51
  Sawyer Road

  
	
   

  	
   

  	
   

  	
   

  	
  Suite
  200

  
	
   

  	
   

  	
   

  	
   

  	
  Waltham

  
	
   

  	
   

  	
   

  	
   

  	
  MA
  02453-3448

  
	
   

  	
   

  	
   

  	
   

  	
  United
  States of America

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For
  the attention of:

  	
   

  	
  General
  Counsel

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.4

  	
   

  	
  The address of Stirling is:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
  249
  West George Street

  
	
   

  	
   

  	
   

  	
   

  	
  Glasgow
  G2 4RB

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For
  the attention of:

  	
   

  	
  Company
  Secretary

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.5

  	
   

  	
  The address of Swissco is:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  	
  Bundesplatz
  1

  
	
   

  	
   

  	
   

  	
   

  	
  6300
  Zug

  
	
   

  	
   

  	
   

  	
   

  	
  Switzerland

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For
  the attention of :

  	
   

  	
  General
  Counsel

  

 

 

11.          General

 

11.1         If any provision of this
Guarantee is held invalid or unenforceable for any reason by any Court of
competent jurisdiction, such provision shall be severed and the remainder of
the provisions hereof shall continue in full force and effect as if this
Guarantee had been executed with the invalid, illegal or unenforceable
provision eliminated.

 

11.2         For the avoidance of any
doubt, service of any process or any writ or document in relation to any court
proceedings which may be taken hereunder may be served on the Guarantor at c/o
DLA Piper Rudnick Gray Cary Scotland LLP, Rutland Square, Edinburgh, EH1 2AA
(or such other address in Scotland as notified to the Company hereunder from
time to time).  For the

 

52

 

avoidance of doubt, such service of such
process, writ or document shall at the same time be made to the Guarantor.

 

 

12.          Governing Law

 

This Guarantee shall be governed by and construed in accordance with
the law of Scotland, and any dispute which may arise between the parties
concerning this Guarantee shall be determined by the exclusive jurisdiction of
the Scottish Courts:  IN WITNESS WHEREOF these presents
consisting of this and the eight preceding pages together with the Schedule annexed
hereto are executed as follows:

 

 

	
  They
  are subscribed for and on behalf of

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Inverness
  Medical Innovations Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  at

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  on

  	
  2005

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  by

  	
  , Director

  	
   

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
  in
  the presence of the following witness:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  They
  are subscribed for and on behalf of ITI

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Scotland
  Limited by
                                               ,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  an
  authorised signatory, at

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  on

  	
   

  	
  Signatory:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  before
  this witness:

  	
   

  	
  Full
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
  Witness

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Full Name

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  
								

 

53

 

This is the Schedule to
the foregoing Parent Company Guarantee between Inverness Medical Innovations
Inc. and ITI Scotland Limited

 

SCHEDULE

 

Notice

 

Notice to [the
R&D Principal] or [the Exploitation Principals] or [BIA Licence Principal]*
to Rectify a Breach/Failure of a [Payment Obligation] [Additional Payment
Obligation]  [BIA Licence Payment
Obligation]* under the [R&D Agreement] or [Exploitation Agreement] or  [BIA Licence]* served in accordance with the
Parent Company Guarantee

 

Date:

 

Address of
[the R&D Principal ] or [the Exploitation Principals] or [BIA Licence
Principal]* for Service of Notice:

 

TAKE
NOTICE that unless within twenty one days of
the date of this Notice the breach identified below is rectified, Inverness
Medical Innovations Inc. (“Parent Company”)
will be required to rectify the breach in accordance with the Guarantee (“Parent Company Guarantee”) which was
granted by Inverness Medical Innovations Inc. in favour of ITI Scotland Limited
on [• ].  This Notice is being copied to the Parent
Company in terms of the Parent Company Guarantee.

 

Description of Breach in respect of a [Payment Obligation]
[Additional Payment Obligation] [BIA Licence Payment Obligation]* which
required rectification:

 

Request to Parent Company to make good the default or
non-performance of [Stirling] or [Swissco]* in accordance with the Parent
Company Guarantee

 

 

	
  To

  	
  (Name
  of Parent Company)

  
	
   

  	
   

  
	
  Address
  (being the registered office of the Parent

  Company):

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date

  

 

* Delete as
appropriate

 

54

 

The above
Notice was served on [the R&D Principal] or [the Exploitation Principals]
or [the BIA Licence Principal]* on the date specified in the Notice.  TAKE NOTICE that
if, within twenty one days of the date of the Notice, [the R&D Principal]
or [the Exploitation Principals] or the [BIA Licence Principal]* has failed to
rectify the breach identified in the Notice under the terms of the Parent
Company Guarantee, ITI Scotland Limited requires the Parent Company, without
further notice, pursuant to the Parent Company Guarantee, to rectify the
breach.

 

 

Signed on
behalf of the Company

 

	
  Dated:

  	
   

  	
   

  

 

 

55

 

Part
8

 

Part 8A

 

Legal Opinion regarding SwissCo

 

The Directors

ITI Scotland
Limited

180 St.
Vincent Street

Glasgow

G2 5SG

 

Zurich, February 25th
2005

ML/DK

 

Inverness
Medical Switzerland GmbH / Legal Opinion

 

Dear Sirs

 

You have asked
for our opinion concerning the legal effect under the laws of Switzerland and
the laws of the Canton of Zug (being the Canton in which Inverness Medical
Switzerland GmbH has its legal domicile and being the Canton of incorporation
of Inverness Medical Switzerland GmbH) of the Research and Development
Agreement and of the Exploitation Agreement each of which is among Inverness
Medical Switzerland GmbH, Inverness Medical Innovations, Inc, ITI Scotland
Limited and Cardiosure Limited as well as the Background Intellectual Assets
Licence Agreement between Inverness Medical Switzerland GmbH and ITI Scotland
Limited, copies of which are attached to this Opinion (the “Agreements”).

 

We confirm
that we have sufficient knowledge of all relevant aspects of such law and are fully qualified to give this Opinion.

 

We have
examined the Agreements and also all other documents that we consider necessary
for the purposes of giving this Opinion and have made such enquiries, as we
consider necessary.

 

We confirm as
follows:

 

1.   Inverness Medical Switzerland GmbH is a corporation duly organised,
validly existing and in good standing under the laws of Switzerland and
Inverness Medical Switzerland GmbH has appropriate power and authority to own
its property and assets and carry on its business as now conducted.

 

2.   Inverness Medical Switzerland GmbH has appropriate power and
authority to grant and comply with its obligations under the Agreements.

 

3.   The Agreements have been validly executed in accordance with
Inverness Medical Switzerland GmbH’s organisational documents and the laws of
Switzerland and have been executed by a duly authorized attorney and
representative of Inverness Medical Switzerland GmbH, whose execution binds
Inverness Medical Switzerland GmbH.

 

4.   No permit, licence, approval or authorisation of any governmental,
judicial or other authority or other third party
is required or desirable in connection
with the execution, performance, validity or enforceability of the Agreements.

 

5.   Under the laws of Switzerland and the Canton of Zug the Agreements
constitute legal, valid and binding obligations upon Inverness Medical
Switzerland GmbH, enforceable against Inverness Medical Switzerland GmbH in
accordance with the terms of the Agreements.

 

6.   Any final judgment which you obtain from a Scottish court against
Inverness Medical Switzerland GmbH in relation to
the Agreements can be enforced in the Canton of Zug by bringing separate
proceedings in the courts of Zug founded on the Scottish judgment and the
courts of Zug will

 

56

 

 

recognise, accept and enforce the Scottish judgment without any retrial
or examination of the merits of the case.

 

7.   It is not necessary or advisable in order to ensure the validity,
effectiveness, performance and enforceability of the Agreements that the
Agreements be filed, registered or recorded in any public office or elsewhere
nor that any other instrument relating thereto be executed, filed, registered
or recorded.

 

8.   No stamp, registration, documentary or other tax is or will be payable
in Switzerland in respect of the execution, performance or enforcement of the
Agreements nor to render the Agreements admissible in evidence, except for the
regular court costs and fees.

 

9.   No other formalities are considered requisite or desirable for the
validity and enforceability of the Agreements.

 

This Opinion
is limited to the laws of Switzerland and of the Canton of Zug.

 

Yours
sincerely,

 

 

Marco
Lanter/Charlotte Good

 

57

Part 8

 

Part 8B

 

Legal Opinion regarding IMI

 

February 25,
2005

The Directors

ITI Scotland
Limited

180 St Vincent
Street

Glasgow

G2 5SG

 

Re:          Inverness
Medical Innovations, Inc. – Parent Company Guarantee

 

Ladies and
Gentlemen:

 

We have acted
as counsel for Inverness Medical Innovations, Inc., a Delaware corporation (the
“Guarantor”), in connection with the authorization and execution of the Parent
Company Guarantee, dated February      , 2005
(the “Guarantee”), by and between the Guarantor and ITI Scotland Limited.  Capitalized terms used but not defined herein
shall have the meanings set forth in the Guarantee, unless the context requires
otherwise.

 

We have
examined such documents and made such other investigation as we have deemed
appropriate to render the opinions set forth below.  As to matters of fact material to our
opinions, we have relied, without independent verification, on certificates and
other inquiries of officers of the Guarantor.

 

Our opinions
below are subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws of general application affecting the rights
and remedies of creditors and to general principles of equity.

 

The opinions
expressed below are limited to the laws of the Commonwealth of Massachusetts,
the Delaware General Corporation Law and the federal laws of the United
States.  We note that the Guarantee
provides that it is to be governed by the law of Scotland.  We are rendering the opinions expressed in
paragraph 5 below regarding the validity, binding effect and enforceability of
the Guarantee as though it were governed by the internal law of Massachusetts,
and subject to the assumption that each of the Payment Obligations are valid,
binding and enforceable obligations of Cardiosure and Swissco, as the case may
be, and their permitted assigns.

 

Based upon
the foregoing and subject to the additional qualifications set forth below, we
are of the opinion that:

 

1.           The Guarantor is validly existing as a
corporation and in good standing under Delaware law.

 

2.           The Guarantor has the corporate power to
conduct its business as presently conducted as described in the Guarantor’s
most recent report on Form 10-Q filed with the United States Securities and
Exchange Commission, and to execute and deliver the Guarantee and to perform
its obligations thereunder.

 

3.           The Guarantor has duly authorized and
executed the Guarantee.  David Scott,
Ph.D. has been duly authorized by the Guarantor to execute the Guarantee on its
behalf.

 

4.           No consent, approval, license or
exemption by, or order or authorization of, or filing, recording or
registration with, any Massachusetts or federal governmental authority is
required to be

 

58

 

obtained
by the Guarantor in connection with the execution and delivery of the Guarantee
or the performance by it of its obligations thereunder.

 

5.           The Guarantor’s obligations set forth in Section 1
of the Guarantee constitute the valid and binding obligations of the Guarantor,
enforceable against the Guarantor in accordance with their terms.

 

This opinion
shall be interpreted in accordance with the Legal Opinion Principles issued by
the Committee on Legal Opinions of the American Bar Association’s Business Law Section as
published in 53 Business Lawyer 831 (May 1998).

 

This opinion
is being furnished only to you for your use solely in connection with the
transaction described above and may not be relied on without our prior written
consent for any other purpose or by anyone else.

 

Very truly
yours

 

Goodwin
Procter LLP

 

59Exhibit 10.21

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (this “Agreement”) by and between Western
Sierra Bancorp (“Bancorp”) and Patrick J. Rusnak (“Executive”), is dated May 3,
2005. (the “Effective Date”)

 

1.                                      PURPOSE OF
AGREEMENT.  This Agreement sets forth
the terms of Executive’s employment with Bancorp and provides Executive with a
contingent signing bonus and severance benefits in certain circumstances as set
forth in the Agreement.

 

2.                                      TERM OF
AGREEMENT.  This Agreement starts on
the Effective Date and expires on the third anniversary of the Effective Date.

 

3.                                      NO TERM OF
EMPLOYMENT.  Notwithstanding the term
of this Agreement, Bancorp may terminate Executive’s employment at any time for
any lawful reason or for no reason at all, subject to the provisions of this
Agreement.  Executive’s employment with
Bancorp is “at will.”

 

4.                                      DUTIES AND
EXECUTIVE POSITION.  As of the
Effective Date, Executive shall be employed as Executive Vice President/Chief
Operating Officer, and will perform such duties as may be designated by Bancorp’s
board of directors (the “Board”) or the Chief Executive Officer of Bancorp, to
whom Executive will directly report (the “Supervisor”).

 

Executive agrees that to the best of Executive’s
ability and experience, Executive will at all times loyally and conscientiously
perform all of the duties and obligations required of Executive pursuant to the
express and implicit terms of this Agreement and as directed by the Board or
the Supervisor.  Executive shall devote
Executive’s entire working time, attention and efforts to Bancorp’s business
and affairs, shall faithfully and diligently serve Bancorp’s interests and
shall not engage in any business or employment activity that is not on Bancorp’s
behalf (whether or not pursued for gain or profit) except for (i) activities
approved in writing in advance by the Board and (ii) passive investments that
do not involve Executive providing any advice or services to the businesses in
which the investments are made.

 

5.                                      COMPENSATION.  For all services performed under this
Agreement, Bancorp agrees to pay the following compensation and benefits:

 

Base
Salary.  Executive’s
base salary is $16,666.67 per month ($200,000 on an annualized basis) (the “Base
Salary”) and shall increase to $18,333.34 per month ($220,000 on an annualized
basis) beginning November 1, 2005, provided that Executive is still actively
employed by the Bancorp at such time. 
Executive’s base salary shall further increase to $20,000 per month
($240,000 on an annualized basis) beginning May 1, 2006, provide Executive is
still actively employed by the Bancorp at such time and has met the goals (“Goals”)
outlined in Appendix A to this Agreement. 
The Board shall in good faith determine whether Executive has satisfied
such Goals, and its decision shall be final and definitive.

 

 

Contingent
Signing Bonus and Participation in the Senior Management Incentive Compensation
Plan.  Executive
upon successfully completing 90 days of active employment with Bancorp shall be
paid a $21,000 signing bonus as additional incentive compensation.  Executive
shall be entitled participate in the Senior Management Incentive Compensation
Plan and earn additional incentive compensation as set forth in such plan.

 

Paid
Time Off and Special Sick Time Off.  Executive shall be entitled to 26 days paid
time off per year for vacation, personal time off and short-term illnesses to
be used in accordance with the Bancorp’s Employee Handbook.  Executive shall receive five days per year of
employment with Bancorp, which will accumulate each year up to a maximum of 45
days, to cover time off due to illnesses of four or more consecutive days under
doctor’s care.

 

Stock
Options.  Subject
to the successful completion of 90 days of active employment with Bancorp,
Bancorp shall grant to Executive an option to purchase upon exercise 30,000
shares of Bancorp common stock at a per share option price equal to the market
price of the Bancorp common stock at the date of grant by the Board and with
such vesting conditions as determined by the Board.

 

Automobile
Allowance. 
Executive shall be paid an additional $400 per month compensation for
Executive’s automobile allowance.

 

Other
Benefits. 
Executive is entitled to participate, under the terms of the respective
plans, in other benefit plans and perquisites generally available to Bancorp’s
executives and employees.  Executive
shall be entitled to medical, dental, vision, chiropractic, employee assistance
plan, life, accidental disability, disability and long term disability coverage
on such terms as such is provided by Bancorp to its executive officers.  Bancorp shall pay 100% of Executive’s monthly
premiums for Executive and Executive’s dependents upon Executive becoming
eligible for such coverage beginning on the first of the month, following the
completion of 90 days of employment with Bancorp.

 

6.                                      TERMINATION.  Executive’s employment may be terminated
before the expiration of this Agreement as described in this Section, in which
event Executive’s compensation and benefits shall terminate except as otherwise
provided in this Agreement.

 

For
Cause.  Upon
Bancorp’s termination of Executive for Cause. 
For Cause shall mean

 

(a)                                  Dishonest or
fraudulent conduct by Executive with respect to the performance of Executive’s
duties with Bancorp;

 

(b)                                 Conduct
by Executive that materially discredits Bancorp or any of its subsidiaries or
is materially detrimental to the reputation of Bancorp or any of its
subsidiaries, including but not limited to conviction or a plea of nolo
contendere of Executive of a felony or crime involving moral turpitude;

 

(c)                                  Executive’s
willful misconduct or gross negligence in performance of Executive’s duties
under this Agreement, including but not limited to Executive’s refusal to
comply in any material respect with the legal directives of the Board or the
Supervisor, if such misconduct or negligence has not been remedied or is not

 

2

 

being remedied to the Board’s reasonable satisfaction
within thirty (30) days after written notice, including a detailed description
of the misconduct or negligence, has been delivered by the Board to Executive;

 

(d)                                 An order or
directive from a state or federal banking regulatory agency requesting or
requiring removal of Executive or a finding by any such agency that Executive’s
performance threatens the safety or soundness of Bancorp or any of its
subsidiaries; or

 

(e)                                  Material
breach of Executive’s fiduciary duties to Bancorp if such breach has not been
remedied or is not being remedied to the Board’s reasonable satisfaction within
thirty (30) days after written notice, including a detailed description of the
breach, has been delivered by the Board to Executive.

 

Without
Cause.  Upon
Bancorp’s termination of Executive without Cause, with or without notice, at
any time in Bancorp’s sole discretion, for any reason other than for
Cause.  A Change in Control does not in
itself constitute Termination Without Cause.

 

Death or
Disability.  For
purposes of this Agreement, disability (“Disability”) shall mean either that the Executive is (i) unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than
twelve (12) months, or (ii) is, by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can
be expected to last for a continuous period of not less than twelve (12)
months, receiving income replacement benefits for a period of not less than
three (3) months under an accident and health plan sponsored by the Bank.

 

Resignation.  Upon Executive’s voluntary resignation,
written notice of which Executive must give Bancorp at least 60 days in advance
of his resignation.

 

Change
in Control.  For
purposes of this Agreement, a “Change in Control” shall be deemed to have
occurred when any of the following events take place:

 

(a)                                  A Change In
Ownership Of The Bancorp.  A
change in ownership of the Bancorp occurs on the date that any person (or group
of persons) acquires ownership of stock of the Bancorp that, together with
stock held by such person or group, constitutes more than fifty percent (50%)
of the total fair market value or total voting power of the stock of the
Bancorp.

 

(b)                                  A Change in
Effective Control of the Bancorp. 
A change in effective control of the Bancorp occurs on the date that:

 

1.                                       Any
person (or group of persons) acquires (or has acquired during the twelve (12)
month period ending on the date of the most recent acquisition by such person
or persons) ownership of stock of the Bancorp possessing thirty-five percent
(35%) or more of the total voting power of the stock of the Bancorp; or

 

3

 

2.                                       A
majority of members of the Bancorp’s Board is replaced during any twelve (12)
month period by directors whose appointment or election is not endorsed by a
majority of the members of the Bancorp’s Board prior to the date of the
appointment or election.

 

(c)                                  A Change in
Ownership of a Substantial Portion of the Bancorp’s Assets.  A change in the ownership of a substantial
portion of the Bancorp’s assets occurs on the date that any person (or group of
persons) acquires (or has acquired during the twelve (12) month period ending
on the date of the most recent acquisition by such person or persons) assets
from the Bancorp that have a total gross fair market value equal to, or more
than, forty percent (40%) of the total gross fair market value of all of the
assets of the Bancorp immediately prior to such acquisition or acquisitions.

 

7.                                      PAYMENT UPON
TERMINATION.  Upon termination of
Executive’s employment for any of the reasons set forth in Section 6 above,
Executive will receive payment for all Base Salary and paid time off and other
benefits accrued as of the date of Executive’s termination (“Earned
Compensation”), which shall be paid no later than the end of the business day
of such termination unless an earlier time is required by applicable law, in
which case it shall be paid at such earlier time.  In the event of termination for death or
Disability, Executive’s estate or Executive, respectively shall receive in
addition to Earned Compensation, accrued paid time off and medical, dental,
vision, chiropractic insurance coverage for Executive and/or Executive’s
dependents, as applicable for three months following the date of death or Disability
at Bancorp’s expense.  In the event of
Executive’s termination of employment for Cause or resignation without proper
notice, Executive shall receive Earned Compensation and any accrued paid time
off to the date of resignation.

 

8.                                      SEVERANCE
BENEFIT.  In the event of Executive’s
termination Without Cause prior to the second anniversary of this Agreement, in
addition to receiving Earned Compensation, Executive will receive a severance
benefit equal to one month of Base Salary, based on Executive’s Base Salary
just prior to termination (the “Severance Benefit”) for each month Executive is
actively employed by the Bancorp up to a maximum Severance Benefit of six
months Base Salary.  In the event of
Executive’s termination without Cause after the second anniversary of this
Agreement, in addition to receiving Earned Compensation, Executive will receive
a severance benefit equal to one month of Base Salary, based on Executive’s
Base Salary just prior to termination (the “Severance Benefit”) for each month
Executive is actively employed by the Bancorp up to a maximum Severance Benefit
of 12 months Base Salary.  The Severance
Benefit shall be paid in installments over the number of months of continued
base salary, starting on the next regular payday following termination. Receipt
of the Severance Benefit is conditioned on Executive having executed the
Separation Agreement in substantially the form attached hereto as Exhibit B and
the revocation period having expired without Executive having revoked the
Separation Agreement.  Receipt and
continued receipt of the Severance Benefit is further conditioned on Executive
not being in material violation of any material term of this Agreement or in
material violation of any material term of the Separation Agreement.  Executive shall not be required to mitigate
the amount of any payments under this Section (whether by seeking new employment
or otherwise), and the amount of Severance Benefits shall not be reduced by any
income or funds that Executive may receive from another party.  In addition to any Severance Benefit paid by
the

 

4

 

Bancorp, the Executive shall receive medical, dental,
vision, and chiropractic insurance coverage for Executive and Executive’s
dependents for three months following the date of termination without Cause at
Bancorp’s expense.

 

9.                                      CHANGE IN CONTROL
BENEFIT.  After a Change in Control,
if either (i) the Executive is not retained by the resulting corporation for a
period of 18 months in a position comparable to that of the highest level
executive vice president of the resulting corporation or a position with the
resulting corporation that is acceptable to Executive, or (ii) as a condition
of accepting or performing the functions of the position under (i) above, the
Executive is required to relocate his residence or increase his daily commuting
distance to greater than 40 miles,  or
(iii) the resulting company reduces Executive’s Base Salary from Executive’s
Base Salary immediately prior to the Change in Control at any time during the
18 month period immediately following the consummation of the Change in Control
(either event shall constitute a “Triggering Event”), then Executive shall be
paid the 18 months of Executive’s Base Salary, based on Executive’s Base Salary
just prior to the Change in Control (“Change in Control Benefit”).  Executive shall also be entitled to any
Earned Compensation in addition to the Change in Control Benefit upon a
Triggering Event.  The Change in Control
Benefit and Earned Compensation shall be paid to Executive in a lump sum within
5 calendar days following the Triggering Event.

 

10.                               CONFIDENTIAL
INFORMATION.  The parties acknowledge
that in the course of Executive’s duties, Executive will have access to and
become knowledgeable with certain proprietary and confidential information of
Bancorp and its subsidiaries not known by its existing or potential
competitors.  Executive acknowledges that
such information constitutes valuable, special, and unique assets of the
business of Bancorp.  Executive agrees to
hold in a fiduciary capacity, not use for Executive’s benefit, and not
disclose, communicate, or divulge in any manner during the period of Executive’s
employment with Bancorp or at any time thereafter, any such data and
confidential information of any kind, nature, or description concerning any
matters affecting or relating to Bancorp’s business, its customers, or its
services.  Executive agrees that all
memoranda, notes, records, papers, customer files, other documents, and all
copies thereof relating to Bancorp’s operations or business or matters related
to any of Bancorp’s customers, some of which may be prepared by Executive.  Executive further agrees that all media,
electronic or otherwise associated therewith containing such confidential
information held by or in the control of Executive, shall be Bancorp’s property
(“Bancorp Property”).  Upon termination
of employment, Executive shall promptly return all the Bancorp Property to
Bancorp.

 

11.                               DISPUTE RESOLUTION.  Except where such matters are deemed governed
by ERISA, the parties agree to submit any dispute arising under this Agreement
to final, binding, private arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment on the
award rendered by the arbitrators may be entered in any court having
jurisdiction in Sacramento, California. 
This includes not only disputes about the meaning or performance of the
Agreement, but disputes about its negotiation, drafting, or execution.  Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction.  There shall be three arbitrators, one to be
chosen directly by each party, and the third arbitrator to be selected by the
two arbitrators so chosen.  If any
arbitration proceeding is brought for the enforcement of this Agreement or
because of an alleged dispute, breach or default in connection with this
Agreement, (i) the nonprevailing party shall pay the fees of the arbitrators
and all other

 

5

 

costs of the
arbitration, including the cost of any record or transcripts of the
arbitrations and administrative fees; and (ii) the prevailing party shall be
entitled to recover reasonable attorney’s fees and any other costs and expenses
incurred in that action or proceeding, in addition to any other relief to which
it or he may be entitled.

 

12.                               NOTICES.  All notices, requests, demands, and other
communications provided for by this Agreement will be in writing and shall be
deemed sufficient upon receipt, when delivered personally or by a
nationally-recognized delivery service (such as Federal Express), or three (3)
business days after being deposited in the U.S. mail as certified mail, return
receipt requested, with postage prepaid, if such notice is addressed to the
party to be notified at such party’s address as set forth below or as
subsequently modified by written notice.

 

	
  To Bancorp:

  	
  Western Sierra Bancorp

  
	
   

  	
  4080 Plaza Goldroado Circle

  
	
   

  	
  Cameron Park, California 95682

  
	
   

  	
  Attention: Gary D. Gall, Chief Executive Officer

  
	
   

  	
   

  
	
  To Executive:

  	
  Patrick J. Rusnak

  
	
   

  	
  111 Heaton Court

  
	
   

  	
  Granite Bay, California 95746

  

 

13.                               GENERAL PROVISIONS.

 

Governing
Law.  The validity,
interpretation, construction and performance of this Agreement shall be
governed by federal ERISA, as applicable, and otherwise by the laws of the
State of California.

 

Saving
Provision.  If any
part of this Agreement is held to be unenforceable, it shall not affect any
other part. If any part of this Agreement is held to be unenforceable as
written, it shall be enforced to the maximum extent allowed by applicable law.

 

Survival
Provision. The confidential information and dispute
resolution provisions of this Agreement shall survive after termination of this
Agreement, and shall be enforceable regardless of any claim Employee may have
against Bancorp.  Also, if any benefits
provided in Section 8 of this Agreement are still owed, or obligations or
claims pursuant to Section 10 or 11 are still pending, at the time of
termination of this Agreement, this Agreement shall continue in force, with
respect to those obligations or claims, until such benefits are paid in full or
claims are resolved in full.  The
obligation in Section 10 shall survive this Agreement for an indefinite period.

 

Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.

 

Entire
Agreement.  This
Agreement constitutes the sole agreement of the parties regarding Executive’s
benefits in the event of termination or Change in Control and together with
Bancorp’s employee handbook governs the terms of Executive’s employment.  Where there is a conflict between the
employee handbook and this Agreement, the terms of this Agreement shall govern.

 

6

 

Previous
Agreements.  This
Agreement replaces and supersedes all prior oral and written agreements between
the Executive and Bancorp, or any affiliates or representatives of Bancorp
regarding the subject matters set forth herein.

 

Waiver.  No waiver of any provision of this Agreement
shall be valid unless in writing, signed by the party against whom the waiver
is sought to be enforced.  The waiver of
any breach of this Agreement or failure to enforce any provision of this Agreement
shall not waive any later breach.

 

Assignment.  Executive shall not assign or transfer any of
Executive’s rights pursuant to this Agreement, wholly or partially, to any
other person or to delegate the performance of its duties under the terms of
this Agreement.  The rights and obligations
of Bancorp under this Agreement shall inure to the benefit of and be binding in
each and every respect upon the direct and indirect successors and assigns of
Bancorp, regardless of the manner in which the successors or assigns succeed to
the interests or assets of Bancorp.  This
Agreement shall not be terminated by the voluntary or involuntary dissolution
of Bancorp, by any merger, consolidation or acquisition where Bancorp is not
the surviving corporation, by any transfer of all or substantially all of Bancorp’s
assets, or by any other change in Bancorp’s structure or the manner in which
Bancorp’s business or assets are held. 
Executive’s employment shall not be deemed terminated upon the
occurrence of one of the foregoing events. 
In the event of any merger, consolidation or transfer of assets, this
Agreement shall be binding upon and shall inure to the benefit of the surviving
corporation or the corporation to which the assets are transferred.

 

Attorneys’
Fees.  If either
party institutes a proceeding to enforce its rights under, or to recover
damages for breach of, this Agreement, the prevailing party shall be awarded
all costs and expenses of the proceeding, including, but not limited to,
attorneys’ fees, filing and service fees, witness fees, and arbitrator’s fees.
If arbitration is commenced, the arbitrator will have full authority and
complete discretion to determine the “prevailing party” and the amount of costs
and expenses to be awarded under this paragraph.

 

14.                               ADVICE OF COUNSEL.  TERMS AND PROVISIONS OF THIS AGREEMENT. THIS
AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY PARTY BY REASON OF THE DRAFTING OR
PREPARATION HEREOF.

 

	
  WESTERN SIERRA
  BANCORP

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Gary D. Gall

  	
   

  	
  /s/ Patrick J. Rusnak

  	
   

  
	
   

  	
  Gary D. Gall, Chief Executive Officer

  	
   

  	
  Patrick J. Rusnak

  

 

7

 

EXHIBIT B

 

EMPLOYMENT SEPARATION AGREEMENT

AND RELEASE OF CLAIMS

 

This is a confidential
agreement between you, Patrick J. Rusnak, and us, Western Sierra Bancorp.  This agreement is dated for reference
purposes                           ,
20      , which is the date we delivered this
agreement to you for your consideration. 
For purposes of this Agreement Western Sierra Bancorp together with each
of its subsidiaries or affiliates is referred to as “Bancorp.”

 

1.                                      TERMINATION OF
EMPLOYMENT.  Your employment
terminates [or was terminated] on                               ,
20       (the “Separation Date”).

 

2.                                      PAYMENTS.  In exchange for your agreeing to the release
of claims and other terms in this agreement, we will pay you the Severance
Benefit specified in Section 8 of the Employment Agreement between you and
Western Sierra Bancorp dated                         
, 2005 (the “Employment Agreement”).  You
acknowledge that we are not obligated to make these payments to you unless you
agree to comply with the terms of this agreement.

 

3.                                      COBRA
CONTINUATION COVERAGE.  Your normal
employee participation in Bancorp’s group health coverage will terminate three
months following your termination (“Separation Date”).  Continuation of group health coverage
thereafter will be made available to you and your dependents pursuant to
federal law (COBRA).  As long as you
timely elect COBRA continuation coverage, Bancorp will waive the requirement
that you pay for the cost of continuation coverage through the Separation
Date.  Continuation of group health
coverage thereafter is entirely at your expense, as provided under COBRA.

 

4.                                      TERMINATION OF
BENEFITS.  Except as provided in
paragraph 3 above, your participation in all employee benefit plans and
programs ended on the Separation Date. 
Your rights under any pension benefit or other plans in which you may
have participated will be determined in accordance with the written plan
documents governing those plans.

 

5.                                      FULL PAYMENT.  You acknowledge having received full payment
of all compensation of any kind (including wages, salary, vacation, sick leave,
commissions, bonuses and incentive compensation) that you earned as a result of
your employment by Bancorp.

 

6.                                      NO FURTHER
COMPENSATION.  Any and all agreements
to pay you bonuses or other incentive compensation are terminated, except for
any payments earned during active employment as determined in accordance with
the written plan documents governing those plans.  You understand and agree that you have no
right to receive any further payments for bonuses or other incentive
compensation.  Bancorp owes no further
compensation or benefits of any kind, except as described above.

 

7.                                      RELEASE OF
CLAIMS.

 

(a)                                  You
hereby release (i) Bancorp and its subsidiaries, affiliates, and benefit plans,
(ii) each of Bancorp’s past and present shareholders, Executives, directors,
agents, employees, representatives, administrators, fiduciaries and attorneys,
and (iii) the

 

1-B

 

predecessors, successors, transferees and assigns of
each of the persons and entities described in this sentence, from any and all
claims of any kind, known or unknown, that arose on or before the date you
signed this agreement.

 

(b)                                 The
claims you are releasing include, without limitation, claims of wrongful
termination, claims of constructive discharge, claims arising out of employment
agreements, representations or policies related to your employment, claims arising
under federal, state or local laws or ordinances prohibiting discrimination or
harassment or requiring accommodation on the basis of age, race, color,
national origin, religion, sex, disability, marital status, sexual orientation
or any other status, claims of failure to accommodate a disability or religious
practice, claims for violation of public policy, claims of retaliation, claims
of failure to assist you in applying for future position openings, claims of
failure to hire you for future position openings, claims for wages or
compensation of any kind (including overtime claims), claims of tortious
interference with contract or expectancy, claims of fraud or negligent
misrepresentation, claims of breach of privacy, defamation claims, claims of
intentional or negligent infliction of emotional distress, claims of unfair
labor practices, claims arising out of any claimed right to stock or stock
options, claims for attorneys’ fees or costs, and any other claims that are
based on any legal obligations that arise out of or are related to your
employment relationship with us.

 

(c)                                  You
specifically waive any rights or claims that you may have under the California
Labor Code, the Civil Rights Act of 1964 (including Title VII of that Act), the
Equal Pay Act of 1963, the Age Discrimination in Employment Act of 1967 (ADEA),
the Americans with Disabilities Act of 1990 (ADA), the Fair Labor Standards Act
of 1938 (FLSA), the Family and Medical Leave Act of 1993 (FMLA), the Worker
Adjustment and Retraining Notification Act (WARN), the Employee Retirement
Income Security Act of 1974 (ERISA), the National Labor Relations Act (NLRA),
and all similar federal, state and local laws.

 

(d)                                 You
agree not to seek any personal recovery (of money damages, injunctive relief or
otherwise) for the claims you are releasing in this agreement, either through
any complaint to any governmental agency or otherwise.  You agree not to start any lawsuit or
arbitration asserting any of the claims you are releasing in this
agreement.  You represent and warrant
that you have not initiated any complaint, charge, lawsuit or arbitration
involving any of the claims you are releasing in this agreement.  You agree not to apply for future employment
with Bancorp and that Bancorp has no obligation to consider you for future
employment.

 

(e)                                  You
represent and warrant that you have all necessary authority to enter into this
agreement (including, if you are married, on behalf of your marital community)
and that you have not transferred any interest in any claims to your spouse or
to any third party.

 

(f)                                    This
agreement does not affect your rights, if any, to receive pension plan
benefits, medical plan benefits, unemployment compensation benefits or workers’
compensation benefits.  This agreement
also does not affect your rights, if any, under agreements, bylaw provisions,
insurance or otherwise, to be indemnified,

 

2-B

 

defended or held harmless in connection with claims
that may be asserted against you by third parties.

 

(g)                                 You
understand that you are releasing potentially unknown claims, and that you have
limited knowledge with respect to some of the claims being released.  You acknowledge that there is a risk that,
after signing this agreement, you may learn information that might have
affected your decision to enter into this agreement.  You assume this risk and all other risks of
any mistake in entering into this agreement. 
You agree that this release is fairly and knowingly made.

 

(h)                                 You
are giving up all rights and claims of any kind, known or unknown, except for
the rights specifically given to you in this agreement.

 

8.                                      NO ADMISSION OF
LIABILITY.  Neither this agreement
nor the payments made under this agreement are an admission of liability or
wrongdoing by Bancorp.

 

9.                                      BANCORP
MATERIALS. You represent and warrant that you have, or no later than the
Separation Date will have, returned all keys, credit cards, documents and other
materials that belong to us.

 

10.                               NONDISCLOSURE AGREEMENT.  You will comply with the covenant regarding
confidential information in Section 10 of the Employment Agreement.

 

11.                               NO DISPARAGEMENT.
You may not disparage Bancorp or Bancorp’s business or products, and may not
encourage any third parties to sue Bancorp.

 

12.                               COOPERATION REGARDING
OTHER CLAIMS.  If any claim is
asserted by or against Bancorp as to which you have relevant knowledge, you
will reasonably cooperate with us in the prosecution or defense of that claim,
including by providing truthful information and testimony as reasonably
requested by us.

 

13.                               NO INTERFERENCE. You
will not, apart from good faith competition, interfere with Bancorp’s
relationships with customers, employees, vendors, or others.

 

14.                               INDEPENDENT LEGAL
COUNSEL.  You are advised and
encouraged to consult with an attorney before signing this agreement.  You acknowledge that you have had an adequate
opportunity to do so.

 

15.                               CONSIDERATION PERIOD.  You have 21 days from the date this agreement
is given to you to consider this agreement before signing it. You may use as
much or as little of this 21-day period as you wish before signing. If you do
not sign and return this agreement within this 21-day period, you will not be
eligible to receive the benefits described in this agreement.

 

16.                               REVOCATION PERIOD AND
EFFECTIVE DATE.  You have 7 calendar
days after signing this agreement to revoke it. To revoke this agreement after
signing it, you must deliver a written notice of revocation to Bancorp’s
President before the 7-day period expires. This agreement shall not become
effective until the 8th calendar day after you sign it.  If you revoke this agreement it will not
become effective or enforceable and you will not be entitled to the benefits
described in this agreement.

 

3-B

 

17.                               GOVERNING LAW.  This agreement is governed by the laws of the
State of California that apply to contracts executed and to be performed
entirely within the State of California.

 

18.                               DISPUTE RESOLUTION.  Except where such matters are deemed governed
by ERISA, the parties agree to submit any dispute arising under this agreement
to final, binding, private arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, and judgment on the
award rendered by the arbitrators may be entered in any court having
jurisdiction in Sacramento, California. 
This includes not only disputes about the meaning or performance of the
agreement, but disputes about its negotiation, drafting, or execution.  Judgment on the award rendered by the
arbitrators may be entered in any court having jurisdiction.  There shall be three arbitrators, one to be
chosen directly by each party, and the third arbitrator to be selected by the
two arbitrators so chosen.  If any
arbitration proceeding is brought for the enforcement of this agreement or
because of an alleged dispute, breach or default in connection with this
agreement, (i) the nonprevailing party shall pay the fees of the arbitrators
and all other costs of the arbitration, including the cost of any record or
transcripts of the arbitrations and administrative fees; and (ii) the
prevailing party shall be entitled to recover reasonable attorney’s fees and
any other costs and expenses incurred in that action or proceeding, in addition
to any other relief to which it or he may be entitled.

 

19.                               ATTORNEYS’ FEES.  If either party institutes a proceeding to
enforce its rights under, or to recover damages for breach of, this agreement,
the prevailing party shall be awarded all costs and expenses of the proceeding,
including, but not limited to, attorneys’ fees, filing and service fees,
witness fees, and arbitrator’s fees.  If
arbitration is commenced, the arbitrator will have full authority and complete
discretion to determine the “prevailing party” and the amount of costs and
expenses to be awarded under this paragraph.

 

20.                               FINAL AND COMPLETE
AGREEMENT.  This agreement is the
final and complete expression of all agreements between us on all subjects and
supersedes and replaces all prior discussions, representations, agreements,
policies and practices. You acknowledge you are not signing this agreement
relying on anything not set out herein.

 

	
   

  	
  WESTERN SIERRA BANCORP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Gary D. Gall, Chief Executive Officer

  

 

 

I, THE UNDERSIGNED, HAVING BEEN ADVISED TO CONSULT WITH AN ATTORNEY,
HEREBY AGREE TO BE BOUND BY THIS AGREEMENT AND CONFIRM THAT I HAVE READ AND
UNDERSTOOD EACH PART OF IT.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Patrick J. Rusnak

  
	
   

  	
   

  	
   

  
	
   

  	
  Date

  

 

4-B

 

Appendix
A

 

Goals/Expectations:

 

The following is a list of goals and expectations for the position of
Chief Operating Officer for Western Sierra Bancorp.  It is understood that to truly enhance the
organization, our COO must understand and embrace our current status while
providing guidance and support to enhance the organization, both culturally and
financially.

 

Defining Success:

 

1.     Get
to know the financials forward and backwards as well as the mission and
objective of the WSBA so you can represent the Bank to Investors.

 

2.     Become
the resident expert on the financials so that you can represent the Bank to the
board and related committees on all aspects of Bank performance.

 

3.     Gain
an understanding of the charters, history and relationships of the holding
company with its banks and develop a working relationship with those CEO’s.

 

4.     Using
the proper metrics, assist in managing the banks implementation of board stated
goals in a way that assures continued profitability and growth.

 

5.     Act
as a confidant, buffer and intermediary between the office of CEO and
management.

 

6.     Gain
the respect and confidence of the Board and Management in a way that allows you
to influence decisions made regarding goals, key hires, terminations, and Bank
policies.

 

7.     Oversee
the search, evaluation and implementation of all Merger and Acquisition
activity.

 

8.     Create5
an atmosphere of confidence and respect with management and the board in order
to step in as interim CEO, if needed

 

9.     Strategically
organize and manage the holding company as a true back office for the
subsidiaries including enhancing the management information systems in the
spirit of “best practices”.

 

10.   Insure
that WSBA is taking care of its employees in a way that balances profitability
with proper management principles.

 

5-B

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