Common use of Right of First Negotiation and Right of First Refusal Clause in Contracts

Right of First Negotiation and Right of First Refusal. (a) If at any time during the Term, Seller intends to distribute any Alternative Product or HIV Alternative Product for purposes of the Humanitarian Program within the Territory, Seller shall provide a Right of First Negotiation to Parent to manufacture such Alternative Product or HIV Alternative Product by sending a written notice to Parent not less than 18 months before Seller’s intended commencement of such project. During the 3-month period following Parent’s receipt of such written notice, Seller and Parent shall negotiate in good faith regarding Parent’s manufacture of such Alternative Product or HIV Alternative Product (including the terms of a license with respect to any patents owned, held or licensed (with the right to sublicense) held by Seller or its Affiliates which are required for the manufacture of such Alternative Product or HIV Alternative Product, which such license shall be ****); provided, however, that Parent provides reasonable evidence to Seller of its ability to commence manufacturing such Alternative Product or HIV Alternative Product no later than 18 months after receipt of such notice at both a performance level and price comparable to any other potential third-party manufacturer. In the event Parent and Seller reach a definitive agreement for the manufacture of such Alternative Product or HIV Alternative Product , within 6 months of Parent’s receipt of the foregoing notice, Parent shall obtain any license from third parties required to manufacture such Alternative Product or HIV Alternative Product. Seller shall cooperate and assist Parent to obtain any license from any third party required for the manufacture of the Alternative Product or HIV Alternative Product. If Parent and Seller fail to negotiate terms acceptable to both Parties for the manufacture of such Alternative Product or HIV Alternative Product within 3 months after Parent’s receipt of such written notice or Parent’s failure to obtain the third party license within such 6-month period, Seller shall be free to offer the manufacture of such Alternative Product or HIV Alternative Product to any potential third-party manufacturer; provided, however, that solely in the case of an HIV Alternative Product (but not in the case of an Alternative Product), Seller shall promptly pay to Parent the pro rata amount (up to a maximum of $2,500,000) of the net book value of the Line 2 Equipment (based on 5 year depreciation schedule, which such depreciation beginning when the first lot of Product is manufactured for any purposes) attributable to the manufacturing of Determine® HIV 1-2 for purposes of the Humanitarian Program of Seller and its Affiliates, provided further, such pro rata amount shall be calculated on the basis of a fraction, the numerator of which is the average daily hours that Line 2 Equipment was used for the manufacturing of Determine® HIV 1-2 for purposes of the Humanitarian Program during the entire period that Line 2 Equipment was commissioned and the denominator of which is the average daily hours that Line 2 Equipment was in use for the manufacturing of all Products (regardless whether or not such Products were for commercial purposes or for purposes of the Humanitarian Program) plus the average daily hours that Line 2 Equipment was idle during the entire period that Line 2 Equipment was commissioned, and provided further, that upon the receipt of such amount, Inverness Japan shall **** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. (i) decommission the Line 2 Equipment to the extent used, and only to the extent used, for the production of Determine® HIV 1-2 for purposes of the Humanitarian Program, and (ii) deliver prompt written notice to Seller or an Affiliate nominated by Seller, certified by the manager of the manufacturing facility or an officer responsible therefore, that affirms that the portion of the Line 2 Equipment capacity used for the production of Determine® HIV 1-2 for purposes of the Humanitarian Program shall no longer be utilized in the production of any products manufactured at the plant. Parent shall (a) deliver to Seller, within 15 Business Days of the end of each calendar month a written statement that the capacity has been decommissioned to the extent used for Determine® HIV 1-2 for purposes of the Humanitarian Program, and (b) grant Seller the right to review the books and records of Parent with respect to the manufacturing output of the Line 2 Equipment to verify that such capacity has been decommissioned. If, at any time following the decommission of Line 2 Equipment as described above, Parent desires to initiate production using the capacity of the Line 2 Equipment attributable to Determine® HIV 1-2 for purposes of the Humanitarian Program, whether or not such products will be sold to Seller or an Affiliate thereof, Seller and Inverness Japan shall negotiate in good faith to compensate Seller or its Affiliate, at the fair market value at the time, for the right of Inverness Japan to utilize capacity of the Line 2 Equipment attributable to Determine® HIV 1-2 for purposes of the Humanitarian Program. (b) If, at any time during the Term, Seller receives a written proposal from a third party to supply to Seller for purposes of the Humanitarian Program one or more products similar to the Products at a price per unit that, as of the date of such written proposal, is (i) ****% or more lower than the Adjusted Price per Unit and (ii) the Purchase Price exceeds the Adjusted Price per Unit, Seller shall provide a right of first refusal to Parent to match such price reduction by sending a written notice to Parent. Within 45 days of Parent’s receipt of such written notice, Parent shall notify Seller if it wishes to match such improved terms and provide Seller with a binding offer corresponding thereto. If Parent fails to respond to such notice from Seller within 45 days of Parent’s receipt thereof or declines to match such improved terms, then Seller shall be required to source no more than 50% of its requirements of the Products from Buyer during the first 18 months thereafter, and following such 18-month period, shall be free to source all of its requirements of the Products from any third-party supplier; provided, however, that, if the product in question which will be supplied by the third party in accordance with the provisions of this Section 5.7(b) is a product similar to Determine® HIV 1-2 for purposes of the Humanitarian Program, then Seller shall promptly pay to Parent the pro rata amount (up to a maximum of $2,500,000) of the net book value of the Line 2 Equipment (based on 5 year depreciation schedule, which such depreciation beginning when the first lot of Product is manufactured for **** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. any purposes) attributable to the manufacturing of Determine® HIV 1-2 for purposes of the Humanitarian Program of Seller and its Affiliates, provided further, such pro rata amount shall be calculated on the basis of a fraction, the numerator of which is the average daily hours that Line 2 Equipment was used for the manufacturing of Determine® HIV 1-2 for purposes of the Humanitarian Program during the entire period that Line 2 Equipment was commissioned and the denominator of which is the average daily hours that Line 2 Equipment was in use for the manufacturing of all Products (regardless whether or not such Products were for commercial purposes or for purposes of the Humanitarian Program) plus the average daily hours that Line 2 Equipment was idle during the entire period that Line 2 Equipment was commissioned, and provided further, that upon the receipt of such amount, Inverness Japan shall (i) decommission the Line 2 Equipment to the extent used, and only to the extent used, for the production of Determine® HIV 1-2 for purposes of the Humanitarian Program, and (ii) deliver prompt written notice to Seller or an Affiliate nominated by Seller, certified by the manager of the manufacturing facility or an officer responsible therefore, that affirms that the portion of the Line 2 Equipment capacity used for the production of Determine® HIV 1-2 for purposes of the Humanitarian Program shall no longer be utilized in the production of any products manufactured at the plant. Parent shall (a) deliver to Seller, within 15 Business Days of the end of each calendar month a written statement that the capacity has been decommissioned to the extent used for Determine® HIV 1-2 for purposes of the Humanitarian Program, and (b) grant Seller the right to review the books and records of Parent with respect to the manufacturing output of the Line 2 Equipment to verify that such capacity has been decommissioned. If, at any time following the decommission of Line 2 Equipment as described above, Parent desires to initiate production using the capacity of the Line 2 Equipment attributable to Determine® HIV 1-2 for purposes of the Humanitarian Program, whether or not such products will be sold to Seller or an Affiliate thereof, Seller and Inverness Japan shall negotiate in good faith to compensate Seller or its Affiliate, at the fair market value at the time, for the right of Inverness Japan to utilize capacity of the Line 2 Equipment attributable to Determine® HIV 1-2 for purposes of the Humanitarian Program. (c) If during the Term, Parent or any of its Affiliates manufactures anywhere in the world one or more immunoassay lateral flow products similar to the Products (but expressly excluding nucleic acid testing products), Seller shall notify Parent if it wishes to purchase from Parent or any of its Affiliates, for use only in connection with the Humanitarian Program, such similar products at a price equal to Parent’s **** cost plus ****% and its anticipated monthly requirements of such similar products during the following 12 months. In the event that Seller so requests to purchase such products and Parent **** REPRESENTS TEXT OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPERATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. does not then have the necessary capacity to provide Seller with the amount of products that Seller projects pursuant to rolling 12 month forecasts, Parent and Seller shall enter into good faith negotiations in an effort to formulate a solution to the capacity needs to produce the volume of products requested by Seller. Any such agreement shall be set forth in a subsequent supply agreement to be entered into between the Parties.