An intercompany agreement, or sometimes referred to as an ICA, is a legal document that helps facilitate two or more companies owned by the same parent company in exchange for financing, goods, services, or other exchanges. An agreement of this type is important to have as it can cement pricing structures, protect intellectual property, and formalize the rights of each company engaging in the agreement.
An intercompany agreement has a bit more flexibility in negotiations because the companies involved are all related under the same parent company. Intercompany agreements can facilitate the sharing of what they call intercompany services, which may include human resources, accounting, and legal service
Below is a list of common sections included in Intercompany Agreements. These sections are linked to the below sample agreement for you to explore.
MASTER INTERCOMPANY AGREEMENT
This Master Intercompany Agreement (this “Agreement”) is made and entered into by and between OSI Systems, Inc., a California corporation located at 12525 Chadron Avenue, Hawthorne, California (“OSI”) and Spacelabs Healthcare, Inc. a Delaware corporation with offices at 5150 220th Avenue SE, Issaquah, WA 98029 (“SHI”), effective as of October 24, 2005.
WHEREAS, SHI and its subsidiaries on the one hand, and OSI and its subsidiaries (who are not SHI subsidiaries) on the other hand, from time to time require assistance from each other in administrative, operational, financial, manufacturing and other matters (each, a “Service” and collectively, the “Services”);
WHEREAS, the subsidiaries of SHI currently collectively owe to OSI an intercompany balance reflected on the books of the respective companies.
WHEREAS, OSI, SHI and their various subsidiaries are willing to provide such Services for each other in exchange for appropriate compensation; and
WHEREAS, the OSI and SHI each wish to set forth the framework for performance of such Services.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Identification of Parties . For purposes of this Agreement, the following definitions shall apply:
1.1. “ OSI Group ”. The “OSI Group” means OSI and its subsidiaries, other than SHI subsidiaries;
1.2. “ SHI Group ”. The “SHI Group” means SHI and its subsidiaries. A party’s subsidiary refers to an entity in which that party has a majority equity interest, measured by voting power; and
1.3. “ Service Provider ”. The party providing a Service shall be identified as a “Service Provider”.
1.4. “ Service Recipient ”. The party receiving a Service shall be identified as a “Service Recipient”.
2. Assignment within Groups . OSI may, in its discretion, cause some or all of its obligations under this Agreement to be performed, and permit some or all of its rights hereunder to be exercised, by any member of the OSI Group. SHI may, in its discretion, cause some or all of its obligations under this Agreement to be performed, and permit some or all of its rights hereunder to be exercised, by any member of the SHI Group. Each party agrees to
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3. Service Order . As a “master” form of contract, this Agreement allows the parties to contract for Services through the issuance of service orders without having to re-negotiate the basic terms and conditions contained herein. The specific details of a Service to be provided by a Service Provider under this Agreement shall be separately negotiated and specified in services orders substantially in the form attached hereto as Exhibit A . or as otherwise agreed in writing (each, a “Service Order”). Each Service Order will include, at a minimum, a description of the Service to be provided, the identity of the Service Provider and the Service Recipient, the term during which the Services will be provided, and the applicable fees and charges, as well as any requirements, considerations, or objectives which are in addition to the general provisions of this Agreement. Each Service Order shall be deemed to incorporate all of the terms and conditions of this Agreement. Notwithstanding the foregoing, OSI and SHI acknowledge and agree that some of the terms and conditions contained in this Agreement may not be applicable to every Service Order and that in such instances, such terms shall not apply. To the extent any terms or provisions of a Service Order conflict with the terms and provisions of this Agreement, the terms and provisions of the Service Order shall control. No Service Order shall be effective unless and until it is executed by an authorized representative of each party to such Service Order.
4.1. Space Allocation .
4.1.1. A Service Order relating to allocation of space shall set forth a description of the premises allocated, the duration of the allocation, the amount of any rent and other fees due for such allocation and applicable payment schedules. In the event the premises are leased by Service Provider from a third party, the Service Provider shall provide to Service Recipient a copy of the underlying lease between Service Provider and the landlord of the premises.
4.1.2. Service Recipient agrees and covenants to vacate the premises immediately upon termination or expiration of the underlying lease; not to make any alteration or addition to the premises without Service Provider’s consent (which shall not be unreasonably withheld or delayed); to leave the premises in as good as condition as when first occupied by Service Recipient (normal wear and tear excepted); and to comply in every respect with the provisions of any law and/or the underlying lease in respect to the premises. Service Provider covenants to permit Service Recipient to peaceably and quietly hold and enjoy the premises during the term of Service Recipient’s occupancy.
4.2. Support Services . Service Provider may provide administrative, IT or other support services for Service Recipient pursuant to a Service Order. Service Recipient agrees to reimburse Service Provider one hundred percent of Service Provider’s costs and out-of-pocket expenses, which shall include all direct costs incurred by Service Provider that are attributable to the employees directly engaged in providing the services (on a fully-burdened basis); all direct costs attributable to the materials and supplies consumed in rendering the Services; and any specifically-identifiable indirect costs that relate to the aforesaid direct costs, such as an allocable portion of occupancy costs, utilities, supervisory and clerical support, and
other overhead, general, and administrative costs (e.g., depreciation) reasonably allocable to a particular service or activity (collectively, “Costs”).
4.3. Financial Support and Tax Sharing . Both OSI and SHI agree, on their own behalves and on behalf of their respective subsidiaries, to mutually extend financial support and tax sharing arrangements to each other; provided however, that in the event OSI shall cease to own a majority of the combined voting power of the outstanding securities of SHI then, as of the date upon which OSI becomes such minority shareholder of SHI, no further mutual financial support or tax sharing shall occur between the parties. Such financial support from OSI to the SHI Group shall include access to additional working capital funds borrowed under OSI’s then-current banking credit facilities unless or until such time as SHI assets are not required to guarantee any of OSI’s obligations under such banking credit facilities. In the event that a Service Order provides for financial support or funding by OSI to the SHI Group, such Service Order shall be further evidenced by and made in accordance with the form of SHI Revolving Promissory Note, attached hereto as Exhibit B , or as otherwise agreed in writing. The opening balance under the SHI Revolving Promissory Note shall include the intercompany balance currently owed to OSI by SHI’s subsidiaries, as reflected on the books of the respective companies. In the event that a Service Order provides for financial support or funding by SHI to the OSI Group, such Service Order shall be further evidenced by and made in accordance with the form of OSI Revolving Promissory Note, attached hereto as Exhibit C , or as otherwise agreed in writing (collectively, the SHI Revolving Promissory Note and the OSI Revolving Promissory Note are referred to herein as the “Notes”). The Notes shall state the amount of the loan, the date made, the date payment is due, the payment schedule, the currency for repayment, any applicable grace period and the applicable interest rate. In the event that a Service Order provides for a tax sharing arrangement between OSI and SHI, such Service Order shall be further evidenced by and made in accordance with the terms of the form of Tax Sharing Agreement, attached hereto as Exhibit D , or as otherwise agreed in writing.
4.4. Manufacturing . SHI agrees to grant OSI preferred manufacturer status for products and manufacturing services required by SHI during the term of this Agreement as follows:
4.4.1. Submission of Manufacturing Proposal . If SHI requires the manufacture of a product or component, or manufacturing services, of a type that the OSI Group is capable of providing, SHI shall notify OSI of such requirement. SHI shall then provide OSI an opportunity to bid on such requirement on terms no less favorable to OSI than terms provided to other bidders with respect to that requirement.
4.4.2. Acceptance of Manufacturing Proposal . SHI shall provide OSI the right to manufacture such product or component or provide such services if (i) OSI’s proposal meets the delivery, quality, regulatory and documentation requirements for such product or component; and (ii) the pricing offered by OSI (including tax, shipping and insurance) is no more than 5% more than the lowest quotation provided by a competitor for such product or component or services supplied on comparable terms. In the event that OSI’s proposal complies with section 4.4.2 (i) but not 4.4.2 (ii), SHI shall advise OSI of same and provide an opportunity for OSI to revise the pricing in its proposal.
4.4.3. Purchase by SHI . In the event OSI’s proposal meets the above conditions, SHI shall purchase such product or component from OSI under SHI’s standard purchase order terms and conditions, setting forth the product description and specifications,
quantity of product to be manufactured and delivered to SHI, timeframe for delivery of such product, and the price to be paid for the product.
4.5. Other . The parties may enter into such other intercompany arrangements as they may from time to time agree in writing.
5. Fees . For the Services provided under a Service Order, Service Recipient shall pay Service Provider the fees detailed in the Service Order. Such fees shall be based on Service Recipient’s use of Service Provider’s Services as agreed upon at the execution of the Service Order. Any request for alteration, substitution or change from such agreed Services will be evaluated on an individual basis and may be subject to additional charges if mutually agreed by the parties.