TAX ALLOCATION & INDEMNITY AGREEMENT

Exhibit 10.21 ================================================================================







TAX ALLOCATION AND INDEMNIFICATION AGREEMENT







Dated as of October 30, 1996









DEPUY, INC.,





BOEHRINGER MANNHEIM CORPORATION









CORANGE LIMITED







================================================================================

TAX ALLOCATION AND INDEMNIFICATION AGREEMENT (the "Agreement")

dated as of October 30, 1996 among

DEPUY, INC., a Delaware Corporation

(the "Company"),

BOEHRINGER MANNHEIM CORPORATION, an Indiana corporation

("BMC") and CORANGE LIMITED,

a Bermuda corporation ("Corange").





WHEREAS, each of the Company and BMC is an indirect, wholly-owned subsidiary of Corange, which is the ultimate holding company within the Corange Limited group of companies (the "Corange Group"), and each of various subsidiaries in the Corange Group listed in Exhibit A hereto is engaged in the manufacture and/or the distribution of orthopaedic products for the DePuy division of the Corange Group;



WHEREAS, Corange U.S. Holdings Inc., an Indiana corporation ("CUSHI") was the common parent corporation, within the meaning of Section 1502 of the Internal Revenue Code of 1986, as amended (the "Code"), of an affiliated group of corporations (the "Affiliated Group") filing consolidated Federal income tax returns and consolidated, combined or unitary state income tax returns, pursuant to which CUSHI, BMC, and other members of the Affiliated Group have paid taxes on a consolidated, combined or unitary basis;



WHEREAS, in connection with an overall plan of reorganization affecting those corporations within the DePuy division of the Corange Group, which plan was approved by the Board of Directors of Corange in resolutions adopted at a meeting held on July 11, 1996: (i) CUSHI has sold all of the outstanding shares of BMC to Pharminvest S.A., a Luxembourg corporation in the Corange Group (the "BMC Share Sale"), (ii) Corange and certain direct and indirect subsidiaries of Corange have sold or otherwise transferred to CUSHI or to newly-created subsidiaries of CUSHI, their shareholding in certain subsidiaries within the DePuy division of the Corange Group, and certain assets related to the DePuy business previously owned by a foreign distribution subsidiary of Corange affiliated with the Boehringer Mannheim business of the Corange Group, and (iii) CUSHI has merged with and into the Company (the "Merger"), with the Company being the surviving corporation in the Merger (collectively, the "Pre-Offering Reorganization");



WHEREAS, pursuant to the Pre-Offering Reorganization, CUSHI ceased to be the common parent of the Affiliated Group, BMC ceased to be a member of the Affiliated Group, and the Company became the common parent corporation of the Affiliated Group;



WHEREAS, Corange, BMC and the Company desire to allocate the liability for the taxes (including any interest or penalties thereon) of members of the Affiliated Group for any taxable period beginning before the Pre-Offering Reorganization and to provide for certain other tax-related matters;



NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows.

1. Indemnification by Corange and BMC. (a) Corange shall indemnify and

hold harmless on an After-Tax Basis (as hereinafter defined) the Company

and the DePuy Subsidiaries (as hereinafter defined) against any Corange Tax

Liabilities (as hereinafter defined). The term "Corange Tax Liabilities"

shall mean any Taxes (as hereinafter defined): (i) imposed (x) with respect

to any taxable period that ends prior to the date upon which the Closing of

the public offering of the stock of the Company occurs (the "Closing Date")

and (y) with respect to a taxable period that begins before and ends after

the Closing Date, the portion of such period up to and including the the

Closing Date (each period described in clause (x) or clause (y), being

hereinafter referred to as a "Pre-Closing Tax Period"), or (ii) imposed as

a result of the Pre-Offering Reorganization; provided, however, that the

Taxes subject to indemnification as Corange Tax Liabilities under this

Section 1(a) shall not include any "BMC Tax Liabilities" (as hereinafter

defined) subject to indemnification by BMC under Section 1(b) hereof or any

"DePuy Tax Liabilities" (as hereinafter defined) subject to indemnification

by the Company and the DePuy Subsidiaries under Section 2 hereof.



(b) BMC shall indemnify and hold harmless on an After-Tax Basis the

Company and the DePuy Subsidiaries against any BMC Tax Liabilities. The

term "BMC Tax Liabilities" shall mean: (i) the full amount of the Taxes of

BMC or a BMC Subsidiary (as hereinafter defined), as the case may be, for

any taxable period for which the Tax liability of BMC or a BMC Subsidiary,

as applicable, is determined on the basis of a separate Tax return, and

(ii) in the case of any taxable period for which the Tax liability of BMC

or a BMC Subsidiary, as applicable, is determined on the basis of a

Consolidated Return (as hereinafter defined), the portion of the Taxes of

the Consolidated Group (as hereinafter defined) attributable to BMC or to a

BMC Subsidiary, as determined under Section 6 with respect to consolidated

or combined returns, and under Section 7 with respect to unitary returns;

provided, however, that the term "BMC Tax Liabilities" shall include no

liabilities for Taxes imposed as a result of the Pre-Offering



(c) Corange hereby guarantees BMC's obligation to indemnify and hold

harmless on an After-Tax Basis the Company and the DePuy Subsidiaries

against the BMC Tax Liabilities. In the event that BMC defaults on its

obligations to make indemnification payments with respect to any BMC Tax

Liabilities in accordance with this Agreement, the Company and the DePuy

Subsidiaries shall be entitled to collect such indemnification payments

from Corange; provided, however, that the Company and the DePuy

Subsidiaries shall in no event be entitled to receive more than the full

amount of one indemnification payment with respect to any single claim for

Taxes under this Agreement.



2. Indemnification by the Company. The Company and each DePuy

Subsidiary shall indemnify and hold harmless on an After-Tax Basis Corange,

BMC, the Corange Subsidiaries (as hereinafter defined) and the BMC

Subsidiaries against any and all DePuy Tax Liabilities. The term "DePuy

Tax Liabilities" shall mean: (i) the full





amount of the Taxes of the Company or a DePuy Subsidiary, as the case may

be, for any taxable period for which the Tax liability of the Company or a

DePuy Subsidiary, as applicable, is determined on the basis of a separate

Tax return, (ii) in the case of any taxable period for which the Tax

liability of the Company or a DePuy Subsidiary, as applicable, is

determined on the basis of a Consolidated Return, that portion of the Taxes

of the Consolidated Group attributable to the Company or to a DePuy

Subsidiary, as determined under Section 6 with respect to consolidated or

combined returns, and as determined under Section 7 with respect to unitary

returns, and (iii) Taxes imposed as a result of the Pre-Offering

Reorganization solely by reason of one or more actions taken by the Company

or any DePuy Subsidiary in violation of any of its obligations under the

agreements entered into with respect to the Pre-Offering Reorganization;

provided, however, that the term "DePuy Tax Liabilities" shall include (x)

no liabilities for Taxes imposed as a result of the Pre-Offering

Reorganization except for liabilities for Taxes described in clause (iii)

hereof, and (y) no liabilities for any interest or any penalties relating

to any taxes, tariffs or governmental charges, in the case of liabilities

for Taxes described in clauses (i) and (ii) hereof, and all such

liabilities for interest and penalties shall be deemed to be Corange Tax

Liabilities subject to indemnification by Corange under Section 1(a)



3. Definitions. (a) The term "Tax" or "Taxes" means Federal, state,

local and foreign income, franchise, property, sales, excise, transfer,

withholding (with respect to amounts paid or received), employment or other

taxes, tariffs or governmental charges (and all interest and penalties

relating thereto) imposed by a governmental authority pursuant to the

exercise of its power to tax.



(b) The term "After-Tax Basis" means, with respect to any payment, an

amount calculated by taking into account the Tax consequences of the

receipt of such payment, as well as any Tax benefit associated with the

liability giving rise to the payment. In the case of any item which gives

rise to a deduction, the Tax benefit of such deduction shall be determined

at the maximum statutory tax rate in effect during the relevant taxable

period, whether or not the taxpayer actually realizes currently such Tax

benefit. For this purpose, all indemnification payments made by Corange

under this Agreement shall be deemed to be capital contributions to the



(c) The term "DePuy Subsidiary" shall mean each entity listed in

Exhibit A hereto and shall be deemed to include any predecessor or

transferee of (or successor or transferor to) the Company or any entity

listed in Exhibit A, but shall not include CUSHI for any period prior to

the Merger or any subsidiary in the Corange Group affiliated with the

Boehringer Mannheim business of the Corange Group; provided, however, that

the DePuy division of BMC, which was a predecessor of DePuy, Inc.

(incorporated on January 1, 1992) shall be deemed to be a DePuy Subsidiary.

The term "BMC Subsidiary" shall mean any subsidiary of BMC, and shall be

deemed to include any predecessor or transferee of (or successor or

transferor to) BMC or any subsidiary of BMC, but shall not include CUSHI

(or any predecessor thereof or transferor thereto),





the Company or any DePuy Subsidiary. The term "Corange Subsidiary" shall

mean any subsidiary in the Corange Group, including CUSHI, and shall be

deemed to include any predecessor or transferee of (or successor or

transferor to) Corange or any subsidiary of Corange, but shall not include

the Company, any DePuy Subsidiary, BMC or any BMC Subsidiary.



(d) The term "Tax Asset" shall mean any net operating loss, net

capital loss, investment tax credit, foreign tax credit, target jobs tax

credit, low income housing credit, research and experimentation credit,

charitable deduction or any other credit or tax attribute, including

additions to basis of property, which could reduce any tax, including,

without limitation, deductions, credits, or alternative minimum net

operating loss carryforwards related to alternative minimum taxes.



(e) The term "BMC Sale Date" shall mean the date upon which the BMC

Share Sale occurs, and the term "Pre-BMC Sale Tax Period" shall mean (i)

any taxable period that ends prior to the BMC Sale Date and (ii) with

respect to a taxable period that begins before and ends after the BMC Sale

Date, the portion of such period up to and including the BMC Sale Date.



(f) The term "Consolidated Group" shall mean (i) the Affiliated Group

and (ii) any group filing consolidated, combined or unitary tax returns for

state tax purposes for any taxable period beginning before the BMC Sale

Date which, for such taxable period, is comprised of at least one

corporation which is a BMC Subsidiary and at least one corporation which is

a DePuy Subsidiary. The term "Consolidated Return" shall mean any Federal

income tax return or any state tax return filed by the Consolidated Group

on a consolidated, combined or unitary basis.



4. Tax Return Filing and Related Matters. (a) The Company shall

prepare all Consolidated Returns of the Consolidated Group for taxable

periods beginning on or after January 1, 1996 and ending on or before

December 31, 1996, and all separate Tax returns of the Company and the

DePuy Subsidiaries. With respect to any Consolidated Returns referred to

in the first sentence of this Section 4(a), BMC shall provide pro forma tax

returns and other relevant data to the Company at least forty-five (45)

days prior to the due date of such Tax returns (taking into account any

applicable extensions). The Company shall provide BMC with preliminary

draft copies of such Tax returns at least thirty (30) days prior to the due

date for filing (taking into account any applicable extensions) for review

and approval by BMC with respect to BMC Tax Liabilities. If BMC objects to

any matter reflected in such draft Tax returns with respect to BMC Tax

Liabilities, BMC shall inform the Company within ten (10) days of receipt

of the draft Tax returns, and the Company shall revise such Tax returns as

so directed by BMC, and shall sign and timely file such Tax returns with

the appropriate taxing authorities.



(b) BMC shall prepare all Consolidated Returns of the Consolidated

Group for taxable priods ending on or before December 31, 1995, all

separate Tax returns of





CUSHI for taxable periods ending on or before the Merger, and all separate

Tax returns of BMC and the BMC Subsidiaries. The provisions of this

Section 4 shall apply with respect to any action or inaction after the date

of this Agreement in connection with the preparation and filing of any such

Tax returns. With respect to any Consolidated Returns referred to in the

first sentence of this Section 4(b), the Company shall provide pro forma

tax returns and other relevant data to BMC at least forty-five (45) days

prior to the due date of such Tax returns (taking into account any

applicable extensions). BMC shall provide the Company with preliminary

draft copies of such Tax returns at least thirty (30) days prior to the due

date for filing (taking into account any applicable extensions) for review

and approval by the Company with respect to DePuy Tax Liabilities. If the

Company objects to any matter reflected in such draft Tax returns with

respect to DePuy Tax Liabilities, the Company shall inform BMC within ten

(10) days of receipt of the draft Tax returns and BMC shall revise such Tax

returns as so directed by the Company, and shall sign and timely file such

Tax returns with the appropriate taxing authorities.



(c) With respect to Consolidated Returns of the Consolidated Group for

taxable periods beginning on or after January 1, 1996 and ending on or

before December 31, 1996, BMC shall pay, or cause to be paid, to the

Company an amount equal to (1) BMC's share of the Consolidated Group's

consolidated Federal Tax liability and consolidated state Tax liability,

determined in accordance with Section 6, and (2) BMC's share of the

Consolidated Group's unitary state Tax liability, determined in accordance

with Section 7, as provided below.



(i) Promptly after the Company makes an estimated Tax payment

with respect to any such Consolidated Return, the Company shall in

good faith determine the amount of BMC's share of such estimated Tax

payment in accordance with Section 6, in the case of any consolidated

Federal Tax liability or any consolidated state Tax liability of the

Consolidated Group, and in accordance with Section 7 using 1995

apportionment factors, adjusted for significant dispositions or

transfers of assets, in the case of any unitary state Tax liability of

the Consolidated Group. The Company shall deliver a written statement

to BMC reflecting the determination descri ...