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EXHIBIT 10.5
JOINT DEVELOPMENT AGREEMENT
This Joint Development Agreement ("Agreement") dated as of the _____day of
November, 1999 ("Effective Date") is by and between ILLUMINA, INC., a California
corporation, located at 9390 Towne Centre Drive, Suite 200, San Diego, CA 92121-
3015 ("Illumina"), and PE CORPORATION, a Delaware corporation, through its PE
Biosystems Group, located at 850 Lincoln Centre Drive, Foster City, CA 94404
("PEB").
Background
Illumina has certain skills, proprietary technology and know-how related to
the manufacture, design and use of Assembled Arrays.
PEB has certain skills, proprietary technology and know-how related to the
development of bioanalytical instrumentation systems and associated reagents,
and the marketing, sales and support of products incorporating such systems.
Illumina and PEB desire to enter into a Joint Development Program with the
objective of developing and commercializing products based on bioanalytical
instrumentation systems incorporating Assembled Arrays.
Illumina and PEB will enter into a Series C Stock Purchase Agreement as of
the Effective Date, whereby PEB will purchase 1,250,000 shares of Illumina's
stock at a share price of $4.00 per share (the "Equity Agreement").
Agreement
1. Definitions
1.1. "Affiliate" means
(A) an organization of which 50% or more of the voting stock is
controlled or owned directly or indirectly by either Party;
(B) an organization that directly or indirectly owns or controls 50%
or more of the voting stock of a Party;
(C) an organization, the majority ownership of which is directly or
indirectly common to the majority ownership of either Party; or
(D) an organization under (A), (B), or (C) immediately above in which
the amount of the ownership is less than 50% and that amount is
the maximum amount permitted by law.
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1.2. "Intellectual Property Rights" means all intellectual property rights
worldwide arising under statutory or common law, and whether or not
perfected, including, without limitation, the following:
(A) all patents, patent applications and patent rights, including
divisions, continuations, renewals, reissues, continuing prosecution,
and extensions of the foregoing (as and to the extent applicable) now
existing, hereafter filed, issued or acquired;
(B) all rights associated with works of authorship including copyrights,
copyright applications, copyright registrations, mask works, mask
work applications, and mask work registrations;
(C) all rights relating to the protection of trade secrets and
confidential information; and
(D) all know-how.
1.3. "Pre-Collaboration Illumina Intellectual Property" means all Intellectual
Property Rights that are owned by, either partially or wholly, or licensed
to, or otherwise controlled by, Illumina as of the Effective Date.
1.4. "Collaboration Illumina Intellectual Property" means all Intellectual
Property Rights arising out of work performed under this Agreement that
are conceived solely by one or more employees or agents of Illumina or its
Affiliates.
1.5. "Collaboration Joint Intellectual Property" means all Intellectual
Property Rights arising out of work performed under this Agreement, that
are jointly conceived by one or more employees or agents of Illumina, and
by one or more employees or agents of PEB or its Affiliates.
1.6. "Pre-Collaboration PEB Intellectual Property" means all Intellectual
Property Rights that are owned by, either partially or wholly, or licensed
to, or otherwise controlled by, PEB or its Affiliates as of the Effective
Date, and that are necessarily infringed by the manufacture or use of
Instruments.
1.7. "Collaboration PEB Intellectual Property" means all Intellectual Property
Rights arising out of work performed under this Agreement that are
conceived solely by one or more employees or agents of PEB or its
Affiliates.
1.8. "Subject Patent" means any patent or patent application claiming or
disclosing Pre-Collaboration Illumina Intellectual Property, Collaboration
Illumina Intellectual Property, Collaboration Joint Intellectual Property,
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Pre-Collaboration PE Intellectual Property or Collaboration PEB
Intellectual Property, including any Related Patents.
1.9. "Subject Intellectual Property" means Pre-Collaboration Illumina
Intellectual Property, Collaboration Illumina Intellectual Property,
Collaboration Joint Intellectual Property, Pre-Collaboration PEB
Intellectual Property, or Collaboration PEB Intellectual Property,
including Subject Patents.
1.10. "Net Sales" means:
(A) with respect to sales by a Party, or an Affiliate of a Party, to non-
affiliated third party purchasers, the actual amount of gross sales
of Collaboration Product to a third party, less: trade, cash and
quantity discounts, if any, actually allowed, amounts refunded for
faulty or defective product, returns, rejections, freight, insurance
and other transportation costs, tariffs, duties and similar
governmental charges paid (except income taxes);
(B) with respect to sales by a Party made to any Affiliate, the Net Sales
will be determined as if such Collaboration Product had been sold to
a non-affiliated third party purchaser at an average Net Sales for
such Collaboration Product during the immediately preceding 120 days;
and
(C) with respect to Collaboration Product that is used by a Party, or an
Affiliate of a Party, to supply services or information to a third
party for commercial purposes, or are otherwise disposed of,
excluding demonstration or other marketing activities performed for
no or de minimis compensation, the Net Sales will be determined as if
such Collaboration Product had been sold to a non-affiliated third
party purchaser at the average Net Sales for such Collaboration
Product during the immediately preceding 120 days.
1.11. "Manufacturing Cost" means the fully-burdened manufacturing cost of a
product as determined using a Party's customary practices and procedures
in accordance with United States generally accepted accounting principles
("GAAP") including the following: direct material cost, material overhead
cost, direct labor cost, fixed manufacturing overhead cost, variable
manufacturing overhead cost, manufacturing variance cost, and third-party
royalties (excluding up-front payments).
1.12. "Gross Margin" means Net Sales less Manufacturing Cost.
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1.13. "Sales and Marketing Cost" means the fully-burdened cost associated with
marketing, selling, distributing and supporting a product as determined
using a Party's customary practices and procedures in accordance with
GAAP including the following: installation cost, warranty cost,
distribution cost, direct marketing cost, marketing overhead cost, direct
selling cost, and selling overhead cost, and subject to Sections 4.1.3
and 5.1(C).
1.14. "Ongoing R&D Cost" means the fully-burdened cost associated with ongoing
research and development to improve or develop new Collaboration Product
after the New Product Release of a Collaboration Product, and subject to
Sections 4.1.4 and 5.1 (D).
1.15. "Residual Gross Margin" means Gross Margin less (A) Sales and Marketing
Cost and (B) Ongoing R&D Cost.
1.16. "Party" means Illumina or PEB and, when used in the plural, means
Illumina and PEB.
1.17. "Related Patent" means any patent or patent application that:
(A) claims substantially the same subject matter as a Subject Patent;
(B) claims improvements to inventions disclosed or claimed in a Subject
Patent and requires rights under the Subject Patent to exploit such
improvements;
(C) claims priority to a Subject Patent, including but not limited to
continuation applications and patents, continuation-in-part
applications and patents, divisional applications and patents,
reexamination applications and patents, reissue applications and
patents, and continuing prosecution applications and patents;
(D) is a parent of a Subject Patent; or
(E) any foreign equivalents of a Subject Patent or any patent or patent
application set forth in (A), (B), (C) or (D) immediately above.
1.18. "PEB DNA Synthesis and Purification Patents" means U.S. Patent Nos.
4,997,927 (GBF), 4,458,066, 5,132,418, 5,153,319, 4,973,679 (Caruthers
Process), and 4,415,732, 4,668,777, 4,500,707 (Caruthers Reagents),
including any Related Patent.
1.19. "Start Development Checkpoint" means that point in a project at which,
under PEB's ISO 9001 procedures, a report is produced which documents
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that the following parameters have been established with respect to a
Collaboration Product:
(A) technical feasibility;
(B) determination of funding and staffing levels required to effect New
Product Release;
(C) product definition and specifications, including a target minimum
sales price; and
(D) a schedule for New Product Release.
1.20. "New Product Release" means that stage in the development of a
Collaboration Product at which, under PEB's ISO 9001 procedures,
unrestricted sale of the Collaboration Product to unaffiliated third-
party customers is authorized.
1.21. "Quarter" means a three month period beginning on or about the first day
of January, April, July or October next following the Effective Date, and
each three month period thereafter, except that the first Quarter will
include the period from the Effective Date to the first day of the
nearest such three month period after the Effective Date. Precise dates
for the beginning and ending of Quarters may vary in accordance with
PEB's customary accounting practices and procedures in accordance with
GAAP. Upon Illumina's request, PEB will provide Illumina with a schedule
of PEB's fiscal Quarters.
1.22. "Assembled Array" means an array of microspheres having chemical
functionality attached thereto distributed on a patterned substrate, as
generally described in U.S Patent Application No.08/818,199.
1.23. "Zip Code Chemistry" means a nucleic acid sequence detection method
employing a sequence-specific hybridization pull-out step subsequent to a
chemical or enzymatic polynucleotide ligation reaction, as generally
described in International Patent Application No. WO 97/31256.
1.24. "Instrument" means a device, including software required to operate the
device and image assembly software, designed to perform assays in
combination with an Assembled Array, and that is developed under the
Joint Development Program.
1.25. "Reagent" means a composition comprising enzymes, probes, PCR primers, or
buffers necessary to effect Zip Code Chemistry used in combination with
an Assembled Array, and that is developed under the Joint Development
Program.
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1.26. "Early Access Program" means a program in which one or more third parties
or Affiliates are given access to Beta Prototype Collaboration Product
prior to New Product Release in return for a fee, including the providing
of service or information to a third party by Illumina.
1.27. "Beta Prototype" means a prototype Instrument that is assembled during
the development of a Collaboration Product under the Joint Development
Program for the purpose of design verification. Beta Prototype units are
built by hand by the manufacturing department in consultation with the
research department in limited numbers using few or no tooled parts. With
respect to PEB's ISO 9001 procedures, the terms "Beta Prototype" and VTS
Instrument" may be used interchangeably.
1.28. "Collaboration Product" means Instrument, Reagent, or Assembled Array.
1.29. "Collaboration Field" means the field of Zip Code Chemistry used in
combination with Assembled Arrays.
1.30. "Nucleic Acid Analysis Field" means the field of characterization of a
nucleic acid sample including but not limited to the determination of the
relative abundance of the nucleic acid, all or part of a sequence of the
nucleic acid, or variations in the sequence of the nucleic acid. The
Nucleic Acid Analysis Field excludes the Collaboration Field.
1.31. "Joint Development Program" means the collaborative development and
commercialization program to be conducted by Illumina and PEB as defined
herein.
1.32. "Confidential Information" means confidential knowledge, know-how,
practices, processes, equipment, or other information that:
(A) is disclosed by a Party in a tangible form and is clearly labeled as
confidential or proprietary at the time of disclosure; or,
(B) is disclosed by a Party in nontangible form, and is summarized in a
writing that is delivered to the other Party within 30 days after
disclosure; or,
(C) is disclosed by a Party under circumstances in which a reasonable
person would understand that such information is confidential and
proprietary to the disclosing Party.
Notwithstanding (A), (B), and (C) immediately above, Confidential
Information will not include, and nothing in Section 7 will in any way
restrict the rights of either Illumina or PEB to use, disclose or
otherwise
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deal with, any information that:
(A) was in the public domain as of the Effective Date or comes into the
public domain during the term of this Agreement through no act of
the receiving Party; or,
(B) was independently known to the receiving Party prior to the receipt
thereof, or made available to the receiving Party as a matter of
lawful right by a third party; or,
(C) is independently conceived, invented or acquired by the receiving
Party by persons who were not exposed to the information.
2. Exclusivity; Costs; Diligence
2.1. Exclusivity. Except as may be expressly permitted herein, during the
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term of this Agreement neither Party nor its Affiliates will design,
develop, manufacture, market, sell, distribute or service any
Collaboration Product within the Collaboration Field except in
accordance with the terms and conditions of this Agreement.
2.2. Responsibility for Costs. Except as provided in Section 3.7, each
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Party will be responsible for its own costs and expenses in connection
with its activities in furtherance of the Joint Development Program.
2.3. Diligence. The Parties will use commercially reasonable efforts to
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conduct the Joint Development Program in accordance with the terms and
conditions of this Agreement.
3. Development of Collaboration Product
3.1. Responsibilities. In consultation with Illumina, PEB will have primary
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responsibility for definition of Collaboration Product, and
development of Instruments and Reagents. In consultation with PEB,
Illumina will have primary responsibility for development of Assembled
Arrays. Illumina and PEB will share responsibility for development of
particular assays to be used in conjunction with Collaboration
Product. Primary responsibilities may be reallocated by the Joint
Steering Committee.
3.2. Information Exchange. The Parties will keep each other informed with
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respect to all activities directly related to the Joint Development
Program, including without limitation access to design plans and
drawings, specifications, engineering change orders, software,
supplier information, nucleic acid sequences, processes, materials,
and chemistries directly related to Collaboration Product. Both
Parties will participate in engineering milestone reviews for
Collaboration Product.
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3.3. Work Plan. Development of Collaboration Product may be conducted by
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the Parties in accordance with a Work Plan The Work Plan may be
modified as required from time to time by the Joint Steering
Committee.
3.4. Development Teams. Each Party will assign personnel to its
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development team with the appropriate skills and experience to
accomplish the work established in the Work Plan. It is expected that
such teams will work together to accomplish the objectives of the
Joint Development Program including, if appropriate, conducting
efforts at the same facility.
3.5. Exchange of Instruments, Reagents and Assembled Arrays for Internal
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Use Within the Collaboration Field.
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3.5.1. Provision of Instruments and Reagents to Illumina. PEB will
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provide Instruments and Reagents to Illumina, as such
Instruments and Reagents become available to PEB, for
Illumina's internal use in furtherance of the Joint Development
Program and not for resale, services, or other use except as
provided in Section 3.6. The number of Instruments and the
quantity of Reagents so provided will be determined by the
Joint Steering Committee.
3.5.2. Provision of Assembled Arrays to PEB. Illumina will provide
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Assembled Arrays to PEB, as such Assembled Arrays become
available to Illumina, for PEB's internal use in furtherance of
the Joint Development Program and not for resale, services, or
other use except as provided in Section 3.6. The number of
Assembled Arrays so provided will be determined by the Joint
Steering Committee.
3.6. Early Access Program. Illumina and PEB may manage the release of Beta
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Prototype Instrument through an Early Access Program. Illumina will,
in consultation with PEB, have the primary responsibility for
identifying participants in the Early Access Program. Illumina will
receive any income derived from the Early Access Program. Illumina
will reimburse PEB for PEB's direct manufacturing and support costs
relating to the provision of Beta Prototype Instrument and any
associated Reagents used in the Early Access Program to the extent
that PEB's expenses do not exceed Illumina's income. No more than [*]
Beta Prototype Instruments will be provided for use in the Early
Access Program. At the conclusion of the Early Access Program, all
Beta Prototype Instruments will be returned to PEB. Unless otherwise
agreed to by the Parties in writing, the term of the Early Access
Program will end upon the New Product Release of the relevant
Instrument. Except, in no event will the term of the Early Access
Program be less than 6 months from the time at which each Beta
Prototype Instrument first become available.
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THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
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3.7. Development Funding to Illumina. PEB [*] to Illumina [*] in
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development funding to be used by Illumina to partially finance
Illumina's activities in furtherance of the Joint Development Program.
The [*] will be paid out to Illumina according to the schedule and
conditions set forth in Exhibit 1. If the conditions are not achieved
by Illumina on schedule as set forth in Exhibit 1, development funding
will accrue according to the schedule. At such time as Illumina
achieves the conditions set forth in Exhibit 1 and provided that the
Agreement has not been terminated, PEB will pay Illumina all accrued
development funding and continue paying future development funding
according to the schedule set forth in Exhibit 1. PEB [*] for such
development funding [*] for a given Quarter as set forth in Section
4.3.
4. Commercialization of Collaboration Product
4.1. Responsibilities.
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4.1.1. Manufacture of Assembled Arrays. Assembled Arrays will be
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exclusively manufactured by Illumina or its designate in
consultation with PEB and transferred to PEB as provided under
Section 4.2.
4.1.2. Manufacture of Instruments and Reagents. Instruments and
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Reagents will be exclusively manufactured by PEB or its
designate in consultation with Illumina. Subject to any
required licenses, Illumina may manufacture oligonucleotides
for its internal use within the Collaboration Field. For the
avoidance of doubt, it is understood by Illumina that no
rights under PEB DNA Synthesis and Purification Patents are
granted by this Agreement, either expressly, impliedly, or by
estoppel.
4.1.3. Marketing, Sales and Support. Collaboration Product will be
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exclusively marketed, sold and supported (including service,
customer training and application support) through the
marketing, sales and service organizations of PEB, its
Affiliates and distributors, in accordance with a marketing
plan to be developed by PEB in consultation with Illumina.
Budgets for marketing, sales, and support activities relating
to Collaboration Product will be subject to the approval of
the Joint Steering Committee. Unless decided otherwise by the
Joint Steering Committee, Sales and Marketing Cost will be at
least 15% of annual Net Sales but no more than 30% of annual
Net Sales. Marketing literature dedicated to Collaboration
Product will be marked so as to indicate that the
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Collaboration Product is a product of both PEB and Illumina,
and PEB and Illumina will be referenced in the dedicated
marketing literature with equal prominence.
4.1.4. Ongoing Research and Development. After the New Product
--------------------------------
Release of a Collaboration Product, the Joint Steering
Committee may elect to support ongoing research and
development to improve the Collaboration Product. The
allocation of such research and development between Parties
will be decided by the Joint Steering Committee and reimbursed
to each Party pro rata to each Party's share of the research
and development expenses for such year.
4.2 Transfer of Assembled Arrays to PEB for Resale by PEB.
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4.2.1. Supply Agreement. Illumina will transfer to PEB Assembled
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Arrays for use in Collaboration Product used to generate Net
Sales. Prior to 90 days before a New Product Release of a
Collaboration Product, the Parties will enter into a supply
agreement to be negotiated in good faith between the Parties
which, consistent with this Agreement, will govern the
transfer of Assembled Arrays from Illumina to PEB. The supply
agreement will contain provisions which, in addition to
customary warranty, representations and indemnification
provisions, will set forth a commercially reasonable plan for
Illumina to supply Assembled Arrays to PEB in satisfaction of
PEB's reasonable requirements as to volume, cost, physical
specifications, regulatory requirements and schedule, and
obligate Illumina to provide technical support to PEB (but not
directly to PEB's customers).
4.2.2. Forecasts. Within 90 days prior to the date of a New Product
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Release, and prior to the end of each calendar month
thereafter, PEB will submit to Illumina a 6 month rolling
forecast of PEB's estimated requirements for Assembled Arrays.
The forecast is an estimate only, and does not constitute an
order by PEB or any commitment by PEB to purchase the amount
of Assembled Arrays shown in the forecast. Any order of
Assembled Arrays by PEB will be in the form of a purchase
order. The Joint Steering Committee will determine an
appropriate level of inventory for Assembled Arrays based upon
forecasts and Illumina's demonstrated manufacturing capacity.
If the Joint Steering Committee elects to maintain more than 3
months of inventory of Assembled Arrays ("Excess Inventory"),
PEB will assume the financial burden for the Excess Inventory
by reimbursing Illumina for its Manufacturing Cost associated
with the Excess Inventory within 30 days of the date of
delivery by Illumina to PEB of the Excess Inventory.
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4.2.3. Illumina Unwilling or Unable to Supply Assembled Arrays. If
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Illumina is unwilling or unable to supply Assembled Arrays to
PEB in accordance with this Section 4.2, or, if Illumina
refuses to negotiate in good faith with respect to entering
into such an agreement, the Assembled Arrays may be
manufactured by PEB or its designate, under the conditional no
exclusive license set forth in Section 6.3.3, and subject to
the payment obligations of Section 4.3. Illumina will provide
PEB reasonable assistance with respect to PEB's or its
designate's manufacture of Assembled Arrays, including the
transfer of know-how and documentation directly related to
manufacture of Assembled Arrays.
4.3. Value Sharing. After first reimbursing each Party's Manufacturing
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Cost, next reimbursing each Party's Sales and Marketing Costs and
then reimbursing each Party's Ongoing R&D Costs, PEB will pay
Illumina [*] of Residual Gross Margin of Collaboration Product sold
by PEB, its Affiliates, and distributors ("Illumina Share"), less
monies owed to PEB for reimbursement of development funding provided
to Illumina under Section 3.7. The balance of Gross Margin will be
retained by PEB. If Residual Gross Margin becomes negative in any
Quarter, PEB will accrue such losses. These accrued losses will be
repaid to PEB from future Illumina Share before any future Residual
Gross Margin is paid to Illumina. Illumina Share will be paid to
Illumina as set forth in Sections 4.3.1, 4.3.2, 4.3.3, and 13.4.
4.3.1. Payment to Illumina of Actual Illumina Share. At the end of
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each Quarter in which Net Sales are realized ("Revenue
Quarter"), PEB will pay to Illumina the actual Illumina Share
earned for that Quarter.
4.3.2. Pre-payment to Illumina of Estimated Illumina Share.
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Beginning with the second Revenue Quarter, and for each
Quarter thereafter, in addition to payment to Illumina of the
actual Illumina Share for the previous Quarter under Section
4.3.1, PEB will pay to Illumina an estimated Illumina Share
for the Quarter. The amount of the estimated Illumina Share
will be equal to the actual Illumina Share for the previous
Quarter. The estimated Illumina Share will be paid to
Illumina in equal monthly installments during the Quarter.
4.3.3. Reconciliation. At the end of the second Revenue Quarter, and
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at the end of each Quarter thereafter, PEB will determine the
difference between the actual Illumina Share for that Quarter
and the estimated Illumina Share for that Quarter. Illumina
will be charged or credited depending on whether the
estimated Illumina Share represents an overpayment or an
underpayment, respectively, for that Quarter.
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4.4. Supply of Instruments to Illumina for Use by Illumina Outside of the
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Collaboration Field. PEB will supply Instruments to Illumina for use
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by Illumina outside of the Collaboration Field ("OEM Instruments")
under a supply agreement to be negotiated in good faith between the
Parties. Except as otherwise provided for in Section 4.4.1 or in the
supply agreement, Illumina or its designate will be solely
responsible for all marketing, sales and support (including without
limitation service, customer training and application support) of OEM
Instruments. The transfer price for OEM Instrument will be the lower
of (i) [*] below the then-current list price or (ii) [*] below the
average selling price charged for Instruments sold to non-affiliated
third party purchasers during the preceding Quarter.
4.4.1. OEM Instrument for Use Inside the [*]. Illumina will not
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distribute OEM Instrument within the [*] through third
parties without first providing PEB the opportunity to
distribute the OEM Instrument, as follows. If Illumina
desires to distribute the OEM Instrument within the [*]
through a third party, then Illumina will so notify PEB of
its desire in writing, the notice to include a reasonable
description of the proposed OEM Instrument, including the
particular application of the OEM Instrument, sufficient
for PEB to meaningfully evaluate its technical and
commercial merits. Thereafter, PEB will have a period of 45
days after receipt of the notice to evaluate the
opportunity and to notify Illumina in writing that PEB has
elected to distribute the OEM Instrument under the terms
and conditions of Section 4.3 of this Agreement. For the
avoidance of doubt, the value sharing in Section 4.3
applies only to net sales of OEM Instruments, not reagents
and Assembled Arrays outside the Collaboration Field.
Alternatively, if PEB declines to distribute the OEM
Instrument, or fails to notify Illumina of its election to
distribute the OEM Instrument within the 45 day period,
Illumina may distribute the OEM Instrument through a third
party distributor.
4.4.2. PEB Unwilling or Unable to Supply OEM Instruments. If PEB is
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unwilling or unable to supply OEM Instrument to Illumina in
accordance with this Section 4.4, or, if PEB refuses to
negotiate in good faith with respect to entering into such
an agreement, the OEM Instrument may be manufactured by
Illumina or its designate, under the conditional non-
exclusive license set forth in Section 6.3.6, and subject
to the royalty obligations of Section 6.3.8. PEB will
provide Illumina reasonable assistance with respect to
Illumina's or its designate's manufacture of OEM
Instruments, including the transfer of know-how and
documentation directly related to manufacture of OEM
Instruments.
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THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
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5. Joint Steering Committee
5.1. Purpose. A joint steering committee will be established to oversee
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the Joint Development Program established by this Agreement ("Joint
Steering Committee"). The duties of the Joint Steering Committee will
include, but not be limited to, the following:
(A) oversight of all aspects of the Joint Development Program,
including definition, development, manufacturing (supply),
marketing, sales, and support of Collaboration Product;
(B) implementation of changes to the Work Plan;
(C) approval of annual sales and marketing budgets for Sales and
Marketing Cost;
(D) approval and allocation of annual budgets for Ongoing R&D Cost;
(E) allocation of Instruments, Assembled Arrays, and Reagents to
Affiliates should either be in limited supply;
(F) organization of development teams and oversight of their
activities;
(G) review of forecasts for Net Sales of Collaboration Products
provided by PEB at least 90 days prior to New Product Release
and Quarterly thereafter; and
(H) resolution of disputes arising under this Agreement as set forth
in Section 5.4.
5.2. Membership. The Joint Steering Committee will be comprised of 3
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employees from Illumina and 3 employees from PEB, appointed at the
sole discretion of the respective Parties. Substitute employees may
be appointed at any time. The Joint Steering Committee will be
chaired in the first year by a senior representative from PEB, and
thereafter on a rotating annual basis, by a senior representative
from Illumina or PEB. The initial composition of the Joint Steering
Committee will be as follows:
For Illumina: John R. Stuelpnagel
Mark S. Chee
Richard J. Pytelewski
For PEB: J. William Efcavitch
Dawn E. Madden
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Elaine J. Heron
5.3. Meetings. The Joint Steering Committee will meet as often as is
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reasonably necessary to accomplish its purpose but at least
quarterly, on a mutually agreeable date and at a place selected
initially by PEB and then by each Party in turn thereafter.
Representatives of Illumina or PEB, or both, in addition to members
of the Joint Steering Committee, may attend such meetings at the
invitation of either Party.
5.4. Joint Steering Committee Decisions and Dispute Resolution. Decisions
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by the Joint Steering Committee will be made by consensus. If the
Joint Steering Committee is unable to reach agreement, within 10
business days the matter will be submitted for resolution to the
President of Illumina and the President of the PE Biosystems Group.
In the event that the Presidents of each Party cannot reach agreement
within 10 business days after receiving notice from the Joint
Steering Committee, which period may be extended by mutual agreement
of the Parties, then either Party may initiate arbitration in
accordance with the rules and procedures set forth in Exhibit 2.
5.5. Expenses. The Parties will each bear all expenses of their respective
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members related to their participation on the Joint Steering
Committee.
6. Intellectual Property; Patent Prosecution and Litigation; Licenses;
Trademarks
6.1. Ownership of Intellectual Property.
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6.1.1. Pre-Collaboration Illumina Intellectual Property and
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Collaboration Illumina Intellectual Property. All rights and
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title to Pre-Collaboration Illumina Intellectual Property and
Collaboration Illumina Intellectual Property, whether
patentable or copyrightable or not, will belong to Illumina
and will be subject to the terms and conditions of this
Agreement.
6.1.2. Collaboration Joint Intellectual Property. All rights and
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title to Collaboration Joint Intellectual Property, whether
patentable or copyrightable or not, will belong jointly to
PEB and Illumina and will be subject to the terms and
conditions of this Agreement. Each Party will have the right
to independently practice the Collaboration Joint
Intellectual Property, without accounting to the other Party,
only to the extent that the practice of the Collaboration
Joint Intellectual Property by PEB does not require rights
under Pre-Collaboration Illumina Intellectual Property,
Collaboration Illumina Intellectual Property, or any other
Intellectual Property Rights owned by, either partially or
wholly, or licensed to Illumina
14
<PAGE>
(subject to Sections 6.3.1, 6.3.2, and 6.3.3), and that
practice of the Collaboration Joint Intellectual Property by
Illumina does not require rights under Pre-Collaboration PEB
Intellectual Property, Collaboration PEB Intellectual
Property, or any other Intellectual Property Rights owned by,
either partially or wholly, or licensed to PEB (subject to
Sections 6.3.5, 6.3.6 and 6.3.7). Additionally, each Party
will have the right but not the obligation to bring, at its
own expense, an infringement action against any third party
under its interest in Joint Collaboration Intellectual
Property, subject to the same limitations set forth above
with respect to the practice of the Joint Collaboration
Intellectual Property by Illumina or PEB. The Parties will
assist one another and cooperate in any such litigation at
the other's reasonable request, and, if a Party is necessary
in order to institute or maintain an infringement suit by the
other Party as defined by law, that Party agrees to be joined
in the suit.
6.1.3. Pre-Collaboration PEB Intellectual Property and Collaboration
-------------------------------------------------------------
PEB Intellectual Property. All rights and title to Pre-
-------------------------
Collaboration PEB Intellectual Property and Collaboration PEB
Intellectual Property, whether patentable or copyrightable or
not, will belong to PEB and will be subject to the terms and
conditions of this Agreement.
6.2. Filing of Patent Applications.
------------------------------
6.2.1. Collaboration Illumina Intellectual Property. Illumina will
--------------------------------------------
have the first right, using in-house or outside legal counsel
selected by Illumina's sole discretion, to prepare, file,
prosecute, maintain and extend patent applications for
Collaboration Illumina Intellectual Property in countries of
Illumina's choosing. Illumina will bear all costs relating to
such activities. Illumina will solicit PEB's advice and
review of the patent applications, and Illumina will take
into consideration PEB's advice thereon. If Illumina elects
not to prepare, file, prosecute or maintain certain of the
patent applications or certain claims encompassed within the
patent applications, in one or more countries, Illumina will
give PEB notice thereof within a reasonable period prior to
allowing the patents or claims to lapse or become abandoned
or unenforceable, and PEB will thereafter have the right, at
its sole expense and discretion, to prepare, file, prosecute,
and maintain the patent applications in the name of PEB in
the one or more countries. Illumina will, at Illumina's
expense, assign the patent applications to PEB and provide
reasonable assistance to PEB to facilitate the filing and
prosecution of all the patent applications that Illumina has
elected not to pursue, and Illumina will execute all
documents
15
<PAGE>
deemed necessary or desirable therefor. Subject to any future
license agreement between the Parties, PEB will provide to
Illumina a royalty-free non-exclusive license, with right to
sublicense, under all the patent applications that Illumina
has elected not to pursue and PEB has elected to pursue under
this Section 6.2.1. If claims describing Collaboration
Illumina Intellectual Property are combined in a patent
application with claims describing Pre-Collaboration Illumina
Intellectual Property, PEB's rights under this Section 6.2.1
will be limited to those claims describing Collaboration
Illumina Intellectual Property. PEB and Illumina will each
hold all information it presently knows or acquires under
this Section 6.2.1 as Confidential Information in accordance
with Section 7.
6.2.2. Collaboration PEB Intellectual Property. PEB will have the
---------------------------------------
first right, using in-house or outside legal counsel selected
by PEB's sole discretion, to prepare, file, prosecute,
maintain and extend patent applications for Collaboration PEB
Intellectual Property in countries of PEB's choosing. PEB
will bear all costs relating to such activities. PEB will
solicit Illumina's advice and review of the patent
applications, and PEB will take into consideration Illumina's
advice thereon. If PEB elects not to prepare, file, prosecute
or maintain certain of the patent applications or certain
claims encompassed within the patent applications, in one or
more countries, PEB will give Illumina notice thereof within
a reasonable period prior to allowing the patents or claims
to lapse or become abandoned or unenforceable, and Illumina
will thereafter have the right, at its sole expense and
discretion, to prepare, file, prosecute, and maintain the
patent applications in the name of Illumina in the one or
more countries. PEB will, at PEB expense, assign said patent
applications to Illumina and provide reasonable assistance to
Illumina to facilitate the filing and prosecution of all the
patent applications that PEB has elected not to pursue, and
PEB will execute all documents deemed necessary or desirable
therefor. Subject to any future license agreement between the
Parties, Illumina will provide to PEB a royalty-free non-
exclusive license, with right to sublicense, under all the
patent applications that PEB has elected not to pursue and
Illumina has elected to pursue under this Section 6.2.2. If
claims describing Collaboration PEB Intellectual Property are
combined in a patent application with claims describing Pre-
Collaboration PEB Intellectual Property, Illumina's rights
under this Section 6.2.2 will be limited to those claims
describing Collaboration PEB Intellectual Property. PEB and
Illumina will each hold all information it presently knows or
acquires under this Section 6.2.2 as Confidential Information
in accordance with Section 7.
16
<PAGE>
6.2.3. Collaboration Joint Intellectual Property. PEB and Illumina
-----------------------------------------
will jointly have the right, using in-house or outside legal
counsel selected by both Parties, to prepare, file,
prosecute, maintain and extend patent applications for
Collaboration Joint Intellectual Property in countries of the
Party's choosing. But, if the practice of the Collaboration
Joint Intellectual Property would necessarily infringe claims
of patents or patent applications claiming Pre-Collaboration
PEB Intellectual Property, the Collaboration Joint
Intellectual Property will, for the purposes of this Section
6.2.3 only, be treated as Collaboration PEB Intellectual
Property under Section 6.2.2; and, if the practice of the
Collaboration Joint Intellectual Property would necessarily
infringe claims of patents or patent applications claiming
Pre-Collaboration Illumina Intellectual Property, the
Collaboration Joint Intellectual Property will, for the
purposes of this Section 6.2.3 only, be treated as
Collaboration Illumina Intellectual Property under Section
6.2.1. If only one Party ("Filing Party") desires to file a
patent application in one or more countries, then the Filing
Party will thereafter have the right, at its sole expense, to
prepare, file, prosecute, and maintain the applications in
its own name in the one or more countries. The other Party
will, at its own expense, assign said patent applications to
the Filing Party and provide reasonable assistance to the
Filing Party to facilitate the filing and prosecution of all
the patent applications that the other Party has elected not
to pursue, and the other Party will execute all documents
deemed necessary or desirable therefor. The Filing Party will
provide to the other Party a royalty-free non-exclusive
license, with right to sublicense, under all the patent
applications that the other Party has elected not to pursue
and the Filing Party has elected to pursue under this Section
6.2.3. PEB and Illumina will each hold all information it
presently knows or acquires under this Section 6.2.3 as
Confidential Information in accordance with Section 7.
6.3. Licenses of Intellectual Property.
---------------------------------
6.3.1. Exclusive License to PEB for Instruments and Reagents.
-----------------------------------------------------
Subject to the exclusivity obligations of Section 2, payment
obligations under Section 4.3, and Illumina's reservation of
rights under Section 6.3.4, Illumina grants to PEB an
exclusive royalty-free license under Illumina's interest in
Subject Intellectual Property to make, have made, import,
use, offer to sell, and sell Instruments and Reagents in the
Collaboration Field.
6.3.2. Exclusive License to PEB for Assembled Arrays. Subject to the
---------------------------------------------
exclusivity obligations of Section 2, payment obligations
under
17
<PAGE>
Section 4.3, and Illumina's reservation of rights under
Section 6.3.4, Illumina grants to PEB an exclusive royalty-
free license under Illumina's interest in Subject
Intellectual Property to use, offer to sell, and sell
Assembled Arrays in the Collaboration Field.
6.3.3. Conditional Non-Exclusive License to PEB for Assembled
-------------------------------------------------------
Arrays. In the event that Illumina is unwilling or unable to
------
supply Assembled Arrays to PEB under Section 4.2.3, or if
this Agreement is terminated by PEB under Section 11.2.2 and
subject to payment obligations under Section 4.3, Illumina
grants to PEB an exclusive royalty-free world-wide license
under Illumina's interest in Subject Intellectual Property to
make, have made, and import Assembled Arrays in the
Collaboration Field.
6.3.4. Illumina's Reservation of Rights. Notwithstanding the license
--------------------------------
grants of Sections 6.3.1, 6.3.2, and 6.3.3, Illumina retains
the right to use Instruments, Reagents, and Assembled Arrays
in the Collaboration Field for Illumina's internal use in
furtherance of the Joint Development Program and not for
resale, services or other use except as provided for in the
Early Access Program set forth in Section 3.6.
6.3.5. Non-Exclusive License to Illumina for Instruments. Subject to
-------------------------------------------------
the distribution restrictions of Section 4.4.1, PEB grants to
Illumina a non-exclusive royalty-free world-wide license
under PEB's interest in Subject Intellectual Property to use,
offer to sell, and sell Instruments outside of the
Collaboration Field.
6.3.6. Conditional Non-Exclusive License to Illumina for
-------------------------------------------------
Instruments. Subject to the royalty obligation of Section
-----------
6.3.8, and in the event that PEB is unwilling or unable to
supply OEM Instrument to Illumina under Section 4.4.2, or if
this Agreement is terminated by Illumina under Section
11.2.2, PEB grants to Illumina a non-exclusive royalty-
bearing world-wide license under PEB's interest in Subject
Intellectual Property to make, have made, and import,
Instruments outside of the Collaboration Field.
6.3.7. Non-Exclusive License to Illumina for Instruments Developed
-----------------------------------------------------------
Outside the Joint Development Program. Subject to the royalty
-------------------------------------
obligation of Section 6.3.8, PEB grants to Illumina a non-
exclusive royalty-bearing world-wide license under PEB's
interest in Collaboration PEB Intellectual Property to make,
have made, use, import, offer to sell, and sell instruments
(other than Instruments) outside the Collaboration Field.
18
<PAGE>
6.3.8. Royalties. Illumina will pay to PEB a royalty of [*] of Net
---------
Sales of Instruments or other instruments sold or otherwise
disposed of under the non-exclusive license granted to
Illumina under Section 6.3.6 or 6.3.7.
6.3.9. No rights other than those expressly granted in this Section
6.3 are hereby granted or intended to be granted to or by
either Party, either expressly, impliedly, or by estoppel,
under Subject Intellectual Property, or any other
Intellectual Property Rights, of either Party.
6.4. Interfering Third Party Intellectual Property. If a Party believes
---------------------------------------------
that any activities within the Joint Development Program infringe any
Intellectual Property Rights of a third party, that Party will
promptly notify the other Party, and the Joint Steering Committee
will seek to agree upon the appropriate response to be taken.
6.5. Patent Litigation.
-----------------
6.5.1. Defense Against Third Party Claims. In the event of the
----------------------------------
institution of any suit by a third party against Illumina or
PEB alleging that the manufacture, use, sale, distribution or
marketing of Collaboration Product infringes a third party
patent, the Party sued will promptly notify the other Party
in writing. The other Party will have the right but not the
obligation to defend or participate in the defense of such
suit at its own expense. Illumina and PEB will assist one
another and cooperate in any such litigation at the other's
reasonable request without expense to the requesting Party.
The Party conducting such action will have full control over
its conduct, including settlement thereof. But, no settlement
of an action will be made without the prior written consent
of the other Party if such settlement would adversely affect
the rights of the other Party, the consent not to be
unreasonably withheld or delayed.
6.5.2. Prosecution of Infringement Action. In the event that
----------------------------------
Illumina or PEB becomes aware of actual or threatened
infringement of a patent resulting from Collaboration
Illumina Intellectual Property, Collaboration PEB
Intellectual Property, or Collaboration Joint Intellectual
Property, that Party will promptly notify the other Party in
writing. Either owner of a patent resulting from the
intellectual property will have the first right but not the
obligation to bring, at its own expense, an infringement
action against any third party and to use the other Party's
name in connection therewith. If an owner of the patent does
not commence a particular infringement action within 90 days,
the other Party, after
____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
19
<PAGE>
notifying the owner in writing, will be entitled to bring the
infringement action at its own expense. The Party conducting
the action will have full control over its conduct, including
settlement thereof. But, no settlement of an action will be
made without the prior written consent of the other Party if
such settlement would adversely affect the rights of the
other Party, such consent not to be unreasonably withheld or
delayed. In any event, Illumina and PEB will assist one
another and cooperate in any such litigation at the other's
reasonable request without expense to the requesting Party,
and, if a Party is necessary in order to institute or
maintain an infringement suit by the other Party as defined
by law, that Party will join such suit, represented by its
own counsel.
6.5.3. Expenses. Illumina and PEB have the right to recover their
-------
respective actual out-of-pocket expenses, or proportionate
share thereof, in connection with any litigation or
settlement thereof from any recovery made by any Party. Any
excess amount will be shared between PEB and Illumina in an
amount proportional to their respective expenses.
6.5.4. Information. The Parties will keep one another reasonably
-----------
informed of the status of their respective activities
regarding any such litigation or settlement thereof.
6.6. Effect of Bankruptcy. All rights and licenses granted under this
--------------------
Agreement by one Party to the other Party are, and will irrevocably
be deemed to be, "intellectual property" as defined in Section
101(56) of Title 11, U.S. Code ("Bankruptcy Code"). In the event of
the commencement of a case by or against either Party under any
Chapter of the Bankruptcy Code, this Agreement will be deemed an
executory contract and all rights and obligations hereunder will be
determined in accordance with Section 365(n) thereof.
6.7. Trademarks and Non-Proprietary Names. The Joint Steering Committee,
------------------------------------
at equally shared expense between each Party, will be responsible for
the selection, registration and maintenance of all trademarks that it
employs in connection with Collaboration Product, and both Parties
will own and control such trademarks jointly for use in the
Collaboration Field. Nothing in this agreement will be construed as a
grant of rights, by license or otherwise, to either Party to use any
trademarks for any purpose other than co-promotion of Collaboration
Product as provided in this Agreement. PEB, at its expense, will be
responsible for the selection of non-proprietary names for
Collaboration Product sold by PEB.
7. Confidentiality and Non-Solicitation
20
<PAGE>
7.1. Non-Disclosure. Because Illumina and PEB will be cooperating with
--------------
each other under this Agreement, each may reveal Confidential
Information to the other. The Parties agree, by using the same degree
of care as each uses for its own information of like importance, but
not less than a reasonable degree of care, to hold in confidence any
Confidential Information disclosed by the other Party hereunder, and
not to disclose any Confidential Information to any third party
without the express written consent of the other Party. Each Party
will disclose Confidential Information only to its employees or
agents who have a need to know. Each Party will use Confidential
Information only for purposes of furthering the Joint Development
Program. With respect to any Confidential Information that is
revealed by a Party to the other Party, this confidentiality
requirement will remain in force for a period of 5 years following
the date the Confidential Information is revealed.
7.2. Responsibility over Employees and Agents. Each Party will assume
----------------------------------------
individual responsibility for the actions and omissions of its
respective employees, agents and assigns, and to inform same of the
responsibilities for confidentiality under this Agreement, and to
obtain their agreement to be bound in the same manner that the Party
is bound.
7.3. Affiliates. Nothing herein will be construed as preventing either
----------
Party from disclosing any information to an Affiliate of PEB or
Illumina for the purpose of furthering the Joint Development Program,
provided such Affiliate has undertaken a similar obligation of
confidentiality with respect to the Confidential Information.
7.4. Bankruptcy. All Confidential Information disclosed by one Party to
----------
the other will remain the intellectual property of the disclosing
Party. The bankrupt or insolvent Party will, to the extent permitted
by law, take all steps necessary or desirable to maintain the
confidentiality of the other Party's Confidential Information and to
ensure that the court or other tribunal maintain such information in
confidence in accordance with the terms of this Agreement. In the
event that a court or other legal or administrative tribunal,
directly or through an appointed master, trustee or receiver, assumes
partial or complete control over the assets of a Party to this
Agreement based on the insolvency or bankruptcy of such Party, the
bankrupt or insolvent Party will promptly notify the court or other
tribunal
(A) that Confidential Information received from the other Party
under this Agreement remains the property of the other Party;
and,
(B) of the confidentiality obligations under this Agreement.
7.5. Publication. Neither PEB nor Illumina will submit for written or oral
-----------
publication any manuscript, abstract or the like that includes data
or other
21
<PAGE>
information generated and provided by the other Party or otherwise
developed by either Party under the Joint Development Program without
first obtaining the prior written consent of the other Party, which
consent will not be unreasonably withheld or delayed. If written
consent or written denial is not provided by the other Party within
90 days, the first Party will have the right to publish. But, the
foregoing will not apply to customary literature that is prepared for
marketing and sales purposes and that does not contain Confidential
Information.
7.6. Publicity. Neither Party nor any of its Affiliates will originate any
---------
news relating to this Agreement without the prior written approval of
the other Party, which approval will not be unreasonably withheld or
delayed. However, within 30 days after the execution of this
Agreement the Parties will mutually agree on a joint press release
announcing the existence of this Agreement.
7.7. Compliance with Statutory Requirements. Nothing in this Agreement
--------------------------------------
will be construed as preventing or in any way inhibiting either Party
from complying with statutory or regulatory requirements governing
the development, manufacture, use, sale, or other distribution, of
Collaboration Product in any manner that it reasonably deems
appropriate, including, for example, by disclosing to regulatory
authorities Confidential Information or other information received
from a Party or third parties. The Parties will take reasonable
measures to assure that no unauthorized use or disclosure is made by
others to whom access to such information is granted under this
Section 7.7.
7.8. Non-Solicitation. During the term of the Agreement, and for a period
----------------
of 1 year thereafter, a Party will not solicit any person who is
employed by or is an exclusive consultant to the other Party, and
directly involved with the Joint Development Collaboration to
terminate that person's employment by or consultantcy to the other
Party. As used herein, the term "solicit" will mean requesting,
directly or indirectly, any employee or consultant to terminate his
employment by or consultantcy to a Party.
8. Representations, Warranties and Covenants
Each Party represents, warrants and covenants to the other Party that:
(A) it has the corporate power and authority and legal right to
enter into this Agreement and to perform its obligations
hereunder;
(B) the execution and delivery of this Agreement and the performance
of the transactions contemplated thereby have been duly
authorized by all necessary corporate action of the Party;
22
<PAGE>
(C) the execution and delivery of this Agreement and the performance
by the Party of any of its obligations under this Agreement do
not and will not:
(1) conflict with, or constitute a breach or violation of, any
other contractual obligation to which it is a party, any
judgment of any court or governmental body applicable to
the Party or its properties, or, to the Party's knowledge,
any statute, decree, order, rule or regulation of any court
or governmental agency or body applicable to the Party or
its properties, and
(2) require any consent or approval of any governmental
authority or other person;
(D) each Party will, to the best of its knowledge without
undertaking a special investigation, disclose to the other Party
any material adverse proceedings, claims or actions that arise
that would materially interfere with that Party's performance of
its obligations under this Agreement; and
(E) each Party's employees have executed or will execute agreements
whereby all right, title and interest in any Intellectual
Property Rights will be assigned to their respective employers.
9. Indemnification
9.1. PEB's Indemnity. PEB will defend and indemnify Illumina against any
---------------
judgement, damage, liability, loss, cost or other expense, including
legal fees ("Liability"), resulting from any third-party claims made
or proceedings brought against Illumina to the extent that the
Liability arises from the following:
(A) PEB's negligent or willful act or omission in the manufacture,
storage, handling, distribution, use or sale of Collaboration
Product; or,
(B) from PEB's breach of any warranty set forth in Section 8.
9.2. Illumina's Indemnity. Illumina will defend and indemnify PEB against
--------------------
any Liability, resulting from any third-party claims made or
proceedings brought against PEB to the extent that the Liability
arises from the following:
(A) Illumina's negligent or willful act or omission in the
manufacture, storage, handling, distribution, use or sale of
Collaboration Product; or,
23
<PAGE>
(B) from Illumina's breach of any warranty set forth in Section 8.
9.3. Notice; Choice of Attorney. A Party that intends to claim
--------------------------
indemnification under this Section 9 (the "Indemnitee") will promptly
notify the other Party (the "Indemnitor") of any Liability in respect
of which the Indemnitee intends to claim indemnification. The
Indemnitor, after it determines that indemnification is required of
it, will assume the defense and settlement thereof with counsel of its
choice, reasonably satisfactory to the other Party. But, an Indemnitee
will have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitor if Indemnitor does not assume
the defense; or, if representation of such Indemnitee by the counsel
retained by the Indemnitor would be inappropriate due to actual or
potential differing interests between such Indemnitee and any other
Party represented by counsel. The Indemnitee's failure to deliver
notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to Indemnitor's
ability to defend the action, will relieve the Indemnitor of any
liability to the Indemnitee under this Section 9, but the omission to
deliver notice to the Indemnitor will not relieve it of any liability
that it may have to any Indemnitee otherwise than under this Section
9.
9.4. Consent Required. The indemnity provisions in this Section 9 will not
----------------
apply to amounts paid in settlement of any Liability if the settlement
is effected without the consent of the Indemnitor.
9.5. Cooperation. The Indemnitee under this Section 9, its employees and
-----------
agents, will cooperate fully with the Indemnitor and its legal
representatives in the investigations of any action, claim or
liability covered by this indemnification. In the event that each
Party claims indemnity from the other and one Party is finally held
liable to indemnify the other, the Indemnitor will additionally be
liable to pay the reasonable legal costs and attorneys' fees incurred
by the Indemnitee in establishing its claim for indemnity.
9.6. Limitation on Liability. In no event will either Party be liable to
-----------------------
the other for incidental, special, consequential, or punitive damages.
10. Quiet Period
During the period beginning on the Effective Date and ending 6 months
thereafter, and inside the Nucleic Acid Field, Illumina will not negotiate
with, or enter into any agreement with, a third party with respect to the
commercialization of Illumina Pre-Collaboration Intellectual Property,
Illumina Collaboration Intellectual Property, or Illumina's interest in
Collaboration Joint Intellectual Property.
24
<PAGE>
11. Term and Termination
11.1. Term. Unless terminated earlier as provided herein, this Agreement
----
will commence on the Effective Date and will remain in full force
until the expiration of the last to expire Subject Patent.
11.2. Termination.
-----------
11.2.1. This Agreement may be terminated without cause by mutual
written agreement of the Parties, effective as of the time
specified in such written agreement.
11.2.2. This Agreement may be terminated by either Party,
(A) in the event the other Party files in any court or
agency under any statute or regulation of any state or
country, a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or
trustee of the other Party or of its assets, or if the
other Party proposes a written agreement of composition
or extension of its debts, or if the other Party will be
served with an involuntary petition against it, filed in
any insolvency proceeding, and the petition is not
dismissed within 60 days after the filing thereof, or if
the other Party will propose or be a Party to any
dissolution or liquidation, or if the other Party will
make an assignment for the benefit of creditors; or
(B) upon any material breach of this Agreement by the other
Party; except that,
(1) the Party alleging such breach must first give the
other Party written notice thereof, which notice
must state the nature of the breach in reasonable
detail and the other Party must have failed to cure
such alleged breach within 60 days after receipt of
the notice; and
(2) the Party alleging the breach terminates the
Agreement within 1 year of first giving the other
Party such written notice.
11.2.3 Survival of Obligations. Upon any termination of this
-----------------------
Agreement, by expiration of the term or otherwise, neither
Party will be relieved of any obligations incurred prior to
such termination. Despite any termination of this Agreement,
the obligations of the Parties under Sections 4.4, 6.1, 7, 8,
9, 11.2.3, and 13, as well as
25
<PAGE>
any other provisions that by their nature are intended to
survive any termination, will survive and continue to be
enforceable. With respect to the survival of licenses granted in
Section 6.3,
(A) if termination of this Agreement is by PEB under Section
11.2.2, licenses granted to PEB under Section 6.3 will survive
termination of this Agreement only to the extent that the
licenses relate to Collaboration Product that has reached New
Product Release prior to such material breach; or
(B) if termination of this Agreement is by Illumina under Section
11.2.2, licenses granted to Illumina under Section 6.3 will
survive termination.
11.2.4 Refund of Unused Development Funding. In the event that the
------------------------------------
Agreement is terminated by PEB under Section 11.2.2, Illumina will refund
to PEB any portion of development funding given to Illumina under Section
3.7 that is unspent at the time of termination.
12. Use of Collaboration Product by PEB or Affiliates
In the event that PEB or an Affiliate of PEB uses Collaboration Product to
supply services or information to a third party for commercial purposes,
PEB shall make such Collaboration Product available for sale to third
parties on commercially reasonable terms and without restriction, by way of
license or otherwise, on the ability of such customers to themselves use
such Collaboration Product to supply services or information to third
parties for commercial purposes. An Affiliate of a Party who desires to
purchase or use Collaboration Product will not receive (i) any preferences
over and above those granted to preferred third-party customers with
respect to price of, the use of, or access to Collaboration Product, or
(ii) any rights under Collaboration Illumina Intellectual Property,
Collaboration Joint Intellectual Property, or Collaboration PEB
Intellectual Property, beyond those granted to third party customers with
the sale of Collaboration Product.
13. General Provisions
13.1. Force Majeure. If the performance of any part of this Agreement by
-------------
either Party, or of any obligation under this Agreement, is
prevented, restricted, interfered with or delayed by reason of any
cause beyond the reasonable control of the Party liable to perform,
unless conclusive evidence to the contrary is provided, the Party so
affected will, upon giving written notice to the other Party, be
excused from the performance to the extent of the prevention,
restriction, interference or delay; provided, however, the affected
Party will use its reasonable best efforts to avoid or remove the
26
<PAGE>
causes of non-performance and will continue performance with the
utmost dispatch whenever the causes are removed. When the
circumstances arise, the Parties will discuss what, if any,
modification of the terms of this Agreement may be required in order
to arrive at an equitable solution.
13.2. Governing Law. This Agreement will be deemed to have been made in
-------------
the State of California and its form, execution, validity,
construction and effect will be determined in accordance with the
laws of the State of California.
13.3. Books and Records. Using a Party's customary practices and
-----------------
procedures in accordance with GAAP, each Party will keep and
maintain proper and complete records and books of account sufficient
in detail to enable the verification of monies spent and received by
each Party in connection with each Party's obligations under this
Agreement. The books and records will be retained for a period of at
least 6 years. Each Party will provide to the other Party detailed
quarterly statements for monies spent and received by each Party in
connection with each Party's obligations under this Agreement. Each
Party will have the right from time to time (not to exceed once
during each calendar year) during normal business hours and upon
reasonable notice to inspect in confidence, or have an agent,
accountant or other representative inspect in confidence, the books
and records. The Party initiating the inspection will bear the costs
thereof unless the inspection reveals a discrepancy unfavorable to
that Party of at least 10%, in which case the other Party will pay
the costs of the inspection. If the inspection results in a final
determination that amounts have been overstated or understated, the
applicable amount will be refunded or paid promptly by the
appropriate Party.
13.4. Payments. All payments due under this Agreement will be due 30 days
--------
following the start or end, as the case may be, of the relevant
Quarter. All payments under this Agreement will be made in United
States dollars by wire transfer to a bank account designated by the
Party receiving the payment, without deductions of taxes charges and
any other duties that may be imposed. For converting payments due on
sales made in currencies other than United States dollars into
United States dollars, the payments will be converted at the closing
commercial sell rate of exchange for United States dollars and each
currency involved as quoted by Citibank, N.A., or any successor
thereto, in New York on the last business day of the relevant
period.
13.5. Severability. If a court or an arbitrator of competent jurisdiction
------------
holds any provision of this Agreement to be illegal, unenforceable,
or invalid, in whole or in part for any reason, the validity and
enforceability of the remaining provisions, or portions thereof,
will not be affected.
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<PAGE>
13.6. Entire Agreement. This Agreement and the Equity Agreement, and
----------------
exhibits, and schedules referred to in this Agreement constitute the
final, complete, and exclusive statement of the terms of the
agreement between the Parties pertaining to the subject matter of
this Agreement and supersedes all prior and contemporaneous
understandings or agreements of the Parties. However, confidential
disclosures made under previously executed Confidentiality
Agreements between Illumina and PEB will remain subject to the terms
of those Confidentiality Agreements. No Party has been induced to
enter into this Agreement by, nor is any Party relying on, any
representation or warranty outside those expressly set forth in this
Agreement.
13.7. Modification of Agreement. No terms or conditions of this Agreement
-------------------------
will be varied or modified by any prior or subsequent statement,
conduct or act of either of the Parties, except that the Parties may
supplement, amend, or modify this Agreement by written instruments
specifically referring to and executed in the same manner as this
Agreement.
13.8. Assignment. Neither Party has the power to assign this Agreement nor
----------
any interest hereunder without the written consent of the other
Party. Except that either Party may assign this Agreement or any of
its rights or obligations to any Affiliate or to any third party
with which it may merge or consolidate, or to which it may transfer
all or substantially all of its assets to which this Agreement
relates, without obtaining the consent of the other Party.
13.9. Construction.
------------
13.9.1. Headings; Sections and Exhibits. Headings contained in this
-------------------------------
Agreement are for convenience only and will not be used in
the interpretation of this Agreement. References herein to
sections and exhibits are to the sections and exhibits,
respectively, of this Agreement. The exhibits are hereby
incorporated herein by reference and made a part of this
Agreement. Should any inconsistency exist or arise between
a provision of this Agreement and a provision of any
exhibit, schedule, or other incorporated writing, the
provision of this Agreement will prevail.
13.9.2. No Construction Against Drafter. Each Party and its counsel
-------------------------------
have participated fully in the review and revision of this
Agreement. Any rule of construction to the effect that
ambiguities are to be resolved against the drafting Party
will not apply in interpreting this Agreement.
13.9.3. Certain Words and Terms. Unless the context clearly
----------------------
requires otherwise,
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(A) the plural and singular numbers will each be deemed to
include the other;
(B) the masculine, feminine, and neuter genders will each
be deemed to include the others;
(C) "will," "will agree," or "agrees" are mandatory, and
"may" is permissive;
(D) "or" is not exclusive; and
(E) "includes" and "including" are not limiting.
13.10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, and each counterpart will be deemed an original
instrument, but all counterparts together will constitute but one
agreement.
13.11. Notices.
-------
13.11.1. Sufficient Notice. All notices, requests, demands, or
-----------------
other communications under this Agreement will be in
writing. Notice will be sufficiently given for all
purposes as follows:
(A) when personally delivered to the recipient, notice is effective
on delivery;
(B) when mailed certified mail, return receipt requested, notice is
effective on receipt, if delivery is confirmed by a return
receipt;
(C) when delivered by Federal Express/Airborne/United Parcel
Service/DHL WorldWide, or United States Express Mail, charges
prepaid or charged to the sender's account, notice is effective
on delivery, if delivery is confirmed by the delivery service;
and
(D) when sent by telex or fax to the last telex or fax number of the
recipient known to the Party giving notice, notice is effective
on receipt, provided that
(1) a duplicate copy of the notice is promptly given by first-
class or certified mail or by overnight delivery, or
(2) the receiving Party delivers a written confirmation of
receipt. Any notice given by telex or fax will be deemed
received on the next business day if it is received after
5:00 p.m. (recipient's time) or on a nonbusiness day.
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<PAGE>
13.11.2. Notice Refused, Unclaimed, Or Undeliverable. Any correctly
-------------------------------------------
addressed notice that is refused, unclaimed, or undeliverable
because of an act or omission of the Party to be notified
will be deemed effective as of the first date that said
notice was refused, unclaimed, or deemed undeliverable by the
postal authorities, messenger, or overnight delivery service.
13.11.3. Addresses. Addresses for purpose of giving notice are as
---------
follows:
If to Illumina: Illumina, Inc.
9390 Towne Centre Drive, Suite 200
San Diego, CA 92121-3015
FAX No.: 858-587-4297
Attn.: President
If to PEB PE Biosystems
850 Lincoln Centre Drive
Foster City, CA 94404
FAX No.: 650-638-6677
Attn.: President, PE Biosystems
[Signature Page Follows]
30
<PAGE>
The Parties , through their authorized officers, have executed this Agreement as
of the Effective Date.
ILLUMINA, INC. PE CORPORATION, THROUGH ITS PE
BIOSYSTEMS GROUP
By: _______________________________ By: _______________________________
Name: _____________________________ Name: _____________________________
Title: ____________________________ Title: ____________________________
Date: _____________________________ Date: _____________________________
31
<PAGE>
EXHIBIT 1
Technical Milestones and Development Funding
--------------------------------------------
Technical Milestones
[*]
____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
1
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Development Funding
[*]
____________________
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
2
<PAGE>
EXHIBIT 2
Alternative Dispute Resolution
In the event of any dispute, difference or question arising between the Parties
in connection with this Agreement, the construction thereof, or the rights,
duties or liabilities of either Party excluding any dispute or controversy for
which arbitration is prohibited by any applicable law or treaty, and which
dispute is not amicably resolved by the good faith efforts of the Parties under
Section 5.4, then such dispute will be resolved by binding Alternative Dispute
Resolution ("ADR") in the manner described below:
1) If any Party intends to begin an ADR to resolve a dispute, such Party will
provide written notice to counsel for the other Party informing the other
Party of such intention and the issues to be resolved. Within 10 business
days after the receipt of such notice, the other Party may by written notice
to the counsel for the Party initiating ADR, add additional issues to be
resolved. From the date of receipt of the ADR notice and until such time as
any matter has been finally settled by ADR, the running of the time periods
in which a Party must cure a breach of this Agreement will be suspended as
to the subject matter of the dispute.
2) Within 5 business days following the receipt of the original ADR notice
("Notice Date") a neutral will be selected by the then President of the
Center for Public Resources ("CPR"), 14th Floor, 366 Madison Avenue, New
York, New York 10017. The neutral will be an individual who will preside in
resolution of any disputes between the Parties. The neutral selected will be
a member of the Judicial Panel of the CPR and will not be an employee,
director or shareholder of either a Party or of an Affiliate of either
Party.
3) Each Party will have 10 business days from the date the neutral is selected
to object in good faith to the selection of that person. If either Party
makes such an objection, the then president of the CPR will as soon as
possible thereafter, select another neutral under the same conditions set
forth above. This second selection will be final.
4) No later than 90 business days after selection, the neutral will hold a
hearing to resolve each of the issues identified by the Parties.
a) Each Party will have the right to be represented by counsel at the
hearing.
b) The hearing will be held at such place as agreed upon by the Parties or
if they are unable to agree at a place designated by the neutral.
5) The ADR proceeding will be confidential and the neutral will issue
appropriate protective orders to safeguard each Parties' Confidential
Information. Except as required by law, no Party will make (or instruct the
neutral to make) any public
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announcement with respect to the proceedings or decision of the neutral
without the prior written consent of each other Party. The existence of any
dispute submitted to ADR, and the award of the neutral, will be kept in
confidence by the Parties and the neutral, except as required in connection
with the enforcement of such award or as otherwise required by applicable
law.
6) It is the intention of the Parties that discovery, although permitted as
described herein, will be limited except in exceptional circumstances. The
neutral will permit such limited discovery necessary for an understanding of
any legitimate issue raised in the ADR, including the production of
documents. Each Party will be permitted but not required to take the
deposition of not more than 5 persons, each such deposition not to exceed 6
hours in length. If the neutral believes that exceptional circumstances
exist, and additional discovery is necessary for a full and fair resolution
of the issue, the neutral may order such additional discovery as the neutral
deems necessary. At the hearing the Parties may present testimony (either by
live witness or deposition) and documentary evidence. The neutral will have
sole discretion with regard to the admissibility of any evidence and all
other materials relating to the conduct of the hearing.
7) Each Party will be entitled to no more than 4 hours of hearing to present
testimony or documentary evidence. The testimony of both Parties will be
presented during the same calendar day. Such time limitation will include
any direct, cross or rebuttal testimony, but such time limitation will only
be charged against the Party conducting such direct, cross or rebuttal
testimony. It will be the responsibility of the neutral to determine whether
the Parties have had the 4 hours to which they are entitled. If the neutral
believes that exceptional circumstances exist, and additional hearing time
is necessary for a full and fair resolution of the issue, the neutral may
order such additional hearing time as the neutral deems necessary.
8) At least 15 business days prior to the date set for the hearing, each Party
will submit to each other Party and the neutral a list of all documents on
which such Party intends to rely in any oral or written presentation to the
neutral and a list of all witnesses, if any, such Party intends to call at
such hearing and a brief summary of each witnesses testimony.
9) At least 5 business days prior to the hearing, each Party must submit to the
neutral and serve on each other Party a proposed ruling on each issue to be
resolved. Such writing will be limited to presenting the proposed ruling,
will contain no argument or analysis of the facts or issues, and will be
limited to not more than 10 pages.
10) Not more than 5 business days following the close of hearings, the Parties
may each submit post hearing briefs to the neutral addressing the evidence
and issues to be resolved. Such post hearing briefs will not be more than 50
pages.
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11) The neutral will rule on each disputed issue after the hearing as
expeditiously as possible, but in no event more than 30 days after the
close of the hearing. The neutral will, in rendering his decision, apply
the substantive law of the state of California, U.S.A., and without giving
effect to its principles of conflicts of law, and without giving effect to
any rules or laws relating to arbitration. The neutral is not empowered
with the remedy of termination of the Agreement.
12) Any judgment upon the award rendered by the neutral may be entered in any
court having jurisdiction thereof. The decision rendered in any such ADR
will be final and not appealable, except in cases of fraud or bad faith on
the part of the neutral or any Party to the ADR proceeding in connection
with the conduct of such proceedings, and will be enforceable in any court
of competent jurisdiction.
13) The neutral will have the option to assess costs and expenses to the non-
prevailing Party, otherwise the Parties will pay their own costs
(including, without limitation, attorneys fees) and expenses in connection
with such ADR.
3
