Exhibit 10.331

 

CONFIDENTIAL

 

REDACTED VERSION

 

[***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.

 

 

MODIFIED BLOOD SCREENING INSTRUMENT –

eSAS 2 ADDENDUM

 

AMENDING

 

AGREEMENT ENTERED INTO AS OF JUNE 11, 1998

 

BY AND BETWEEN

 

GEN-PROBE INCORPORATED, A DELAWARE CORPORATION

 

AND

 

CHIRON CORPORATION

 

effective as of January 1, 2002

 

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TABLE OF CONTENTS

 

1.

Definitions

 

 

1.1

Agreement

 

 

1.2

Binder

 

 

1.3

Budget

 

 

1.4

eSAS 2 Instrument

 

 

1.5

eSAS 2 Development Costs

 

 

1.6

eSAS 2 Development Program

 

 

1.7

eSAS 2 Addendum Term

 

 

1.8

FTE Labor Rate

 

 

1.9

Material Modification

 

 

1.10

Non-material Modification

 

 

1.11

Product Requirements Document

 

 

1.12

Resource Plan

 

 

1.13

Software Requirements Specifications

 

 

1.14

Technical Plan

 

 

1.15

Timeline

 

2.

eSAS 2 Development Program

 

 

2.1

Objective

 

 

2.2

General Conduct of Development

 

 

2.3

No Liability if Commercially Reasonable Efforts Are Expended

 

 

2.4

Project Management

 

 

 

2.4.1

Principles of Project Management

 

 

 

2.4.2

Project Manager

 

 

 

2.4.3

Project Manager’s Responsibilities

 

 

 

2.4.4

Project Leaders

 

 

 

2.4.5

Reports

 

 

 

2.4.6

Meetings of the Supervisory Board

 

 

2.5

Development Responsibilities

 

 

 

2.5.1

Principal Responsibility; General Statement

 

 

 

2.5.2

Regulatory/Licensure

 

 

 

2.5.3

Project Leader Disagreements

 

3.

Modifications

 

 

3.1

eSAS 2 Development Program Definition

 

 

 

3.1.1

[***] Modules

 

 

 

3.1.2

[***] Modules

 

 

3.2

Modifications

 

 

 

3.2.1

Request for Modifications

 

 

 

3.2.2

Monthly Progress Reports

 

 

3.3

Material Modifications

 

 

 

3.3.1

Request for Material Modifications

 

 

 

3.3.2

Initial Analysis of Impact of Proposed Material Modification

 

 

 

3.3.3

Preparation of Modified eSAS 2 Development Program

 

 

 

3.3.4

Acceptance of Modified eSAS 2 Development Program

 

 

 

3.3.5

Effective Date of Modified eSAS 2 Development Program

 

 

3.4

Notice of Significant Changes

 

4.

Changes to eSAS 2 Instrument after Completion Date

 

 

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5.

eSAS 2 Development Costs

 

 

5.1

[***] to pay Development Costs

 

 

5.2

Definition and Calculation of eSAS 2 Development Costs

 

 

 

5.2.1

eSAS 2 Development Costs; FTE Labor Rate

 

 

 

5.2.2

Comparison with Resource Plan

 

 

 

5.2.3

Methodology

 

 

5.3

Payment of eSAS 2 Development Costs

 

 

 

5.3.1

Accrued eSAS 2 Development Costs

 

 

 

5.3.2

Monthly Notices; Payments

 

 

 

5.3.3

Invoices

 

 

5.4

Reimbursement of eSAS 2 Development Costs

 

6.

Manufacturing and Commercialization

 

 

6.1

eSAS 2 Instrument Manufacturing Costs

 

 

6.2

Rights to Manufacture and Sell

 

 

 

6.2.1

Blood Screening Field

 

 

 

6.2.2

Clinical Diagnostic Field

 

 

 

6.2.3

Right to Acquire All Rights to Manufacture and Commercialize

 

 

6.3

Consideration on eSAS 2 Instrument Sales

 

 

6.4

Authorization Letter

 

7.

Ownership; License Grant

 

 

7.1

Ownership

 

 

7.2

License Grant

 

 

7.3

[***] Immunity

 

8.

Addendum Effective Date; Term; Termination

 

 

8.1

Term of eSAS 2 Addendum

 

 

8.2

Termination for Breach

 

 

 

8.2.1

Default

 

 

 

8.2.2

Right to Cure Event of Default

 

 

 

8.2.3

Effect of Termination for Breach

 

 

8.3

Termination by Chiron

 

 

8.4

Continuance of eSAS 2 Development Program following Termination

 

 

 

8.4.1

Election

 

 

 

8.4.2

Funding and Conduct of Development

 

 

 

8.4.3

Reimbursement of Development Costs

 

 

 

8.4.4

Control of the Program upon Unilateral Funding

 

 

 

8.4.5

Rights under Agreement

 

9.

Escalation

 

 

9.1

Escalation Process

 

 

9.2

Remedies in Event of Default

 

 

9.3

Survival

 

10.

No Other Amendment

 

11.

Counterparts

 

 

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CONFIDENTIAL

 

REDACTED VERSION

 

 

MODIFIED BLOOD SCREENING INSTRUMENT –

eSAS 2 ADDENDUM

 

This Modified Blood Screening Instrument — eSAS 2 Addendum (“eSAS 2 Addendum”)
is entered into, effective as of January 1, 2002 (“Addendum Effective Date”)
pursuant to and amending that certain Agreement entered into as of June 11, 1998
(“Agreement”) by and between Gen-Probe Incorporated, a Delaware corporation
(“Gen-Probe”) with a principal place of business at 10210 Genetic Center Drive,
San Diego CA 92121, and Chiron Corporation, a Delaware corporation (“Chiron;”
Chiron and Gen-Probe each is individually referred to as  “Party” and
collectively are referred to as the “Parties”) with a place of business at 4560
Horton Street, Emeryville, CA 94608.

 

Recitals

 

A.                                   The Parties entered into the Agreement as
of June 11, 1998.  The Agreement was amended by the following: (i) June 11, 1998
Supplemental letter agreement, (ii) June 26, 1998 Addendum to Collaboration
Agreement, (iii) June 30, 1998 Supplemental letter agreement, (iv) June 30, 1998
Consent, (v) December 7, 1999 Amendment to Collaboration Agreement,
(vi) February 1, 2000 Amendment No. 2 to Collaboration Agreement, (vii) June 7,
2001 Supplemental agreement no. 1  (Customer training and Support),
(viii) October 30, 2001 Confidentiality and Joint Interest Agreement,
(ix) April 1, 2002 Amendment No. 3 (warehousing and shipping), (x) the Short
Form Agreement dated November 16, 2001 and the Definitive Written Settlement
Agreement dated December 5, 2001, (xi) the Future Blood Screening Assay – Ultrio
Addendum dated as of January 1, 2002 (the “Ultrio Development Addendum”), (xii)
March 5, 2003 Amendment No. 4 (Milestone for Ultrio on Tigris); (xiii) the
Future Blood Screening Assay – WNV Addendum dated as of June 1, 2003 (the
“Ultrio Development Addendum”) and (xiv) January 1, 2004 Amendment No. 5
(Applicable Purchase Price).

 

B.                                     In the Agreement, the Parties agreed to
discuss, during the term thereof, the selection and establishment of one or more
Development Programs for one or more Blood Screening Instruments.

 

C.                                     The Parties have discussed the proposed
development of an eSAS 2 Instrument system, consisting of the following multiple
modules: (i) a front end pipettor; (ii) an automated reagent addition station;
(iii) an automated target capture bay; (iv) an automated incubation module; and
(v) a data management to track sample and system interactions to meet customer
demands of throughput and automation required for pooled donor screening by NAT.

 

D.                                    The Parties intend that the development of
each module in the eSAS 2 Instrument system will provide improved automation or
replacement of current aging or obsolete instrument components with newer
technology, all without [***] the assay sensitivity or specificity; subject to
all the terms and conditions of this eSAS 2 Addendum, the Parties will agree
that each such module within the eSAS 2 Instrument system will be a modification
to a “Blood Screening Instrument”, as provided in Section 3.3.7 of the
Agreement.

 

E.                                      By this eSAS 2 Addendum, the Parties
desire to provide for the development of the eSAS 2 Instrument by Chiron
pursuant to the Agreement, as clarified and amended by the terms and conditions
more particularly described in this eSAS 2 Addendum.

 

2

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Agreement

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
set forth in this eSAS 2 Addendum, the Parties agree as follows:

 

1.               DEFINITIONS.  ALL CAPITALIZED TERMS USED BUT NOT DEFINED IN
THIS ESAS 2 ADDENDUM SHALL HAVE THE MEANINGS SET FORTH IN THE AGREEMENT.

 

1.1         AGREEMENT MEANS THE AGREEMENT (AS DEFINED IN THE PREAMBLE OF THIS
ESAS 2 ADDENDUM), AS AMENDED BY THE AGREEMENTS REFERRED TO IN RECITAL A OF THIS
ESAS 2 ADDENDUM AND AS MAY BE SUBSEQUENTLY AMENDED.

 

1.2         BINDER MEANS THAT CERTAIN THREE-RING BINDER, WITH ONE OR MORE
VOLUMES, ENTITLED “ESAS 2 DEVELOPMENT PROGRAM FOR THE ESAS 2 INSTRUMENT
(GEN-PROBE/CHIRON ESAS 2 DEVELOPMENT ADDENDUM, DATED AS OF     , 2004) BINDER,”
IN WHICH CERTAIN DOCUMENTS, MATERIALS OR OTHER ITEMS INCORPORATED INTO THIS ESAS
2 ADDENDUM BY REFERENCE ARE KEPT.  THE ORIGINAL BINDER AND AN ADDITIONAL VOLUME
OF THE BINDER, LABELED “AMENDMENTS TO ESAS 2 DEVELOPMENT PROGRAM” AND REFLECTING
ANY CHANGES, MODIFICATIONS OR AMENDMENTS TO THE BINDER, ARE MAINTAINED BY AND
LOCATED AT THE PREMISES OF CHIRON.  A COPY OF THE ORIGINAL BINDER, AND A COPY OF
THE ADDITIONAL VOLUME OF THE BINDER, EACH SIGNED BY BOTH PARTIES, SHALL BE
MAINTAINED BY AND LOCATED AT THE PREMISES OF GEN-PROBE.

 

1.3         BUDGET MEANS THE BUDGETED ESAS 2 DEVELOPMENT COSTS OF THE ESAS 2
DEVELOPMENT PROGRAM.  THE BUDGET SHALL INCLUDE THE ESTIMATED COST OF THE ESAS 2
DEVELOPMENT PROGRAM ON A MONTHLY BASIS THROUGH THE END OF THE ESAS 2 DEVELOPMENT
PROGRAM.  A PRELIMINARY BUDGET IS ATTACHED HERETO AS SCHEDULE 1.3.  THE BUDGET
MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3
BELOW.

 

1.4         ESAS 2 INSTRUMENT IS DEFINED ON SCHEDULE 1.4.

 

1.5         ESAS 2 DEVELOPMENT COSTS MEANS, WITH RESPECT TO THIS ESAS 2 ADDENDUM
ONLY, THE DEVELOPMENT COSTS DEFINED IN SECTION 5 HEREOF.

 

1.6         ESAS 2 DEVELOPMENT PROGRAM MEANS THE DEVELOPMENT PROGRAM FOR THE
DEVELOPMENT OF THE ESAS 2 INSTRUMENT SYSTEM UNDER THE TERMS OF THIS ESAS 2
ADDENDUM, AN OUTLINE OF WHICH IS SET FORTH IN SCHEDULE 1.6 HERETO AND AS SUCH
DEVELOPMENT PROGRAM FOR EACH MODULE OF THE ESAS 2 INSTRUMENT SYSTEM IS DESCRIBED
IN THE BINDER, AND CONSISTING OF (I) THE PRODUCT REQUIREMENTS DOCUMENTS,
(II) THE SOFTWARE REQUIREMENTS SPECIFICATIONS, (III) THE TECHNICAL PLAN,
(IV) THE RESOURCE PLAN INCLUDED WITHIN THE TECHNICAL PLAN, AND (V) THE BUDGET.

 

1.7                                 ESAS 2 ADDENDUM TERM IS DEFINED IN
SECTION 8.1.

 

1.8                                 FTE LABOR RATE IS DEFINED IN SECTION 5.2.1.

 

1.9                                 FULLY BURDENED MANUFACTURING COSTS IS
DEFINED IN SECTION 6.1.1.

 

1.10                           MATERIAL MODIFICATION MEANS A CHANGE OR AMENDMENT
TO THE ESAS 2 DEVELOPMENT PROGRAM THAT MATERIALLY AFFECTS THE REQUIREMENTS SET
FORTH IN THE THEN-CURRENT PRODUCT REQUIREMENTS DOCUMENT, SOFTWARE REQUIREMENT
SPECIFICATIONS, TECHNICAL PLAN, RESOURCE PLAN OR BUDGET, INCLUDING WITHOUT
LIMITATION ANY MODIFICATION THAT COULD SIGNIFICANTLY DEGRADE THE ASSAY
SENSITIVITY OR SPECIFICITY ALL AS FURTHER DEFINED IN SECTION 3.3.

 

3

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1.11                           NON-MATERIAL MODIFICATION MEANS A CHANGE OR
AMENDMENT TO THE ESAS 2 DEVELOPMENT PROGRAM OTHER THAN A MATERIAL MODIFICATION. 
AGREEMENT AMONG THE PROJECT MANAGEMENT THAT A MODIFICATION IS A “NON-MATERIAL
MODIFICATION” HEREUNDER AS DESCRIBED IN SECTION 3.2 BELOW SHALL BE CONCLUSIVE.

 

1.12                           PRODUCT REQUIREMENTS DOCUMENT (OR “PRD”) MEANS
THE SPECIFICATIONS FOR EACH MODULE WITHIN THE ESAS 2 INSTRUMENT SYSTEM, EACH OF
WHICH INCLUDES AS A COMPONENT THEREOF THE APPLICABLE SOFTWARE REQUIREMENTS
SPECIFICATIONS.  THE INITIAL PRODUCT REQUIREMENTS DOCUMENT FOR TWO OF THE FIVE
(5) MODULES DESCRIBED IN SCHEDULE 1.4 ARE ATTACHED HERETO AS SCHEDULE 1.12-A AND
SCHEDULE 1.12-B.  THE PRD FOR EACH OF THE REMAINING THREE (3) MODULES DESCRIBED
IN SCHEDULE 1.4 WILL BE DEVELOPED, AND EACH PRD AFTER AGREEMENT BETWEEN THE
PARTIES MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 3 BELOW.  EACH PRD, AS IT MAY BE DEVELOPED AND/OR AMENDED FROM TIME TO
TIME, SHALL BE RETAINED IN THE BINDER UNDER THE HEADING “PRODUCT REQUIREMENTS
DOCUMENT (PRD, REVISION    , DATED XX/XX/XX).”

 

1.13                           RESOURCE PLAN MEANS THE DESCRIPTION OF (I) A
PARTY’S PERSONNEL TO BE ALLOCATED TO THE ESAS 2 DEVELOPMENT PROGRAM, INCLUDING
THE NAME OF THE SPECIFIC PERSONNEL OR THE QUALIFICATION OR GRADE OF UNIDENTIFIED
PERSONNEL, AND DEDICATED AMOUNT OF TIME AND PERIODS FOR THE COMMITMENT OF SUCH
PERSONNEL REQUIRED FOR THE ESAS 2 DEVELOPMENT PROGRAM, AND (II) EQUIPMENT,
TOOLS, SOFTWARE, OR OTHER SPECIAL ITEMS, THE PURCHASE, LICENSE OR LEASING OF
WHICH IS SPECIFICALLY REQUIRED FOR USE BY SUCH PERSONNEL TO SUPPORT THE ESAS 2
DEVELOPMENT PROGRAM.  THE INITIAL RESOURCE PLAN IS ATTACHED HERETO AS
SCHEDULE 1.13.  THE RESOURCE PLAN MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 3 BELOW.  THE RESOURCE PLAN, AS IT MAY BE AMENDED
FROM TIME TO TIME, SHALL BE RETAINED IN THE BINDER UNDER THE HEADING “RESOURCE
PLAN.”

 

1.14                           SOFTWARE REQUIREMENTS SPECIFICATIONS (OR “SRS”)
MEANS THE SPECIFICATIONS FOR THE SOFTWARE COMPONENT OF THE ESAS 2 DEVELOPMENT
PROGRAM.  THE INITIAL SOFTWARE REQUIREMENTS SPECIFICATIONS FOR TWO OF THE FIVE
(5) MODULES DESCRIBED IN SCHEDULE 1.4 ARE ATTACHED HERETO AS SCHEDULE 1.14-A AND
SCHEDULE 1.14-B.  THE SRS FOR EACH OF THE REMAINING THREE (3) MODULES DESCRIBED
IN SCHEDULE 1.4 WILL BE DEVELOPED, AND EACH SRS AFTER AGREEMENT BETWEEN THE
PARTIES MAY BE AMENDED FROM TIME TO TIME IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 3 BELOW.  THE SRS, AS IT MAY BE DEVELOPED AND/OR AMENDED FROM TIME TO
TIME, SHALL BE RETAINED IN THE BINDER UNDER THE HEADING “SOFTWARE REQUIREMENTS
SPECIFICATIONS (SRS, REVISION    , DATED XX/XX/XX).”

 

1.15                           TECHNICAL PLAN MEANS THE STATEMENT OF WORK
PREPARED FOR THE DEVELOPMENT OF THE ESAS 2 INSTRUMENT, INCLUDING THE
RESPONSIBILITIES TO BE PERFORMED BY EACH PARTY, THE RESPONSIBILITIES TO BE
PERFORMED JOINTLY, THE SCHEDULE FOR PERFORMANCE OF THOSE RESPONSIBILITIES, AN
OVERALL DEVELOPMENT TIMELINE AND A RESOURCE PLAN.  THE INITIAL TECHNICAL PLAN IS
ATTACHED HERETO AS SCHEDULE 1.15.  THE TECHNICAL PLAN MAY BE AMENDED FROM TIME
TO TIME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 BELOW.  THE TECHNICAL
PLAN, AS IT MAY BE AMENDED FROM TIME TO TIME, SHALL BE RETAINED IN THE BINDER
UNDER THE HEADING “TECHNICAL PLAN, REVISION    , DATED XX/XX/XX.”

 

1.16                           Third Party OEM means any third party original
equipment manufacturer supplying any component of the eSAS 2 Instrument,
including without limitation pipettors, automated reagent addition stations,
automated target capture bays or automated incubation modules.

 

1.17                           TIMELINE MEANS THE OVERALL DEVELOPMENT TIMELINE
INCLUDED WITHIN THE TECHNICAL PLAN.

 

4

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2.               ESAS 2 DEVELOPMENT PROGRAM.

 

2.1         OBJECTIVE.  SUBJECT TO THE TERMS OF THE AGREEMENT, AS AMENDED BY
THIS ESAS 2 ADDENDUM, THE PARTIES EACH SHALL CONDUCT THEIR RESPECTIVE
OBLIGATIONS UNDER THE ESAS 2 DEVELOPMENT PROGRAM AS ESTABLISHED IN ACCORDANCE
WITH THE TERMS HEREOF, AND SHALL APPLY FOR AND ENDEAVOR TO OBTAIN SUCH
REGULATORY APPROVALS AS NECESSARY OR APPROPRIATE TO MAKE AND SELL THE ESAS 2
INSTRUMENT IN THE TERRITORY FOR USE IN THE BLOOD SCREENING FIELD.

 

2.2         GENERAL CONDUCT OF DEVELOPMENT.  THE PARTIES, USING COMMERCIALLY
REASONABLE EFFORTS, SHALL CONDUCT THEIR RESPECTIVE OBLIGATIONS UNDER THE ESAS 2
DEVELOPMENT PROGRAM IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ALL REQUIREMENTS
OF APPLICABLE LAWS AND REGULATIONS AND ALL APPLICABLE GOOD LABORATORY, CLINICAL
AND MANUFACTURING PRACTICES.  IN ADDITION, THE PARTIES EACH SHALL PROCEED
DILIGENTLY WITH THEIR RESPECTIVE OBLIGATIONS UNDER THE ESAS 2 DEVELOPMENT
PROGRAM AND SHALL USE THEIR RESPECTIVE COMMERCIALLY REASONABLE EFFORTS TO
ACHIEVE THE OBJECTIVES OF THE ESAS 2 DEVELOPMENT PROGRAM EFFICIENTLY AND
EXPEDITIOUSLY.  THE PARTIES EACH SHALL ALLOCATE SUCH PERSONNEL, EQUIPMENT,
FACILITIES AND OTHER RESOURCES TO THE ESAS 2 DEVELOPMENT PROGRAM TO CARRY OUT
THEIR RESPECTIVE OBLIGATIONS AND TO ACCOMPLISH THE OBJECTIVES THEREOF, ALL AS IS
MORE PARTICULARLY DESCRIBED IN THE ESAS 2 DEVELOPMENT PROGRAM, AS AMENDED FROM
TIME TO TIME DURING THE TERM OF THIS ESAS 2 ADDENDUM, IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 3.  EACH PARTY SHALL HAVE THE RIGHT TO CONSULT WITH THE
OTHER PARTY REGARDING THE ESAS 2 DEVELOPMENT PROGRAM AND THE OBLIGATION TO
REASONABLY CONSIDER THE OTHER PARTY’S ADVICE.

 

2.3         NO LIABILITY IF COMMERCIALLY REASONABLE EFFORTS ARE EXPENDED.
NEITHER PARTY WILL BE IN BREACH OF ITS OBLIGATIONS TO THE OTHER HEREUNDER AND
SUCH PARTY SHALL BE DEEMED TO HAVE EXERCISED COMMERCIALLY REASONABLE EFFORTS, SO
LONG AS SUCH PARTY SHALL HAVE COMMITTED THE RESOURCES DESCRIBED IN THE ESAS 2
DEVELOPMENT PROGRAM.  THE PAYMENT OF ESAS 2 DEVELOPMENT COSTS BETWEEN THE
PARTIES SHALL BE DUE AND PAYABLE WITHOUT RESPECT TO THE ACHIEVEMENT OF ANY
PARTICULAR DELIVERABLE SPECIFIED IN THE ESAS 2 DEVELOPMENT PROGRAM.

 

2.4         PROJECT MANAGEMENT.

 

2.4.1                        PRINCIPLES OF PROJECT MANAGEMENT.  THE PARTIES
AGREE THAT IN THE PROCESS OF EXERCISING THEIR RESPONSIBILITIES, THE PROJECT
MANAGEMENT (CONSISTING OF THE PROJECT MANAGER AND PROJECT LEADERS, AS SET FORTH
HEREIN) SHOULD HAVE ROUTINE ACCESS TO SUCH INFORMATION NEEDED TO ASSESS PROGRESS
UNDER AND COSTS OF THE ESAS 2 DEVELOPMENT PROGRAM.  SPECIFICALLY, THE PARTIES
AGREE THAT THE PROJECT LEADERS SHALL BE INVITED TO PARTICIPATE IN ALL TEAM
MEETINGS, AND WILL HAVE ACCESS TO TEAM MEETING MINUTES, TIMECARDS AND OTHER
EXPENSE RECORDS, EXCEPT TO THE EXTENT THE PROJECT LEADER FOR THE PARTY ASSIGNED
PRINCIPAL RESPONSIBILITY UNDER SECTION 2.5.3 OF THIS ESAS 2 ADDENDUM FOR AN
ACTIVITY DETERMINES IN ITS REASONABLE DISCRETION THAT ANY SUCH MEETINGS OR
MINUTES CONTAIN CONFIDENTIAL, PROPRIETARY INFORMATION OF THE RESPONSIBLE PARTY. 
IN SUCH CASES, THE PROJECT MANAGER SHALL (I) DETERMINE WHETHER THE PROJECT
LEADER FOR THE PARTY NOT HAVING PRIMARY RESPONSIBILITY FOR THE ACTIVITY CAN
ATTEND ALL OR A PORTION OF SUCH MEETING, (II) PROVIDE A COPY OF THE MEETING
MINUTES TO THE PROJECT LEADER NOT HAVING PRIMARY RESPONSIBILITY FOR THE ACTIVITY
WITH SUCH CONFIDENTIAL, PROPRIETARY INFORMATION REDACTED, AND (III) TO THE
EXTENT THAT SUCH MINUTES HAD PROPRIETARY OR CONFIDENTIAL INFORMATION REDACTED,
INFORM THE PROJECT LEADER NOT HAVING PRIMARY RESPONSIBILITY OF THE GENERAL
NATURE OF ANY DECISIONS MADE AT SUCH MEETING WHICH AFFECT THE PRD, SRS, TIMELINE
OR BUDGET; PROVIDED, HOWEVER THAT THE PROJECT MANAGER MAY ONLY REDACT
INFORMATION COMPRISING CHIRON INTELLECTUAL PROPERTY AND KNOW HOW OR CONFIDENTIAL
BUSINESS ISSUES.  PROJECT LEADERS WILL HAVE ACCESS TO NON-CONFIDENTIAL AND
NON-PROPRIETARY INFORMATION OF THE OTHER PARTY NECESSARY TO PERFORM THEIR
RESPONSIBILITIES UNDER THE ESAS 2 DEVELOPMENT PROGRAM, INCLUDING THOSE LISTED
UNDER 2.4.4.  PROJECT LEADERS WILL INFORM AND COORDINATE ALL ACTIVITIES,
INCLUDING MEETINGS WITH

 

5

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PERSONNEL INVOLVED IN THE PERFORMANCE OF THE ESAS 2 DEVELOPMENT PROGRAM, WITH
THE PROJECT MANAGER.  THE PRIMARY POINT OF CONTACT FOR THE ESAS 2 DEVELOPMENT
PROGRAM AT CHIRON WILL BE CHIRON’S PROJECT MANAGER, THE PRIMARY POINT OF CONTACT
AT GEN-PROBE WILL BE GEN-PROBE’S PROJECT LEADER.  IN ORDER TO MAINTAIN AN
EFFICIENT AND ORDERLY DEVELOPMENT THE PARTIES WILL COMMUNICATE THROUGH THE
PRIMARY POINTS OF CONTACT AS MUCH AS POSSIBLE WHEN REQUESTING INFORMATION
CONCERNING THE PROGRESS OF THE ESAS 2 DEVELOPMENT PROGRAM.  CONFIDENTIALITY WILL
BE MAINTAINED IN ACCORDANCE WITH SECTION 8.1 OF THE AGREEMENT, AND DISCLOSURE OF
ANY INFORMATION UNDER THIS SECTION 2.4.1 SHALL BE GOVERNED BY THAT CERTAIN
CONFIDENTIALITY AND JOINT INTEREST AGREEMENT, BY AND BETWEEN THE PARTIES, DATED
AS OF OCTOBER 30, 2001.

 

2.4.2        PROJECT MANAGER.  THE PROJECT ASSOCIATED WITH DEVELOPMENT AND
COMMERCIAL SALE OF THE ESAS 2 INSTRUMENT WILL BE MANAGED UNDER A PROJECT
MANAGER, THE RESPONSIBILITIES OF WHICH ARE DESCRIBED IN SECTION 2.4.3.  A
PROJECT MANAGER APPOINTED BY CHIRON WILL MANAGE THE ESAS 2 DEVELOPMENT PROGRAM. 
AS OF THE ADDENDUM EFFECTIVE DATE, THE PROJECT MANAGER SHALL BE [***].  ANY
CHANGE BY CHIRON OF THE PROJECT MANAGER MUST BE APPROVED BY THE SUPERVISORY
BOARD, WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD.

 

2.4.3        PROJECT MANAGER’S RESPONSIBILITIES.  THE PROJECT MANAGER SHALL BE
RESPONSIBLE FOR THE FOLLOWING ACTIVITIES, TOGETHER WITH SUCH OTHER ACTIVITIES AS
THE PARTIES MAY AGREE:

 

(A)  MANAGING ALL MATTERS RELATING TO THE ESAS 2 DEVELOPMENT PROGRAM UNDER THIS
ESAS 2 ADDENDUM, INCLUDING EACH PARTY’S RESPECTIVE RESPONSIBILITIES AND
CONTRIBUTIONS AND RECEIVING REPORTS FROM THE PROJECT LEADERS;

 

(B)  PROVIDING WRITTEN PROGRESS REPORTS MONTHLY TO THE PARTIES AND PRESENTING
STATUS REPORTS TO THE SUPERVISORY BOARD IN ACCORDANCE WITH SECTION 2.4.6 BELOW;

 

(C)  SUBMITTING AND RECEIVING THE REPORTS, MATERIALS AND DOCUMENTS REQUIRED TO
BE DELIVERED UNDER THIS ESAS 2 ADDENDUM;

 

(D)  OVERSEEING THE PROCESS OF PROPOSING, AND SUBMITTING TO THE PARTIES, ANY
PROPOSED MODIFICATIONS TO THE PRODUCT REQUIREMENTS DOCUMENT, SOFTWARE
REQUIREMENT SPECIFICATIONS, TECHNICAL PLAN, RESOURCE PLAN OR BUDGET, AND IN THE
EVENT THE PARTIES CANNOT AGREE, PRESENTING THE SAME TO THE SUPERVISORY BOARD IN
AN OBJECTIVE AND NEUTRAL MANNER;

 

(E)  ARRANGING ANY MEETINGS TO BE HELD BETWEEN THE PARTIES AND PARTICIPATING, TO
THE EXTENT THE PROJECT MANAGER DEEMS APPROPRIATE, IN MEETINGS OF THE PROJECT
LEADERS;

 

(F)  MAINTAINING, FOR RECORD KEEPING PURPOSES, A LOG BOOK OR NOTES CONTAINING
SUMMARIES AND DATES OF ALL MATERIAL COMMUNICATIONS AND DELIVERIES BETWEEN THE
PARTIES OF WHICH THE PROJECT MANAGER IS AWARE, CONSISTENT WITH THE PARTIES’
PROTOCOL FOR SUCH SHARING OF CONFIDENTIAL INFORMATION SET FORTH IN THAT CERTAIN
CONFIDENTIALITY AND JOINT INTEREST AGREEMENT, BY AND BETWEEN THE PARTIES, DATED
AS OF OCTOBER 30, 2001;

 

(G)  IMPLEMENTING APPROPRIATE PRACTICES AND PROCEDURES TO MANAGE THE PROGRESS
UNDER THIS ESAS 2 ADDENDUM;

 

(H)  FOSTERING GOOD COMMUNICATION BETWEEN THE PARTIES.  IT IS INTENDED BY THE
PARTIES THAT BOTH PARTIES SHARE, THROUGH REPORTS FROM THE PROJECT LEADERS TO THE
PROJECT MANAGER, IN THE INFORMATION CONCERNING THE PROGRESS MADE IN THE ESAS 2
DEVELOPMENT PROGRAM AND THE CAUSE OF ANY DELAYS.  IT IS EXPECTED THAT THE
PROJECT LEADERS WILL MAKE RECOMMENDATIONS TO THE PROJECT MANAGER FOR

 

6

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PREFERRED PATHS WHEN SUBSTANTIAL DELAYS ARE IDENTIFIED AND MULTIPLE PATHS
FORWARD ARE IDENTIFIED.  UNDERSTANDING THAT IT TAKES TIME FOR INFORMATION TO
FLOW UP THE CHAIN OF COMMAND, THE PROJECT MANAGER WILL INFORM GEN-PROBE OF
DELAYS AND PROGRESS ON RESOLUTION AS SOON AS IT BECOMES AVAILABLE TO HIM; AND

 

(I)  IT IS UNDERSTOOD THAT BOTH COMPANIES HOLD PROPRIETARY TRADE SECRET KNOW-HOW
AND PROCESSES REGARDING THEIR RESPECTIVE TECHNOLOGIES THAT ARE NOT NECESSARILY
SHARED AS PART OF THIS AGREEMENT.  ON OCCASION IT MAY OCCUR THAT A FULL
UNDERSTANDING OF DIFFICULTIES IN THE PROGRESS OF DEVELOPMENT MAY REQUIRE A
DETAILED UNDERSTANDING OF THIS PROPRIETARY KNOW-HOW AND PROCESSES.  EACH PARTY
WILL ENDEAVOR TO APPRAISE THE OTHER OF THE OUTCOMES AND CONSEQUENCES OF THESE
DIFFICULTIES, WHILE PROTECTING THE CONFIDENTIALITY OF THE INFORMATION.

 

2.4.4                        PROJECT LEADERS.  GEN-PROBE AND CHIRON WILL EACH
APPOINT A PROJECT LEADER (EACH A “PROJECT LEADER”) WHO IS RESPONSIBLE FOR
(A) ASSEMBLING PROJECT TEAMS FOR HIS OR HER RESPECTIVE PARTY AND (B) COMPLETING
PROJECT RESPONSIBILITIES ALLOCATED TO SUCH PARTY IN SECTION 2.5.  FOR THE
PURPOSES OF COMPLETING THE ESAS 2 DEVELOPMENT PROGRAM, THESE PROJECT LEADERS
WILL REPORT TO THE PROJECT MANAGER.  THE PROJECT LEADER EMPLOYED BY A PARTY
SHALL BE RESPONSIBLE FOR REPORTING TO THE EMPLOYING PARTY WHETHER HE OR SHE
BELIEVES THE OTHER PARTY HAS PROCEEDED DILIGENTLY WITH ITS STATED OBLIGATIONS
UNDER THE ESAS 2 DEVELOPMENT PROGRAM, HAS ALLOCATED SUFFICIENT PERSONNEL,
EQUIPMENT, FACILITIES AND OTHER RESOURCES TO ACHIEVE THE OBJECTIVES OF THE ESAS
2 DEVELOPMENT PROGRAM AND HAS EXERCISED COMMERCIALLY REASONABLE EFFORTS TO
ACHIEVE ITS OBJECTIVES EFFICIENTLY AND EXPEDITIOUSLY.

 

2.4.5                        REPORTS.  IN ADDITION TO THE RECORDS AND REPORTS
REQUIRED TO BE KEPT BY THE PARTIES UNDER SECTION 3.5 OF THE AGREEMENT, EACH
PROJECT LEADER WILL PROVIDE TO THE PROJECT MANAGER, IN WRITING, A PROGRESS
REPORT DELIVERED ON OR BEFORE THE 15TH DAY OF EACH CALENDAR MONTH DURING THE
TERM OF THE ESAS 2 DEVELOPMENT PROGRAM.  THESE REPORTS WILL COVER TECHNICAL
PROGRESS AS WELL AS FINANCIAL EXPENDITURES.  THE PROJECT MANAGER MAY RELY ON ANY
SUCH REPORTS FOR THE PURPOSE OF MAKING HIS OR HER PROGRESS REPORT TO THE
SUPERVISORY BOARD DESCRIBED IN SECTION 2.4.6 BELOW.

 

2.4.6                        MEETINGS OF THE SUPERVISORY BOARD. THE SUPERVISORY
BOARD SHALL MEET FROM TIME TO TIME DURING THE TERM OF THIS ESAS 2 ADDENDUM, BUT
NOT LESS FREQUENTLY THAN ONCE EACH CALENDAR QUARTER DURING THE TERM HEREOF.  NOT
LESS FREQUENTLY THAN QUARTERLY, A REGULAR AGENDA ITEM AT THE REGULARLY SCHEDULED
SUPERVISORY BOARD MEETING SHALL BE TO RECEIVE A REPORT FROM THE PROJECT MANAGER
AND CONDUCT A REVIEW OF THE ESAS 2 DEVELOPMENT PROGRAM TO ASSESS PROGRESS OF THE
DEVELOPMENT AND THE POTENTIAL FOR COMMERCIALIZATION OF THE ESAS 2 INSTRUMENT.

 

2.5         DEVELOPMENT RESPONSIBILITIES.

 

2.5.1                        PRINCIPAL RESPONSIBILITY; GENERAL STATEMENT.  THE
PARTIES’ INTENTION IS THE SMOOTH AND EFFICIENT CONDUCT OF DEVELOPMENT, AND THE
PARTIES DESIRE BY THIS SECTION 2.5 TO PROVIDE GUIDING PRINCIPLES BY WHICH THE
RESPONSIBLE PARTY MAY MAKE DAY-TO-DAY DECISIONS AND BY WHICH THE APPROVAL
PROCESS MORE PARTICULARLY DESCRIBED IN SECTION 3 BELOW SHALL BE GOVERNED.  THE
PARTIES INTEND THAT THE ESAS 2 INSTRUMENT DEVELOPMENT WILL BE CONDUCTED
PRIMARILY AND PRINCIPALLY BY [***] WITH CONSULTATION AND DISCUSSION FROM [***],
UNDER THE SUPERVISION OF THE PROJECT MANAGER, AS FOLLOWS: (I) [***] WILL HAVE
PRINCIPAL RESPONSIBILITY UNDER THIS ESAS 2 ADDENDUM FOR THE [***] OF THE ESAS 2
INSTRUMENT, [***] AND [***] FOR [***] AND [***], [***] WITH [***] FOR [***] AND
[***] OF THE ESAS 2 INSTRUMENTS, [***] OF [***] AND [***] OF [***], AND [***] OF
[***] AND [***], AND (II) [***] WILL ASSIST IN THE DEVELOPMENT AND APPROVAL OF
[***] OF EACH INSTRUMENT, PROVIDE [***] TO ITS [***] (MEANING [***] FROM THE
[***] AND [***] AS APPLICABLE) TO FACILITATE DEVELOPMENT OF A [***], PROVIDE
[***] TO ITS [***], PROVIDE [***] INCLUDING [***] TO [***] REQUIRED FOR THE
DEVELOPMENT UNDER THE CONFIDENTIALITY TERMS OF

 

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THE AGREEMENT, AND WILL HAVE PRINCIPAL RESPONSIBILITY UNDER THIS ESAS 2 ADDENDUM
FOR THE [***] OF THE [***] AND [***], FOR THE DEVELOPMENT OF THE [***] FOR [***]
SPECIFICALLY RELATED TO THE [***] AND [***], AND FOR THE FORMULATION OF THE
[***] FOR [***] AND FOR EACH [***] WITH [***] TO THE [***] FOR [***].  THE
PARTIES SHALL JOINTLY AGREE UPON ALL VALIDATION ACTIVITIES AND SOFTWARE
DEVELOPMENT PER PRD AND SRS.  THE PARTY TO WHOM PRINCIPAL RESPONSIBILITY IS
ALLOCATED IN THIS SECTION 2.5 HAS THE POWER TO MAKE DAY-TO-DAY DECISIONS
REGARDING MATTERS WITHIN THE AREA OF SUCH RESPONSIBILITY, CONSISTENT WITH THE
OVERALL ESAS 2 DEVELOPMENT PROGRAM.  THE PARTIES’ OBLIGATIONS WITH RESPECT TO
CERTAIN WAREHOUSING AND SHIPPING ARE SUBJECT TO AMENDMENT NO. 3.

 

2.5.2                        REGULATORY/LICENSURE.  GEN-PROBE AND CHIRON HAVE
ENTERED INTO THAT CERTAIN DEFINITIVE WRITTEN SETTLEMENT AGREEMENT, DATED
DECEMBER 5, 2001.  SECTION 2(A) OF THE DEFINITIVE WRITTEN SETTLEMENT AGREEMENT
INCORPORATES BY REFERENCE THE PROVISIONS OF THE SHORT FORM AGREEMENT (ATTACHED
AS EXHIBIT A TO THE DEFINITIVE WRITTEN SETTLEMENT AGREEMENT).  THE PARTIES
HEREBY EXPRESSLY INCORPORATE THE PROVISIONS OF SECTION F.6 OF THE SHORT
FORM AGREEMENT BETWEEN THE PARTIES, DATED NOVEMBER 16, 2001, INTO THIS ESAS 2
ADDENDUM, AS AMENDED BY THE MEMORANDUM FROM [***] TO [***] SETTING FORTH THE
PARTIES’ AGREED UPON REGULATORY STRATEGY, ATTACHED HERETO AS SCHEDULE 2.5.2. 
PURSUANT AND SUBJECT TO SECTION F.6 OF THE SHORT FORM AGREEMENT, AS AMENDED BY
SCHEDULE 2.5.2, GEN-PROBE AGREES TO USE ITS BEST EFFORTS TO (I) REGULARLY REVIEW
BLOOD SCREENING REGULATORY/LICENSURE STRATEGY AND MANAGEMENT OF REGULATORY
SUBMISSIONS WITH CHIRON, (II) PROVIDE DRAFT COPIES OF ALL WRITTEN REGULATORY
SUBMISSIONS TO CHIRON AT LEAST FIVE WORKING DAYS PRIOR TO THE PROPOSED DATE OF
THEIR SUBMISSION, (III) MAKE AVAILABLE THE APPROPRIATE PERSONNEL FOR A
DISCUSSION OF ANY ADVICE OR RECOMMENDATIONS OF CHIRON ON ANY REGULATORY
SUBMISSIONS AND (IV) REASONABLY CONSIDER SUCH ADVICE OR RECOMMENDATIONS, BUT
GEN-PROBE IS NOT REQUIRED TO ACCEPT SUCH ADVICE AND RECOMMENDATIONS; IN EACH
CASE AS REASONABLY ATTAINABLE BY GEN-PROBE.  ALL DISAGREEMENTS ON
REGULATORY/LICENSURE ISSUES SHALL BE ADDRESSED BY THE SUPERVISORY BOARD AND, IF
NECESSARY, BY IMPLEMENTATION OF THE ESCALATION PROCEDURE DESCRIBED IN ARTICLE 13
OF THE AGREEMENT, EXCLUDING ARBITRATION.  FOR ISSUES THAT CANNOT BE RESOLVED
THROUGH SUCH PROCEDURES, GEN-PROBE’S CHIEF EXECUTIVE OFFICER SHALL HAVE THE
RIGHT TO MAKE A FINAL DECISION.  GEN-PROBE SHALL HAVE NO OBLIGATION UNDER THIS
ESAS 2 ADDENDUM TO APPLY FOR OR ENDEAVOR TO OBTAIN REGULATORY APPROVAL FOR ANY
ESAS 2 INSTRUMENT (OR ANY MODULE WITHIN THE ESAS 2 INSTRUMENT SYSTEM) THAT FAILS
TO MEETS THE CRITERIA SET FORTH IN THE APPLICABLE PRD AND SRS.  COSTS OF ALL
REGULATORY AND LICENSING ACTIVITIES (INCLUDING GEN-PROBE INTERNAL ESAS 2
DEVELOPMENT COSTS) WILL BE INCLUDED IN THE ESAS 2 DEVELOPMENT COSTS AND PAID FOR
BY CHIRON.

 

2.5.3                        PROJECT LEADER DISAGREEMENTS.  IT IS RECOGNIZED
THAT THE PROJECT LEADERS MAY DISAGREE ON APPROACHES.  EVEN THOUGH ONE PARTY HAS
THE PRINCIPAL RESPONSIBILITY FOR DEVELOPMENT IN THE FUNCTIONAL AREA DESCRIBED IN
SECTION 2.5, DISAGREEMENTS THAT CANNOT BE RESOLVED BY PROJECT MANAGEMENT MAY BE
BROUGHT TO THE SUPERVISORY BOARD.  HOWEVER, WORK WILL PROCEED IN ACCORDANCE WITH
THE CHOICE OF THE PRINCIPALLY RESPONSIBLE PARTY, WHILE BEING DISCUSSED AT THE
SUPERVISORY BOARD.  IN THE EVENT THAT THE PARTIES DO NOT AGREE AT THE
SUPERVISORY BOARD LEVEL, THE PARTY WITH PRINCIPAL RESPONSIBILITY MAY CONTINUE TO
PROCEED PER THEIR BEST JUDGMENT.  IF A DISAGREEMENT ARISES IN A FUNCTIONAL AREA
FOR WHICH RESPONSIBILITY IS SHARED AND RESOLUTION CANNOT BE ACHIEVED AT THE
SUPERVISORY BOARD, EXCEPT AS TO REGULATORY/LICENSURE STRATEGY THAT SHALL BE
GOVERNED BY SECTION 2.5.2 ABOVE, WORK SHALL BE SUSPENDED IN SUCH FUNCTIONAL AREA
UNTIL A RESOLUTION IS REACHED THROUGH ARTICLE 13 OF THE AGREEMENT, INCLUDING
ARBITRATION.

 

3.               MODIFICATIONS.

 

3.1         ESAS 2 DEVELOPMENT PROGRAM DEFINITION.

 

3.1.1                        [***] MODULES.  THE PARTIES HAVE PREPARED AND
AGREED UPON AN ESAS 2 DEVELOPMENT PROGRAM, AS DESCRIBED IN THE BINDER, FOR [***]
MODULES IN THE ESAS2 INSTRUMENT SYSTEM,

 

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AND WILL NEED TO PREPARE AND AGREE UPON AN ESAS 2 DEVELOPMENT PROGRAM FOR THE
REMAINING [***] MODULES IN THE ESAS2 INSTRUMENT SYSTEM.  THE ESAS 2 DEVELOPMENT
PROGRAM, AS DESCRIBED IN THE BINDER WITH RESPECT TO [***] MODULES AND AS
PREPARED AND AGREED UPON WITH RESPECT TO THE REMAINING [***] MODULES, WILL
GOVERN THE RIGHTS AND RESPONSIBILITIES OF THE PARTIES UNTIL CHANGED IN
ACCORDANCE WITH THE PROVISIONS HEREOF.  THE PARTIES RECOGNIZE AND ANTICIPATE
THAT ADDITIONAL CLARIFICATION AND REFINEMENT OF THE ESAS 2 DEVELOPMENT PROGRAM,
INCLUDING CHANGES, IF ANY, NECESSARY TO REFLECT ACCEPTED DELAYS IN, OR INCREASES
IN COSTS OF, DEVELOPMENT, WILL BE REQUIRED AS DEVELOPMENT PROCEEDS.  THE PARTIES
INTEND THAT THIS ESAS 2 ADDENDUM ESTABLISH A PROCESS BY WHICH THE PARTIES WILL
AMEND THE ESAS 2 DEVELOPMENT PROGRAM, IN ACCORDANCE WITH THE TERMS DESCRIBED IN
THIS SECTION 3.

 

3.1.2                        [***] MODULES.  EITHER PARTY MAY PROPOSE AN ESAS 2
DEVELOPMENT PROGRAM FOR EACH OF THE [***] MODULES IN THE ESAS2 INSTRUMENT
SYSTEM.  EACH SUCH PROPOSAL SHALL DESCRIBE (I) THE PRODUCT REQUIREMENTS
DOCUMENTS, (II) THE SOFTWARE REQUIREMENTS SPECIFICATIONS, (III) THE TECHNICAL
PLAN, (IV) THE RESOURCE PLAN INCLUDED WITHIN THE TECHNICAL PLAN, AND (V) THE
BUDGET FOR THE DEVELOPMENT OF ONE MODULE IN THE ESAS 2 INSTRUMENT SYSTEM.  THE
PROJECT MANAGER, AND UNDER HIS OR HER SUPERVISION, THE PROJECT LEADERS AND THEIR
RESPECTIVE TEAMS, WILL REVIEW EACH SUCH PROPOSED ESAS 2 DEVELOPMENT PROGRAM. 
UPON AGREEMENT BETWEEN THE PROJECT LEADERS, THEN SUCH APPROVED ESAS 2
DEVELOPMENT PROGRAM SHALL BE INCLUDED WITHIN THE BINDER.  IF THE PROJECT LEADERS
ARE UNABLE TO AGREE UPON A PROPOSED ESAS 2 DEVELOPMENT PROGRAM, THEN THE
SUPERVISORY BOARD SHALL REVIEW THE PROPOSED ESAS 2 DEVELOPMENT PROGRAM AND MAKE
A DETERMINATION WITH RESPECT TO WHETHER SUCH PROPOSED ESAS 2 DEVELOPMENT PROGRAM
SHALL BE APPROVED BY THE PARTIES.  IF THE SUPERVISORY BOARD HAS MET AND
CONSULTED WITHOUT RESOLUTION, THEN THE PARTIES SHALL IMPLEMENT THE ESCALATION
PROCEDURE DESCRIBED IN ARTICLE 13 OF THE AGREEMENT TO RESOLVE SUCH IMPASSE.

 

3.2         MODIFICATIONS.

 

3.2.1                        REQUEST FOR MODIFICATIONS. 

 

(A)  EITHER PARTY MAY PROPOSE EITHER MATERIAL OR NON-MATERIAL MODIFICATIONS TO
ANY PART OF THE ESAS 2 DEVELOPMENT PROGRAM, INCLUDING THE PRODUCT REQUIREMENTS
DOCUMENT (AND THE SOFTWARE REQUIREMENTS SPECIFICATIONS THAT FORM PART THEREOF),
THE RESOURCE PLAN (AND THE TECHNICAL PLAN THAT FORMS PART THEREOF), AND THE
BUDGET, AND INCLUDING WITHOUT LIMITATION A REQUEST FOR A CHANGE TO THE FTE LABOR
RATE, AS DEFINED IN SECTION 5.2.1, FROM TIME TO TIME, AS FOLLOWS:

 

(I)                                     CHIRON MAY PROPOSE AND IMPLEMENT SUCH
MODIFICATIONS FROM TIME TO TIME IN ITS SOLE DISCRETION.  HOWEVER, UNLESS
GEN-PROBE SHALL HAVE APPROVED A MATERIAL MODIFICATION USING THE PROCESS MORE
PARTICULARLY SET FORTH IN THIS SECTION 3, CHIRON SHALL HAVE NO RIGHT TO
REIMBURSEMENT OF DEVELOPMENT COSTS FOR SUCH MATERIAL MODIFICATION AND GEN-PROBE
SHALL HAVE NO OBLIGATION TO PURSUE REGULATORY APPROVAL OR OTHERWISE PURSUE
DEVELOPMENT EFFORTS WITH RESPECT THERETO.

 

(II)                                  GEN-PROBE MAY PROPOSE SUCH MODIFICATIONS
FROM TIME TO TIME.  THE PROCESS APPLICABLE TO APPROVAL AND IMPLEMENTATION OF ANY
SUCH PROPOSED MODIFICATIONS SHALL BE AS DESCRIBED IN THIS SECTION 3.

 

(B)  CHANGES, MODIFICATIONS OR IMPROVEMENTS TO THE ESAS 2 INSTRUMENT, AFTER THE
COMPLETION DATE, ARE GOVERNED BY THE PROVISIONS OF SECTION 4 BELOW.

 

(C)  THE PROJECT MANAGER, AND UNDER HIS OR HER SUPERVISION, THE PROJECT LEADERS
AND THEIR RESPECTIVE TEAMS, WILL REVIEW ANY PROPOSED MODIFICATION TO THE ESAS 2
DEVELOPMENT PROGRAM;

 

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IF THE TWO PROJECT LEADERS MUTUALLY AGREE THAT A PARTICULAR MODIFICATION IS A
MATERIAL MODIFICATION OR IS A NON-MATERIAL MODIFICATION, THEN SUCH DETERMINATION
SHALL BE CONCLUSIVE.  IF THE PROJECT LEADERS ARE UNABLE TO AGREE WHETHER A
PARTICULAR REQUESTED MODIFICATION IS A MATERIAL OR NON-MATERIAL MODIFICATION,
THEN THE SUPERVISORY BOARD SHALL REVIEW THE REQUESTED CHANGE AND MAKE A
DETERMINATION WITH RESPECT TO WHETHER SUCH REQUESTED MODIFICATION IS A MATERIAL
OR NON-MATERIAL MODIFICATION.  IF THE SUPERVISORY BOARD HAS MET AND CONSULTED
WITHOUT RESOLUTION, THEN EITHER PARTY MAY, IN ITS DISCRETION, DETERMINE THAT THE
PARTIES HAVE REACHED AN IMPASSE WITH RESPECT THERETO AND IMPLEMENT THE
ESCALATION PROCEDURE DESCRIBED IN ARTICLE 13 OF THE AGREEMENT TO RESOLVE SUCH
IMPASSE.

 

(D)  IF THE TWO PROJECT LEADERS MUTUALLY AGREE THAT A PARTICULAR MODIFICATION IS
A NON-MATERIAL MODIFICATION AND BOTH PROJECT LEADERS MUTUALLY AGREE TO IMPLEMENT
SUCH NON-MATERIAL MODIFICATION, NO ADDITIONAL APPROVAL SHALL BE NEEDED FROM THE
PARTIES TO IMPLEMENT SUCH NON-MATERIAL MODIFICATION.

 

3.2.2                        MONTHLY PROGRESS REPORTS.  UNLESS CHANGES TO THE
SPECIFICATIONS DESCRIBED IN SECTION 3.2.1 CONSTITUTE A MATERIAL MODIFICATION,
ANY NON-MATERIAL MODIFICATIONS SHALL BE REPORTED IN THE MONTHLY SUMMARY PROGRESS
REPORTS PURSUANT TO SECTION 2.4.4 AND SHALL NOT BE SUBJECT TO THE APPROVAL
PROCESS DESCRIBED IN SECTION 3.3.

 

3.3         MATERIAL MODIFICATIONS.

 

3.3.1                        REQUEST FOR MATERIAL MODIFICATIONS.  IN THE EVENT
THAT ONE PARTY DESIRES TO REQUEST A MATERIAL MODIFICATION TO THE ESAS 2
DEVELOPMENT PROGRAM FROM TIME TO TIME DURING THE TERM HEREOF, SUCH PARTY (THE
“REQUESTING PARTY”) SHALL SUBMIT TO THE OTHER PARTY SUCH REQUEST IN WRITING, IN
SUFFICIENT DETAIL TO ENABLE THE OTHER PARTY (THE “RECEIVING PARTY”) TO EVALUATE
THE REQUEST.   WITHOUT LIMITING THE FOREGOING, THE REQUESTING PARTY SHALL
PREPARE A REVISED DRAFT VERSION OF THE BUDGET, REFLECTING ANY CHANGES NECESSARY
TO FULLY IMPLEMENT THE REQUESTED MATERIAL MODIFICATION TO THE ESAS 2 DEVELOPMENT
PROGRAM.

 

3.3.2                        INITIAL ANALYSIS OF IMPACT OF PROPOSED MATERIAL
MODIFICATION.  PROMPTLY UPON RECEIPT OF SUCH REQUEST, BUT IN ANY EVENT NOT MORE
THAN [***] THEREAFTER, THE PARTIES SHALL CONDUCT A PRELIMINARY ANALYSIS OF THE
IMPACT THAT THE REQUESTED MATERIAL MODIFICATION WOULD HAVE, INCLUDING WITHOUT
LIMITATION THE IMPACT ANY SUCH PROPOSED MATERIAL MODIFICATION WOULD HAVE ON THE
BUDGET AND/OR THE PRD AND/OR SRS, AND SHALL MEET AND CONDUCT AN ANALYSIS OF THE
IMPACT OF SUCH MATERIAL MODIFICATION ON THE ECONOMICS OF MARKETING AND SALE OF
THE ESAS 2 INSTRUMENT.  SHOULD EITHER PARTY CONCLUDE, IN ITS REASONABLE
DISCRETION, THAT THE POTENTIAL FOR [***] IS [***] AND [***] BY ANY PROPOSED
CHANGE TO THE ESAS 2 DEVELOPMENT PROGRAM REQUESTED IN ACCORDANCE WITH THIS
SECTION 3.3, THE PARTY SHALL NOTIFY THE OTHER OF SUCH DETERMINATION IN WRITING. 
IN SUCH EVENT, CHIRON MAY ELECT AMONG ONE OF THE FOLLOWING THREE CHOICES: 
(I) TO TERMINATE PARTICIPATION IN THE ESAS 2 DEVELOPMENT PROGRAM UNDER THE
PROVISIONS OF SECTION 8.3, (II) TO IMPLEMENT THE MATERIAL MODIFICATION WITHOUT
GEN-PROBE’S APPROVAL UNDER THIS SECTION 3, IN WHICH EVENT CHIRON SHALL HAVE NO
RIGHT TO REIMBURSEMENT OF DEVELOPMENT COSTS FOR SUCH MATERIAL MODIFICATION AND
GEN-PROBE SHALL HAVE NO OBLIGATION TO PURSUE REGULATORY APPROVAL OR OTHERWISE
PURSUE DEVELOPMENT EFFORTS WITH RESPECT THERETO, OR (III) TO CONTINUE THE ESAS 2
DEVELOPMENT PROGRAM UNAFFECTED WITHOUT SUCH MATERIAL MODIFICATION.

 

3.3.3                        PREPARATION OF MODIFIED ESAS 2 DEVELOPMENT
PROGRAM.  UNLESS CHIRON TERMINATES THE ESAS 2 DEVELOPMENT PROGRAM UNDER
SECTION 8.3 BELOW OR ELECTS TO CONTINUE THE ESAS 2 DEVELOPMENT PROGRAM
UNAFFECTED WITHOUT SUCH MATERIAL MODIFICATION UNDER SECTION 3.3.2, PROMPTLY UPON
COMPLETION OF THE REVIEW AND ANALYSIS UNDER SECTION 3.3.2, CHIRON SHALL COMPLETE
AND DELIVER TO

 

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GEN-PROBE REVISIONS TO THE PRODUCT REQUIREMENTS DOCUMENT, SOFTWARE REQUIREMENTS
SPECIFICATION, TECHNICAL PLAN, RESOURCE PLAN OR BUDGET, AS APPLICABLE,
RESPONSIVE TO THE REQUEST.  COSTS INCURRED BY CHIRON TO PREPARE SUCH RESPONSE TO
THE REQUEST SHALL BE INCLUDED IN ESAS 2 DEVELOPMENT COSTS HEREUNDER.

 

3.3.4                        ACCEPTANCE OF MODIFIED ESAS 2 DEVELOPMENT PROGRAM.

 

(A)  UNLESS CHIRON TERMINATES THE ESAS 2 DEVELOPMENT PROGRAM UNDER SECTION 8.3
BELOW OR ELECTS TO CONTINUE THE ESAS 2 DEVELOPMENT PROGRAM UNAFFECTED WITHOUT
SUCH MATERIAL MODIFICATION UNDER SECTION 3.3.2, THE PARTIES SHALL PROMPTLY, BUT
NOT LATER THAN THIRTY (30) DAYS AFTER PREPARATION BY CHIRON OF A MODIFIED ESAS 2
DEVELOPMENT PROGRAM UNDER SECTION 3.3.2 MEET AND CONSULT WITH RESPECT TO THE
PROPOSED MODIFIED ESAS 2 DEVELOPMENT PROGRAM.  WITHOUT LIMITING THE OTHER BASES
ON WHICH IT SHALL BE REASONABLE FOR GEN-PROBE TO WITHHOLD APPROVAL, IT SHALL BE
REASONABLE FOR GEN-PROBE TO WITHHOLD APPROVAL OF ANY MODIFICATION THAT COULD
RESULT IN A MATERIAL DEGRADATION IN ASSAY SENSITIVITY OR SPECIFICITY, OR THAT
AFFECTS GEN-PROBE’S EFFORT OR CONTRIBUTION OF RESOURCES OR THE AMOUNT OF COSTS
FOR WHICH GEN-PROBE IS ENTITLED TO BE REIMBURSED BY CHIRON.  SUBJECT TO THE
UNCONDITIONAL RIGHTS OF GEN-PROBE UNDER SECTION 3.2.1(A) ABOVE TO PRECLUDE
CHIRON FROM REIMBURSEMENT FOR MATERIAL MODIFICATIONS AND TO WITHHOLD
PARTICIPATION IN THE REGULATORY APPROVAL PROCESS, IT SHALL BE UNREASONABLE TO
WITHHOLD APPROVAL OF ANY REQUEST FOR MODIFICATION MADE (I) TO REFLECT ACTUAL
ESAS 2 DEVELOPMENT COSTS INCURRED (OR NOT INCURRED) TO THE DATE OF SUCH PROPOSED
MODIFICATION THAT (A) WITH RESPECT TO THE ESAS 2 INSTRUMENT TAKEN AS A WHOLE,
WHEN AGGREGATED WITH ALL PREVIOUSLY AUTHORIZED MODIFICATIONS, FALLS WITHIN [***]
PERCENT ([***]%) OF THE ORIGINAL BUDGET APPROVED AND IN EFFECT AS OF THE DATE
THIS ESAS 2 ADDENDUM WAS EXECUTED BY THE PARTIES, OR (B) WITH RESPECT TO ANY
DISCREET COMPONENT, WHEN AGGREGATED WITH ALL PREVIOUS AUTHORIZED MODIFICATIONS
FOR SUCH COMPONENT, FALLS WITHIN [***] PERCENT ([***]%) OF THE ORIGINAL PORTION
OF THE BUDGET FOR SUCH COMPONENT APPROVED AND IN EFFECT AS OF THE DATE THIS ESAS
2 ADDENDUM WAS EXECUTED BY THE PARTIES, OR (II) TO REFLECT ACTUAL CHANGES TO THE
TIMELINE INCURRED TO THE DATE OF SUCH PROPOSED MODIFICATION WHICH DO NOT IMPACT
THE BUDGET IN EXCESS OF THE FOREGOING THRESHOLDS.

 

(B)  EACH PARTY SHALL, UPON COMPLETION OF THE CONSULTATION AND REVIEW UNDER
PARAGRAPH (A), DELIVER TO THE OTHER PARTY EITHER A WRITTEN ACCEPTANCE OF THE
PROPOSED MODIFIED ESAS 2 DEVELOPMENT PROGRAM OR A DETAILED WRITTEN STATEMENT
SPECIFYING THE BASIS FOR REJECTION.  THE REQUESTING PARTY MAY, IN RESPONSE TO A
REJECTION, REVISE THE PROPOSED MODIFIED ESAS 2 DEVELOPMENT PROGRAM TO REFLECT
THE DISCUSSIONS OF THE PARTIES, AND REDELIVER THE REVISED PROPOSED MODIFIED ESAS
2 DEVELOPMENT PROGRAM FOR FURTHER REVIEW, UNTIL THE PARTIES AGREE UPON THE
MATERIAL MODIFICATION.  EITHER PARTY MAY, IN ITS DISCRETION AND WITH NOTICE TO
THE OTHER PARTY, DETERMINE THAT THE PARTIES HAVE REACHED AN IMPASSE WITH RESPECT
TO ANY PROPOSED MATERIAL MODIFICATION AND DELIVER THE REQUEST TO THE SUPERVISORY
BOARD FOR DETERMINATION.

 

(C)  IF A PARTY DELIVERS THE REQUEST TO THE SUPERVISORY BOARD FOR DETERMINATION,
THE SUPERVISORY BOARD SHALL PROMPTLY, BUT NOT LATER THAN THE LATER OF (I) THIRTY
(30) DAYS AFTER RECEIPT OF A REQUESTED MODIFIED ESAS 2 DEVELOPMENT PROGRAM, OR
(II) THE NEXT REGULARLY SCHEDULED SUPERVISORY BOARD MEETING, MEET AND DISCUSS
THE PROPOSED MATERIAL MODIFICATION TO ESAS 2 DEVELOPMENT PROGRAM.

 

(D)  IF THE SUPERVISORY BOARD HAS MET AND CONSULTED WITHOUT RESOLUTION, THEN
EITHER PARTY MAY, IN ITS DISCRETION, DETERMINE THAT THE PARTIES HAVE REACHED AN
IMPASSE WITH RESPECT TO ANY PROPOSED MODIFICATION AND IMPLEMENT THE ESCALATION
PROCEDURE DESCRIBED IN ARTICLE 13 OF THE AGREEMENT TO RESOLVE SUCH IMPASSE. 
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS ESAS 2 ADDENDUM OR THE

 

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AGREEMENT, ALL MATERIAL MODIFICATIONS, WHETHER AGREED OR DETERMINED THROUGH
ARBITRATION, SHALL BE FINALLY DETERMINED AND DOCUMENTED IN ACCORDANCE WITH THIS
SECTION 3.3.

 

3.3.5                        EFFECTIVE DATE OF MODIFIED ESAS 2 DEVELOPMENT
PROGRAM.  AT SUCH TIME AS THE PARTIES (OR, IF APPLICABLE, THE SUPERVISORY BOARD)
SHALL HAVE ACCEPTED A MODIFIED ESAS 2 DEVELOPMENT PROGRAM INCORPORATING A
MATERIAL MODIFICATION, OR ANY PORTION THEREOF, THE PARTIES SHALL EVIDENCE SUCH
AGREEMENT BY INITIALING THE REVISED PRODUCT REQUIREMENTS DOCUMENT, SOFTWARE
REQUIREMENTS SPECIFICATION, TECHNICAL PLAN, RESOURCE PLAN OR BUDGET, AS
APPLICABLE.  THE ESAS 2 DEVELOPMENT PROGRAM AS SO MODIFIED AND APPROVED SHALL
CONSTITUTE THE ESAS 2 DEVELOPMENT PROGRAM HEREUNDER AND BE INCORPORATED BY
REFERENCE INTO THIS ESAS 2 ADDENDUM, AND SHALL SUPERSEDE THE PRECEDING ESAS 2
DEVELOPMENT PROGRAM, OR APPLICABLE PORTIONS THEREOF, FOR ALL PURPOSES.  IN ORDER
TO EVIDENCE THEIR AGREEMENT TO THE REVISED ESAS 2 DEVELOPMENT PROGRAM, THE
PARTIES SHALL INCLUDE IT IN AN ADDITIONAL VOLUME OF THE BINDER, LABELED
“AMENDMENTS TO ESAS 2 DEVELOPMENT PROGRAM,” IN WHICH ALL AMENDMENTS AND
MODIFICATIONS TO THE ESAS 2 DEVELOPMENT PROGRAM WILL BE KEPT.

 

3.4         NOTICE OF SIGNIFICANT CHANGES.  EACH PARTY WILL GIVE THREE
(3) CALENDAR MONTHS NOTICE TO THE OTHER PARTY PRIOR TO ANY PROPOSAL OF A
SIGNIFICANT REDUCTION OR INCREASE IN RESOURCES FROM THE THEN-CURRENT RESOURCE
PLAN IN ORDER TO ALLOW THE PARTIES TIME TO DIVERT RESOURCES EITHER TO OR FROM
THE ESAS 2 DEVELOPMENT PROGRAM.  ANY SIGNIFICANT CHANGES TO THE BUDGET OR THE
RESOURCE PLAN SHALL BE EFFECTIVE ONLY UPON THE EXPIRATION OF THREE (3) MONTHS
FROM THE DELIVERY OF SUCH NOTICE, UNLESS THE PARTIES BOTH AGREE TO A SHORTER
PERIOD OF TIME IN WRITING.

 

4.               CHANGES TO ESAS 2 INSTRUMENT AFTER COMPLETION DATE. 
NOTWITHSTANDING THE PROVISIONS OF SECTION 3, THE PARTIES RECOGNIZE THAT, AFTER
THE ESAS 2 INSTRUMENT DEVELOPMENT IS COMPLETED, THE MARKET MAY DEMAND OR
REGULATORY CHANGES MAY REQUIRE THAT SPECIAL ENHANCEMENTS OR MODIFICATIONS BE
MADE TO THE ESAS 2 INSTRUMENT, AND THAT EITHER PARTY MAY DESIRE TO ADOPT SUCH
CHANGES.  ANY SUCH ENHANCEMENTS OR MODIFICATIONS SHALL BE GOVERNED BY
SECTION 3.3 OF THE AGREEMENT.

 

5.               ESAS 2 DEVELOPMENT COSTS.

 

5.1         [***] TO PAY DEVELOPMENT COSTS.  [***] IS RESPONSIBLE FOR AND AGREES
TO PAY THE [***] ESAS 2 DEVELOPMENT COSTS, AS DEFINED IN AND SUBJECT TO
SECTION 5.2 BELOW.  SUCH COSTS SHALL BE PAYABLE AS DESCRIBED IN SECTION 5.3
HEREIN.  THE BUDGET HAS BEEN PREPARED FOR THE PURPOSE OF PERMITTING [***] TO
PLAN FOR ESAS 2 DEVELOPMENT PROGRAM EXPENDITURES RELATED TO ESAS 2 DEVELOPMENT
COSTS HEREUNDER AND REPRESENTS THE PARTIES’ BEST ESTIMATE OF SUCH ESAS 2
DEVELOPMENT COSTS, BUT DOES NOT REPRESENT A “FIXED PRICE MAXIMUM” OR OTHER
GUARANTEED MAXIMUM COST OF THE DEVELOPMENT REQUIRED FOR THE ESAS 2 DEVELOPMENT
PROGRAM.

 

5.2         DEFINITION AND CALCULATION OF ESAS 2 DEVELOPMENT COSTS.  “ESAS 2
DEVELOPMENT COST” WITH RESPECT TO THE ESAS 2 DEVELOPMENT PROGRAM MEANS THE
FULLY-BURDENED COST OF CONDUCTING THE RESEARCH AND DEVELOPMENT (INCLUDING
DOMESTIC AND INTERNATIONAL REGULATORY AND LICENSING ACTIVITIES) OF THE ESAS 2
INSTRUMENT, AND SHALL INCLUDE THE [***] OF [***] THAT ARE [***] FOR THE [***]
AND [***] OF SUCH QUANTITIES OF THE ESAS 2 INSTRUMENT [***] THE [***].  COSTS
WILL BE CALCULATED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, CONSISTENTLY APPLIED (“U.S. GAAP”), OR AS OTHERWISE
MUTUALLY AGREED IN WRITING BETWEEN THE PARTIES.

 

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5.2.1                        ESAS 2 DEVELOPMENT COSTS; FTE LABOR RATE. 

 

(A)  IN LIEU OF ACCOUNTING SPECIFICALLY FOR AND RECEIVING DIRECT REIMBURSEMENT
FOR CERTAIN ESAS 2 DEVELOPMENT COSTS, THE PARTIES HAVE AGREED TO INCLUDE
REIMBURSEMENT FOR THOSE CERTAIN CATEGORIES OF ESAS 2 DEVELOPMENT COSTS WITHIN AN
AGREED-UPON LABOR RATE FOR FULL TIME EQUIVALENT PERSONNEL (THE “FTE LABOR
RATE”).  EACH PARTY WILL CALCULATE ITS OWN FTE LABOR RATE.  THOSE CATEGORIES OF
“ESAS 2 DEVELOPMENT COSTS” INCLUDED WITHIN THE FTE LABOR RATE ARE THOSE COSTS
MORE PARTICULARLY DESCRIBED ON SCHEDULE 5.2.1A, IN PARAGRAPH 2 ENTITLED “ESAS 2
DEVELOPMENT COSTS INCLUDED WITHIN FTE LABOR RATE”.  NEITHER PARTY SHALL BE
REIMBURSED SEPARATELY FOR ESAS 2 DEVELOPMENT COSTS INCLUDED WITHIN FTE LABOR
RATE.  THOSE CATEGORIES OF “ESAS 2 DEVELOPMENT COSTS” NOT INCLUDED WITHIN THE
FTE LABOR RATE ARE THOSE COSTS MORE PARTICULARLY DESCRIBED ON SCHEDULE 5.2.1A,
IN PARAGRAPH 3 ENTITLED “ESAS 2 DEVELOPMENT COSTS NOT INCLUDED WITHIN FTE LABOR
RATE”.  EACH PARTY SHALL BE REIMBURSED SEPARATELY FOR ESAS 2 DEVELOPMENT COSTS
NOT INCLUDED WITHIN FTE LABOR RATE.

 

(I)                                     THE FTE LABOR RATE IN EFFECT AS OF THE
ADDENDUM EFFECTIVE DATE IS SET FORTH IN PARAGRAPH 1 ON THE ATTACHED
SCHEDULE 5.2.1A, AND IS INCLUDED IN THE RESOURCE PLAN AND REFLECTED IN THE
BUDGET.  EITHER PARTY SHALL HAVE THE RIGHT TO REQUEST A CHANGE IN THE FTE LABOR
RATE REFLECTED ON THE ATTACHED SCHEDULE 5.2.1A ON A PROSPECTIVE BASIS UNDER THE
APPROVAL PROCESS SET FORTH IN SECTION 3.  IN THE EVENT AGGREGATE ACTUAL ESAS 2
DEVELOPMENT COSTS INCURRED BY A PARTY DURING ANY CALENDAR YEAR THAT ARE
REIMBURSED THROUGH THE FTE LABOR RATE EXCEEDED, OR FELL SHORT OF, THE AGREED FTE
LABOR RATE REFLECTED IN THE BUDGET FOR SUCH CALENDAR YEAR, EITHER PARTY MAY SEEK
A REQUEST FOR MODIFICATION OF THE ESAS 2 DEVELOPMENT PROGRAM TO REFLECT SUCH
ACTUAL COSTS.  ACCEPTANCE OF SUCH REQUEST FOR MODIFICATION SHALL BE GOVERNED BY
SECTION 3.3.4.  NOTWITHSTANDING THE FOREGOING, THROUGHOUT THE TERM OF THIS ESAS
2 ADDENDUM, IN THE EVENT EITHER PARTY REQUESTS A MODIFICATION TO THE FTE LABOR
RATE HEREUNDER, THE MODIFIED FTE LABOR RATE SHALL BE CALCULATED USING THE SAME
METHODOLOGY AS THAT USED TO CALCULATE THE FTE LABOR RATE IN EFFECT AS OF THE
ADDENDUM EFFECTIVE DATE.  THE METHODOLOGY USED TO CALCULATE THE FTE LABOR RATE
IN EFFECT AS OF THE ADDENDUM EFFECTIVE DATE IS DESCRIBED ON THE ATTACHED
SCHEDULE 5.2.1B, ENTITLED “FTE LABOR RATE ANALYSIS”.

 

5.2.2                        COMPARISON WITH RESOURCE PLAN.  THE PLANNED
RESOURCES, AND THE ASSOCIATED COSTS, WILL BE BROKEN OUT ON A MONTHLY BASIS AND
ANALYZED AGAINST THE RESOURCE PLAN INCLUDED WITHIN THE TECHNICAL PLAN, AND
REFLECTED IN THE BUDGET.

 

5.3         PAYMENT OF ESAS 2 DEVELOPMENT COSTS.  IN ADDITION TO THE PROVISIONS
OF ARTICLE 7 OF THE AGREEMENT, THE PARTIES AGREE AS FOLLOWS:

 

5.3.1                        ACCRUED ESAS 2 DEVELOPMENT COSTS.  EACH PARTY HAS
ALREADY INCURRED, PRIOR TO THE DATE OF EXECUTION OF THIS ESAS 2 ADDENDUM,
CERTAIN ESAS 2 DEVELOPMENT COSTS.  [***] SHALL REIMBURSE [***] FOR ITS ESAS 2
DEVELOPMENT COSTS INCURRED PRIOR TO AND UNTIL THE DATE OF EXECUTION OF THIS ESAS
2 ADDENDUM.  ATTACHED TO THIS ESAS 2 ADDENDUM AS SCHEDULE 5.3.1 IS A SUMMARY OF
THE ESAS 2 DEVELOPMENT COSTS INCURRED BY THE PARTIES PRIOR TO THE EXECUTION OF
THIS ESAS 2 ADDENDUM.

 

5.3.2                        MONTHLY NOTICES; PAYMENTS.  AT THE END OF EACH
MONTH, EACH PARTY SHALL CALCULATE ITS ACTUAL EXPENDITURES AND FTE LABOR AMOUNTS
FOR ESAS 2 DEVELOPMENT COSTS IT INCURRED DURING SUCH MONTH AND SHALL PROMPTLY
PROVIDE TO THE OTHER PARTY A REASONABLY DETAILED WRITTEN BREAKDOWN OF SUCH
COSTS.  [***] SHALL INVOICE [***] FOR THE AMOUNT OF SUCH COSTS INCURRED BY [***]
DURING SUCH MONTH UNDER SECTION 5.3.3 BELOW.

 

5.3.3                        INVOICES.  [***] WILL INVOICE [***] FOR THE AMOUNTS
DESCRIBED IN THIS SECTION 5.3 AND ALL INVOICES WILL BE DUE AND PAYABLE THIRTY
(30) DAYS FROM THE DATE OF THE INVOICE.  IN THE EVENT PAYMENT IS NOT RECEIVED
WITHIN SUCH PERIOD, CHIRON SHALL PAY A SERVICE CHARGE EQUAL TO THE AMOUNT

 

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OVERDUE MULTIPLIED BY THE LIBOR IN EFFECT ON THE FIRST DAY OF SUCH CALENDAR
MONTH, BUT NOT EXCEEDING THE MAXIMUM ALLOWABLE RATE.

 

5.4         REIMBURSEMENT OF ESAS 2 DEVELOPMENT COSTS.   CHIRON WILL BE ENTITLED
TO REIMBURSEMENT, IF AT ALL, OF ESAS 2 DEVELOPMENT COSTS SOLELY FROM REVENUES
FROM THE ESAS 2 INSTRUMENT, AS MORE PARTICULARLY DESCRIBED IN SECTION 3.3.6 OF
THE AGREEMENT AS AMENDED BY SECTION 6.3 OF THIS ADDENDUM.

 

6.               MANUFACTURING AND COMMERCIALIZATION.

 

6.1         ESAS 2 INSTRUMENT MANUFACTURING COSTS.

 

6.1.1                        THE “FULLY-BURDENED MANUFACTURING COSTS” OF THE
ESAS 2 INSTRUMENT FOR PURPOSES OF THIS ESAS 2 ADDENDUM (INCLUDING REVISED
SECTION 3.3.6 OF THE AGREEMENT) SHALL MEAN [***] PERCENT ([***]%) OF THE
REASONABLE THIRD PARTY OEM INVOICE COST OF THE ESAS 2 INSTRUMENT (INCLUDING
FREIGHT, TAXES, ETC.,).  THE FOREGOING AMOUNT SHALL BE USED IN LIEU OF THE
ACTUAL INTERNAL COSTS INCURRED OR ALLOCATED TO THE PURCHASE FOR QA, PURCHASING,
RECEIVING AND WAREHOUSING, ETC.

 

6.1.2                        GEN-PROBE IS ENTITLED TO REVIEW, EVALUATE, AND IN
ITS DISCRETION INDEPENDENTLY VERIFY THE BASIS OF CHIRON’S FULLY-BURDENED
MANUFACTURING COST USING AN INDEPENDENT THIRD PARTY, IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 7.3 OF THE AGREEMENT.

 

6.2         RIGHTS TO MANUFACTURE AND SELL. 

 

6.2.1                        BLOOD SCREENING FIELD.  NOTWITHSTANDING
SECTION 3.3.3 OF THE AGREEMENT, CHIRON SHALL HAVE THE EXCLUSIVE RIGHT AND
OBLIGATION DURING THE ESAS 2 ADDENDUM TERM TO MANUFACTURE (AND HAVE
MANUFACTURED) THE ESAS 2 INSTRUMENTS TO SATISFY CHIRON’S REQUIREMENTS OF ESAS 2
INSTRUMENTS IN THE TERRITORY FOR USE IN THE BLOOD SCREENING FIELD.  IF CHIRON
ELECTS TO SUBCONTRACT THE MANUFACTURE OF THE ESAS2 INSTRUMENT, THEN CHIRON SHALL
COMPLY WITH THE REQUIREMENTS OF SECTION 3.3.3(D) OF THE AGREEMENT.  GEN-PROBE
AGREES TO COMPLY WITH THE OBLIGATION TO PROVIDE REASONABLE TECHNICAL ASSISTANCE,
AT CHIRON’S SOLE COST, AS NECESSARY OR APPROPRIATE TO ENABLE CHIRON TO FULFILL
ITS OBLIGATION AND EXERCISE THE RIGHT TO MANUFACTURE (OR HAVE MANUFACTURED) THE
ESAS 2 INSTRUMENT FOR USE IN THE BLOOD SCREENING FIELD, INCLUDING DELIVERING
SPECIFICATIONS AND OTHER KNOW-HOW TO CHIRON AND CAUSING RESPONSIVE GEN-PROBE
PERSONNEL THAT POSSESS SUCH KNOW-HOW TO BE AVAILABLE TO CHIRON, IN EACH CASE AS
REASONABLY NECESSARY TO ENABLE CHIRON TO EXERCISE THE RIGHTS GRANTED AND FULFILL
ITS OBLIGATIONS HEREUNDER.  CHIRON SHALL HAVE THE EXCLUSIVE DISTRIBUTION RIGHT
IN THE TERRITORY TO PROMOTE, MARKET AND SELL THE ESAS 2 INSTRUMENT TO CONDUCT
BLOOD SCREENING ASSAYS IN THE BLOOD SCREENING FIELD, AS SET FORTH IN
SECTION 3.3.4 OF THE AGREEMENT.  NOTHING IN THIS ESAS 2 ADDENDUM SHALL AFFECT
GEN-PROBE’S OBLIGATIONS TO CHIRON UNDER THE AGREEMENT WITH RESPECT TO THE
MANUFACTURE AND SUPPLY OF EXISTING BLOOD SCREENING INSTRUMENTS OR CHIRON’S
OBLIGATIONS TO GEN-PROBE UNDER THE AGREEMENT WITH RESPECT TO THE
COMMERCIALIZATION OF EXISTING BLOOD SCREENING INSTRUMENTS.

 

6.2.2                        CLINICAL DIAGNOSTIC FIELD.   NOTWITHSTANDING
SECTION 6.2.1 OF THIS ESAS 2 ADDENDUM OR SECTIONS 3.3.4 OR 4.4.3 OF THE
AGREEMENT, GEN-PROBE SHALL HAVE THE EXCLUSIVE RIGHT TO MANUFACTURE (AND HAVE
MANUFACTURED) THE ESAS 2 INSTRUMENTS FOR USE IN THE CLINICAL DIAGNOSTIC FIELD. 
CHIRON AGREES TO PROVIDE GEN-PROBE SUCH REASONABLE TECHNICAL ASSISTANCE, AT
GEN-PROBE’S SOLE COST, AS NECESSARY OR APPROPRIATE TO ENABLE GEN-PROBE TO
EXERCISE THE RIGHT TO MANUFACTURE (OR HAVE MANUFACTURED) THE ESAS 2 INSTRUMENT
FOR USE IN THE CLINICAL DIAGNOSTIC FIELD, INCLUDING WITHOUT LIMITATION
DELIVERING MANUFACTURING DRAWINGS, SPECIFICATIONS AND OTHER KNOW-HOW TO
GEN-PROBE AND CAUSING RESPONSIVE CHIRON PERSONNEL THAT POSSESS SUCH KNOW-HOW TO
BE AVAILABLE TO GEN-PROBE, IN EACH CASE AS REASONABLY

 

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NECESSARY TO ENABLE GEN-PROBE TO EXERCISE THE RIGHTS GRANTED HEREUNDER. 
NOTWITHSTANDING SECTION 4.4.4 OF THE AGREEMENT, GEN-PROBE SHALL HAVE THE
EXCLUSIVE DISTRIBUTION RIGHT IN THE TERRITORY TO PROMOTE, MARKET AND SELL THE
ESAS 2 INSTRUMENT IN THE CLINICAL DIAGNOSTIC FIELD TO THE EXTENT, AS OF THE
ADDENDUM EFFECTIVE DATE, THAT CHIRON HAS THE ABILITY TO GRANT SUCH RIGHTS TO
GEN-PROBE.

 

6.2.3                        RIGHT TO ACQUIRE ALL RIGHTS TO MANUFACTURE AND
COMMERCIALIZE.  GEN-PROBE SHALL HAVE THE RIGHT, BUT NOT THE OBLIGATION, TO
ACQUIRE FROM CHIRON THE EXCLUSIVE RIGHT TO MANUFACTURE AND DISTRIBUTE THE ESAS 2
INSTRUMENT IN ALL FIELDS AT THE EXPIRATION OR SOONER TERMINATION OF THE ESAS 2
ADDENDUM TERM FOR ANY REASON UNDER SECTION 8 OF THIS ADDENDUM.  GEN-PROBE MAY
EXERCISE SUCH RIGHT BY PROVIDING CHIRON WITH WRITTEN NOTICE OF ELECTION UNDER
THIS SECTION 6.2.3, TOGETHER WITH PAYMENT IN AN AMOUNT EQUAL TO THE ESAS 2
DEVELOPMENT COSTS FOR WHICH [***] IS ENTITLED TO REIMBURSEMENT HEREUNDER BUT FOR
WHICH [***] HAS NOT YET RECEIVED REIMBURSEMENT UNDER SECTION 3.3.6(B) OF THE
AGREEMENT, AS AMENDED BY SECTION 6.3 BELOW.  GEN-PROBE MAY RELY UPON AND BASE
ITS CALCULATION OF SUCH AMOUNT UPON THE ACCOUNTING [***] FROM TIME TO TIME FROM
[***] UNDER SECTION 3.3.6 OF THE AGREEMENT, AS AMENDED BY SECTION 6.3 BELOW.

 

6.3         CONSIDERATION ON ESAS 2 INSTRUMENT SALES.  IN CONSIDERATION FOR THE
RIGHTS GRANTED AND OBLIGATIONS UNDERTAKEN BY THE PARTIES IN THIS ESAS 2
ADDENDUM, THE CONSIDERATION RECEIVED ON THE SALE, TRANSFER OR OTHER DISPOSITION
OF THE ESAS 2 INSTRUMENT WILL BE GOVERNED BY THIS SECTION 6.3.  EXCEPT AS
OTHERWISE PROVIDED IN SECTION 8.3 OF THIS ESAS 2 ADDENDUM, SECTION 3.3.6 OF THE
AGREEMENT IS AMENDED AND RESTATED IN ITS ENTIRETY AS FOLLOWS BUT SOLELY WITH
RESPECT TO CONSIDERATION ON THE SALE, TRANSFER OR OTHER DISPOSITION OF THE ESAS
2 INSTRUMENT.

 

“3.3.6                  Compensation for eSAS 2 Instruments.  In consideration
for the rights granted, and the obligations accepted, by the Parties, each Party
shall pay to the other the applicable amounts described in this Section 3.3.6.

 

a)                                      Definitions.

 

(i)                                     Revenues from the eSAS 2 Instrument.  As
used in this Section 3.3.6 “revenues from the eSAS 2 Instrument” for a fiscal
quarter shall mean all amounts received by a Party or a Party’s Affiliates for
the sale, transfer, placement, lease or other disposition of the eSAS 2
Instruments during such fiscal quarter; provided, however, that:

 

(A)                              Revenues for Collaboration Combination
Products.  If an eSAS 2 Instrument is sold in combination with one or more
non-eSAS instruments or instrument components (a “Collaboration Combination
Product”) for a single price or on a single invoice to the customer, the
“revenues from the eSAS 2 Instrument” with respect to such Collaboration
Combination Product shall be calculated by multiplying the total amount received
by a Party or its Affiliates for such Collaboration Combination Product by the
fraction A/B, where A is gross selling price of the eSAS 2 Instrument sold
separately and B is the gross single price or aggregate prices on a single
invoice to the customer for such Collaboration Combination Product.  Such
calculation of the Collaboration Combination Product revenues shall be
negotiated in good faith between the Parties and resolved pursuant to Article 13
if they are unable to agree.

 

(B)                                Revenues for Lease, Rental or Placement
Programs.  If the eSAS 2 Instrument is not sold separately but rather is leased,
placed or rented pursuant to a reagent/rental program or comparable sale or
lease program (including instrument upgrade/maintenance programs) (each a
“Program”) where the instrument revenue is included in

 

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such Program revenue, then the “revenues from the eSAS 2 Instrument” with
respect to such Program shall: (i) be [***] percent ([***]%) of the Fully
Burdened Manufacturing Costs [***]% until [***] has been reimbursed for all eSAS
2 Development Costs, and [***] percent ([***]%) thereafter;  based upon an
imputed instrument depreciation factor consistent with Chiron’s then-current
accounting policy that provides for a depreciation of at least three (3) years
for each eSAS 2 Instrument.

 

(C)                                 Nothing herein shall amend the manner in
which the Agreement determines the revenues for Combination Products where the
eSAS 2 Instrument is sold in combination with one or more Third Party products.

 

(ii)                                  As used in this Section 3.3.6:

 

(A)                              the “Chiron Blood Screening Split” used under
Section 3.3.6(b) below with respect to sales of the eSAS 2 Instrument in the
Blood Screening Field shall be the remainder of (I) [***] percent ([***] %) less
(II) the Gen-Probe Blood Screening Split.

 

(B)                                the “Gen-Probe Blood Screening Split” used
under Section 3.3.6(b) below with respect to sales of the eSAS 2 Instrument in
the Blood Screening Field shall be calculated, for a given fiscal quarter, by
taking the dollar weighted average of the Applicable Purchase Price earned by
Gen-Probe for all Blood Screening Assays sold as calculated under 1.2.1 and
1.2.3 of the Agreement during such fiscal quarter.

 

(C)                                the “Chiron Clinical Diagnostic Split” used
under Section 3.3.6(c) below with respect to sales of the eSAS 2 Instrument in
the Clinical Diagnostic Field shall be equal to the Gen-Probe Blood Screening
Split.

 

(D)                               the “Gen-Probe Clinical Diagnostic Split” used
under Section 3.3.6(c) below with respect to sales of the eSAS 2 Instrument in
the Clinical Diagnostic Field shall be equal to the Chiron Blood Screening
Split.

 

b)                                     Instrument Sales; Chiron Sales of eSAS 2
Instruments.

 

(i) Until [***] has been reimbursed for all eSAS 2 Development Costs, within
forty-five (45) days following the end of each fiscal quarter Chiron shall
(A) first, calculate (and provide written notice to Gen-Probe of such
calculation) the revenues from eSAS 2 Instruments sold and received by Chiron or
its Affiliates during such fiscal quarter; (B) second, calculate (and provide
written notice to Gen-Probe of such calculation) [***] percent ([***]%) of the
Fully Burdened Manufacturing Costs for the eSAS 2 Instruments sold in such
fiscal quarter by Chiron and its Affiliates; (C) third, calculate (and provide
written notice to Gen-Probe of such calculation) and retain the lesser of
(I) revenues from eSAS 2 Instruments sold and received by Chiron and its
Affiliates in such fiscal quarter or (II) [***] percent ([***]%) of the Fully
Burdened Manufacturing Costs for the eSAS 2 Instruments sold in such fiscal
quarter by Chiron and its Affiliates; (D) fourth, apply and credit (and provide
written notice to Gen-Probe of such calculation) the difference between such
retained amount and [***] percent ([***]%) of the Fully Burdened Manufacturing
Costs for the eSAS 2 Instruments sold in such fiscal quarter by Chiron and its
Affiliates as reimbursement to Chiron of the eSAS 2 Development Costs;
(E) fifth, calculate (and provide written notice to Gen-Probe of such
calculation) and retain the Chiron

 

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Blood Screening Split, if any; and (F) sixth, pay to Gen-Probe an amount equal
to the Gen-Probe Blood Screening Split, if any.

 

(ii)                                  After [***] has been reimbursed for all
eSAS 2 Development Costs under subparagraph 3.3.6(b)(i) above, within forty-five
(45) days following the end of each fiscal quarter Chiron shall thereafter
(A) first, calculate (and provide written notice to Gen-Probe of such
calculation) revenues from eSAS 2 Instruments sold and received by Chiron and
its Affiliates in such fiscal quarter; (B) second, calculate (and provide
written notice to Gen-Probe of such calculation) and retain [***] percent
([***]%) of the Fully Burdened Manufacturing Costs for the eSAS 2 Instruments
sold in such fiscal quarter by Chiron and its Affiliates; (C) third, calculate
(and provide written notice to Gen-Probe of such calculation) and retain the
Chiron Blood Screening Split, if any; and (D) fourth, pay to Gen-Probe an amount
equal to the Gen-Probe Blood Screening Split, if any.

 

(iii) If the eSAS 2 Instrument is not sold separately by Chiron but rather is
leased, placed or rented by Chiron pursuant to a Program (as defined in
subsection 3.3.6(a)(i)(B)), within forty-five (45) days following the end of
each fiscal quarter Chiron shall calculate (and (provide written notice to
Gen-Probe of such calculation) and shall be entitled to retain any and all
revenues from the eSAS 2 Instruments sold, leased, placed or rented pursuant to
a Program and received by Chiron and its Affiliates in such fiscal quarter.

 

c)                                      Instrument Sales; Gen-Probe Sales of
eSAS 2 Instruments.

 

(i)                                     Within forty-five (45) days following
the end of each fiscal quarter Gen-Probe sells eSAS 2 instruments Gen-Probe
shall (A) first, calculate (and provide written notice to Chiron of such
calculation) the revenues for the eSAS 2 Instruments received by Gen-Probe and
its Affiliates during such fiscal quarter from the sale, transfer, placement,
lease or other disposition of the eSAS 2 Instrument in the Clinical Diagnostic
Field; (B) second, calculate (and provide written notice to Chiron of such
calculation) and retain [***] percent ([***]%) of the Fully Burdened
Manufacturing Costs for such eSAS 2 Instruments; (C) third, calculate (and
provide written notice to Chiron of such calculation) and retain an amount equal
to the Gen-Probe Clinical Diagnostic Split, if any; and (D) fourth, pay to
Chiron an amount equal to the Chiron Clinical Diagnostic Split, if any.

 

d)                                     Service Revenues.  Each Party is entitled
to retain the aggregate commercially reasonable revenues received by such Party
and its Affiliates in consideration for required maintenance and servicing of
the eSAS 2 Instruments consistent with standard industry practices; provided,
however that the revenues retained may not exceed [***] percent ([***]%) of the
Fully Burdened Manufacturing Costs of the eSAS 2 Instruments per year; provided
however that in the event that the revenues exceed [***] percent ([***]%) of the
Fully Burdened Manufacturing Costs of the eSAS 2 Instruments in any given year,
such excess shall be shared by Gen-Probe and Chiron such that, for maintenance
and service revenues of eSAS 2 Instruments used in the Blood Screening Field,
the parties shall receive such amount equal to their respective Blood Screening
Splits, and for maintenance and service revenues of eSAS2 Instruments used in
the Clinical Diagnostic Field, the parties shall receive such amount equal to
their respective Clinical Diagnostic Splits.

 

6.4         AUTHORIZATION LETTER.  CHIRON WILL ALLOW GEN-PROBE TO DIRECTLY
ACCESS OEM SUPPLIERS OF ESAS-2 INSTRUMENTS TO PURCHASE OR MODIFY ESAS- 2
INSTRUMENTS FOR THE CLINICAL DIAGNOSTIC FIELD.

 

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CHIRON WILL NOT MAKE ANY AGREEMENT WITH SUB-CONTRACT MANUFACTURERS THAT WILL
RESTRICT GEN-PROBE’S ABILITY TO NEGOTIATE ITS OWN CONTRACT WITH THE VENDORS FOR
THE MANUFACTURE AND PURCHASE OF MODIFIED ESAS- 2 INSTRUMENTS FOR THE CLINICAL
DIAGNOSTIC FIELD.  IN ADDITION, THE PARTIES ACKNOWLEDGE THAT GEN-PROBE SHALL
HAVE THE RIGHT TO PURCHASE THE ESAS 2 INSTRUMENT FROM ANY THIRD PARTY THAT
CHIRON EMPLOYS TO MANUFACTURE THE ESAS 2 INSTRUMENT.  PROMPTLY FOLLOWING THE
EXECUTION OF AN AGREEMENT BETWEEN CHIRON AND A THIRD PARTY FOR THE MANUFACTURE
OF THE ESAS 2 INSTRUMENT, AND AT GEN-PROBE’S WRITTEN REQUEST, CHIRON SHALL
EXECUTE THE AUTHORIZATION LETTER ATTACHED HERETO AS SCHEDULE 6.4 (“SALES
AUTHORIZATION LETTER”).

 

7.               OWNERSHIP; LICENSE GRANT.

 

7.1         OWNERSHIP.  OWNERSHIP OF ANY INVENTIONS INCORPORATED IN THE ESAS 2
INSTRUMENT OR OTHERWISE MADE IN THE COURSE OF THE ESAS 2 DEVELOPMENT PROGRAM
SHALL BE “JOINT INVENTIONS” AND SHALL BE ALLOCATED AS PROVIDED IN SECTION 9.1 OF
THE AGREEMENT FOR JOINT INVENTIONS; PROVIDED, HOWEVER, THAT (A) DURING THE ESAS
2 ADDENDUM TERM GEN-PROBE HEREBY GRANTS TO CHIRON UNDER ITS RIGHTS IN AND TO
SUCH JOINT INVENTIONS AN EXCLUSIVE RIGHT TO MAKE, USE, SELL AND IMPORT SUCH
JOINT INVENTIONS IN THE BLOOD SCREENING FIELD AND (B) DURING THE ESAS 2 ADDENDUM
TERM, CHIRON HEREBY GRANTS TO GEN-PROBE UNDER ITS RIGHTS IN AND TO SUCH JOINT
INVENTIONS AN EXCLUSIVE RIGHT TO MAKE, USE, SELL AND IMPORT SUCH JOINT
INVENTIONS IN THE CLINICAL DIAGNOSTIC FIELD.  NEITHER PARTY SHALL HAVE THE RIGHT
TO SUBLICENSE OR OTHERWISE TRANSFER ITS RIGHT, TITLE OR INTEREST IN OR TO THE
JOINT INVENTIONS WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY.

 

7.2         LICENSE GRANT.  DURING THE ESAS 2 ADDENDUM TERM, GEN-PROBE HEREBY
GRANTS TO CHIRON A LICENSE UNDER ALL INTELLECTUAL PROPERTY RIGHTS OF GEN-PROBE
NOW-OWNED OR HEREAFTER ACQUIRED TO THE EXTENT REASONABLY NECESSARY FOR CHIRON TO
PERFORM ITS OBLIGATIONS UNDER THE ESAS 2 DEVELOPMENT PROGRAM AND FOR THE
MANUFACTURE, USE OR SALE OF ESAS 2 INSTRUMENTS IN THE BLOOD SCREENING FIELD, BUT
ONLY TO THE EXTENT THAT GEN-PROBE HAS OR HEREAFTER ACQUIRES AN OWNERSHIP OR
OTHER LICENSABLE INTEREST IN SUCH INTELLECTUAL PROPERTY RIGHTS AND HAS THE RIGHT
TO GRANT LICENSES, IMMUNITIES OR OTHER RIGHTS THEREUNDER.  DURING THE ESAS 2
ADDENDUM TERM, CHIRON HEREBY GRANTS TO GEN-PROBE A LICENSE UNDER ALL
INTELLECTUAL PROPERTY RIGHTS OF CHIRON NOW-OWNED OR HEREAFTER ACQUIRED TO THE
EXTENT REASONABLY NECESSARY FOR GEN-PROBE TO PERFORM ITS OBLIGATIONS UNDER THE
ESAS 2 DEVELOPMENT PROGRAM AND FOR THE MANUFACTURE, USE OR SALE OF ESAS 2
INSTRUMENTS IN THE CLINICAL DIAGNOSTIC FIELD, BUT ONLY TO THE EXTENT THAT CHIRON
HAS OR HEREAFTER ACQUIRES AN OWNERSHIP OR OTHER LICENSABLE INTEREST IN SUCH
INTELLECTUAL PROPERTY RIGHTS AND HAS THE RIGHT TO GRANT LICENSES, IMMUNITIES OR
OTHER RIGHTS THEREUNDER.  THE LICENSES HEREBY GRANTED SHALL EXTEND ONLY TO THE
EXTENT OF THE DESIGN OF THE ESAS 2 INSTRUMENT AS OF THE DATE OF THIS ESAS 2
ADDENDUM AND TO ANY FUTURE DESIGN MODIFICATIONS APPROVED AND ADOPTED IN
ACCORDANCE WITH THE TERMS HEREOF.  THE LICENSE HEREBY GRANTED SHALL BE
ROYALTY-FREE EXCEPT TO THE EXTENT THE LICENSING PARTY HAS AN OBLIGATION TO PAY
ROYALTIES TO A THIRD PARTY PURSUANT TO THE AGREEMENT.  THE LICENSE GRANTED BY
GEN-PROBE IN SECTION 3.3.5(C) OF THE AGREEMENT SHALL APPLY TO THE MANUFACTURE OF
ESAS 2 INSTRUMENTS BY OR FOR CHIRON FOR USE IN THE BLOOD SCREENING FIELD. 
EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY GRANTS TO THE OTHER PARTY ANY
LICENSE OR OTHER INTEREST IN AND TO SUCH PARTY’S INTELLECTUAL PROPERTY RIGHTS OR
OTHER RIGHTS.  FOR THE AVOIDANCE OF DOUBT, NOTHING IN THIS SECTION 7.2 SHALL BE
CONSTRUED AS A GRANT BY CHIRON TO GEN-PROBE FOR AN EXPRESS OR IMPLIED LICENSE
IN, TO OR UNDER THE CHIRON HIV PATENT RIGHTS OR THE CHIRON HCV PATENT RIGHTS.

 

7.3         [***] IMMUNITY.  FOR THE AVOIDANCE OF DOUBT, [***] CONFIRMS THAT
[***] SHALL BE ENTITLED TO THE BENEFIT OF THE IMMUNITY FROM SUIT PREVIOUSLY
GRANTED TO [***], AND SUBJECT TO THE LIMITATIONS AS GRANTED TO [***], BY [***]
AND [***] UNDER THE [***] RELATED PATENTS, WHICH IMMUNITY WAS PREVIOUSLY GRANTED
TO [***] (AND A PARTY TO BE DESIGNATED BY [***]) BY [***] AND [***].

 

18

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8.               ADDENDUM EFFECTIVE DATE; TERM; TERMINATION.

 

8.1         TERM OF ESAS 2 ADDENDUM.  THIS ESAS 2 ADDENDUM SHALL BECOME
EFFECTIVE ON THE ADDENDUM EFFECTIVE DATE AND SHALL CONTINUE IN EFFECT THROUGH
THE BLOOD SCREENING TERM, AS IT MAY BE AMENDED OR EXTENDED FROM TIME TO TIME,
UNLESS SOONER TERMINATED IN ACCORDANCE WITH THE PROVISIONS HEREOF.  TERMINATION
OF THIS ESAS 2 ADDENDUM SHALL BE GOVERNED BY THE TERMS OF THIS SECTION 8 AND
TERMINATION OF THE AGREEMENT IS GOVERNED BY SECTION 11 OF THE AGREEMENT.

 

8.2         TERMINATION FOR BREACH. 

 

8.2.1                        DEFAULT. EITHER PARTY (THE “NONDEFAULTING PARTY”)
HAS THE RIGHT, UPON WRITTEN NOTICE TO THE OTHER PARTY (THE “DEFAULTING PARTY”),
TO TERMINATE THE ESAS 2 DEVELOPMENT PROGRAM, UPON THE OCCURRENCE OF ANY OF THE
FOLLOWING EVENTS OF DEFAULT AND THE EXPIRATION OF ANY APPLICABLE PERIOD OF TIME
FOR CURE:

 

(A)  IF A PARTY FAILS TO MAKE A PAYMENT REQUIRED UNDER SECTIONS 5.3.1 OR 5.3.3
HEREUNDER;

 

(B)  IF A PARTY INVOICES FOR AMOUNTS USING EXPENDITURES NOT FALLING WITHIN THE
DEFINITION OF ESAS 2 DEVELOPMENT COSTS OR NOT INCLUDED WITHIN THE BUDGET.

 

(C)  IF A PARTY FAILS TO EXERCISE COMMERCIALLY REASONABLE EFFORTS TO COMMIT THE
RESOURCES DESCRIBED IN THE ESAS 2 DEVELOPMENT PROGRAM OR TO EXERCISE
COMMERCIALLY REASONABLE EFFORTS ACHIEVE THE OBJECTIVES OF THE ESAS 2 DEVELOPMENT
PROGRAM; PROVIDED, HOWEVER, THAT THE FAILURE TO SUCCESSFULLY COMPLETE THE
DEVELOPMENT OF THE ESAS 2 INSTRUMENT, OR TO COMPLETE THE DEVELOPMENT OF THE ESAS
2 INSTRUMENT ON THE TIMELINE SET FORTH IN THE TECHNICAL PLAN OR FOR THE AMOUNTS
DESCRIBED IN THE BUDGET OR TO THE SPECIFICATIONS SET FORTH IN THE PRD OR THE SRS
SHALL NOT BE DEEMED TO BE A BREACH OF THIS ESAS 2 ADDENDUM; AND

 

(D)  IF A PARTY DEFAULTS UNDER THE AGREEMENT OR THIS ESAS 2 ADDENDUM WHICH
DEFAULT RESULTS IN THE TERMINATION OF THE AGREEMENT OF THIS ESAS 2 ADDENDUM.

 

8.2.2                        RIGHT TO CURE EVENT OF DEFAULT.  UPON THE
OCCURRENCE OF ANY EVENT OF DEFAULT ENTITLING A PARTY TO TERMINATE THIS ESAS 2
ADDENDUM, THE NON-DEFAULTING PARTY SHALL SEND TO THE DEFAULTING PARTY NOTICE OF
EVENT OF DEFAULT, SPECIFYING IN REASONABLE DETAIL THE NATURE OF THE DEFAULT. 
THE DEFAULTING PARTY WILL HAVE THIRTY (30) DAYS FOLLOWING THE DATE OF RECEIPT OF
SUCH NOTICE WITHIN WHICH TO CURE THE BREACH OR EVENT OF DEFAULT.  FAILURE TO
CURE THE DEFAULT WITHIN SUCH TIME PERIOD WILL RESULT IN TERMINATION OF THE ESAS
2 DEVELOPMENT PROGRAM WITHOUT FURTHER NOTICE BY THE NON-DEFAULTING PARTY, UNLESS
SUCH NON-DEFAULTING PARTY EXTENDS THE CURE PERIOD BY WRITTEN NOTICE OR WITHDRAWS
THE DEFAULT NOTICE. (THE EXPIRATION OF THE PERIOD FOR SUCH RIGHT TO CURE WITHOUT
CURE, EXTENSION OR WITHDRAWAL OF THE DEFAULT NOTICE IS REFERRED TO AS THE
“EFFECTIVE DATE OF TERMINATION”.)

 

8.2.3                        EFFECT OF TERMINATION FOR BREACH.  UPON A
TERMINATION OF THIS ESAS 2 ADDENDUM FOR DEFAULT UNDER THIS SECTION 8.2:

 

(A)  SUBJECT TO THE RIGHTS OF THE PARTIES UNDER SECTION 9.3, THE ESAS 2
DEVELOPMENT PROGRAM SHALL BE TERMINATED.

 

(B)  THE NON-DEFAULTING PARTY’S RIGHTS UNDER THE AGREEMENT AND THIS ESAS 2
ADDENDUM SHALL REMAIN IN FULL FORCE AND EFFECT UNCHANGED.

 

19

--------------------------------------------------------------------------------

 

(C)  THE DEFAULTING PARTY’S RIGHTS UNDER THE AGREEMENT AND THIS ESAS 2 ADDENDUM
WITH RESPECT TO ALL PRODUCTS, OTHER THAN THE ESAS 2 INSTRUMENT, SHALL REMAIN IN
FULL FORCE AND EFFECT UNCHANGED.

 

(D)  THE DEFAULTING PARTY’S RIGHTS UNDER THE AGREEMENT AND THIS ESAS 2 ADDENDUM
WITH RESPECT TO THE ESAS 2 INSTRUMENT SHALL TERMINATE AND BE OF NO FURTHER FORCE
AND EFFECT.  THE DEFAULTING PARTY MAY NOT UNDERTAKE A DEVELOPMENT SUBSTANTIALLY
SIMILAR TO THE ESAS 2 DEVELOPMENT PROGRAM WITH ANY OTHER PARTY FOR A PERIOD OF
[***] FROM THE DATE OF TERMINATION.

 

(E)  IF CHIRON IS THE DEFAULTING PARTY, CHIRON SHALL PAY TO GEN-PROBE IN
ADDITION TO ANY OTHER RIGHTS OR REMEDIES AVAILABLE TO GEN-PROBE AT LAW OR
EQUITY, PROMPTLY UPON RECEIPT OF AN INVOICE THEREFORE, AN AMOUNT EQUAL TO
(I) [***] FOR WHICH AN [***] HAS BEEN [***], (II)  [***] NOT YET [***] BUT [***]
IN THE [***], WHETHER OR NOT DISPUTED, AS [***] IN THE [***], AND (III) AN [***]
BY [***], WITH [***] PROVIDED TO [***], TO [***] THE [***] OF [***] THE [***],
IF APPLICABLE.

 

8.3         TERMINATION BY CHIRON.  CHIRON MAY ELECT TO TERMINATE THIS ESAS 2
ADDENDUM UNDER THIS SECTION 8.3 FOR CONVENIENCE AT ANY TIME DURING THE ESAS TERM
IN ITS SOLE DISCRETION UPON WRITTEN NOTICE TO GEN-PROBE. FOLLOWING ANY SUCH
TERMINATION, CHIRON SHALL PAY, PROMPTLY UPON RECEIPT OF AN INVOICE THEREFOR, TO
GEN-PROBE AN AMOUNT EQUAL TO (I) [***] IN THE [***] FOR WHICH AN [***] HAS BEEN
[***] AND (II) [***] NOT YET [***] BUT [***] IN THE [***], WHETHER OR NOT
DISPUTED, AS SET FORTH IN THE APPROVED BUDGET.

 

8.4         CONTINUANCE OF ESAS 2 DEVELOPMENT PROGRAM FOLLOWING TERMINATION. 

 

8.4.1                        ELECTION.  FOLLOWING ANY TERMINATION OF THIS ESAS 2
ADDENDUM FOR BREACH BY CHIRON IN ACCORDANCE WITH SECTION 8.2 OR TERMINATION BY
CHIRON IN ACCORDANCE WITH SECTION 8.3, GEN-PROBE MAY ELECT TO CONTINUE THE ESAS
2 DEVELOPMENT PROGRAM BY PROVIDING WRITTEN NOTICE TO CHIRON ON OR BEFORE THE
EFFECTIVE DATE OF TERMINATION UNDER SECTION 8.2.

 

8.4.2                        FUNDING AND CONDUCT OF DEVELOPMENT.  IF GEN-PROBE
ELECTS PURSUANT TO THIS SECTION 8.4 TO CONTINUE FUNDING THE ESAS 2 DEVELOPMENT
PROGRAM, GEN-PROBE SHALL BE SOLELY RESPONSIBLE FOR THE CURRENT FUNDING OF ALL
ESAS 2 DEVELOPMENT COSTS, INCLUDING THOSE APPLICABLE TO, OR INCURRED BY CHIRON
UNDER THE TERMS OF THIS AGREEMENT, FROM AND AFTER THE EFFECTIVE DATE OF
TERMINATION UNDER SECTION 8.2, SUBJECT TO THE RIGHT TO REIMBURSEMENT MORE
PARTICULARLY DESCRIBED BELOW.

 

Reimbursement of Development Costs.  If Gen-Probe elects to continue development
of the eSAS 2 Instrument in accordance with this Section 8.4, then before
distribution of compensation as provided in revised Section 3.3.6 of the
Agreement (amended as provided in Section 6.3 above), Gen-Probe shall be first
entitled to reimbursement of all eSAS 2 Development Costs incurred by Gen-Probe
from and after the effective date of such termination and election to continue. 
Section 3.3.6 of the Agreement is amended to add the following, as a new
Section 3.3.6A, inserted before revised Section 3.3.6 of the Agreement (amended
as provided in Section 6.3 above), as follows

 

 “3.3.6A                                                     Notwithstanding
anything to the contrary in this Section 3.3.6, until Gen-Probe has been
reimbursed for all eSAS 2 Development Costs, within forty-five (45) days
following the end of each fiscal quarter Chiron shall (A) first, calculate (and
provide written notice to Gen-Probe of such calculation) the revenues from the
eSAS 2 Instrument received by Chiron or its Affiliates during such fiscal
quarter; (B) second, calculate and retain (and provide written notice to
Gen-Probe of such

 

20

--------------------------------------------------------------------------------

 

calculation) [***] ([***]%) of the Fully Burdened Manufacturing Costs for the
eSAS 2 Instruments sold in such fiscal quarter; (C) third, calculate and pay to
Gen-Probe the lesser of  (I) the remainder of the revenues calculated in (A) and
the Fully Burdened Manufacturing Costs retained in (B)  from each eSAS 2
Instrument sold in such fiscal quarter received by Chiron or its Affiliates or
(II) [***] percent ([***]%) of the Fully Burdened Manufacturing Costs of such
eSAS 2 Instruments sold in such fiscal quarter (and provide written notice to
Gen-Probe of such calculation); (D) fourth, apply and credit the difference
between such amount paid to Gen-Probe for the eSAS 2 Instrument sold in such
fiscal quarter as reimbursement to Gen-Probe for the eSAS 2 Development Costs
(and provide written notice to Gen-Probe of such calculation); (E) fifth,
calculate (and provide written notice to Gen-Probe of such calculation) and
retain the Chiron Blood Screening Split, if any; and (F) sixth, pay to Gen-Probe
an amount equal to the Gen-Probe Blood Screening Split, if any.  Until such time
as Chiron receives written notice from Gen-Probe that Gen-Probe has been
reimbursed for all eSAS 2 Development Costs, then the provisions of
Section 3.3.6 of the Agreement (amended as provided in Section 6.3 above) shall
govern the distribution of consideration received on sale, transfer or other
distribution of the eSAS 2 Instrument.”

 

8.4.3                        CONTROL OF THE PROGRAM UPON UNILATERAL FUNDING. 
GEN-PROBE SHALL HAVE THE RIGHT TO APPOINT THE PROJECT MANAGER FROM AND AFTER THE
EFFECTIVE DATE OF TERMINATION BY CHIRON UNDER SECTION 8.3 AND THE DECISION TO
CONTINUE THE PROGRAM.  GEN-PROBE SHALL HAVE THE RIGHT TO MAKE SUCH MATERIAL
MODIFICATIONS TO THE ESAS 2 DEVELOPMENT PROGRAM THAT IT DEEMS NECESSARY OR
PRUDENT IN ITS REASONABLE DISCRETION, WITHOUT THE ACCEPTANCE OF THE OTHER PARTY
AS OTHERWISE REQUIRED UNDER SECTION 3.3.4 OF THIS ESAS 2 ADDENDUM. 
NOTWITHSTANDING THE ABOVE, GEN-PROBE SHALL REMAIN OBLIGATED TO PROVIDE CHIRON
WITH A COPY OF THE ESAS 2 DEVELOPMENT PROGRAM, AND ALL NOTICE AND REPORTING
OBLIGATIONS SET FORTH HEREIN SHALL REMAIN IN FULL FORCE AND EFFECT.

 

8.4.4                        RIGHTS UNDER AGREEMENT.  EXCEPT AS EXPRESSLY
MODIFIED BY THIS SECTION 8.3, THE PARTIES SHALL RETAIN ALL RIGHTS AND
OBLIGATIONS ALLOCATED PURSUANT TO SECTION 3.2 OF THE AGREEMENT.

 

9.               ESCALATION.

 

9.1         ESCALATION PROCESS.  PRIOR TO IMPLEMENTING THE ARBITRATION PROCESS
MORE PARTICULARLY DESCRIBED IN ARTICLE 13 OF THE AGREEMENT, THE PARTIES AGREE TO
ESCALATE ANY DISPUTE FIRST TO A DISCUSSION BETWEEN RESPONSIBLE MANAGERS, AND IF
THEY CANNOT AGREE, THEN TO THE SUPERVISORY BOARD.  HOWEVER THE PARTIES
EXPLICITLY ACKNOWLEDGE THAT IN THE EVENT OF THE NEED FOR AN URGENT DECISION THE
PARTY WITH PRIMARY RESPONSIBILITY WILL PROCEED TO MAKE THE DECISION, AND
IMPLEMENT.  IT IS AGREED THAT THE PARTY WITH PRIMARY RESPONSIBILITY WILL MAKE
ALL REASONABLE AND TIMELY EFFORTS TO INFORM THE OTHER PARTY OF THE ISSUE
REQUIRING DECISION, PARTICULARLY WHERE THE ISSUE IS ONE OF SOME CONSEQUENCE.

 

9.2         REMEDIES IN EVENT OF DEFAULT.  NEITHER PARTY SHALL BE ENTITLED TO
EXERCISE ANY REMEDY OTHERWISE AVAILABLE TO IT AT LAW OR IN EQUITY UNLESS AND
UNTIL SUCH PARTY SHALL HAVE PROVIDED THE OTHER PARTY WITH NOTICE OF SUCH EVENT
OF DEFAULT, REASONABLY SPECIFYING THE NATURE OF THE DEFAULT, AND ANY APPLICABLE
PERIOD OF TIME FOR CURE THEREOF SHALL HAVE EXPIRED WITHOUT CURE, AND THE
PROCEDURES DEFINED IN ARTICLE 13 OF THE AGREEMENT SHALL HAVE BEEN FIRST
EXHAUSTED.

 

9.3         SURVIVAL.  UPON A TERMINATION OF THIS ESAS 2 ADDENDUM, THE FOLLOWING
PROVISIONS OF THIS ESAS 2 ADDENDUM SHALL SURVIVE SUCH TERMINATION: 
SECTIONS 2.3, 2.4.1, 8, 9, AND 10.

 

10.         NO OTHER AMENDMENT.  EXCEPT AS EXPRESSLY SET FORTH IN THIS ESAS 2
ADDENDUM, ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT, THE PARTIES’
DEFINITIVE WRITTEN SETTLEMENT AGREEMENT, DATED DECEMBER 5, 2001, AND THE SHORT
FORM AGREEMENT, DATED NOVEMBER 16, 2001, ARE HEREBY RATIFIED AND SHALL CONTINUE
IN

 

21

--------------------------------------------------------------------------------

 

FULL FORCE AND EFFECT.  ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT, THE
DEFINITIVE WRITTEN SETTLEMENT AGREEMENT, AND THE SHORT FORM AGREEMENT SHALL
CONTINUE IN FULL FORCE AND EFFECT.  IN THE EVENT OF A CONFLICT BETWEEN THE TERMS
OF THIS ESAS 2 ADDENDUM AND THE AGREEMENT, THE TERMS OF THIS ESAS 2 ADDENDUM
SHALL CONTROL.  THE PROVISIONS OF THIS ESAS 2 ADDENDUM ARE INTENDED TO, AND
HEREBY, SUPERCEDE ANY PROVISIONS IN THE DEFINITIVE WRITTEN SETTLEMENT AGREEMENT
ENTERED INTO BY AND BETWEEN THE PARTIES, DATED DECEMBER 5, 2001, AND THE SHORT
FORM AGREEMENT ENTERED INTO BY AND BETWEEN THE PARTIES, DATED NOVEMBER 16, 2001,
ON THE SAME SUBJECT MATTER.

 

11.         COUNTERPARTS.  THIS ESAS 2 ADDENDUM MAY BE EXECUTED IN COUNTERPARTS,
EACH OF SUCH SHALL BE DEEMED AN ORIGINAL, AND ALL OF WHICH TOGETHER SHALL
CONSTITUTE ONE AND SAME INSTRUMENT.

 

IN WITNESS WHEREOF, the Parties have caused this eSAS 2 Addendum to be executed
and the persons signing below warrant that they are duly authorized to sign for
and on behalf of the respective Parties.

 

GEN-PROBE INCORPORATED,
a Delaware corporation

CHIRON CORPORATION,
a Delaware corporation

 

 

 

 

By:

/s/HANK NORDHOFF

 

By:

/s/ GENE W. WALTHER

 

Its:

President & CEO

 

Its:

President

 

Date:

12-21-04

 

Date:

18 Feb. 2005

 

 

22

--------------------------------------------------------------------------------

 

Schedule 1.3

 

Budget

 

Preliminary Budget

 

2002

 

 

 

CBT Grand Total Hours

 

[***]

 

CBT Avg Monthly FTE

 

[***]

 

CBT cost @ [***]/FTE

 

[***]

 

GP cost @ [***]/FTE

 

—

 

Total Project

 

[***]

 

 

 

 

 

2003

 

 

 

CBT Grand Total Hours

 

[***]

 

CBT Avg Monthly FTE

 

[***]

 

CBT cost @ [***]/FTE

 

[***]

 

GP cost @ [***]/FTE

 

[***]

 

Total Project

 

[***]

 

 

 

 

 

2004

 

 

 

CBT Grand Total Hours

 

[***]

 

CBT Avg Monthly FTE

 

[***]

 

CBT cost @ [***]/FTE

 

[***]

 

GP cost @ [***]/FTE

 

[***]

 

Total Project

 

[***]

 

 

 

 

 

Total Budget

 

[***]

 

 

--------------------------------------------------------------------------------

 

Schedule 1.4

 

Description of eSAS 2 Instrument system

 

The eSAS 2 Instrument system consists of the following modules:

Name of Module

 

Specifications

 

 

 

(i) a front end pipettor

 

 

 

 

 

(ii) an automated reagent addition station

 

 

 

 

 

(iii) an automated target capture bay

 

 

 

 

 

(iv) an automated incubation module

 

 

 

 

 

(v) a data management to track sample and system interactions to meet customer
demands of throughput and automation required for pooled donor screening by NAT

 

 

 

--------------------------------------------------------------------------------

 

Schedule 1.6

 

eSAS 2 Development Program Outline

 

1.               Product Requirements Document (PRD)

 

2.               Software Requirements Specification

 

3.               Technical Plan

 

4.               Resource Plan

 

5.               Budget

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

 

REDACTED VERSION

 

Schedule 1.12-A

PRD – robotic sample handling and transport system

 

--------------------------------------------------------------------------------

 

CONFIDENTIAL

 

REDACTED VERSION

 

Schedule 1.12-B

PRD – front end pipettor

 

--------------------------------------------------------------------------------

 

Schedule 2.5.2

 

eSAS 2 Regulatory Strategy

 

[g73232ka03image002.gif]

 

INTEROFFICE MEMORANDUM

 

To:

 

[***],

 

 

 

 

 

[***]

 

 

 

Date:

 

May 30, 2003

 

 

 

From:

 

[***]

 

 

 

Copies:

 

[***]

 

Subject:   eSAS 2.0 Regulatory Strategy and Contract Requirements

 

This memo is to document the Regulatory strategy and expectations for eSAS 2.0,
and address both U.S. and International submission requirements.

 

Background:  [***] instruments are intended for the eSAS 2.0 system.  The [***]
is to be used as a [***] for the addition of [***] and [***], and replaces the
[***] instrument.  The [***] instrument, called the [***], will automate current
manual [***] steps for [***] of [***],[***], etc.  These [***] instruments will
be placed in separate areas of the lab, as the steps associated with their use
are during the [***] and [***] stages of the [***] procedure.

 

Current timelines reflect a [***] launch of the [***] instruments in [***]
approximately [***].  Within the [***], the initial estimate on the timeline is
[***],[***] launch plan for both instruments.  This date will be updated
concurrent with the completion of the relevant Gen-Probe/Chiron Agreement.

 

Business Assumptions:  The following information is intended to outline
responsibility, per the current Gen-Probe/Chiron Agreement for U.S. and
International submissions as they relate to this project.  Certain assumptions
with regard to contractual obligations have been made to complete this
assessment.  Those are:

 

1.                                       [***] is the [***] entity responsible
for [***] or [***] [***] regarding the [***],[***]or any other component that is
an addition to, or modification of, the current eSAS blood screening system.

2.                                       [***] responsible for [***][***][***]
for the blood screening system.

3.                                       [***] will receive a complete copy of
the [***], including [***] and reports, relating to the development of the [***]
instrument, hardware and software components.

4.                                       There may be more than one model number
applied to the [***] instrument, with modifications to the instrument as
necessary for subsequent applications.   Therefore, [***]will have direct access
to [***].

5.                                       The [***] instrument will be [***]
marked according to the appropriate directive(s) (e.g. EMC directive, Medical
Device Directive) prior to being delivered to [***] as a completed component of
the eSAS system.

 

--------------------------------------------------------------------------------

 

6.                                       No changes or improvements in the
instrument or software will be made, once approved by [***], without prior
approval by [***].

 

Because a [***] launch of the [***] and [***] is planned in [***] the [***] and
[***], no considerations have been made in regard to [***] requirements for
[***] [***] component.  A [***], or [***], approach to implementation of the
[***] and [***] could alter the regulatory strategy presented below.

 

4.

 

Additional Background:  The original eSAS submission (formally called the Chiron
Procleix System) incorporated general purpose laboratory equipment, primarily
the [***],[***], and [***].  Two [***] components, the [***] and [***]), were
developed for the system.  The [***] is [***] from 510(k) submission
requirements and only [***] brief descriptions in the [***] 510(k).  The [***]
was a [***] for FDA and the [***] of the submission was about the [***] of the
[***] components.

 

[***] Requirements and Strategy:

 

5.                                       THE [***] AND [***]

 

The [***] is intended to replace the [***] instrument, and will have [***],
which [***] replace the [***] currently used with the [***].  The [***] is a
[***] that will not interact with either the [***] or the [***].

 

The [***] reads [***] and [***], creates [***],[***] and [***] into the
appropriate [***] within the [***] and sends the [***] to the [***].  The [***]
is partly responsible for [***], and as such is ultimately classified as a
“[***] under FDA guidance on [***] in medical devices.  This FDA guidance
document specifies which [***] must be submitted according to the [***], and
will be used as the guidance within the project team for determining the
deliverables for the submission.  Additionally, [***] testing will be required
and the protocol(s) and results will be presented in the submission.  All
changes to [***] will also be submitted.  Because this is [***] of a [***]
instrument, but does not affect [***] or [***] steps, it is anticipated that
this will be designated as a [***].  A [***] typically has a [***] review
cycle.  The sheer volume of the [***] and [***] documentation, and the protocols
and results from the [***] testing may be [***] to the typical 30 day cycle,
however.

 

The [***] is basically an [***] that is usually classified by [***] as [***]. 
Because it is [***] and does not interact or interfere with the normal [***] or
[***] process, it should be presented to FDA that there are [***] for this
particular component, other than a [***] in the [***] of the component itself
and it’s use in the overall system.

 

If a [***], or [***] implementation is planned for the [***] and the [***], then
it should be presented to FDA that a [***] will be submitted for the [***] and
it’s associated [***], but [***] submission is intended for the [***].

 

[***]

 

Any changes to [***] as a result of the implementation of the [***] or [***]
will require a [***], since the [***] are [***] specific and were submitted
through the [***] process.  All [***] is to be submitted [***] and [***] in all
submissions to allow the most rapid [***] review.

 

5.1                                 [***] REGULATORY REQUIREMENTS AND STRATEGY

 

--------------------------------------------------------------------------------

 

Any component that is part of an [***] system must first be tested to ensure
that it meets the safety requirements of the appropriate [***] for that
component (e.g. [***]).  Once that has been established, the use of the
component (or instrument) is defined for the [***] system and “[***]” testing is
performed.  This testing demonstrates that the instrument [***] as [***] within
the [***] system.  Upon successful [***] testing, the instrument (and its
associated software) is [***] compliant with the [***] for that [***]
application.

 

A [***] has [***] been approved by [***] (Gen-Probe’s [***]) for the Chiron
Procleix HIV-1/HCV Assay and the Chiron Procleix System.  The major components
of the Chiron Procleix System were [***] according to each component’s
appropriate [***] by the component’s [***] prior to the development of the [***]
for the overall [***] and system.  This has [***] to be an [***] and [***]
manner to [***] that the system component meets it’s safety requirements, and
can be [***] to different [***] applications as long as [***] is achieved for
each [***] application.

 

The [***] instrument should be tested according to the standards of the
appropriate [***] prior to being delivered to [***].  [***] testing (which
should be the same as the [***] testing mentioned in the [***] section of this
document) can be performed at [***] or [***], and the results of that testing,
along with the [***] of [***] product [***] testing for the instrument, will be
presented to the [***] to amend the current [***].  While the [***] and [***]
documentation may be required for the [***] for the instrument itself, it is
[***] that extensive [***] documentation will be required for the [***]
submission.  However, the [***] will [***] audit [***].  In addition, results of
the [***] testing will [***] be required for the [***] amendment as well as
[***] or [***].

 

This concludes the Regulatory Strategy.

 

--------------------------------------------------------------------------------

 

Schedule 5.2.1a

eSAS 2 Development Costs

 

1.               REIMBURSABLE FTE RATE.   [$[***] PER FTE PER CALENDAR YEAR]

 

2.               ESAS 2 DEVELOPMENT COSTS INCLUDED WITHIN FTE LABOR RATE.  ESAS
2 DEVELOPMENT COSTS INCLUDED WITHIN FTE LABOR RATE CONSIST OF ALL ATTRIBUTABLE
COSTS ASSOCIATED WITH THE DEVELOPMENT OF THE ESAS 2 INSTRUMENT AND MODIFICATIONS
TO ASSOCIATED INSTRUMENT SYSTEM PLATFORMS THAT MAY BE REQUIRED FOR SUCH ESAS 2
INSTRUMENT (CALCULATED IN ACCORDANCE WITH UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES, OR AS OTHERWISE MUTUALLY AGREED IN WRITING BETWEEN THE
PARTIES) INCURRED PRIOR TO THE COMPLETION DATE AND INCLUDES PILOT DEVELOPMENT;
VALIDATION STUDIES NECESSARY FOR PRODUCT AND PROCESS LICENSURE; CLINICAL
STUDIES; LICENSING ACTIVITIES; AND THE MANUFACTURE AND ULTIMATE DISPOSITION OF
CONFORMANCE LOTS OF MATERIAL, CALCULATED AS FOLLOWS:

 

(A)  SHARED DEVELOPMENT COSTS INCLUDE: RESEARCH AND DEVELOPMENT ASSOCIATED WITH
THE ESAS 2 DEVELOPMENT PROGRAM; CLINICAL STUDIES; VALIDATION EXCLUSIVELY
ASSOCIATED WITH THE PARTICULAR ANALYTE; DEVELOPMENT LOTS; DOCUMENT PREPARATION
SPECIFIC TO THE DEVELOPMENT;

 

(B)  THE PLANNED RESOURCES, AND THE ASSOCIATED COSTS, WILL BE BROKEN OUT ON A
MONTHLY BASIS AND ANALYZED AGAINST THE RESOURCE PLAN INCLUDED WITHIN THE
TECHNICAL PLAN, AND REFLECTED IN THE BUDGET;

 

(C)  SALARIED STAFF COSTS INCLUDED WITHIN THE BUDGET WILL BE ADJUSTED TO REFLECT
ACTUAL STAFF COSTS.  SALARY INFORMATION MAY BE AGGREGATED TO PROTECT THE
IDENTITY OF INDIVIDUALS.  THIS SALARY INFORMATION WILL BE VERIFIABLE ON A NEED
TO KNOW BASIS TO A SELECT NUMBER OF PERSONNEL FROM EACH COMPANY;

 

(D)  COST FOR WAGE LABORERS PLUS THE APPLICABLE OVERHEAD CHARGE FOR SUCH LABOR
(CALCULATED AT THE RATES AND CHARGES DESCRIBED IN SECTION 5.2.1) PAID TO
PERSONNEL DESCRIBED IN THE RESOURCE PLAN, INCLUDING THE ESAS 2 DEVELOPMENT
PROGRAM PROJECT MANAGER AND PERSONNEL ENGAGED TO PERFORM QA TESTING FOR THE ESAS
2 DEVELOPMENT PROGRAM;

 

(E)  COSTS FOR ENGINEERING PROTOTYPES AND MANUFACTURING PILOT MODULES REQUIRED
FOR THE ESAS 2 DEVELOPMENT PROGRAM;

 

(F)  COSTS OF INVENTORY CONSUMED IN THE ESAS 2 DEVELOPMENT PROGRAM, INCLUDING
RAW MATERIAL, INTERMEDIATES AND FINISHED GOODS, AND CONFORMANCE LOTS, WHETHER
REJECT OR NOT, THAT ARISE FROM THE ESAS 2 DEVELOPMENT PROGRAM OR ARE NECESSARY
TO SUPPORT THE ESAS 2 DEVELOPMENT PROGRAM, AND SCRAP MATERIAL, INCLUDING RAW
MATERIALS AND DEVELOPMENT MATERIALS THAT ARISE FROM THE ESAS 2 DEVELOPMENT
PROGRAM BUT EXCLUDING ESAS 2 INSTRUMENT AND SCRAP MATERIALS USED STRICTLY FOR
INTERNAL RESEARCH PURPOSES OR CONSUMED IN DEVELOPMENT PROGRAMS OTHER THAN THE
ESAS 2 DEVELOPMENT PROGRAM;

 

(G)  COSTS FOR CONFORMANCE PRODUCT DOCUMENTATION;

 

(H)  COSTS FOR COURIER AND MAIL SERVICE FEES FOR DELIVERY OF ITEMS BETWEEN
GEN-PROBE AND CHIRON;

 

(I)  COSTS OF TRAVEL, LODGING AND REASONABLE PER DIEM EXPENSES FOR EMPLOYEE AND
CONSULTANTS OF GEN-PROBE OR CHIRON INCURRED IN FURTHERANCE OF THEIR ACTIVITIES
HEREUNDER, PROVIDING TRAINING OR PARTICIPATING ON THE SUPERVISORY BOARD TO THE
EXTENT SUCH COSTS ARE NOT INCLUDED WITHIN THE OVERHEAD CHARGE APPLICABLE TO
LABOR COSTS;

 

--------------------------------------------------------------------------------

 

(J)  COSTS OF FOREIGN REGISTRATION, MARKETING STUDIES TO SUPPORT REGISTRATION,
AND MARKET RESEARCH COSTS NECESSARY TO BETTER DEFINE REQUIREMENTS OR TO SUPPORT
NATIONAL DECISION-MAKING;

 

(K)  SUCH OTHER CATEGORIES AS THE PARTIES MAY AGREE FROM TIME TO TIME USING THE
APPROVAL PROCESS DESCRIBED IN SECTION 2.5.2.

 

(L)  ALL BUDGETED EXPENSES OF DEPARTMENTS DIRECTLY INVOLVED WITH THE ESAS 2
DEVELOPMENT PROGRAM

 

(M)  APPROPRIATE PORTIONS OF BUDGETED COSTS OF DEPARTMENTS INDIRECTLY INVOLVED
IN THE ESAS 2 DEVELOPMENT PROGRAM.

 

3.               ESAS 2 DEVELOPMENT COSTS NOT INCLUDED WITHIN FTE LABOR RATE.

 

(A)                                  COST OF CONFORMANCE LOT MATERIALS CONSUMED
IN PERFORMANCE OF ESAS 2 DEVELOPMENT PRODUCT OR CLINICAL TRIALS.

 

(B)                                 SIGNIFICANT THIRD PARTY CONSULTANT CHARGES
(I.E. CRO, REGULATORY EXPERTISE, ETC.) TO THE EXTENT NOT CAPTURED WITHIN THE FTE
RATES IN ITEM 2 ABOVE.

 

(C)                                  THIRD PARTY DEVELOPMENT AND HARDWARE
ACQUISITION COSTS.

 

--------------------------------------------------------------------------------

 

SCHEDULE 5.2.1B

 

FTE Labor Rate Analysis

 

--------------------------------------------------------------------------------

 

Schedule 5.2.1b

FTE Labor Rate Analysis

 

Cost Center

 

 

 

(Controllable)
Salary & Wage
Expense

 

(Controllable)
Other
Costs

 

(Controllable)
Total
Costs

 

Benefits

 

Deprec/
Amort

 

Facilities

 

I/S

 

Indirect
Allocation

 

Total Cost
per Employee

 

eSAS
HC

 

eSAS
Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quality Assurance

 

11038

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

VP Operations

 

13010

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Ots Engineering

 

13011

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Ots Development Manufacturing

 

13012

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Ots Bb Product Support

 

13017

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Program Management

 

16015

 

[***]

 

[***]

 

[***]

 

[***]

 

—

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Clinical Affairs

 

16021

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

VP Regulatory & Quality

 

16022

 

[***]

 

[***]

 

[***]

 

[***]

 

—

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Regulatory Affairs

 

16023

 

[***]

 

[***]

 

[***]

 

[***]

 

—

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Research

 

16041

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Bloodbank

 

16071

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Marketing-Bloodbank

 

17019

 

[***]

 

[***]

 

[***]

 

[***]

 

—

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Validation

 

11039

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

VP Diagnostic Development

 

16056

 

[***]

 

[***]

 

[***]

 

[***]

 

—

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Std Development

 

16052

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

VP Sales/Marketing

 

17005

 

[***]

 

[***]

 

[***]

 

[***]

 

—

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Prod.Planning

 

11005

 

[***]

 

[***]

 

[***]

 

[***]

 

—

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

QC Microbiology

 

11023

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Stability

 

11035

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

QC Analytical

 

11037

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Instrument Development

 

16019

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

Performance QC

 

13016

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

[***]

 

[***]

 

Adjusted Controllable Total (total less non cc related

 

 

 

 

 

 

 

[***]

 

 

 

 

 

 

 

 

 

 

 

 

 

[***]

 

[***]

 

expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost/FTE w/o 6021

 

[***]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost/FTE w-6021

 

[***]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost/FTE w/o 6021 & w/o  G&A

 

[***]

 

 

 

 

HR
*Based on H/C

 

Finance
**Based on Tot Cont

 

***Bonus Pool

 

Allocations

 

G&A Allocations:

 

 

 

 

 

 

 

 

 

Controllables

 

[***]

 

[***]

 

 

 

[***]

 

Benefits

 

[***]

 

[***]

 

 

 

[***]

 

Deprec/Ammort

 

—

 

[***]

 

 

 

[***]

 

Facilities

 

[***]

 

[***]

 

 

 

[***]

 

Human Resources

 

[***]

 

[***]

 

 

 

[***]

 

Total Allocation

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

Changes to center 60-71 Controllables

 

 

 

 

Remove Inventory Used (AC620)

 

[***]

 

 

Remove Inventory Used Valuation Adjustment

 

[***]

 

 

Remove Inventory Used-Clin

 

[***]

 

 

Remove Inventory Used-Adjs

 

[***]

 

 

Remove Standard Cost Applied

 

[***]

 

 

Remove Work Order Scrap-Diag

 

[***]

 

 

 

 

[***]

 

 

 

--------------------------------------------------------------------------------

 

Schedule 5.3.1

 

Accrued eSAS 2 Development Costs

 

2002 Summary

 

 

 

CBT Grand Total Hours

 

[***]

 

CBT Avg Monthly FTE

 

[***]

 

CBT cost @ [***]/FTE

 

[***]

 

GP cost @ [***]/FTE

 

—

 

Total Project

 

[***]

 

 

 

 

 

2003 Summary

 

 

 

CBT Grand Total Hours

 

[***]

 

CBT Avg Monthly FTE

 

[***]

 

CBT cost @ [***]/FTE

 

[***]

 

GP cost @ [***]/FTE

 

[***]

 

Total Project

 

[***]

 

 

 

 

 

6 Months 2004 Summary

 

 

 

CBT Grand Total Hours

 

[***]

 

CBT Avg Monthly FTE

 

[***]

 

CBT cost @ [***]/FTE

 

[***]

 

GP cost @ [***]/FTE

 

[***]

 

Total Project

 

[***]

 

 

 

 

 

Total Accrued Development Cost

 

[***]

 

 

--------------------------------------------------------------------------------

 

Schedule 6.4

 

Sales Authorization Letter

 

[DATE]

 

[NAME OF THIRD PARTY MANUFACTURER]

 

Dear Sir or Madam:

 

Chiron Corporation (“Chiron”) and [NAME OF THIRD PARTY MANUFACTURER] entered
into that certain [NAME OF AGREEMENT] dated as of                 (the
“Chiron/[NAME OF THIRD PARTY MANUFACTURER] Agreement”) for the manufacture of
eSAS 2 instruments for use in blood screening (the “eSAS 2 Instruments”).  As
used herein, “blood screening” means the nucleic acid probe based testing of
human blood, plasma or other human blood products intended for transfusion or
other administration to humans for purpose of detecting the presence or absence
of viral organisms, and expressly excludes diagnostic testing. Chiron and
Gen-Probe Incorporated (“Gen-Probe”) are parties to certain agreements pursuant
to which, among other things, Chiron has granted Gen-Probe the right to purchase
certain eSAS 2 Instruments directly from NAME OF THIRD PARTY MANUFACTURER.

 

Accordingly, Chiron therefore authorizes [NAME OF THIRD PARTY MANUFACTURER] to:
accept orders from, manufacture for and deliver to Gen-Probe eSAS 2 Instruments
under the financial terms and conditions contained in the Chiron/[NAME OF THIRD
PARTY MANUFACTURER] Agreement.

 

Sincerely,

 

 

Chiron Corporation

 

--------------------------------------------------------------------------------